The numbers on failing businesses are through the roof. If you start an electrical business, you have an 80 to 90% chance of failing within the first five years, and if you are in the 10 to 20% who do make it, you have an 80 to 90% chance of failing in the next 10 years. I know the numbers are daunting, but you can beat them. First you need to know that the number one failing business in this country is a restaurant. Almost 90% of new restaurants fail. At the same time the most successful business in this country is a restaurant - a franchise restaurant. 70 to 80% of franchises are successful. Now I am not telling you to franchise your electrical business or go and purchase a franchise. But my point is that the businesses that do make it out there have a complete system in place with policies and procedures set up so the business can run itself no matter who is in the driving seat. By setting your company up to run itself without depending on you as the owner to run everything, you have put in place the necessary components to creating a successful and profitable electrical business. If your business is a veteran to the industry and has beaten the odds, you still need a full set of policies and procedures in place. Here’s why: If you wanted to sell your business today, do you know what it would be worth? Well if you don’t have it set up to run itself, it is worth almost nothing except for the assets you have paid for. What I mean is, if you do 1 Million in sales a year, and you have about 300 thousand in paid assets, your business is worth 300 thousand. It does not matter that you did 1 million in sales because you are the value of the company. If you leave then it is not worth really anything, because no one knows what you know. But if you set up your company to run itself and put together all the manuals with policies and procedures, now you have established value. No matter who is thrown in the driving seat of the company they can make it work without you. Now an investor can come in, with no electrical background, and make profit. That same company that did 1 million in sales and has about 300 thousand in assets is now worth around three to four times the annual sales. Wow! That is about 3 to 4 million. It’s the franchise mentality.

Your Electrical Business’ Worth Pt 1

Posted by Mark on August 10, 2009

Ask yourself this question. If I went on vacation today or had to go into the hospital for the next week or month, would I still have a business when I came back? Or better yet, would the company still be making money if I was not there? The answer to both questions when doing our surveys were no!

The problem is most electrical contracting business owners were trained to be an electrician but never trained on how to run an electrical business. Doing the electrical work and running a business that does electrical work are two totally different things. Most of the time electrical businesses are started by exceptional electricians who were working for someone else and one day said for what ever reason, “I am going to start my own business.” It’s the American Dream!

Did you know that most millionaires are made from owning their own business or through real estate? Bill G. Page an author of Making Money Work wrote, “Most millionaires have made their own fortunes in one generation—they did not win the lottery, win money on a TV game show, or pick the next Microsoft on the stock market. Many are self-employed in small businesses working in “dull-normal” areas like pest control, paving, contract work, or welding. Most millionaires work 45 to 55 hours per week. Most marry once and are still married. Most typical millionaires do not score well on their SATs for college and were not voted most likely to succeed while in high school. Most millionaires are self-made, receiving no inheritance and little financial aid from relatives.” (Emphasis added).

If that is the case then you are on the right track to being successful and having financial freedom right? Wrong! But don’t panic there is a solution. Find out about what can help in our next blog.

Why Break-Even Rates are Critical

Posted by Mark on August 3, 2009

Too many electrical contractors don’t understand how their numbers work. Let’s look at break-even rate for one; now your break-even rate can be a daunting task to figure out, but it is a number that must be known. To figure your break-even rate properly you will need to include your pay rate for your employees, the burden for each employee such as health benefits, vacation pay, 401K etc. and don’t forget the most important part of the equation: your overhead costs. Overhead is the most important factor because it is the number one thing that most contractors admit they don’t know or can’t figure out. Most contractors will guess because they don’t know how to calculate this number or will use a percentage method that can be even more damaging to their business.

(If you need help figuring your break-even rate with overhead or burden, there is a website that is very helpful: www.myoverhead.com .You will want to check your overhead every week if you can, and if not, at least start with every month.)

Also you need to find your own break-even rate. It is impossible to make your company successful if you try to mimic or copy another electrical contracting business. The numbers don’t match up, and your numbers are crucial to making profit. If your break-even rate is say $95.00 per hour and another contractor that you may be thinking of copying is $75.00 per hour, you will lose money faster than you will make it. Your business plan will only work if you structure it around your company’s specific needs.

Outsourcing Your Electrical Estimates Boosts Accuracy

Posted by Mark on July 13, 2009

Maintaining objectivity is difficult when you devote yourself to a project every single day. A freelance electrical estimating service can bring an unbiased mindset and offer a fresh perspective. The freelancer can help you breath new life into your estimates and revitalize your company.

When you’ve been staring at the same project for so long, everything starts to blend together. And when that happens, despite your best efforts, errors slip through. The problem is that even though it may be a good estimate, one missed item or qualifier in the estimate or proposal can be disastrous. A professional electrical estimating service will deliver concise, clear and detailed estimates with checking procedures in place performed by many different estimators, reducing the possibilities of errors.

Outsourcing Your Electrical Estimates is a Time Saver

Posted by Mark on July 1, 2009

Freelance electrical estimating services estimate everyday, something you or another staff member may not be able to do so frequently. Estimating is a tedious job, but a freelancer is trained to get highly effective estimates in a quick and efficient manner. A job that may take an employee a week to estimate, a freelancer could have done in a day.

 

Deadlines must be met. Every time. No exceptions. Unfortunately, deadlines are set according to a project’s needs, not complexity, and sometimes there’s just too much to be done to get it all out in time. You never have to miss a project out for bid with a quick turnaround time, and you can devote your time towards growing your business.

Outsourcing Your Estimates is Cost Effective

Posted by Mark on June 23, 2009

Hiring a professional electrical estimating service to work on your bidding project will save you money, and ultimately increase your bottom line, because a professional freelance electrical estimating service knows how to take off the bid to maximize your estimate so that it dramatically increases its effectiveness. Effective estimating means increased success and increased success means more profits. Numbers never lie!

Also, as an added bonus, professional freelance electrical estimating services pay for their own taxes, overhead, equipment and software. You pay them for the estimate and that’s it. They also work on estimates only when you need them, therefore you avoid paying an employee when there is down time when the market is slow or when you have been awarded enough work.

It’s a win-win situation.