Skilled Labor Shortage: Why Now May Be the Right Time to Start a Contracting Business

Construction companies have plenty of work in the pipeline and not enough qualified people to complete it. Associated Builders and Contractors estimated that the industry needed 439,000 additional workers in 2025 and would need another 499,000 in 2026 to meet demand. In an Associated General Contractors survey, 92% of firms that were hiring said they had trouble finding qualified workers.

Those numbers make contracting look like an easy opening. It is not. A new contractor faces the same labor market, material costs, and scheduling problems as the established firms. The opportunity belongs to owners who already know a trade, understand their local market, and can begin with a service they are able to deliver reliably.

The shortage is real, but it is not the same everywhere

National figures hide large differences between trades and cities. A plumbing company in a fast-growing suburb may have a six-week backlog, while a general remodeler nearby competes for every kitchen project. Public infrastructure, data centers, and advanced manufacturing are creating work in some regions. Slow residential construction may weaken demand in others.

The strongest evidence of a broad shortage comes from contractors themselves. In the AGC survey, 88% of firms reported openings for craft workers, and more than half said available candidates often lacked the required skills or licenses. This helps explain why projects are delayed even when companies are willing to hire.

Retirements add pressure, although many figures about an approaching “retirement cliff” come from old surveys. A prospective owner needs local information: how many licensed tradespeople are available in the intended service area?

The Bureau of Labor Statistics projects about 649,300 openings per year in construction and extraction occupations from 2024 through 2034. Most of those openings will replace people who retire, change occupations, or otherwise leave the workforce. They are not all newly created jobs. Employment in the occupational group is still expected to grow faster than the average for all occupations.

Where a small contractor can find room

Large contractors are built for large projects. Their estimating, insurance, and management costs can make small repairs, maintenance calls and tightly defined specialty work unattractive. A small operation can sometimes serve those jobs profitably, especially when the owner performs the work and keeps the service area compact.

Consider an HVAC technician who begins with seasonal maintenance and equipment replacement rather than bidding on complete mechanical packages for new buildings. The work is easier to estimate, requires a smaller crew, and can produce repeat customers. Similar openings exist in electrical panel upgrades, accessibility modifications, water-damage repairs and maintenance for small commercial properties. The right niche depends on local permits, housing stock, and competition.

Renewable energy is growing quickly. BLS projects employment for solar photovoltaic installers to rise 42% between 2024 and 2034, equal to about 12,000 additional jobs. The work requires appropriate training and is concentrated in particular markets.

Pay in the trades is solid, but new contractors often underestimate how much of each invoice disappears into vehicles, tools, insurance, permits, estimating time, and callbacks. Their rates need to cover far more than the hours spent on-site. A business rate must also cover vehicles, tools, insurance, permits, estimating time, and callbacks. High demand does not make those expenses disappear.

Start with a job you can control

Offering every possible service creates messy estimates and equipment purchases that sit unused. A clearer opening offer might be residential service calls within 20 miles, commercial door installation for property managers or bathroom modifications for aging homeowners.

Review local permit records, competitor reviews, and quoted lead times. Ask suppliers what moves consistently and general contractors which trades are difficult to schedule. Those conversations say more about local demand than a national shortage figure.

Licensing differs by state, municipality and trade. Verify the required experience, examination, bond, insurance, and continuing education with the relevant board. Workers’ compensation rules also vary for owners, employees, and subcontractors.

Build estimates from actual costs: labor burden, disposal, travel, equipment, materials, overhead and profit. Deposits, progress payments and change orders belong in the contract before work begins.

Hiring is where the shortage reaches your own business

A contractor who wins more work than the crew can perform has created a scheduling problem. Early hiring should follow booked work and cash flow. Apprenticeships can build a pipeline, but inexperienced workers require supervision.

Bringing in a subcontractor is useful when a job includes work outside your own trade. Problems start when the same people follow your schedule and work like a regular crew but are still paid as independent contractors. Issuing a 1099 does not settle the question, and getting it wrong can leave the business responsible for back taxes and unpaid wages.

Share schedules early, define subcontracted work in writing, and confirm insurance before the job starts. Rework can erase any saving from the cheapest crew.

Government work is an option, not a shortcut

The federal government aims to award at least 23% of prime contracting dollars to small businesses. In fiscal year 2025, they received nearly 28%, worth about $179 billion across all industries. Some work is reserved for firms in SBA programs.

Federal work may require registration, past-performance evidence, detailed accounting, certified payroll, bonding and enough operating cash. Starting under an experienced prime contractor is often more realistic than pursuing a major direct award.

What the first few months should look like

Complete a small number of jobs cleanly, document the work, and learn where estimates were wrong. Keep job photos, signed change orders, receipts, and labor-hour notes. Ask satisfied customers for reviews while the result is fresh.

Track which inquiries become profitable jobs. If property managers repeatedly request the same repair, turn it into a defined service with a repeatable estimate. If a type of project creates constant scope disputes, change the contract, or stop offering it.

The labor shortage creates genuine openings, but it also punishes weak planning. A licensed tradesperson with a focused service, realistic pricing, and dependable execution has a credible reason to enter the market now. Starting because “construction is busy” is not enough. Start when you can name the customer, the job, and the reason your company can deliver it better than the alternatives already available.