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How to Start an Electrical Business

Written by:

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by:

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

How to Start an Electrical Business

Fast Facts

Investment range

$3,250 - $23,100

Revenue potential

$130,000 - $1,000,000 p.a.

Time to build

1 – 3 months

Profit potential

$100,000 - $260,000 p.a.

Industry trend

Growing

Commitment

Full-time

​​Electricity is something that nearly everyone in the United States uses every day of their lives, one way or another. Electrical services are so important that the electrician industry is valued at over $200 billion. Electricians are highly skilled and are able to do work that is dangerous for the layperson to attempt, which is why they are in high demand. You can start an electrical business and tap into that demand and build a lucrative business.

Starting an electrical business will have challenges and require hard work and knowledge to be successful. This step-by-step guide has all the information and insight that you need to be on your way to start your entrepreneurial journey.

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting an electrical business has pros and cons that you should consider before deciding if the business is right for you.

Pros

  • High Demand – Electrical services are in demand by consumers and businesses
  • Valuable Service – Provide essential services and safety to customers
  • Good Profit – Electricians command high rates

Cons

  • Education – You need to complete education to become licensed
  • Odd Hours – Customers may require emergency service at odd hours

Electrical industry trends

Rising new home construction has contributed to the growth of the US electrician industry. 

Industry size and growth

electrical industry size and growth

Trends and challenges

electrical industry Trends and Challenges

Some trends in the industry include:

  • Demand for energy efficiency is rising, which is increasing the demand for electrical upgrades. New technologies, including energy storage technologies, are emerging to increase efficiency. Electricians will need to stay up to date on these technologies.
  • Sustainably made materials are also in demand, including recycled parts.

Some challenges also exist in the electrical industry which include:

  • There is a shortage of licensed electricians which will present a challenge for electrical companies looking to hire.
  • Liability issues exist if mistakes are made that jeopardize safety. Electricians must work with extreme caution. 

What kind of people work as electricians?

electrical industry demographics

How much does it cost to start an electrical business?

Startup costs for an electrical business range from just over $3,000 to nearly $25,000. The low end assumes that you are already licensed and are going to run your business as a solopreneur from home. The high end includes the cost of training and setting up an office and shop. 

You’ll need a handful of items to successfully launch your electrical business. Here’s a list to get you started:

  • Pliers
  • Screwdrivers and nut drivers
  • Wire strippers
  • Fishing tools
  • Measuring devices
  • Labeling machines
  • Power drills and drivers, hammer/drills
  • Power saws
Start-up CostsBallpark RangeAverage
Setting up a business name and corportation$150 - $200$175
Licenses and permits$400 - $600$500
Insurance$500 - $1,000$750
Business cards and brochures$200 - $300$250
Website setup$1,000 - $3,000$2,000
Education to become licensed$0 - $10,000$5,000
Shop and office space security deposit$0 - $5,000$2,500
Tools and equipment$1,000 - $3,000$2,000
Total$3,250 - $23,100$13,175

How much can you earn from an electrical business?

Electrical business earnings forecast

The average electrical contractor usually charges $75 to $100 per hour.  Working from home, your profit margin should be about 80%. In your first year or two, you could work from home 25 hours a week at $100 per hour, bringing in $130,000 in annual revenue. This would mean over $100,000 in profit, assuming that 80% margin. 

As your brand gains recognition, sales could climb to jobs that take 200 hours per week. At this stage, you would have a shop and office and staff, including other electricians, reducing your profit margin to around 25%. With expected annual revenue of over $1,000,000, you would make over a quarter-million dollars.

What barriers to entry are there?

There are a few barriers to entry for an electrical business. Your biggest challenges will be:

  • You need to be a licensed electrician or go through the process to become licensed
  • Finding other qualified electricians to work for you may be challenging

Related Business Ideas

If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
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Step 2: Refining Your Business Concept

develop a business idea

In-depth Market Research:

Comprehensive market research is foundational for any successful business. This includes analyzing local electrical services, understanding customer demands, and identifying gaps in the market. For example, is there a demand for eco-friendly electrical services or advanced home automation installations? Such insights can help you differentiate your business right from the start.

Service Portfolio Development:

Detail the range of services you plan to offer. Will your focus be on residential electrical issues, commercial electrical systems, or specialized services like smart home installations or renewable energy solutions? Clarify your expertise areas and consider offering unique services that are in demand but not widely available in your area.

Pricing and Profitability

Competitive Pricing Strategy:

Set your service rates competitively, typically between $75 to $100 per hour. Factor in costs for parts, potential markups, and overhead charges. A solo operation should aim for a higher profit margin (around 80%), while a business with a team and office should adjust to a lower margin (around 25-30%). Regularly review and adjust your pricing to stay competitive and profitable.

Cost Management:

Use tools like our profit margin calculator to fine-tune your pricing strategy. Keep track of all expenses, including materials, labor, and overhead, to ensure your pricing covers costs and yields a healthy profit margin.

Identifying Your Target Market

Market Segmentation:

Your services should align with the needs of your target market. For residential services, focus on homeowners, offering maintenance, repairs, and upgrades. For commercial services, target businesses requiring installations, inspections, and energy-efficient solutions. Use platforms like Facebook, LinkedIn, and local community forums to connect with potential clients.

Setting Up Your Business Location

Starting Small and Scaling Up:

Initially, operating from home can significantly reduce overhead costs. As your business expands, look for commercial spaces that cater to your growing needs. Key factors for choosing a space include accessibility, adequate space and ventilation, natural lighting, and a flexible lease. Utilize online resources like Craigslist or Crexi to find suitable locations.

Infrastructure Needs:

Consider the necessary infrastructure for your business, such as storage for tools and materials, a workspace for small repairs, and an office area for administrative tasks. Ensure the space can be adapted as your business grows.

electrical business idea rating

Step 3: Brainstorm an Electrical Company Name

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better 
  • Name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “electric” or “electrical”, boosts SEO
  • Name should allow for expansion, for ex: “Jim’s Electric” over “Jim’s Wiring”
  • A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create an Electrical Contractor Business Plan

Here are the key components of a business plan:

what to include in a business plan
  • Executive Summary: Summarize your electrical contractor business’s mission to provide high-quality, reliable electrical installation and maintenance services for residential, commercial, and industrial clients.
  • Business Overview: Describe your business’s focus on offering electrical services, including wiring installations, repairs, inspections, and upgrades for a variety of projects.
  • Product and Services: Detail the range of electrical services offered, such as new construction wiring, electrical system upgrades, safety inspections, and emergency repair services.
  • Market Analysis: Evaluate the demand for electrical contracting services, considering factors like construction trends, local business growth, and home renovation activities.
  • Competitive Analysis: Compare your business to other local electrical contractors, focusing on your strengths like specialized skills, quick response times, or competitive pricing.
  • Sales and Marketing: Outline your strategy for attracting clients, using methods like local advertising, building partnerships with construction firms, or creating an online presence.
  • Management Team: Highlight the qualifications and experience of your team, particularly in electrical work, project management, and customer service.
  • Operations Plan: Describe the operational aspects, including project bidding, job scheduling, staff management, and compliance with safety standards.
  • Financial Plan: Provide an overview of financial aspects, covering startup costs, pricing strategy, and revenue projections.
  • Appendix: Include supplementary documents such as licenses, certifications, project portfolios, or detailed market research to support your business plan.

If you’ve never created a business plan yourself before, it can be an intimidating task. Consider hiring an experienced business plan writer to create a professional business plan for you.

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to electrical businesses. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your electrical business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

types of business structures
  • Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
  • C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
  • S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

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Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

types of business financing
  • Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
  • Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
  • Personal: Self-fund your business via your savings or the sale of property or other assets.

Personal financing or friends and family financing may be your best bets, or you might be able to get a bank loan for your training.

Step 8: Apply for Electrical Contractor Licenses and Permits

Business Licenses and Permits

Starting an electrical business requires obtaining a number of licenses and permits from local, state, and federal governments. You need to be a licensed electrician in your state. Check your state’s website for requirements. An electrician’s license is considered a specialty contractor’s license.

Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level licenses and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. You could also check this SBA guide for your state’s requirements. 

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

For peace of mind and to save time, we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state, and provide them to you to make sure you’re fully compliant.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account. Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your electrical business as a sole proprietorship. 

Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

types of business insurance
  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.

Step 11: Prepare to Launch

Business Licenses and Permits

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You can use industry-specific software, such as ServiceTrade, connecteam, or ServiceTitan, to manage your pricing, bids, scheduling, dispatching, and to monitor your key performance indicators (KPIs).

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.

Marketing

Here are some powerful marketing strategies for your future business:

  • Local Partnerships and Sponsorships: Forge partnerships with local businesses, contractors, or community events. Sponsoring local events or sports teams can increase brand awareness and position your electrical business as an integral part of the community.
  • Local SEO — Regularly update your Google My Business and Yelp profiles to strengthen your local search presence.
  • Targeted Social Media Advertising: Leverage social media platforms like Facebook and Instagram to run targeted advertising campaigns. Focus on specific demographics and geographic areas to reach potential customers who are more likely to need electrical services.
  • Customer Referral Programs: Encourage your satisfied customers to refer your services to others by implementing a referral program. Offer discounts or incentives for each successful referral, turning your happy clients into brand ambassadors.
  • Seasonal Promotions: Introduce seasonal promotions or discounts during peak times when homeowners are likely to undertake electrical projects, such as the spring and fall. This can create a sense of urgency and attract more business during high-demand periods.
  • Educational Workshops: Host workshops or webinars in your local community to educate homeowners on electrical safety, energy efficiency, or DIY tips. Position yourself as an expert, and participants are more likely to turn to your business for their electrical needs.
  • Vehicle Branding: Ensure your service vehicles are branded with your logo, contact information, and a brief service offering. These moving advertisements not only enhance your professional image but also serve as mobile billboards, promoting your business wherever you go.
  • Online Reviews and Testimonials: Actively encourage satisfied customers to leave positive reviews on popular review sites like Google, Yelp, or industry-specific platforms. Positive reviews build trust and credibility, influencing potential clients to choose your services.
  • 24/7 Emergency Service Promotion: Highlight your ability to provide 24/7 emergency electrical services. Create targeted marketing materials that emphasize your quick response times during urgent situations, positioning your business as a reliable and responsive service provider.
  • Loyalty Programs: Implement a loyalty program for repeat customers. Offer discounts or special perks for clients who consistently choose your services, fostering long-term relationships and customer loyalty.
  • Branded Merchandise Giveaways: Distribute branded merchandise such as pens, notepads, or even small electrical tools at local events or as part of a promotion. This creates brand visibility and serves as a constant reminder of your services.

Focus on USPs

unique selling proposition

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your electrical business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your electrical business could be: 

  • Eco-friendly electrical services to increase your energy efficiency
  • 24/7 on-call electrical services
  • Reliable electrical services for small businesses

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running an electrical business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in electric for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in electrical businesses. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

Building a Team for a New Business

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for an electrical business would include:

  • Electricians – provide electrical services
  • Dispatcher – take calls and dispatch electricians
  • General Manager – staff management, supply ordering, accounting

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run an Electrical Business – Start Making Money!

Running a Business

Electricians are in high demand. The industry is worth over a shocking $200 billion in the United States alone!  You can start your own electrical business and get just a few watts of that market to make a healthy profit. Even working by yourself from your home, you’ll be doing well since you can charge $100 per hour or even more. 

Your skills are valuable, and you’ll be performing an essential service as well. Now that you’ve added more knowledge to your toolbelt, you’re ready to start wiring up a successful electrical business!

Electrical Business FAQs

How do I become a licensed electrician?

Every state has its own requirements to become licensed. Some require a certain number of hours or years working with a licensed electrician, and some require more formal training. You also may have to pass an exam.

How do I get customers for my electrical business?

To get customers for your electrical business, you can focus on developing a strong online presence through social media, search engine optimization, and online advertising. You can also network with other professionals in the industry, such as contractors and real estate agents, to generate referrals and build relationships with potential clients. 

How profitable is an electrical business?

Generally, electrical businesses that focus on providing high-quality services, building strong customer relationships, and staying up-to-date with the latest industry trends and technologies are more likely to be profitable over the long term.

What types of services can I offer as an electrical business?

As an electrical business, you can offer a wide range of services to clients, including installation, repair, and maintenance of electrical systems in residential, commercial, and industrial settings. Specific services may include wiring and rewiring, lighting installation, electrical panel upgrades, generator installation, and energy efficiency upgrades.

How can I differentiate my electrical business from competitors in the market?

You can emphasize your commitment to safety, reliability, and sustainability, and showcase your qualifications and certifications to demonstrate your expertise and credibility in the industry. 

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How to Start an Electrical Business