So You Want to Start a Home Inspection Business…
Becoming a home inspector is one of the most fulfilling careers you can choose, but it can be daunting as well. How do you get started? How do you structure your business? How do you set things up so you can make a living – but then make room to grow your business later on?
I remember very clearly starting my first home inspection company. I wasn’t nervous about it – I was flat out scared. There were many successful home inspectors around me, but they closely guarded their information on how to get started. I had owned a couple of companies before (including a contracting company), but none were like the home inspection industry. I learned a lot starting that home inspection company (which is still around today) and that lead me to start a second, and then a third.
I want to share some of the basic logistics of starting a home inspection business with you and some of the things I learned (things that I wished others had shared with me). This is not a blog on marketing your inspection business – but one on the business behind the inspections and how to get it going.
Step 1: Licensing and Certifications
So this one is simple, and we won’t spend much time on it, but make sure you have all the needed licensing and certifications. Too many times we have had inspectors call us and think that they are all set up, and then they get in trouble with the State or some other organization. Be sure that you have thoroughly researched everything you need to perform every service you provide.
On top of that, certifications are not always required, but they are good to have. Being certified through one of the major home inspection associations is not “required”, but adds a lot of legitimacy to your business, and gives you some great training that could help you fill in the gaps of your knowledge. Inspectors that are certified through these organizations do FAR better than those who skip out on it.
Step 2: Should You Form a Sole Proprietorship, LLC, or Other Corporation Type?
This is a common question that a lot of new home inspectors ask, and too many of them make this decision lightly. I am not an attorney – just a home inspector who has been through this before, so the following information is just my opinion. A sole proprietorship is the fastest and easiest way to start your home inspection business – but the riskiest. It means that if you get sued for something missed or broken on an inspection – you have no shield. Your assets are not protected and that is a dangerous position to be in, no matter how much or little your assets are.
When we went to an attorney, he immediately told us to start our company as an LLC (limited liability company). It makes the business an “entity” all of its own and gives you a layer of protection. For that protection to work though, the LLC needs to be COMPLETELY separate from you. It needs to have its own bank account, credit card, etc. – this way it is hard for anyone to do what is called “piercing the corporate veil”. In other words, they can sue you instead of your corporation (you can thank ENRON for that). When you are a new home inspector, this is when you are most likely to miss something or get sued – so it is the most important time to have protection like an LLC.
When forming your LLC, a lot of guys like to use their full company name like “Your Home-Pro Inspection Company, LLC”. The issue with that is you now are limited. What if you want to branch into commercial inspections down the road? Hard to do when your LLC says home inspections. I find that it is better to keep things open so that you have room to grow your business in the direction of the opportunities that come up. So this is what I do: I create an LLC with a generic name related to mine. So “Upstate Inspection Services” would be “Upstate LLC” or “Upstate Inspections LLC”. Then, I create a DBA (doing business as) under that LLC for “Upstate Inspection Services”. Then if I want to start a septic system-specific part of my company I do another DBA “Upstate Septic Inspections”, and it falls under that same LLC. This way you can roll with opportunities and not confine your name to one LLC.
An example of why this is important is a client of ours that started a home inspection company and was sure he would only ever do home inspections forever – except one day, about 3 years into it, he got an amazing opportunity from one of his clients to travel all over his State doing commercial inspections and making great money. Fortunately, he followed my advice and was all set up for it and could just add a DBA to his LLC for commercial inspecitons. We had another client in another State that did not follow our advice though – and ended up having to start a new LLC to accommodate a new aspect of his business.
Step 3: Filing as an S-Corp
This is another huge advantage to starting an LLC over aDBA/Sole Proprietorship. The Federal Government will allow you to file your LLC taxes as an S-Corp. An S-Corp is a kind of like a mix between a C-Corp and an LLC. Without going into too much detail, it makes you one step more distanced from your company. Why is this an advantage? Because it helps you potentially save tons of money on your taxes.
Talk to a CPA about it, but when you file as an S-Corp, you use a “pass-through entity”. This gives you many tax advantages. One inspector in my areas didn’t believe me until he went to my accountant who set it up for him. He had to pay other taxes that he had never paid before, so he was kind of worried at first. Then when tax season came around he called me and said he saved over $8,000 – that’s a nice chunk of change. The new tax laws (as of the writing of this blog) allow you to take advantage of it. Again, visit a CPA and ask for details.
Step 4: Getting Your Team Together
So don’t wait on this one. Too many new inspectors hop out there without ever getting their backup ready. When we say “Team”, we mean a group of people you can rely on. The two most important players are going to be an attorney you trust and an accountant you trust. Spend the money up front to make sure you are ready to go. Have them check your plans and what you have in place.
It costs too much to skip this step. I missed some pretty serious tax advantages that cost me thousands of dollars without even knowing it. I was creating liability without knowing it by not paying for an hour of consultation with an attorney. You will make more money and have more peace of mind by spending a little bit of money for your “Team” up front.
Step 5: Branding
This is critical – start your business out the right way with proper branding. If you don’t, it is very expensive later on to do it. Branding sells your services and makes you recognizable. When you grab a soda in the store, do you automatically grab a Pepsi or the generic brand you don’t recognize? You grab the Pepsi – the same is true with people and how they choose a home inspector. So what does this involve?
First, choose a great company name. Don’t use a company name that everyone already has… be original, but not TOO original. Simple is better too. You can even use your last name if you’d like. Superlatives are over used too, like “Superior Home Inspections” – there are a lot of companies with that name. Choose something unique to you, easy to pronounce, and simple to remember.
After that, you need to create a logo. You should really have this professionally done and not skimp on this part, as it is a critical part of your business. There are many professionals to choose from who can make a great logo. You can have the InterNACHI Logo Design Team help you, or you can hire a freelancer on a site like Fiverr. Whatever you choose, keep these points in mind (again, this is my opinion and experience, as well as data collected):
- Keep it very simple. Don’t add complex pictures with a lot of detail
- Keep the color scheme to 1 or 2 colors (three colors only if you have to)
- Avoid brown logos. Studies show that brown clothes, logos, etc are turnoffs to the human eye when evaluating a person.
- The same goes for red. You can use red, just keep it toned down with another color. Make red an accent – not the main color
- Avoid cartoon characters. I have this conversation so often with new inspectors. Cartoon characters don’t exactly scream “professional”
However you go about it – make sure you LOVE your logo. A great logo makes a great brand. An “OK” logo, makes you look unprofessional.
In that same regard, spend the money to have a great website. People will always say things like “you can do it yourself” or “you just need something up there for people to contact you” – but that couldn’t be farther from the truth. People judge you by your website – so invest in a professional to build an amazing one for you. You will lose a lot of clients and never know it by having a mediocre website.
Step 6: Software and Back Office Stuff
This is another step that you don’t want to retrofit later on. Start off with home inspection software that works for you, and then continually get better at using it. Try to choose home inspection software that other inspectors have tried and used first. Most software will give you a free trial as well. Just make sure the software fits YOU, and not the other way around.
Scheduling is important, but can be confusing if you are trying to do it on the road and enter people’s information on the fly into your calendar. Online scheduling is also expected in today’s market by many potential clients. Yes, I know, we all want the client to call us first and talk with them to schedule – but that’s not every client anymore. Many people want to schedule online (especially if you spent the money to design an awesome website). Use free tools like Inspector Toolbelt to take care of online scheduling, document storage, agreements, and more. You can start out on the free tier and upgrade later on.
Step 7: Get your Marketing Together
This one goes along with the branding aspect. Many new inspectors don’t see this as an important aspect until after they are already out there, and then try to put it together later on. Instead, have this all done ahead of time. Here are some things you will need:
- Professional looking shirts and hats with your logo on it. If you don’t want to be a walking billboard, then you just need to get over that – because you are building a brand
- Professional business cards. I am not talking about free ones from Vista Print either (although you can use them to print your design if you want), but hire a professional designer so that your card stands out from the pack
- Marketing plan. Yes, write this out on paper. Write a schedule of what marketing you will do each day. For instance: Sunday 9 am -5 pm – visit open houses, Monday 3 pm -5 pm cold calling RE offices, etc. Write it out and stick to it
- Professional-looking vehicle. If you can afford it, get the vehicle lettered up. Show up on site with a CLEAN vehicle that you would expect a professional to show up in. Doesn’t need to be a BMW, just clean and professional-looking
- Get brochures…. or don’t. I actually don’t use them because I don’t think they are horribly effective – but in some markets, they are… just not mine
The big takeaway from this is to have your marketing material ready, and have all of it connected to a killer website and online scheduling so people can hire you easily.
Step 8: Be Motivated
There is no shortcut. Be motivated, work hard, and do it in an organized manner. There are obviously going to be bumps and discouragement, but the ones who stick with it will see the fruits of their labor. Don’t give up, but keep working at it and you will get there. All good things come in time :).