How to Start an Electrical Business

You're a qualified electrician. You've put in your time as an apprentice and think it's time to start an electrician business for yourself.

Yes, you might know a lot about installing, maintaining, and repairing electrical wiring and electrical systems in residential and commercial buildings, but are you aware of what's involved in starting an electrician business?

While being your own boss comes with rewards, successful entrepreneurship takes planning, commitment, and a detailed understanding of your legal and professional obligations. Here's a guide to some of the most important things you need to know about starting an electrician business.

Training and Outlook for an Electrician Business

To become a professional electrician, entry-level education requirements are a high school diploma or GED. Many in the field attend a technical school to get background courses in the trade and then proceed to on-the-job training, known as an apprenticeship. Most states require electricians to be licensed.

There is a high demand for trained electricians. The U.S. Bureau of Labor Statistics (BLS) sets their median pay at $56,900 per year or $27.36 per hour. Growth in the profession will rise by 8% over the next few years due to the rising demand to install, maintain, and repair electrical power, communications, lighting, and control systems in homes and businesses.

Of course, when you run your own electrical contracting business, you have the potential to make much more than this if you have licensed electricians working for you. The downside is that you'll need to take on a lot of responsibilities, ranging from managing and paying staff to taking care of various legal and tax requirements.

When it comes to what you can ask customers to pay, HomeAdvisor points out that electricians charge between $50 and $100 per hour. The full cost to complete most home electrical jobs ranges between $162 and $522. These rates depend on the type of job undertaken and the license and experience of the electrician in question (are they a journeyman or a master?).

Prepare Before Powering Up Your Electrical Business

Before the sparks start flying, you need to plan for starting your electrician business. What are the costs involved? What equipment will you need? What do the competition and market look like?

Startup and Ongoing Costs for an Electrician Business

When starting your new business, you'll need to factor in some investment costs. These often include:

• Registering your business
• Certificates, permits, and state licenses
• Electrical equipment and gear
• Insurance
• A truck or van

You may also have to rent or lease office space if you don't work out of a home office and storage space for your equipment and vehicles. Many electrical companies also have to factor in startup marketing and branding costs, which might include logo design and application to uniforms, vehicle signage (with your phone number and web address), business cards, websites, and more.

You will also have fixed or overhead costs, which stay the same no matter how much or how little money you make. These could include office rental fees, utilities, and electrical worker salaries.

Electrical Equipment and Supplies Needed

Depending on what type of electrical work you do, you'll have to invest a fair bit in equipment and supplies. The tools and supplies for your electrical contracting business might include:

• Voltage indicator
• Insulated screwdrivers
• Wire cutters
• Wire strippers
• Multifunction tester
• Battery drill
• Electrical wall chaser
• Fish tape
• Electrical tape
• Solder wire
• Solder flux
• Solder wick
• Flux cleaner
• Cotton buds
• Freezing spray
• Kapton tape
• Wire wrapping wire
• Single-core wire
• Multi-core wire

Research Your Target Market

As you plan your electrician business, you will have to decide who your market is. Generally, electrician services fall under one of two categories: residential electrical services and commercial electrical services.

With residential work, you will be dealing with homeowners and single-phase service. With commercial work, often working as one of the construction industry trades, you will be servicing buildings, offices, shopping centers, and schools, often dealing with a greater power draw and three-phase service.

You should look at your competitors for your market, including what they charge and which services they offer. You might choose to differentiate yourself by pricing or by the high quality of your work and customer service. You might try to specialize the type of work you offer, honing in on a market that might not be served so well (e.g., installing and repairing outdoor lighting or installing smart solutions for the home).

Average Project Rates

While what you charge depends on your experience, licensing, and what your market can bear, here are some sample project rates provided by HomeAdvisor:

Create a Professional Business Plan

Creating a business plan is an essential step in launching an electrician company. It usually looks a few years ahead and reveals the steps you'll take to meet revenue and growth goals. It serves as a strategic roadmap that you will check all business decisions against.

A traditional business plan usually includes a description of the company and the services you will offer, how the company will be organized and managed, your marketing and sales plan, and your financial projections.

Ensure There Are No Shocks Before Starting

Before you power up, you need to look after some legal, financial, regulatory, marketing, and day-to-day operations matters. These include:

Taking Care of the Legal, Tax, and Banking Stuff

To act as a business, you need to register with the secretary of state and choose the type of business structure you want. The choices include a limited liability company (LLC), sole proprietorship, partnership, or corporation.

Although sole proprietorships and partnerships are fast and easy to set up, the lack of separation between personal and business assets can lead to liability and tax issues. An LLC provides the separation between these assets, giving the owner or partners important protection, and provides the kind of flexibility these other companies have. A corporation would typically be used for a large venture.

For federal tax identification purposes, you'll need to apply for a free employee identification number (EIN) from the Internal Revenue Services (IRS) website and may need to get a state tax ID, as well.

You should also set up a business bank account and business credit card. These will help keep your personal and business assets separate, simplifying your work at tax time. They can also serve to create a good credit history for your company, enabling you to apply for business loans and extended lines of credit.

Getting Your Licenses and Insurance in Order

Most states require electrician companies to get licensed, allowing them to bid on projects and apply for the necessary permits for projects. They may also need to obtain a generic contractor license in some places. Depending on the state, the contractor license might be given to individual employees or the entire company.

While licensing requirements may vary by state, they may require:

• Application fee
• Unemployment and workers' compensation insurance information
• Certificate of authority (if the business is a foreign entity)
• Licensed electrician information
• List of officers or members

The majority of cities and counties demand that electrician businesses get a permit before performing electrical installations, alterations, replacements, or repairs.

Businesses operating out of a physical office usually need to get a certificate of occupancy (CO), confirming they have complied with all building codes, zoning laws, and government regulations.

Business insurance for electrical contractors can vary depending on location, size, payroll, sales, and experience. It's important to have since an improperly wired house could catch on fire and cause a lot of damage.

Usually, an insurance package will include:

• General liability insurance
• Errors and omissions
• Commercial property
• Workers' compensation
• Contractors' equipment coverage

Sparking Interest With the Right Marketing

To keep your doors open, you need to get potential customers through them. This is done by building a sound marketing strategy. Yes, you can do traditional or online advertising, but there are also low-cost and no-cost alternatives. You could, for example, help your word-of-mouth referrals by printing up business cards that can be given out to people.

A lot of people like to read online review sites before choosing a business. Some free online business review sites you can participate in include Google My Business and Yelp.

Online marketing, selling, and customer relations are increasingly important tools for businesses. Utilize your social media channels to stay connected to customers and post information about your services. You should also have a website providing information about your services, connecting to your social media platforms, answering customer queries, and letting them book appointments and services.

While you can hire a professional creative agency to handle your branding, logo, and web design, it's sometimes easier and less expensive to find independent design and branding talent through a site like Upwork, connecting freelancers with clients. If you want to do the web design yourself, you can use a simple site-building platform like Squarespace, Wix, or Weebly.

If you want to rank high in search engine results, you should also consider hiring a search engine optimization (SEO) firm.

Running Daily Electrician Business Operations

Of course, there's more to electrician work than doing electrician work. Your day-to-day administrative duties can include:

• Sending estimates, invoices, and receipts, which can be made easier if you have custom-branded templates from Skynova
• Making appointments
• Doing accounting, with a full-featured package that doesn't require professional accounting knowledge to use and helps keep a regular cash flow
• Taking care of payroll and deductions (if you have employees)
• Setting up an email list for your customer base
• Setting up a payment system so that you don't have to deal in cash alone

Make Your Company a Success

Starting an electrician business can be hard, so it helps to have a small business resource dedicated to getting you paid faster with the kind of billing, accounting, and other services you need.

Our online business modules are easy and intuitive to use. Check out Skynova today to learn more.