If you’re ready to take the leap into business ownership, we’ll help you to get started with researching your electrical contractor business target market. With that information in your back pocket, you’ll be ready to dive into business planning and then launch your new contracting company.
Getting Started with Your Business Plan
You’ve been mulling over your business ideas for a while and now it’s time to make it happen. The word “startup” may give you mental images of Silicon Valley, but every business has to begin somewhere and yours is no exception.
As an electrical contractor, you understand that frameworks are the only way to make a project successful, so think of your business plan as the blueprint that you’ll be working from as you prepare to launch and grow.
There are plenty of business plan templates out there so that you don’t have to start from scratch, but we’re going to run through a few key areas that you’ll want to include in your research and planning stages. Below, we’ll cover a few nuts and bolts business plan sections:
- Competitive analysis
- SWOT analysis
- Target market research
- Financing and cash flow
Sound overwhelming? It doesn’t need to be. Let’s walk through the details of each of these.
Electrical Contracting Competitors
You need to know who else is operating in your space to plan how you’re going to stand out from the crowd.
It’s likely that you already have an extensive network of fellow electrical contractors like other electricians, subcontractors, project managers, and general contracting firms in the local area. Take a look at their websites and research the services they offer to their clients.
Is there a gap in your local market for residential or commercial services that your new business could fill? What do their customer reviews say? By knowing what your competition looks like, you can make informed decisions about the type of business you want to run and how your unique offers could attract potential customers.
SWOT is an acronym that stands for strengths, opportunities, weaknesses, and threats. This type of analysis is an important part of the business planning process.
Like with your competitor research (which can be used to make up the “threats” part of this analysis), this is where you’ll have the opportunity to jot down what you do well, where you need to improve, and what opportunities there are in your market that you could leverage.
You’ll also want to think about the type of business structure you want to have at this stage. You can change this later on if you need to, but mapping out your vision for the future of your business now can help you to save time down the road.
While this is definitely an aspect to consider before you launch, a SWOT analysis is something that you should be working on as the business owner at least twice a year, if not quarterly. If this is the first time you’ve ever worked on one, you can find templates online to help you get started.
Target Market Research
To build a successful electrical business, you need to know what your target market looks like. As an electrician, you’ve likely worked with a range of customers across all kinds of projects, but now that you’re running your own business, you need to decide who exactly you want to serve.
Research your service area and what the demographics look like—is it mainly commercial businesses who might need ongoing electrical work like electrical systems maintenance, or are there a large number of homeowners that could be looking for residential electrical services in your community? Is there a contracting company that’s building a new development nearby that could be looking to hire an electrician for multiple HVAC or electrical installations on their new properties?
Finding new clients to provide you and your team with consistent work is one of the biggest challenges of entrepreneurship, but doing your research ahead of time will help you to build out your new business in a way that works for both you and your potential customers.
Financing and Cash Flow
You can’t get a business off the ground without funding! Understanding your cash flow and bottom line, both ahead of launching and during the day-to-day operations of your electrical contractor business, is vital in ensuring that your business will survive.
As most electrical contractors use equipment supplied by their company, you may not have much of your own to get started. If you’re hiring a team, you’ll also be responsible for supplying them with everything they might need on a jobsite, along with any necessary insurance, including workers’ comp.
Your costs are going to vary greatly, but here’s a rough estimate for each of these items:
- Liability insurance: $600 per year
- Equipment: $1,000-$5,000 depending on what you need
- Employees or subcontractors: $15-$100 per hour
- Workers’ comp insurance: This one’s a little trickier, since rates vary so much depending on location, payroll amount, classification of workers, and your prior injury history. Use this formula to estimate the workers' comp rate for each employee you hire:
(Employee Gross Salary x Workers' Comp Insurance Rate)/$100 = Annual Rate
To get you up and running, you might be considering taking a small business loan. The U.S. Small Business Administration, or SBA, is a great resource for helping you find loan providers that make sense for your situation. You could also be a candidate for small business grants, which are worth looking into when you’re getting started.
Pricing your services correctly will also be important, and this is where your competitor analysis can come in handy. See what the average rates are for electrical contractors in your service area (Indeed reports that electrical contractors earn an average of $23.22 per hour), but also consider what kind of profit margin you want to make after you’ve run payroll, paid back any loans, and settled outstanding bills. This will be one of the most important parts of your business plan, so be sure to take enough time to work on this before you open your business to the public.
Marketing Strategies for Your Electrical Contracting Business
You’ve got your business mapped out on paper and fully funded, but now you need to let the world know that your new electrical company is ready to start working! That’s where your marketing plan comes in. It’s one thing to understand exactly who your target audience is, but it’s another to have a plan in place for how you’re going to reach them.
Marketing strategies don’t have to be complicated and can be broken down into three distinct categories–digital, traditional, and referrals.
For many of your customers, the first place that they’ll go when searching for an electrical company is Google. When they do, you want your website to be one of the first results that they find.
One of the best methods to do this is to use a strategy called search engine optimization, or SEO. It may seem overwhelming at first but there are plenty of small tweaks that you can make to your website that can hugely improve your visibility online—such as using clear and intuitive headings on your webpages (like “California Electrical Contractor”).
Setting up a Google My Business profile will also be useful. This will help your business show up in Google Maps listings, as well as make your phone number, and open hours easily accessible for any potential customers.
Using social media to connect with your market is also a helpful digital marketing strategy. You might consider hiring a freelancer to help create your social media content and manage your online communities, particularly when you first launch, as this can be a significant amount of work to manage alongside your other responsibilities as the business owner.
It’s easy to think that everyone is online these days but, particularly if you work with residential customers, you’ll find that certain demographics may not have the access or inclination to use digital communications.
Leaving business cards at other local businesses or with a customer after a job is completed is still a great way to get your name out there and keep your business top-of-mind when someone needs an electrical company.
Direct mail pieces that can be delivered throughout your service areas can also be helpful in letting the local community know that your new business is in town and ready to take on new projects.
Referrals and Word of Mouth
One of the best ways that small businesses can grow is through word-of-mouth referrals from previous and existing customers. After all, they have first-hand experience of working with you and can give potential customers an idea of what your quality of work is really like.
If you can, gather testimonials and reviews from clients as soon as you finish a job with them. Encourage them to leave a review on your Google My Business profile (that’s great for your SEO too!) that you can then reuse on your own website and post on social media. Make the customer experience excellent from beginning to end and you’ll start to see those five-star reviews coming in in no time.
Launching and Growing Your Electrical Contracting Business
You planned carefully and now your business is thriving. At this point, you might be thinking about hiring some electrical contractor employees.
Your first hires will probably be more experienced workers like a master electrician, journeyman, or estimator. These individuals have been in the electrical construction industry for a while and know how to work independently on a jobsite. But you should also consider how you can support the future of the industry.
Apprenticeships and training programs require hands-on experience and someone has to be willing to give these up-and-comers a chance. As the business owner, you have decision making authority to bring in new trainees during the early years of their career and mold them into dream employees. Not only are you helping to keep your industry a thriving career prospect, but you’re also ensuring the future stability and growth of your new business.
Running A Successful Electrical Contracting Business
Owning and running a business full-time is hard work, but it’s also incredibly rewarding.
A firm business plan will help you stay on top of the many moving pieces that make up your new venture, while giving you the opportunity to understand your market and competition in a way that pushes you toward your success.
Becoming a business owner is a lifelong dream for many people. If you have the entrepreneurial bug and an interest in construction, starting your own electrical contracting business could be the right move for you.