Guides
Where an electrical contractor business actually makes money: margins and break-even
Service calls, panel upgrades, and new build-outs earn different margins, and that mix of jobs decides whether an electrical contractor covers overhead.
What to take away
- A residential service call and a new-build rough-in carry different gross margins, and that mix decides whether an electrical contractor covers overhead.
- Gross margin is revenue minus direct costlabor with burden, material, permits, and the truck time to get there.
- Typical gross margin runs about 45 to 60 percent on residential service, 35 to 45 percent on panel work, and 15 to 25 percent on general contractor build-outs.
- Break-even is monthly overhead divided by gross margin percentage, not a sales figure you guess at.
- A price list that loses money per job cannot be fixed by selling more of those jobs.
- Confirm licensing, permit and payroll treatment with the authority that sets it: your provincial regulator, the CRA or the IRS, and your own accountant.
This is general business information for electrical contractors. It is not code, licensing, permit, tax or safety advice. Requirements vary by province, state and municipality, so confirm them with the authority having jurisdiction and a licensed electrician.
Where the money is made
Three kinds of work, three different margins. A residential service call bills a diagnostic minimum plus parts, and the truck and the journeyperson are paid whether the call takes twenty minutes or two hours. Residential service usually carries the fattest gross margin in the mix, typically 45 to 60 percent.
Margins by Work Type
Residential service
- Pricing
- Diagnostic plus parts
- Gross margin
- 45-60 percent
- Net profit
- Not stated
- Margin risk
- Truck time
Panel upgrade
- Pricing
- Fixed quote
- Gross margin
- 35-45 percent
- Net profit
- Not stated
- Margin risk
- Permit fee
Commercial build-out
- Pricing
- Contract progress billing
- Gross margin
- 15-25 percent
- Net profit
- 3-5 percent
- Margin risk
- Holdback
A panel upgrade is quoted fixed, and the margin depends on how the estimate handled permit fees and inspection re-visits. Typical gross margin is 35 to 45 percent. One permit line missed, or a second trip for inspection, can knock a 40 percent job down to 30 percent.
A commercial or new-build contract runs months, holds back a percentage under construction holdback rules, and pays on a schedule you do not control. Gross margin typically lands at 15 to 25 percent, and net profit on this work often falls between 3 and 5 percent of revenue.
None of those is automatically the profitable one. What matters is gross margin per job and how many of each you can run with the crew you have.
The arithmetic, in your own numbers
Write these down with your figures, not industry averages.
Break-even Revenue by Margin
- 30000Monthly overhead
- 100000Break-even at 30 percent margin
- 150000Break-even at 20 percent margin
- 75000Break-even at 40 percent margin
- Direct labor.Journeyperson wage plus burden: CPP or Social Security, EI or payroll taxes, WCB or workers' compensation, vacation pay, and the van. A wage of W with burden rate B gives a true hourly cost of W x (1 + B). A $38 an hour wage with a 30 percent burden costs $49.40 an hour.
- Material and permits.What you paid, plus the permit fee, plus the inspection re-visit if the first one fails. A residential panel permit typically runs $75 to $250, so check the fee with your local authority before you quote.
- Gross margin per job.Revenue minus those direct costs. Divide by revenue for the percentage. A $420 service call with $70 in parts and two hours at $49.40 leaves $251.20, or about 60 percent.
- Monthly overhead.Rent, insurance, software and office wages. Vehicle payments and the owner's own draw sit here too.
- Break-even.Overhead divided by gross margin percentage. That is the revenue the month has to hit before anyone earns anything.
If overhead is $30,000 and blended gross margin is 30 percent, break-even revenue is $100,000. At 20 percent it is $150,000; at 40 percent it is $75,000. Same overhead, same crew, fifty thousand dollars more work to stand still.
In job terms, $100,000 a month at a $250 average gross margin per call takes 400 service calls. That is about 18 calls a working day.
What each kind of work returns
| Work type | How it is priced | Typical gross margin | What erodes the margin |
|---|---|---|---|
| Residential service call | Diagnostic minimum plus parts, hourly after | 45 to 60 percent | Windshield time between calls, unpaid callbacks |
| Panel upgrade or service change | Fixed quote | 35 to 45 percent | Permit fee, inspection re-visit, unexpected knob-and-tube |
| EV charger installation | Fixed quote per unit | 30 to 45 percent | Panel capacity, trenching, load calculation surprises |
| Homeowner renovation rough-in | Fixed quote per room | 25 to 40 percent | Scope creep, drywall coordination, waiting on other trades |
| General contractor build-out | Contract, progress billing | 15 to 25 percent | Holdback, retainage, 60 to 90 day payment |
| Summer cooling and emergency call | Hourly with after-hours rate | 40 to 55 percent | Overtime burden, parts runs, no schedule control |
The general contractor rows look largest on the invoice and often carry the thinnest margin. Holdback sits with the owner for the statutory period, and your crew is paid long before it comes back. Price that wait into the contract or decline the work.
Where the price list goes wrong
A price list that loses money per job is common in service work. The flat rate for a receptacle replacement was set years ago and never moved with wage or material cost. Every one of those jobs is a small loss, and volume makes it worse, not better.
Job costing software carries the numbers. Jobber and Housecall Pro list small-shop plans from roughly $50 to $200 a month per company, ServiceTitan quotes enterprise pricing by technician count, and QuickBooks Online starts in the $30s a month at list.
Trimble Accubid and McCormick Systems price electrical estimates from labor-unit databases instead of a guess. Flat-rate guides such as the Callahan Roach books set the counter price, and they still need updating when wage or material cost moves.
Review the list against actual job cost, not against what the competitor down the road charges. That is the work behind setting profitable electrical contractor prices, and it needs a named owner and a review date.
Records, claims and wages
The IRS recordkeeping guide sets out what a recordkeeping system has to show, and the documents behind purchases, payroll and assets have to be kept.
The FTC advertising guide requires advertised claims to be truthful and supported, which applies to a "lowest price" line on a van.
The BLS wage tables give wage estimates by occupation and metro area; the national median for electricians has recently sat in the low-to-mid $60,000s a year.
Union rates come from IBEW local agreements and NECA chapter wage scales, which in many markets run $40 to $60 an hour on the check before burden.
Material cost comes from distributor invoices. Graybar, WESCO and Grainger sell to contractors on account, and the invoice is the number that goes into job costing, not the list price.
Payroll, GST or HST and holdback treatment sit with the CRA or the IRS and your accountant.
Common questions
What margin should an electrical contractor aim for?
There is no universal number, and anyone quoting one is guessing. Work out your own break-even from overhead and blended gross margin, then decide what the work has to carry to leave a profit after it.
A common rule of thumb puts net profit at 3 to 8 percent of revenue. Your accountant can check the arithmetic and that range against your filed statements.
Why does a big contract sometimes earn less than service work?
Holdback, retainage and slow payment. The invoice is large, but the money arrives months later while wages and material are paid now. A $200,000 build-out at 15 percent gross margin leaves $30,000 before overhead, and it arrives in stages. Price the wait, or leave the work to someone with the cash to carry it.
When should the price list be reviewed?
When wage, material or insurance cost moves, and at least once a year. Compare the list against actual job cost rather than a competitor's rate. If a job type loses money at the current price, raising volume will not fix it.
Does permit and inspection cost belong in the quote?
Yes, as a named line. Permit fees and inspection re-visits are real costs, and burying them in labor hides which jobs actually pay. Confirm current fees and requirements with your local authority having jurisdiction.
