It’s been five years and your plumbing business isn’t turning a big enough profit, if any at all.
You have the passion, knowledge, and skills for the job, but you’re beginning to wonder if the investment in your business will ever pay off. When will you begin to see a profit?
Creating a profitable plumbing business is no easy task. You must spend money (and time) to make money. But it’s not impossible.
Read on to learn how to build, maintain, and increase profitability for your plumbing business.
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Plumbing is a business that is essential to the economy — so much so that it was deemed an “essential industry” during the COVID-19 pandemic and plumbers were able to continue operating and providing their services to customers.
However, the pandemic has hurt the plumbing industry and has affected the outlook of plumbing.
The Bureau of Labor Statistics (BLS) predicts that the plumbing industry will grow by 12% from 2014 to 2024. However, BLS could’ve never predicted the pandemic and the challenges business would face because of its effects.
Although COVID-19 made it difficult for plumbers to receive their supplies, plumbing services were considered “essential” throughout the pandemic. Other “essential” industries help drive the demand for plumbing, too, including:
The plumbing industry faces a similar problem as the construction industry does: cash flow. It can take weeks — sometimes even months — to be paid for your work in these industries. When you don’t have the money in the bank, your profitability is influenced.
For example:
Your plumbing business is tasked to handle $10,000 worth of work in one week and is paid 50% ($5,000) upfront. It takes an additional 45 days to receive the remaining $5,000 for your work.
On paper, you made $10,000 for the job. But your bank account only has $5,000 to show for it.
This affects how profitable your plumbing industry appears and is a big reason why industries like plumbing need a financial system that works for them, like Flexbase.
Flexbase helps to ensure:
In 2020, the average salary for a plumbing business owner was $56,330. The best-paid 25% made $73,370 while the lowest 25% made $42,330. The salary outlook for the plumbing industry has steadily increased throughout the last decade and is expected to continue to rise.
The average salary for a plumbing business owner varies by state:
Alabama - $53,767
Alaska - $64,325
Arizona - $56,732
Arkansas - $52,921
California - $64, 095
Colorado - $57, 210
Connecticut - $62, 087
Delaware - $60, 251
Florida - $54,513
Georgia - $55,517
Hawaii - $60,205
Idaho - $54,158
Illinois - $58,931
Indiana - $56,062
Iowa - $54,914
Kansas - $54,455
Kentucky - $53,996
Louisiana - $54,972
Maine - $55,316
Maryland - $59,164
Massachusetts - $62,431
Michigan - $57,428
Minnesota - $58,701
Mississippi - $50,009
Missouri - $54,780
Montana - $52,107
Nebraska - $52,710
Nevada - $58,918
New Hampshire - $58,343
New Jersey - $63,551
New Mexico - $52,538
New York - $61,677
North Carolina - $54,837
North Dakota - $53,975
Ohio - $56,125
Oklahoma - $54,032
Oregon - $57,251
Pennsylvania - $57,366
Rhode Island - $60,585
South Carolina - $53,802
South Dakota - $49,204
Tennessee - $52,222
Texas - $56,445
Utah - $54,459
Vermont - $55,354
Virginia - $57,136
Washington - $61,390
West Virginia - $50,928
Wisconsin - $56,619
Wyoming - $51,158
Yes! But it’s up to you as an owner to pay close attention to your spending and revenue to be profitable.
Creating a profitable plumbing business is challenging. You must be making more than you are spending to turn a profit, which could be difficult to do.
Here are a few tips plumbing businesses can use to increase business and bring in revenue:
Creating a profitable plumbing business takes work, but it’s not impossible. Learn about and stick to these four steps to likely turn a worthwhile plumbing business profit.
As with most things, to be successful, there should be a plan. If you want your plumbing business to be profitable, creating a business plan that is realistic enough for you to stick to is a great start.
Your business plan might include things like:
Deciding on pricing is a big step in determining plumbing business profitability. It’s not enough to randomly choose a price to charge and see how it plays out as you begin working for paying customers.
Instead, plumbing business owners should determine how and what they want to charge for.
Will you be charging customers a flat rate? Will you charge for time and materials per job? You’ll need a solid pricing formula to help determine your price and remain competitive in the industry.
Your base hourly rate is the standard hourly wage you will be paid. To determine this, divide the dollar amount you want to earn each week by the billable hours you plan to work.
Your billable hours are the amount of time spent working on a plumbing project that can be charged to the client.
First, calculate your profit margin and overhead expenses. Take this number and add it to your base hourly rate to determine your billable hourly rate.
Bidding is used by big companies (plumbing, construction, government agencies) to win a project. To determine your bidding prices, you must gather the pricing for:
Determining labor hours is simple. Note how many hours you work on a project and multiple that by your base hourly rate.
To determine a final total quote, you’ll need your bidding total and labor hours.
Simply add together those two numbers for a total quote.
Next, determine your overhead and profit margin.
What is included in overhead?
Costs like:
First, add up these expenses. Take your total and add a percentage – like 30%, for example – for your profit margin. So, if you want to earn $40 per hour, the formula looks like this:
$40 x 30% = $12
Now you can double-check if that percentage covers your expenses and creates a profit. If not, go back to work on your formula by adding another percentage —like 25%, for example.
So, you’re adding the total from the formula above to your hourly rate. Then you’re multiplying that total by 25%. The formulas look like this:
$40 x 30% = $12
$12 + $40 = $52
$52 x 25% = $13
$13 + $52 = $65
When it’s all said and done, this formula determines you’ll charge $65 per hour to your clients to ensure you have enough to cover overhead expenses while simultaneously generating profits.
Lastly, you want to consider your current market and your competitors.
Do your competitors have similar pricing or are they charging more or less? Is there a demand for plumbing services in your area?
The answers to these questions can help you determine your pricing and play a role in your plumbing business profit.
You’ve successfully created a profitable plumbing business, but now it’s time to ramp it up. Are you hoping to increase your plumbing business’s profitability? Consider these 10 tips.
Poor cash flow can negatively affect your plumbing business in more ways than just financially, but working to increase cash flow can help with profitability.
If you find yourself in the position to source funding from external institutions, extra costs are involved, affecting your profit and cash flow. Not only do bank fees add up, but interest also begins to accumulate if you fall outside of their credit terms.
How can you avoid this?
The Flexbase card is built for businesses just like yours. Get pre-approved and begin enjoying things like:
Analyzing your business is a vital tool for increasing profitability. Mainly, it helps to:
Ask yourself some questions that help you reflect on your business, like:
Not all of these answers may be positive, but that’s okay. Acknowledging where there are problems allows you to make adjustments and increase your profitability.
Maybe you need to change up your employees.
You might need to reconsider your market.
You may need to focus more on the “big” jobs and let the ones that aren’t as cost-effective go.
Marketing sounds like a place you’ll be spending money. You’re not wrong.
Although marketing is an upfront investment, doing marketing well can help increase your profit in the long run.
How can you effectively market your plumbing business?
Debt comes with interest and interest payments can quickly add up and eat away at your profits.
If you can focus on paying off outstanding debts, you can allocate the money you are spending on interest payments elsewhere.
Budgeting can be difficult, but paying attention to your spending can go a long way in increasing your plumbing business’s profit. Take note of where you are overspending, what might be frivolous spending, and if there is cash leaking anywhere.
With this information, create a realistic and manageable budget for your business and do your best to stick to it.
Word-of-mouth referrals go a long way in the plumbing business, so your current clients can be a great asset for reaching a new audience. Consider offering a referral program, like a discount for services in exchange for new customer referrals.
Although you’ll lose some money on the services where discounts are applied, you’ll make up for it with the work for new clients paying in full.
Clients aren’t the only source of good referrals. By teaming up with local businesses that have the same types of clients as you — homeowners — you can increase your clientele.
Consider teaming up with local businesses like:
If they’re working on a home and the client also needs a plumber, they’ll recommend your business.
More work equals more income equals greater profitability.
Do you currently offer a small pot of services? If you offered more services, could you bring in more work?
Maybe your plumbing business focuses primarily on residential jobs. By adjusting things within your business, maybe you could also accommodate commercial jobs and bring in more money.
Take a look at your current services and see if there are any opportunities to expand for more work.
Conduct market research to see if surrounding areas have an unmet demand or low competition for plumbing services that you offer. If so, consider the costs of transportation and time to these areas and decide if expanding your service area would be beneficial and profitable to your business.
Retaining current employees is more cost-effective than hiring new employees. Each time new employees are hired, they must go through a training period which costs your business money. How so?
A new employee's level of skills and knowledge will determine how much training they need. The longer they’re in training, the fewer jobs your business is completing while multiple men are working one job site for training.
How can your plumbing business retain high-performing employees and limit the number of new hires?
Consider implementing performance incentives to keep your team motivated and encouraged to get their work done to the best of their ability. And remember, because referrals are a top source for new clients, providing high-quality service is key for securing future jobs.
