They may not work in the most glamorous of industries, but welders literally help us hold our world together. Whether you’re a welder with years of experience or are just learning the tools of the trade, you may have given some thought to starting a business of your own.
And while this may seem like an old-school profession to some, there’s still plenty of demand for this kind of work. Between 2018 and 2028, the U.S. Bureau of Labor Statistics estimates that the job market for welders (and related professions) is expected to expand by 14,500 positions, or roughly 3%.
If you’re considering how to start a welding business of your own, it’s important to approach the challenge from all angles before you decide to strike out on your own. By thoroughly planning, preparing, and ensuring that you are truly ready to be a business owner, you can increase your likelihood for long-term business success.
How to Open a Welding Business
Below, we outline the key steps involved in starting a welding business so that you can prepare yourself for the challenge ahead.
1. Write a Business Plan
The first step in opening any business—whether a welding business, a florist shop, or anything in between—should be to write a business plan.
A business plan is a document that outlines the vision you have for your business. The process of writing a business plan can be helpful to you as an owner, because it forces you to think through the logistics of opening and running a business, but it is also critical if you ever plan to bring on business partners or investors. And because many lenders like to see a clear path to profitability before lending to a business, it can also prove essential in securing a business loan (as we’ll discuss in more detail below).
At a high level, a business plan outlines what your business will do, the market that you plan to operate within, your business’s organizational structure, and your plans for growth and sustainability, among other considerations. As a welding business, for example, you would probably use your business plan to define things like:
- Whether you plan to operate your business out of a single location (welding shop) or offer a mobile welding service
- Whether you plan to work alone or build a team of employees
- Whether you plan to specialize in aluminum welding, stainless steel welding, underwater welding, or some other specialty
- The kinds of projects you are comfortable and willing to complete
- The geographic limits you are willing to provide services in
- The main competition you will be facing (and how you can differentiate your business)
If you’re concerned about the work that will go into drafting a business plan, don’t be: There are many templates and software options available that can help you document your plan. This is one part of the process that you really don’t want to cut corners on.
2. Choose a Business Entity Structure
In order to complete your business plan, you will need to choose the type of business entity that you wish to structure your welding business as. There are many different business structures, and each is best suited for different business needs and realities. The most common business entities are sole proprietorships, general partnerships, limited partnerships, C-corporations, S-corporations, and limited liability companies (LLCs).
While every situation is, of course, unique, forming a limited liability company (LLC) is likely to be the most straightforward path for you to take as you first launch your welding business, offering you greater protections than a sole proprietorship or general partnership while avoiding some of the complexities associated with running a C-corp or S-corp.
Perhaps the greatest benefit of operating your business as an LLC as opposed to a sole proprietorship is it protects you from being personally liable for your business’s debts or liabilities. This means that if your welding business were to go bankrupt, for example, or be sued, you would not be at risk of losing your personal assets.
Of course, if you’re unsure which entity to choose for your business, we recommend connecting with a business attorney or tax professional to help walk you through the pros and cons of each. Once you’ve decided on your entity, your next step will be to register your business with the state in which you’ll be operating. Almost every business entity will need to be registered, which you can likely do with your local secretary of state’s office or chamber of commerce department.
3. Get the Appropriate Licenses and Permits
Before you open for business and take on your first welding client, it is crucial that you make sure you have all of the appropriate licenses and permits. Without the proper documents, you could face fines or penalties—neither of which will be good for your business.
What types of licenses and permits will you need? That will all depend on where you choose to open and operate your welding business. There are many different types of business licenses and permits that you may be required to hold in order to operate your business. This may include a basic state and local business operating license, zoning and land use permits, building permits, fire department permits, and more.
Furthermore, some states and cities require welders to hold licenses related to the field. In New York City, for example, you must hold a welder’s license in order to perform structural welding within city limits. Receiving this license will require you to demonstrate proficiency in the field by earning certain welding certifications and passing a background check.
Even if working as a welder in your locality doesn’t require you to hold a welder’s license, earning related certifications can go far in helping you attract clients and grow your business.
4. Insure Your Business
Welding can be an inherently dangerous business. After all, you’re working with heavy machinery, high voltages, and flames. Insuring your business is a key step in protecting yourself from the liabilities that can come with working in such a potentially dangerous industry.
Exactly what types of business insurance you need will depend on the specifics of how you operate your business. That being said, some of the most common that you should consider include:
- General liability insurance, which protects you against losses that your business might cause someone else, such as a pedestrian, a customer, or another third party
- Vehicle and property insurance, which protects against theft, vandalism, fire, and other concerns
- Workers compensation, unemployment, and disability insurance, each of which is required if you choose to employ others in your business
5. Set up Your Business Finances
Another key part of starting any business is to make sure that you set up your business’s finances in a way that they are not intermingled with your personal finances. This will make it much easier for you to track and manage your business expenses and understand the various costs of doing business, monitor your profits, file your taxes, and protect yourself against audits.
Employer Identification Number (EIN)
One of the first steps you should take in setting up your business’s finances is to apply for an employer identification number (EIN), also known as a federal business tax ID. This is a nine-digit number that the IRS uses to identify your business for tax purposes. You will need an EIN to file business taxes, apply for a business loan, open a business bank account, apply for a business credit card, and more.
Getting an EIN is easy and free. Depending on how you submit your application, you may receive your EIN instantly (in the case of electronic applications), in a few days (in the case of faxed applications), or in a few weeks (in the case of mailed applications).
Bank and Credit Card Accounts
Keeping your company’s finances separate from your personal finances is one of the easiest things you can do to set yourself up for long-term financial success. Typically, this will involve opening a business bank account. Different types of accounts you might want to consider include:
- A business checking account: This will enable you to access your business’s working capital by check, debit card, and/or electronic disbursement so that you can make essential, day-to-day payments.
- A business savings account: This is a home for capital that you don’t need to run the day-to-day operations of your business. Keeping money in a business savings account enables you to earn some profit in the form of interest, while also keeping your funds safe.
- A business credit card: This is a flexible means of making essential payments and purchases, even during periods of uneven cash flow.
Many small business owners decide to manage their own business accounting, especially in the early stages of owning their business, before finances get too complex. Choosing the right business accounting software can make the whole prospect of managing your welding business’s finances much easier.
That being said, there is no shame in admitting that you might not be up to managing your own books. If that’s the case, it might make more sense for you to hire a freelance, part-time, or full-time accountant, especially as your business grows and your finances become more complex.
Small Business Loans and Financing Options
Starting a welding business can be expensive, especially in the earliest stages when you might be gearing up before you’ve even landed your first project or customer.
At the least, you’re going to need to rent or buy the welding tools, equipment, and materials necessary for you to do your job—things like a plasma cutter, machining equipment, milling machine, and lathes. And depending on how you’ve structured your business, you’ll undoubtedly find yourself covering other expenses. Renting or buying a welding shop and/or vehicles, for example, can be incredibly capital intensive.
All told, the costs associated with starting your own welding business can be prohibitive if you plan to do so out of pocket. Thankfully, there are a number of financing options available to help you get your business off of the ground and to help you grow once you’ve established yourself.
One popular option is an SBA loan, which is provided by a bank but guaranteed by the Small Business Administration (SBA), a federal agency created to further entrepreneurship in the U.S. As such, SBA loans typically carry lower interest rates and more flexible terms than other forms of funding. Because they are so competitive and desirable, however, they can be difficult to qualify for. As a new business owner, you’ll likely have the most success with their microloan program, which offers new entrepreneurs up to $50,000 in funding.
While SBA loans come with strong benefits for borrowers, business owners do have other options as well. For example, equipment financing is specifically designed to facilitate the purchase of new or used equipment necessary for your business, and business term loans are an alternative source of funding for those who either don’t qualify for SBA loans or who need access to funding faster than is typically possible with SBA loans.
6. Market and Grow Your Business Intelligently
The final step to starting your welding business is really an ongoing process of marketing your business in a way that empowers you to build and grow a client base.
While there’s a lot that goes into small business marketing, a few key steps, especially when you’re first launching your business, include:
- Registering a domain and building a website through a host like Godaddy, WordPress, Wix, or Shopify
- Creating or commissioning a logo
- Registering a Google My Business listing that will help you rank in local Google searches and in Google Maps
- Embracing a marketing strategy that aligns with your business model
Additionally, when you’re first starting out, an easy way of drumming up business is to turn to customers and clients that you have provided welding services for in the past, whether through a former employer or on a freelance basis, and letting them know that you’re now on your own. If you decide to do this, however, it is important that you understand whether or not you are bound by a non-compete or non-solicitation agreement or clause with your former employer, which might prevent you from courting previous clients.
The Bottom Line
Nobody ever said that starting a welding business was going to be easy, or that it would be without risk. While only you can decide if the potential for reward is great enough to justify that risk, you can take comfort in knowing that thorough preparation can help you minimize that risk and increase your chances of success. If you are considering how to start a welding business, following the steps above is a great place to start.