How to Start an Electrical Business: 9-Step Guide [2024]

1. Get Licensed

Safety is paramount in electrical work, as even minor electrical mistakes can have grave consequences, such as accidents and fires. That’s why federal and state governments require every electrical company to possess specific licenses and have a certified master electrician to limit such risks.

You can hire a master electrician or earn electrical certification by working with a master or journeyman electrician and passing the state examination. We advise you to do the latter, which helps you gain practical knowledge of running an electrical business.

Beyond a professional certification or electrical contractor license, jurisdictions—states and municipalities—require additional licenses for starting an electrical business. The electrical licensing requirements and agencies that award them can vary depending on your location.

Check the National Electrical Contractors Association website to confirm the electrical business licenses and certifications required in your area.

2. Create Your Electrical Business Plan

A business plan outlines a description of your company, its goals, and the strategies and timeframe for achieving them. Regularly reviewing and updating the document can confirm whether you're on track to achieving business goals and adapting as the market evolves.

Also, a recent study published in the International Review of Management and Marketing (p.1) shows companies with a business plan are more likely to succeed, as planning lets them monitor current trends, identify potential roadblocks, and develop strategies to overcome them. 

Before creating a business plan, you'll need to analyze your competitors and the market, as the results will inform some sections of the business plan. Competitor and market research is also an excellent way to validate service demand.

To gather data for your research, check competitor social media handles, survey contractors in adjacent industries and potential customers, and collect local market statistics from agencies like the U.S. Census Bureau.

Here are nine vital sections to include in your business plan.

• Executive summary: Provide a brief overview of the document's subject. Mention your company name, mission statement, and values. Keep the summary to one page.

• Company description: Provide an overview of your organization. Outline the number of field and back-office staff you plan to hire and the amount you’ll pay them. If you lack the resources to hire immediately, just sketch the organizational chart detailing the roles of each future hire.

• Market analysis: Outline the results of your market research. State the number of potential clients available and the number of companies competing for them. 

• Market opportunities: Explain the problem you plan to solve and the competitive landscape. You should also mention competitors’ weaknesses you found during your market research and how you plan to use them to your advantage.

• Target market: Provide a detailed description of your target market, including their pain points, demographics, income level, and psychographics. 

• Marketing plan: Explain how you’ll promote your services to generate sales. Give a detailed description of the tactical plan for executing each strategy.

• Financial projections: This section should contain a one-year revenue projection for each service type, cash flow, pricing strategy, and the predicted customer growth from your marketing efforts. Also, create a detailed budget showing operating expenses such as salaries, electrical advertising costs, utilities, etc.

After creating a business plan, the next step is getting a cash infusion to fund your idea.

3. Get Financing

Starting a business is capital-intensive. You need money to invest in tools and equipment, acquire licenses and certifications, and hire employees.

Before securing funding, create a budget with everything you need to spend on and their prices. Considering the current price fluctuations, have a buffer to cover potential price increases.

After creating the budget, look for a way to get the funds. You can use your saved money or explore additional funding sources such as the following.

SBA loans: The Small Business Administration (SBA) offers low-interest loans with longer repayment periods and grants to businesses. Approach your local SBA branch to confirm what you’re eligible for and request help with the application process. 

Bank loans: Apply for a small business loan with a bank. Banks may have stringent application requirements such as collaterals and numerous documents and offer high interest rates given the current economic conditions.

Families and friends: Contact family and friends who can offer you a startup loan. However, clarify that it’s an investment and have a lawyer draw up a repayment agreement to preserve the relationship.

Private investors: If you have a strong track record and a business plan, you can seek funding from private investors. However, they may require a share of your profits.

4. Register Your Business 

Beyond getting the necessary licenses, you must register your business with the appropriate authorities to operate legally.

The registration process starts with picking a business name. 

We advise you to avoid using your name, as people will ask for you specifically. This makes it difficult to focus on scaling business operations.

Before picking a business name, confirm there's a suitable web domain available for your website. Also, ensure it’s unique, describes your services, and is catchy enough to capture homeowners’ attention. Trademark this name to ensure no one else uses it.

The next step is choosing a business structure. This choice significantly impacts how you'll be taxed and your personal asset's exposure to business liabilities. Below are the options available.

1. A sole proprietorship does not place a barrier between you and the business. This means your personal assets are on the line if the business faces lawsuits or defaults on its debts. 

2. Partnership splits the risk, control, and profits between the owners, using the ratio spelled out in the partnership agreement. Partnerships come in two forms: general (with one partner facing unlimited liability and others having limited liability) or limited (where all partners have asset protection).

3. Limited liability company (LLC) business structure completely protects the personal assets of the partners or sole owner from business liabilities. However, LLC members are taxed twice: on the company’s net income generated and the member’s dividends.

The last step is filing the necessary paperwork with your jurisdiction’s business registration agency and getting an employer identification number (EIN) from the IRS website.

Note: The registration process depends on your business structure and jurisdiction’s business registration guidelines. For more information, consult SBA’s business registration guide.

5. Handle Finances and Accounting

Setting up a system to streamline financial reporting is crucial, as it makes it easy to track expenses, file taxes, and measure revenue growth. This financial clarity empowers you to allocate resources to different business activities without going bankrupt.

You must open a business account and set up an accounting system to handle your finances.

Open a business account

It’s advisable to open a business bank account. Pick a bank that offers high savings interest rates and has a broad physical location and ATM coverage in your region.

Also, apply for a business credit card with a low introductory annual percentage rate (APR) to cover short-term expenses and build up credit. However, ensure you pay off the credit card balance before the deadline to avoid high-interest debt.

Set up an accounting system

Creating an accounting system makes it easy to comply with tax laws and maintain accurate financial records.

First, decide on a schedule for paying vendors. Then, hire an accountant, outsource one, or handle the accounting process using a free tool like Microsoft Excel or a premium accounting software like QuickBooks.

However, to avoid data redundancy, reduce data-entry errors, and ensure every job done in the field is automatically captured, consider using ServiceTitan’s Accounting Platform.

ServiceTitan’s Accounting Platform integrates with tools like QuickBooks, Sage Intacct, Viewpoint, and Vista and automates daily accounting tasks.

The platform allows field techs to collect cash and credit cards and check customer payments on their mobile tablets, which other office employees can access immediately. This ensures customers pay quickly and lets you view up-to-date financial records in real time.

Another great feature of ServiceTitan’s Accounting software is the Accounts Receivable report, which displays outstanding invoices, and Accounts Payables, which lets you pay vendor invoices and export reports from ServiceTitan to any accounting software you choose.

This prevents you from spending valuable time chasing outstanding payments at the end of the month and helps you keep track of vendor invoices. 

For example, Mid-America Electric decreased its billing process after switching from Quickbooks to the ServiceTitan Accounting platform. This automation helped the company generate $4.7 million in revenue in 2022.

“(Our billing person) used to be two-to-three weeks behind on invoicing, just because it was a process to go through with all the paper and everything else,” Phil Burmeister, vice president of Mid-America, says. 

“Now, it’s almost instantaneous.”

6. Purchase Your Electrical Tools and Equipment

You need the right electrical equipment and tools to deliver quality electrical services. Typically, the tools and equipment you’ll purchase depend on your services.

While acquiring all the tools and equipment upfront might not fit your current budget, don’t compromise on quality. Instead, purchase the high-quality versions of these essential electrical tools and equipment: 

• Pliers

• Wire cutters

• Flashlight

• Solder wire

• Tape measure

• Voltage tester

• Screwdriver

• Electrical tape

• Cable ties

• Electrical drills

• Electrical tester

• Insulated gloves and fire-resistant work clothes

• Safety goggles

• Circuit breaker finders

Check out our guide on the best electrician tools for the complete list.

You can start with these essentials and explore rental options for tools to handle complex electrical jobs.

To avoid spending a lot on replacing or repairing tools and prevent situations where technicians arrive at a job site and realize an item or part is unavailable, consider investing in ServiceTitan’s Inventory Management software.

The software facilitates inventory monitoring and automates truck replenishment, purchase order generation, material transfers, returns, and adjustments.

The software’s Item Overview section gives electricians a comprehensive overview of the available materials and tools, capturing their name, code, description, quantities, average cost per unit, and total stock value.

The Item Overview section also grants users access to granular inventory data such as items’ usage frequency, location, and deployment history. 

ServiceTitan’s Inventory Management software lets field technicians view a customer’s complete equipment history via the Field Service App and add items to invoices, triggering an automated workflow. 

This automated workflow updates ServiceTitan’s Replenishment schedule to account for the item the technician just used and notifies the business owner to start a purchase order.

This makes it easy to monitor inventory levels so technicians always have the necessary equipment and materials, minimizing job delays and schedule disruptions.

7. Decide on The Pricing of Your Electrical Services

Setting your prices is vital in starting your own electrical contractor business, as it impacts your profitability and ability to compete favorably with other electrical contractors.

To arrive at the best prices for your services, consider the following.

• Competitor prices: Model your prices after what local competitors are charging. However, don't simply undercut them. Still consider other factors listed below to arrive at a profitable and competitive price.

• Overheads: Consider overheads such as business insurance, salaries and wages, marketing costs, and equipment maintenance expenses.

• Material costs: Factor in the material costs for each service type. Add an extra amount to account for price fluctuations. Consider using ServiceTitan Pricebook Pro Connect, which links to industry supplier catalogs, to confirm each material’s cost.

• Labor costs: Estimate the number of hours each project will consume per its complexity. Add a small amount to accommodate unexpected costs such as equipment repairs. Consider using ServiceTitan’s labor rate calculator.

• Profit margin: Fix a percentage profit margin you want to get from each job.

The next step is to choose a suitable pricing strategy—flat rate, hourly, or hybrid billing. Before choosing one, consider the pros and cons of each approach.

For example, while flat rate pricing is simple for customers to understand and limits price renegotiations, you may end up operating at a loss for large-scale and complex projects.

On the other hand, the hourly rate lets you track the time it takes to complete a project but may lead to customer disputes when unexpected variables extend the project’s time frame. 

Recommended read: Check out this guide to learn more about pricing your electrical services.

8. Get Electrical Business Insurance

Electrical business insurance is a legally binding contract with an insurance provider that protects you from financial losses caused by covered events, such as property damage, accidents, and lawsuits.

Given the daily risks business owners face, business insurance is a must-have. Business owner Brian Quinn and chief operating officer (COO) Vicki Gibiault from Best Quality Electric know this very well.

“In our trade specifically, you're dealing with live electrical power, it's dangerous,” Gibiault says. “The crew does it daily, so they don't really understand that you're messing with people's lives.” 

Emphasizing electricians’ risk exposure, Quinn says, “We’ve had it all happen. One of our guys got stung by a bee in his eye, the silliest of things, but guys cut their hands; you're working around electric live parts, ladders, drills, tools.”

Here are the basic insurance policies to protect your business, employees, and customers from unforeseen circumstances.

• General liability insurance: Protects your business from work-related personal injury, bodily injury, and property damage. 

• Worker’s compensation: Covers employees’ medical care costs, lost wages, and disability benefits from work-related accidents.

• Commercial property insurance: Protects owned and rented company assets.

• Professional liability insurance: Covers negligence claims arising from unintentional professional errors.

• Commercial auto insurance: Protects company vehicles from accidents during work-related assignments.

Recommended read: Discover how Best Quality Electric increased its revenue with ServiceTitan.

9. Market Your Electrical Company

Word-of-mouth referrals are powerful but have their limits. 

To truly scale your electrical business, you need a strategic marketing plan leveraging digital and offline channels. This will help you reach a wider audience, convert electrical leads into paying customers, and accelerate growth.

Before marketing your company, establish your goals using the SMART framework, which stands for specific, measurable, achievable, relevant, and time-bound. Using this framework makes it easy to track your progress.

Here’s an example of a goal created with the SMART framework.

I plan to generate 500 customers by generating 20 percent more qualified leads using paid ads within the next three months.

Additionally, outline a measurement plan to ensure you’re on track to achieving your goal. 

You can use tools such as Google Analytics to measure your SEO efforts, EmailAnalytics for email, Hootsuite for social, etc.

However, to save costs and avoid the technical learning curve associated with such tools, consider investing in ServiceTitan’s Home Services Marketing platform.

Unlike other marketing tools that track clicks and impressions (which don’t always translate to business), the Home Services Marketing platform shows you the exact ROI of each marketing channel so you can better allocate resources.

This is possible, as the tool allows you to create and assign unique phone numbers to each marketing campaign. These dedicated numbers act like trackable codes, revealing which campaign generated a customer call.

ServiceTitan’s Home Services Marketing platform also ranks your campaigns by revenue and highlights the geographical areas generating the most revenue using a heatmap display.

With this ROI data, you can dedicate more marketing resources to campaigns generating more revenue and scale back those not delivering results.

After crafting your marketing plan, the next step is outlining the marketing channels you wish to explore. You can use traditional marketing strategies like yard signs, distributing business cards, direct mail, and low-cost digital marketing strategies like the following.

Email Marketing

Email marketing lets you connect directly with customers and prospects in the intimate space of their inboxes, building trust and emotional connection with them.

You can use tools like MailChimp and ConvertKit to create an email marketing campaign. However, to save costs on hiring email designers, consider ServiceTitan’s Email Marketing platform.

Created specifically for home service companies, the platform lets you design attractive emails using several professionally designed templates and create hyper-targeted email marketing campaigns using data from your CRM tool.

You can also track each email’s exact ROI and use the insight to modify your email copy, and improve your click-through rate and conversions.

Grab listings

Customers typically use listing directories such as Google Business, Home Advisor, and Yelp for Business to find home service companies. So, create a listing on such platforms and ensure your name, address, and phone number (NAP) are consistent.

Pro tip: Use ServiceTitan’s Listing Scan tool to track how you appear across all directories.

Social media marketing

Maintaining an online presence on social media platforms such as TikTok, Instagram, and Facebook is an excellent way to engage with potential customers.

You can also use it to prove your expertise, generate leads, and build brand awareness.

Here are some ways to use social media.

• Share behind-the-scenes of running an electrical business.

• Showcase before-and-after images from successful projects and testimonials from satisfied customers.

• Partake in relevant discussions and respond to brand mentions and comments.

• Share educational posts such as maintenance tips.

Customer reviews

Customers typically read reviews before choosing a local service provider. Encourage satisfied customers to leave online reviews and ensure you respond to each one, whether negative or positive.

Given the positive impact of reviews on a company’s online reputation and ability to attract leads, ServiceTitan created the Reputation Management tool.

The tool lets you view and respond to customer reviews across listing directories from one central dashboard, ensuring you track customer complaints and your online information’s accuracy.

ServiceTitan’s Reputation Management tool also automates customer review requests and lets you tie each review to the specific job, customer, and technician involved.

Orient Electric has been using ServiceTitan’s Reputation Management platform to generate multiple online positive reviews, increasing revenue.

“I mean, we had 40 reviews over (the last) 12 years,” Rick Close, the service manager at Orient Electric, said. 

“So the fact that we have 10 more in a month is obviously really good.”

Search engine optimization (SEO)

This involves using strategies such as targeting relevant keywords, creating optimized content, and getting customer reviews to rank high on search engine result pages (SERPs). This grows your online presence, ensuring you appear when customers search online.

To use SEO, create a website. You can use templates on website builders such as Squarespace, Wix, and WordPress or hire a professional designer for a custom build.

After creating your website, optimize it with relevant keywords such as “electricians near me.” Then, create a Google Business Profile (GBP), write optimized content, and build backlinks.

Over to You

Starting an electrical business involves setting up processes and ensuring operational efficiency. For a first-time business owner, this might be difficult.

However, using the correct electrical software, you can simplify the entire process and surmount these challenges.

Consider using ServiceTitan electrical business software to automate business processes such as job scheduling, dispatching, inventory management, and customer communication.

ServiceTitan is an all-in-one, cloud-based electrical software home service providers use to automate business processes. Top electrical companies use the software to boost their revenue.

Frequently Asked Questions (FAQs)

Here are quick answers to common questions about starting an electrical business.

How profitable is an electrical business?

ServiceTitan's Bill Powers, a budgeting expert, recommends aiming for a gross profit margin of 65-67% on services. This translates to a desirable net profit margin of 17-20%.

Read this article to learn how to improve electrical business profit margins.

How much does it cost to start an electrical business?

Starting an electrical business costs between $60,000 and $200,000, depending on your services, location, competition landscape, and target market size.

How do electrical businesses get clients?

Electrical businesses can get clients using referrals, digital marketing, local SEO, flyers, local services ads, attending trade shows, etc.

Read this article to discover more electrical marketing strategies.