Nigel Best, Managing Director at electrical training specialist, EC4U, discusses his top tips on kick-starting a successful new electrical business.
Starting up an electrical business can be a daunting prospect which requires thorough training, the correct licensing and equipment, a rigorous business plan and a clear marketing strategy. In a competitive industry, standing out above contenders and getting ahead requires a solid business start-up.
The beneﬁts of starting, owning and running your own electrical contracting company are plain to see. It is a proﬁtable industry with great business growth potential.The demand for electricians,whether for emergency work,construction projects, larger electrical installations, smart home installs and much more, is strong and will continue to rise year on year. People need electricians and the specialist skills they provide.
So, you might have the experience, the funds, the qualiﬁcations and the tools to start this project, but what are the ﬁrst steps into establishing your own company?
Choosing the right business for you
When entering into the electrical entrepreneurial world, you are guaranteed to face industry jargon. The ﬁrst and most important term to understand is the difference between a limited company or a sole trader company, and which of the two is more beneﬁcial. I have always been advised, and in turn, I have always advised others, to elect a limited company.
Whilst a sole proprietorship will allow you full control of your business and how it is run, along with the security of owning all of the assets of the business and any proﬁt made, there are also major downfalls. Not only is a sole trader held entirely responsible for all decisions, large or small, but they are also accountable for all debts and liabilities the business accrues. Meanwhile, the beneﬁts of owning a limited company are copious.
Beneﬁts of owning a limited company
1. Tax advantages: you are guaranteed to pay less personal tax than a sole trader. As the director of a small company, you can pay yourself a small salary which is tax free. This amount currently stands at £10,600 until April 2016 when the tax-free limit will increase to £11,100. Should you earn over the tax-free amount as a director and shareholder of a limited company, from April 2016 you can pay yourself £5,000 tax free as a dividend allowance. Above that, up to £31,785, you will pay 7.5% on dividends.
“Starting up an electrical business can be a daunting prospect which requires thorough training, the correct licensing and equipment, a rigorous business plan and a clear marketing strategy. In a competitive industry, standing out above contenders and getting ahead requires a solid business start-up.”
2. Limited liability: you are protected if things go wrong. Some large organisations will sometimes expect tradesmen such as bathroom fitters or kitchen fitters to buy their own materials which are reimbursed once the project is complete. Should the leading organisation go into receivership or close, by owning a limited liability business you are able to close your company and avoid expensive repercussions. If you are a sole trader, your home and assets are at risk of being taken as a form of payment for the debt.
3. Professional: you are perceived as a more credible company. Both publicly and in a business to business field, a limited company is considered more positively than sole traders.
Remember the name
Your next focus is the name of the business. Ideally, you will choose a name that will last and will embody both your values, your company’s characteristics and what your potential customers are interested in.
Once you have your name, visit the government run website ‘Companies House’ to ensure your business name is not already taken. If it has, it is time to go back to the drawing board. Unlike sole trading companies, where 20 businesses can be called the same name, Limited companies must be exclusive.
Now it is time to register your company. Many companies and establishments including the government, The National Business Register and Go Limited, offer this service. Registration costs range from £50-80 for your company to be legally registered with Companies House. A Certiﬁcate of Incorporation will be sent to you once your registration has been successful.
A good accountant will always save you money. Therefore, finding the right accountant is imperative. Always look to go for a smaller company over a larger organisation, and finding an accountant through referrals is even better. To ensure you have a good accountant, it is key to do your research, they can save you a lot of money. For example, a lot of people are not aware that the first 10,000 miles that are travelled for business can be offset against your taxable profits by 40p per mile, and anything over 10,000 at 25p per mile.
Next, set up a business bank account. There are new deals and offers every day from each of the UK’s banks fighting for your business. Take your time, do your research and seek advice from your accountant about your banking needs. Ensure you have a direct contact at your bank who will help you to manage your banking, and always remember to read the product disclosure statement before signing any agreements. Finally, whatever you do, do not use your personal account, as this can be messy! Always keep the accounts separate.
We are in the digital age; ensure your business is active online. Make sure your website is Google-friendly and get active on social media. Share testimonials from customers on your website and use this platform to market your company to thousands of people – and for free!