The next step for many journeyman electricians with years of experience is to become their own boss and start an electrical contracting business. Owning an electrical business comes with many advantages but can also be challenging. The difference between a successful electrical business and one that struggles is often the steps an electrical contractor takes at the beginning. Discover the steps to starting an electrician business to get on the right track toward success or check out this case study to learn how an electrical contractor partnered with Sera to generate 450% growth.
1) Secure an Electrician License
Electrical services come with significant liability, so aspiring electrical business owners want to ensure they have a contractor license. Most states require you to be a master electrician to own your own business, but training and licensing requirements may differ depending on the state or city. Check with your state’s labor department about the requirements for a contractor license. You’ll likely have to complete and pass state exams to earn licensure.
2) Research the Market
The next step in starting an electrician business is researching the local market. This will help you determine demand for electrical services, pricing models, and how to differentiate your business. Market research will include establishing the number of electrical contractors in the area, the services they offer, and what they charge. Your findings help identify a gap in electrical services that your business can fill. This gap is called your unique value proposition, or what makes you stand out from others in the local electrical industry.
3) Estimate Startup Costs
Calculating the various costs of starting your business helps determine how much funding you may need. There are fees for registering the business, obtaining licensure and certification, and getting insurance. If you hire an accountant to help with the business plan, you’ll need to pay this person. Factor in the costs of equipment and vehicles, as well as other tools for running the business. Include rent or mortgage costs for the office and utilities for that space. Finally, include wages for employees and your salary.
4) Draft a Business Plan
Market research gives you an idea of the direction of your electrical company, and from there you can create a business plan. The typical business plan will include the following:
- Executive summary: Establishes the overall mission of your business and key differentiators in one page
- Company overview: Discusses business structure, business name, strategic goals, and target market
- Market analysis: Explains your target audience (personas), local business competitors in the area, and how your business responds to an unfilled need
- Services: Provides a list of the services you plan to offer and a pricing structure
- Marketing and sales: Explores potential marketing strategies and sales tactics for attracting and retaining residential homeowner and/or commercial customers
- Financial projections: Forecasts revenue for the first year or few years (often includes a profit and loss (P&L) statement)
A business plan isn’t just a helpful guide for an aspiring contractor or small electrical business. It’s also necessary for securing business loans. As with any startup, lenders want a business plan to gauge the potential success of the investment. It may be challenging to get funding from any lender without one.
5) Register the New Business
Once you secure funding, you can begin the initial steps of owning a business. First, you must register the business. Before registering, determine your business structure. There are several options. Your business can be a sole proprietorship, where you have total control over the business. If starting the company with several other electricians, your business will be a partnership. Some electrical contractors opt for a limited liability company (LLC) to protect themselves against legal issues that may arise.
You also need to register your business name. This is where you can get creative. Your company name should be unique yet easy for potential customers to remember. In addition to the contractor license, you may need a business license as an entrepreneur. Find out the licenses and permits you might need in your state or city.
6) Obtain Business Insurance
Business insurance is vital for protecting your electrical company against risk. General liability insurance is a must-have, but additional policies you might need include:
- Workers’ compensation insurance for employees
- Property insurance for offices and electrical equipment
- Cybersecurity insurance for digital payments
- Commercial auto insurance for business vehicles
- Loss of income insurance in situations where your business is inoperable
- Errors and omissions insurance for mistakes with electrical work
7) Develop a Pricing Structure
Thinking about the costs of operating an electrical contractor business beforehand is helpful because it guides your pricing structure. You need to charge enough to cover all expenses and still make a profit.
There are several approaches to pricing. One is to charge by the hour and the other is flat rate pricing. Each has benefits and drawbacks, so electrical contractors need to determine which pricing structure works best for the business. In some cases, evaluating electrical jobs on a case-by-case basis is best.
Along a similar vein, contractors want to open a business bank account. This helps separate personal assets from business assets, which simplifies taxes.
8) Obtain Electrical Tools and Equipment
Proper electrical installation and repair aren’t possible without the right tools. Provide a better employee experience for your electricians by ensuring they have the tools and equipment they need to get jobs done right the first time. These supplies include:
- Hand tools (screwdrivers, pliers, hammers)
- Measuring tools (voltage testers, circuit analyzers)
- Personal protective equipment (safety goggles and gloves)
- Toolboxes
9) Devise Marketing Strategies
You’ve established your target market — how will you attract them to your business? This is where you begin developing your brand. Your brand includes your key differentiators, your mission, and your values. It’s also about aesthetics, such as your logo and color palettes.
Between traditional and digital marketing mediums, there are numerous ways to get the word out about your business and grow your customer base. In today’s digital world, some of the best options include your website, social media, and email. Word of mouth can also be effective; as you obtain more customers, create incentives such as discounts for referrals to friends and family. Over time, you can get creative with your marketing mix, from business cards, to website SEO, and even podcasts. For more tips on how to generate leads via Marketing, check out our marketing blogs.
10) Hire Qualified Electricians
When passionate, professional electricians are in your employ, it boosts the customer experience significantly. To find the best electricians, create job descriptions that clearly outline the qualifications and attitudes of the ideal candidate. During interviews, ask questions that help show the candidate’s knowledge in various situations to determine their skill set and level of experience.
Bonus Tip: Connect With Industry Associations
Launching your own electrical business involves much more than tracking cash flows. You'll need to juggle scheduling, dispatching, drafting proposals and templates, managing billing, marketing your services, training your team, and addressing customer issues. It’s a lot to handle, especially when you’re aiming to grow your business.
To help you navigate the journey, here are some key resources for electrical business owners:
Boost Your Electrical Contracting Business With FSM Software
These steps will guide you toward success when starting an electrician business, and you can also find tools to ensure long-term success. For instance, field service management (FSM) software helps streamline tasks like scheduling, dispatching, and invoicing to enhance operational efficiency.
Sera offers electrician software designed with the needs of residential contractors like you in mind. Electrical contractors who choose our software reduce inefficiencies and pricing errors, often enabling them to add more money to their bottom line.
Contact us today to schedule a 15-minute discovery call and learn more about FSM software for electricians.
