Running an electrical business

[Tradie]

Where to operate the business, do you operate from a garage and room at home or do you go rent a space away from home. Do you build a office and workshop on side of your property.

This decision is very important, because there so many factors to take into consideration:

Your neighbours, will complain or report you?
Do you want staff arriving at your home everyday?
Do start off at home and relocate as your scale the business?
Do you have the space, parking etc?
Do the tax benefits outweigh the challenges and personal tax.

Do you buy a property in your name or the business and operate from the property and charge the business rent?

So many questions, what happens when it gets quiet, can you afford the rent for an office space?

[Tradie]

One of the biggest challenges we face currently, is the rubbish electrical equipment being sold, as a small business it is becoming impossible to offer a warranty on equipment being sold.

It's not only the cheap junk, it is all types of equipment.

Choosing brands to sell is not so much about price anymore, it's becoming more about support, today is a good example, we have a firmware issue with a product, we tried to do it online, however the device has now gone off line, which means that I have to drive to site (2 hours) to go plug in a cable or replace the unit.

If its a R20 000 item and you had at least a 50% markup, then its fine if you have the odd warrant claim, however if you fit a socket outlet or a switch and it fails, then you just wasting time and money.

[Derlyn]

Synergy bell push switches are junk.

[Tradie]

For many years I have wondered how people who run Aircon businesses for example, seem to do a lot better than electrical companies, then suddenly solar came along and the vehicles at the wholesalers were bigger and better, instead of seeing the usual old Ford or Corsa half tonners, there were suddenly new 4x4 Toyotas and panel vans, and its wasnt the new guy who just got an estate project.

It all boils down to the cost of the equipment being installed, you need to install a LOT of plug and lights and twin + E to make R100 k, compared to solar for example.

You sell 1 complete solar system, which can take 3 days to install and you make more money on the equipment markup than you do in the 3 days labour.

Lets use a small solar install as an example ... R100k plus 25 % = 25 k in your pocket before you drill a hole in the wall. For you as a small electrical business to make 25 k profit on plug and lights would take you months to install.

Something else to consider, you do an apprenticeship (a couple years), then night classes to study further, then years of site work to gain the experience needed to apply to register as a SPT or IE, then years of tech and experience on site to become a MIE.

People shyte themselves if you want bill more than R450 per hour as a registered person, yet they are happy to pay a "technician" with at least 3 days training R650 per hour.

You know who is to blame, every single one of us and the industry as a whole, try get a toolmaker to work for a company for less than R60K per month.

[Tradie]

Some of the challenges I face with regards to support and warranties. This thread is not about trashing brands, more focus on the challenges.

As a small business doing small basic electrical jobs, installing a DB, couple plugs and lights, its happy days, well it should be, provided you install brands which support their product.

For example some average priced products will offer support and send out technicians to assess and fix or replace faulty products, saving you a time and money.

How do you overcome these challenges, put a higher markup on the cheaper products, which then blow your quote out the budget, or do you just quote for the better product and stick to the average markup of 25%.

Do you charge 25% on the list price or the price after yoru discount?

[Tradie]

A challenge that is costing more than anticipated, electronic devices.

I have designed and built many control panels with PLC's and drive etc, in most cases if your design is correct, the equipment is a reputable brand an commissioned correctly , you install and wall away, sometime a little tweaking if you install level controls and stuff.

I have been burnt once (R30k) because I used a cheap brand which resulted in school fees, I upgraded to a decent brand and compared to every 3-6 months replacing components, it's been about 3 years since I have worked on that plant.

You move into a new field and start installing solar, alarms, CCTV and all those nice easy quick money projects, with huge equipment value, those days of installing R2k (including installation) alarm systems are long gone, you cant even buy a beam for that price anymore, you leave those for the armed response companies.

These project have highlighted a few challenges, the fail rate of these products become a huge problem, the support in many cases is not a simple remove and replace the same day, some of the solar warranty repairs can take as long as 8- 10 weeks (solar related) , people start getting frustrated and you start taking the knock.

Another issue is firmware updates, in most cases, it is as simple as a message on a whatsapp group and its done automatically, however it is not always the case.I am currently busy with a project where the manufacturer released a firmware update which is causing connection failures, it is not as simple as logging in and updated the firmware, WPS is required, if you are using a certain network brand which doesn't support WPS, then you either have to link another device which has WPS or you have to remove the product and return it to the manufacturer to update the firmware which take about 15 minutes, because it is an alarm related issue, it needs to be sorted out ASAP. No big deal right, not if you only have 1 or 2 issues, and the site is within 30 km or you are currently working on the site.

[Tradie]

The big question is how do you deal with these electronic projects?

Complete the installation and charge a call out fee for any warranty or firmware related issues?

Include a sundrie amount to cover for these issues for a year then charge normal call out rates?

Offer a monthly service fee for the electronic equipment, which includes one call out per month, if required?

Something I noticed the other day when contacting a network service provider, they assist to a point then offer to open a "ticket", which means you pay for everything including the talk time on the phone, the technicians call out fee plus materials.

This is something I need to look into, especially after hours and on weekends.

[Derlyn]

Client pays list price. My markup is the trade discount I receive. That's how I do it.

[Tradie]

I have been on this mission to get debt free, which I managed to achieve near the end of last year, but now I look at what I have been paying in tax and wonde rif I have done the right thing.

Because I had to register with VAT, that has just made it even worse, thanks to the labour charges which are not VAT deductible.

As a small service industry business, you want to stay as far away from VAT as possible, if you going to buy high value equipment, register a company and use it for buying and selling equipment only, rather look at other ways to bill labour, now I am looking at ways to reduce my turnover to make make sure I stay below the threshold,

I am bad at this stuff and managing money, so dont take my advice, I am still trying to figure out how to do this part of running a business, hopefully by March next year I would have learnt enough that I can start the new venture a little smarter.

[Tradie]

Another reason you dont want to register with VAT unless you exceed the threshold, or any other extras, you now have to pay someone every 2 months to sort out the returns, which now becomes an addition fee added to all the other crazy expenses and overheads.

The registrations, overheads and expenses start to add up, for a small business, they break you faster than bad debts, it just takes 1 month to get behind with a payment, by the next month you are already sweating, by the 3rd month you are drowning, add the fees and interest from SARS, you could be out of business faster than a bad debt.

The key to survival in a small business is less fees less interest, less overheads and less of everything.

Just when you thought it couldn't get any worse, SARS now has the authority to remove any outstands funds from any of your accounts at anytime, as I experienced a couple of month ago, to make it even worse, they took the money on the same day I paid them, so it was a double whammy on wage day.

Let this be a warning, you dont pay your taxes you go jail, so make sure you get someone to do it right.

[Tradie]

When it comes to equipment that is online, requires updates or adjustments, should we be charging a monthly subscription?

Solar systems for example, do we charge a monthly service fee, in this day and age, you pay subscriptions for everything.

Look at Sunsynk, they now offer a free connect app (which is about as efficient as their support), or you can upgrade and pay an additional R30 000 (for the warranty period of the product) for the pro version, which could be a little more reliable than the free version.

[Tradie]

This a big one, and you need to be very very careful.

Talking about customers that you work for, in short, you should never ever discuss anything about any of your customers,

Not the rate you charge them, it has nothing to do with anyone, be very careful when doing work for friends of customers. There is whole discussion to be had about this, but we will leave that for another day.

Not how rich or poor they are, how much you think they might earn, just dont, it has nothing to do with you or anyone else, not the rep who drops off supplies, not the your mate nor your family.

Not even if they owe you money, dont bad mouth them in front of other people even if you are with a bunch of mates. I know sometimes you want to unload and warns others about them, just dont.

Even down to sharing a customers contact details, rather send your customer the other persons number with a few details.

I talk form experience, I have down all of the above, but it has always come back around and bitten me properly, learn't from my mistakes.

[Tradie]

Anyone one that is even more important that the previous post, you can still get away with some of those things.

Posting pictures of projects you are busy with, complete recently or even a long time ago, make sure you get permission, even if the picture is not clear or personal info or serial numbers etc are blurred out.

Trust me if this happens you could loose the customer, get into trouble for sharing the pictures because of the privacy laws etc.

It doesn't matter if all the details are not shared, you might send a new customer a picture as a demo to show the kind of work you do, that person shares it on one of their social media platforms.

I have even stopped showing pictures on my phone to potential customers.