Starting a septic tank business can be a lucrative venture with a constant demand for services. Septic tanks can be a headache for homeowners but a critical amenity in order to get rid of wastewater and sewage. Given the essential nature of these services, a septic tank business can be both profitable and provide an essential service to the community.
This guide will walk you through the process of starting your own septic tank business, providing an in-depth look into the industry, steps to get started, and answers to common questions.
A septic tank business involves the installation, maintenance, cleaning, and pumping of septic tanks, primarily catering to rural households and some suburban areas that aren’t connected to municipal sewer lines. A septic tank business may be a cleaning service company only, or they can handle septic tank installation and removal. The ongoing routine maintenance of a septic tank involves emptying the waste periodically and sometimes cleaning it as well.
The septic tank industry plays a vital role within the waste management sector. With many rural and suburban households relying on septic systems instead of municipal sewer lines, the demand for septic services remains steady. This industry might not be the most glamorous, but it’s necessary and can be profitable if managed correctly.
As houses get built, septic systems are installed. And with the average septic system requiring an inspection or pumping every 3-5 years, recurring business is a given. Moreover, as systems age, the need for repairs and replacements grows, leading to a continuous demand for services.
The Septic, Drain & Sewer Cleaning Services industry generated $6.5 billion in 2022. Over the last 5 years, the industry has grown 7.5% per year. The business is not generally affected by economic fluctuations since it is a necessary service.
There are a number of factors driving growth in the septic tank industry. A few of these include:
- Increasing rural populations: More homes being built in rural locations without municipal sewer access creates demand for septic system installation and maintenance.
- Aging systems: Tanks have a lifespan of around 25-30 years. Many older tanks will need replacement soon.
- Stricter regulations: New government standards for wastewater treatment from septic systems provide business opportunities for qualified contractors.
- Environmental awareness: There is a growing public understanding of the environmental hazards posed by poorly maintained septic tanks.
- New technology: Advanced treatment processes and pumping devices make septic business owners more competitive and valuable to customers.
The target market for a septic tank business primarily includes homeowners, particularly those owning older homes (20 years old or older) and construction companies that build in rural areas. These regions often rely on septic systems as they lack access to municipal sewer lines.
New home builders also represent a significant portion of the target market since newly constructed homes in rural and some suburban areas will require the installation of septic systems.
In addition, businesses within the city and surrounding areas that have septic tanks in need of pumping services can be a potential customer base.
Another potential market is restaurants for clearing grease traps.
Checklist To Start A Septic Tank Business
Diving into the septic tank industry requires more than just technical know-how; it’s about thorough research, strategic planning, and timely execution. From the intricacies of the market to the legalities of business registration, every step is crucial. This checklist is your roadmap to ensuring your septic tank business begins on the right foundation, setting the stage for long-term success.
Step 1: Research the Market
Conducting market research is a critical first step before launching any new business, including a septic tank service company. Taking the time to assess demand helps avoid wasted effort and lost money if the market is too saturated. Here are some tips on researching the market potential:
- Analyze demographics and building permits:– Look for growing rural populations and new construction in areas without sewer access. Check with county/municipal offices for permit data to identify potential customer locations.
- Survey real estate agents: Agents often know where septic systems are located and what issues homeowners experience. Ask about septic replacement needs, maintenance concerns, and contractor recommendations.
- Talk to health departments: They govern septic system codes and maintain public records. Request data on the number, age, and the type of systems in the area to gauge maintenance needs.
- Competitor analysis: Look at the number of existing septic tank businesses in your area. If there are many, it might indicate high demand. However, it also means more competition.
- Search online reviews: Look at what current customers say about existing septic companies. Numerous negative reviews or service complaints can signal customer demand gaps.
- Drive service areas: Scouting rural neighborhoods firsthand gives a sense of potential client concentration and accessibility.
- Interview septic companies outside of your area: Ask about their customer base, changes in the industry, and any tips or lessons learned they would give to someone starting their business.
Conducting research upfront not only evaluates the business opportunity but also generates market awareness and relationships to leverage when launching your septic company. The goal is to determine if enough customer demand exists to sustain and grow the business.
Step 2: Write a Business Plan
After determining that there is still potential for your idea, the next step in starting your septic business should be to write a business plan. Creating a well-thought-out business plan is highly recommended when starting any new company, especially a septic service venture which requires a significant upfront investment.
The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, and more.
Not only will a bank require a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business.
Related: How to write a business plan
Step 3: Source Financing
Starting a septic tank business requires financial resources. While the exact costs can vary based on the size of your operation, the equipment needed, and your location, it’s safe to say you’ll need a significant amount of capital to get started. Here are some common sources of funding for a septic tank business:
Personal savings: Personal savings is often the first source of funding for small businesses. The advantage of using personal savings is that there are no loan payments or interest to worry about. This means more cash flow for your business operations.
Commercial loans: Banks and credit unions often lend to small businesses. They usually require the borrower to invest 15%-25% of their own funds, have a good credit score, and provide collateral. If a lender feels that a loan to a new business is risky, they may require an SBA loan guarantee, covering up to 85% of the loan amount.
Equipment leasing: Leasing allows businesses to use equipment without buying it outright. Essentially, you pay a monthly fee to use the equipment, and at the end of the lease term, you may have the option to purchase it, renew the lease, or return it. The benefit of leasing is that you pay monthly amounts instead of making a large upfront expenditure, which may entail taking on a lot of debt. The downside is that over the long term, leasing might end up costing more than purchasing. Also, you don’t build equity in the equipment during the lease term.
Specialty lenders: Unlike traditional banks, specialty lenders focus on specific industries or types of equipment. For the septic tank business, these lenders deeply understand the industry’s nuances and equipment values. The benefit of a specialty lender vs. a bank is that the specialty lender might be more willing to lend to newer businesses or those with less-than-perfect credit because they understand the industry’s profit potential.
Microloans: If your startup costs are low or if you’re unable to secure a traditional loan, microloans could be a good option. These are small loans that are generally more lenient than banks and are offered by economic development organizations and some nonprofits.
Friends and family: Borrowing from friends and family is another way to fund a new business. The advantage is that they may offer more flexible repayment terms than a bank. However, mixing business and personal relationships can be tricky. Always put agreements in writing to avoid misunderstandings.
Step 4: Register the Business
Starting a septic tank business goes beyond mastering the technical aspects; it’s equally important to ensure you have a firm legal foundation. While specific regulations can vary by state, there are general steps every aspiring septic tank business owner should take:
Choose a business structure:
- Sole proprietorship: The simplest structure, where the business and the owner are the same entity. The advantage is the ease of startup and lower costs. However, personal liability is a major concern, meaning if the business incurs debt or faces legal issues, your personal assets are at risk.
- Partnership: Suitable for businesses with multiple owners. Like a sole proprietorship, it’s relatively simple to set up but comes with shared liability among partners.
- Corporation: This structure is separate from the owners, providing the most protection from personal liability. However, it’s more complex and costly to set up and maintain.
- Limited Liability Company (LLC): A hybrid structure that provides the personal liability protection of a corporation while offering the tax benefits and flexibility of a partnership.
Many septic contractors choose to operate as sole proprietors for the cost and ease of startup or LLCs for the liability protection.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Obtain business licenses and permits: Specific to septic tank businesses, you’ll likely need health department permits and possibly a contractor license. Since your customers will likely be in multiple towns and counties, you may need multiple licenses. Knowledge of local, state, and Environmental Protection Agency regulations regarding treating and disposing sanitary wastewater is important. Also, a Commercial Driver’s License (CDL) will be needed to drive a septic truck legally.
In addition, there are also some general business registrations to research. These could include a local business license, sales tax permit, and Employer Identification Number if you plan to have employees.
Zoning: If leasing a space or using your personal property to store trucks and equipment storage, review any zoning restrictions.
By taking the necessary legal and regulatory steps to establish your septic business, you ensure compliance and the ability to operate safely and effectively. The process may seem too intrusive, but carefully following requirements will pay off in the long run.
Step 5: Purchase Equipment
Acquiring the right equipment is the next but critical step in starting your septic tank business. The right equipment can make your job easier, improve efficiency, and help ensure you provide high-quality services to your customers. Here’s some tips on how to proceed:
Identify your equipment needs: First, identify what equipment you need. Essential tools for a septic tank business typically include septic pumper trucks, mini tanks, metal detectors, flushable septic tank locators, electronic septic tank locators, and plumbing cleanout snakes.
Research suppliers: Before committing to a purchase, dedicate some time to supplier research. Look into the supplier’s history and credibility in the industry. Customer reviews, testimonials, and case studies can provide insights. Also, a robust warranty can save costs down the line. Also, a flexible return policy indicates the supplier’s confidence in their products.
Compare prices and quality: Compare prices, quality, and after-sales service from different suppliers. Check customer reviews and ratings to get an idea of the supplier’s reputation. Check industry trade groups like the National Environmental Health Association or National Onsite Wastewater Recycling Association for equipment discounts and insurer-approved vendors.
Place your order: Once you’ve made your decision, place your order. Ensure you understand the terms and conditions, including delivery times, warranties, and return policies.
Step 6: Create a Marketing Strategy
Now that the business is close to launching, the next step is to get a marketing plan in place. Even with the best service, customers won’t automatically find you. There are a number of strategies that septic tank businesses use, which we will cover below.
Online marketing: As more and more people start their research online, it shouldn’t be much of a surprise that online marketing is popular. This includes having a professional-looking website and leveraging search engine optimization (SEO) to improve your business’s visibility in online search results by using keywords like the name of your service area plus words like “septic pumping” or “septic inspection.” It’s also recommended to maintain an active presence on social media platforms like Facebook, Instagram, LinkedIn, and even TikTok, where you can showcase your services and promote special offers.
Claiming your business online: Another key step is to claim your business on relevant online business directories. This includes Google My Business, Yelp, HomeAdvisor, and Angie’s List. These platforms increase your online visibility and allow customers to leave reviews, which can help build your business’s reputation.
Print marketing: Despite the rise of digital marketing, print marketing materials like brochures, flyers, and direct mail campaigns to rural homeowners introducing your services remain effective for reaching potential customers. They are tangible and have a longer lifespan compared to digital ads.
Referrals and reviews: Positive word-of-mouth referrals and online reviews can significantly boost your business. Encourage satisfied customers to share their experiences, either through verbal referrals or by leaving reviews on your website or online directories.
Vehicle marketing: Don’t overlook investing in visible truck branding so you stand out driving through service areas. Also, make sure your vehicle is clean, as a dirty truck can send the wrong impression.
Networking: Joining local business associations, such as your local Chamber of Commerce, can provide networking opportunities and increase your business’s visibility within the community. Also, networking with local real estate agents, contractors, and plumbers can help generate new clients. As an incentive, offer finder’s fees or discounts.
Step 7: Prepare to Launch!
After laying the groundwork for your septic tank cleaning service, there are a few more steps to ensure you’re fully prepared to commence operations. Each septic tank business will have unique needs, and there’s no one-size-fits-all approach, but here are some common loose ends that may need to be taken care of.
Business insurance: This is not just a wise decision but often a requirement. Given the nature of septic tank operations, you’ll want general liability insurance to protect against potential damages or accidents and auto insurance for the vehicle. Worker’s compensation is also necessary if you have employees.
Bookkeeping: Proper financial record-keeping is essential for tax purposes and to understand your business’s financial health. You might consider using accounting software like Wave Accounting (FREE) or Quickbooks, or hiring a part-time accountant.
Contracts: Develop standard contracts for your services. These should include terms of service, pricing, and liabilities. Industry-specific contracts may involve agreements on regular septic tank maintenance or emergency services.
Banking: Open a business bank account. This will help separate your personal and business finances, making bookkeeping and tax preparation easier.
Hiring: While many septic tank businesses start as owner-operated, as demand grows, you might need to hire technicians. Ensure proper training and certifications are provided.
Grand opening: Plan an event or promotion to announce your business’s opening. Local press releases, community involvement, or special offers can generate initial buzz.
Common Questions When Starting A Septic Tank Business
How much does it cost to start a septic tank business?
Starting a septic tank business requires a significant initial investment, predominantly because of the equipment necessary to operate effectively. While costs can vary widely based on the location, size, and scope of the business, initial expenses typically range from $100,000 to over $200,000, although these figures can vary widely depending on specific circumstances
Equipment: The primary expense is likely to be the cost of equipment, particularly a pump truck, which can range from $50,000 for a used model to over $200,000 for a new one. Other necessary equipment might include hoses, fittings, inspection camera, and safety gear can cost an additional $5,000 to $10,000.
Business registration: Count on at least $2,000 for permits, business filing costs, and professional services.
Insurance: Business insurance is another significant cost. While the exact price will depend on your specific business and location, you can expect to pay at least a few thousand dollars for your initial premium.
Marketing: Initial marketing costs can also add up. This might include the cost of setting up a website, printing flyers or brochures, and running online ads. A budget of $2,000 to $3,000 could cover these initial marketing efforts.
In addition to these startup costs, it’s worth considering having three to six months’ worth of operating expenses on hand to cover any unexpected costs or slow periods. While this amount will depend on your specific business operations, it’s an important factor to consider when calculating your startup costs
How profitable is a septic tank business?
A septic tank business, like any other, has potential profitability tied to various factors such as location, market competition, efficiency, and client base.
Industry statistics suggest that the average septic tank pumping service can cost between $300 to $700 per job, depending on the size of the tank and the complexity of the work. If an average septic tank business performs just three jobs a day at an average price of $500, that’s $1,500 in daily revenue. Monthly, this would be approximately $30,000 in revenue (assuming 20 working days).
Now, let’s consider the expenses. The primary recurring costs for a septic tank business include equipment maintenance, fuel, waste disposal fees, employee wages, marketing, insurance, and office overhead. If these monthly costs sum up to $15,000, the gross profit before taxes would be $16,500 per month.
Therefore, a septic tank business could potentially make a monthly profit of around $16,500 before taxes, provided they maintain steady work and control their expenses. However, it’s crucial to note that these figures can vary based on local market conditions, business scale, and efficiency in operations. Also, initial investments and loan repayments (if any) would affect the net profitability, especially in the early years of the business.
What skills are needed to run a septic tank business?
Running a septic business involves a variety of skills, both technical and interpersonal. Here are some key skills to have:
A knowledge of septic tank service: While any service can be learned, if you want to have your own business, you should have extensive experience doing septic tank installation and repair.
Technical skills: Practical skills such as digging, operating machinery, and using various cleaning products are often necessary.
Honesty and reputation: Being honest and building a good reputation are important for attracting and retaining customer
Business skills: As with any business, skills like finance, human resources, and marketing are important.
Customer service: You’ll need to build rapport with your customers to retain them as customers and gain repeat business and referrals.
What is the NAICS code for a septic tank business?
The NAICS code for a septic tank business is 562991.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?