Benchmarking: Electrical Industry

Sep 17, 2018Construction & Real Estate

It is estimated, over 211,000 electrical companies exist across the nation and over 92% of those have less than 10 employees. Although most are small in size, the combined revenue generated by these companies was over $164 billion dollars in 2017. With the low number of employees, along with the minimal property and equipment required to be successful, the industry has seen an increase of companies entering the market.

Good News: Revenue is expected to grow within the industry at roughly 3.5% annually over the next five years. However, with price-sensitive consumers awarding work, often, to the lowest bid, an electrical company’s growth opportunities continue to be tied to their ability to increase margin on jobs by controlling costs.

Utilizing benchmarks is the easiest way to determine how well your electrical company stacks up against others in the industry and it may play an important role in identifying opportunities for growth. 

KEY INDUSTRY STATISTICS

  • Profit, as a percentage of revenue, for the industry is expected to be approximately 5.2%.  This has increased over the last four years, as the construction market has grown. 
  • Expenses, as a percentage of revenue, include:
    • Purchases at 30.4%, which, beyond materials, includes payments to subcontractors and temporary workers, which are common non-payroll expenses for the industry.
    • Wages at 34.5%, moving forward, the wage percentage is going to be difficult to control, as demand is expected to climb while supply, hopefully, stays constant.  Wage costs have been increasing by 4.5% annually in the last five years and are expected to increase 3.1% annually over the next five years.   
    • Compared to other industries, rent, utilities and depreciation expenses are low at 2.3% and are expected to remain constant. 

The future appears positive for the electrical industry, but as competition continues to grow, it will require companies to adapt and be proactive. An electrical company’s success may be tied to their ability to seize growth opportunities and forge relationships with builders, developers and building owners. 

Questions?

Every electrical company is unique and the above statistics will not apply to all companies. The metrics should be used as a guideline. To bring you innovative solutions, our Construction Group stays on top of industry issues, trends, tools and technologies to ensure we give you the best possible advice. Smith Schafer professionals have serviced the construction industry since 1971. We take great pride in consulting on various industry specific issues, as well as the broader needs of these companies and their owners. 

Statistics and information was provided from the IBISWorld Industry Report 23821, Electricians in the US, December 2017.

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