Find aDomain Search Powered byGoDaddy.com ...
You might consider targeting a niche market by specializing in a certain aspect of your industry such as a commercial electrical company.
We earn commissions if you shop through the links below. Read more
Written by: Carolyn Young
Carolyn Young has over 25 years of experience in business in various roles, including bank management, marketing management, and business education.
Published on January 6, 2022
Updated on September 26, 2022
Investment range
$3,250 - $23,100
Revenue potential
$130,000 - $1,000,000 p.a.
Time to build
1 – 3 months
Profit potential
$100,000 - $260,000 p.a.
Industry trend
Growing
Commitment
Full-time
Electricity is something that nearly everyone in the United States uses every day of their lives, one way or another. Electrical services are so important that the electrician industry is valued at over $200 billion. Electricians are highly skilled and are able to do work that is dangerous for the layperson to attempt, which is why they are in high demand. You can start an electrical business and tap into that demand and build a lucrative business.
Starting an electrical business will have challenges and require hard work and knowledge to be successful. This step-by-step guide has all the information and insight that you need to be on your way to start your entrepreneurial journey.
Starting an electrical business has pros and cons that you should consider before deciding if the business is right for you.
Rising new home construction has contributed to the growth of the US electrician industry.
Some trends in the industry include:
Some challenges also exist in the electrical industry which include:
Startup costs for an electrical business range from just over $3,000 to nearly $25,000. The low end assumes that you are already licensed and are going to run your business as a solopreneur from home. The high end includes the cost of training and setting up an office and shop.
You’ll need a handful of items to successfully launch your electrical business. Here’s a list to get you started:
Start-up Costs | Ballpark Range | Average |
---|---|---|
Setting up a business name and corportation | $150 - $200 | $175 |
Licenses and permits | $400 - $600 | $500 |
Insurance | $500 - $1,000 | $750 |
Business cards and brochures | $200 - $300 | $250 |
Website setup | $1,000 - $3,000 | $2,000 |
Education to become licensed | $0 - $10,000 | $5,000 |
Shop and office space security deposit | $0 - $5,000 | $2,500 |
Tools and equipment | $1,000 - $3,000 | $2,000 |
Total | $3,250 - $23,100 | $13,175 |
The average electrical contractor usually charges $75 to $100 per hour. Working from home, your profit margin should be about 80%. In your first year or two, you could work from home 25 hours a week at $100 per hour, bringing in $130,000 in annual revenue. This would mean over $100,000 in profit, assuming that 80% margin.
As your brand gains recognition, sales could climb to jobs that take 200 hours per week. At this stage, you would have a shop and office and staff, including other electricians, reducing your profit margin to around 25%. With expected annual revenue of over $1,000,000, you would make over a quarter-million dollars.
There are a few barriers to entry for an electrical business. Your biggest challenges will be:
Now that you know what’s involved in starting an electrical business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Research electrical companies in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing an eco-friendly electrical contractor.
You might consider targeting a niche market by specializing in a certain aspect of your industry such as a commercial electrical company.
This could jumpstart your word-of-mouth marketing and attract clients right away.
Essentially, in an electrical business, you need to determine how extensive your services will be. Will you just do just basic residential electric repairs or will you do complete upgrades? Will you rewire old homes that have knob and tube wiring? You can even do the electrical installation of new constructions or even large industrial projects.
Electrical services generally command between $75 to $100 per hour. You can also charge your customers for parts and include a markup. Some contractors even add an extra charge to cover some of their overhead, although if you start as a solopreneur from home, you won’t have much overhead. When you’re on your own, you should target a profit margin of about 80% and when you have a shop and staff your target should be about 25%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price point. Remember, the price you use at launch should be subject to change if warranted by the market.
Your target market will depend on if you decide to focus on residential or commercial electrical work. If you choose residential, your market will be homeowners who are a more established group. You can find them on sites like Facebook and LinkedIn.
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and need to rent out an office and shop. Find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
If you’ve never created a business plan yourself before, it can be an intimidating task. Consider hiring an experienced business plan writer on Fiverr to create a professional business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to electrical businesses.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your electrical business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Personal financing or friends and family financing may be your best bets, or you might be able to get a bank loan for your training.
Starting an electrical business requires obtaining a number of licenses and permits from local, state, and federal governments. You need to be a licensed electrician in your state. Check your state’s website for requirements. An electrician’s license is considered a specialty contractor’s license.
Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level licenses and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. You could also check this SBA guide for your state’s requirements.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
For peace of mind and to save time, we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state, and provide them to you to make sure you’re fully compliant.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account. Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your electrical business as a sole proprietorship.
Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You can use industry-specific software, such as ServiceTrade, connecteam, or ServiceTitan, to manage your pricing, bids, scheduling, dispatching, and to monitor your key performance indicators (KPIs).
Some of your business will come from the casual online visitors, but still, you should invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.
Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your electrical business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your electrical business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running an electrical business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in electric for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in electrical businesses. You’ll probably generate new customers or find companies with which you could establish a partnership.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for an electrical business would include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Electricians are in high demand. The industry is worth over a shocking $200 billion in the United States alone! You can start your own electrical business and get just a few watts of that market to make a healthy profit. Even working by yourself from your home, you’ll be doing well since you can charge $100 per hour or even more.
Your skills are valuable, and you’ll be performing an essential service as well. Now that you’ve added more knowledge to your toolbelt, you’re ready to start wiring up a successful electrical business!
If you’re already a licensed electrician, you could start your own electrical business from home for $3,000 or even less if you already have all the tools and equipment. If you need to learn to be an electrician and want to set up a shop with staff, it will be closer to $25,000.
Electricians generally charge between $75 to $100 per hour plus parts. Some also charge a markup on parts and an extra charge to cover the company overhead.
In most states, you need to be a licensed electrical contractor. You also may need other licenses and permits at the state and local levels. Check with your local governments for requirements.
Every state has its own requirements to become licensed. Some require a certain number of hours or years working with a licensed electrician, and some require more formal training. You also may have to pass an exam.
Published on August 16, 2023
Find aDomain Search Powered byGoDaddy.com ...
Read Now
Published on March 16, 2023
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, ...
Read Now
Published on March 10, 2023
When to Use Paychex Flex When to Use QuickBooks Payroll ...
Read Now
No thanks, I don't want to stay up to date on industry trends and news.
Comments