Contracting is a Great Small Business

shutterstock_resized.jpgUnlike other small business construction contracting, the electrical contracting industry requires more than a few "good guys" to start. Every way you look at it, small business has as many challenges as any other larger business. The difference is that contracting has a more fluid income and the contractor is only as good as "their last job." Just like any restaurant, they can only make your food or service bad once. The customers have a choice. 

Small business is defined many different ways. The U.S. government has its own definition when it comes to qualifications for doing business with the government. If you would like to know about it, see this link: https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/table-small-business-size-standards

In MCA’s studies for IEC and NECA, we found out that 57% of electrical contractors are smaller than $5,000,000 in annual sales and 82% are smaller than $10,000,000 (See Figure 1 for breakdown of contractor sizes). So, the next time you give a few hundred thousand dollars job to a foreman to “run it” for you, you are actually giving him or her a company to run. What is even scarier is that they most likely have zero education, training, or experience in running a company, including money management, people management, and work management. The irony is that many of these foremen end up figuring it out by the school of hard knocks; and those are the ones that often go into business for themselves. The challenge becomes that as the “small business” moves from field to office, the “foreman” – who is now the owner – needs to know a few key things to be as successful at running his shop as he was at running his jobs. The common theme is: transfer value to the customer and they will vote with their dollars.

Figure 1 Figure 2
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Build a Business Model

So, what should you do to start or improve your contracting company? First and foremost, realize that you are a business and not just an electrical shop. You may ask what does that mean? Here is what it means:

  • A business is there to help the economy of the country to run by turning the money and employing people
  • A business has to treat the money as “a means of commerce” and not just a means of wealth
  • A business can depreciate its investment in properties of any kind
  • A business is taxed based on its organization and selection of its type of business
  • A business has to be active for it to benefit the society and the owner

Why are all these important to know? Because if you don’t know the legal environment of your business you could easily lose it or be put away for violation of laws governing:

  • Money
  • People
  • Environment
  • Safety
  • Material

All businesses should start off with a good lawyer and accountant. These two social professions are not something you want to fool with. Then you can start building or improving your business based on the markets you are in and based on engagement with your customers.

Your customers are the ones that pay your bills, send your kids