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How To Start an Electrical Business

How To Start an Electrical Business

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Posted by Brad Smith

January 1, 2020

If you're a residential or small commercial electrician, there's a good chance you've thought about starting your own business or have already taken steps to do so. And you’ve figured out there’s so much more to running an electrical business than just knowing the trade. That's why we've put together a comprehensive guide to help you understand the steps you need to take related to you your legal and financial requirements, the tech you’ll need, finding and specializing in a niche, and more. The guide is filled with curated advice from successful business owners and other industry experts about things they wish they’d known when first starting out. We’ve also pulled the steps together in a printable check-off list. Let's get started!

Electrical Business Start-Up Costs and Beginning Finances

A residential electrical business has relatively low start-up costs compared to other home service industries. But even if it takes less upfront capital to get started, day one is the perfect time to begin thinking about your business's long-term financial goals. Here are a few things to consider.

Steps

  1. Add up your business expenses

  2. Assess your personal expenses not covered by other income or savings

  3. Estimate your initial monthly revenue

  4. Calculate your

    break-even point

  5. Figure out your

    business credit score

  6. Compare financial options for your startup costs

  7. Write a business plan

Where Do You Want to Head?

At the heart of

Ron Douglas’s plan to make six figures in six months

is setting specific goals and creating a blueprint in to meet them. He suggests new businesses start with a six month goal and break the goal down into monthly action steps. Month number six is your vision; months one through five is how to get there.

What’s a realistic goal for you? Start by figuring out what you need. Add up your business and personal expenses, and what you think it’ll take

in addition

to these expenses to truly grow your business.

Set a revenue goal, then work backward at creating actionable steps to meet it. Most likely, you’ll end up adjusting all of it over time: your goals, expenses, and your strategy. But you have to start somewhere.

The Legal Stuff: Electrical Business Requirements

If you’ve worked as an electrician, you’re already aware of the licensing requirements of your state. But to run your own business, you’ll also need to

register your business

on the federal, state and local levels, including registering for a tax ID. You’ll need this ID to open a business banking account and get insured. If you’re not sure how to register, you can work with a

registered agent

.

Steps

  1. Make sure you have all the licenses you need 

  2. Incorporate and register your business 

  3. Apply for a tax ID

  4. Open business bank account

  5. Apply for insurance and bonding

Drew Abrams had been doing side electrical work until 2017, when he decided it was time to go all in and start his own business. “The hardest part about it was getting all the paperwork in order, getting a federal tax ID, a state ID, and all the proper licenses that I needed.”

Drew is based in Indiana — a state that doesn’t have an overarching license requirement. Each municipality is in charge of its own set of requirements. If Drew is working on a project in Indianapolis, the license and permits he’ll need are very different than what he’ll need for a job in Carmel, an adjacent city. As a result, Drew has seven local licenses with different sets of requirements for each.

Tips:

  • Many states or cities require a specific amount of general liability insurance. Know what you’ll need before applying for coverage.

  • Make a list of all the cities, counties, and other locales that you’re interested in covering, research and make a list of their license and permit requirements. It’ll come in handy when you’re picking up customers in new places.

Include your license number in all advertisements. In order to avoid fraudulent companies from getting business, many states (

like Maryland

) require home service businesses to put their license number in all ads. Check with your state to see its official requirements for advertising.

The Technical Stuff: Electrical Business Scheduling, Invoicing, Payment & Quickbooks

Administrative tasks are one of the biggest time sinks that business owners face, and the solution is to automate as much of it as possible.

Steps

  1. Set up a website and social media profiles

  2. Shop for and invest in tech platforms (see chart)

  3. Create calls-to-action (CTAs) on your website and social media profiles

It can be helpful to chart out all of the administrative tasks you’ll need to do on a regular basis, and then see what kinds of tools and features can make these tasks easier. To get you started, take a look at the following table, which goes through what happens before, during, and after a job and matches up tools that can assist you throughout the process.

Customer LifecycleTech NeedsWork Order LifecycleOperations
Consumer searches for a service providerSocial media management
Online booking & schedulingNew job is created
Job management and dispatchJob assigned to technician and added to schedule
Customer is notified and reminded of upcoming appointmentEstimate ManagementTech prepares quote
Customer accepts estimateInvoicing & Payment ProcessingJob is completed and payment is taken or invoice is sent, then receipt is sent
Customer paysReview ManagerRequest for review is sent
Customer books another service or signs up for recurring servicesEmail marketingCustomer is sent a follow-up message
Bookkeeping Payroll

Additional Resources From Our Blog

The Supplies

Going out on your own full time, there’s likely some tool upgrades or investments you’ll need to make. Our biggest piece of advice here is to reinvest a portion of what you make off of each job back into the business, including upgrading tools that can help you do the next job faster and more efficiently. 

Steps

  1. Assess and fill tool inventory

  2. Rent office front and/or warehouse space (if needed)

  3. Invest in a service van or truck

Ask the Pros

What equipment investments should you make? As other pros. You’ll find tool recommendations in electrician forums on

Reddit

,

Mike Holt’s Forum

, and

electriciantalk.com

. You can also find

tool review videos

on the Journey 2 Master YouTube Series, among others.

Supplies to Build a Professional Presence

Our pros consistently talk about the importance of maintaining a professional appearance. While this starts with basics like grooming and cleanliness, wearing company uniforms (even if you’re a one person operation) can set you apart. The more professional you look, the more professional people will treat you. When your uniforms match your van or truck wrap, business cards and website, it creates an inclusive, memorable brand experience.

 

Positioning Yourself in the Market 

Defining your target market and ideal customer enables you to take control of the direction of your business. We’ll look at what this means and how to go after customers who are the best fit for you.

Steps

  1. Outline your target market and ideal customer

  2. Decide if you want to specialize

  3. Update your brand messaging and service offerings accordingly

Defining Your Target Market and Ideal Customer

A target market is the general group of people you’d like to work with, such as homeowners or small businesses in your area. Ideal customers are the people

inside

of those groups that are the best fit for you. For instance, homeowners of a certain income bracket or those considering a remodel or addition. 

Knowing who you want to work with can help you make decisions around where you advertise, what services you choose to offer, and how you price them.

And here’s where we get into the finer strategy of your business. Do your website and the rest of your branding efforts speak to the people you most want to do business with? Your messaging should speak directly to your ideal customer. Knowing who you want to work with on what kinds of projects will help you fine-tune your business plan and brand.

Case Study: Ideal Customer Looking for the Experience

Jennifer Clements Wells of

Clements Electric

explained that their ideal customer has changed. 

They used to be the person who needed work ASAP.  “Now, our ideal customer is somebody that is not looking for a deal but looking for an experience. They know that they're going to get someone that's going to be on time and that their estimate is going to be done quickly. They're not price shopping, they're looking for the experience.”

Jennifer has found that her best customers find them on Google. “They are looking for the really good reviews that has a little bit of caution to cost, but it's not their ultimate decision factor.”

Knowing who their ideal customer is and how they find them has helped Clements Electric know where to invest their time and marketing dollars. They stopped working with Angie’s List. They started encouraging customers to leave reviews. 

And they prioritize trade shows where potential customers can have personal interactions with service providers. “You can ask me questions; you can vet us and find out if we're a good fit for you. We’re not everyone's company. And if they walk away and say no and that's saving us because that's not going to turn into a bad review or an unnecessary experience.”

Choosing Specialties

Most residential and small commercial electricians cover basic troubleshooting, panel and circuitry work. Beyond that, you get to choose what you’d like to do and what you’d like to be known for. Better yet, specializations can help you attract your ideal customer.

For residential electricians, there are a ton of things you can specialize in, such as exterior lighting, new construction designs, solar energy, or smart home hookups. It can take some digging to find good certification programs.

Colby Hunter of

Hunter Electric

took lighting design classes and began designing landscaping lighting. “That puts me in front of customers with million dollar homes all the time. And that customer in the million dollar home is not just going to pay for landscape lighting,” he explained. For instance, his team also specializes in hooking up swimming pools, hot tubs and spas. According to Colby, “Most people leave so much on the table because they haven't bothered to put forth the time to learn about these other components that are going to be in a house, but you don't see every single day.”

Setting Your Services and Rates

As discussed above, knowing who your ideal customer can help you decide what services to offer and how to price them. So does setting revenue goals and knowing how much an average job actually costs.

Steps

  1. Create a list of services you’re able or interested in offering

  2. Create a price list for all of your services

  3. Choose between a

    flat rate or time and materials

    pricing structure

  4. Create a contract template

  5. Write up a terms and conditions document

Setting Rates for Service Calls 

Here are some things to consider when setting your rates.

Should you waive a diagnostic fee?

Many professional electricians will charge an

initial diagnostic fee

to offset the time it takes to drive to a customer and diagnose the problem, but some companies will waive the fee when the customer consents to a job. Just keep in mind that you want to charge at a point where you will remain profitable after deducting your fixed and variable expenses.

Should you charge by the hour or a flat rate?

Many electricians are moving from a time and expenses system to charging flat rates. This gives customers the security of knowing what they’re agreeing to ahead of time. But there are some caveats to keep in mind:

  • You don’t need to treat repair work like install or new construction gigs. Many electricians offer very different flat rates for different kinds of jobs.

  • Have a game plan when things go way differently than you expect. If you give an estimate, consider adding terms for what happens when the job goes over a certain number of hours or requires more parts than you initially thought.

  • It’s okay to charge different rates for different technicians — especially dependent on their experience level.

  • When calculating prices, make sure your total price will not only cover your expenses but also give you a profit. 

Selling Recurring Service Plans

When setting your services, don’t forget about

recurring service plans

. Customers subscribe to a scheduled fee — typically monthly or annually – in return for discounted services or other benefits.

These plans are a great way to increase the value of a current customer. As electrician Jason Shadowen, owner of

Service Detectives

, explained at one of our

Mastermind events

, “They get you back in the home every year.”

His advice: “Don’t sell it on the price, sell it on the benefits.” His

plan members receive benefits like no dispatch fee, priority scheduling, discounts on emergency services and member-only coupons.

Additional Resources From Our Blog

Electrical Business Marketing

“The number of avenues that clients take to potentially find a contractor’s doorstep are tenfold increase from what they were even ten years ago. That's good and bad. It’s difficult, especially for someone starting off, who take a look at that and say,

What the heck am I supposed to do?

That stresses people out, and it really thins out their effort. The hard part is really finding the right recipe.” — Chris Lonergan, President of

Footbridge Media

,

In this section, we’ll look at how to use a mix of short-term and long-term marketing strategies to build a robust and effective marketing recipe.

Steps

  1. Create a marketing plan

  2. Design business cards,

    van wrap

    , and other marketing materials

  3. Sign up for Google My Business

  4. Claim your business on other lead generation platforms

  5. Optimize your website for search engines (SEO)

  6. Join digital and in-person networking groups

Chris advises new businesses to consider both short-term and long-term strategies. In the short-term, you need business ASAP. While businesses can often bring in some business through word-of-mouth, it’s usually not enough. In the short-term, businesses tend to rely heavily on more expensive lead generation sites, paid print or online advertising where you’re essentially paying for each individual lead. 

The goal over time should be to move to more brand-based marketing which impacts a greater number potential customers at once:

“The long-term is making sure you've got a strong website that you're continually adding content to. Social media is great even if post once a once a week just to show what you're doing on the job. It helps to humanize the business. In the long-term, that's really important. Same thing with online review generation. That's incredibly important now more than ever to have good, strong Google reviews, not just for people but also for the sake of optimization,” Chris explained.

Short-Term Lead Generation

Purpose: Gets business quickly

Examples:

  • Lead generation sites like Home Advisor, Thumbtack, Angie’s List

  • Pay-per-click Advertising (Google Ads, Facebook ads)

  • Initial friends and family networking

  • Working with home warranty companies

Long-Term Lead Generation

Purpose: Has cumulative effect that continually increases return on investment (ROI) over time

Examples: Search Engine Optimization (SEO)

  • Accumulating Online Reviews

  • Social Media Presence

  • Referral programs

We often see businesses that continue to favor short-term tactics because they don’t immediately see the benefit of these other long-term efforts.

“If a bodybuilder went to the gym and lifted a couple of weights and said, ‘I really don't see any improvement today, so I guess I'll stop’ —  it’s kind of the same story with organic search, and social media and your website presence. It's really about that cumulative effect … Unfortunately, you really have to stick it out and try it out for a long time, which is the scary part.” Chris said.

Get Help Early On

Why build a relationship with an agency sooner rather than later? Building a brand and marketing strategy is time consuming: from designing a logo, building a website, maintaining a social media presence, and so much more. 

Chris explained, “You can be busy and not be productive. There may be technical issues that an electrician wouldn't even think about because their expertise is in their industry. So it makes sense to lean on someone whose expertise is online marketing, especially for that long-term investment.”

You can also save money in the long-run. Marketing and advertising simply requires trial and error, but working with an experienced company can prevent lots of beginner mistakes. For instance, Chris explained that many people hear of the horror stories of their friends and peers losing tons of money on paid advertising. “But when you have an agency who knows how to geographically restrict your ads,  you're not showing your electrical repair ads to someone three states away and burning money that way, it makes sense to have someone who knows what they're doing and all they do all day long is focused on that type of ad for that type of industry.” 

Case Study: How $300 in Coffee Turned into over $4500 in Sales

Mike Parks, owner of Electric Medics in Orange County, California, bought customers their next cup of coffee at his neighborhood coffee shop. Over two months, he spent $300 on coffee and

saw a 1300% return on his investment

.

electricalmarketingexample

How He Did It

He approached the owner about placing a sticker with his company’s logo and contact information on the coffee sleeve. He prepays for $150-worth of coffee and sits in the shop for as long as his budget lasts.

Why It Worked

Mike believes the idea was successful for a few reasons. 

1. It’s Personal Without Being Pushy

Mike doesn’t approach customers to start up a marketing conversation. Instead, he’s available if they want to talk to him. When people

do

talk to him, he gives them a business card with his cell phone number on it.

2. It’s Unique

When people need an electrician, they’re inclined to remember the guy that bought them coffee. Mike believes it’s important to think outside the box to find ways to make his business stand out.

Additional Resources From Our Blog

Hiring: Your Path to Growth

You'll most likely start as a one-person electrical business. Many electrical businesses stay as a one or two-person team. But if you're keen to grow your business, you'll need to hire in a few extra pairs of hands.

Steps

  1. Assess the numbers (what can you afford?)

  2. Research the legal requirements (federal, state, and local) of hiring someone

  3. Outline the hiring and onboarding processes

  4. Set up functions to handle salary and benefits

  5. Create job listing ad

Where to Look

“Indeed offers free posting and company profile page. Set up your company profile page with keywords of the word clusters that job seekers would search for. Also, try pointing people to Indeed which has great SEO, so those results should show up great. For example, make multiple job pages in Indeed, like Level 1, Level 2, Level 3 (entry-level technician, ideal technician, superstar technician).

Many times the tech is lacking something and needs more experience or training. By having multiple job descriptions with different expertise/skill sets, it shows techs that you are willing to allow them to grow and that you recognize growth opportunities. So instead of just one job posting, now you have essentially three listings. It takes roughly 45 days to cycle through organically. Leave it up all year round.”

How to Train and Manage People

Training Employees

According to Colby Hunter, one of the problems of training electricians is the lack of focus on soft skills, which often isn't touched on at all in trade schools or apprenticeships.

"Growing a business in the residential sector, the most important thing isn't how much you know as an electrician, it is 100% your customer service skills. It's about being able to deliver a positive experience to your customers. And that positive experience has a lot of components and the smallest of which is actually be able to fix their electrical problem." 

If you're finding soft skills an issue with your new contractors or employees, you should consider holding a soft skills training session every week. That's what Colby Hunter does. He uses a mix of training professionals and online resources on a mix of customer service and sales topics. 

"I'll have my techs present if they have like a big win or something like that. It's almost like a testimony. They'll get up there and testify, so to speak, on what it was that made the difference to their customers and where they got the big win." 

The Result: Higher Rates and Better Employee Retention

Over the past two years, Colby raised his rates over 50% because his customers loved his techs and trusted his services. 

"So you hire good people that you can trust, and you can raise your prices and increase your profit margin, and you can afford to pay those good people more money to stick around. And even though you're paying those guys more than market rate, it doesn't matter because they're making you way more than that." 

Another Tip for Employee Retention: Show Appreciation

Drew Abrams recently bought all of his technicians batteries for their headlamps. “I also bought them new Phillips tips for their impact drills. So I spent 10 bucks per employee and now they're ecstatic and super happy and motivated again. You’ve got to keep them happy. You keep them happy, and they'll stick around.”

More Resources from Our Blog

Where to Go From Here

We know there’s a lot to do and encourage you to find community to support you in this process.

In 2017, Wells Electric did $380,000. They’re expecting to end 2019 with $1.1 million in revenue. Jennifer Clements Wells explained that her family-run business took off when they began using Housecall Pro and discovered the online community of pros (managed by Housecall Pro) that supported each other. 

The Case for Community

“Running a business is so incredibly lonely,” Jennifer explained. “Before Housecall Pro, there was not a place where businesses our size could go and ask questions. We were a four person business. You could go and hang out with the big dogs, but they don't talk. And so when I discovered the group, I just ate it up. Every single day, I was reading and posting and taking criticism and feedback and molding my business off of the ideas of others.”

Jennifer’s advice to other businesses is to learn to ask questions. “You've got to ask questions even if things are going positively. Ask the question.”

Housecall Pro runs

local meetups

where pros can network with other pros in their area, as well as national regional

Mastermind events

.

You can find extra support from local and national associations.

See also:

For general business resources, we recommend:

Check out a longer list of

small business associations

.

Finally, don’t forget to download the ‘How to Start an Electrical Business Checklist’ — a summary of all of the steps we went over in this guide.

How to Start an Electrical Business Checklist

1. Where Can You Get Help?

  • Have you prepared a list of

    associations

    you can join?

  • Are there local

    small business networking events

    in your area?

  • Do you need to upskill on any

    industry-related training

    ?

2. Electrical Business Startup Costs 

  • Do you know how to

    calculate overhead costs

    ?

  • Do you know how to calculate your

    Break-Even Point?

  • Do you know how to calculate an

    average transaction value (ATV)?

  • Do you know how to calculate the

    average revenue per client (ARPC)?

  • Have you researched different

    grants online?

  • Do you know what your

    tax benefits and deductions

    are

    ?

  • Have you signed up for a

    free small business mentor

    online

    ?

3. The Legal Stuff

  • Have you

    registered your business

    yet

  • Have you signed up for

    electrical business insurance?

  • Do you have a

    business checking account? 

  • Have you written your

    terms of service? 

  • Have you signed up for an

    electrical business license

    ?

  • Are you interested in becoming a

    franchisee

    ?

4. The Technical Stuff

  • Do you know how to keep

    track of sales?

  • Do you have an

    online invoicing software?

  • Do you have an

    email marketing software? 

  • Do you have an online tool that can

    accept credit card payments? 

  • Have you registered for

    Quickbooks online?

  • Have you added an

    online booking option? 

  • Have you considered

    streamlining

    your business early on?

5. Equipment Needed 

  • Have you considered purchasing

    wholesale or used models

    ?

  • Do you have a

    uniform

    for your business?

  • Have you purchased a

    service truck or a used van

    ?

6. Positioning Yourself in the Market 

  • Have you selected a

    niche

    or

    specialization

    in your field?

  • Have you explored the pros and cons of

    residential and commercial

    electrical business?

  • Are you thinking of

    charging a diagnostic fee

    ?

7. Electrical Services Pricing 

  • Do you know how to

    set your rates

    ?

  • Will you

    charge per hour or fixed-rate

    ?

  • Have you factored into account all the

    costs and potential costs

    associated with a job?

  • Do you know the

    national and regional average price

    for an electrical job (within your niche)?

  • Do you know how to calculate your

    net earnings

    ?

8. Your Offerings: Electrical Services List

  • Have you put together an

    electrical services list

    ?

  • Have you considered

    specializing down

    even further?

 

9. How to Get Leads: Electrical Business Marketing Services 

  • Have you made a plan to

    prioritize reviews and referrals

    ?

  • Have you joined a

    business network

    ?

  • Have you joined online

    Facebook Groups

    ?

  • Have you come up with several ways to

    retain customers

    ?

10. Your Path to Growth: Hiring

  • Do you know when to

    hire

    ?

  • Do you have all your

    company processes

    in order?

  • Have you

    made a plan to train and manage

    people?

Download the 'How to Start an Electrical Business Checklist' now, if you're keen to get started!

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