Are Your Electrician Profit Margins Where They Should Be?

A guide on how to supercharge your profitability, without adding hours to your week.

When you’re swept up in growing your business, it’s easy to become focused on the thrill of winning jobs.

But all those cha-ching bells ringing in your head can distract you from the cold hard reality of your bottom line. 🔔

Are you actually making money? As much as you SHOULD be?

Whether you’re lowballing yourself to win jobs or just using an ineffective estimating system, if your profits aren’t up to par… you’re leaving money on the table.

Even worse, you’re running yourself ragged for nothing.

Profit margins are the most important indicator of the health of your business. If you don’t know where yours stand, now’s the time to find out. And if they’re not where they could be, we’ve got five tips to amp them up.

What are average profit margins for electricians?

Breakthrough Academy has years of experience analyzing contractor businesses, which means we’ve amassed a ton of data. The numbers provided here are based on what we typically see for companies in the electrical industry.

These benchmarks are broken out by service and construction streams, though we realize many electrical companies engage in both. If that’s the case for your business, we recommend tracking your profit margins for each stream separately so you can gain the most accurate comparison.

So, without further ado… here are the profit margin benchmarks for electricians, ranging from “Awesome” to “Average” to “Ah…Uh Oh…”

Gross versus net electrician profit margins

If you tend to trip up the difference between gross and net profit margins, here’s a quick overview:

📈Gross profit margin – This is the money you bring in from your projects or services BEFORE you pay any overhead costs, such as salaries (including your own!) and office expenses. Carefully managing your gross profits is a great way to increase profitability.

📈Net profit margin – This is what’s commonly referred to as your “bottom line.” It’s what’s left after you’ve paid ALL your expenses, including project-related costs and overhead. Your net profits can be reinvested into your business to fuel growth.

For more info on calculating your gross and net profit margins, check out this article. 

How to increase your electrician business profits

Becoming more profitable starts with shifting your mindset. According to Shawn Van Dyke, author of Profit First for Contractors, it’s really more about behavior than math. 

Before you release too large a sigh of relief, keep in mind that behavioral changes can be tough. Fortunately, we’ve got you covered with five simple and proven actions that can have a dramatic impact on your profit margins. 

#1 - Use a budget

In the early days of Crew Electrical Services, before owners Cory Magee and Drew Lunham created a budget, their finances were in “absolute chaos” (their words). From one month to the next, they weren’t sure whether they had the money to pay suppliers, cover payroll or order materials.

It’s a very common scenario for busy electrician business owners, but one that’s easily rectified with a defined budget. This vital component of your financial system helps you:

• Track the financial health of your business
• Calculate metrics, like your gross and net profit margins
• Set up a cashflow and payments schedule
• Keep your overhead under control
• Make strategic plans for the future 
• Navigate business decisions

Need a better budget? (Or a budget, period?) This Budget Tool will get you set up.

#2 - Make job costing a habit

For Cory Byron of VanCity Electric, improving the company’s job costing routine was an eye-opening experience. 

When he started, he was doing side jobs just to keep the business alive. But a steady job costing practice helped him figure out a better pricing model, which ultimately allowed him to work less and DOUBLE his gross profits.

Job costing is one of the most vital parts of financial management. Stay on it, and you’ll be richly rewarded. Let it slide, and your electrician profits will fizzle out.

#3 - Choose  projects strategically

Remember Cory from five seconds ago? Once he was able to see a clear picture of the company’s project expenses, he was able to discern the difference between “good jobs” and “bad jobs.” That allowed him to be more selective about what work he took on.

Why does that matter? Because focusing on jobs that meet your gross profit margin targets will help you maximize profits.

But to be able to make those decisions, you need to have the numbers. That’s why you’ve got to create a budget and get a solid job costing system in place (FYI: we can help with both). 

#4 - Don’t overhire

Obviously, you need a crew to work on your projects. But how many staff have you got working in your office? Shawn Van Dyke has found that overhiring is one of the biggest mistakes owners make.

Overloading your payroll, especially with too many office employees, will blow up your overhead and can short-circuit your profit margins.

Ideally, what you want to aim for is a size-appropriate team of A-players. What does that mean? Aim for the minimum number of people needed, and choose ones who will get the work done right the first time.

#5 - Invest in your people

Now, here’s the caveat to the above tip: A-players aren’t cheap. But that’s okay. You have a budget and a financial system that ensures you can afford the best people (right?).

Once you’ve made your hires, infuse your margin targets into their performance goals, offer incentives tied to those expectations, and set up an accountability system to help keep their progress on track.

Can you see how everything ties together? Protecting your profit margins involves a delicate balance of managing projects and people. But it all begins with a budget.

Download your free Budget Tool and start supercharging your profits today.

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