How to Start an Electrician Business 

You know you’re ready to go out on your own as an electrical contractor. But do you know how to start an electrician business? 

This article will walk you through critical steps, starting with market research and a business plan. Then, you’ll learn about marketing and building customer relationships. We’ll also discuss pricing strategies and how to increase your profit margin. 

Start with Market Research for an Electrician Business 

Before you hang out a shingle for your new business, you need to make sure there is enough demand for your services in your area. That means you must conduct some market research first. 

Some things you will need to know include: 

• How many electrical contractors are already working in your area? 
• Is there a shortage of electricians in your locale? 
• What do local electricians typically charge for various services? 
• What does the client base look like, and who is hiring electricians? 
• Which niches are available where you could fill a gap in services? 

The last point is a particularly important one. Ideally, you want your business to have a unique value proposition or unique selling proposition (USP). 

Your USP is what differentiates you from your competitors. A well-defined USP gives you an edge in the market and helps you attract new customers. 

For instance, you might specialize in: 

• High-tech and smart tech for homes 
• Green and sustainable electrical solutions 
• Installing outdoor and landscape lighting 
• Security, surveillance, and fire suppression 
• Residential electric vehicle charging stations 
• Partnering with real estate agents for inspections 
• Retrofitting older buildings for new offices 
• Remodeling and renovating single-family homes 
• Repairs and installations for rental properties 
• Providing installation service for new home construction 

Generally speaking, the more populated the area you serve, the more specialized you need to be to stand out in your market. In rural areas, though, you probably need to provide a wider range of services. 

FROM ONE OF OUR PARTNERS: How to Start a Small Electrical Contractor Business 

Write a Business Plan 

Once you’ve researched your local market and developed your USP, the next step is to draft a business plan. Your business plan serves two primary purposes: 

1. It guides you as you begin and as you grow, like a roadmap. 
2. It outlines your vision for the future of the business to obtain any needed funding. 

It can be challenging to secure loans from any lender. They will want to see that you have a well-developed business plan and have a good chance of success. Otherwise, you look like a financial risk. 

Notably, 18% of all small businesses fail within one year. Half fail after five, and 65% within 10 years. Financial challenges are one of the top reasons businesses close. 

How do you write a business plan? Start with the following sections: 

Executive Summary 

This section provides a summary of your entire business plan. It should let the lender know what they’ll be seeing and establish an overall mission statement. 

Company Overview 

This section gives an overview of your business, goals, target market, and USP. Mention any experience you have in the industry going in to show an understanding of the market. 

Marketing Analysis and Strategy 

This is where you can show that you’ve done your homework. It outlines your customer demographics and how you can fill an untapped area of the market. Include your strategies for getting the word out about your new business. 

Management and Organization 

Explain how your company will be structured. Will you be a sole proprietor? An LLC? Will you have employees or hire independent contractors for each job? 

Services 

This section lists any services you plan to offer. It should also include your pricing structure. Will you be charging a flat rate or per hour? 

Financial Projections 

This is the meat and potatoes section for lenders. Include profit and loss (P&L) statements and how much revenue you need to break even. It’s recommended that you hire a certified public accountant (CPA) to help you with this section. 

If necessary, you can add an appendix for copies of any documents, like bank statements, licenses, or endorsements. 

Legal Considerations and Licensing Requirements for Electricians 

You will want to decide on a legal structure for your business, which means incorporating with your state. This step is necessary to obtain business loans and open a business bank account. 

Your CPA or a business attorney can help you with this. A lawyer can also assist you with any partnership or employment contracts. 

Electrical contracting involves a great deal of liability risk. So, electrician licensing is more highly regulated than other types of contracting. You will need to hold a license for your state of operation. However, some states may have reciprocity with others. 

Check with your state’s labor department on your requirements. Most licensing requires passing exams to demonstrate a deep understanding of your work. 

You will also need liability insurance for electricians. If you have employees, you may be required to carry workers’ compensation coverage, too. Bonds will likely be required to bid for municipal jobs. 

You may also elect to buy other types of insurance, such as: 

• Business umbrella insurance to increase your liability cap 
• Errors and omission insurance in case of mistakes on the job 
• Property insurance for your headquarters and/or equipment 
• Cyber insurance if you accept digital payments 
• Loss of income insurance in case you are not able to operate 

Don’t forget that your personal auto insurance doesn’t cover any business vehicles. They will need an additional commercial policy. 

The Costs of Starting an Electrician Business 

By now, you may be keeping a list of the expenses involved in starting your electrician business. Here are some of the costs you can expect to cover: 

• Accountant and legal fees for your business plan and incorporation 
• State fees for registering your business 
• Business license and certification fees 
• Commercial insurance policies 
• Buying or leasing a vehicle or fleet, if not using your own 
• Fuel to travel to job sites 
• Purchasing or financing tools and equipment 
• Bulk supplies billed to clients (wire, tape, etc.) 
• Rent or mortgage if setting up an office 
• Computer and telephone equipment, plus software and SaaS fees 
• Payroll for employees and contractors 
• Your salary as owner to cover your personal expenses 

Fortunately, the outlook is good for electrical contractors if you have a solid business plan. Demand for electricians is up, while the number of available workers is falling short. 

The average salary for an electrician in the U.S. is $57,558. However, salaries are higher in some states and lower in others. 

If you’re starting your own electrician business, presumably, you’re more experienced. You call the shots when it comes to business growth. 

So, you can expect to earn at the upper end of the pay scale. That’s $79,000 to $120,000 on average across the country. 

The key to earning more is carefully calculating your gross and net profit margins. Gross is what you bring in before the cost of goods on a job. Net is what you make after subtracting the cost of goods plus overhead. 

Overhead includes expenses like fuel, insurance, and employee wages. These are the costs you need to operate every day. 

You need to ensure you’re earning enough profit on your jobs to cover your expenses and your salary. 

The average startup business takes two to three years to turn a profit. Keeping your overhead lean is one way to speed that up. But you may need a loan to cover your salary for the first year or two. 

Pricing jobs properly can also help decrease your time to profitability. 

Pricing Your Electrician Business 

You will need to determine a pricing structure for your business plan. And, of course, once you start seeing clients, you will want to have this worked out. 

Your business needs to charge enough to cover your overhead, like many of the expenses listed above. And it needs to pay employees, plus cover the cost of materials. 

There are different methods you can use for billing, but they’re not equally profitable. For example, you could charge by the hour. But this can work against you in two ways. 

First, imagine that a project takes longer than expected to complete. The customer may not be happy with your fee—even if you can justify it—if it’s much more than the going rate or your initial estimate. 

Second, you might be short-changing yourself if you complete jobs quickly. That’s why it makes sense to seriously consider flat rate pricing instead. 

Flat rate or per-project pricing has several benefits. You don’t have to bother keeping track of every minute on a job. And if you finish a job quickly, you make the same amount of money regardless. That improves your profit margin. 

The only downside to flat rate pricing is running into problems on a job that slow you down. It’s important to accurately assess the project conditions when you give an estimate to account for that possibility. 

For instance, say you are running electrical wiring in a renovation of a pre-war apartment building. Those structures tend to have thick concrete floors that are hard to penetrate. You may need special drilling tools or creative solutions to work around the floors. 

This requires extra time. In this case, a flat rate price may cost you money in the end. That’s a scenario where hourly pricing may serve you better. 

Tools and Equipment for Electricians 

We mentioned above that electrical contractors need their own tools and equipment. For small jobs, you may not charge clients for little parts like connectors. But these parts add up on larger jobs, so you may want to bill for them. 

Here are some common items you can expect to lease, buy, or finance as a startup: 

• Safety gear: goggles, gloves, insulating matting, etc. 
• Measuring and diagnostic tools: multimeters, circuit analyzers, etc. 
• Hand tools: drills, hammers, pliers, crimpers, screwdrivers, etc. 
• Toolboxes or bags: to hold small equipment and supplies 
• Contracting equipment: ladders, tape measures, etc. 
• Field service management software: management software, like Service Fusion, to help streamline office tasks 

Many startup electrician businesses forget about software to help run the business side of their operation. But field service management software can help with: 

• Fleet tracking and fuel costs 
• Dispatching and routing 
• Project scheduling and job site updates 
• Customer calls and call tracking 
• Generating quick and accurate estimates 
• Monitoring leads and sales conversions 
• Billing and invoicing for quicker payment 

RELATED ARTICLE: 3 Ways You Can Grow Your Business with Field Service Dispatch Software 

Marketing and Branding Your Electrician Business 

We mentioned your USP above. That’s part of the face your business puts forth to the world, or your “brand.” 

Your brand also includes your values, aesthetics (color palette, logo, artwork, etc.), and online presence. 

You only get one chance to make a first impression. So, you want to think carefully about marketing and branding when opening your business. 

Here are some ways you can market your company to your target audience. In doing so, you always want to be thinking about reinforcing your unique brand. 

Your Website 

Build a professional website that outlines your services and credentials. Be sure to make it responsive for mobile devices. And use search engine optimization (SEO) to help it rank higher on sites like Google. 

Email Capture 

Include an email capture bar on your website to collect the information of those interested in your services. Then, use an email management system to send personalized messages. 

You can first welcome people to your business. Then, move them along your sales funnel with email nurture campaigns. 

Social Media 

Set up a few social media accounts on platforms where your customers are most likely to spend time. If you have an older demographic, Facebook is a good choice. But TikTok might be better if you work with young people on a budget. YouTube is always a good choice for posting engaging content and useful tips that keep your business top of mind. 

Consider also using online ads to reach more people. Pay-per-click (PPC) ads are economical because you only pay when someone actually clicks on the ad. 

FROM ONE OF OUR PARTNERS: Digital Marketing for Electricians 

Building Customer Relationships 

Marketing is closely related to customer relationship management. You want to develop rapport with clients in your local area to bring in new business. Here are some expert tips for meeting new people who can eventually become clients: 

Join Online Communities. 

Sign up for neighborhood groups like Nextdoor and Facebook community pages. You’ll find people looking for contractors there. And you can post that you’re available for work, which is free advertising. 

Network Locally. 

Join your town’s chamber of commerce, especially if you want to land any commercial projects. It’s a great way to network with other business owners. Small businesses often have bigger budgets for electrical contracting. This can be quite lucrative. 

Offer Workshops. 

Connect with community agencies for free how-to workshops. For example, electrical hazards contributed to 338,000 home fires in 2021. Could you team up with your local fire department to offer a seminar on how to reduce the risk of electrical fires? You could leverage this type of workshop into video content to get extra mileage out of it. 

Request Online Reviews. 

Don’t underestimate the influence of reviews. Online reviews carry a lot of weight with people looking for electricians and other service professionals. 

Ask all customers to submit an online review on Google or Yelp after completing a project. Make it simple by including a QR code on your invoice or follow-up communications. Customers can scan it with their phone or device and link straight to your preferred review site. 

Follow up and thank them or address any reported issues promptly. 

First Steps to Starting an Electrician Business 

Ready to get going now that you know more about how to start an electrician business? Here are the top ways to get started today: 

Start Your Research. 

Begin your thorough market research and figure out your USP first. Take your time and get it right. That’s going to determine nearly everything else that comes after. You don’t want to start a business in a niche that’s already oversaturated. 

Secure Proper Licensing. 

Determine the licensing and insurance requirements for your state and municipality. Schedule classes and exams to obtain the right certifications for general electrical contracting and anything extra needed for your USP if necessary. You need to get this out of the way before taking on clients. 

Hire a CPA or Business Attorney. 

You need to create the best financial section of your business plan possible. Hiring a professional is worth the investment. You will likely need funding, and lenders want to see financial strength. They want to know you can lead a business, not just provide electrical contracting services. 

Select a Software Service. 

Explore field service business management software. It will help you get organized from the start. You can make the best use of your time by automating many tasks. Being able to devote more time to billable work and growth is yet another way to increase your profits. 

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