How to Start an Electrical Business – An Electricians Guide?

Below, we will discuss how we can start and grow our electrical service and maintenance business, and whether it is the right business idea for you.

1.   Start with a Business Plan

A clear and comprehensive business plan is essential for any business, including electrical maintenance and service business. Your business plan will help you map your business’s strengths while also discovering opportunities and threats.

In developing your business plan, here are some key factors to consider:

• Initial costs

The initial cost of starting the electrical business can vary depending on many different factors, but it should include costs for licenses/certifications, insurance, overhead, rent for office space, and equipment/tools. They should cost at least $2,000 to $5,000.

If you are not planning to partner up with a certified electrical technician, then you should add costs for education and apprenticeship, which can range from $2,000 to more than $20,000 depending on the educational institution.

• Operational expenses

Running electrical maintenance and service business has relatively small ongoing operational expenses, and in general will only include rent costs, licensing renewal, insurance, and overhead. License renewal should only cost below $500 per year depending on your location, and annual insurance premiums should cost around $2,000. Rent costs and overhead will vary depending on your location and other factors.

• Target market & competition

Nowadays, virtually everyone has electricity, and you can target both residential homes and businesses in your area. You should also conduct a proper competitive analysis to determine the competition in the area and the ratio between the number of competitors and potential target markets.

2.   Business Structure

Getting your business structure right in the first place is very important. Yes, you can change the structure along the way, but you might be charged with extra taxes for doing so, so it’s best to plan ahead.

In the U.S., the most common business structure types are sole proprietorship, partnership, LLC (Limited Liability Company), and corporation. Most electrical technicians opening a business on their own do so in a sole proprietorship form since it is typically the cheapest and easiest option.

However, if you are planning to hire a lot of people or have more than one partner, it’s best to start an LLC or corporation instead to avoid future tax issues. Establishing your business as an LLC or corporation will protect yourself from being held personally liable in legal cases and other issues.

3.   Permits and Licenses

We have briefly discussed this above in the business plan section, but starting an electrical business without first acquiring the necessary permits and licenses can cause various future problems from fines to your business being permanently shut down.

While the requirements might vary depending on your location, here are the most important ones:

a)      Local Business Licensing Requirements

Most states in the U.S. require electrical technicians/electricians to be certified (after passing a certain exam), so you either need to possess one or have a business partner who does.

Depending on your location, local licensing and regulatory requirements may apply. Check with your town’s clerk office for such requirements, and contact the local associations in your area to get a clearer picture of your local/state licensing requirements.

b)      Certificate of Occupancy

Since most likely your business is going to operate out of a physical location, you (or your landlord) will be required to get a Certificate of Occupancy.

If you plan to lease an office location, it’s typically the landlord’s responsibility to get a CO, so check with your landlord whether they have obtained a valid CO applicable for your electrical business before leasing the building.

Remember that after a major renovation, you will need a new CO issued. A common practice is to include a clause in your lease agreement stating that lease payments will not commence until a valid CO is issued to avoid future problems.

c)      Service Agreements

Not mandatory, but it is recommended to require your clients/customers to sign a professional service agreement before starting a new project. This agreement functions to minimize risks of legal disputes, listing what’s expected by clients in the project, payment terms, and completion requirements, among others. If necessary, get help from a legal professional to create a professional service agreement template for your business.

4.   Get Business Insurance

Depending on your location, you might be required to be insured before you can even start the electrical business. However, even when it’s not legally required, business insurance can help protect your business in various events of potential losses, so it’s best to set aside a budget for insurance covers.

While there are various types of insurance policies that might be applicable for your electrical business, you should at least get a General Liability Insurance and Worker’s Compensation Insurance.

Again, check your local association for more clarity about legal requirements regarding insurance in your location.

5.   Growing Your Business

Branding is very important to set your business apart from your competitors and communicate your business’s unique value.

If you buy into an existing franchise, then a lot of the branding and marketing processes are done for you, so you’ll typically only need to pay the franchise fee. If you are starting your own brand, however, it’s important to pay extra attention to your branding and set a marketing budget.

The basic principle, however, is to deliver great value with your service and focus on providing a great experience. Happy customers/clients will turn into advocates and recommend your business to their friends, family, and peers, creating a word-of-mouth marketing effect.

One of the key secrets in maximizing customer experience is to ensure your technicians always arrive on time and complete their jobs ASAP. This is where an automated electrician scheduling and management solution like fieldd can help your business in implementing advanced scheduling to assign the right job to the right technician at the right time.

Conclusion

Starting an electrical repair and maintenance business can be a lucrative business targeting both residential and commercial clients. However, the competition can be very stiff, so as a business you’ll need to stay on top of the game and deliver unique values that can’t be matched by your competitors.

It’s very important to develop the mindset that you and your team will focus on delivering a quality customer experience so your clients and customers can refer your business to their family, friends, and peers – this is the best way to market your business in the long-run.

Using tools like automated scheduling software, online review sites, and social media can also help your business in providing high-quality service and also in effectively marketing your business to potential clients.