5 Steps to a Plumbing Business Plan for Increased Growth and Net Profit
Operating your plumbing business without a business plan is like sailing a ship across the ocean without any instruments or even a simple compass. There’s a chance the ship may reach its desired destination; however, it’s not likely.
For more than 20 years, CertainPath has successfully guided thousands of contractors to enhanced sales and profitability. Read on to learn about the different components of a plumbing business plan, strategies for writing a comprehensive business plan, and resources to help you make sure you have everything you need to get started and to reach your desired destination at the end of a fiscal year.
What is a plumbing business plan?
A business plan should outline everything that must be done to achieve your desired goals for the year. It should consist of five core components:
- Marketing plan
- Manpower plan
- Training plan
- Priority list
If you can successfully outline these five items, you will know precisely what you must accomplish every day, every week, every month, and every quarter to have an exceptional year. Breaking down big goals into attainable benchmarks makes managing your operation considerably easier.
What you need to know before writing a plumbing business plan
There are three things you must do before constructing your plumbing business plan:
Define your vision statement, mission statement, and core values.
You can’t determine where you’re going until you define who you are. The very best plumbing companies—those that hit their revenue and profit goals, have an exceptional culture, and possess a sterling reputation in their communities—have clearly defined vision statements, mission statements, and core values. While each of these could be its own blog post, we’ll summarize them here.
Your vision statement should explain what drives your company every day.
Your mission statement should explain your daily purpose, including how you serve your market.
These are the bedrock principles that guide your organization’s conduct and its relationship with its clients, partners, and shareholders.
Your core values will shape your vision, and your mission will help you achieve your vision.
State your revenue and profit goals
Too many plumbing business owners simply operate day by day without ever truly considering where their company is going. As you construct your business plan, it is imperative that you clearly state your sales and profit goals. It’s our experience at CertainPath that 20% topline annual growth is a reasonable number, and you should aim to reach a 15% net profit.
MUST READ: If you are not achieving 15% net profit right now, stop planning for aggressive sales growth. There’s an expression that holds true: More money, more problems. If your operation is struggling to make money, it’s only going to become worse if you try to add more customers, more employees, and more trucks. Dedicate the next year to finding your operational inefficiencies and craft a plan to solve them. Once you’re profitable, then you can work on growing sales.
Make planning a priority.
We get it—no one likes planning. As a plumbing business owner, you’re a do-er, and you want to be in the field, helping your techs and talking with customers. However, as you are the leader of your company, your decisions help your team to feed their families and pay their mortgages.
Be intentional in creating your plumbing business plan. Set aside a minimum of two to three days to complete it and try to carve out time without interruptions. You may even want to check in to a hotel or lock yourself in a room. Include your key management team in this planning process. If they are involved in creating the plan, it is now “our” plan and not just yours.
Now, let’s dive into what you’ll want to accomplish during those two to three days of planning.
Five steps to writing a plumbing business plan
Writing a business plan takes focus and work, but the time and effort you put into each of these five steps will pay off in the end in the form of more sales and higher profit margin.
1. Build your budget.
Your budget identifies what parts of the business make and lose money. If your plumbing business does residential service, commercial service, and residential new construction, each of those departments should have its own budget. If not, there’s no way to know if one is making or losing money. Over the last two decades, we at CertainPath have found countless contractors who swore their new construction division was killing it, only to find once we separated their financials that it really was killing them. It may have generated big revenue, but it was doing so at a huge loss for the company.
Assuming you’ve been properly departmentalized for a while, you will ideally have three years of budgets to review to properly forecast your new fiscal year. Let’s say you want to increase your residential service sales by $1 million 3next year. Based upon your past knowledge, you know each truck produces roughly $1,500 in revenue every day, and there are 260 working days in a year. Thus, each truck generates roughly $390,000 in sales annually. So, to increase revenue by $1 million next year, you will need three more trucks on the road, assuming you’re priced properly, and your margins are correct.
When you’re priced properly, you can finally make a real profit that fuels your business’ growth and allows you to pay your people the very best wages in your market. CertainPath has created a formula that can tell you exactly what you should be charging for every single service in your plumbing business. Talk to an advisor to find out more!
2. Determine your marketing budget and plan.
Your marketing plan will be dramatically impacted by your marketing budget. How much you spend on marketing should be dictated by your projected annual revenue.
Start by defining how much you want to make, then budget about ten percent of that for marketing. For example, if you’re hoping to have a $4 million residential plumbing business, budget $400,000 for marketing. That’s your loose constraint.
Next, break down your revenue goal into the number of calls it will take to achieve it. CertainPath members 17 have proprietary, key performance indicators (KPIs) available to them that will ensure they’re on target to hit their financial goals. Two of those KPIs are average invoice and technician closing percentage. Based on how many jobs your team took last year, how much they sold, and the average revenue generated by each ticket, you can determine how many additional calls you must generate to hit your revenue target. How you spend your budget depends on your company and market size.
If it sounds confusing, we have a team of experienced business coaches to walk you through the math. Get in touch with CertainPath to learn more.
3. Construct your manpower plan.
To grow your plumbing business revenue significantly, you need to add more service trucks. Now, you must put plumbers in those trucks! How do you do that? It begins with a manpower plan.
Your first step is to construct an organizational chart. Even if you’re currently a three-person company, you must have one. Every job function in your company—from GM to CCR to Plumber to Service Manager and beyond—should have a box. While you may only be three people, your org chart can still have seven or more boxes.
At CertainPath, we offer customizable organizational charts for our plumbing members to adopt and utilize. Get in touch to find out more!
Let’s assume your goal is to add three trucks. You will need to create three new boxes in your org chart for the three plumbers you must hire. Include a “goal date” in each box for when you want to have those positions filled.
To determine your “goal date” hiring your new plumbers, note when your busy season usually hits. If you’ve been properly tracking your call counts, this should be easy to figure out—it’s the time of year when you struggle to keep up with demand. We recommend hiring seasoned technicians at least three to six months before business spikes, so they can be properly trained.
By the way, more plumbers also mean more support staff. The last thing you want is to hire and train great plumbers only to watch them leave because they feel like they’re not being properly supported in the office.
At CertainPath, we offer our members a successfully structured program for onboarding “green” employees—those with no experience—into your business. We also provide metrics that tell you how when it’s time to hire a Service Manager and an additional Customer Call Representative (CCR) based upon the numbers of people you have in the field. Find out more!
4. Review your training plan.
After improper pricing, the most common reason that plumbing businesses fail is a lack of training. You should have processes for onboarding, technical training, communication training, and performance management for your plumbers, and you should also have training available for your CCRs.
You should sketch out your employee training plan for an entire year. Schedule days in your calendar to have your plumbers come in for technical training and communication training. Make time for monthly ride-alongs to ensure your techs are executing the training you’re providing. Also, make time for monthly one-on-ones with each plumber. This is time for you as the business owner, to talk with your plumbers about how you can help them become more successful. You’ll be surprised at how your plumber retention will increase with that simple, monthly meeting.
At CertainPath, we have defined tools for each that our members can easily download, customize, and utilize in their company. In addition, we offer countless in-person and online trainings hosted by our award-winning trainers, such as:
- Service Essentials
- Plumbers Advanced
- The Fundamentals of Drain Cleaning
- Telephone Essentials
- Dispatching for Profits
- Developing Winning Trainers
- Developing Effective Managers
- … and more.
5. Write a priority list.
Your budget, marketing plan and manpower plan are all based on simple math: for you to achieve a certain amount of revenue and profit, you must have a certain number of calls run by a certain number of people.
However, there’s another part of your plumbing business plan that is not necessarily driven by numbers: your priority list. This is a list of critical initiatives that you want to implement in your business—changes or additions that will improve your plumbing business, making it easier for your team to hit those revenue and profit goals year after year.
For example, perhaps you’re thinking about hiring a Service Manager or Call Center Manager for your growing business. For those new positions to be successful, you want to provide them with checklists and standard operating procedures (SOPs), so you should include those on your priority list with a due date. That’s just one example of a task that should be on your priority list.
Hold a meeting with any senior leaders or managers in your company and do a SWOT—strengths, weaknesses, opportunities, threats—analysis. Ask each team member to write down their own lists of these that they see in the business. Once you compile that information, you will quickly know what needs to be improved and add those items to your priority list. Review your priority list quarterly with the same team to see what you’ve accomplished, hold one another accountable, and look for new tasks to add to it.
CertainPath provides our members with customizable priorities list to use as starting point. Contact us to find out more!
Frequently asked questions
What should be included in a plumbing business plan?
There are many things you can include in your plumbing business plan, but at a bare minimum, you must absolutely have a well-constructed budget, marketing plan, manpower plan, training plan, and priority list. All those plans, CertainPath offers both templates, training, and one-on-one coaching on how to correctly build. Before you go to work building your plan, we urge you to take time to write down a clearly defined vision statement, mission statement, and core values. Those will serve as the foundation of your company that will help you and future managers make critical decisions in your business.
What is the best way to advertise my plumbing business?
The best way to advertise your plumbing business depends on the size of your organization and where you’re located. First and foremost, you need to determine what your budget is. At CertainPath, we recommend spending roughly 10% of your projected revenue on marketing. If you’re a smaller plumbing company, as much as you focus on sales, you must equally focus on getting 5-star reviews. We can show you how to pleasantly ask a homeowner for one on every call. You can make your very small plumbing company look gigantic if you have a ton of 5-star reviews. As a small contractor, you should be networking.
Next, you should find a solid vendor to assist you with a professional website, as well as how to optimize that site using HSA, PPC, and SEO. Then, as you get much larger, there’s a right time to begin investing in branding initiatives on TV and radio. When you get to that point, you must be exceptionally careful. Never work with a TV or radio station’s creative people. Find a reputable third party. Again, we have vendors and coaches who can walk you through this process. Get in touch with CertainPath!
How do I create a plumbing business plan template?
Creating a plumbing business plan template is straightforward: you must have a budget, marketing plan, manpower plan, training plan, and priority list. The good news is once you have these constructed, you can use the previous years as a template. What if you don’t have them yet? Not a problem! At CertainPath, we can provide examples for you. If you want to do it on your own, it doesn’t have to be complicated. Sit down at a computer, or even just with a pen and paper. Identify what you desire to achieve in terms of revenue and profit. From there, utilizing the information in this blog, you can begin writing out your plan.
What qualifications are needed to start a plumbing business?
The licensing and certification requirements of every city, state, and province vary greatly. I recommend researching your area. Once you’re in compliance, if you’re looking to start your own plumbing business, we would recommend looking to join an organization like CertainPath to help guide you. So often we work with companies who have a host or problems and challenges that have developed over the years. The more problems, the longer it can sometimes take to repair that plumbing business. As a new plumbing business owner, you have the ability to create the proper foundation with which to flourish. Get in touch with CertainPath to find out more.
How do I market my plumbing business?
Marketing your plumbing business is very specific based upon two conditions: the size of your company and the type of media market you reside in. For example, profitable plumbing businesses should budget to spend 10% of their overall budget on marketing. Naturally, the smaller your company, the less you can spend on marketing. In marketing, you can either spend money or time to create business. So, naturally, if you’re a smaller company, you must invest more of your time. That means going to business networking events, working trade shows, and asking customers personally to leave you a five-star review on Google. As your revenue expands, as does your marketing budget. You should invest in a professional website and promote it using SEO, PPC, and HSA ads.
The final step is the costliest; however, it’s exceptional for branding. It involves investing in traditional media like radio and TV. Once you get to that point in your plumbing business journey, it’s imperative you work with an outside agency with a successful track record in home services. Again, CertainPath can help with that as well. Talk to an advisor to find out how!
What type of liability insurance do I need for a plumbing business?
Liability insurance is an important part of running any business, but it is especially important for plumbers since they are working with hazardous materials and dealing with potential hazards on other people’s property. Depending on the area in which you operate, the types of liability insurance you will need may vary. Generally, you should look into getting general liability, auto liability, workers’ compensation, professional indemnity, and product/completed operations coverage. These policies will provide protection from claims related to bodily injury, property damage, accidents, and errors and omissions. In addition to these types of policies, it is also important to consider umbrella policies that can increase your coverage limits in case of catastrophic events.
How do I find customers for my plumbing business?
We’ve talked extensively throughout this blog about ways to market your plumbing business. However, there are two other avenues where you can capture customers that we haven’t covered. The first is the easiest and least expensive. It’s building a club membership program.
Essentially, you’re offering premier services to your customers, and in exchange, they pay you a monthly or annual amount. In addition, as part of the membership, your plumbers visit their home once a month to provide a safety inspection. Those safety inspections provide peace of mind for customers, and they provide your plumbers with service calls during those traditionally slow, shoulder months when the phone isn’t ringing. CertainPath has a customizable club program available to members that has been successfully implemented in thousands of cities and towns across the country for more than two decades. Get in touch to learn more!
The other way to find customers for your plumbing business is to acquire them. Every day, there are plumbing business owners looking to retire or sell. Those companies all have customer lists of homeowners they’ve developed relationships with over the years. You’ll be shocked at how inexpensive those lists can be. Very often it’s much cheaper than the money you’d invest in advertising. At CertainPath, we can show you how to identify these plumbing business owners, how to approach them about acquiring their member list, and how much you should pay for that information. Talk to a CertainPath advisor today.
What is the best way to price my plumbing services?
Pricing is the number one reason plumbing businesses go out of business. Please, value your services! Plumbing is a difficult trade, and you deserve to be paid like a true professional. When building your prices, it’s critical that you take into account your time and your plumbers’ time, the cost of your materials and equipment, the cost of your trucks and tools, the cost of your shop, the cost of the utilities, the cost of your office staff, the cost of your marketing, the cost of insurance and benefits, etc. In other words, every cost you incur should be covered by your customers. That’s how business is done. Don’t worry about what any other competitors charge. You must charge enough to cover all your expenses, plus make a profit of at least 15%. It’s with those profits you can hire more people, buy more trucks, buy a bigger office… in short, invest in your business. Trying to figure out how to develop your pricing for all your services is tricky.
Learn what’s possible with CertainPath. Attend a Profit Day near you or online to gain critical insights, tips, strategies, and advice to increase your profits and streamline your business operations.