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E L E CT R I C AL CONNE CT I ON
S P R I NG 2 01 5
BUSINESS BASICS
Am I ready to go it alone?
J
ust 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:
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Am I a decision-maker?
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Am I competitive?
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Am I self-disciplined?
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Am I a planner?
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Do I have leadership qualities?
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Am I prepared to work long hours?
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Do I have the ambition to succeed?
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Is my family or others close to me willing
and able to go along with the inevitable
struggle for business success?
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How much money am I willing to
gamble on this venture, knowing that I
might be risking all of it?
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Do I have sufficient experience in this field?
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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
There’s a lot more to running
a successful electrical
contracting business than
being a good electrician.
Brian Seymour
outlines other
crucial skills.
BRIAN’S TOP 6 TIPS
1. Figure out your profit margin. Know
your current gross profit margin from
your last month end accounts. Get
some benchmarking figures from your
accountant – how do you compare with
the industry average?
2. It’s about profit, not turnover. It’s
irrelevant howmany thousands of dollars
of sales each month you make if your
overheads are as high or higher.
3. The only accurate method to achieving a
profitable tender/quotation is count and
measure.
4. The job can only be profitable if all
materials and associated labour is
accounted for.
5. Analyse your competitors. They may be
run a more efficient operation.
6. Understand the risks and rewards. Take
calculated risks to help the business grow
and determine the worst case scenario.