Money is likely to top your list when you’re considering starting your own electrical business. There’s the extra money you can take home by being your own boss, but also the money you’ll need to invest upfront — and along the way — to keep your business humming. While there are plenty of variables in the mix (like which type of insurance you go for and how much you spend on a work van), there are also plenty of fixed costs to consider, like essential tools and licensing requirements.
So before you pull together your business plan, brainstorm witty business names, or think about hiring staff, make sure you’ve got these 7 electrical business start-up costs covered:
- 1. Tools
- 2. Components and starting inventory
- 3. Insurance
- 4. Vehicle
- 5. Marketing and advertising
- 6. Legal costs
- 7. Time
Wondering if you'll turn enough profit with all these costs to absorb? Take a look at our free profit margin calculator to find out!
1. Tools of the trade
From voltage testers and the perfect tool bag to essential electrician apps and software, getting your electrical business set up with reliable and efficient tools from the outset can make all the difference in the long run. Here’s what you’ll need:
Digital tools
Unless you have extensive bookkeeping skills, investing in accounting software from the outset is worth every cent. It’s the best way to manage cash flow, ensure your invoices are delivered and paid on time and avoid major admin headaches when tax time rolls around. And it’s much more affordable than hiring an accountant.
Clued-up tradespeople also integrate their accounting packages with job management software like Tradify — built specifically for tradespeople. Tradify makes it easy to keep all your notes, quotes, and documents collated digitally, allows you to whip up professional quotes on the spot, and will even automatically chase up overdue payments for you.
Combine the two, and you have a digital admin powerhouse in your corner.
Ballpark annual subscription costs for job management and accounting software at the time of writing:
- 🇬🇧 UK — £500-600
- 🇺🇸 USA — $700-800
- 🇦🇺 AU — $600-700
- 🇳🇿 NZ — $600-700
Physical tools & gear
A solid stash of tools will likely be one of your highest upfront costs. It’s not the time to skimp on quality — cheaper tools can be unreliable and generally won’t last as long as their premium counterparts. While the exact tools you’ll need can vary, at a bare minimum, you’ll need:
- Essential electrical tools, including insulated screwdrivers, wire strippers, cable cutters and a hacksaw
- A sturdy, well-constructed electrical tool bag, so you have everything to hand while on the job
- Protective clothing and PPE like safety glasses, non-conductive hard hats and specialised work boots
Ballpark tools and equipment costs at the time of writing:
- 🇬🇧 UK — £300-650
- 🇺🇸 USA — $1,000-3,000
- 🇦🇺 AU — $1,500-5,000
- 🇳🇿 NZ — $1,500-5,000
Remember, tools are considered a business asset — they add to the value of your business and their purchase costs and depreciation can be accounted for at tax time.
2. Components and starting inventory
Running to the hardware store to stock up before every job eats into your time and costs more. It’s best to get your electrical business stocked with commonly used items like electrical tape, solder wire, various standard gauges and types of wire and cable, cover plates and commonly used lighting fixtures.
Research which brands other electricians use, compare prices of different suppliers and ask about discounts or loyalty programs.
Don’t forget to consider components and materials when calculating your charge-out rate.
3. Insurance
Electricity can be dangerous. As an electrical business owner, you can’t afford to be without insurance. It gives you peace of mind if your tools were to go walkabout and keeps you (and your job site) covered if something goes wrong. In some cases, you’ll have to be insured by law, so check our business insurance guide to see what’s required of you in your area.
The main electrical business insurances you might need are:
- Public liability insurance — covers you if your company causes injury or property damage. If a claim is successful, the insurance will pay out.
- Tools and equipment cover —one of the biggest financial outlays when starting an electrical business must be protected against loss or damage.
- Income protection — will kick in if you get sick or injured and can’t work for a while.
- Employer’s liability insurance — if you hire employees or take an apprentice under your wing, you need specific insurance to cover them.
- Vehicle insurance — your work vehicle must also be insured under your business.
Insurance costs vary from region to region, between insurance companies and between customers – your best first step is to sit down with an authorised business insurance broker.
4. Vehicle
Your work vehicle is your home base and your office on wheels. Plenty of financing options are available on new vehicles, so you won’t necessarily need to outlay massive amounts of cash. Choosing the right workhorse isn’t as simple as factoring in reliability and good looks. Here’s what you need to consider:
- Your work van is your customer’s first impression of your business – ensure it’s tidy but not flashy.
- It can generate new business — add branded decals or signage.
- It can impact your productivity — make sure it’s fitted with plenty of internal storage, a roof rack for long objects like ladders, and non-slip rubber mats to avoid accidents.
Ballpark used vs new vehicle costs at the time of writing are:
- 🇬🇧 UK — £8,000-35,000
- 🇺🇸 USA — $20,000-40,000
- 🇦🇺 AU — $20,000-60,000
- 🇳🇿 NZ — $20,000-57,000
Stuck on the new versus used conundrum? Our guide will help you decide!
5. Marketing and advertising
If you’ve been in the industry a while, you might have already built a reputation and customer base. It’s still important to invest in marketing and advertising to attract new customers and keep your electrical business in mind. Fortunately, you don’t need to spend a tonne of money – start with a solid marketing plan and focus on the following:
- Building your brand — channel your creative side on Canva or enlist the pros through Fiverr to create a logo and company colours for your website, uniforms, vehicle decals, business cards, invoices and quotes. Once you’ve got the branding sorted, spread it liberally to get your name out there.
- Creating a digital presence — get active on social media and create a website that ticks all the boxes for potential customers. List your electrical business on relevant online directories and leverage customer reviews to win new business. And remember… never stop taking photos of the great work you’ve been doing!
These ideas are free or relatively low cost, making them a great place to start. Once you’re more established and turning a profit, you can expect to spend 2-5% of your gross annual revenue on marketing and advertising.
For more digital marketing tips, read our guide to digital marketing for small businesses and tradespeople!
6. Making it official
For obvious safety reasons, not just anyone can start an electrical business. Depending on local, state or national government requirements, there are likely to be several licenses, permits and qualifications you must have. As the business owner, it’s your responsibility to adhere to these and ensure any contractors or employees meet the requirements.
You’ll also need to register your business name. Pick a name that’s professional, unique, easily remembered and not already taken (you can check this on Google and against a local business name database). This is a crucial (and exciting!) step towards setting your electrical business up for tax requirements, opening a bank account and becoming an official business owner.
The ballpark costs for registering your business at the time of writing are:
- 🇬🇧 UK — £12-40
- 🇺🇸 USA — $100-800
- 🇦🇺 AU — $440-530
- 🇳🇿 NZ — $115
Skipping these steps can result in hefty penalties, so if you’re unsure, enlist the help of a professional.
7. Don’t let time be your biggest cost
Going out on your own can be daunting, but a solid understanding of basic electrical business start-up costs allows you to proceed with your eyes wide open. It’ll help you decide between the must-haves and the nice-to-haves and prioritise expenses that will contribute to long-term success.
Don’t spend your time hunched over a pile of paperwork when there are perfectly good job management solutions out there. Tradfy will cut hours off your admin and give your business every opportunity to succeed.
Try Tradify for free, or pop over to one of our live demo webinars to see it in action.
