Skilled trades are some of the most in-demand businesses in the United States. If you’re an electrician or thinking about how to start an electrical business, we’ll help you understand what you need to do.

Joel Walsman started Jefferson Electric in 2009 but barely made any money because he lacked a business plan to become a successful electrical business. At first, he was operating as a handyman, but he learned quickly and narrowed his niche to focus on the solar target market. He’s now making $6 million in revenue per year.

We’ll share what he’s learned from making mistakes, fixing them, and becoming the first Tesla solar installer in his local area, plus marketing strategies to help you learn about how to start your own electrician business.

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Case Study: Jefferson Electric

Joel Walsman started Jefferson Electric in 2009 after the master electrician he trained under retired. He started with just $15K, a pickup truck, and some basic tools. Joel told us:

Once he specialized and focused on offering solar installation, his company started growing by 40% a year, and it now makes $500K a month.

Learn About the Electrical Industry

According to IBIS World, there are 239,000 electrical businesses in the U.S. earning a combined $233.4B a year. That’s an average of $976,569 annually per business. Of course, that doesn’t mean every electrical contracting business makes that much. It will vary based on the number of employees, with each employee generating about $233,400 a year.

Note that the industry is experiencing a slowdown due to increased interest rates and expanding wages. This is also leading to lower profit margins.

How much does it cost to start an electrical business?

An electrical business can be fairly expensive to start. Unlike some local businesses, you have higher risks involved. That means there are more government regulations, which lead to more costs including:

• Electrical LLC (limited liability company): $50 to $1,000+
• Insurance: $676 monthly or $4,056 for six months
• Vehicle: Free to $1,000 per month
• Tools: Depends on trade, but assume a minimum of $1,000
• Business license: Typically under $1K
• Electrical supplies: Based on the size of your electrical jobs (Assume you’ll need a few thousand for these, though.)
• Marketing: 8% of desired revenue

Even in light of these expenses, as Joel told us, with the right electrical business structure, you can become your own boss with around $15K.

How to Start an Electrical Business Without a License

An electrical contractor company requires electrical business licenses.

A business owner who does not want to get an electrical contractor license may provide some electrical services as a handyman business, but you will most likely be constrained to potential customers who need small work (normally under $1,000, but check your state’s regulations).

How to Start an Electrical Business

Starting an electrical business requires that you:

1. Get training.
2. Write a business plan.
3. Create a financial plan.
4. Choose your services and price them.
5. Secure funding.
6. Register your business.
7. Get an electrical contractor license.
8. Get business insurance.
9. Set up your business.
10. Get electrical equipment and tools.
11. Get customers.
12. Hire employees or electrical contractors.

Get ready to learn how to start an electrical business.

Step #1. Get Training

To become an electrical contracting business, you’ll need to work under master electricians for a period of time, typically four years of electrical work. Joel told us:

Check out a state-by-state requirements guide to learn the requirements for starting an electrical business in your state. You may also be required to pass a test and prove insurance before starting an electrician business.

The International Brotherhood of Electrical Workers, a union for electricians, discusses their green electric training for apprentices and journeymen in the video below:

Step #2. Write an Electrical Business Plan

An electrician business plan will help you map the path to success. You’ll want to start by defining your goals before continuing electrician business planning. Joel explained

Then you’ll want to detail:

• Market and competitors
• Services you’ll offer
• Marketing and sales strategy
• Funds needed and how you’ll get them

Joel gave some pointers about business planning including:

He also explained:

Don’t just plan. Consistently remind people—yourself included!—of what you’re trying to do in your electrical business.

Learn more about writing an electrical business plan.

Step #3. Create a Financial Plan

Another crucial element of your electrical business plan will be planning your financials. You’ll need to understand the startup costs, which will vary based on the types of services you’ll offer, the tools and supplies you’ll need, and the overhead costs in your area.

Financial projections should be for one to five years, but you’ll need to adjust them as things change.

Once you’ve estimated financial costs, you can establish how much of an initial investment you need.

Step #4. Choose Your Services and Price Them

Electrical business owners have all kinds of electrical services they can offer. Some of the electrical work you can do includes:

• Electric car charging station installation
• Solar energy and other eco-friendly services
• Electrical systems for residential customers
• Video surveillance system and security systems installation
• Commercial electrical installation
• Industrial electric work

Joel told us:

Step #5. Secure Funding

You’ll also have to think about how to get funding when starting an electrical business.

Owners of new electrical businesses may need to find a small business loan or seek angel investors to help cover the costs if they don’t have enough money to cover the startup costs on their own.

Step #6. Register Your Business

You’ll need to register your business name. You’ll want to check that the business name is available on social media and as a website domain. Then, you’ll need to do a business name search on the Secretary of State website.

Once you’ve confirmed that your intended name is available, you’ll need to get an electrician LLC or incorporation. You’ll also want to get your employer identification number from the Internal Revenue Service.

Step #7. Get an Electrical Contractor License

Before you can start your own electrical business, you’ll need your electrical contractor’s license. Licenses are granted to qualified electricians, and each state has different requirements related to the time applicants have spent building hands-on skills and the legal knowledge they have to demonstrate.

Some states mandate tests, bonds, and other requirements for your business, so make sure to research your local requirements thoroughly. New businesses can face legal trouble if they don’t follow the laws when running an electrical company.

Step #8. Get Business Insurance

According to Insureon, you’ll need numerous types of insurance. We’ve listed the average price a small business pays for electrician insurance below:

• Surety bonds: $4 per month
• Commercial auto insurance: $140 per month
• General liability insurance: $57 per month
• Professional liability insurance: $74 per month
• Workers compensation: $217 per month
• Tools and equipment: $41 per month
• Commercial umbrella insurance: $65 per month

Pro Tip: You may be able to combine many of these in a business owner’s policy (BOP), which averages $78 per month. Learn more from Small Business Insurance: 17 Things to Know.

Step #9. Set Up Your Electrical Company

Once you’ve satisfied your area’s legal requirements, setting up an electrical business will include:

• Creating a website
• Choosing your software
• Getting electrical business cards
• Choosing suppliers

One of the things that Joel feels gave his business model a competitive edge against many electricians is that he was the first Tesla solar installer in his area. He explained that he has to keep track of leads per month, conversions, revenue, team, and positions.

And all of that means he’s needed software for running an electrical business. Fortunately, he gave us some advice on software to use when starting electrical business operations.

Some of the software Jefferson Electric uses includes:

• Company Cam: $19 per month for video and storage database. Sales people take before photos, then they have the installers take photos after the fact. This makes things easier when maintenance is necessary.
• QuickBooks: Jefferson Electric uses QuickBooks for managing its finances. They have a forward-looking dashboard that shows current leads, closing rate, and expected upcoming revenue.
• Ninety.io: Joel appreciates that this software is both user friendly and based on Entreprenuerial Operating System, a system espoused by entrepreneur Gino Wickman.
• HubSpot: Joel suggests HubSpot as a CRM because of its capacity for integrating with other software.
• Service Fusion: This software is for service business operations.

In addition, you’lll need a clear process that is followed by all. One of Joel’s suggestions? Praise people heavily in public and only criticize in private.

Step #10. Get Electrical Equipment and Tools

An electrician company will need tools. Joel estimates that you’ll need about $15,000 for tools when you start your electrical business. At a minimum, you’ll need:

• Pickup truck: This will be the largest cost if you don’t have one.
• Safety equipment: You might already have general protective equipment such as hard-toe work boots, safety goggles, a hard hat, and a construction vest. You’ll also need specialized items such as electrical gloves and lock-out, tag-out equipment.
• Wire strippers: These are used to cut and strip wire.
• Multimeter: Use these to test ohms, watts, volts, and other electrical characteristics.
• Hand tools: You should have basic hand tools like hammers and screwdrivers.
• Conduit bender: As its name suggests, this tool is used to bend electrical piping conduit.
• Fish tape: Fish tape runs wire through conduit.
• Circuit breaker finder: Plug one end into an electrical outlet and then check the breaker with the other end.
• Self-leveling laser: A laser helps you keep conduit level.

Got all the tools? Next, we’ll discuss how to build a successful electrical contracting business by finding the right people.

Step #11. Get Customers for Your Electrical Contracting Business

Your marketing strategy doesn’t need to be challenging. Jefferson Electric has two main types of clients: contractors and homeowners. Joel explained:

The way they handle referrals is:

1. Request a referral after completing the job.
2. Reach out the same day they get the referral.
3. Have a meaningful conversation about the referral’s needs within 48 hours.

Joel also said:

In other words, don’t spend a lot of money on paid advertising until you have good data on your target market.

Joel also told us that Google is their best lead generator and that signage is highly effective, too.

Want to learn more about marketing a service business? Check out the video below:

Step #12. Hire Licensed Electricians

As you grow, you’ll need to hire electricians. Joel shared that the electrical field naturally has teaching built in and explained his two-step interview process:

• Interview the candidate.
• Take them for an on-site test.
• If they’re hired, help them assimilate into the company.

When you’re training electricians, he suggests offering starting salaries that are $4K to $6K per year over the cost of living to make sure they are able to live in the local area.

Interview the Candidate

Teaching and leading have expanded Joel’s business the most, so he looks for people who fit in with a learning culture. During interviews, he also tries to scare them with sincerity by telling them:

He went on to tell us he’s shocked every time his number of employees doubles.

You’ll want to ask questions based on applicants’ experience and have them take a general electrical knowledge test.

Take Them for an On-Site Test

Taking a person to work on site with you will help you identify whether they are a good fit. When customers that you have ongoing relationships with see a person, they will commonly comment on whether the person aligns with their perceived business goals.

Joel uses that as a sign to establish whether the person will fit into the company or not.

Help Team Members Assimilate

Joel explained that if you treat people like gold, they will do anything for you. Some of the ways he uses this mentality after he’s hired employees include:

It seems to work given he has 50 employees across three departments, including a CEO, COO, operations, a financial department, and a sales and marketing department.

Learn more about hiring employees for a service business by watching the video below:

Start Your Own Electrical Business

We’ve discussed how to start an electrical contracting business. We started with a case study and market analysis. Then we explained the start up costs and how to start your own venture.

It’s up to you to decide how you want to develop a competitive edge for your own business. Make sure you check with your local government to get a business permit, comply with regulations, and protect your personal assets with a business structure like an LLC. Then you can venture into your niche and create a great company culture that has people wanting to work for and learn from you.

What type of electrical business will you start?