Are you a certified electrician? Do you want to set your own schedules? If you answered yes to these questions, you may want to consider starting an electrical contracting business. It'll allow you the flexibility to work whenever you want and also be your own boss.
While starting an electrical business has several benefits, it also comes with certain challenges, which can be difficult for some aspiring entrepreneurs to overcome. Lucky for you, this guide will cover everything you need to know to help you get started!
How to Start an Electrical Business: Nine Steps to Become an Entrepreneur!
According to Verified Market Reports, the electrical service industry was valued at $122.18 billion in 2023, and experts expect it to reach $186.16 billion by 2030. There is plenty of room for licensed electricians to start providing services.
Here are the key steps that you should follow to start an electrical contracting business in the United States:
1. Get the Required Training and Licenses
If you wish to provide electrical services, you must be a certified electrician. This line of work involves a lot of risk, which is why the industry is heavily regulated.
That said, the type of training and licensing you require varies from one state to another. To succeed in this competitive landscape, you'll need to know the ins and outs of the electrical industry. It's best to check with the National Electrical Contractors Association to learn more about the legal requirements.
2. Seek Funding to Start Your Electrical Contracting Business
Unlike many other types of businesses, starting an electrical company requires capital. It is an expensive endeavor that costs $5,000 to $25,000 or even more to get started. You'll need the money for registration, tools, equipment, insurance, and marketing. If you require a license or training or need a van, be prepared to pay more.
The best way to fund your business is with your own personal money. That way, you won't owe anyone when you set up your company, reducing your liabilities and ensuring greater profits.
However, if you don't have enough savings, you may want to consider exploring other financing options, such as microfinancing, a small business loan, or an investment from family and friends.
To secure funding from a financial institution or investor, you will need to prepare a solid business plan, which should include the following:
Cover page
Executive summary
An overview of the business
List of services
Market analysis
Business operations
Marketing and sales
Financial plan
Forbes has published a comprehensive guide on writing a winning business plan. Click here to check out some tips before you write yours to increase your chances of receiving an investment.
3. Register Your Electrical Contracting Business
You must register your electrical business to operate legally in the United States. Here is what you should do to set up your company:
Choose a Business Structure
Before registering your firm, you must decide on the business structure under which to operate. The most common options include sole proprietorship, partnership, and limited liability company. What are these structures, and what are the differences between them?
Registering your business as a sole proprietorship means that you're your own boss. However, since you'll be alone in your entrepreneurial journey, you'll have to deal with the challenges that come your way.
A partnership consists of two or more people running the electrical contracting business. You'll have more support in terms of operating and financing the company, but at the same time, there may be disagreements or disputes between the partners that you must navigate.
A limited liability company (LLC) protects you from financial and legal responsibility in case you run into any problems. That said, the process of registering your electrical contracting business as an LLC is tedious and expensive.
The type of business structure you choose will have an impact on you and your company. It's important to work with an attorney to understand the different options and choose the right one for your electrical business.
Register Your Business Name
Now that you've decided on a business structure, it's time to name your company. Make sure it is catchy, memorable, and resonates with the brand you want to create.
Get a Business License
Check with the local city or state to determine the type of licenses or permits you'll need to operate legally. Without them, you may struggle to find projects and could even end up in legal trouble.
Buy Business Insurance
Due to the dangerous nature of their work, electrical businesses must have the right type of insurance to protect their property, customers, and employees.
Policies like general liability insurance, property insurance, and professional liability insurance can keep you and your company safe from financial harm in case of accidents or injuries.
4. Set up a Business Bank Account
To set up and register your electrical business, you must apply for a bank account. This will also keep your personal and company expenses separate, which is crucial when filing taxes.
Make sure you consult with a banker before opening a bank account. They can guide you to any ongoing promotions or benefits.
You also need to have processes in place to ensure steady operations. Many electrical contracting business owners struggle with managing their finances, which is why you should consider using accounting software. QuickBooks is an excellent option for small companies, but there are many other free tools to explore.
5. Purchase the Right Equipment and Tools
Your electrical van should have the right equipment to help you get the job done. These may include the following:
Voltage tester
Wire cutters
Electric drill set
Screwdrivers and pliers
Safety gear and flashlight
Measuring tape
Electrical supplies, such as soldier wire, cotton buds, flux cleaner, and freezing spray
The type of services your business offers will help you determine the electrical equipment and tools you need. While there may be a lot of things to buy, which can affect your finances, we recommend only getting the things you need to complete your first few jobs.
Once you have cash available, you can visit a hardware store to buy more tools and equipment.
6. Price Your Electrical Services
Since you'll be offering electrical services, it makes sense to price them according to your experience and skills. However, it's also essential to research what your competitors are charging when determining the pricing of your offerings, as you don't want to overcharge and lose potential customers.
When calculating the price of a particular service, figure out how many hours you require to complete that job, the hourly rate, the cost of materials needed, and your profit margin. By adding these amounts, along with state and sales taxes, you'll arrive at the price you should charge for the electrical work.
If you need to create a business plan to attract investment, you will need to think about the prices of your services earlier on. This is important when creating a financial model with revenue and cost projections.
7. Market Your Electrical Contracting Business
As a new business owner, you must consider marketing your services to get customers. There are many different strategies that you can explore without breaking the bank, some of which include the following:
Create a website for your electrical business to get started with having a digital footprint. While there are many resources online that you can use to build your site, it's best to work with a reputable company like Blue Collar Websites, which can highlight your expertise and make it easy for potential customers to reach out to you.
Offer discounts to clients you're working with in exchange for online reviews or testimonials. You can also introduce a referral program to grow your clientele.
Create listings on online directories, such as Google Business, Yelp, and Facebook Business. It should include your company name, a description of your services, and contact details.
Focus on your company's branding by choosing the right colors and investing in business cards and uniforms. Executing electrical work with the utmost professionalism can help you build a good reputation in your locality. Don't underestimate the power of word-of-mouth.
If you have a van to help you get to the client's property, it should have signage that states your business name, unique selling point, and contact number. This will help attract attention and get you a few projects in the neighborhood.
Market your electrical services within your social circle. Reach out to family, friends, and neighbors if they require any help. You can also offer to do the first few jobs for free as long as the client promises to recommend your business to others.
Understand how to effectively use search engine optimization (SEO) and focus on creating SEO-optimized content to divert local customers to your website. While you can learn all of the secrets to ranking high on search engines, the process can be time-consuming. It's best to let an expert help you with this.
Advertise your electrical work online by offering services on B2B and B2C platforms. Here, you'll have access to thousands of potential customers, making it easy to get some projects.
8. Expand Your Electrical Business
After you start an electrical business, you must focus on growing it, which means getting more clients. As you continue to receive projects, you'll need to hire a qualified electrician. Post a job opening on LinkedIn and other platforms to get the right person on your team. Perhaps, consider a web designer for electricians when promoting your business.
9. Partner with Other Businesses
Do some research to find contractors near you and reach out to offer your services at discounted rates to their customer base. This creates a win-win situation for both parties: you gain more clients, and the other business can expand its offerings by collaborating with you.
Tips to Help You Run a Successful Electrical Business
Before you start your very own electrical business, it's essential to understand that you're going to be doing more than just rewiring some fixtures.
You'll have to oversee appointments, handle clients, coordinate with the other employees, manage complaints, and supervise training, among other things. That's a lot of work, which is why seeking help from others can go a long way.
Here are some extra resources that you should consider checking out to help grow your electrical business:
International Association of Electrical Inspectors: As an electrician, you must stay up-to-date with the industry trends and what's happening globally in this field. It will give you an idea of what people want, allowing you to upgrade your services to attract more customers. Plus, it's a great way to brush up on code requirements in all electrical specialties.
National Electrical Contractors Association (NECA): Most electrical business owners are members of different associations, including the NECA and Independent Electrical Contractors. By being part of this circle, you can network with other professionals, learn more about continuing education in your field, and keep updated with the latest industry trends.
Electrical Contractor Magazine: Subscribe to relevant publications and magazines like the Electrical Contractor Magazine to learn more about new products, explore different trade secrets, and find out what your target audience wants.
Other electricians: Talk to other professionals in your field to determine the pricing for your commercial and residential electrical services, understand the challenges, and learn how to avoid the pitfalls. There are many online communities like Electrician Talk where you can connect with like-minded electricians.
Want to Start an Electrical Business? Blue Collar Websites Can Help Establish an Online Presence!
Starting your own electrical business is more complex than you might think. It requires understanding the industry, knowing your target market, and mastering the craft. If you're ready to take the first step toward becoming an entrepreneur, reach out to us. We can also help with how to start a painting business.
At Blue Collar Websites, we are a US-based company with experienced designers who can create websites specific to your trade. Our services include SEO assistance, which means that we will optimize title tags, meta descriptions, header tags, and more to improve your site's visibility and ranking.
Call us at (740) 729-1010 to get started with your very own electrical contracting business!
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