Every business has its share of bureaucratic hoops to jump through. For contractors, however, it’s more like regulatory Olympics. Qualifying exams, bonds, insurance policies, background checks, lists of officers and managers and detailed financials. Even for ace administrators and .gov gurus, government paperwork presents a substantial burden in construction, and one that can weigh your company down and potentially prevent you from winning new business.
Since it’s government paperwork we’re talking about many contractors assume they just need to run harder, shift the burden around a little, or cut corners to keep up. Meanwhile, your clients and prospects are moving, connecting, and making decisions faster than ever before.
There’s a better way. With a few simple changes, contractors can adjust their approach to regulatory paperwork and reduce overhead costs, enhance their competitive abilities, and eliminate the financial risks of inadvertent unlicensed contracting. Here’s how to do it:
Put license costs in perspective.
The first step in getting that licensing burden off your back is to put it in perspective with some numbers:
- Thirty-four states require general contractor’s licenses at the state level,
- Seventeen states require licenses at the county and/or city levels,
- The average cost of a state contractor’s license is $225.
These numbers reveal key truths that can have a great impact on your company’s financial and competitive performance. One, licenses are relatively inexpensive—particularly, when compared to the opportunities presented by a license to bid and work in a new city, county, or state. Two, licensing requirements for contractors vary widely by jurisdiction, making them hard to predict and plan for.
Consider the timing.
While the financial barriers are small, the time required to obtain a license is a major operational hurdle. Between sitting for exams, foreign qualifying, and applying to licensing authorities, the process of entering a new jurisdiction is generally measured in months, not weeks. Since licenses have to be in place before bidding for work or advertising your services—even something as small as handing out business cards—can seriously limit your opportunities and impede business development. Consider these numbers:
- Twenty states require qualifiers to sit for exams,
- Twenty-one to 120 days to receive approval from state licensing boards,
- One to 42 days to foreign qualify in a new state.
Finally, quantify the financial risks.
There’s a final numeric piece to consider in all of this, and that’s the price of licensing errors and gaps. In addition to jumping the gun with a letter of interest or proposal before your licenses are active, unlicensed practice can result from missing a required report or a license renewal. State and local authorities are actively enforcing licensing requirements, and the penalties for even a momentary oversight can be steep. Again, let’s look at some numbers:
- $100–$5,000 potential fine per offense for unlicensed practice
- 825 calls to Florida’s unlicensed practice hotline in six months
- 50% fee increase for a California license renewal one day after the deadline
Lay out a strategy to win the race.
So how can you turn all of these numbers to your advantage? You can just put your head down, shoulder the load, and muscle on through, hoping your teams can make up for the regulatory drag on your finances and operations.
Alternatively, you can jettison the work, fast-track the filings, and save your energy for your projects through the following step:
1. Outsourcing tasks
Since requirements change with each new jurisdiction, there are limits on how efficient you can make licensing internally. Each new locality presents too many variables. However, by outsourcing to a dedicated compliance provider, you can shrug off the research and paperwork load entirely, cutting overhead. Compliance specialists with expertise in each jurisdiction can file in a fraction of the time and expedite the license according to the preferences and habits of the relevant authority.
2. Consolidating compliance activities
Licenses are just a small piece of the compliance puzzle for contractors, particularly those operating across numerous jurisdictions. Construction companies need to maintain good standing with the secretary of state wherever they are licensed, including filing timely annual reports, reporting changes in company information, and maintaining a registered agent. In addition, licenses must be renewed on time, and qualifiers must complete continuing education requirements. Once again, tracking and maintaining these disparate tasks requires a significant investment of staff hours. By consolidating these tasks under a single provider, you can further reduce the administrative burden on your business.
3. Bringing the power of automation to compliance
Many aspects of construction are moving to the cloud, and your regulatory compliance should reside there, too. Dedicated software further streamlines compliance for your teams by automating rote tasks, generating reminders of deadlines, and providing instant access to key records and documents. No more storing, tracking, and chasing down government paperwork.
4. Enhancing internal control and communication
A dedicated compliance interface empowers your teams to share compliance information across functional areas, such as legal, accounting, operations, and sales. This information can be used to anticipate licensing needs and inform business development efforts.
5. Eliminating risks
Since deadlines are spread throughout the year with no apparent pattern, it’s all too easy for a report or renewal to slip by unnoticed, creating financial risk. By outsourcing the technical aspects of compliance to specialists and leveraging the power of compliance software, like Harbor Compliance, to monitor your status across all jurisdictions in real time, you can put the risks of unlicensed practice behind you.
Now, take your place on the podium!
Fast and easy are not words that contractors generally associate with licensing and government regulations. Nevertheless, with the right tools and support, compliance truly can be swift and painless, reducing overhead, enhancing agility, and making your company a stronger contender.