Step-by-Step Guide: How to Start an Electrician Business 

The road ahead is exciting. Your plans are set, and your future looks bright. 

You’re ready to make your mark on the electrical industry. But before this can become a reality, you need to learn how to start an electrical business.  

What’s involved? How can you set yourself up for success? This is your guide to all of the above—and more. 

We’ll start you off with some insight into market research. Then, we’ll move on to your business plan. We’ll look at legal requirements and financial planning. 

We’ll talk you through potential business structures and those key operational considerations you can’t overlook. We’ll explore some marketing and branding ideas. And to wrap up, we’ll give you three steps you can take to start today. 

The world’s waiting. It’s time to reach your potential and set the standard for what an electrical business should be. Onward and upward! 

RELATED ARTICLE: How Much Does an Electrician Make? 

Start with Market Research 

Before you even think about launch day, you need to conduct market research. 

Why? Because you’ve got a lot of decisions to make about your business. The more informed those decisions are. For example, it can help you choose a path with a higher demand for work when starting a business. It can also help you build a brand that stands out from the competition. 

So far, so good. The question begs: What exactly does market research involve? 

Start with your target audience. Who are they? What’s important to them? Are they homeowners or business owners? 

Then, analyze your competitors. How many do you have? What do they excel at? Where could they improve? 

Look at their pricing and brand positioning. Use this insight to envision how you might stand out. What could you do better? What could you do differently? What gap in the market could you fill? 

In addition, it’s worth considering broader industry trends. Good news—the electrical industry is on an upward trajectory. Revenue has grown at a 0.9% annual rate over the past five years, reaching about $255.4 billion in 2024. 

Demand from US households has grown, too. This is partly driven by the rise in electric vehicles (EVs) and more appliances. 

Electricians are now installing more EV chargers in homes and businesses. Perhaps this is a service you could offer to future-proof your business. 

Create a Business Plan for Your Electrical Business 

Next on the agenda is your business plan. This is a detailed document outlining how your business will function and succeed. 

Why do you need one? 

• It gives you a clear and concrete roadmap to follow. You’ve got set goals and the steps listed out that’ll help you achieve them. 
• It helps you plan and manage your money. If you need a loan, it shows lenders that you’re committed to your business long-term. 
• It grounds your decisions. You can make strategic, risk-aware choices. 

How to Develop a Business Plan 

It doesn’t have to be overcomplicated. Put together a solid plan for your electrical business in three steps: 

1. Define what you want to achieve with your business. Do you want to focus on residential services or commercial projects? Will you specialize in areas like energy-efficient installations? Be specific about your goals and set realistic timelines. 
2. Next, detail how you plan to reach your goals. Include information about your target market, marketing strategies, pricing structure, and risk mitigation. 
3. Finally, create a financial plan. This should include your startup costs, ongoing expenses, and revenue projections. Be detailed—list everything from tools and equipment to licensing fees. 

FROM ONE OF OUR PARTNERS: 15 Common Small Business Fees and Startup Costs You Need To Know 

Key Legal Requirements and Licensing for Electricians 

A successful business is a compliant one. So, make sure you meet your legal and licensing requirements before your first job. 

What might this include? 

Electrical Licensing 

You must have a valid electrician’s license to perform electrical work legally. 

What this entails depends on where you plan to operate. But generally, you’ll need to have completed an apprenticeship and secured a journeyman license. 

Again, the requirements will differ a whole lot between states. In Texas, for example, you need at least 8,000 hours of on-the-job training and to pass the exam to get a journeyman license. 

You can find your state’s licensing requirements in this state electrician licensing guide.  

Business Licensing 

You’ll also likely need a business license to operate legally. You can get this from your local city or county government. 

Check your state requirements for any special rules. For example, to operate in Florida, you’ll need both a state business license and a certified electrical contractor license. 

Insurance 

Insurance is a must for any electrical business. 

You’ll need general liability insurance to protect against potential accidents or damages. Some states—including California—have minimum coverage requirements. 

Workers’ compensation insurance is mandatory if you have employees. This covers medical costs and lost wages if someone gets injured on the job. 

Permits and Inspections 

Electrical work often requires permits and inspections. 

Before starting a job, you may need to apply for a permit from your local government. After the job is completed, an inspector might check the work to see if it meets safety codes. 

Financial Planning and Funding 

The number one risk new businesses face? Running out of money. 

Proper financial planning and funding solutions can both be a huge help. 

Budgeting for Your Electrical Business 

Making a budget is about planning how you’ll spend or save your money. It helps you control costs and cover expenses. 

You’ll start by listing all the items you need to buy to start your business—things like tools, marketing, insurance, licensing, and so on. 

Then, consider your ongoing expenses. These might include fuel, employee wages, software, and equipment repairs. 

Some of these costs will be fixed. You might spend the same amount on wages each month. But others will be variable. This means they’ll fluctuate. One month you might spend double on fuel, for example. 

Knowing your expenses is one piece of the puzzle. The other is understanding how much revenue you’ll earn. 

According to Investopedia, “Owners of failing companies are less in tune with how much revenue is generated by sales of products or services…This disconnect can lead to funding shortfalls that can quickly put a small business out of operation.” 

Make sure you have a system in place to track your earnings. Regularly review them and adjust your budget to match. 

FROM ONE OF OUR PARTNERS: How to Price Residential Electrical Work 

Funding Options for Your Electrical Business 

You’re still learning how to start an electrical business, so you’re not earning revenue now. Because of this, you might need some kind of funding. 

You have options: 

• If you have personal savings, you can use them to cover your startup costs. This is an excellent option if you want to avoid debt. 
• You can take out a small business loan. Shop around to find the best interest rates and terms. 
• You can look for an investor or partner. This is someone who offers funding in exchange for a share of the business—and potentially its profit. 

Financial Management Best Practices 

Healthy finances are like a garden. They require ongoing care and attention to keep healthy. 

Here are some best practices to keep in mind: 

• Set up a separate business bank account. This makes it easier to track income and expenses. 
• Use accounting software to monitor your finances and generate reports. 
• Pay attention to cash flow, which is the money coming in and going out of your business. 
• Plan for taxes by setting aside money throughout the year. That way, a big tax bill won’t catch you off guard. 

Choosing a Business Structure 

You’ll need to choose a structure for your business. Your decision will impact: 

• How you manage your business 
• How much you’ll earn 
• How much tax you’ll pay 

Let’s explore your options. 

Sole Proprietorship 

A sole proprietorship is the simplest business structure. You own the business and are responsible for its debts and liabilities. 

The benefits: 

• It’s easy to set up and manage. 
• You have complete control over decisions. 

The potential drawbacks: 

• You’re personally liable for any business debts or legal actions. This can put your personal assets at risk. 

Partnership 

A partnership is when two or more people share ownership of the business. Partners share profits, losses, management responsibilities, debts, and liabilities. 

The benefits: 

• It’s easier to raise funds and share the workload. 
• Partners bring different skills to the business. 

The potential drawbacks: 

• You’re still personally liable for the business’s debts, just like in a sole proprietorship. 
• Disagreements between partners can cause problems. 

Limited Liability Company (LLC) 

An LLC is a happy medium between a corporation and a partnership. You get the liability protection of the former and the tax benefits of the latter. This makes it a popular choice. 

The benefits: 

• Your personal assets are protected. 
• You have flexibility in how you manage and tax the business. 

The potential drawbacks: 

• It’s more complex and costly to set up compared to a sole proprietorship or partnership. 
• There’s more paperwork involved. 

Corporation 

A corporation is a separate legal entity from its owners. It can own property, enter into contracts, and even be sued. There are two main types: S corporations and C corporations. 

The benefits: 

• Owners (shareholders) are not personally liable for the corporation’s debts. 
• Owners can raise funds by selling stock. 

The potential drawbacks: 

• You’ll have more regulations and paperwork to contend with. 
• You might be subject to double taxation—once on profits and again on dividends paid to shareholders. 
• It may not be suitable for small businesses. 

How to Choose the Right Business Structure 

It’s a big decision. To help you make the right one, consider these questions: 

• How much liability protection do you need? If protecting your personal assets is important, consider an LLC or corporation. 
• How do you want to be taxed? Different structures offer different tax advantages. Sole proprietorships and partnerships are taxed on personal income. Corporations face double taxation. 
• How much control do you want? If you want to maintain full control, a sole proprietorship or single-member LLC might be best. If you’re comfortable sharing control, a partnership could be a good fit. 

Key Operational Considerations 

Next up, we have your operational considerations. These relate to your day-to-day. Get them right early on and save yourself a headache or two further down the line. 

Here’s what to think about: 

• First, invest in the best quality tools and safety gear you can afford. Think of this as an investment in your business. Good tools will last longer, which means you’ll spend less on repairs and replacements. Better yet, they can improve the standard of your work. Your clients will be delighted, which means more business via word of mouth. 
• Then, get yourself a work vehicle. Reliability is the name of the game here. Your clients don’t want to be left waiting because your truck broke down en route. As a bonus, consider branding your vehicle—this adds a touch of professionalism and helps with brand recognition. 
• Embrace technology and use software like Service Fusion to simplify your operations. Software can schedule and dispatch jobs. It covers all things estimating and invoicing, too. You stay organized without the fuss of paperwork. This means less time on admin and more spent doing what you love. 
• Learn accounting basics. Consider account software with in-built reporting and tax functionalities. 
• Figure out how you’ll manage your inventory. Create a system to track your materials and supplies. That way, when you show up ready to work, you have the gear to get the job done right. 
• Take out the right insurance policy. Don’t skimp here. You need general liability insurance to protect your reputation and financial health. If you plan to hire staff, you’ll need workers’ compensation insurance, too. 

RELATED ARTICLE: How to Grow & Run a Successful Electrical Business 

Marketing and Branding Your Electrical Business 

You couldn’t be happier with how your business is shaping up. You’re so thrilled, in fact, that you want to shout about it from the rooftops. 

Well, marketing is the next best thing, and it starts with your brand identity. This is all about how others see you. It includes things like: 

• Your business name 
• Your logo 
• The colors you use 
• The “voice” or tone you use to communicate 

A strong and memorable brand identity helps you stand out. It makes you memorable and nurtures all-important trust. 

When you’re ready to start serving customers, you’ll need to market your services. This means getting your business in front of the right people at the right time. 

Here are three strategies to try: 

• Make sure your business has a strong online presence. Create a professional-looking website. List your services and contact information. Use local search engine optimization (SEO) best practices to increase your visibility. Don’t forget to claim your Google Business Profile too. 
• Use social media platforms like Facebook and Instagram. Connect with your audience where they spend their time. Share helpful tips to show that you’re an expert. You might even run a few paid ads to get faster results. 
• Advertise locally. Run an ad in the local newspaper. Print flyers and do a mailbox drop. Not keen on old-school marketing tactics? No worries. What about Google Ads? Use powerful filters to target potential customers in your community. 

First Steps to Starting an Electrician Business 

Get started today with these three steps: 

• Create a budget. List all your initial costs. Use this to calculate how much you’ll need to get your business off the ground. 
• Research your licensing requirements. Find out what the rules are in your state or city. Make sure you tick all the boxes to operate legally. 
• Decide on a business structure. It should align with your goals and growth plans.