How to Grow an Electrical Business
Are you looking into how to grow your electrician business? Well, you’re at the right place. In this guide, you’ll learn the top considerations — everything from coming up with a business plan to financing options.
Here are the steps you should be taking to ensure your electrical business is set up for the growth that you envision.
Devise an Electrical Business Plan
Just like any business, an electrical business needs a solid plan. Going through the planning process allows you to focus on specific steps to get your ideas off the ground. It also provides an opportunity for you to outline short- and long-term growth objectives.
As you devise your electrical business plan, you’ll need to address and evaluate market needs, capital, overhead, competition and pricing. This information will come in handy when it’s time to set specific benchmarks. A business plan will also make managing risks easier because you’ll have a better understanding of revenue and expense projections, logistics and operational plans, and the competitive market landscape. All of this can lead to improved decision-making and provide a more realistic view of where you expect your electrical company to be in the future.
A business plan for growing an electrical business generally consists of the following components:
- Executive summary
- Market opportunity
- Marketing and sales strategy
- Operations plan
- Personnel strategy
- Financial projections
The overall purpose of this plan is to formulate an effective strategy for growth, determine your future financial needs and attract lenders and investors.
Before you get started on this important step, you should first find a mentor who’s doing what you want to accomplish and is willing to share everything you need to know about growing an electrical business. By shadowing your mentor on the job, you’ll have the opportunity to ask questions and get electrical business ideas — everything from how to finance electrical equipment to professional liability insurance.
And industry business owners agree. Tommy Mello, The Homer Service Expert, for instance, says it would have been helpful to find a mentor before starting his own garage-door business 15 years ago. Instead of spending time figuring things out on his own, he could have more quickly emulated best business practices.
“You’ve got to act like the business you want to become, and I didn’t know that back then,” says Mello, owner of A1 Garage Door Service, which reached $30 million in revenue last year.
“If I would have listened to a mentor tell me, ‘This is why you shouldn’t do this,’ or ‘This is why you should,’ it would have definitely fast-forwarded the business.”
Before creating your electrical business plan, you may also want to listen to electrician podcasts for tips and ideas, as well as read books on how to grow your electrical business.
Create a Marketing Plan
Once you determine that there’s a marketing opportunity for growing your electrical business, it’s time to develop a marketing plan or strategy. Start by creating an outline of specific marketing tactics that could help expand your customer base and build sustainable long-term growth.
Some examples of marketing tactics for an electrical business are as follows:
- Content marketing, such as search engine optimization (SEO) services for electricians to get your business visible in multiple cities
- An optimized website to showcase your brand
- Pay per click (PPC) advertising
- Google local services ads for lead generation
- Networking with other large and small businesses, especially home services businesses
- Networking with other local electricians
- Social media, video and email marketing
- Customer testimonials
- Offer free annual electrical “health” services
Decide an estimated budget for each marketing tactic that you choose to utilize, and be sure to test each strategy and measure the results. Your marketing plan should also detail how you will sell to customers, key marketing partnerships, a pricing strategy and your market positioning. Keep in mind, as your electrical business grows, you’re marketing mix will likely change. Therefore, your marketing tactics, strategy and financial ability will continue to evolve along with your business needs and goals.
Develop an Operations Plan
Your operation’s plan will explain all the specifics about how your electrical business will run. It should include actionable details on your company goals, procedures and timelines, as well as keep everyone involved accountable for meeting deadlines and on track with growing your electrical business.
Your operations plan should have the following:
- Long-term goals, key milestones and timelines
- Strategy and processes for inventory sourcing, suppliers, equipment, technology, people, capital, financing, sales, marketing and in some instances, R&D, logistics and supply chains.
- Departmental budgets, as well as employee roles and responsibilities
- Strategy for support processes, such as human resources, payroll and accounting
- Process for monitoring progress
Overall, you’ll need to think about what your electrical business will look like as it grows. Start by looking at where it is today and where you would like it to be in the future. A communication strategy along with your operations plan is also critical to ensure your team is working towards your stated goals.
Recruit and Train Competent Employees
Electrical contracting businesses belong to a sector of skilled trades that often find it difficult to attract and retain qualified employees due to high demand. However, although employee turnover risks may be greater in the electrician construction and maintenance sector than others, you should not skimp on investing time and money in training while growing your electrical business. By having a properly trained workforce, your workers will be able to learn necessary skills that allow them to improve productivity, reduce costly mistakes and build confidence. In turn, adequate training can lead to the engagement needed to increase workforce morale and reduce employee turnover.
For electrical businesses, safety training is typically a priority. From using electrical equipment to installing electrical wiring, training will help eliminate mishaps on the job that could hinder your business from growing.
Technology training is also key, especially from a competitive standpoint. Keep technology in the forefront by developing a comprehensive skills training program to help foster new technologies and innovations, which can in turn improve crew management, project handling and safety strategies.
Keep in mind, your employees will be working and interacting with your clients on a daily basis, so your electrical contracting business will only be as good as the people you hire and train. A well-trained staff can see where improvements could be made and develop client relationships to propel your business forward.
When building your recruiting program, it’s suggested to develop a comprehensive organizational chart that includes clear job descriptions and expectations for every position. Incentive pay for recruiting efforts is also recommended.
“Some people say, ‘always be closing.’ I say, ‘always be recruiting,’” says Mello, who gives employees $1,500 for referring a new hire.
“I think a lot of us, we just don’t start the business right,” he adds. “Give it such a strong foundation, there’s nowhere to grow but up.”
Set Financial Projections and Secure Financing
Growing your electrical contracting business can put a strain on your cash flow. Therefore, you’ll likely need to secure additional financing. Before shopping for loans, determine how much financing you’ll need based on your overall growth plans for each investment.
Some common options to finance your electrical business expansion are:
Bank Term Loans
Start your loan shopping by looking for bank term loans from traditional lenders, especially if you have good credit and established profitability. Bank term loans can cover most of your electrician financing needs and have the most favorable rates and terms.
SBA business loans have similar rates and terms as traditional loans because they are actually provided by traditional lenders. SBA loans are partially backed by the federal government, which means some of the lender’s losses will be taken care of if you default on the loan.
For quick financing, you can also look into online business lenders. Online loans are typically under $250,000 and come with shorter terms and higher interest rates than traditional bank loans. However, online loans have lower credit and cash-flow requirements, a faster funding process and give electrician companies another option to finance their business expansion when a bank loan is not available or can not get you the working capital you need quickly enough.
Obtaining machinery or equipment is common when expanding an electrical business. A good alternative to traditional equipment loans is equipment leasing, as equipment leases are conducted relatively fast and are easier to qualify for. Terms can also be more flexible, and lease payments lower, when compared to equipment loans. The option to purchase the equipment at the completion of the lease is another benefit.
Overall, there is a loan out there for any kind of electrical business expansion need, including working capital, advertising, recruiting, payroll expenses and more. It’s just a matter of determining what type of loan will be the best fit for your particular situation.
Know Why You Want to Grow Your Electrical Business
Growing an electrical business is an important endeavor that requires quite a bit of thought. Identify your personal strengths to find out where you’re going to need help and to see if expanding your business is right for you. Determine how well you understand other areas of business, for instance, financial and management topics in electrical contracting. Then, seek the assistance of mentors in the industry to fill in the knowledge gaps.
More importantly, though, set forth a compelling case for growing your electrical business in the first place. Or as Mello says, “You’ve got to choose what’s important to you and decide what’s your ‘Why?’”