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Opening a low-voltage division

Many (or even most) of the "Communications Contractor" minivans you see driving around town actually belong to old-fashioned electrical contractors. In the last couple of years, hundreds of electrical contractors have spun-off low-voltage divisions.If you're a contractor who wants to do low-voltage work, you have two basic options: open a new low-voltage company, or run such projects within your existing

Many (or even most) of the "Communications Contractor" minivans you see driving around town actually belong to old-fashioned electrical contractors. In the last couple of years, hundreds of electrical contractors have spun-off low-voltage divisions.

If you're a contractor who wants to do low-voltage work, you have two basic options: open a new low-voltage company, or run such projects within your existing company. For a variety of reasons, most electrical contractors are choosing to open a new division, rather than incorporating low-voltage work into their existing company. Here are the primary reasons why:

1) Many low-voltage customers don't think a power-and-light electrical contractor is competent to do data work. They're much more comfortable dealing with a specialty company. (This is reasoning enough by itself. Alienating any possible customers is a huge mistake.)

2) You'll need to keep separate accounting records for the two different operations (power wiring and low voltage wiring). If you don't separate them cleanly, your record keeping will get jumbled, and you'll have a hard time analyzing your true costs and profits.

3) It gets confusing in the minds of your existing power wiring customers. "Are you still going to focus on regular electrical work?" "You'll get distracted with that data stuff and your regular work will suffer." These are things that go through some customers' minds when you keep marketing your communications capabilities to them.

4) By setting up a separate low-voltage corporation, you're keeping your liabilities separate. The power division is responsible for its work, and the low voltage division is responsible for its work.

5) There'll be separate (and different) groups of people working in the two companies. If you are a union contractor, the workers are probably from different locals.

Setting up your business Setting up a new company allows you to design it right, from the ground up. With no pre-existing operations to contend with, you can organize this company the way you've always wanted. Here's where to begin.

First, set up an operating system that covers everything the company will do. Make a list of all the necessary activities (marketing and sales, estimating, billing, collecting, accounting, purchasing, answering the phones, supervision, etc.). Assign each of these activities to a specific person. Then compare the list with what you had in mind, see how all the activities will work together, and modify where necessary.

Second, set up a separate corporation for the new company. And don't automatically choose a local corporation-the laws in your state may not be the best for you. Shop around; you can form your corporation in another sate, or even in another country. Doing this is not that hard, and it can save you a lot of money in the long run. There's not much difference between the rates lawyers charge in California, New York, and the Netherlands. And your bank account doesn't have to be in the same place in which you incorporate.

Third, get your accountant to review your plans before you put them into place. None of us has enough time to be specialists on everything, so pay the accountants and lawyers to look things over (briefly).

Fourth, make sure you'll be able to staff your company with enough qualified workers. This is not a given. Make some good plans for keeping a healthy supply of qualified installers. Don't cut any corners here. If you run out of skilled installers you are "dead in the water." Both the IEC (Independent Electrical Contractors) and IBEW (International Brotherhood of Electrical Workers) have apprentice datacom training. Check your local chapter for status and apprentice availability.

Finally, make sure you have a shop area, supply sources, delivery methods, and all necessary tools and equipment.

Getting work You'll have to spend time developing a marketing plan, and coming up with multiple strategies and options. Data work comes from scattered sources. That means you'll have to spend a lot of energy finding customers. (I know of no plan rooms where you can find many low-voltage jobs to bid.)

The average electrical contractor spends less than half of one percent of its sales volume on advertising. In the low-voltage business, you'll have to do a lot better than that. In fact, you may want to have a full-time outside salesperson. We covered sources of jobs in last month's datacom article, so it's not necessary to repeat them all here, but a recap of the important ones is needed:

Your existing power customers.

Subcontracting from electrical and mechanical contractors.

Referrals from distributors and component dealers.

Sales calls on local businesses.

Direct mail and telemarketing.

Spend some time learning about marketing before you start selling. Two marketing books you must read are The 22 Immutable Laws of Marketing, by Reis and Trout, and Guerilla Marketing, by Levinson.

Getting your business off the ground Prepare yourself for a slow start. New companies take a while to get moving. If your first marketing plans don't get you much business, try a different angle, and keep going. Don't get scared if your first results are slow in coming. If you've done your research well, it shouldn't take more than one to two years before you have a thriving young business.

Once you begin to get work, be sure to go very slowly. These are new types of projects to both you and your workers. As such, there'll be many new, confusing, and difficult situations to face. And, you need time deal with these as they appear. If you go slowly, you can resolve these difficulties without creating problems for your customers. If, however, you go too fast, you won't be able to react to problems fast enough, and you'll end up disappointing your customers. Don't let that happen, especially in the beginning.

Once you get past your first series of projects, you can begin to expand. Even so, don't expand too quickly; handling a number of projects at the same time will also present obstacles to overcome. Don't be in a hurry, and in a year or two you can be very profitable.

It's a new world Remember, almost all electrical contracting companies are designed around a method of operating that came of age 50 years ago. If you're designing a new company, don't simply assume the old way of doing it is best. Make your own decisions, and design your company for what works best now, not what worked in 1950. Here are a few ideas for you to consider:

Involve as few people as possible in the performance of each activity. There should be a minimum of cross checking and waiting for approvals. Make decisions as close as possible to the place where the problems or question areas appear, not back at headquarters.

Distribute authority for company operations throughout the company; don't centralize it. This will carry with it the obvious risk of employees making costly mistakes. But, it will also avoid the continual paralysis that occurs while your people on the job site wait for answers from the office.

Try to hire people you can trust. If you're giving employees increased decision-making functions, they need to be more than technically competent-they should be trustworthy as well. Obviously, you can't simply hire nice people and hope they'll work out. You'll have to give your employees financial incentives for being trustworthy. They should make extra money for being honest and reliable. This is different and will require some innovation, but it makes good sense.

Try to make your company a place where people like to work. Mix a strong work ethic with a bit of comic relief and camaraderie.

Focus all your activities should on one central concern: the needs of the customer. In every decision, the central issue should be "How does this affect the customer?" Even when dealing with suppliers or employees, relate your decisions to the needs of the customer.

Transfer information quickly, easily, and in a useable format. Free and fast communication between the people in your company is paramount. Blow money on communications equipment when you must, but don't let important information get lost.

Supply your technicians and installers with everything they need to get their work done. If things go wrong, there should be no other place for blame to go than to management.

Supply solutions to your customers' needs. This is your purpose in the market place. In fact, you should provide

solutions your customer didn't even know existed. Your objective is to make your customer operate better and cheaper. Your services are valuable to your customer only to the extent that you improve the situation. You must recognize this fact and periodically spend time brainstorming about each of your customer's needs. Then you have to come up with beneficial ideas (whether they involve your services or not).

Continual learning and flexibility In any of the low-voltage fields, you must keep learning and be flexible. Because datacom technologies are continually changing, new opportunities are opening up all the time. On the other hand, opportunities that used to be great are winding down.

To find out what's best for you, you'll have to spend a fair amount of time researching new opportunities and learning new technologies. That means you'll have to spend a lot more time reading and taking training courses.

Bear in mind, the best opportunities in low-voltage contracting pop up somewhere just off the beaten path, so you should be flexible. Not flighty and unreliable, but willing and able to consider jobs a little bit different from the norm. Good luck!

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