No company wants to go out of business, yet many, including electrical repair businesses, do. According to the SBA Office of Advocacy, two-thirds of all small businesses fail within the first year. Here are some of the reasons why small electrical repair businesses fail and what you can do to avoid the failure.
- Starting an Electrical Repair Business for the Wrong Reasons
Some electricians decide to go out on their own after working for aelectrical contractor for several years. Although these electricians may have the skills to do electrical work, they may not have the business sense to successfully manage a business. Over time, their enthusiasm wanes and they are forced to close shop.
You are likely to succeed if you start an electrical business for the right reasons. To succeed, you must be passionate about electrical work, have a positive mindset to keep on when others give up, and be willing to learn new skills that will help you successfully manage your business.
- Insufficient Capital
Starting an electrical repair business without sufficient capital sets the business on a path of failure. Some electricians underestimate the dangers of operating an electrical company without sufficient capital. Some even resort to using their credit cards to fund their businesses.
This is exactly what caused one certified electrician to lose his business. He was used to a regular paycheck while he was employed and did not realize that he may work for weeks or months before clients pay up for electrical services such as electrical repair and electrical panel upgrades. Faced with cash flow problems, he was forced to take up loans to finance his business. Eventually, he was forced to close his business and find a job in another firm.
It is important to protect your capital to cushion you against the perils of your business. Consider getting liability insurance for your business because you may be sued even when you have not made a mistake and may be forced to spend significant amounts of your capital to deal with the lawsuit.
Before you start an electrical repair business, determine how much money you will need to cover startup and operational costs for the first couple of years. Consider sitting down with a financial advisor to discuss your plans.
- Lack of or Inadequate Planning
This is one of the most common reasons why electrical repair businesses go out of business. Many times an electrical contractor is focused on achieving their dreams of financial independence. Create a strategic plan for business. Factors such as marketing budgets and analysis of workforce needs as well as competitors may have significant effects on the success of your business. Take time to create an effective strategic plan for your business.
- Poor Management and Leadership
Effective management and leadership have great effects on the success of your electrical repair business. Lack of management and leadership can cause numerous problems, which may lead to poor morale and decreased productivity.
Prioritize the acquisition of skills that will strengthen the areas you know you are weak. Read books on leadership and management or sign up for management and leadership courses online or at your local university. As a certified electrical contractor, your employees look up to you to provide leadership, so lead.
Many electrical repair businesses fail within the first year of operation. It is important to understand the problems that could cause your business to fail so that you can avoid them.