How to start a plumbing business in 10 steps
Looking for a business opportunity that doesn’t run hot and cold? That’s growing at an average of 4% annually, with nearly half of licensed workers nearing retirement age?
Maybe starting a plumbing business is the opportunity for you. Ask yourself these 5 important questions before you start your entrepreneurial journey.
Owning any business can be a wild ride. Don’t be part of the 50% of small businesses that fail in their first 5 years. Get your share of leaky faucet repairs by following these steps for a successful plumbing business that gets nothing but great returns.
1) Choose what services you’ll offer
“Yay! New pipes!” said no plumbing customer ever. It’s true. Plumbing is something people pay for when they have to, never because they want to. That means that many plumbing businesses often market three specific features their customers care about: price, quality, and speed.
This is where your plumbing niche comes in. If you are an expert, the quality you bring to your plumbing work can help differentiate your business. After all, most plumbers present themselves as quality workers, but not everyone can boast the highest customer ratings for slab leak detection in town.
Your authority grows trust with potential customers. It also helps focus your marketing toward ideal clients. Start your plumbing business by thoughtfully considering your niche and gathering master endorsements offered in your state that apply to your expertise.
Some typical plumbing niches include:
- Emergency, after-hours plumbing
- Slab leak detection
- Trenchless sewer repair
- Backflow testing and repair
- New construction
- Water filtration
- Water heater installation
- Drain cleaning
- Fixture installations
After having a hard look at your skills and desires, take a look at your local market. What is already offered? Who will your competitors be?
Analyze the market by looking at:
- Market share
- Strengths and weaknesses
- Customer reviews
- Marketing strategy
A good overall viewpoint can help you discover business opportunities. For example, you might invest around $10,000 in a drain camera and pipe finder knowing most other plumbing services do not have one, then form partnerships with other plumbing companies to come out and camera or track lines, or get referred to their customers for camera work.
2) Uncover your unique selling position (USP)
Becoming an expert on your local market will help you recognize unique features you can offer to build a business advantage.
List your features and services one by one, and then try expressing them in terms of the benefits for your customer demographic.
What features does my business offer? Are you the only camera tracking service around? The highest quality? The best customer service? What guarantees or special products do you offer?
How do these features benefit the customer? For each feature, write out the benefit to customers. Maybe you offer smoke testing in an area where that is not the norm. It’s inexpensive, saves time and money, and helps customers feel confident about leaks.
Here’s another example of developing a successful USP for a plumbing business: One plumbing company decided to focus on making their customers (largely women homeowners who were alone when they let in the plumber) feel safe. They brainstormed ways to express this benefit, and they found their referrals tripled. Ultimately, their USP became “safety and security,” and the company reinforced their USP by changing the smoke alarm batteries during their annual boiler tests.
3) Name your plumbing business
Let your creativity take over and brainstorm some names for your new plumbing business. The name should unite your USP and niche and be easy for customers to remember. It should also be easy to find online. You can keep it simple by using your name, like “Foster’s Plumbing” or witty like “Flush Gordon’s.”
If your creativity is as blocked as your customers’ drains, use a business name generator. Talk to family, friends, and customers. See what is memorable as well as easy to spell and find online. Check the domain name and social media accounts to make sure they’re available.
Finally, do a trademark search to see if a similar business has already staked a claim to your name.
4) Get your paperwork in order
You’ll want to consider whether you’ll be the primary plumber in your business or if you’ll hire an employee with a plumbing license to do the work. Get started on the route toward becoming a journeyman or a master plumber since these licenses may be required in your state to start a plumbing business.
Requirements differ by state about how much experience you’ll need to work independently with a contractor's license or a registered plumber’s license. You may also consider an electrical trainee card if you want to work with pumps and irrigation systems. Annual costs to renew licenses average $300.
In most states, you’ll also apply for a business license from the state or the city in which your business is based. You’ll register your business name with the secretary of state, county, or city.
When registering your business, you’ll have to consider your business structure, from a sole proprietorship (easiest) to a partnership, corporation, or limited liability company (LLC). An LLC has advantages but is more difficult to register. It protects the owner’s personal assets from claims against the business. An LLC also lets owners choose taxation structures so you can decide what’s best for your business.
Next, you’ll have to apply for an Employer Identification Number (EIN) from the federal government. This tax identification number will help your customers see your business as trustworthy. It will also let you open bank accounts and lines of credit in the name of your business. You’ll pay taxes using your EIN, which functions as a Social Security Number for a business.
5) Insure your business
After taking care of registration and licensing, you’ll most likely be required to protect your fledgling business with small business insurance. If you own a plumbing business, start reading about common types of plumbing business insurance coverage. It’s part of small business insurance coverages that you’ll need to run your business safely.
Here are some of the coverages that you could use in your plumbing business:
- Business Owner’s Policy (BOP): This coverage bundles three essential coverages-- general liability, business property, and business interruption. These coverages can also be purchased separately, and additional coverages, like equipment breakdown coverage, can be added to the package.
- General liability insurance: Almost all states require general liability insurance to do business in your state. It covers your business in the case of injury or property damage claims.
- Workers’ compensation insurance: If you hire employees, you’ll need workers’ compensation insurance, which can help alleviate the costs of worker injury, covering medical bills, lost wages, and rehabilitation. It’s easy to calculate your premiums.
- Property insurance: Property insurance can include coverage for both your business location and the personal property inside. Many electrical businesses start with an independent worker and a truck, but others may need a building for housing their fleet or responding to business calls.
- Hired and non-owned auto insurance: Personal auto insurance will not cover auto use for business. If you don’t own your vehicles, this type of commercial auto insurance can keep your fleet in service.
- Business interruption: This coverage can supplement lost income if your business needs to cease operations for any reason temporarily.
6) Create a business plan
A business plan is like a plumbing diagram for your business strategy. It shows the route to your success and how elements like marketing and cash flow contribute to an overall healthy growth plan. A business plan can help convince partners, plumbers, and lenders to support your business.
Your plan should contain these sections:
- Executive Summary: Can you describe your business, the management team, and the customer focus?
- Company Summary: What are your goals? What services will you provide?
- Market Analysis: What is your market segment? What can you provide that is not already available?
- Strategy: What are your sales strategy and budget?
- Personnel Plan: How will you hire plumbers and a management team?
- Financial Plan: What are your financial projections, including projected profit and loss? What are your fixed costs, margins, and expenses? What will cash flow look like?
Your goal is to have researched how much capital is realistic to start and grow your business. It should include working capital, vehicle and equipment costs, marketing, and business expenses.
The financial plan section is necessary if you plan on applying for loans to start your plumbing business. It requires you to research how many jobs you will book each day along with the average prices and profit per job, showing that your business can surpass the “break-even” point and begin making a profit.
Include pricing and profit
A business plan will show how much you expect to make in your plumbing business. In general, plumbing business owners make upwards of $80,000 per year. A master plumber earning $40 an hour and billing 8 hours a day will earn $100,000 per year, though the cost of basic supplies and time spent administering the business will lessen this profit.
Ultimately, each hired plumber can earn a plumbing business an additional $25,000 to $50,000 per year. The more your plumbing business grows and accommodates new plumbers and trucks, the more you can expect to earn.
How much you expect to earn will also differ by the prices you can charge in your area for services. Typical plumbing contractor prices for a small job run $150 to $350 using flat-rate pricing, where your plumbing company will estimate the work needed and quote the customer a final price.
Average industry prices for typical residential consumers you can use in your business plan are:
- Emergency after-hours surcharge: $85 per hour
- Installing a bathtub: $2,750
- Replacing a faucet: $500
- Dishwasher repair: $450 or less
- Replacing a gas line: $1,450
- Installing water system drainage: $3,300
- Replacing a holding tank: $1,700
- Installing a water heater: $1,000
- Toilet installation: $615
- Unclogging a sink: $300
- Unclogging a toilet: $350
- Main water line installation: $3,750
- Installing garbage disposal: $325
- Repairing a septic tank: $750 to $3,000
7) Figure out your financial plan
Plumbing businesses can enjoy flush margins, but they can quickly go down the drain with poor financial management.
How much should you spend to get started? The answer can vary widely. Some would-be entrepreneurs trade in their personal vehicles for a van and have accumulated tools over time. They have gotten started with free marketing and registration costs of under $1,000. Without existing tools or vehicles, you can expect to spend over $10,000 to $60,000 or more.
Costs involved in starting your plumbing business can include:
- Van. Outfitting a van can be done over time, with many plumbers choosing to start with an affordable used van starting around $3,000. You can also put a down payment on a vehicle, allowing you to get started for less. Don’t forget the cost of gas and insurance! If you’re considering a pre-owned van, consider the business cost of days lost when the van needs servicing.
- Tools. A complete set of starter tools can run upwards of $5,000. What do you already have? Do you need power tools, cameras, or just hand tools? Can you justify the price of renting tools? This will save you money in the short term but costs more over time.
- Registration, licensing, and insurance. For $400 to $1,200, you can register an LLC or S-corp in your state, get licenses like a business license, plumber’s contracting license, and handle your first payments for liability and workers’ compensation insurance.
- Business setup. Business costs vary widely depending on what you already have on hand and can make do without while you’re growing. You can expect to pay $2,000 to $4,000 for a basic website, business cards, ads in the local paper and on Google’s pay-per-click system, accounting software, invoicing software, a CRM, computer, etc.
Paying for all of it can feel like an overflowing drain. But there are multiple ways to finance your new plumbing business. Business loans, grants, investors, loans from friends and family, and self-funding through credit or savings are common ways to finance a new plumbing business.
Small Business Administration loans for plumbing businesses exist to help cover equipment and working capital. You can use them for buying equipment or vehicles to expand your business or refinancing business debt. And there are many kinds of SBA loans, covering expenses from $5,000 to $50,000. Microloans are quick to get and flexible in funding business expenses like tools. The government does not grant SBA loans but partially guarantees them. These loans are designed to allow more small businesses to access financing.
Bank loans can be harder to access than SBA loans, and the guidelines and requirements vary from bank to bank.
Funding some upfront expenses with a 0% introductory credit card with a plan to pay the balance before the interest rate is activated can be one way for a plumber with existing customers to get expensive equipment needed in their business.
Grants are another way to fund your business start-up costs, but they are difficult to find and very specific. Check out BusinessUSA and Grants.gov, and be sure to keep an eye out for veterans’, minority, or women-owned business grants if you meet the criteria.
8) Hire employees
If you’re anticipating starting your business with employees, read about how to hire your first employee, then consider some plumbing specific questions:
- What kinds of plumbers will you consider?
- How will you train them?
- How can your employees help grow your customer base?
It’s important to consider the types of employees you’ll want to hire. Experienced master plumbers can instill trust in your new business. However, hiring newcomers means you can train your workers in your approach.
Full-time licensed plumbers earn an average salary of $55,000 or around $30 an hour (don’t forget taxes, benefits, and expenses).
Consider who will answer phones, handle questions and quotes, book appointments, invoice customers, market the business, and handle bookkeeping while plumbers are working on plumbing jobs. Are these tasks you can outsource?
9) Spread the word
Reaching new customers is the first step to growing a predictable client base. According to Plumber Success International, a group that teaches plumbers how to scale their businesses, there are five affordable areas many plumbing businesses overlook:
- Asking for reviews. Develop a script for asking existing customers for referrals and reviews. Incentivization plans that offer services or discounts for referrals can also coax existing customers into recommending your business.
- Developing a membership plan. Enrolling customers in service plans is not only an upselling strategy. It gives businesses a chance to check in, take care of small problems, do annual inspections that benefit the customers, and build rapport.
- Follow-up calls. Unsold calls are a part of service businesses. Following up with customers on work that wasn’t sold allows plumbing businesses to make sure the customer resolved their issue during their slow times, potentially generating new income. It lets plumbing businesses offer a discount and build goodwill.
- Networking groups. Join a networking group to help fuel word of mouth and uncover partners in the community.
- Partnerships with contractors. You can team up with real estate offices to offer a valuable service teaching agents about residential plumbing. Because plumbers are local, growing allegiances within the local tradesman community can also uncover new leads. Try introducing yourself to joiners, builders, and electricians for subcontracting and referral trades.
Ignoring your online presence and local visibility is like money down the drain. Consider some more ideas to get seen:
- Website. This is one area where a newcomer can look as professional as the industry leaders. Your website can also help potential customers find you if you use search engine optimization (SEO) best practices.
- Van advertising. Add painting, vehicle wraps, and logos for added visibility, and you can drive from job to job while marketing your business. Highlight your USP.
- Search results. Google My Business local results for your locale will deliver high returns. Aim for the sustainable visibility of becoming a featured result on the local search Google map.
- Paid advertising. Many plumbing businesses pay for leads through pay-per-click advertising on Google, Angie’s List, or Facebook. Search engine advertising can work, but experts recommend keeping lead costs under your profit margin for an average single job. You’ll need to pay attention to how many jobs your company closes to determine your ideal numbers. Remember that plumbing leads average $35 to $100, with the industry average about $80. Do you close enough leads to make search engine marketing worth your while?
- Social media. You may not think that toilet is Instagram-worthy, but plumbers who detail what they do in a visual format build camaraderie with clients and lead to more inbound calls. Need ideas? While you’re on jobs, ask clients if you can feature before and after shots of the work you’ve done. Do video walkthroughs of simple jobs that homeowners can do themselves. Talk about what they should look for in a plumber.
10) Check out these tips
Plumbers and business owners have a lot in common. You’ll have to figure out problems with the right knowledge and training—and then find water-tight solutions. Sometimes, you may have to jackhammer a floor or two. It might make you question how you’ll stay sane as an entrepreneur.
When you’re ready to learn more about running a plumbing business, check out these plumbing industry titans:
- The Plumbing-Heating-Cooling Contractor’s Association: Talk with other contractors, access a library of information, and chat about plumbing codes at the annual conference, where you’ll find a wealth of wisdom from other entrepreneurs. The safety training online content is even free to members.
- Plumber Magazine: This is where plumbing geeks can battle it out over cold vs. hot water jetting and other trade controversies. This magazine-format portal has more than reading. It includes webinars, interviews, and classifieds, too.
- Plumbing Contractors of America: PCA offers fountains of information for new plumbing business owners, much of it available to non-members. You can even listen to their plumbing podcast.
If your plumbing business is ready to expand beyond a pipe dream, grab a business insurance quote from Huckleberry. It’s free, easy, and 100% online.