How to Start an Electrical Business: A Step-by-Step Guide

By Ashley Tortorelli

Posted On: Posted In: Management

If you’ve been thinking about how to start an electrical business, you’ve landed in the right place. You’ve also picked a great time to take on this endeavor, as revenue for the electrical industry is on the rise and is expected to experience robust growth over the next five years to 2026! 

While it’s an exciting time in the market, there’s a lot to consider when starting your own business. That’s why we’ve created this step-by-step guide to help set you up for maximum success. Read on, or skip to what matters most to you. 

  1. The first step to start an electrical business is doing your research.
  2. Next, you’ll need to create a solid business plan.
  3. Then, map out all of your start up costs and finances. 
  4. Don’t overlook any legal requirements when starting an electrical business.
  5. Consider the team and tools you’ll need to start your electrical business.
  6. And make sure you have a marketing strategy ready to go.
  7. Finally, it’s time to launch your new business! 

Whether you’ve been an electrician for two decades or two years, starting your own business is always an exciting adventure. However, it’s also important to lay a solid foundation before opening your company. To ensure your business has the structure to bear through thick and thin, make sure you have all your ducks in a row before your big launch. 

Here are some ways that will help get you there! 

1. The first step to start an electrical business is doing your research. 

You can have the best company name, utilize the newest technology, and work with the most outstanding team in town—but it doesn’t mean much if you’re targeting the wrong audience. In order for your business to thrive, it’s crucial to know who your consumer base is from the get-go. After all, they’ll be the ones driving the cash flow. 

Even if you already work in the area you’re planning to start your electrical business in, you still need to research and define who your customer is. What works for one electrical company won’t work for another, and it’s best to see where the most opportunities lie for the services you offer. 

You can start your research by deciding if residential or commercial work (or both!) is right for you. Here are some questions to consider: 

  • Is the area you plan to start your electrical business in more rural or urban? 
  • Is there new construction planned in your area, or are there no plans for development in the near future? 
  • How many electricians will your company be competing with in the area? 
  • What services are the competitors offering, and is the market over saturated for that type of work? 
  • What is the income rate of the area your business will be in? 

Knowing your customer will ultimately help to reduce risks associated with starting a business. If you can answer the above, you’re one step closer to building the most profitable and sustainable business plan. And once you understand who your customer is, be sure to check out this article on how you can generate more leads and scale your electrical business

The more you know and understand about the industry in your area, the more successful you’ll be. Look at competitors and identify trends and themes, and think how you can translate what they’re doing well to your company and customers. 

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And once you know who your target audience is, make sure you get off on the right foot with great communication. To help, we’ve put together 10 free templates for you to download!

2. You’ll need to create a solid business plan.

There are a lot of moving parts when starting a company, and a business plan should act as the guide. A traditional business plan typically will consist of nine sections: 

  1. An executive summary 
  2. Your company description 
  3. Market research
  4. Management structure 
  5. Products and services 
  6. Plans for marketing and sales 
  7. Financial analysis 
  8. Financial projections 
  9. Appendix

An Executive summary 

Essentially, this is the introduction to your business plan. Here you’ll put your company’s mission statement and the services you will offer. Give a brief overview of your plans–everything from goals to strategies to what differentiates you and your business from the rest. 

Your company description

This section should explain what your business is all about. Start by writing more basic information like what the official name will be, the location of your company, and employees. Then, explain what you plan to do. Think about what makes your business a good investment and then highlight all of those strengths. 

Market research

This is where your prior research will be helpful. Try not to copy and paste, but instead think about how you can concisely and effectively demonstrate that you know the competitive landscape and where you stand within it. Map out everything you know about your target audience and how this research will help your electrical business rise to the top. 

Management structure people icon

Use this space to lay out your business’s legal structure as well the organization of your internal team. Will your company be a corporation, partnership, sole proprietorship, or limited liability company? If you plan to have a management team, clearly define their roles and responsibilities. Write out their qualifications and what they will bring to the team, and how they will contribute to the overall success of the business.  

Products and services 

In this section list out the services you offer. Will you be doing residential or commercial work? Will you offer service, repairs, maintenance, installations, or all of the above? Also use this section to highlight qualifications you have that enable you to do more advanced jobs. For example, maybe you’ll be offering solar panel installations or services on data and security systems. These can differentiate your business from the next, so be thorough! 

Plans for marketing and sales 

Here, you’ll write out your strategy for marketing your company and the steps you’ll take to see it through. How will you promote your electrical business? What will your outreach to target customers look like? And how will you make your company stand out from the competition? Be detailed in your plans, as potential investors will want to make sure you have a solid strategy in place. 

Financial plan

Every business needs to know where their finances are going, so this is the place to spell it out. Starting an electrical business is a big undertaking and there will be upfront costs. So, map how you’ll allocate those funds. Some will need to go towards equipment, paid marketing, employee costs, etc. If you plan to get third party funding, layout how much you need, what you’ll be using it for, and the terms and length of the request.  

Financial projections 

If you are seeking financing you’ll need to outline how investors will see a return of investment. Create projected income statements, balance sheets, and cash flow statements. Show that you’ve thought through and planned for all the risks of starting a company. It’s important to lay out realistic goals that are achievable for you within the first year–ultimately, don’t make promises you can’t keep.  

Appendix

If there are additional documents that you couldn’t fit in the above sections, include them here. This is a great place to attach your permits and licences, letters of reference, and financial documents like credit history. 

When thinking about how to start an electrical business, your business plan should be the ultimate resource. It might be just for your own eyes or shared with potential investors, but either way dedicate the time to go through the above sections. It will help you structure your business and plan for growth while setting realistic and achievable financial goals. 

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Starting a business means having a lot on your plate, and we’re here to help reduce the load. Don’t stress about finding your words when communicating with customers–just click above for your free email templates!

3. Map out all of your start up costs and finances. 

While some businesses can launch with minimal startup costs, an electrical business requires upfront investments. You most likely will need funds for equipment, inventory, and maybe even a physical office space. Before you go purchasing these necessities, though, it is important to have a clear overview of how much money you can realistically dedicate to them. 

First, we recommend listing out what’s a “must have” and what’s a “nice to have” for your company. Having your own vehicle is most likely a must have, as you’ll need transportation to go from job to job. Buying tablets for you and your team is most likely a nice to have, since your personal phones will work just as well to get you started. 

To help plan for all your must haves, here’s a list of what a typical electrical business needs: 

  • Equipment
  • Basic inventory 
    • + warehouse costs if needed
  • Licenses and permits 
  • Insurance 
  • Office space 
    • + cost of utilities 
  • Employee salaries 
  • Marketing 
    • Creating a website
    • Paid advertisements 
  • Lawyers and accountants (if needed) 

From there, determine if you can fund yourself or if you’ll need a loan or investors to get up and running. If it’s the latter, start exploring your options. This is where your business plan will prove especially effective, so leverage it when requesting a small business loan.

how to start an electrical businessYou will need to determine what the right kind of loan is for your business goals, as it varies from one company to the next. It is a big decision and one that should be thoroughly researched before moving forward with a request. Be aware of all the terms and conditions associated with the loans you evaluate, and be realistic about your ability to repay your loan on time. 

And once your finances are in order…

4. Don’t overlook any legal requirements when starting an electrical business.

If you want to run a successful business, it’s important it’s a fully legal one. 

First you will need to register your business with the IRS. You will get an Employer Identification Number (EIN) which you will need for tax purposes. It’s also a good idea to check if there are other laws and regulations in your specific area for starting a new business. 

Then, make sure you have all the licenses and permits required by your state. To legally operate as an electrician or electrical contractor, you do need a state-issued license. Make sure all your documents are up to date or if you will need to take additional tests. You can do this by getting in touch with your state’s electrical licensing department. 

You will also need insurance for your electrical business. Be sure to have the essentials like general liability and commercial auto insurance. These will protect against lawsuits and other financial liabilities as well as the valuable equipment you will keep on your vehicle. 

Consider getting business owners insurance and workers compensation. The coverage you get solely depends on the needs of your business, but be sure to evaluate all of your options to keep yourself, your employees, and your business fully insured. 

We also recommend opening a business bank account and credit card. Your personal and business accounts should not be mixed. By separating them you’re protecting your personal assets from your company’s assets. Having a separate credit card also makes it easier to see an overview of your business expenses, while simultaneously building your company’s credit. 

These are just some legal measures to take when starting your electrical business. Be sure to research all requirements and have all of the proper documentation in order before launching your company. 

5. Consider the team and tools you’ll need to start your electrical business.

Behind every great business is a great team equipped with great resources. While it may be more financially practical to operate alone when first starting your company, weigh the pros and cons of having a partner or employees. 

Reflect on your own strengths and weaknesses. Maybe you’re great in the field but not so great in the office. Will you need an extra hand with the administrative work? Or maybe you’re planning to take on big, ambitious projects early on–can you really complete them solo? Or will another skilled technician be exactly what you need? 

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And if communication isn’t your thing, we have you covered! Download your free email templates and start communicating like a pro.

In most cases, owners plan to expand their team as their business grows. So it’s a good idea to think about these questions early on and figure out what makes the most sense for your company. 

Look at your financial standing and see if hiring additional employees is a possibility. If it is, research all local and state requirements to ensure you can comply with hiring guidelines. Then, seriously consider what type of role will be most valuable to your business. Once you’ve defined the type of position, create a job listing and start your search! And make sure to check out these interview questions when hiring for an electrical job. 

Next, make sure your team is equipped with the right tools. A disorganized business is a recipe for disaster and easily leads to costly mistakes. To help everyone stay on the same page, consider implementing a field service software. It can help streamline everything from scheduling to invoicing, reducing errors and increasing productivity. 

Also consider accounting software. It can have a big impact on the time you spend crunching numbers, and will give valuable insights into your electrical business’s financial standing. That’s especially true if your chosen software tools integrate with one another; that way there’s no double data entry required. 

6. Make sure you have a marketing strategy ready to go.

To start an electrical business is a huge feat, and not one that should go unnoticed. But for people to know about your business, they need to be able to find you. This is where a marketing strategy comes in. 

A marketing strategy is the plan you’ll put in place to reach out to potential customers and turn them into actual users of your services. It might involve building organic brand awareness and publicity, or utilizing paid methods like advertisements and social media. 

Again, the strategy you implement should be unique to your business. With that said, it never hurts to see what’s working for the competitors. If the electrician down the street has thousands of positive online reviews, dig into what’s making them successful. Once you find out, think about how you can adapt it to your own company. Target icon

Your market research (jump back to step one!) will also play a big role here. Who is your target audience and what appeals to them most? If they’re younger, consider utilizing social accounts like Facebook, Twitter, and Instagram. If they’re older, it might make sense to take out an ad in your local newspaper or send mail flyers. 

It’s important to keep in mind that marketing efforts don’t show results overnight. They take time and effort, so if you don’t see an immediate influx of leads after running an ad campaign don’t be discouraged! Be open to experimenting and adjusting as you go. 

If you’re not sure where to start, check out these fifteen marketing ideas that will increase revenue. Figure out which will make the most sense for your business and start implementing them, that way when you’re ready to officially open your business you’re set up for maximum success. 

Speaking of…

7. It’s time to launch your new business! 

Okay, maybe not this very second–but you’re definitely on your way. While there’s nothing written in stone on how to start an electrical business, following this guide will put you on the right path.

And although it is crucial to have your ducks in a row, it’s equally important to start acting out your plans. Why? Because some ideas look great on paper, but fall flat in real life. The only way to gauge what is a hit and what is a miss is by trying them out, so don’t be hesitant to get going! 

Our best advice when starting an electrical business is to be flexible. There will be a curveball or two thrown your way, but all your planning and preparation will prepare you to overcome those challenges. 

You have a solid business plan in place with plenty of research to back you up. Not to mention, the right team, tools, and strategies to get you to the top. You have a recipe for success. And if you’re looking for one more tool to add to your bag, check out our Customer Communication Toolkit below. It has everything you need to say when you need to say it, ensuring you’ll also deliver the perfect customer experience every time!  

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