electrical business

[sparky723]

we all know that that most electricians are in the business for 1 of 2 reasons (maybe even both).

1) To aquire a masters license and open own business and/or
2) Get some type of license and work for an EC.

I want #1.

When I pass my Masters test, I am looking to open shop here in my small town. I will be serving my town and many local towns in what is called locally as the "Big Country".

My question to those who have thier own businesses is this:
What all do I need to do to when opening up my own shop?
I would like to know everything I can about what it takes to get started.
I know I need liabilty insurance,TECL #,tax #(?),bookeeper (lol),etc

Please help me with this.

 

[480sparky]

What all do I need to do to when opening up my own shop?

You need to get the proper licenses in your area.
You need to get some market research done.
You need to get a business plan laid out.
You need to get a balance sheet.
You need to get any bonding required.
You need to get general liability insurance, usually $1mil. minimum.
You need to get a working advertising campaign.
You need to get at least one years' worth of money saved up to live on.
You need to get customers.

THEN you can get going.

 

[hardworkingstiff]

Check with your local community college to see if they offer any business courses, if they do, take the course/s!

Most new ECs don't fail because they don't know electrical work, it's because they don't know business.

 

[satcom]

You need to get the proper licenses in your area.
You need to get some market research done.
You need to get a business plan laid out.
You need to get a balance sheet.
You need to get any bonding required.
You need to get general liability insurance, usually $1mil. minimum.
You need to get a working advertising campaign.
You need to get at least one years' worth of money saved up to live on.
You need to get customers.

THEN you can get going.

You forgot, a wife with a six figure income.

 

[GUNNING]

Plumber.

Plumber.

The big error most new EC's make is taking on everything and not being able to follow through. Sometimes it is with not enough assets either human or cash, sometimes its not enough skill set in the ways of business like answering the phone and returning phone calls and scheduling. All are killers.

Nuts and bolts are not contracts and paper and taxes and estimating and sales and receptionist and human resource officer and book keeper and IT specialist and supply inventory specialist and ... lacking any of these skill sets can make everything come apart sooner or later.

If you want to be a business man take off the tools and learn about the office. You will become an expert in electrical work, not the office it takes to make it happen. You are only as good as your last sale and your reputation can be destroyed in 5 minutes after building it up for 5 years. Make a business plan. Know your overhead costs and projections. Plan for the endgame. Everything comes to an end. When you first can afford it get a bookkeeper and don't give them the power to sign checks.

Lastly,think about becoming a plumber. They make a lot more than electricians and no price is too high when the water is running. Same skill set with a desperate customer base.

 

[480sparky]

You forgot, a wife with a six figure income.

Most nurses & teachers don't make that much. But they can get you onto their health insurance.

 

[readydave8]

win the lottery and run your business until the money's all gone?

 

[flyboy]

we all know that that most electricians are in the business for 1 of 2 reasons (maybe even both).

1) To aquire a masters license and open own business and/or
2) Get some type of license and work for an EC.

I want #1.

When I pass my Masters test, I am looking to open shop here in my small town. I will be serving my town and many local towns in what is called locally as the "Big Country".

My question to those who have thier own businesses is this:
What all do I need to do to when opening up my own shop?
I would like to know everything I can about what it takes to get started.
I know I need liabilty insurance,TECL #,tax #(?),bookeeper (lol),etc

Please help me with this.

What you "want" and what you are willing to do may be very different once you truly understand what it takes to be in this business. Or any business for that matter.

The business of electrical contracting has little to do with the work an electrician does. You'll be called upon to learn things you may not be interested in learning, but will be necessary for you to succeed.

You will need to prepare a business plan. In this plan you'll need to decide what particular market you want to serve. Is it residential, commercial, industrial service or new construction? Do you have the financial backing to serve a particular market you decide to serve? Marketing, competition, business model, your team, etc. There is plenty of help on the internet for creating an effective business plan. You may also want to seek out help from the SBA.

You'll need to learn the components of a Profit and loss statement and how to read them. You'll need to learn what breakeven means, overhead, direct costs, Key Performance Indicators (KPI's) and profit mean and their relationship to one another. You'll need to learn how to make a budget, how to implement and stay on target with it.

You'll need to learn how to price yourself correctly based on your costs and billable efficiency and not what your competition charges. You'll need to learn how to sell the value of doing business with your business as opposed to your competition.

You'll need to learn about how to choose a good accountant and understand the tax liabilities you'll be responsible for.

You'll need to learn human resources, recruiting, cash management, purchasing, payables, recievables, payroll, workers compensation, customer service, public relations etc, etc.

You'll you need to change your own personal paradymes on a whole variety of subjects.

You'll need to know, that you don't know, what you don't know.

Your going to have to take off your tool belt and become a business person, not an electrician.

Your going to have to accept all the respondsibility that comes with being a business owner, as a provider of services to the public, as a employer and as a business person in your community.

There's more, but I need a nap. In the meantime, you can start by reading this book http://www.amazon.com/E-Myth-Revisited-Small-Businesses-About/dp/0887307280

This book was the jumping off point for me 17 years ago that has made me millions.

 

[480sparky]

.......paradymes...........

​

 

[sparky723]

You need to get the proper licenses in your area.
You need to get some market research done.
You need to get a business plan laid out.
You need to get a balance sheet.
You need to get any bonding required.
You need to get general liability insurance, usually $1mil. minimum.
You need to get a working advertising campaign.
You need to get at least one years' worth of money saved up to live on.
You need to get customers.

THEN you can get going.

market research?-live in small town
business plan-definition?
balance sheet-definition?
bonding-where do I get this info?
insurance-general ins. company or spcialized type carrier?
advertising campaign-local paper and radio. small town, word gets out. Fast!
1 years money saved up- really? I have so many jobs backed up, I cant see straight.
customers-(see subject above)

 

[480sparky]

market research?-live in small town

There's no ECs in your area doing any work?

business plan-definition?
balance sheet-definition?
bonding-where do I get this info?

Asking this does not bode well for you.

insurance-general ins. company or spcialized type carrier?

Tell me you're kidding.

advertising campaign-local paper and radio. small town, word gets out. Fast!

But what works????

1 years money saved up- really? I have so many jobs backed up, I cant see straight.

So what happens when a half-dozen jobs don't pay right away, or never pay at all?

customers-(see subject above)

OK, so you've 'got' customers. Now how about retaining them?

 

[sparky723]

There's no ECs in your area doing any work?
There is 1 guy in town. he has been here for a LOOOOONG time. Hes the only guy people know to call. The "older" generation in this town usedhim for years, but they are 'dying' off (not to be rude) and the younger crowd is moving in. I feel like this would be the time to open shop. If I dont, the younger people will call an out of town electrician.


Asking this does not bode well for you.
I ask this because I dont know. I always heard there isnt a dumb question. It takes asking questions to get answers.



Tell me you're kidding.
Not kidding. and why would I be? I am simply wondering where you get this type of insurance.


But what works????
they both work actually.
my sister in law is an advertising major and a good friend runs the advertising for the local radio station. MANY important people and business owners go to my church and my name is ALL over. People are waiting and wanting me to get the license so they dont have to use the other guy.



So what happens when a half-dozen jobs don't pay right away, or never pay at all? I think this is a concern for ALL business owners. I am not in a position where I can stay at my current job for another year saving up money to live on when I decide to drop it and open shop. I like the electrical field, not what im doing now. 2 1/2 years not being every day in the field has made me rusty. Its time to move on




OK, so you've 'got' customers. Now how about retaining them?

I was taught safety,quality,profit. My original EC I worked for when I started, taught me the right way to do electrical work. I have repaired what the "other guy" has fixed. I am not a corner cutter and could be called a mild perfectionist. So with that said, I feel if you do the customers' job right, then they will call you back the next time. when they call you a 2nd time, they are on their way to being 'retained'.

 

[sparky723]

elec. business

elec. business

FYI-That previous post reply is messed up. My apology to 480 sparky. I dont know exactly how to seperate the quotes.

I think I need to clear some things up.

My town is barely 3000 people. I am not going to open shop in a city like Dallas,Austin,or Houston.
While I appriciate your comments, I am confused why I would need to know so much just to get on my feet.

Flyboy, what are the components to get started? Your post, while informative, was a bit overwhelming.
As for taking my tool belt off,thats a not gonna happen. If I was to do that , then the business would surely fail. you see, Im the one who's gonna do the work with maybe a helper down the road when I see fit. I
I just need the strong basics. I know I said "everything" in the OP, but I really dont need to know what it takes "to make millions".:grin:
If someone with a small shop could comment, Id appreciate that as that will be closer to my demographic of business rather than a large shop.

 

[480sparky]

I think I need to clear some things up.

My town is barely 3000 people. I am not going to open shop in a city like Dallas,Austin,or Houston.
While I appriciate your comments, I am confused why I would need to know so much just to get on my feet.

Flyboy, what are the components to get started? Your post, while informative, was a bit overwhelming.
As for taking my tool belt off,thats a not gonna happen. If I was to do that , then the business would surely fail. you see, Im the one who's gonna do the work with maybe a helper down the road when I see fit. I
I just need the strong basics. I know I said "everything" in the OP, but I really dont need to know what it takes "to make millions".:grin:
If someone with a small shop could comment, Id appreciate that as that will be closer to my demographic of business rather than a large shop.

You're assuming that running a business takes very little time, effort and knowledge.

Even a 1-man shop cannot make it unless you work 8-10 hours a day, and that's when you're tools are moving. You are just an electrician during those hours. Outside of those hours, there's bookkeeping, taxes, invoicing, billing, accounts payable, advertising, training, licensing, CEUs, vehicle maintenance, filling out permit requests, bidding jobs, getting quotes, collecting unpaid bills, calling your lawyer & accountant & banker, calling customers back, checking deliveries, repairing tools, straightening out the truck, building & maintaining your website, 'selling' your services, and even taking out the trash.

If you're going to hire someone, it's a lot worse than getting married. You enter into a whole other realm of responsibilities........ workers comp., payroll taxes, benefits...................

 

[growler]

I just need the strong basics.

Once you pass the test and get your license you will need the following to start doing your first job legally.

Normally a business license is required. Business license office at City Hall.
They may require a bond and if so they will tell you about it and most times tell you where to get it. You may or may not be required to carry liabiltiy insurance but it a good idea. start checking rates now.

You need to know how you are going to run your company and get a commercial bank account and start keeping business and personal expenses seperate.

If you have a master's license, a business license, bond and insurance you can normally do a job legally. If you have help you would need workman's comp.

 

[bradleyelectric]

You're assuming that running a business takes very little time, effort and knowledge.

Even a 1-man shop cannot make it unless you work 8-10 hours a day, and that's when you're tools are moving. You are just an electrician during those hours. Outside of those hours, there's bookkeeping, taxes, invoicing, billing, accounts payable, advertising, training, licensing, CEUs, vehicle maintenance, filling out permit requests, bidding jobs, getting quotes, collecting unpaid bills, calling your lawyer & accountant & banker, calling customers back, checking deliveries, repairing tools, straightening out the truck, building & maintaining your website, 'selling' your services, and even taking out the trash.

If you're going to hire someone, it's a lot worse than getting married. You enter into a whole other realm of responsibilities........ workers comp., payroll taxes, benefits...................

The reason most electricians go back to being an electrician working for someone else in less then a year. They think being a contractor means doing pretty much the same thing they do everyday already, just they are going to make the big money now.

 

[sparky723]

You're assuming that running a business takes very little time, effort and knowledge.

Even a 1-man shop cannot make it unless you work 8-10 hours a day, and that's when you're tools are moving. You are just an electrician during those hours. Outside of those hours, there's bookkeeping, taxes, invoicing, billing, accounts payable, advertising, training, licensing, CEUs, vehicle maintenance, filling out permit requests, bidding jobs, getting quotes, collecting unpaid bills, calling your lawyer & accountant & banker, calling customers back, checking deliveries, repairing tools, straightening out the truck, building & maintaining your website, 'selling' your services, and even taking out the trash.

If you're going to hire someone, it's a lot worse than getting married. You enter into a whole other realm of responsibilities........ workers comp., payroll taxes, benefits...................

I dont assume anything. I just dont think it entails as much as a larger company. I know that there will be things to do other than electrical work. I am going to have to find time and people to do those things. All I want to know is if I was to open shop tommorrow, what is legally required by law to open a shop?
I was under the impression it was a TECL # and insurance. I will be contacting the SBA and other small business owners in town to obtain the legal info. I have cpa friends,lawyer (and judge) friends. Alot of info can be obtained from them. The way people talk on here, it is almost making me not want to get a masters, although Ive worked so hard to try and get it.

 

[480sparky]

........All I want to know is if I was to open shop tommorrow, what is legally required by law to open a shop?...........

Depends on your area's requirements. That is needed varies state to state, county to county, city to city.

In my area, I need an EC and Master Electricians' license, register with the state, and liability insurance.

But that alone does not constitute any measure of success.

 

[satcom]

I dont assume anything. I just dont think it entails as much as a larger company. I know that there will be things to do other than electrical work. I am going to have to find time and people to do those things. All I want to know is if I was to open shop tommorrow, what is legally required by law to open a shop?
I was under the impression it was a TECL # and insurance. I will be contacting the SBA and other small business owners in town to obtain the legal info. I have cpa friends,lawyer (and judge) friends. Alot of info can be obtained from them. The way people talk on here, it is almost making me not want to get a masters, although Ive worked so hard to try and get it.

The guys are just trying to let you know, it is no picnic starting a business, and there is plenty of work involved, the electrical work, is the easy part, starting and growing a business is the hard part, but it can be done, with plenty of hard work and money.

I started out with borrowed funds, and an existing family business, that needed some professional help, with accounting and marketing, the first 10 years were the hardest, get use to eating peanut butter, when times are tight, and don't think electrical contracting in a gold mine business, every dollar is hard earned, there were times we went without, because we had had to meet payroll, or pay some supply bills, to keep things rolling, and then just when you think things are looking up, some of your customers, stiff you for some large amounts of money, you have to enjoy the ride, to stay in business, after many years of struggle and long hours, I was looking to retire, and take some of those long delayed vacations, and a few months before I planned to spend time with the wife, and I got a call from her doctor, I have some bad news for you, and all those years of building the business, ment nothing to me, I lost the one I loved, so what the guys are saying is, starting a business is a serious decision, it will have a huge impact on your life, so plan it well and run it right, so you and your family can operate the business and do well enough to have time to smell the roses over the years.

 

[480sparky]

Here's a story I like to tell in this situation:

-------------------------

Years ago, Joe Sixpack got a job as a helper for Fly-By-Night Electric. He started out working with a journeyman wiring houses for Cut Corners Construction. Joe turned out to be a pretty good electrician, learning fast and working hard. As the years went by, Joe got pretty good at wiring houses. Soon, he was running the jobs himself, and had his own helper.
Then recently, Joe got to thinking. "Fly-By-Night charges Cut Corners ten grand to wire a house. I know I get paid about $1500, and my helper gets $1000. I know the material costs around $2500.......... so that means the boss is making five grand just sitting at the office endorsing checks!"
So Joe decides to strike out on his own. "Man, this'll be great! I'll charge just $7000 to wire the houses, and with only $2500 in material, I'll pocket $4500 for each house I do....... Jeez, that's more than three times what I was making for 'the man'!"
So Joe hangs out his shingle. . He doesn't have any health insurance, thinking he'll get that later when things really get started. Suddenly, he realizes he needs to be licensed. So he takes the test, and spends more money for the test and license. He also doesn't understand that driving his own truck costs money, both in gas, repairs, insurance, etc
All fired up, he gets his first job for Cut Corners. Right from the start, Cut Corners wants a current liability insurance certificate. So Joe forks out $3000 for insurance. A few weeks later, he gets a letter from the state saying he's not a registered contractor. So another $600 is spent. Oh, yea, the city says they need $1250 for a permit.
A few days into the first job, Cut Corners says they need temporary power. Joe didn't figure the cost of a temp pole into the job, but he builds one and gets it hooked up. Joe finds out he needs more than a 3/8" drill and 4-foot stepladder. So he goes out and buys more cords and a couple ladders. Every time Joe needs material or another tool, he'd drive down to Home Depot and whip out the plastic. Pretty soon, he realizes he's a couple days behind schedule. Why? He's working alone, and doesn't have his old helper with him.
So Joe starts working 12-hours days, and a couple Saturdays as well. He skips his daughter's dance recital, and misses his son's Little league game. He comes home dirty, tired and grouchy, which cause his family to stay away from him.
By the time the house is roughed in, his credit card is maxed out and Joe needs to borrow money from his parents. "Just until I get this job done, then I'll be rolling in dough" he tells them. He borrows even more money just to buy the material he needs to trim the house. By this time, he has alienated his family and taken his credit rating down below 400.
And the sad truth is, by the time job is done, he's been paid only $7000 and has spent $14000 just to 'be in business'. So he tells Cut Corners the next job will be $8500, thinking he can 'make it up' on the future work. But even that 'extra' $1500 'from the next job' won't cover his $7000 shortfall. Besides, Cut Corners won't hire him again because Joe caused them to get behind on their schedule. And to add insult to injury, they found someone else to do the job for less.
Dejected, Joe goes home, only to find a letter from the IRS saying they want $3250 for the income tax Joe owes from that job. The state also wants $675 for sales tax. All the 'profit' Joe thought he was going to make went to pay his bills, leaving nothing to pay his parents back with.

And who did Cut Corners hire to wire their next house? Joe's old helper from Fly-By-Night!