Advice on Electrical Contracting Business

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by a searcher from Georgia Institute of Technology
in Atlanta, GA, USA

3yrs ago

Advice on Electrical Contracting Business

Hi - I am considering an LOI for an electrical contracting business in the Southeastern US. It's about 80% residential "service work" and 20% commercial "bid work". Doing $2.5M in revs.

Curious if anyone else has engaged with an electrical contractor business recently and what you'd recommend exploring during diligence that is specific to this trade. Also, what are you seeing in terms of valuation multiples versus HVAC, plumbing, etc. Any downside (or upside) opinions on the electrical category beyond EV charging stations?

Thank you!

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reply by a searcher 3yrs ago
from Harvard University in Chicago, IL, USA

Fred - Happy to connect and chat (spent the past few years in the space). Residential, while tough to finance at this stage is where you will see outsized valuations if you can scale the business - and requires less working capital. Everyone's comments are spot on re: licensing, but having the previous owner agree to using theirs, or paying a stipend to someone in the company to use theirs works. At $2.5m revenue, you are pretty sub-scale and will be tough without some general knowledge of the trades. Look if there are any others businesses you could also acquire to get to at least $5/6m so that you can build a team around you and be less dependent on you and/or previous owner. Generators is an interesting market, and one you could drive scale to a few m pretty easily with some mkting. At that size you are also buying the technicians - make sure there are retention hooks in place. Again - hit me up if you want to chat further.

reply by a professional 2yrs ago
from Williams College in Atlanta, GA, USA

I hope to provide some insight. I am currently in my 3rd year of being an electrical apprentice with a year or so left until I can sit for the master electricians exam. I plan to start (potentially fund) a contracting business here in Georgia. I also have my certifications for HVAC, which helps me to speak on that subject, as well. Honestly, the reason for the higher risk is probably exactly what you thought. There's a higher risk because no matter how much education one has, things just go wrong. The injuries, when involving high voltages (for journeymen that would typically be 120-480V) are deadly, and can fry nerves in the body, rendering someone helpless to the current on a branch circuit. When working with main breakers and transformers, a mistake can mean a closed casket, or no casket at all. (Forgive my candidness) Also, in the industry, there are more installers rather than electricians, which lead to shaky work that will have to be tended to in the future. Double that with the phasing out of experienced tried and true electricians, many younger guys are falling through the cracks without the proper experience, training, know how to tackle complex jobs. Now HVAC, is safer due to the engineering of the system itself. Outside of the carelessness of the tech, there is much less exposure to high voltages/current. Additionally, the system itself is closed and rather sturdy to the high pressures. When installed well, it'll hold preventing the injury of the technician, and some basic knowledge of safety and thermodynamics can save the technician from any mishaps from using refrigerant both in the system and external to the system. Hope you found this relevant.