Electrical Contractors

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 75,400 electrical contractor firms in the US provide electrical installation, repair, and maintenance work. They handle wiring, lighting, networking, fire and safety equipment, and energy management systems, among other tasks. Much of the work is installation and repair of residential electrical wiring. Contractors must buy materials and then install them according to code in homes and other buildings.

Demand Dependent on Construction Activity

Contractors can market new services such as design work during periods of low demand, but new construction ultimately drives the industry.

Liability for Damages

Oftentimes builders or general contractors will try to cut corners, directing ECs to take shortcuts that violate code.

Industry size & Structure

An average electrical contractor has 12 employees and does $2-3 million in annual revenue.

    • Overall, the electrical contractor industry has $173 billion in annual revenue and 1 million employees.
    • Segments include power installation, telecommunications setup, fire and safety systems.
    • 88% of establishments have fewer than 20 employees.
    • About 41% of establishments do less than $500,000 a year in business.
    • Large firms include Emcor Group (CT), Integrated Electrical Services (TX), and Rosendin Electric (CA).
                                Industry Forecast
                                Electrical Contractors Industry Growth
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Feb 13, 2024 - Wage Growth Outpaces Pricing Growth
                                • Wages in the electrical contracting industry rose moderately year-over-year in Q4. Meanwhile, producer prices for nonresidential electrical contractors have been falling since the beginning of 2023, but in Q4, they were up slightly year-over-year. As wage growth rises and producer prices remain mostly flat, electrical contractor margins could be squeezed. In Q4 2023, employment in the electrical contracting industry rose slightly compared to the same period in 2022.
                                • Total nonresidential building construction spending is projected to rise 8% in 2024 over 2023, according to FMI’s first-quarter 2024 North American Engineering and Construction Outlook. At growth of 18%, manufacturing will lead 2024 nonresidential building construction, followed by lodging (+12%), educational (+10%), and healthcare (+8%). Some other segments of the nonresidential building sector face headwinds, including high interest rates, inflation, and tighter lending standards. These pressures and high vacancy rates will reduce office project spending by 2% in 2024. Commercial project spending is forecast to decline by 4% in 2024. High interest rates will also challenge the housing market. Single-family construction spending is forecast to drop 5% in 2024 after falling 14% in 2023. Spending for multifamily is expected to decline 15% in 2024 after projects in development peaked at 1 million units in mid-2023. Home improvement project spending will drop 4% in 2024 from 3% growth in 2023.
                                • Some of the top challenges homebuilders faced in 2023 are expected to ease in 2024, while others may get worse, according to a recent survey for the NAHB/Wells Fargo Housing Market Index (HMI). At 90%, high interest rates was the most-cited challenge builders said they faced in 2023, and 77% expect them to remain an issue in 2024. About 83% of builders ranked inflation as their second-biggest headache in 2023, but only 52% think it will be a problem in 2024. In 2023, 73% of builders said the cost and availability of labor was a significant issue, and 71% believe this problem will persist in 2024. In 2023, 71% of builders said potential buyers believed interest rates and home prices will fall if they postpone buying, but for 2024, 77% of builders think buyers believe they can save by waiting. The cost and availability of developed lots was a problem for 57% of builders in 2023, but 64% of builders think lot shortages will be a major challenge in 2024.
                                • Demand for building design services was flat in December compared to the prior month, according to a January report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI) rose to 45.4 in December from November’s reading of 45.3. Any reading of 50 or more indicates growth in architectural billings. The score for new project inquiries fell to 53.1 in December compared to 56.9 in November, and the index for the value of new design contracts increased to 50.0 from 48.1. The AIA’s Chief Economist, Kermit Baker said, “Billings at firms declined for eight months of the year, and the last four months saw this overall weakness accelerate. Fortunately, project backlogs at firms eased only slightly through the year despite the overall reported softness in billings.”
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