How to Start an Electrical Contracting Business

Electrical contracting has some of the highest barriers to entry in the trades. That's actually good news if you're qualified, because it keeps competition lower than trades where anyone with a truck can hang a shingle.

The demand side looks strong too. EV charger installations, solar panel work, smart home systems, and the ongoing need for panel upgrades in aging housing stock mean there's more electrical work available now than there was five years ago. And the electrician shortage isn't getting better anytime soon.

But the licensing and insurance requirements are real, and the consequences of screwing up are more severe than most trades. Here's what you need to know.

Licensing requirements

Every state requires electrical contractors to be licensed. Most require a master electrician license before you can pull permits and operate independently. A few states let journeyman electricians start a business if they have a master electrician on staff, but that's the exception.

The typical path: 4 years as an apprentice (8,000 hours in most states), 2 to 4 years as a journeyman, then the master electrician exam. The exam covers the National Electrical Code (NEC), load calculations, grounding, and business/contract law.

If you're coming from one state and moving to another, check reciprocity agreements. Some states accept out-of-state licenses; others make you start the exam process over. This catches people off guard.

Budget: $300 to $800 for exam fees, $200 to $500 for NEC code book and study materials, $500 to $1,000 for a prep course if you want one. Many electricians find the prep course worth it, since the pass rate on master exams runs around 60% on the first attempt.

Business setup

LLC formation, EIN, business bank account. Same as any trade business. Cost: $200 to $600 total.

The one thing specific to electrical contracting: many cities and counties require you to register separately as an electrical contractor in addition to your state license. Some also require a bond ($5,000 to $25,000 depending on the jurisdiction). Check with both your state licensing board and your local building department.

Also register with your local utility company as an approved contractor. This matters for service upgrades, meter installations, and solar interconnection work.

Insurance

Electrical work has higher liability exposure than most trades. A wiring error can cause a fire that destroys a house. Your insurance needs to reflect that.

• General liability ($1M/$2M minimum). Premium: $2,000 to $5,000/year for a solo contractor. Higher than HVAC or plumbing because of fire risk.
• Workers' compensation. $3,000 to $7,000/year. Electrical work is a higher rate class.
• Commercial auto. $1,500 to $3,500/year.
• Professional liability (errors and omissions). Optional for residential, worth considering if you do commercial or industrial work. $1,000 to $3,000/year.

Total year-one insurance: $7,500 to $18,000. It's the biggest annual cost after your vehicle, and there's no way around it. General contractors won't sub work to you without a certificate of insurance, and working uninsured is gambling your entire financial future on never making a mistake.

Equipment and startup costs

Item	Cost range
Work van (used)	$15,000 - $28,000
Multimeters (Fluke or equivalent)	$300 - $800
Wire pulling equipment	$500 - $2,000
Conduit benders (hand and hydraulic)	$400 - $2,500
Circuit tracers, voltage testers, clamp meters	$400 - $1,200
Hand tools (strippers, pliers, screwdrivers, etc.)	$800 - $2,000
Power tools (drill, sawzall, rotary hammer)	$600 - $1,500
Initial wire and materials inventory	$1,000 - $3,000
Licensing, insurance, bonds, formation	$8,000 - $19,000

Realistic all-in: $27,000 to $60,000. Electrical contracting has one of the higher startup costs in the trades, mostly because of insurance and bonding. But the hourly rates you can charge also tend to be higher, so the payback period is reasonable.

Pricing your work

Electricians typically price using one of two methods: time and materials (T&M) for service work, or per-circuit/per-fixture pricing for new construction and remodels.

For service work, you need to know your loaded hourly cost. Our electrical pricing calculator runs through the full calculation. Most solo electrical contractors in 2026 are billing $100 to $200/hour depending on the market and type of work. Panel upgrades, EV charger installs, and generator hookups tend to command premium rates because customers see them as specialized.

For project bids, the electrical bid template will get you started with a framework. Always include your permit fees in the bid (and mark them up 10% to 15% for your time handling the paperwork).

Check the contractor rate data for your metro area to see where local electrician wages land. Your billing rate should be roughly 2x to 2.5x the local median wage for employed electricians.

Finding customers

Electrical work has a nice split between retail (homeowners) and commercial (contractors, property managers, businesses). You want both, but they come from different places.

For residential customers:

• Google Business Profile. Non-negotiable. Most homeowners search "electrician near me" and call someone from the top 3 results. Get reviews early and often.
• Real estate agents. They constantly need electricians for pre-sale inspections and buyer repair requests. Build relationships with 5 to 10 local agents.
• EV charger installations. This is a growth niche right now. Every Tesla owner needs a Level 2 charger installed. Market yourself specifically for this.

For commercial and subcontract work:

• General contractors. Visit job sites. Introduce yourself. Leave a card and your certificate of insurance. Most GCs are looking for reliable electrical subs.
• Property management companies. They need electricians for tenant turnover work, code compliance, and emergency repairs.
• Electrical supply houses. Same as plumbing, the counter guys know everyone. Be a regular. Be friendly. Referrals follow.

Common early mistakes

• Underpricing to win work. You're a licensed master electrician with insurance and bonding. Charge like it. The handyman down the street doing unlicensed electrical work for $50/hour is not your competition.
• Ignoring the permit process. Always pull permits for work that requires them. Unpermitted electrical work creates liability that follows you forever.
• No material markup. Your markup on wire, panels, breakers, and fixtures should be 25% to 40%. You're sourcing it, transporting it, and guaranteeing it. That has value.
• Trying to do everything. Pick a lane early. Residential service, residential new construction, light commercial, or industrial. You can expand later, but specializing early makes marketing easier and helps you build a reputation in one area.

What year one looks like

A well-run solo electrical contracting business can gross $150,000 to $250,000 in year one, with take-home of $60,000 to $110,000 after expenses. The higher end is realistic if you're in a market with strong demand and you price correctly from the start.

The biggest variable is how quickly you fill your schedule. Electricians who come into the business with existing relationships (former employers who sub work to them, GC contacts, real estate connections) tend to hit profitability faster than those starting completely cold.

Either way, if you're a licensed electrician who shows up when you say you will and does clean work, you're already ahead of half the competition. The bar for reliability in this industry is frustratingly low, which works in your favor.

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