Starfish Coaching · Electrical contractors
Electrical contractor profit · service and new-build · material markup · apprentices · callbacks
Busy and profitable are not the same thing for an electrical contractor. What is hard to see is how much of each job is left once the van, the licensed and apprentice labour, the materials, the callbacks, the quoting time and your own pay have been taken out. There is no honest single number for the average electrical contractor profit margin or the average profit per electrical job, and this page explains why. It also shows a method for finding your own, with a calculator you can use as you read.
Search for the electrical contractor profit margin and you will find confident-looking percentages with no way to tell whose books they came from. A figure like that is not worth putting on a page, because it would be borrowed from other businesses and applied to yours. An electrician who spends the week on service calls, a contractor who roughs in and finishes new builds, a firm that mostly does renovation and a shop with six vans and a dispatcher are running different businesses with different costs. One average hides every one of those differences, and it can make a healthy line of work look weak or a weak one look healthy.
What is useful is the method. Once you know how an electrical job turns into profit, you can work out your own number for each kind of work, see which part needs attention, and judge your electrical business profitability against the margin you set out to keep and not against someone else's.
Six things decide how much of an electrical invoice you keep. The first two are the ones owners tend to watch. The rest are easier to miss.
Callouts and service work are short and urgent, with a lot of driving and diagnosis and small tickets. New-build is quoted from plans, usually against other bids, and runs to somebody else's schedule. Renovation sits between them, with the added risk of whatever is behind the wall. The table below sets them side by side. Pooling them into one margin hides which one is paying for the others.
Markup is a percentage of what the material cost you and margin is a percentage of what you charged, and they are never the same number. Materials bought for $600 and sold for $900 carry a 50% markup and a 33.3% margin. Mark the same materials up 30% and you sell them for $780 and keep 23.1%. The price of wire, cable and equipment can also move between the day you quote and the day you buy, so a quote with no time limit on its prices carries that risk for you. The overhead and profit page shows the full markup table.
A licensed electrician and an apprentice cost different amounts an hour, and they do not produce the same amount of billable work. Apprentices usually work under the supervision of a licensed person, and the rules on who may supervise whom, and how many, differ by place and licence, so check yours. Time a licensed electrician spends checking and teaching is a real cost even when nobody invoices for it. Cost every hour at what it truly costs you, payroll costs included, and look at the mix of hours on each type of job.
The van, its stock, fuel, insurance, tracking, hand and power tools and test equipment are paid whether or not the van moves, and so are licences and renewals. Add up the yearly cost and divide it across the jobs the van did. In the example below, a van and its tools costing $24,000 a year across 600 jobs puts $40 on every job, and that share belongs in every price. If you pay permit and inspection fees up front, make sure they come back on the invoice, and that the time spent arranging them is priced too.
A return visit to fix something you already billed for, or to redo work that failed inspection, earns nothing. It costs the electrician's time, the travel and the van, and it pushes a paying job back. Count how many return visits you made last year and cost each one.
Estimating takes real hours, especially on new-build and renovation, and not every quote turns into work. The cost of the quotes you lose is paid for by the jobs you win, so it belongs in overhead. The same goes for you: if you work on the tools and no wage for you is booked as a job cost, every job looks richer than it is. Give yourself a fair wage for the hours you work. What is left after that, and after overhead, is the profit of the business, which is a different thing from your pay.
The headings below are the questions to ask of each kind of work in your own business. None of this is a benchmark. It is a way to see why the same electrician can have a very different year on each.
| Service and callouts | New-build | Renovation | |
|---|---|---|---|
| Where the time goes | Driving, diagnosing and short jobs. Unbilled time is easy to lose between calls. | Long runs on site, fitted around other trades and the builder's schedule. | Opening up walls, working around finished rooms and finding what was done before. |
| How it is priced | Often an hourly rate or a flat price per repair, with a minimum charge. | Quoted from plans, often against other bidders. | Quoted from a site visit, then changed when the unknowns turn up. |
| What tends to go wrong | Short jobs priced too low, and travel that nobody pays for. | Bidding too tight, waiting for the next trade, and money tied up until the work is signed off. | Scope creep, change orders given away and surprises behind the wall. |
| What to measure | Profit per call-out and per van-day. | Margin against the bid, and how much cash is tied up. | Hours against the quote, and change orders won against change orders given away. |
These numbers are invented to show the arithmetic. They are not an industry figure, a benchmark or a target. The figures are in dollars, but the arithmetic works in any currency. Your costs and prices will be different, which is the whole point of working it out yourself.
| One panel upgrade, step by step | Amount |
|---|---|
| Labour billed at a blended rate: 10 hours at $100 | $1,000 |
| Materials sold (cost $600) | $900 |
| Job total | $1,900 |
| Electrician paid 6 hours at $55 (5 on site, 1 travelling and collecting materials) | $330 |
| Apprentice paid 6 hours at $30 (5 on site, 1 travelling and collecting materials) | $180 |
| Materials at cost | $600 |
| Share of the van, tools and test gear ($24,000 a year over 600 jobs) | $40 |
| Direct cost | $1,150 |
| Gross profit: $750, or 39.5% of $1,900 | $750 |
| Share of callbacks and failed inspections (one job in ten, about $200 each) | $20 |
| After callbacks: $730, or 38.4% | $730 |
| Share of overhead (office, quotes that were not won, insurance, licences, software, owner's pay) | $490 |
| Left over: $240, or 12.6% of $1,900 | $240 |
The same job can be made to look very different. Leave the electrician's wage out because the owner did the work, and the direct cost drops to $820 and the job looks like a 56.8% gross margin. It is not. Mark the $600 of materials up 30% instead of 50% and they earn $180, not $300. And two of the twelve paid hours had no revenue against them, one for the electrician and one for the apprentice, which cost $85 between them. Each of these is small, and they all point the same way.
That is also why the average profit per electrical job is a poor number to chase. Here the job leaves $240. A service call would leave a very different amount, and so would a new-build rough-in, for different reasons. Work each type out on its own.
This is the same calculator as on the overhead and profit page. Replace the starting figures, which are only placeholders, with last year's revenue, direct job costs and overhead. Put your own wage in overhead if it is not already in your direct costs.
Where the money actually goes
Nothing is sent anywhere. The arithmetic runs in your browser.
Markup is calculated on your cost. Margin is calculated on your price. They are never the same number, and the gap gets wider the higher you go.
| If you mark up | Your margin is | You keep on $100k |
|---|
To keep 25% you have to mark up 33.3%, not 25%.
| Sell more at today's margin. Extra revenue needed | n/a |
| Or hold revenue and lift net margin to | n/a |
| Or cut overhead by | n/a |
Three doors into the same room. The third is usually the fastest, and it is the one owners look at last.
Service call, new-build, renovation, maintenance or inspection work. If your software does not do it, a spreadsheet column will.
Labour at what you pay for every hour, travel and supervision included, so use hours paid and not hours billed. Then materials at cost, the van's share and any permit costs you carried.
How many return visits did you make, what did each cost, and how many hours went into quotes that did not become work?
The office, insurance, licences, software, admin pay and your own pay. A simple split is by revenue.
The first gives you the net margin of that type of work. The second gives you your own profit per job.
Not with a national average. Where one type of work keeps far less than another, look there first.
There is no single honest answer, and a page that gives you one percentage is guessing. A good margin depends on the mix of service work, new-build and renovation you do, how much of the labour is licensed and how much is apprentice, whether you work on the tools yourself, and what it costs to operate where you are. A borrowed average blends all of that into a number that is not true of any one business, so this page does not quote one.
The useful test is your own net margin, worked out with your pay included, tracked over time and set against the margin you decided you need to keep. The overhead and profit calculator gives you the whole-business version.
There is no honest single figure. A service call, a panel upgrade and a renovation rewire carry completely different costs, travel and risk, so an average across all of them describes none of them. As a simple illustration with invented numbers, 140 service calls that each keep $55 and 9 renovation jobs that each keep $1,100 add up to $17,600 over 149 jobs, which averages about $118 a job. That number is true of neither kind of work.
To find your own, add up the profit you kept on one type of job over a year, after direct costs, callbacks, overhead and a fair wage for yourself, and divide by the number of those jobs. Do it for each type of work separately.
It can be, and many are, but a full diary and a profitable business are not the same thing. An electrical contractor can be busy every week and still keep very little if the van, the travel, the apprentice's supervision, the callbacks, the quotes that went nowhere and the owner's unpaid hours are not in the price. Electrical business profitability is something you work out for your own business by putting revenue, direct job costs and overhead side by side, which is what the calculator on this page does.
Markup is a percentage of what the material cost you. Margin is a percentage of what you charged. Materials that cost you $600 and sell for $900 carry a 50% markup, but only a 33.3% margin. If you mark the same $600 up by 30%, you sell it at $780 and keep $180, which is a 23.1% margin. Quote on markup and budget on margin, and the difference comes out of your pocket on every job.
They cost different amounts an hour and they produce different amounts of billable work. Apprentices usually work under the supervision of a licensed person, and the rules on who may supervise whom, and how many, differ by place and by licence, so check yours. The time a licensed electrician spends checking and teaching is a real cost even when nobody invoices for it. The way to find out what the mix is doing to your margin is to cost the hours of each person on each type of job, at what they actually cost you including payroll costs, and compare.
Yes, because the costs are different. A service call carries driving, diagnosis time and a short job, so it often needs a call-out charge or a minimum that covers the driving and diagnosis as well as the repair. New-build work is quoted from plans against other bids, and renovation work has to allow for what is behind the wall. Work out the margin of each type on its own, then price each to reach the margin you want, and not the one you happened to see last year.
Yes. If you do the work and no wage for you is booked anywhere, the job looks far more profitable than it is. In the example on this page, leaving the electrician's wage out lifts a 39.5% gross margin to 56.8%. That is not profit. It is your pay, counted as if the business had earned it.
Yes. The arithmetic is the same anywhere, whether you call yourself an electrical contractor, an electrician with a van or a tradie. Licensing, permits, apprentice rules and tax differ by place, so check yours, and put the real costs of your own place into the numbers. Eric works with design and construction business owners wherever they are. The coaching for electrical contractors page explains how.
If the numbers surprise you, talk it through with Eric. The consultation is free and the arithmetic is the same for electrical contractors anywhere.
Eric Lee · Starfish Coaching · 1937 Triumph St, Vancouver BC V5L 1K6
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