Service, new construction, or commercial: choosing your electrical work mix

Ask two electrical contractors doing the same revenue why one is comfortable and the other is broke, and the answer is usually work mix. The three main lines of electrical work (service/repair, new construction, and commercial/tenant-improvement) look similar from the outside (electricians, trucks, material, permits) but run on completely different economics. Get the mix right and the business funds itself and pays you well. Drift into the wrong mix (usually builder work that fills the schedule but starves the bank account) and you can be busy, growing, and quietly going under. This guide lays out how each line actually behaves and how to shift your mix on purpose instead of by accident.

The three lines, honestly

Service and repair: high margin, steady, overhead-heavy

Service is the highest-margin electrical work you can do, and the most controllable. You set the price (flat-rate, built from your real burdened costs; see pricing electrical service work), the jobs are short, material intensity is low, and you usually get paid the day you finish. The customer needs you now, which means you compete on trust and response, not on being the cheapest bid.

The catch is that service is overhead-heavy per dollar of revenue. Small tickets mean a lot of windshield time, dispatching, phone-answering, and truck-stocking to generate each invoice. It lives or dies on dispatch and scheduling and applied-hour efficiency: how much of the hours you pay for actually land on a billable job. Run it loose and the margin evaporates into drive time and supply-house runs. Run it tight and it is the best business in the trade.

New construction: volume, thin margins, and someone else’s schedule

New construction (tract housing, spec homes, subdivision work, ground-up multifamily) is the opposite animal. You bid against everyone, so margins are the thinnest in the trade and a small estimating error erases the job. You work on the general contractor’s schedule, not your own: rough-in when they say, trim when they say, and eat the cost when the framer or the inspector puts you behind.

The real killer is cash flow, not margin. New construction typically runs net-30 to net-60 or worse (often pay-when-paid), with retainage/holdback (commonly 5-10% in the US; often a statutory ~10% holdback in most Canadian provinces) held until the whole project closes out, which can be months after your work is done and inspected. Meanwhile you’ve fronted material and run payroll every week since rough-in. Winning a big builder contract feels like a milestone; for the first quarter it is a cash event running hard in the wrong direction. The upside is volume and predictability: a builder relationship can keep crews loaded for a year, which is exactly why shops get seduced into it.

Commercial / tenant improvement: the middle, built on relationships

Commercial and TI work sits in between and varies enormously. Negotiated service, small commercial, and repeat TI for a property manager or a favored GC can carry solid middle-of-the-pack margins with budgeted customers who plan for the work. Hard-bid competitive commercial, on the other hand, can be as thin as new construction, with the same net-30/60 terms, retainage, and sometimes prevailing-wage or bonding requirements stacked on top.

What distinguishes commercial is that the good version is a relationship sale, not a lead-form sale. One property manager or GC can mean years of work across a portfolio. It rewards reliability and a phone that gets answered, and it can be a genuinely strong line, but only the negotiated, repeat version. Chasing every public hard-bid is just low-margin new construction wearing a suit.

How mix drives everything downstream

Your work mix isn’t one decision. It silently sets four others:

• Margin. A blended gross margin lies to you. A shop that is 70% service can post a fat blended number; a shop that is 70% new construction is running on fumes even at high revenue. Calculate margin by line, not blended. This is the single most important habit in know your numbers.
• Cash flow. Service pays same-day; new construction pays in 60-90+ days with retainage on top. The more builder work in your mix, the more working capital you must carry just to make payroll while you wait. Push past your reserve and growth itself becomes the thing that bankrupts you, the classic “profitable on paper, out of cash” failure. If builder work is or is becoming a real share of your revenue, line up a working-capital cushion before you need it (see financing your electrical business).
• Staffing. The lines want different people. Service needs seasoned, customer-facing troubleshooters who can walk into chaos, diagnose, price, and close. New construction rewards fast, repeatable production hands running the same rough-in over and over, often more apprentice-heavy. You can’t freely swap a crew from one to the other, and a shop that is half-and-half often needs two effective crews.
• Estimating. Service is priced from a flat-rate book you build once and refine. New construction and hard-bid commercial live on takeoff-and-bid estimating, where discipline is everything. You’re forecasting material, labor units, and schedule risk months out. Weak estimating on service costs you a little; weak estimating on a builder job costs you the whole job and then some.

The drift into low-margin builder work

Here is how good shops end up in the wrong mix without ever deciding to. A builder offers a big, steady block of work: a whole subdivision, a run of spec homes. It fills the schedule, it feels like security, and it’s easy to say yes. So you take it, and to service it you hire, buy vans, and rack up material. Now that builder is 40% of your revenue, and:

• You can’t quit without laying people off, so the builder knows they own your pricing.
• The net-60 and retainage on that volume swallows your cash, so you start using deposits and the next job’s money to pay for the last one.
• Your best service techs get pulled onto builder crews to hit the GC’s schedule, so your high-margin service line withers from neglect: missed calls, slow response, lost repeat customers.
• One market softening, one builder slow-paying or going under, and a huge slice of revenue vanishes overnight, far faster than service churn.

The trap isn’t that new construction is bad. It’s that it’s seductive at the exact moment it’s most dangerous: it grows revenue and headcount while shrinking margin and cash, and it does it quietly. Volume is not the same as profit. Watch two numbers like a hawk: margin by line and percentage of revenue from any single builder or GC. If one customer is creeping past ~25-30% of revenue, that’s concentration risk, not a win.

Shifting your mix on purpose

You don’t have to abandon a line. You have to choose the balance and steer toward it deliberately:

• Know your current mix and its real margins. Split last year’s revenue and gross margin into service, new construction, and commercial/TI. Most owners are shocked how much of the profit comes from the service slice and how little the builder volume actually contributed after cash-flow cost.
• Set a target mix and a floor margin. Decide what share you want from each line, and set a minimum acceptable margin for bid work. Then walk away from bids below it. The discipline to lose a low-margin job is what protects the mix.
• Grow service as your margin-and-cash anchor. It funds everything else. Protect response time, keep your best troubleshooters on it, and don’t strip it to chase builder volume.
• Move commercial toward negotiated and repeat, away from hard bid. Cultivate a few property managers and GCs who value reliability over lowest price. That’s the middle-margin, relationship version that’s worth having.
• Right-size new construction to what your cash can carry. Treat it as a deliberate slice sized to your working capital, not an open tap. Pull terms in where you can, price retainage and the cash gap into the bid, and diversify across builders so no single one owns you.
• Rebalance gradually. Shifting mix means retraining or rehiring and rebuilding an estimating approach. Do it over quarters, not weeks, and keep the cash-generating lines healthy while you transition.

Checklist

• Split last year’s revenue and gross margin by line: service, new construction, commercial/TI. Never trust the blended number.
• Know the cash-flow clock on each line: same-day service vs. net-60 + retainage builder work.
• Set a target mix and a floor margin for bid work, and actually walk away from bids below it.
• Track concentration: no single builder/GC past ~25-30% of revenue.
• Size new construction to the working capital you can carry; line up financing before you need it.
• Protect the service line (people, response time) as your margin-and-cash anchor.
• Steer commercial toward negotiated/repeat relationships, away from hard bid.
• Rebalance over quarters, matching staffing and estimating to the mix you’re moving toward.

The bottom line

Service, new construction, and commercial aren’t three flavors of the same business. They’re three businesses with different margins, cash-flow clocks, crews, and estimating. The shops that thrive don’t stumble into a mix; they choose one, anchor it on high-margin service and cash flow, take only as much thin builder volume as their bank account can float, and refuse the low-margin work that quietly hollows out the rest. Busy is easy. Profitable and solvent is a choice you make one bid at a time.

General information for electrical contracting business owners, not financial advice. Margin figures here are directional and vary widely by market, size, and work mix. Calculate your own by line and work with your accountant. Payment terms, retainage, prevailing-wage, and bonding rules differ by state and province (US and Canada); confirm specifics for your jurisdiction.