Starting a low voltage business, part 1: should you, and what to expect

Sooner or later, most experienced technicians ask themselves the same question. They have spent years pulling cable, terminating panels, and solving problems in the field. They have watched their employer bid the work, and they have seen what the company charges for their labor. At some point the thought arrives: I could do this myself.

Some can. Many successful low-voltage contractors began exactly this way, as technicians who decided to bet on themselves. The answer is not universal. Anyone considering it deserves an honest picture before they file paperwork or buy a van. This series walks through the practical steps of starting a low-voltage business, including business structure, licensing, insurance, bonding, estimating, and getting in front of customers. This first post covers the question that comes before all of that: is it the right move, and what are the first few years actually like?

The fundamentals series covers how someone enters the trade. This series picks up later, when the question is owning the work rather than working for the shop that bids it.

Being a great technician is not the same as running a business

The skills that make an excellent technician are necessary, but they are not sufficient. A business owner in this trade is responsible for far more than the quality of the installation:

• Sales and business development: finding customers, building relationships, and earning the chance to bid
• Estimating: counting devices, calculating labor, pricing material, and producing proposals accurate enough to win work without losing money on it
• Project management: scheduling, coordinating with other trades, managing submittals, and handling change orders
• Purchasing: establishing accounts with distributors and manufacturers and managing material costs
• Administration: invoicing, collections, payroll, taxes, insurance, licensing, and compliance paperwork
• Leadership: hiring, training, and keeping good technicians

In the early years, the owner does nearly all of it. Days are often spent in the field and nights on estimates, invoices, and paperwork. Technicians who have held lead, service, or management roles, and who have had exposure to estimating, purchasing, or project management, have a significant advantage. Those who have only installed will need to learn the rest quickly.

Counting devices, sizing copper and PoE runs, and checking pathway fill are the same numbers that show up in an estimate. Those live on the calculators page.

The first two to three years are a grind

This point deserves directness, because it is where many new businesses fail. The first two to three years are long, demanding, and frequently discouraging. It can feel as though every problem solved reveals another obstacle behind it. Several of the most common are predictable:

• Cash flow. Commercial construction rarely pays quickly. Payment terms of 30 to 90 days are common, many contracts include pay-when-paid clauses, and general contractors typically withhold retainage, often 5 to 10 percent of each invoice, until the end of the project. Meanwhile, the contractor must pay for material, labor, and insurance up front. A profitable job can still leave a new business short of cash for months.
• Supplier credit. Distributors extend credit terms based on business history and financial strength. A new company may be limited to small credit lines, or required to pay up front, until it establishes a track record.
• Manufacturer access. Many access control, video, and nurse call manufacturers sell only through authorized dealers. Becoming a dealer can require training, minimum purchase commitments, and in some cases a business history the new company does not yet have.
• Insurance and bonding costs. Premiums for a new business with no loss history are often higher, and bonding capacity is limited until the company has financial statements and completed projects to show a surety.
• Credibility. The largest obstacle is often the simplest. Customers and general contractors want to know a company has done this before. A new business has to find ways to prove itself before it has a portfolio.

None of these obstacles is permanent, and every established contractor worked through them. They do, however, require patience, persistence, and enough financial reserves to survive the lean periods while the business builds its reputation.

Why general contractors may not look at a new shop yet

Many technicians expect that once the business is registered, they can begin bidding the same projects their former employer bid. In practice, many general contractors will not consider a new subcontractor until it meets their prequalification requirements. Those requirements vary, but commonly include:

• Years in business, often a minimum of two or three
• Insurance meeting specified minimums for general liability, automobile, workers' compensation, and umbrella coverage, with the general contractor named as an additional insured
• An experience modification rate (EMR), the workers' compensation rating that reflects a company's safety record. A new company has no rating history, and some general contractors will not accept a subcontractor without one.
• Bonding capacity, particularly for public and larger private projects
• Financial statements, sometimes reviewed or audited
• A written safety program and, in some cases, documented safety training for employees
• Proper licensing for the work and the jurisdiction
• References and a list of completed projects of similar size and scope

Many general contractors also manage prequalification through online platforms, where a subcontractor submits this information once and it is reviewed before the company is added to a bid list. A new business can register on these platforms early, but approval often depends on meeting the thresholds above.

The result is a frustrating cycle: the company cannot get on the bid list without experience, and it cannot get the experience without being on the bid list. Breaking that cycle is one of the central challenges of the early years.

Ways to build a foundation

The path through those early years usually begins with work that does not depend on a general contractor's prequalification process:

• Direct work for building owners and end users. Small businesses, property managers, schools, churches, and medical offices often hire contractors directly for additions, upgrades, and service work. These relationships are built on trust and responsiveness rather than paperwork, and many of them come from the contacts a technician built during their career.
• Service and maintenance. Service work provides steadier cash flow than project work and builds long-term relationships. A customer who trusts a contractor for service calls often becomes the customer who calls them for the next project.
• Subcontracting to established low-voltage contractors. Larger contractors regularly need additional labor or specialized help. This work builds references and a project history while the business matures.
• Smaller general contractors. Not every general contractor has the same requirements. Smaller and local firms are often more willing to work with a new subcontractor who is responsive, properly insured, and priced fairly.
• Small business and ownership certifications. Depending on the owner and the location, certifications such as small, disadvantaged, veteran-owned, or woman-owned business designations can open doors on public projects and with companies that have supplier diversity goals.

Each completed job adds a reference, a line on the project list, and a little more credibility. Over time, those pieces add up to the history that general contractors, sureties, distributors, and manufacturers are looking for.

Is it the right move?

There is no single profile of a successful low-voltage business owner, but the ones who make it through the early years tend to share a few traits. They are determined, and they do not treat the first rejection or the first slow month as a verdict. They have financial reserves, or a plan to manage cash flow, that allows them to survive the gap between doing work and getting paid. They are willing to learn the business side of the trade as seriously as they learned the technical side. And they have a network of customers, contractors, and colleagues who already know the quality of their work.

If that describes the reader, the path is difficult but achievable. If it does not yet, there is no shame in building those skills and reserves first. Many of the most successful owners spent years preparing before they made the leap.

What comes next in this series

The rest of this series covers the practical steps of starting the company: business structure and naming, registration and licensing, a presence online and in the community, a working number for startup costs, insurance and bonding, safety programs, suppliers and credit, banking and bookkeeping, a prequalification package, and what makes the company worth selling.

Estimating and project management, and the administrative work that follows, are the next series. Those posts are not published yet.

Planning and device counts are numbers. Those live on the calculators. Office takeoff, proposal files, and Bluebeam chests are a later storefront. The rest of this series is on the business setup page.

Related on this site

• Starting a low voltage business, part 2: business structure, naming, and branding
• Getting started, part 5: certifications and your first job in low voltage
• The many faces of low voltage, part 4: an overview of the trade