There’s a lot more to running a successful electrical contracting business than being a good electrician. Brian Seymour outlines other crucial skills.

 Just because you are a top electrician doesn’t necessarily mean you have great business skills.

Business requires additional skills and attitudes. Before embarking on a business venture, ask yourself these questions:

• Am I a decision-maker?
• Am I competitive?
• Am I self-disciplined?
• Am I a planner?
• Do I have leadership qualities?
• Am I prepared to work long hours?
• Do I have the ambition to succeed?
• Is my family or others close to me willing and able to go along with the inevitable struggle for business success?
• How much money am I willing to gamble on this venture, knowing that I might be risking all of it?
• Do I have sufficient experience in this field?
• Have I had any training in the basics of business?

The prime reason for going into business is to make a profit. So how much money should you expect to make as a successful electrical contractor?

Much depends on your local market, your specialty, your capital, your time in business, your management skills, and many other factors.

Your goal should not be how many jobs you can tender for, but how many customers you can develop for long-term growth. Any dumbkopf can win a job ‘at any cost’, the skill is to win the job and make a profit.

A large turnover is not necessarily the measure of a successful business – only net profit.

The electrical contractor must be many things: a qualified and experienced electrician, employer, estimator, buyer, credit manager, bookkeeper, tax collector, customer relations representative, problem-solver, communicator and – to survive – successful business proprietor.

Apart from electrical trade skills, estimating is the most important. There’s a legion of accountants, bookkeepers or lawyers who offer services to new businesses, but it is rare to find anyone offering estimating services.

The contractor is responsible for calculating all the costs of completing the job, with an acceptable profit margin in the final price.

This cannot be achieved by what is commonly known as ‘price per point’, which in many instances doesn’t remotely resemble real costs. You must count and measure all the materials expected to be consumed. It is a relatively straightforward job to get accurate prices from the wholesaler or industry catalogues.

Calculating the labour takes a lot more skill, using personally calculated labour units or a professional labour unit manual. (A labour unit is the time it takes to install an aspect of an installation.)

However, time and materials constitute only about 70% of the job. There are many more factors that can affect the labour units, including abnormal conditions, weather and work environment. These can be managed, but only if they are factored into the final pricing structure.

Whether it is a multi-million dollar industrial project or wiring a sunroom in someone’s home, the process is the same. The accurate counting of all materials and accessories and the measurement of all cables, conduits, bus-bars, etc, is a relatively simple exercise if carried out by a competent tradesperson.

However, the application of labour units needs skilful assessment and is probably the most important of the estimator’s responsibilities. Labour is potentially the most highly variable factor of project costs.

Even with today’s tested and proven estimating procedures, estimators can’t just sit back and reflect how many days, weeks or months it should take a certain number of electricians to complete a job. They have to tailor the labour estimate to more closely fit the job.

Under highly competitive tendering situations they have little leeway and the target area is extremely small. They must visualise all the problems that are likely to cause labour expenditure over and above the physical installation of materials.

There are several items that contribute to ‘running the labour up’. If you want the expended hours to be somewhere near the estimated hours, all these additional factors need to be taken into consideration when making a final assessment of the tender.

This area marks the difference between a competent estimator and a count-and-measure clerk.

The labour unit, from a labour unit manual or calculated by the estimator, is a cost data figure, indicating the cost (in hours) for installing a given item of material or performing a given labour operation. The distribution of time on any particular job may be divided into two general categories:

• productive labour used in the actual installation or fabrication of material or equipment, or in performing a labour operation not associated with materials, eg: cutting holes, trenching, marking up drawings, etc; and
• non-productive labour, such as supervision, handling and ordering materials, making out time sheets, relocation of work, walking to the workface, material storage, lifting and access times.

Some non-productive labour is inherent in most jobs, but more will be evident in certain job conditions. The extent of it will vary, and this has been historically termed the ‘job factor’. In the next issue we will examine the job factor and techniques for improving profitability.