What every engineer interested in starting an electrical contracting business needs to know up-front
Just as an NFL cornerback would face tribulation from teammates for playing wide receiver, an engineer turned contractor knows he must run the gauntlet as well. The fundamental truth is, engineers interested in starting their own electrical contracting business must realize they're not only switching sides — they're playing an entirely different game.
Why would an engineer give up a cushy desk job? The answer is simple: money. A substantially increased profit margin is why you'll find many engineers today putting away their graphing calculators and picking up pipe-benders. All that's needed is an engineering degree and (in most states) two years of experience to register for the unrestricted electrical exam. Simply put, the exam focuses on book knowledge in lieu of practical experience — so even with minimal experience, an engineer has a distinct advantage.
Although a person brandishes a professional engineering license, as well as an electrical contractor's license, following the transition from designer to contractor with any amount of grace (and hopefully success) is a daunting task. In fact, past design knowledge and credentials may be as much of a handicap as an advantage — and recognizing strengths and weaknesses of a strong theoretical background, not to mention a weak practical one, could mean the difference between success and failure.
A strong theoretical background
One extremely important and valuable resource to an engineer interested in entering contractor turf is a strong theoretical and mathematical background. Directing a new company in the right direction to play off this background is key. Take troubleshooting, for example. Anyone in the field will tell you that troubleshooting requires a level-headed electrician who truly understands how electricity works, not one that simply goes along with how it's always been done or what the “Ugly's Handbook” says. It's surprising how many electricians work for years doing what they know best and still don't understand the theory behind principles such as Ohm's Law.
Consider a service call involving a loose neutral, which can be one of the most difficult, albeit aggravating, problems to locate. Someone having worked in the field for any amount of time could locate the culprit by “backtracking” the circuitry — a method that can be extremely time consuming, and, in turn, costly. An electrician who truly understands what is happening, however, could bypass the backtracking and pinpoint the problem rather quickly. An engineer already has this knowledge, putting him or her one step ahead of the game. Developing a reputation as an excellent troubleshooter to surrounding industries might be the niche that gets the engineer-turned-contractor's foot in the door.
Generally speaking, a contractor's goals are diametrically opposed to those of an engineer. Failure to recognize this change could be costly, if not fatal, to a newborn company. The goal of a design engineer is to provide the best product imaginable that meets the architect's and, most importantly, the owner's expectations; as a matter of custom, aesthetics trumps price more times than not. Don't misunderstand, the goals of the design team are very valid, but wait until the project comes in over budget — this is normally when the contractor is asked to suggest a few value engineering (V.E.) alternatives.
Suddenly, all prices matter, and hours are spent pricing cheaper alternatives. The seemingly important “finishing touches” are not so crucial anymore. The choice between die-cast and steel could make the difference of hundreds (or maybe thousands) of dollars for the owner as well as the contractor. A contractor's goals all boil down to one capitalistic end: Provide the required product with the greatest amount of profit. Therefore, it's necessary to decipher what's required and what's not — and apply it.
A good look in the mirror
The first step toward success is learning the tricks of the trade. Let's face it, no matter how many projects you have designed, if you're like most engineers, you haven't actually installed most of what you specify. Therefore, any engineer wishing to join the practical side of the construction industry should come to terms with his or her own ignorance. You might have been the smartest and most experienced person where you came from, but that isn't necessarily true about where you are going.
The minimum two year's experience required to take the electrical exam simply isn't enough. It take years upon years to adequately learn the field, so electricians half your age will likely understand the field better than you. In other words, leave your ego at the door. Accept advice and help from seasoned electricians. Not only will it help your company avoid costly mistakes, but it will also earn you the admiration and respect required of your employees.
Early to bed, early to rise
A common mistake made by many entering the construction field is not recognizing the importance of availability. Forget about a routine 40- or even 50-hour work week. Call any successful electrical company at 6 a.m., and someone will answer the phone. Most construction crews arrive onsite before the rooster crows. If you live in the hotter regions of the country, it could be even earlier.
Someone has to unlock the doors and turn on the lights, and that person should be you. Seeing the electrical crews off is one of the most important daily activities for the owner, and delegating this responsibility of gathering materials and loading the trucks could result in vast amounts of time being lost due to “extra” runs to the supply house. The materials are more expensive, and the paid time is an absolute waste.
Shake off the specifications
Electricians or field workers don't realize the operational time frame an engineer works under. Some engineering firms have been known to produce entire schools in a matter of weeks from start to finish. This is primarily due to the technological advances in computer-aided design, but that is a subject for another discussion. This type of schedule doesn't leave much room for minimization, and the unavoidable result is an over-designed project. The engineer rarely has time to perform detailed calculations; therefore, an error-proof approach is taken on the contract documents: oversize everything. Legally, this is the most intelligent choice.
As a result, one of the most difficult tasks for an engineer turned contractor is to separate old “better-safe-than-sorry” rules of thumb from what is minimally required. Except on traditionally bid projects, the NEC is the specification. A 1,200A piece of switchgear may be the safest decision in a large warehouse, but if the true load only requires an 800A main, that would be the best choice. Other preferences also become subject of inspection. For example, most owners don't care what name brand wire or device is used as long as it performs to his or her expectations. Although it may be a good idea to use rigid elbows when transitioning from PVC in the slab, it isn't required. In fact, it could waste thousands of dollars on large installations.
The bottom line
The old saying, “A penny saved is a penny earned,” holds true in the world of electrical contracting. If bid correctly, the contract has built-in profit, but that doesn't limit it. Forget the fee-based design style, and embrace the bottom line. Fees based on percentages limit a designer's profit, but not a contractor's. Every step of the construction process is an opportunity to create revenue, if you know how to look for it.
Items ranging from price haggling to labor management could save, and therefore make, a contracting company thousands of dollars. The price in the book isn't what a contractor pays — there is always a lower price to be had. It may only be a $0.10-per-fitting difference, but multiply that by 20,000, and the word “only” disappears. Micromanaging purchases this way may not be popular, but it is necessary.
Attention to labor is as equally important as material prices. When you are price shopping, never forget the delicate balancing act. For every fitting, conduit, or inch of wire, there is an employee installing it. Therefore, always price shop the materials but heed time constraints and project timetables. If the materials are not ordered in a timely fashion, you may be stuck paying employees with nothing to install.
Although learning to generate profits is the ultimate goal, it's equally important to remain true to an honor code. Just remember, no amount of money is worth sacrificing character or moral ethics. In today's ruthless construction market, it's easy to be swept away in back-alley dealings and forget who you are. General contractors learn very quickly whether you are trustworthy or not; therefore, even if you generate huge amounts of cash flow by cutting corners at first, it will cost you in the end.
Also remember that morals and business often clash. The contractor has to address every incident with care, but one such incident is especially difficult for an engineer. Few people understand how easy it is to miss small details during design as well as a fellow engineer does. It may be an honest mistake, but it's the contractor's responsibility to provide what is in the contract documents and nothing more. Although you may recognize the design mistake during the bid phase, you may lose the contract if you start providing items not in the documents during the bid or during construction.
Moye is vice president of Moye Electric Co., Dublin, Ga.