How to Build, Maintain, and Increase Profitability for Your Plumbing Business

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Zaid Rahman
June 7, 2022

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.

Table of Contents

Plumbing Business Profitability: An Outlook on the Industry

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. 

Has COVID-19 Affected the Demand for Plumbing Services?

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:

  • Construction
  • Building maintenance; and
  • Building repair

The Profitability of Your Plumbing Business Is Influenced By Cash Flow

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:

  1. You get paid as soon as possible for your services; and
  2. That your credit card is working for you.

The Flexbase card:

  • Has a 0% interest rate for 60 days
  • Tracks receipts by project
  • Offers credit based on future invoices; and
  • Allows your business to get paid faster

What Is the Average Salary for a Plumbing Business Owner?

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.

Average Salary for a Plumbing Business Owner By State

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

Is It Possible for Your Plumbing Business to Be Profitable?

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:

  1. Use commercial plumbing estimating software to create accurate estimates for jobs.
  2. Increase your online presence so customers have a better chance of finding you.
  3. Take advantage of the housing market and the fact that homeowners are investing in their homes by taking on more home repairs.
  4. Invest in the necessary technology and training for smart plumbing fixtures to meet consumer demand.

4 Steps to Creating a Profitable Plumbing Business

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.

Step 1: Create a Business Plan and Stick to It

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:

  • An executive summary that explains what the business is and who owns and manages it, and who the customer focus is
  • A company summary explaining the who, what, and why of the business
  • The services the business will provide
  • A marketing analysis
  • A business strategy
  • A personnel plan; and
  • A financial plan

Step 2: Develop a Pricing Formula

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.

Base Hourly Rate

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.

Billable Hourly Rate

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

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:

  • The project’s materials
  • Necessary permits
  • Taxes
  • Labor; and
  • Any additional expenses related to the project

Labor Hours

Determining labor hours is simple. Note how many hours you work on a project and multiple that by your base hourly rate.

Total Quote

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.

Step 3: Determine Your Profit Margin and Overhead

Next, determine your overhead and profit margin. 

What is included in overhead?

Costs like:

  • Advertising
  • Maintaining equipment
  • Rent and utilities
  • Insurance
  • Accounting and legal expenses
  • Necessary fees and licenses
  • Property taxes

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.

Step 4: Take the Current Market Into Account

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.

10 Tips for Increasing Your Plumbing Business’s Profitability

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.

#1: Increase Your Cash Flow

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:

  • 0% interest for 60 days
  • Fewer liens and loans
  • 10x the credit limit than traditional credit cards
  • No annual fees
  • More cash on hand; and
  • More profit

#2: Analyze Your Business

Analyzing your business is a vital tool for increasing profitability. Mainly, it helps to:

  • Improve future performance
  • Drive your growth strategy; and
  • Improve decision-making

Ask yourself some questions that help you reflect on your business, like:

  • Which jobs are the most/least profitable?
  • How much time and money do we spend on transportation?
  • How much time do we spend doing admin work?
  • Are we spending more than necessary?
  • Do we need to realign or reallocate any resources?

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.

#3: Step Up Your Marketing Game

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?

  • Create a good website
  • Utilize local SEO strategies
  • Invest in paid advertising
  • Utilize email marketing
  • Market via snail mail
  • Collaborate with other businesses

#4: Focus on Clearing Up Any Outstanding Debt

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.

#5: Create a Budget and Stick to It

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.

#6: Consider Offering a Referral Program

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.

#7: Team Up With Local Businesses

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:

  • Electricians
  • Landscapers; or
  • HVAC companies

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.

#8: Consider Expanding Your Services Offered

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.

#9: Expand Your Service Area

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.

#10: Focus on Retaining High-Performing Employees

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.

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