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How To Start A Plumbing Business

How To Start A Plumbing Business

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How To Start A Plumbing Business

How To Start A Plumbing Business

Scientist and physicist Albert Einstein stated to a magazine that if he were a young man again, he would choose to be a plumber. At the time, plumbing was an industry that was doing well, and Einstein recognized that fact.1 So if Einstein thought it was a smart business opportunity, you must be smart for considering starting one 🙂

Starting a plumbing business provides the opportunity to turn your technical skills and expertise into a profitable enterprise. However, it takes more than just knowing how to snake a drain or solder pipes to get a plumbing service up and running. In this guide, we will provide you with an overview of the plumbing business, outline the steps you need to take to get started, and answer some common questions to help you on your path.

Business Description

Plumbing companies are responsible for installing, repairing, and maintaining pipe systems and fixtures. Plumbing businesses can also offer specialty plumbing services such as pipelaying (installing underground utility pipes) and pipefitting (installing mechanical plumbing systems for heating, cooling, and generating electricity). The business makes money through charging a fee for their services, material costs, and annual maintenance contracts.

Ultimately, all plumbing businesses work with pipe systems; however, within the overall industry category, there are several defined categories of plumbers:

  • Residential plumbers: Residential plumbers are probably the most well-known type. When kitchen sinks leak and toilets are clogged, they are the companies that are called. Residential plumbers work on residential structures, performing various services like unclogging pipes, fixing leaks, replacing hardware, and installing new piping.
  • Commercial plumbers: Commercial plumbers service commercial buildings such as offices, schools, hospitals, or factories. Commercial plumbing requires advanced knowledge or training in commercial facilities and working around industrial equipment.
  • Service and repair plumbers: Service and repair plumbers provide maintenance and repair services for commercial and residential properties. Some tasks that a service and repair plumber would provide include pipe cleaning, unclogging, and fixing water pressure.
  • Water supply plumbers: Water supply plumbers work in residential and commercial settings, installing and maintaining pipes related to water flowing into a building.  
  • Sanitary plumbers: Sanitary plumbers service pipes that connect to bathrooms. These plumbers also work in both commercial and residential buildings.

Related: Best recession proof business ideas

Industry Summary

The plumbing industry is a vital part of modern society, providing essential services to residential, commercial, and industrial clients. With a market size of over $126 billion in the United States alone, the potential for growth and profitability is immense.2

The residential market is the primary target market for many plumbers because of the sheer need for their services. According to Statista, there are over 143 million homes in the U.S.3 Plumbers typically offer a wide range of services to meet the needs of residential customers, including both small and large jobs such as repair and maintenance work and new installation. Plumbers may also offer 24-hour emergency services to address any sudden or unexpected needs that may arise.

Home builders are another great market due to the volume of work. Builders often have plans to build multiple homes in a development, and plumbing businesses that establish a connection with home builders can get long-term, straightforward plumbing projects. Additionally, plumbing businesses that build a good rapport with builders may likely ensure recurring work and referrals. Other lodging projects that need plumbing include multi-family units and custom home building.

Medical buildings are another lucrative market for plumbing as these buildings often use a considerable amount of water and plumbing. Often, clients may pay a fee to have plumbing businesses on retainer for priority service. Further, government buildings, schools, and industrial buildings are additional industries that need reliable, quality plumbers.

Steps To Start a Plumbing Business

Step 1: Get Licensed

One of the first steps you must take before launching your business is to research the licensing requirements. Almost all states require plumbers to obtain a license, which includes completing certain prerequisites such as earning a high school diploma or GED, passing an exam, and completing on-the-job training, usually as an apprentice. Some states have a rigorous process for getting licensed, while others don’t require licensing. Understanding the length of time it may take to become a licensed plumber is important because it affects the timing of the remaining steps.

Also, you will want to brush up on local rules. Your city or county might have specific regulations that may include extra registration steps or plumbing codes you need to follow.

Step 2: Write a Business Plan

After researching the requirements to become a licensed plumber and you know it isn’t going to slow you down, the next step is to write a business plan. This step is hard for a lot of people because they would rather jump in and get to work. However, taking the time to develop a business plan before launching can be the difference between success and failure. Here’s just a couple of reasons why a business plan is so important:

You might know plumbing, but do you know your market? This is where conducting market research comes in. When you include market research in your business plan, you’re digging deep to understand the demand for plumbing services in your area. This research helps you figure out who your competition is, how you should price your services, and what you can offer that’s different or better from everyone else. Are there enough people or businesses in your area that need plumbing services? What are they looking for in a plumber? Answering these questions in your business plan means you’re not just guessing – you’re making informed decisions.

Your business plan also isn’t complete without financial projections. This part is about more than just numbers; it’s about understanding the financial side of your business. How much will it cost to start your plumbing business? What are your expected income and expenses? Financial projections help you estimate your startup costs and calculate whether your business will make the money you want to make. They’re also usually required if you’re planning to seek funding, as lenders will want to see that you have a solid grasp of your business finances.

Related: How to write a business plan

Step 3: Source Funding

When thinking of starting your own plumbing business, one of the first questions that might come to mind is, “Where will I get the money?” It’s a fair question and a significant part of the journey. Here are the most common options for a plumbing business.

Personal savings are the first source of funding to look at. This method of funding is straightforward and doesn’t involve paying interest or accumulating debt.

However, personal savings may not always be enough. That’s where lenders come in. But bear in mind, that lenders typically require a borrower to invest at least 15% of their personal funds towards the total cost of the project. They also look at your credit score and the collateral you can offer. If the bank feels the loan is too risky, they can use a Small Business Administration (SBA) loan guarantee to secure the loan.

Then there are friends and family. Even though these are people you trust, it’s important to put agreements in writing. This helps to avoid any misunderstandings down the line and keeps relationships intact.

For those with smaller funding requirements or when traditional lending options are unavailable, there are microloans. These loans are typically provided by local economic development organizations. An added benefit of microloans is that some organizations offer business training alongside the funding, which can be helpful.

Related: Finding the money to start a business

Step 4: Register the Business

Next, to get your plumbing business off the ground, you need to take care of the legal requirements. The specific requirements may vary depending on your state, but here is a general overview.

Choosing a business structure: When registering a plumbing business, you’ll need to choose a suitable one first. Here are four common options:

  • Sole proprietorship: This structure is the simplest and most common for small businesses. As a sole proprietor, you have complete control over the business and its profits, but you are also personally liable for any debts or legal issues. The advantage of a sole proprietorship lies in its ease of startup and low cost.
  • General partnership: A partnership is formed when two or more individuals decide to start a business together. Each partner contributes capital, shares profits and losses, and has a role in managing the business. Like a sole proprietorship, partners have personal liability for the business’s obligations.
  • Corporation: A corporation is a separate legal entity from its owners. It offers limited liability protection, meaning that the personal assets of shareholders are generally safeguarded. However, setting up and maintaining a corporation can be more complex and costly compared to other structures.
  • Limited Liability Company (LLC): An LLC combines the liability protection advantages of a corporation with the ease of management and flexible taxation of a sole proprietorship or partnership.

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:


IncFile - $0 plus state fees & free registered agent for 1 year!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

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.

Related: Finding a domain name for your business

Plumbing licensing: Depending on your location, you may need to obtain state and local permits and licenses. This often includes a plumbing contractor’s license, which typically requires passing an exam and meeting certain experience requirements.

Business licenses: In addition to registering as a plumber, there will likely be a variety of general business registrations needed before starting your business. These could include a business license, seller’s permit, and Employer Identification Number (EIN).

Related: State guides for general business licensing

Step 5: Set Up Operations

Now that you’ve legally registered your plumbing business, it’s time to take the next step, which is setting up your operations.

The first step is to establish your base of operations. You have two primary options: operating from home or setting up in a commercial shop. A home-based office can be cost-effective and convenient, especially when starting out. A shop outside of your home offers more space, privacy, and storage opportunities. While this option can be more expensive, it may be necessary if you anticipate a high volume of work or have employees.

With a base for your operations decided, it’s time to invest in tools, equipment, and vehicles. As a plumber, your tools are your trade. While some tools are expensive, there are some that you may not use a lot in the beginning, so consider renting those if they are available to rent. Additionally, you’ll need a reliable vehicle to transport yourself, tools, and equipment to job sites. Ensure you have the right insurance to operate the vehicles, as most personal policies won’t cover an accident while a vehicle is being used for commercial purposes.

Next up are the administrative details. Running a business isn’t just about doing the work you love; it also involves managing finances, scheduling jobs, and communicating with clients. This might seem like a lot, but don’t worry. There are plenty of business management software options out there that can streamline these tasks for you. These aren’t required but can make your life easier so you can focus on what you do best – plumbing.

Finally, you’ll need to set up accounts with suppliers in order to purchase equipment, tools, and materials. Some suppliers may also offer discounts if you purchase higher quantities or if you’ve been a loyal customer over time, which will help your bottom line.

Step 6: Prepare to Launch!

As we near the end of our guide for starting a plumbing business, let’s wrap up by addressing some remaining steps that may be needed to ensure a successful launch. While we’ve already covered the core steps, there will be additional tasks that will vary depending on individual needs and circumstances.

Business insurance: A common type of insurance for a plumbing service is General Liability Insurance, which can cover costs related to property damage or bodily injury caused by your services. Workers’ Compensation Insurance is also commonly required by the state if you have employees, helping cover medical expenses and lost wages if an employee gets injured on the job.

Contracts: Having contracts in place can help protect your business. A common plumbing contract is a client service agreement that outlines the terms and conditions of the services you provide.  RocketLawyer and Law Depot have free and inexpensive templates that may be helpful.

Business bank account: Opening a dedicated business bank account allows for better organization and simplifies tax reporting.

Hiring staff: If you plan to hire staff, be sure to understand your legal requirements as an employer.

Pricing strategy: Establishing clear and competitive rates for your plumbing services is essential for profitability. Analyze your costs, consider market standards, and determine your pricing strategy for different types of services.

Marketing strategy: To attract customers to your new business, develop a comprehensive marketing plan for your plumbing business. Consider online advertising, setting up a Google Business Profile, local networking, and creating a brand identity with a logo, and marketing materials. Networking with general contractors and other industry professionals can also help generate referrals and expand your customer base.

Common Questions When Starting A Plumbing Business

How much does it cost to start a plumbing business?

The total cost to start a plumbing business can vary widely, depending on factors like location, scale, and the specific services offered. However, a rough estimate for starting a small to medium-sized plumbing business can range from $30,000 to $50,000.

Vehicle: A reliable vehicle, typically a van or truck, is one of the largest expenses. The cost can range from $15,000 to $30,000 for a new or used vehicle, suitable for carrying equipment and materials.

Tools and equipment: Essential plumbing tools and equipment can cost between $5,000 to $10,000. This includes pipe cutters, wrenches, cameras for pipe inspection, and other specialized tools.

Location: If you choose to rent a commercial space for operations, the initial deposit can vary greatly depending on the location. Deposits typically range from $3,000 to $5,000.

Business registration: The cost of registering your business, which includes filing for an LLC or other business entity, can range from $50 to $500, depending on the state.

Insurance: Initial insurance costs, including general liability, professional liability, and commercial auto insurance, can range from $2,000 to $3,000.

Marketing: Initial marketing costs, such as creating a website, printing business cards, and initial advertising, can range from $1,000 to $5,000.

Additional costs: Other costs can include uniforms, office supplies, and initial inventory of plumbing supplies, which can total around $500 to $1,000.

How profitable is a plumbing business?

Estimating the profit of a plumbing business involves analyzing potential revenue and expenses. Let’s consider some assumptions to provide a clearer picture.

Revenue: Assume the business charges $75 per hour for services.4 If a plumber works on average 30 hours per week, the weekly revenue would be $2,250 (30 hours x $75). Over a month, assuming four weeks of work, the revenue would be $9,000 (4 weeks x $2,250).

Expenses: Monthly expenses can vary, but let’s consider some common costs:
– Vehicle expenses (fuel, maintenance): $500
– Tools and equipment upkeep: $300
– Insurance: $200
– Marketing: $250
– Supplies and miscellaneous: $300
– Labor costs (if hiring employees): Assuming one employee paid $20 per hour for 30 hours a week, that’s $2,400 monthly.

This brings total monthly expenses to approximately $3,950 ($500 + $300 + $200 + $250 + + $300 + $2,400).

Profit: Subtracting expenses from revenue, the monthly profit would be $4,050 ($9,000 – $3,950). Annually, this translates to a profit of around $60,600 ($5,050 x 12 months).

What skills are needed to run a plumbing business?

In order to run a plumbing company, you’ll need a variety of skills to be successful.

An understanding of plumbing: An understanding of plumbing will go a long way in protecting the business from overspending and customer dissatisfaction. In addition, understanding plumbing and its terminology help to assess whether hired technicians and plumbers are knowledgeable.

Additionally, understanding plumbing will help evaluate valuable, cost-effective projects that grow the business’s revenue.

Sales, networking, and marketing: Growing a plumbing business requires an ability to sell services in a competitive market. When a handful of local plumbing businesses compete in one area, what sets your business apart? Your ability to make connections, maintain healthy business relationships, advertise in the correct markets, and convert sales will go a long way in pushing the business forward.

Organization and management: People management skills, such as hiring, training, dispute resolution, and team development, are significant in running a plumbing business. This takes attention to detail, sharp organization skills, and effective management. Fortunately, many tasks, such as HR, accounting, and schedule management, can be delegated.

Nevertheless, it helps to have management and organization skills to get the business off the ground initially.

Sources

  1. Institute for Advanced Study ↩︎
  2. IBISWorld ↩︎
  3. Statista ↩︎
  4. Homeguide ↩︎

How To Start A Plumbing Business

How To Start A Plumbing Business

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