Opening Your Own Low-Voltage Division

If you're a contractor who wants to do low-voltage work, you have two options: Open a new low-voltage company or run such projects within your existing company. Which way is best? Believe it or not, most of the "Communications Contractor" minivans you see on the road actually belong to old-fashioned electrical contractors. In fact, in the past couple of years, hundreds of electrical contractors have

If you're a contractor who wants to do low-voltage work, you have two options: Open a new low-voltage company or run such projects within your existing company. Which way is best?

Believe it or not, most of the "Communications Contractor" minivans you see on the road actually belong to old-fashioned electrical contractors. In fact, in the past couple of years, hundreds of electrical contractors have spun-off low-voltage divisions.

If you want to get into the low-voltage contracting business, you can either run these projects within your existing company or open up a new division. For many reasons, most electrical contractors are opting for the latter. Here's 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 in itself is reason enough. Alienating 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, you'll jumble your record keeping. Then, you'll have a hard time analyzing true costs and profits.

3. It confuses 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 market your communications capabilities.

4. By setting up a separate low-voltage corporation, you're keeping your liabilities separate.

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

Setting up your business. Starting up a new company allows you to design it right:from the ground up. With no preexisting operations to contend with, you can organize it 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 necessary activities (marketing and sales, estimating, billing, collecting, accounting, purchasing, answering the phones, supervision, etc.). Assign each 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. 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 state, 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.

  • 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. If you run out of skilled installers, you're "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.

Now comes your real job: 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 it takes a lot of energy to find 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 1% 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, here's a recap of the important ones:

  • 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 marketingplans don't bring you much business, try a different angle:but keep going! Don't get scared if your first results are slow in coming. If you've done your research, it shouldn't take more than one to two years before your business thrives.

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

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. Don't be in a hurry, and in a year or two you can be very profitable.

New world-old 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 assume the old way 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:

  • Involve as few people as possible in 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.

  • Don't centralize authority for company operations. 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.

  • 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. 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 on one central concern: the needs of the customer. In every decision, ask yourself: "How does this affect the customer?" Even when dealing with suppliers or employees, relate your decisions to the customers' needs.

  • Transfer information quickly, easily, and in a usable 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, blame should fall on 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 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. Since datacom technologies are continually changing, new opportunities open 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. Keep in mind the best opportunities in low-voltage contracting pop up somewhere just off the beaten path. That means you should be flexible, willing, and able to consider jobs a little bit different from the norm.

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