How to Run a Successful Electrical Business
Becoming a successful Electrical Contractor does not just happen. You aren’t born with Electrical Estimating skills or knowing the perfect electrical estimating software. The good news is there are people that are willing to help. Check out bestbidestimating.com.
Many electricians decide to go into business for themselves. After all, they’ve mastered the trade, created relationships with loyal customers, and developed a good sense of the rules and regulations. However, knowing how to run a successful electrical business requires a different skill set than that of a first-rate electrician.
I spend hours each day talking to electricians that are taking the step to become an Electrical Contractor. Going in business for themselves sometimes is a life- long dream and other times it is out of necessity.
I know something that they have yet to find out. Owning a business is completely different than being an electrician in the field bending conduit. It would be equal to dropping off a 1 year apprentice, without a set of plans, to wire a Hyatt Regency Hotel. They would not even realize what they didn’t know.
When you do make that move you likely spent the first few years in business learning the finer details of running an electrical company. Here’s a chance to check in on your progress as a business owner, and spot opportunities for improvement and growth. Just as you need to stay current in your electrical technical skills to maintain your license, keeping your electrical business successful requires a periodic assessment and tune-up.
1. Set Goals for Your Performance
If you feel like your company is growing and profitable, it may be tempting to continue with business as usual. But are you as profitable as you think you are? After speaking to 100’s of people just starting in business they really don’t have a clue if they are making money or not. They have some money in the bank and they have a job or two but they have not learned the lessons of job tracking, taxes, Overhead etc.
Sometime they have money on paper but have not collected for it.
Perhaps your competitors have a formula for how to run a successful electrical business that’s more potent than yours. Business benchmarking is sort of like a voltage drop test. You’re comparing your numbers to those of your peers. CliftonLarsonAllen provided three years of benchmark data for electrical and mechanical contractors. For example, it took contractors an average of 69.6 days to convert their receivables into cash. How long is it taking your business? Check out data relevant to your electrical contracting business to make sure you’re keeping pace.
Collecting money is often harder than doing the work. You need guardrails and signs of potential red flags so you don’t get too far behind… Even when you do collect money getting all of it and getting it on time isn’t that easy. If you ever let a contractor get behind they will always put you last. You must establish right off the bat you want tolerate slow pay. Make sure that you do your part. Send your pay request on time and exactly as they asked for it to be filled out. Make sure that you have spelled out your terms and a clear scope of work and a clear set of exclusions. Most misunderstandings go back to not being clear.
2. Run Your Business Don’t Let Your Business Run You.
If you don’t have a business plan, it might be time to create one. Running an electrical business successfully involves having a plan in place for how you’ll reach your goals.
If you’ve created a business plan in the past, also keep in mind that it can “expire” quickly. That’s because circumstances change. Maybe it’s something good, like a new residential community is about to be built nearby. Or maybe it’s something bad, like a new electrical contractor opened up in your town and hired away some of your best people.
Whatever the circumstances, it’s important to keep a current plan. A common way to begin is with a “SWOT” analysis. SWOT stands for strengths, weaknesses, opportunities and threats. Once you identify them, you can create or update your business plan.
This plan is something that is just not created and stored away. It must be constantly reviewed. In addition to this plan it is extremely important to put in place sales goals.
01. How much current work is on the books today?
02. What percent of that work is complete?
03. What is our current backlog of work?
04. How much work do I need to cover Overhead?
05. How do I look this month compared to last year at this time?
06. Do I have enough employees to do the work on the books?
07. Looking into the future you are always either have too much work and need more employees or not enough work and a foreseeable layoff is coming.
08. Following up on work that has been bid that you have not heard back on.
The idea of all of this tracking is if you see you will need more employees in three months you can’t usually find an employee the day you need them so you can start now.
You also must know how much work is needed to reach your yearly goal.
3. Customer’s Needs Come First
Getting customers can be a challenge, so it’s vital to keep them. When possible, check in to see how things have worked out since your last job. Research and see who are the right contractors that you want to work for. Who does your type of work, builds the job in a hurry, and pays their bills? Specially seek these out. Give them a little extra. Make working with you a pleasure. Keep guys on the job and the biggest lesson I have learned is keep them informed and never tell them you will have guys on the job and not. It is better to say it will be 2 days so they can plan around you. Make sure you do what you say 100% of the time.
Stay on top of things. A great rule is TELL THEM BEFORE THEY ASK. Be there BEFORE THAY ASK.
4. Purchase and Learn the Best Technology Available to Help You Succeed.
Almost daily, new small business technology hits the market that enhances personal safety and business productivity. You don’t need to buy new technology for its own sake, but to help you grow and maximize your profitability. Whether it’s software for customer relationship management, bookkeeping, making financial projections, tracking time, managing work orders, or job bidding, it’s all out there and getting better all the time. Technology’s long-term benefits can make it a worthwhile investment.
I have said it a million times everything counts and everything is important but if you don’t have work nothing else matters. You will fail or succeed on your ability to estimate. This is where we can help.
At https://bestbidestimating.com we offer lots of free information on business and estimating. We also have an on-line school for electrical estimating. http://www.electricalestimatingclass.com
We also make having the best electrical estimating software available, affordable, and always up to the latest technology available.
We offer the only one-time fee period on the market today.
Unlimited license, free technical support. Best Bid Electrical Estimating Software and On-Screen Takeoff Solutions can help you create winning bids in a fraction of the time. Time is money!
Now you can afford the Best with interest free financing. Let Best Bid change your life. Estimating projects these days require electrical estimating software to create detailed estimates in record time. Estimators have chosen Best Bid for years.
5. Keep Sufficient Working Capital At All Times
Running short on cash can be costly in more ways than one — when it forces you to maintain a balance on a credit card account, lose out on discounts from suppliers, or prevents you from purchasing productivity-enhancing technology. Leveraging working capital loans and other forms of small business financing are key to running a successful electrical business. They can tide you over during a dry cash flow spell. It is important to know where you are on every job. You can’t afford to get behind on your billing. With Electrical Estimating Software from Best Bid you can create accurate schedule of values. You can also track your jobs so you never are under billed.
6. Evaluate Your Bidding, Track Your Suscess.
There are two aspects to bidding a job successfully when running an electrical business: getting a healthy share of the available work and charging the right price. If your bids aren’t competitive, you won’t get much business. If they’re too competitive, you could lose money. Take a fresh look at how you’re pricing jobs, and how you’re deciding which projects to bid on (and be prepared to say no to new business). Make sure you’ve accounted for all the costs you need to cover, including overhead, with some money left over for a fair profit. Bidding with Electrical Estimating Software can keep your bids in that sweet spot. Once you have dialed it in it is a game changer.
Also, consider your success ratio. If you’re consistently losing out to a competitor, try to determine the reason. And remember, cost isn’t the only variable, though it’s typically the most important. Are you getting your bids in promptly? Are they detailed, professional and clearly presented? Where applicable, can you provide customers with more than one option when bidding? Please review some of our past post that deal with this issue directly. Electrical Contractors that don’t use electrical estimating software to create their estimates and don’t have a solid foundation of estimating sooner or later bite the dust.
7. Decide What Is The Perfect Size Business For You.
Knowing how to run a successful electrical business includes knowing how big, or small, your business should be. The “Goldilocks principle” applies here — not too hot, not too cold … not too big, not too small. Just right! Too small is when you’re so busy doing administrative tasks that you don’t have enough time to do the work that’s the focus of your business. Too large can mean having greater capacity — and larger associated expenses — than the available work. It’s essential to find the right balance. Bigger isn’t always better. Not being able to micro manage your projects or having to hire temp help is throwing money out the door. So many of our blogs talk in detail about this issue.
8. Demand High Safety Standards
The risk of personal injury inherent in running an electrical business is one of the reasons you can command a good price for your work. But easing up on safety precautions, for whatever reason, is not only bad for business, but could mean the end of your business. Make sure you have proper safety training programs in place, as well as a workers’ compensation policy. One fine from OSHA can take all the profit from the job quickly. Learn the rules and apply them. https://www.osha.gov/laws-regs
Supply the right PPE and teach how to use it. Create mock inspections from time to time. Stay on your toes and stay safe. You never want to see an employee hurt.
9. Think About Where You’re Future Employees Will Be Coming From.
If key people in your business are closing in on retirement, or might just decide to move on to another opportunity, don’t be left in the lurch. It’s not always easy to find skilled younger workers moving into this field, but don’t let the challenge deter you. Consider partnering with a local community college to offer internships or apprenticeships, to keep new talent flowing into your business. Getting good employees in today’s market is challenging and I don’t see it getting any better. Take care of your employees. Pay them well and make them feel at home. Offer bonus plans etc. Spend time on improving their knowledge. Help them grow in the electrical field and promote from within.
10. Ask for Referrals. Check Up On What Your Customers Think About You.
No list of tips on how to run a successful electrical business is complete without a reminder to ask your customers to refer their friends to you. Sometimes it just doesn’t occur to them to do so. But if they’re happy with your work, and if you help them remember you by staying in touch, they’ll become your best — and least expensive — marketing tool.
This is good if you are service related. If you are a plans and spec Electrical Contractor then taking care of your customers and making you their electrical contractor is essential. It is all about relationships. Spend time and money on building relationships. These are the companies that will support your electrical business.
Of course, progress is hard to come by without time, effort and determination on your part. Sometimes, it will also cost money. As you prep for growing your electrical business, you may want to research how to get a small business loan to front some of these expenses without tying up your cash flow. Whether you’re ready to tackle each of these pieces of advice in one go, or you need to start small, it’s important to carve out time to consider your business practices and plan for future growth.
If you own an electrical business, you can consider electrical and plumbing business loan options with National Funding.