How To Start An Electrical Business - An Electricians Guide

Electricians Starting a new business

Your practical guide to going solo

*Updated 2020*

There comes a time in every electrician’s life when becoming your own boss is more appealing than working for someone else. You’ve aced your apprenticeship, you’ve got bucket loads of experience under your belt, and now you’re ready to take the next step – setting up your own electrical business. Navigating the path to entrepreneurship isn’t always easy, but the payoffs are sweet. So if you’re thinking of going solo, this in-house Tradify guide is for you. Packed full of information, we’ve covered everything you need to know about turning your hands-on skills into a fully operational electrical business.

What’s that we hear? The sound of sparks flying?

Now’s a great time to launch – electricians are always in demand

Employment trends come and go, but when it comes to continuing demand, electricians enjoy serious staying power.

Basically, the global talent shortage means that if you’re thinking of setting up an electrical business, your timing couldn’t be better.

Four things you need in place first

First explore why you want to start your own business in the first place. Is the goal to grow your income? Maybe you crave flexible hours that free up more time with your family? It might sound a bit airy-fairy, but at the end of the day, a personal understanding of what’s motivating you to kick-start your entrepreneurial journey will create a strong foundation on which to build your business.

Getting down to the nitty gritty – here are the four things you need to start an electrical business:

1. Training and qualifications
The essential first step is to obtain education and training from a certified trade school or apprenticeship programme. No matter how ‘gung ho’ you are at installing downlights or free wiring a house, official certification is critical – you can’t get a business off the ground without it. You’ll be hard-pressed to secure clients if you’re not qualified, and you’ll also be putting the safety of yourself, your clients and any employees you take on at risk. Programmes vary not just from country to country, but also between states, regions and provinces. The below links will get you started:

2. Finance
The next big factor to get serious about is resources and capital. Starting up any new business doesn’t come cheap, and will almost always require an initial outlay of cash. As an independent electrician, your major costs will be investing in a vehicle and equipment. The scope of these will vary depending on what sort of niche market you intend to service. You pretty much have two options here. You either fund your own venture or seek cash from a third party like a bank, an investor or a business partner. Some of these links might help:

3. A clear-cut business plan

Don't expect to get your electrical business off the ground without a polished business plan. Yes, it takes time, but it’s time well spent. That’s because a comprehensive plan gives your new business structure, purpose and a clear-cut strategy. It should include all of the key business details, such as financial projections, growth opportunities, marketing strategies, financing, short/long term goal outlines and so on. You can hire a business consultant to help you develop your business plan, or there are also lots of tips available to help you DIY:

4. An entrepreneurial state of mind

Alicia Keys croons about New York, but when it comes to setting up an electrical business, it’s all about embracing the entrepreneurial state of mind. Success is all about your attitude, so make an effort to switch into the right mindset as you navigate your way to small business ownership.

What will you need to get your electrical business started?

A small business loan
Unless you’re lucky enough to have enough cash on hand to launch your business, you’ll need to approach your bank about a small business loan. Almost all major banks have small business departments, and they provide a range of financial options – accounts, credit cards, loans – and they often have small business experts who’ll hold your hand through the process and be available on an on-going basis to give you advice and guidance when needed. Just make sure you take your well-thought-out, polished business plan with you, because no bank is going to lend you a red cent if you can’t show them you’ve done your homework and that you have a plan for your electrical business.

There are other options when it comes to finance. You can apply for a grant (mentioned above), but you could also consider investors. Sometimes that might be family – often that means no interest to worry about, although you should think about the other possible downsides of mixing family and business. You can also look into less orthodox investor options, like angel investors: successful entrepreneurs in search of investment opportunities with promising businesses. They’re looking for a piece of the action, but they also have investment criteria and expectations.

Angel Association (New Zealand)
Australian Angel Investors
The UK Angel Investment Network
United States Angel Investors

Investing in materials - The cost to set up an electrical business

Unless you already have your own equipment, an initial investment in materials is going to be your biggest outlay. While the administrative costs of setting up a business are fairly low, you’ll need to invest in a vehicle. A reliable used van or ute can set you back as little as $5000 if you shop around, but a brand new one could be northwards of $50K.

That said, there are some great financing options out there, so you won’t necessarily need a huge stash of cash to drive away in a new Ford Falcon. Equipment costs will also vary pretty significantly, depending on your need and preferences. This isn’t generally the best place to cut costs, as cheap tools are unreliable, and will deteriorate much faster than their sturdier counterparts. Brands we’ve tried, tested and trust include Klein, Knipex, Ideal, Greenlee, Milwaukee, Dewalt, and Bosch.

Costing up your initial outlay can be daunting, but remember that both your vehicle and your equipment are assets, not liabilities. All can be resold if necessary, or added to the total value of your business if you decide to source capital based loans or funding.

Cost to setup an electrical business

Accounting, taxes, and government regulation
How will you stay on top of your books, and transfer business data to accounting software?

For an all-in-one fix that’ll stack your day-to-day business management processes into one streamlined system, Tradify is a must-have tool. Take control of your electrical business with intelligent, trade specific features designed to keep your workflows in top gear. 

Take a look at the difference Tradify has made to JJ Electrical in the UK, NDF Electrical and Motueka Electrical in New Zealand.

As a small electrical business, the last thing you want to do is get on the wrong side of the tax man. Guaranteed, he’s going to come knocking eventually. And when he does, you could get hit with hefty back payments, interest rates and fines that could cripple your venture. Avoid this by playing by the rules right from the start. Find an accountant, and cash in on big time savings in the form of both time, and money.

Think about it this way… you sell your time for $65 per hour. If you do your own taxes, it takes you two hours of mucking around per week, which equates to a cost of $6760 a year. Plus, you’ll probably miss out on a heap of opportunities to maximise your rebate. Pay an accountant and maybe you’ll spend around $2000, but will free up two extra hours a week, which will earn you back that $6760 a year. Remember, two things in life are definite - death and taxes. You can’t avoid either, but a good accountant can take the sting out of your number crunching.

We've also created a handy Cash Flow Template & Guide for trade businesses to help you forecast your business cash flow and keep everything on track.

The other annoying thing you can’t afford to ignore are government regulations. They can be a chore, but if you’re not compliant it could cost your business big-time. So make sure you get it right from the start:

Insurance
In the same way that you wouldn’t ride a motorbike in Thailand without travel insurance, you shouldn’t get down and dirty with electrical wirings without cover. You’ll want to cover your back from top to bottom, with insurance for your vehicle and equipment, as well as other essentials like general liability. Depending on your priorities, you may also want to take out other policies like worker’s compensation, a general business owner’s policy and income protection insurance.

If you’ve got your very own small business expert at your bank, the package they set you up with will probably include insurance. But if it doesn’t, you’ll need to do your homework to find a reputable provider of business insurance.

How will you manage your electrical business?

Management of business processes It’s one thing to spin tools and work wonders with wires, but actually managing day to day business processes is an entirely different ball game. In-between call-outs you’ll need to find the time to manage your core business processes, or allocate this role to someone else. A good place to start is to look at your existing workflows and map them out on paper. If you don’t have any workflows to personally refer to, seek insight from your current employer or someone with relative experience running a similar business. Look at the individual inputs at each stage, and hone in on exactly what’s required, and how much time this will take. Here’s a glimpse of what to factor into the equation: Job inquiries How will you receive job inquiries? Possible mediums include your website, Google advertisements, Facebook page, phone calls or word of mouth referral. Once received, think about who will respond, and whether there’s a protocol in place. Quoting How will you generate accurate quotes, and how long will the process take? Individual job management How will you manage each job as it unfolds? This includes tracking progress, labour and materials used. Scheduling employees If you plan on taking on employees, how will your scheduling system work? Invoicing How will you draft, distribute and track invoices? Materials usage How will you track your materials inventory, and know when to place new orders?

What market will your electrical business operate in?

Scope out the competition
Chances are, you’re not going to be the only electrical business operating in your area. Don’t be ashamed to scope out the competition, and analyse their strengths and weaknesses. Remember, there’s a big difference between imitation and inspiration. So if you hone in on a concept or idea that you love, find a way to make it your own.

Pricing - how much should you charge for your labour/time?
Pricing up your service can be difficult, and we’d suggest finding a balance between quality and quantity. Yes, there are clients out there that will always opt for the cheapest electrician, but at the end of the day, you need to find a price point that does your service justice. Low prices will attract clients who want everything for nothing (and may not cover all of your costs), while high prices may attract clients with superlative standards. Think about what you plan on delivering, how many hours you want to work and how much profit you want to make, and price your service accordingly.

To help you with this, we’ve developed a billable rate calculator for trade businesses that makes crunching the numbers super easy. There’s even a guide to go with it, but don’t hesitate to get in touch if you’ve got any questions about using the billable rate calculator.

Growth Opportunities

Electricial Business Growth Opportunities

As a small business, you’re going to want to put yourself on track for growth. Eventually, this could mean taking on your own employees and watching the business run itself. Hello, retirement! So how can you get there? You’ll need to back your strategy with market research that offers insight into the economic outlook of electrical businesses in your local area. For example, setting up a business in an up-and-coming neighbourhood will likely translate into increased demand a few years down the line.

Geography - where is your electrical business going to operate?
As a mobile service, electrical businesses generally tend to set boundaries defining how far they’ll travel. When setting up your business, think about what areas you’d like to service, and how you can take a geographical approach to optimising business. For example, if you live in an area that’s saturated with electrical businesses yet an hour away there’s hot demand, it could be worth your while to focus on the second locale. It may cost you a little more in petrol every day, but ultimately the trip will pay for itself in the form of increased custom. You can also factor pricing into the mix. If the market for low-cost suppliers in your local area is saturated, try opting for a higher price point, and ‘boutique’ service.

Finding Your Competitive Advantage

As mentioned earlier, you’re probably not going to be the only electrician providing a service in your local area. For this reason, you’ll need to set yourself apart from the noise with unique selling points (USPs) that give you a competitive edge.

A competitive advantage is what you do better than anyone else. The smarter you can be about developing and promoting your competitive advantage, the better placed your business will be to win jobs and succeed. So:

  • Will you offer the cheapest call out rates on the market, free consultations or a lifetime guarantee on all work? 
  • Maybe you guarantee to show up on time or the first hour’s free? 
  • Perhaps you get cheeky and promise to never say no to a cuppa, or play with the heartstrings and donate $5 of every job to a local charity. 

Whatever your USPs, know them, love them and learn how to own them.

Get more info on how to develop and promote your competitive advantage, plus see examples of what other trade businesses have done, in our Marketing Guide & Checklist for trade businesses.

Get ready to launch

Trial and test your plan
You’ve sweated the small stuff, you’re armed with a formidable business plan for your new electrical business and you’ve just secured the keys to a shiny new work vehicle. So what’s next? 

1. Start by testing your plan, and working your way towards a business model that works for you. Go lean with your approach, and remember to spend less time planning and more time doing. This will allow you to test ideas quickly, build on your success, and learn from your failures. Speaking of lean…

2. The Lean Start-up Methodology is gold when it comes to learning to drive your start-up, steer it in the right direction and eventually, switch into top gear. A principled approach to new product development, the key concepts are definitely worth reading up on.

Scoring new clients
When launching a new electrical business, no network is quite as valuable as your family and friends. Pretty much all households need electrical work at some point, so make your inner circle your first point of call. Once you’ve got a bit of a following you can start to build clients via other channels. Word of mouth is invaluable, as are marketing channels like social media – Facebook, Instagram etc. See below!

And again, the Tradify team is here to help. We’ve got a Marketing Guide & Checklist for trade businesses that offers practical advice to getting more business and building up your customer base. You can also check out our job management software that is backed by thousands of electricians. 

Potential marketing channels for Electricians

tradify-marketing-channels

Know your strengths and weaknesses

Be realistic about these, and play to them accordingly:

  • If you’re a marketing genius, then turn guerrilla and take your competitors by storm. 
  • If you’re ‘win-over-the-mother-in-law’ friendly, be the face of your business and try door-to-door marketing. 
  • Similarly, notoriously organised Virgos may want to take the ropes when it comes to daily business management. 

Whatever your strengths, work them to your advantage. Then identify weak points, and take steps to work on improving your aptitude, or simply outsource to experts, especially when it comes to specialist processes like accounting and web development. 

SWOT Analysis
Finding it difficult to figure out where you rock, and where you crash and burn? Running a SWOT analysis is a great way to not only understand your strengths (S) and weaknesses (W), but also identify opportunities (O), and anticipate threats (T).

What is a SWOT analysis?
Usually Strengths and Weaknesses are internal aspects of your business (what you’re good at, what you’re not so good at), while Opportunities and Threats are external forces (what is likely to impact on your business in a negative or positive way).

  • Strengths – top strengths or benefits of your business, and how you can protect and enhance them.
  • Weaknesses – your top weaknesses or issues, and how you can minimise them or do better.
  • Opportunities – top opportunities for your business and how you can access and take advantage of them.
  • Threats – your top threats, and how you can minimise them and do better.

Use this basic template to write them down – this will help crystallise your thoughts:

SWOT Analysis for electrical business

All set to flip the switch on your electrical business?

Granted, setting up an electrical business from scratch isn’t always the easiest path to take. But if you’re dreaming of a better salary, an improved work/life balance and a genuine sense of achievement, it’s a switched-on move. Just be sure to keep this guide on-hand, and take a strategic, step-by-step approach to setting up your electrical business. Be smart, don’t rush and remember that at the end of the day, even tradies need to employ some tried and tested ‘blue chip’ techniques every now and then.

Authored by Denym Bird, working with Tradify he helps thousands of electricians all across the world to leverage technology to create freedom in their business and life.