The plumbing industry brings in over $110 billion in revenue annually in the United States alone. With an ever-growing population and aging infrastructure, the demand for plumbing services is expected to increase by over 14% by 2030.
As homes and buildings require more complex pipe and drainage systems, skilled tradespeople are needed to install, maintain, and repair these essential systems. Entrepreneurial plumbers can capitalize on this growth by starting their own plumbing company.
By specializing in a specific area of plumbing and providing exemplary customer service, new business owners can develop a solid reputation and customer base. Focusing on emergencies and service calls for residential buildings offers steady work year-round.
This guide will focus on how to start a plumbing business. Topics include market research, competitive analysis, registering your EIN, obtaining business insurance, and even forming an LLC. Here’s everything you need to know to start your own plumbing business.
1. Conduct Plumbing Market Research
Market research is an important component of starting a plumbing business plan in the plumbing services industry. It offers insight into your target market, how to obtain your plumbing license, trends in services and products, and more.
Some details you’ll learn through market research as you open your own business include:
- The majority of demand comes from repair and maintenance services for residential buildings.
- With 70% of plumbers self-employed, new plumbing companies can directly capture this increasing demand.
- As infrastructure ages across the country, the need for repair and replacement presents opportunities for plumbers specializing in drainage, pipe fitting, and more complex systems.
- Focusing sales efforts on residential contractors and homebuilders could provide a pipeline of new homes requiring plumbing systems.
- To capitalize on this growing industry, plumbing companies must invest in licensure, certification, reliable work vehicles, specialized tools, and extensive parts inventories.
- By providing around-the-clock emergency service and developing a base of recurring maintenance contracts, a well-run plumbing firm can achieve over $1 million in annual revenue.
The keys to success involve far more than technical competency. Exceptional social skills allow plumbers to interact with customers to accurately diagnose issues and calmly explain solutions. Standing out from the competition requires focusing on specific plumbing systems.
2. Analyze the Competition
Given the highly fragmented plumbing industry, new entrepreneurs must thoroughly analyze local competitors when starting a successful plumbing business. Getting to know your competitors helps determine pricing strategies, service options, and more.
As a plumbing business owner, learning about business competitors is easy if you know where to look. Here are some ways to get to know other plumbing business owners:
- Begin by searching online directories and review sites to identify leading plumbers in the area.
- Pay attention to the number and ratings of reviews, as this indicates market share and customer satisfaction.
- Check licensing databases to see specified specialties like HVAC or pipefitting. Compile a list of the top 5-10 competitors for further evaluation.
- Drive around the territory to note the locations, branding, and vehicle signage of plumbing company offices.
- Search their websites and social media pages to analyze services offered, insurance accepted, response times advertised, and professional affiliations touted.
- Call each company to inquire about emergency service rates and appointment availability to gauge demand volume.
- As most plumbers are dispatched from home offices straight to customer locations, online presence, and digital marketing are far more important than physical company infrastructure.
- Scrutinize the Google rankings, search engine advertisements, and website optimization of competitors.
By holistically evaluating both digital and visible assets for competing brands, new plumbing businesses can identify specialized, underserved markets and niches to target. Tracking market responses to digital and print advertisements also helps gauge potential demand.
It’s also wise to invest some of your time learning about electrical because certain homes may require you to deal with electricity before fixing any plumbing issues.
3. Costs to Start a Plumbing Business
Launching a successful plumbing company requires significant upfront investment in equipment, licensing, marketing, and working capital before profitability is achieved. Prudent cost planning and access to financing are vital when beginning a new venture in this competitive trade.
- The primary start-up costs involve acquiring a well-equipped work vehicle and specialized plumbing tools. Cargo vans or trucks must store all parts and components, costing $25,000.
- Outfitting the vehicle with racks, storage, signage, and a magnetic logo adds roughly $3,000-$5,000.
- An essential inventory of drain cleaners, pipes, fittings, snake cameras, trenchers, sewer augers, leak detectors, wrenches, saws, safety gear, uniforms, and more runs $15,000 minimum.
- Administrative expenses like insurance, bonding, licensing, and an accountant quickly tally. General liability coverage averages $50/month, though more robust business policies with vehicle coverage start around $150/month.
- The plumbing contractor bond required in most states averages $200/year.
- Testing and licensing cost $300, while legal/professional services like an accountant may require a $500 startup retainer and $150/month after.
You also need to consider the costs of plumbing tools and equipment (renting equipment is also a possibility).
Once open for business, the monthly expenses of running a plumbing company add up quickly:
- Vehicle fuel/maintenance – $300
- Cell phone service – $150
- Utility bills – $200
- Accounting services – $200
- Advertising – $500+
- Vehicle/business insurance – $200
- Loan repayment – $1,000+
- Wages for employees (if any) – $3,500+
- Software/app subscriptions – $100
- Continuing education – $75
These recurring monthly expenses often exceed $7,500 for a one-person operation and significantly more once employees are added. Larger annual costs like taxes, license renewals, branding refreshers, and attorney fees for contracts tack on another $5,000-15,000 each year depending on sales and service levels.
4. Form a Legal Business Entity
When establishing a legal structure for a new plumbing business, entrepreneurs must weigh factors like paperwork, taxes, liability protection, and ease of adding owners. The four main options each have distinct pros and cons.
Sole proprietorships require only a business license to quickly get up and running, with pass-through taxation reported on the owner’s returns. However, the owner assumes unlimited financial and legal liability, placing personal assets at risk. This model becomes problematic when securing business loans or bringing on partners.
General partnerships allow multiple owners to easily share control and pooled resources. However, all partners remain jointly responsible for debts and liabilities incurred by the business. Decision-making authority should be clearly defined in a partnership agreement. This framework makes adding new partners simple down the road.
Limited Liability Company (LLC)
In a limited liability company (LLC), member-owners enjoy liability protection similar to a corporation, avoiding personal responsibility for company debts. Taxation passes through to members as with a partnership while avoiding double taxation on business income. Startup paperwork and accounting requirements fall between corporations and sole proprietorships.
Establishing a C or S corporation requires extensive legal paperwork and maintenance. Corporations limit financial liability for shareholders while allowing company equity to be easily traded. However, corporate income incurs double taxation if not carefully structured. Structured dividends to minimize double taxation carry legal risks.
5. Register Your Business For Taxes
Before legally operating any type of business, owners must obtain an Employer Identification Number (EIN) from the IRS. This unique 9-digit number identifies your plumbing company for federal tax purposes similar to how a Social Security number identifies individuals.
Acquiring an EIN is vital for opening business bank accounts, paying employees, filing state registrations and tax returns, and ultimately applying for loans or other financing. The entire online application process takes less than 10 minutes and only requires basic information about your company structure.
Simply navigate to the IRS EIN Assistant and select Apply Online Now. Answer a few initial questions about why you need an EIN, verify your personal identity details, and choose your business structure. With an LLC selected, enter your company name and address.
After specifying someone to contact about EIN details, the site displays your EIN immediately. Just print the confirmation page for your records. You can also download, view, and print your complete EIN application dossier through your IRS online account anytime.
With an EIN established, contact your state revenue agency about registering for the taxes you must collect. For plumbing companies, this certainly includes state and local sales tax for parts and materials. Depending on the state, this may require licensing fees up to $100 every 1-2 years. Failing to collect required taxes results in hefty personal penalties.
Maintaining tax compliance by acquiring an EIN only takes a few minutes but saves substantial hassle when establishing vendor accounts, hiring employees, and demonstrating credibility to customers. Along with proper licensing, insurance, and bonding, securing an EIN keeps plumbing companies on sound legal footing as they grow.
6. Setup Your Accounting
As a tradesperson, excelling at plumbing services is only part of succeeding in business. Proper financial record keeping and accounting from day one separate thriving operations from those risking failure. Investing in organized accounting upfront saves substantial stress and money over the long haul.
After establishing your business entity, one of the first purchases should be small business accounting software like QuickBooks. Robust platforms like QuickBooks track income, expenses, account balances, tax liabilities, and inventory automatically across integrated bank accounts and credit cards. This eliminates manual recordkeeping, ensuring accurate financial reporting. Expect costs of $10-50 per month.
Hire an Accountant
While software handles much of the grunt work, partnering with an accountant leverages professional expertise in filing taxes, establishing payroll, and staying current on regulations. General bookkeeping assistance runs $150-200 monthly, but year-end tax preparation and financial statement generation generally costs $1,000. Audits can Verify financial details up to 7 years back.
Open a Business Bank Account
Keeping business finances strictly separate from personal transactions greatly reduces accounting complications and IRS scrutiny down the road. Always pay vendors, receive payments, and make purchases from a dedicated business checking account not intermingled with personal finances.
Apply for a Business Credit Card
Using a business credit card earns rewards on purchases while keeping expenses easily traceable. Plumbing companies can qualify for basic cards immediately and higher limits after a year of reporting revenue. Personal and business credit scores rely on distinct criteria, so proactive financial management builds business credit to access higher lines of credit.
7. Obtain Licenses and Permits
While mastering pipefitting comes naturally, navigating licensing creates headaches for aspiring plumbing contractors. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for local government requirements.
The cornerstone license comes from the state or municipality to legally perform plumbing projects as a registered contractor. Passing an exam demonstrating familiarity with the plumbing code earns a specialty journeyman license. This qualifies plumbers to undertake public projects.
States then require a specific plumbing contractor license assigning a registration number for consumer protection. This confirms mandatory insurance minimums are met and any specialty certifications like lead abatement. Licensing fees range from $50 to $500 annually depending on location, company size, and services rendered.
Note that many states prohibit simply advertising plumbing services without proper licensing. From business cards to website listings, all promotional materials must display license numbers. Attempting projects without credentials brings citations over $1,000 and permanent disqualification.
Municipalities add permitting requirements for certain plumbing jobs. Common permits include:
Water Service Line: Hooking up water lines from main lines to buildings needs approval. Records must confirm minimum burial depths and usage monitoring compliance. Fees range from $20-$150.
Sewer Tap: Linking sewer drainage pipes from buildings to the public sewer system requires city engineers to vet plans to allocate capacity. Fees range from $100-$500.
Plumbing: Major indoor re-piping, fixture replacement, or drainage work inside commercial buildings or residential homes mandates permits allowing inspectors to validate code compliance. These average $100 per project.
8. Get Business Insurance
Carrying adequate business insurance separates successful plumbing operations from those a single mishap away from failure. The right coverage protects the company’s financial health when the unexpected strikes.
Policies like General Liability insure against property damage, bodily injury, personal injury, and advertising injury claims. This covers incidents like supply line leaks flooding a home, a technician injuring a customer, or copyright issues with marketing materials. Minimum limits of $500,000 per occurrence and $1 million aggregate are recommended.
Garage Keeper’s Insurance handles liability for damage to customer vehicles in your care, custody, or control. This protects against fires, theft, weather events, or employees causing harm while on service calls. Coverage starts at around $60/month.
Commercial Auto Insurance covers vehicle damage along and injuries for at-fault accidents while driving between jobs. Bodily injury coverage worth at least $100,000 per person and $300,000 per incident should supplement mandatory minimums.
Without coverage, a range of scenarios quickly close struggling plumbing shops:
- A technician accidentally cuts through a sink drain pipe, flooding a home and damaging valuables, floors, cabinets, and drywall. Repairs exceed $100,000.
- An employee automobile accident while working puts a customer in the hospital, incurring $250,000 in medical bills.
- A supply line leak or toilet valve issue causes a commercial building to flood, resulting in 7 figures of ruined equipment, inventory, and remediation costs.
Using an independent insurance agent simplifies securing business policies tailored for plumbing contractors compared to direct carriers. Expect to provide your EIN, business valuation, payroll projections, vehicle VINs, license numbers, five years of loss history, and copies of current policies during the application process spanning 2-to 3 weeks.
Investing in proper insurance provides essential financial safeguards allowing new ventures to survive unforeseen catastrophes. Coverage translates into credibility with clients and lenders about withstanding risk.
9. Create an Office Space
While most plumbing operations directly dispatch technicians to customer locations, maintaining some office space provides credibility and functionality. Different stages of business growth call for distinct facilities.
Many solo plumbers operate from a home office when starting. This dedicates space for administrative tasks like phone calls, paperwork, accounting, marketing efforts, and equipment storage for minimal overhead. With no storefront exposure needed, home offices offer ultimate convenience and cost savings.
As the company grows, working alongside other small business owners fosters collaboration and referrals. Coworking spaces like WeWork offer turnkey offices, conference rooms, front desk staff, cafes, gyms, and networking events. Customizable monthly plans start around $300 including utilities and amenities with flexible lease terms.
For plumbing shops servicing residential buildings, a small retail space allows homeowners to directly visit an office when needing extensive repairs quoted or to make payments. This establishes visibility and trust in local communities. Basic 800-square-foot units are leased for approximately $1,500 monthly plus $10 per square foot for utilities and taxes. Ensure ADA compliance.
Eventually fielding multiple plumbers requires larger headquarters for equipment and parts warehousing, training facilities, private offices, and conference rooms to meet with contractors and vendors. Expect basic commercial rates of $3 per square foot monthly for spaces like 2,000-square-foot standalone structures.
10. Source Your Equipment
Outfitting a new plumbing operation with professional tools and reliable vehicles requires significant capital outlays before generating revenue. Strategic purchasing, renting, and financing options balance robust plumbing equipment with cash flow.
Buying new provides the latest equipment with full warranties but premium prices. Look to specialty retailers like Ferguson Plumbing Supply or local distributors for package deals on stocked cargo vans, drainage snakes, fitting kits, pipe cutters, wrenches, safety gear, trenchers, inspection cameras, backflow testers, leak detectors, water jetters, sewer augers, pipe locators, and uniforms.
Seeking quality used wares controls costs considerably. Scout deals on commercial auction sites like BidNet for dispatcher truck fleets retired from other contractors. Facebook Marketplace, Craigslist, eBay, and OfferUp also list well-maintained tools from industry pros. Expect to pay 40-60% off retail.
Renting or leasing large equipment needed only periodically preserves capital for specialized assets used daily. Local suppliers offer reasonable rates on large pipe threaders, jetter trailers, backhoe excavators, jackhammers, and scaffolding. Reserve equipment for projects or during seasonal demand surges.
Financing spreads payments over months instead of huge upfront checks. Applying through primary banks or specialized lenders like Financial Pacific Leasing allows matching equipment life cycles to loans. This conserves working capital early on.
11. Establish Your Brand Assets
Implementing professional branding elevates new plumbing companies above amateur operations relying on word-of-mouth. A consistent visual identity communicates quality and expertise to consumers. This recognition ultimately drives sales and referrals.
Get a Business Phone Number
Acquiring a unique local or toll-free phone number on a reliable platform like RingCentral suits a mobile business receiving calls from potential customers. Expect to budget $30+ monthly for a business line with call routing, voicemail transcriptions, analytics, text messaging, and smartphone integration.
Design a Logo
A polished logo encapsulates the essence of the brand for use across platforms. Clean logo types like lettermarks and badges suit plumbing companies, with icons signifying reliability. User-friendly sites like Looka help create and customize options starting under $20 per design.
Print Business Cards
Printed materials establish legitimacy within communities. High-quality business cards from Vistaprint provide critical contact details to customers, real estate agents, and contractors. For under $20, full-color cards showcase the colors, fonts, and logo shaping brand identity.
Get a Domain Name
Purchasing matching domains solidifies the brand online. Services like Namecheap make registering .com URLs affordable at around $15 annually. For example, ACMEPlumbingService [ dot] com builds credibility.
Design a Website
Well-designed websites drive customer conversion more than printed materials today. Anyone can launch sites on Wix without coding for $20+ per month, adding lead capture forms and calls-to-action to generate business directly. Those less tech-savvy can hire experts on Fiverr to custom craft sites from $500 based on careful specifications.
12. Join Associations and Groups
Joining regional industry associations, attending trade events, and participating in online communities accelerates the growth of plumbing companies by providing insider knowledge and contacts. Surrounding yourself with successful peers provides endless dividends.
In most states, Plumbing-Heating-Cooling Contractors (PHCC) state chapters offer technical training, apprenticeship programs, networking events, and marketing resources to support licensed tradespeople. Joining state groups like California Plumbing and Mechanical Contractors Association for $150-500 annually connects you with local leaders shaping the trade.
Sites like Meetup list regional plumbing trade shows and seminars to display services, view new equipment demos, and build business relationships with attendants. Expect $50 conference fees plus travel expenses.
Industry forums on Facebook allow dialoguing best practices with plumbers nationwide:
- Strictly Plumbing Business Owners Group
- Plumbing Business Success Group: Build a Profitable Plumbing Business
- Plumbing advice group
These groups share sales lead referrals along with technical guidance or regulation interpretations from peers facing similar dilemmas. Participate actively.
13. How to Market a Plumbing Business
Promoting a new plumbing venture effectively requires dedicating time and budget across digital and traditional channels to capture local demand. While perfecting technical skills, never overlook spreading brand visibility to grow quicker.
Launching with an established personal network and stellar early clientele lays the foundation for customer referrals powering sustainable success. Offering $20 restaurant gift cards or account credit for each new customer sent your way costs little compared to other advertising while carrying more weight from personal endorsements.
Digital approaches help dominate regional search and social feeds:
- Run Google Ads campaigns focused on high-intent keywords around urgent issues like “burst pipe repair” to connect with customers exactly needing your services. Expect a $100 per month minimum investment as a new business.
- Cultivate a hyperlocal service area Facebook page for community engagement around plumbing tips, company culture, job sites, and reviews. Boost key posts to nearby homeowners as low as $10 per promotion.
- Creating homemade “day in the life” YouTube videos educating property owners on maintaining pipes or declogging drains raises awareness. Embed website/contact details in each video description.
- Write SEO-optimized blogs about niches like tankless water heater installation for your website. Feature these posts on LinkedIn to establish expertise.
Traditional approaches supplement digital even as internet activity increases:
- Distribute customized flyers and door hangers to surrounding neighborhoods introducing the brand and top services. Focus on higher home values and the age of properties initially.
- Cold call real estate offices, contractors, and property managers monthly to offer preferred plumber status for renovations and tenant maintenance. Discount first jobs to get sales pipelines started.
- Run 30-second radio ads on local stations during drive times and host event booths at home shows to capture broad exposure. Estimate $500 per event for sponsorships/materials.
- Invest in branded work vehicle magnets, uniforms, job site signage, and labeled parts bins for implicit advertising as technicians service homes.
14. Focus on the Customer
More than technical competency, providing exceptional customer service creates loyal clients who refer others for years to come. Compassion and communication differentiate fledgling brands from established players. Some ways to improve customer focus in your plumbing business model include:
- Arriving timely in neat, marked work vehicles with uniformed technicians reassures stressed property owners.
- Introducing yourself, wearing booties to protect floors, and laying down drop cloths demonstrates respect.
- Listen attentively to understand frustrating leaks or clogged drains from the customer’s perspective.
- Calmly explain diagnostics in accessible language while outlining repair options and pricing.
- Recording videos and photos detailing damaged pipes builds trust.
- Finish jobs neatly by thoroughly testing fixes, cleaning work areas, and hauling away old parts.
- Follow up personally by phone the next day to check on issues and provide any warranty details. Consider sending a thoughtful card after large jobs or offer to assist with insurance claims.
Thereafter, email periodic maintenance tips to continue nurturing the relationship. Building close relationships with your clients as a new plumbing company ensures you’ll run a successful business.