Electrical Business Overview

Electrical businesses serve as licensed and trained professionals who handle everything from simple outlet repairs to complex electrical system installations. These businesses serve residential, commercial, and industrial customers by ensuring safe and functional electrical systems for homes, buildings, and machinery.

Related: Checklist To Start A Business

How Do Electrical Businesses Make Money?

Electrical businesses operate on a service-based revenue model where they bill customers for both labor and materials. Billing typically includes hourly rates for electricians’ time, plus a markup on electrical supplies and equipment used in the project. Many electrical businesses also charge travel fees, emergency response premiums, and consultation fees. Smaller jobs often have minimum service charges, while larger projects might use flat-rate pricing or detailed project estimates.

The most common ways electrical businesses earn income include:

• Residential Electrical Services: This is the most common revenue source for smaller electrical businesses. Homeowners pay for services such as installing new lighting fixtures, upgrading panels, or fixing wiring issues. These projects are often smaller but provide steady, consistent income.
• Commercial Electrical Services: Businesses and property owners pay for electrical work in offices, retail spaces, and warehouses. Services include installing lighting systems, maintaining electrical equipment, and ensuring compliance with electrical codes.
• Industrial Electrical Services: Factories and industrial facilities require electrical work for machinery, motor controls, and high-voltage systems. These projects are often larger and more complex, generating higher income.
• Electrical Contracting Projects: Businesses earn revenue by bidding on large-scale construction or renovation projects. Contractors are paid to complete electrical work according to project specifications and timelines.
• Emergency Repair Services: Providing 24/7 repair services allows electrical businesses to charge premium rates for urgent jobs, such as fixing power outages, faulty wiring, or broken electrical systems.
• Maintenance Contracts: Businesses sign ongoing maintenance agreements with commercial or industrial clients. These contracts provide recurring income for regular inspections and servicing of electrical systems.
• Specialized Installations: Offering specialized services, such as installing backup generators, solar panels, or smart home systems, allows electrical businesses to charge higher fees for their expertise.

Industry Statistics

The electrical contracting industry falls under NAICS code 238210 – Electrical Contractors and Other Wiring Installation Contractors. Here are some statistics that show the current state of the electrical industry:

Electrical Industry Size & Growth: The electrical industry generated $255.4 billion in revenue last year. Over the past five years, the industry saw an average annual increase of 0.9%. The industry is projected to continue growing due to increasing demand from commercial construction projects and the rising adoption of electric vehicles requiring charging station installations. (IBISWorld)

Number of Electrical Businesses: There are approximately 242,000 electrical businesses operating throughout the market. Large companies like Quanta Services control about 8.5% of the market share, while Emcor Group and Cleveland Electric each maintain around 5% of total revenue. Most electrical businesses are small, independently owned operations serving local communities. (IBISWorld)

Electrical Business Profit Margin: Electrical businesses typically maintain net profit margins between 10% to 20% of total revenue. This range accounts for operating costs, including labor, materials, and overhead expenses. (Housecall Pro)

Costs To Start an Electrical Business

Starting an electrical business could cost between $10,000 to $75,000, depending on the size and scope of operations. This range accounts for basic equipment needs, licensing requirements, and insurance coverage needed before taking on the first client.

Here are some of the main costs to consider when starting an electrical business:

Tools and Equipment: Professional-grade electrical tools, testing equipment, and safety gear range from $5,000 to $15,000. This includes multimeters, wire strippers, conduit benders, power tools, ladders, and personal protective equipment.

Vehicle: A work van or truck equipped with storage solutions and ladder racks costs between $15,000 to $30,000. The vehicle needs to be reliable and large enough to transport tools, equipment, and materials to job sites.

Insurance and Bonding: Initial insurance coverage and surety bonds cost between $2,000 to $5,000. This includes general liability insurance, workers’ compensation insurance if hiring employees, and required contractor bonds.

Licenses and Certifications: Obtaining necessary electrical licenses, permits, and certifications ranges from $500 to $1,500. Most areas require electricians to pass examinations and maintain proper licensing to operate legally.

These costs represent rough estimates and will vary based on location, business size, and equipment quality.