Advice on Electrical Contracting Business

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February 09, 2023

by a searcher from Georgia Institute of Technology in Atlanta, GA, USA

Hi - I am considering an LOI for an electrical contracting business in the Southeastern US. It's about 80% residential "service work" and 20% commercial "bid work". Doing $2.5M in revs.

Curious if anyone else has engaged with an electrical contractor business recently and what you'd recommend exploring during diligence that is specific to this trade. Also, what are you seeing in terms of valuation multiples versus HVAC, plumbing, etc. Any downside (or upside) opinions on the electrical category beyond EV charging stations?

Thank you!

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Reply by a searcher
from Harvard University in Chicago, IL, USA
Fred - Happy to connect and chat (spent the past few years in the space). Residential, while tough to finance at this stage is where you will see outsized valuations if you can scale the business - and requires less working capital. Everyone's comments are spot on re: licensing, but having the previous owner agree to using theirs, or paying a stipend to someone in the company to use theirs works. At $2.5m revenue, you are pretty sub-scale and will be tough without some general knowledge of the trades. Look if there are any others businesses you could also acquire to get to at least $5/6m so that you can build a team around you and be less dependent on you and/or previous owner. Generators is an interesting market, and one you could drive scale to a few m pretty easily with some mkting. At that size you are also buying the technicians - make sure there are retention hooks in place. Again - hit me up if you want to chat further.
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Reply by a searcher
from University of Florida in Washington, DC, USA
Lots of great comments in this thread. I have done some work in the EV space, so just to flesh out your comment re: upside tied to EV charging stations.

While there is obviously a ton of federal $$ coming for fast chargers, the L2/home charging market should also be very strong, generally tracking EV sales (depending on estimates, something like ~75% of EV purchasers will also buy an L2 charger). While this can be as easy as just running another dryer circuit, if folks panels don't have capacity at the panel this becomes a panel upgrade, which is a pretty nice bit of work. There are some service groups that the auto makers use to help car buyers find installers for L2 chargers (e.g. Qmerit), and also some startups with "smart panels" (e.g. span.io), which could have a nice tie-in to smart home trends. May not move the needle for a $2.5M rev business immediately, but could be a nice secular trend.
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