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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. Time and again, plumbing businesses have proven to be profitable and steady enterprises, assisting people and businesses with their plumbing and water flow needs.

Starting a plumbing business requires hard work and an ability to juggle schedules, teams, and budgets. Therefore, a new plumbing business will require an investment of time. However, with consistency, the revenue will build, trust will be gained with clients, and in time, the plumbing business will run as smoothly as an unclogged pipe.

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).

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.

Industry Summary

Buildings with running water may need the assistance of a plumbing business to help when there is a leak or other plumbing issue. Fortunately for consumers, there are over 130,000 plumbing businesses in the US. According to IBISWorld, in the past five years alone, the plumbing industry has grown by approximately 3.2% per year and has generated $134.1 billion in revenue in 2022.

Industry Trends

Although plumbing businesses have seen consistent growth, some challenges may impede a new business’s ability to grow. For instance, plumbing businesses generate a considerable income from installations on new construction. However, with a decrease in new single-unit house starts, plumbing businesses may face revenue challenges.

Competition is also a hurdle for plumbing businesses—especially new ones. Decreased demand and increased growth drive up the competition, making it hard for new companies to break into the workforce and turn a profit. 

However, despite these challenges, plumbing businesses are still expected to see overall growth, even while house starts are down and competition is up. One of the key factors in growth is effective marketing and knowing where to find solid work.

Target Market

Money spent in the correct markets is well-spent and will often return to the business. The three key markets for plumbing businesses include homeowners, lodging (i.e., home builders), and medical buildings.

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 82 million single-family homes in the U.S. 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. Many plumbers 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.

Checklist for Starting a Plumbing Business

There are a few key things you need to do in order to start your own plumbing business. This checklist will help make sure you have all your bases covered before taking the plunge.

Step 1: Get Certified

Almost all states have plumber licensing requirements for plumbers, but the requirements vary from state to state. In general, most states require having a high school diploma or GED, passing an exam or certification program, and completing a certain amount of on-the-job training as an apprentice before obtaining a plumbing license.

Step 2: Write a Business Plan

A business plan will help you figure out how to start and run your plumbing business. It should include things like your target market, competitors, pricing strategy, and marketing plan.

Not only will a bank require you to have one, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related: How to write a business plan

Step 3: Name the Business

Your business name is important for marketing and branding purposes. Choose a name that is easily remembered and reflects the professional image you want to project.

Related: Tips on naming a business

Step 4: Form a Business Entity

When you’re starting a plumbing business, you’ll need to choose a business structure, such as an LLC or sole proprietorship. This will determine things like how you file taxes and how much personal liability you have if something goes wrong.

A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures 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 plumbing 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 that 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 5: Select Your Location

You’ll need to choose a location for your plumbing business. This can be a home office, a commercial space, or even a mobile van. Just make sure you have enough room to safely store materials and equipment, and that your location is easily accessible to customers to minimize on travel costs.

Step 6: Apply for Business Licenses and Permits

In addition to the state certification, which legally allows an individual to provide plumbing services, there will likely be additional licenses and permits needed before starting the business.

Requirements vary by location, however, a few of these may include a local contractor’s permit, business license, and sales tax permit.

Related: Common business licenses, permits, and registrations by state

Step 7: Find Financing

Depending on the scope of your business and the services provided, a plumbing business can be started out inexpensively with only a van and basic tools.

If funding is needed, there are a few options to consider, such as taking out a bank loan or obtaining investment from friends and family.

Banks are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.

Related: Finding the money to start a business

Step 8: 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 9: Get your Marketing Plan in Place

Plumbing businesses provide an essential service for everyone from homeowners to large corporations. However, running a successful plumbing business requires more than just being a qualified plumber. It also requires effective marketing. Here are some tips for creating a marketing strategy for your plumbing business:

Start by creating a strong brand. Your brand should communicate what makes your business unique and why customers should choose you over the competition.

Make sure your website is professional and easy to navigate. Potential customers should be able to quickly find information about your services and prices.
Use social media like Facebook to reach out to potential customers and build relationships. Regular updates and engaging content will help your local search engine optimization (SEO) to attract new followers and turn them into loyal customers.

Get involved in your local community. Sponsoring community events or partnering with other local businesses can help raise awareness of your business and generate goodwill.

Always provide excellent customer service. This includes being prompt, courteous, and providing fair pricing for your services. Remember, happy customers are likely to recommend your business to others. Over the long term, this is the best marketing.

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 10: Get Business Insurance

When it comes to running a business, there are a lot of things to consider – one of which is insurance. Plumbers, in particular, need to make sure they are properly insured in case of any accidents or damage that might occur while on the job. Some of the most important insurance policies for plumbers to have include general liability and workers’ compensation insurance.

General liability insurance protects plumbers in case they are sued for any injuries or damages that occur as a result of their work.

Workers’ compensation insurance, on the other hand, is often required for businesses with employees and covers medical expenses and lost wages if an employee is injured while on the job.

Related: Types of insurance your business may need

11. Hire Employees

While many plumbing businesses are operated with only the owner performing the work, employees can help grow the business and take on larger jobs.

There are a few key things to keep in mind when hiring employees for a plumbing business. First, it is important to find someone who is skilled and experienced in the field. Plumbing is a complex trade that requires a high level of technical knowledge, so it is essential to find someone who knows what they are doing. Second, it is important to find someone who is reliable and trustworthy. Finally, it is important to find someone who is polite and professional. Plumbing businesses deal directly with customers, so it is essential to hire someone who will represent the company well.

One way to find potential employees is to contact local vocational schools or community colleges that offer plumbing programs. Many of these schools have job placement programs that can help connect you with qualified candidates. Another option is to post ads on job websites or in local newspapers. Be sure to include information about the skills and experience you are looking for in an employee. You may also want to interview each candidate to get a better sense of their qualifications. With a little effort, you can find the perfect employees for your plumbing business.

Related: Hiring your first employee

Step 12: Set up an Accounting System

Setting up an accounting system for your plumbing business is critical to your business’s long-term success. A good system will help with estimating jobs, sending customers the bill, knowing who still owes you money, and staying on top of taxes.

Related: Setting up the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How much does it cost to start a plumbing business?

Start-up costs vary depending on the size of the business. A plumbing business can start small without a brick-and-mortar office and grow as the revenue grows. Some initial costs to expect include:

Business formation expenses include setting up a business entity, applying for licenses and permits, and business insurance. These costs vary widely in each state, so check the state’s licensing and business formation websites to determine the costs.

Equipment costs are another initial expense as the plumbing business will need a vehicle(s) and tools to begin providing services. A used van, truck, or work car is an investment but is often more cost-effective than a brand-new one. A used van can run from $14,000 – $30,000. Tools can also be purchased used to save money.

Basic plumbing tool kits commonly start as low as $50 and increase to several thousands of dollars depending on the number of tools, the brand, and whether it is a specialty item.

Marketing costs include advertising, website costs, and networking costs. Advertising costs quickly add up but are an essential expense for growth. For instance, the average cost-per-click Google ad is $1 – $2. A common rule for small businesses is to spend between 5 – 10% of revenue on advertising. Many sites offer free or low-cost services to DIY your website, however, a professionally built website for a small business can run between $2,000 – $9,000.

Employee costs include wages and outsourcing work. According to the U.S. Bureau of Labor Statistics, the median pay for a plumber is close to $60,000 per year or $28.79 per hour.

Other employees or outsourced costs may include freelance or contracted HR personnel, accountants, social media managers, and marketing managers.

How profitable is a plumbing business?

One way to figure the potential income from a plumbing business is to calculate the number of hours that could be billed.

Plumbers typically charge customers between $45 – $200 per hour for labor, so at a minimum, if a sole operator could work 40 hours a week, 50 week a year and is charging $45 per hour to start, they would earn $90,000 per year. This could be higher as it doesn’t include the markup on any supplies used on the job.

Further, a plumbing business with employees, such as plumbing technicians, will begin earning income from the employees. For instance, if the business has plumbing technicians working for $30 an hour while charging the customers $45 per hour of labor, the business earns $15 for every hour the technicians work. Some of those costs will go to business expenses, but the income increases with more employees or a higher margin.

Are there grants to start a plumbing business?

It’s extremely rare to find a grant to start a plumbing 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 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.
A keen 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.

Final thoughts

With a little bit of elbow grease and an investment of time, a new plumbing business can be successful. Plumbing businesses have consistently performed well over the years. And as long as new buildings continue to be constructed, pipes continue to leak, and flushed objects continue to cause clogs, buildings will always need plumbing assistance. 

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