Are you a master electrician ready to take the next big step in your career? Starting your own electrical business can be a rewarding way to gain independence, increase your earnings, and build something lasting. You’ve put your energy into becoming a master electrician, but you may be wondering how to start an electrical business. This guide will walk you through five essential steps to help you launch your electrical contracting business with confidence, from obtaining the right licenses to planning for growth. Let’s get started!
1) Secure a Master Electrician License
First things first: To operate an electrical business, you must have an electrician license and be certified as a master electrician. Review the rules and regulations for licensing at the state and local levels for where you intend to start an electrical business. Make sure that you and any other technicians are properly licensed and certified.
2) Research the Market
Researching the market includes looking at how much of your service area is residential versus industrial. For a residential electrical business, you’ll want to research who your typical customer will be in your service area–their income, the kind of electrical jobs they need help with, and the best way to reach them for marketing purposes.
Researching your potential customers is just one side of your market. You’ll also want to research who your biggest competitors will be, what they charge for their services, and how your prospective customers view their services.
Researching who your potential customers and competition are will give you insight into how to set up the pricing for your services and how to get the word out about your new electrical business.
3) Estimate Startup Costs
Launching your electrical contracting business is going to require a significant financial investment upfront. The investment you need to put into it really depends on the needs of your specific business. According to ZenBusiness, you could expect to “shell out between $60,000 and $200,000 during the first year.”
Beyond tools and equipment, here are some required upfront costs to make sure you consider:
- Licensing and certifications: $200-$1,500, depending on state requirements
- Business registration for LLCs and corporations: $50-$500
- Insurance: $2,700-$10,000/year
All the other costs are contingent on need and how you choose to fill the need. For example, you’ll need some software to help you manage jobs and accept payments. You could easily spend up to $2,000 a year on software subscriptions, or you could find a modestly priced solution and use Project 2 Payment for all your estimating, billing, and customer communication needs for just $20 a month ($240 a year).
When it comes to buying on-the-job equipment, determine what you need to buy in advance and what you can order on a need-to-have basis for a job—especially when it comes to high-cost items. Many electricians end up buying and storing more parts than they need, costing them a lot of money up front and forcing them to find a storage facility. Often, charging a down payment at the front end of a job will help give you the cash flow to buy the remaining parts you need to finish that job.
Do your research and determine what your true needs are for your business.
4) Draft a Business Plan
Creating a business plan helps organize the big picture of your electrical business into smaller details. It’s almost like mapping out an adventure to see the direction you can take the business and the tools required to get there.
There are six key sections in a business plan:
- Company description
- Market analysis
- Organization and management
- Services provided
- Marketing plan
- Financial projections
If you’d like to go more in-depth into how to create a business plan, the Small Business Administration provides some great resources.
5) Register Your Business and Obtain Business Insurance
To be recognized as a legitimate electrical business, you need a business license and insurance. In each state of the U.S., you are required to register your business. You can do this through the Secretary of State’s office, and the fees are usually around $300 or less.
When registering your business, depending on where you live, you may also be required to show proof of insurance. Only you can decide how much insurance coverage your new electrical business will require, but the most common type of insurance is business liability insurance. You’ll also want to make sure you have your business’s vehicle insured as a commercial vehicle. You can learn more about electrician insurance coverage in this article from Forbes Advisor.
Starting your own electrical business can seem like a daunting task, but by breaking it down into manageable steps, you can put in the work to set yourself up for success. Securing the necessary electrical licenses, researching the market, estimating startup costs, drafting a solid business plan, and registering your business with the proper insurance will help you launch your business on the right foot. As you move forward, keep in mind that staying organized and planning for the future will make a significant difference in how smoothly your business runs. As you think about taking on your first job, do you want some help keeping your business organized and taking payments?
