How to Start a Septic Tank Business
Septic tanks can be a headache for homeowners but a critical amenity in order to get rid of wastewater and sewage. Septic tanks should be professionally inspected every year to keep bigger problems from arising.
If you’ve ever worked in the septic tank business, you know that service is always in demand, so why not start your own septic tank business and be your own boss?
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.
According to IBIS World, the market size of the Septic, Drain & Sewer Cleaning Services industry is $3.6 billion as of 2021. For the last 5 years, the industry has grown 1.9% per year. The business is not generally affected by economic fluctuations since it is a necessary service.
Septic tanks are needed where there is no municipal sewer system, so the areas where they are installed are generally rural. Septic tanks eventually exceed their life span and have to be removed and replaced, and they will always need service. Because people will always live in rural areas and build new homes in rural areas, the need for septic tank installation and service will always exist.
The target market for a septic tank business is anyone who has a septic tank or is building a home and needs a septic tank installed.
Another potential market is restaurants for clearing grease traps.
Skills, Experience, and Education Useful in Running a Septic Tank Business
There are several specific skills that you will need to open a septic tank business.
- 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 installations and repairs.
- Business knowledge and experience. You will need to have at least some basic knowledge of marketing, finance/accounting, and human resources.
- Customer service. You’ll need to be able to build rapport with your customers so that you retain them as customers and gain repeat business and referrals.
Checklist for Starting a Septic Tank Business
If you’re thinking about starting a septic tank business, it’s important to do your research first. Here is a checklist to help you get started.
Step 1: Write a Business Plan
After coming up with the idea, the next step in starting your septic business should be to write a business plan. 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, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.
Not only will a bank require you to have 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. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect septic service name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.
Step 3: Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a septic tank business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
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!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select your Location
The choice of location is absolutely critical, preferably where you have to have many potential customers and little competition within a short drive. If there are a lot of competitors in your area, you will have a rough road trying to break into the market.
Since fuel and vehicle maintenance costs can be costly, a location close to your customers will help minimize transportation costs.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
Knowledge of local, state, and Environmental Protection Agency regulations regarding treating and disposing of sanitary wastewater is important. Also a Commercial Driver’s License (CDL) will be needed to legally drive a septic truck.
There are also some general business registrations to research. A few of these could include a local business license, sales tax permit, and Employer Identification Number if you plan to have employees.
Related: Common business licenses, permits, and registrations by state
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a pumping business is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
A septic tank business will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a septic tank business include social media marketing and online advertising. Developing a website can be a significant expense, but it can also give your septic tank business greater visibility online. Direct mail to homeowners will also be an effective marketing technique.
Related: Low-cost ideas to market a new business
Every business is going to need a logo. Make a professional logo in no time with the free logo makers from BrandCrowd and Canva.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a septic tank business. A few of these include:
– General liability insurance can help protect you from third-party claims of bodily injury and property damage.
– Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.
– Property and casualty insurance protects you if your equipment is damaged.
The cost to insure a septic business will vary depending on several factors. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.
Step 10: Hire Employees
You will likely need employees to help run your septic tank business. They need to be reliable and have the right skills.
In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your septic tank business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
How much does it cost to start a septic tank business?
Here are some of the typical costs you will face when you start a septic tank cleaning service.
– Business cards, logo, brochures, flyers, and postcards for marketing $200 – $300
– Business website setup $100 –$200 for a basic, do it yourself website, $1,000 – $2,000 for a professional site
– Installation and service equipment $20,000 +
– Tank inventory $30,000
– Pump truck $20,000 +
– If operating out of a shop, expect the mortgage, lease or rent to be $1,000 – $4,000 per month depending on the size of the facility
– Insurance $600 – $1,000
How much can a septic tank business owner make?
Your profit potential will depend heavily on your location and the competition in your area. According to HomeAdvisor, the average cost for septic tank pumping ranges from $286 to $534, with a national average of $403. Prices to install a new septic system are about $4,000.
An expense many people overlook is the cost to dump the waste at disposal locations. In some areas, you can pay $100 or more per load, which can eat into profit margins.
Are there grants to start a septic tank business?
It’s extremely rare to find a grant to start a septic tank business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.
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?