Do you want to start a electrical contractor business? If YES, here is a complete guide to starting a electrical engineering contractor business with NO money and no experience.
Okay, so we have provided you an in-depth sample electrical contractor business plan template. We also took it further by analyzing and drafting a sample electrical contractor marketing plan backed up by actionable guerrilla marketing ideas for electrical contractor businesses. In this article, we will be considering all the requirements for starting a electrical contractor business. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- 1 What Does It Take to Start an Electrical Engineering Contractor Business Successfully?
- 2 Starting an Electrical Contractor Business – Market Feasibility and Research
- 3 Starting an Electrical Contractor Business – Legal Matter
- 4 Writing a Business Plan for Your Electrical Engineering Business
- 5 A Detailed Cost Analysis for Starting an Electrical Engineering Business
- 6 Financing Your Electrical Engineering Business
- 7 Choosing a Suitable Location for your Electrical Engineering Business
- 8 Starting an Electrical Engineering Business – Technical & Manpower Details
- 9 Starting an Electrical Engineering – The Marketing Plan
- 10 Tips for Running a Electrical Engineering Business Successfully
What Does It Take to Start an Electrical Engineering Contractor Business Successfully?
If you have had a formal education in electrical engineering as well as training, and you have got the entrepreneurial spirit in you, then you can totally start up this business. In addition to your education and training, you would need to be sure of the requirements from the state where you intend operating from, as most states in the United States of America usually require a testing before license can be issued.
The next step is in getting a local business permit, as well as a license and tax registration certificate from the authorities in the state where you will be operating from. You would also need a Federal Tax Identification Number as well as an Employer Identification Number from Internal Revenue Service. With all the above, you can then approach a financial lending institution for the needed start up financial resources that you will need to start your business with.
Starting an Electrical Contractor Business – A Complete Guide
- Business Overview
The two occupations that have been associated with innovation according to the United States government has stopped growing. According to the Bureau of Labor Statistics (BLS), the number of people who are employed as electrical engineers which stood at a figure of 316,000 will remain at that figure for the next decade. The government put a 10 year outlook for this industry at 0%, which means little or no change. This bleak view means that the United States is suffering a massive shortage of skilled electrical engineers.
Electrical engineers are those who design, develop as well as test electrical equipment that includes radar, motors, communications as well as automotive and power generation. The reason for the slow growth in this industry has largely had the manufacturing sector being blamed, especially as most companies are cutting costs by going into contracting. Even though, there hasn’t been much growth in the industry for electrical engineering, the engineering jobs as a whole have grown to about 7%.
- Interesting Statistics About the Electrical Engineering Industry
There are approximately 1.6 million engineering jobs in the United States of America that pay a median wage of $42 per hour. The electrical engineers alongside electronic, civil, mechanical and industrial engineers make up two-thirds of the engineering workforce in America. In the early 2000s, engineering outputs for graduates stood at a standstill, it however shot up by 33% by 2007.
As at 2002, 385,000 electrical engineers had been employed in the United States with the number dropping to 343,000 in 2004. It climbed a bit to 382,000 in 2006, but according to the Data from the BLS, has not risen above 350,000 since then. This has been due to recession, which has caused most businesses to be unable to employ electrical engineers especially in the development of technologies.
The data concerning the unemployment figure for this year has been described as alarming by the IEEE-USA, especially as unemployment for electrical engineers has been pegged at 6.5%. The unemployment rate as at June declined to 4.5%, but this still isn’t comforting as there is little change in the size of the unemployed workforce. The labour decline has been said to be because more people are retiring or cannot find jobs.
In the next 10 years, the United States will need nearly 250,000 engineers who would work in high growth sectors as well as industries. Also, employers will need to make more than one third of engineering jobs to be available in areas such as Los Angeles, Houston and Washington, D.C. This means that there will be an 11% expansion in the United States engineering market through 2023.
The electrical engineering workforce are dominated by males, with women representing just 13% of the total engineering workforce. According to statistics, employers will be forced to look for engineers who come from outside the United States, because apart from seeking traditional technical skills, they will be seeking for electrical engineers who are not only creative but also innovatively apply new thinking.
Starting an Electrical Contractor Business – Market Feasibility and Research
- Demographics and Psychographics
The psychographic and demographic composition of people who require the services of an electrical engineer are those who at one time or the other have challenges or need something new installed or developed and includes residential home owners, business owners, hospitals, schools and other public institutions. Also, the people that use these services are those that are able to afford and pay for such services.
List of Niche Ideas within the Electrical Engineering Industry
Regarding the niche ideas within the electrical engineering business industry will totally depend on the kind of services being offered. Most electrical engineering firms tend to offer uniformed services except for those that offer additional services.
Some of the areas of specialization in the electrical engineering industry are; radar, motors, communications as well as automotive and power generation, purchasing and supply, consultancy. While it is easier for a bigger electrical engineer firm to offer more of these services, it is not so easy for small electrical engineering firms, especially as offering more services would mean committing more capital and resources to be able to execute any job.
The Level of Competition in the Electrical Engineering Industry
There is a high level of competition in this industry as more companies are continually entering into this field. The ease or difficulty in starting up this business will depend totally on the kind of electrical engineering business you intend to run as well as your target market.
Also, the kind of electrical engineering business will determine the type of equipment you would need to get whilst starting up the business. If you are starting off on a low scale, it would be easier for you to compete with other electrical engineering firms on your level than with the bigger firms. Bigger firms are likely to bid for contracts from the government as well as other bigger businesses. As a smaller electrical engineering you can compete by offering specialized services to your customers.
List Of Well – Known Brands in the Electrical Engineering Industry
Every industry has a list of well known brands that due to a number of factors have not only been consistent but are known to be profitable as well. Being a well known brand has its advantages as most employees are attracted to working there and most new start-ups will study these well-known brands so as to be able to grow their businesses to n enviable standard as well. The list of well known electrical engineering firms in the United States of America are;
- Elmos Semiconductor
- RHL Design Group, Inc
- Siemens & Halske
- Schlesinger-Siemens Electrical
Starting an electrical engineering business means ensuring that you have carried out a proper research and investigation. Depending on the type of electrical engineering business you intend to start up as well as the scale – small, medium or large – your decisions from capital, marketing strategies and analysis, pricing strategy as well as competitive strategy will vary.
This is a business that is highly regulated in that you would need to ensure that you get a license and have formal training as well as the necessary permits before you can start off the business. The regulation also extends to whatever employees you intend to employ in your company.
You should understand that revenue for your business is dependent on how well the economy is. An economy that booms will allow you get more customers likely to pay for your services, however, an economic downturn will see a decline in people seeking for your services.
An important decision in starting off your electrical engineering business is the location of your company. Getting a suitable location is very important as it not only allows your customers conveniently locate and get access to your business, but it is also helpful to your employees as well. The facility too is very important as you would need to ensure that the facility you lease is one that is appropriate for the scale of business you intend to run.
Is an Electrical Contractor Business Worth Starting from Scratch or is Buying a Franchise Better?
Starting a business from scratch or buying a franchise to assist in starting up the business is purely your prerogative as a business owner. Each option has its pros and cons and so you should know which is likely to suit the objectives, vision and goal of your electrical engineering business. Starting from the scratch, affords you the opportunity of knowing about all the aspects of your business very well and also the decisions that will favour you or that which should be discarded.
Buying a franchise on the other hand is for entrepreneurs who do not want to be bothered by the hassles of starting their business purely from scratch. Buying a franchise depending on the conditions attached will ensure that you are not bothered too much with paperwork or how to attract your customers, but in facing other aspects of the business, while the stress is taken from you.
Possible Threats and Challenges You Will Face When Starting an Electrical Engineering Business
Every business that exists whether profit or non-profit oriented faces threats and challenges at every point in the business. Any entrepreneur looking to start a business must be prepared for these challenges and threats that might crop up at any point.
Such challenges and threats include arrival of competitors, economic downturn leading to less people being able to afford the services of your business, and poor business strategy. These challenges and threats should not discourage you but serve to propel you to craft out strategies that will enable you overcome the obstacles.
Starting an Electrical Contractor Business – Legal Matter
- Best legal entity to use for an Electrical Engineering Business
When starting up a new business, the decision on what legal structure would best suit your business is often a serious issue, especially as each structure comes with its pros and cons and will need to be thoroughly looked into before one can be chosen.
Most entrepreneurs are often confused on what legal entity to choose when starting a business; however, the existence of an attorney can help clear such doubts as they are in the best position to guide you on what best legal entity you should choose for your electrical engineering business.
There are four legal structures that you can choose when starting up your electrical engineering business. The simplest is the sole proprietorship especially if you are starting off on a small scale. In this structure, your expenses and income from your business are included in your personal income tax return. There is also the partnership form of legal structure which allows you and another person referred to as a partner run the business together. This form of legal structure is also cheap and also has some tax advantages.
A corporation is a legal entity that protects you the owner from personal liability in case of bankruptcy. There are two types of corporations, the S and the C, with the S corporation being the most common. Finally, there also exists the Limited Liability Company (LLC) structure which offers enormous advantages to the business owner such as tax breaks and protection from personal liability.
Catchy Business Name ideas Suitable for an Electrical Engineering Business
- Gall Electric Inc
- Volts and Watts Company
- Basic Volts Inc
- Probes and Test Electrical Company
- InterTrans Electric Corp
The Best Insurance Policy Needed for an Electrical Engineering Business
No matter the scale of business you intend to run, you would need a basic insurance policy that would protect your and your electrical engineering business. You would need to carry out your own research as well as approach an insurance broker for advice on helping you choose the best insurance policies for your business.
Some of the basic insurance covers you would need to consider purchasing if you intend to run an electrical engineering business in the United States of America include;
- General Liability Insurance
- Professional Liability/Errors & Omissions
- Workers’ Compensation
- Excess Liability/Umbrella Insurance
- Property Insurance
- Business Owner’s Policy (BOP)
Is Intellectual Property Protection Needed for a Electrical Engineering Business?
If you intend starting an electrical engineering business, then you would not require applying for an intellectual property protection except you are going into the business of innovating and developing new products. Most business owners in this field who are into basic services do not consider getting an intellectual property protection as a priority.
Is Professional Certification Needed to Start an Electrical Engineering Business?
If you intend to start an electrical engineering business in the United States of America, you would need to be professionally certified by getting the required license and permit to be able to practice your trade.
The electrical engineering business is a regulated industry especially as you would be required to handle electrical devices that if not handled properly might lead to loss of lives. This is why practitioners have to get a formal education as well as write an exam to get a permit and license to practice electrical engineering.
List of Legal Documents You Need to Run an Electrical Engineering Business
Some of the basic legal documents that is required to successfully run an electrical engineering business in the United States of America
- Certificate of Incorporation
- Insurance Policy
- Business License
- Business Permit
- Business Plan
- Contract Document
- Employment Agreement
- Operating Agreement
Writing a Business Plan for Your Electrical Engineering Business
A business plan is a necessity for any business that intends to compete, make profit and become a success. A business plan as a document helps you know if the business idea you have is worth venturing into so that you do not waste money and other resources in starting a business that is doomed to fail.
A business plan is also important as it helps you source for funds for your business from external parties such as investors, banks, or other lending institutions. Without your business plan, no investor or bank will take your business idea seriously, and so a business plan is a concrete plan aimed at showing stakeholders how serious you are taking your business.
The purpose of having a business plan is that it helps you see how most of the major actions and decisions that you will carry out in the course of running the business will pan out. This is why key components such as how you intend to generate your start-up capital, expand the scope of your business as well as attract clients to patronize your services should not be missing from your business plan.
Other important components that are necessary and should be included in your business plan include;
Executive summary which should clearly state what your electrical engineering business is about, the goals, vision and objectives of your company, your marketing goals and strategy, your target market and what stands you apart from your competitors. Other important components are your SWOT analysis, pricing strategy, advertising strategy as well as financial projections.
While writing a business plan can be overwhelming, in this day and age you can hire an expert to help in writing a comprehensive business plan for you. However, if you are constrained budget wise, there are loads of free business plan templates online that should guide you towards writing a business plan.
A Detailed Cost Analysis for Starting an Electrical Engineering Business
According to several researches, if you are starting a basic electrical engineering business, then the prices of the basic equipment is easy enough for any entrepreneur to get. Some of the prices for the tools and equipment are fixed and can be gotten for cheap in both online and offline stores.
This means that the start-up capital for your electrical engineering business can be low if you decide to start with just the basic tools, and also if you choose to operate from home. Operating from home will greatly reduce your overhead as well as operational expenses.
Some of the items you would need if you intend to launch your own electrical engineering firm in the United States of America are;
- Incorporation fees would cost $700
- Insurance policies would cost $1,000
- Professional permits and license would cost $500
- Amount needed to lease a facility for at least a year for storage of working tools and administrative purposes would cost $15,000
- Equipping the office with computers, phones, printers, safety gadgets and first aid box would cost $1,500
- The cost of acquiring the required working tools and equipment for the business would cost $5,000
- Launching an official website would cost $300
- Additional expenditure would cost $500
From the above detailed report, you will need an average of $25,000 to start a small scale electrical engineering business in the United States of America.
If you intend on starting a medium scale electrical engineering business in the United States, you would need nothing less than $50,000. And if you are looking to start a large scale electrical engineering business in the United States of America, then you might need to look towards raising well over $100,000.
Financing Your Electrical Engineering Business
Finance is a very important part of any business either profit or non-profit oriented. Without finance, most business ideas would die a natural death, no matter how fantastic or unique they might sound. Every business that is thriving now as to a very large extent depended on finance to start, grow and eventually become successful. This is not to say however that raising finance as an entrepreneur is an easy task but it is something that every entrepreneur must go through.
Raising the required finance necessary to start up the business is made easier if you have a comprehensive business plan in hand. Your business plan allows any investor or financial lending institution that you might approach take you seriously.
This shows that in writing your business plan you must take it seriously especially in regards to executive summary and financial projections, and if you do not have the required know how necessary to write a business plan, you can hire an expert.
Some of the options that are available to you when it comes to raising finance for your electrical engineering business are;
- Approaching a bank and seeking for a loan
- Pitching your ideas to an investor to raise the required capital
- Approaching lending organizations to get a loan
- Sale of personal property and stocks to raise money
- Seeking for loan from family member and friends
Choosing a Suitable Location for your Electrical Engineering Business
The right location to start your electrical engineering business is very necessary; this is because a suitable location will bring you more customers than a non suitable location. Your location should be dependent on the type of electrical engineering business you intend to run and the kind of customers you would be targeting. If you are going to be targeting those in residential areas, then it would do you good if you locate your business close to residential areas.
If however, you intend to target businesses and companies as your customers then it would do you well to locate your electrical engineering business in a business district, that way you are easily available to attend to the requests of your customers.
Your business will die a natural death if you attempt to locate it in an area that does not have majority of your target market in place. This is why before starting your business; you must know who your target market is as this would enable you to start sourcing for an appropriate location for your business.
When it comes to the facility you intend to lease for you lease for your business, it shouldn’t be one that would drain all your resources. The electrical engineering business if started on a low scale can be operated from home, as you can store your equipment in the garage.
If however, you intend to get an employee or several, ensure that your facility is able to store the necessary equipment that would be required to run your business. Also, your location should be one that is convenient to reach and also accessible to both customers and employees.
Starting an Electrical Engineering Business – Technical & Manpower Details
Regarding the tools and equipment needed to start an electrical engineering business, you can get fairly used ones that will serve the purpose of new ones; this is especially if you are running on a tight budget, as you can get the fairly used tools and equipment cheaper.
However, you need to ensure that you get the genuine tools so as not to have to discard them after a short use. Some of the equipment you would need to launch your electrical engineering business includes;
- Fish Tape
- Tape Measure
- Digital Voltmeter DVM
- Function Generators
- Radio Frequency
- Voltage Testers
- Current Probes
- Channel Lock Pliers
- Voltage Probes
- Wire Strippers
- Non-contact Voltage Detector
- Side Cutter Diagonal Pliers
- Linesman Pliers
- Torpedo Level
- Allen Wrench Set (Hex Set)
- Razor Blade Knife (Utility Knife)
- Phillips Screwdriver
- Straight Blade Screwdriver
- Wire Crimpers
Depending on the scale you intend starting this business, this is something that can be operated by a single person and from home. If however, you intend to lease a facility, it should be due to the fact that you intend to run a medium or large scale facility.
If you are going to be running a large scale electrical engineering business, you will need to employ more hands to help ensure the business is run effectively. For this, you might need to employ a Manager, Supervisor, Electrical Engineers, a Marketing Executive and a Front Desk Officer. This is about 6 to 12 employees.
The Production Process in the Electrical Engineering Business
The process involved in the electrical engineering business depends entirely on the requirement of the customer. The process could range from designing, testing and development of new products that will directly affect the consumers. It could also involve carrying out safe repairs and installations on customers’ electrical products according to industry standard.
Starting an Electrical Engineering – The Marketing Plan
- Marketing ideas and strategies
Marketing is the major way of generating revenue for your business. If you intend to run a successful electrical engineering business no matter the scale, then you must market your business vigorously. As a new entrant, you would need to employ all convention and non conventional modes of marketing. This means using both online and offline forms of marketing.
Due to the importance of marketing, businesses usually keep a separate budget to be used in marketing their products or services. Also, strategies are drafted out before hand and tested with ineffective marketing strategies discarded for the effective ones.
This does not however mean that you should break the bank by keeping aside a big marketing budget. Due to the growth of the internet and smart phones, there are several inexpensive ways to market your electrical engineering business. Some of the strategies and tips that can be used to market your electrical engineering business include;
- Ensure that you introduce your electrical engineering business to businesses that would require your service, by sending a letter introducing your business, the services you render and the rate for the services
- Advertise your business online in various blogs, websites and forums that are related to engineering
- Create an official website and promote your electrical engineering business
- Advertise your business in local newspapers, as well as on radio and television
- List your business in yellow pages as well as in online directories
- Advertise your electrical engineering business via social media platforms such as Twitter, LinkedIn, Facebook and other various platforms available
- Make use of word of mouth marketing
- Pass out handbills and fliers
- Attend engineering seminars, expos and events especially those related to electrical engineering.
Factors That Will Help You Get the Right Product Pricing for your Electrical Engineering Business
Every business must set the necessary price for it to compete favorably, while making profit. This is why necessary research is needed before starting any business. There are several factors that can allow you get the right pricing for your services and they include, trying to keep your operating cost on a minimum level.
This can be done by operating from home if you are just starting out on a small scale. Another factor is in ensuring that you purchase the required tools for your electrical engineering business as fairly used, that way you get them cheaper, thereby lowering your overhead cost.
Possible Competitive Strategies for Winning Your Competitors in the Electrical Engineering Industry
There is no industry that is bereft of competitors. The electrical engineering industry which is the same as any industry has competitors that are in every niche and on every scale, which usually give customers options as regards cheaper pricing or better services or both. This is why before starting this business; you must determine why you want to go into the business and also why you think your electrical engineering business would be different from that of your client.
Packaging is a very important part of every business, it depicts the fact that you know exactly what your clients need and are ready to accommodate them on any level. Your business must be one that can attend to several clients no matter their level – lower, middle or upper class.
Another way you can beat your competitors in the same industry is to ensure that you offer additional but related services that customers are likely not to be able to resist.
Possible Ways to Increase Customer Retention for your Electrical Engineering Business
Retaining customers is less expensive than acquiring new customers according to research. The amount used in attracting new customers to a company eats more into the advertising budget than that used in retaining customers to your business.
The reason why customers leave a business is usually due to several reasons, which might be a better service offering from your competitors or better customer service. This is why you would need to draft strategies that are aimed at retaining customers and not giving them reasons to move to your competitors.
One way at ensuring that customers do not leave your business is ensuring that you offer excellent services always. If customers are continually satisfied with the services you offer them, then you would not need extra efforts to keep them. Also, customers expect their complaints and enquiries to be answered on time, which means you would need to create an excellent customer system that would attend to customers promptly.
Strategies to Boost your Brand Awareness and Create a Corporate identity for your Electrical Engineering Business
If you want your business to stand out and be unique from that of your competitors, you would need to ensure that you create the needed strategies that will help boost brand awareness while also creating a corporate identity for your electrical engineering business. Some companies usually hire brand experts to help them in handling this aspect of the business.
Listed below are some of the platforms you can use in boosting the brand of your electrical engineering business, while also promoting and advertising your business;
- Ensure that you advertise your electrical engineering business via relevant magazines as well as local newspapers and even on television and radio
- Create awareness for your electrical engineering business by vigorously promoting the business on your official website.
- Ensure that your loyal customers help in referring others to your business by offering them incentives.
- Ensure that your electrical engineering business is listed in local directories offline as well as online directories
- Use the social media platform on the internet such as Facebook, Twitter, LinkedIn and Google Plus to promote your electrical engineering business
- Ensure that you distribute your handbills and fliers in target areas
- Network with other electrical engineering professionals and join associations that will help bolster your business
Creating a Suppliers/Distribution Network for your Electrical Engineering Business
If you run a standard electrical engineering then you might have to deal with sourcing for certain equipments and tools that you will need in order to successfully carry out your business.
Being in a good business relationship with suppliers is very vital for a successful business. Apart from the fact that you get your tools and equipments without delay enabling you to execute a given job efficiently and effectively, you also get tips on what tools and equipment will better serve your business.
This is because suppliers know that your success also help them grow as well as you would likely be referring more clients to them. The bottom line is having a good business relationship with your supplier is beneficial to your business and that of your supplier.
Tips for Running a Electrical Engineering Business Successfully
Electrical engineers are those who design, develop as well as test electrical equipment that includes radar, motors, communications as well as automotive and power generation. As an electrical engineering business that intends to be successful, you would have to draft strategies that would ensure that you have a competitive edge over your competitors that would draw the clients to patronizing your services.
Customers love to be treated specially and so you would need to ensure that you always keep in touch with your clients through your social media platforms as well as your official website in attending enquiries while also offering tips and advice as regards general or specific issues that they might have.
Also, you might need to ensure that you offer your clients incentives once in a while especially for those that refer other customers to you. This will not only encourage your customers to refer others to you but also ensure that they are loyal to you, which will therefore help improve the bottom line of your business.