23 data to include in the business plan of your plumbing services

This article was written by our expert who is surveying the industry and constantly updating the business plan for a plumbing services.

Our business plan for a plumbing services will help you build a profitable project

Ever wondered what the ideal service call conversion rate should be to keep your plumbing business thriving?

Or how many emergency repairs you need to handle each month to meet your revenue goals?

And do you know the optimal labor-to-revenue ratio for a successful plumbing service operation?

These aren’t just nice-to-know numbers; they’re the metrics that can make or break your business.

If you’re putting together a business plan, investors and banks will scrutinize these figures to gauge your strategy and potential for success.

In this article, we’ll cover 23 essential data points every plumbing service business plan needs to demonstrate you're prepared and ready to excel.

Pipe material costs should account for 15-20% of the total project budget

In plumbing projects, it's common for pipe material costs to make up about 15-20% of the total budget because they are a significant but not the largest expense.

Labor costs, which include the time and expertise of skilled plumbers, often represent a larger portion of the budget, sometimes exceeding 50%. Additionally, other expenses such as permits, equipment rental, and unexpected repairs can also add up, making the material costs a smaller percentage of the overall budget.

However, the percentage can vary depending on the specific requirements of the project.

For instance, if a project requires high-end materials like copper or specialized pipes for unique applications, the material costs might exceed 20%. Conversely, in projects where basic materials like PVC are sufficient, the percentage might be closer to the lower end of the range or even less.

Labor costs typically range from 30-40% of the total project cost, depending on complexity

In plumbing services, labor costs often account for 30-40% of the total project cost because skilled labor is essential for ensuring quality and safety.

Plumbing projects require trained professionals who can handle complex systems, which means their expertise comes at a premium. Additionally, the time-intensive nature of plumbing work, such as installing or repairing pipes, contributes to higher labor costs.

The complexity of the project can significantly influence labor costs, as more intricate tasks demand more time and specialized skills.

For instance, a simple faucet replacement might have lower labor costs compared to a full bathroom remodel, which involves multiple plumbing elements. In more complex cases, the need for specialized equipment or additional labor can further increase the percentage of labor costs in the total project budget.

The average turnover rate for plumbing staff is around 20%, so plan for moderate recruiting and training expenses

The average turnover rate for plumbing staff is around 20%, which means businesses should anticipate moderate recruiting and training expenses.

This turnover rate can be attributed to factors such as the physical demands of the job and the competitive nature of the industry. Additionally, many plumbers may leave for better opportunities or to start their own businesses, contributing to this turnover rate.

As a result, plumbing companies need to invest in ongoing recruitment and training to maintain a skilled workforce.

However, the turnover rate can vary depending on specific circumstances, such as the location of the business and the company culture. Companies that offer competitive salaries and a positive work environment may experience lower turnover rates, reducing the need for frequent recruitment and training.

60% of plumbing projects experience delays due to unforeseen site conditions or permit issues

In the plumbing industry, it's quite common for about 60% of projects to face delays due to unforeseen site conditions or issues with permits.

One major reason is that site conditions can be unpredictable; for instance, discovering old pipes or unexpected underground utilities can halt progress. Additionally, permit issues can arise if there are changes in local regulations or if the necessary paperwork isn't processed on time.

These delays can vary significantly depending on the specific circumstances of each project.

For example, a project in a densely populated urban area might face more permit-related delays due to stricter regulations compared to a rural setting. On the other hand, a renovation project in an older building might encounter more unforeseen site conditions than a new construction project, leading to different types of delays.

Projects should aim to reach substantial completion within 12 months to maintain client satisfaction

Projects in plumbing services should aim to reach substantial completion within 12 months to maintain client satisfaction because prolonged timelines can lead to increased costs and inconvenience for clients.

When plumbing projects extend beyond a year, clients may face unexpected disruptions in their daily routines, which can lead to frustration and dissatisfaction. Additionally, longer projects often result in higher labor costs and potential price increases for materials, which can strain the client's budget.

However, the timeline for substantial completion can vary depending on the complexity and scope of the project.

For instance, a simple residential plumbing installation might be completed in a few weeks, while a large-scale commercial project could justifiably take longer than 12 months. It's crucial for plumbing service providers to communicate clearly with clients about expected timelines and any potential delays to ensure transparency and maintain trust.

Profit margins for plumbing projects generally range from 10-15%, with higher margins for residential work

Profit margins for plumbing projects generally range from 10-15%, with higher margins for residential work, because residential projects often involve less complex systems and fewer regulatory hurdles.

Residential plumbing jobs typically require less specialized equipment and fewer permits, which reduces overhead costs. Additionally, homeowners are often willing to pay a premium for quick and reliable service, allowing plumbers to charge more.

In contrast, commercial plumbing projects often involve larger-scale systems and stricter compliance with building codes, which can increase costs and reduce profit margins.

However, profit margins can vary significantly depending on the specific nature of the project. For instance, emergency repairs might command higher margins due to the urgency and inconvenience involved, while routine maintenance might yield lower margins due to competitive pricing.

Prime cost (materials and labor) should stay below 60% of the total project cost for financial health

In plumbing services, keeping the prime cost—which includes materials and labor—below 60% of the total project cost is crucial for maintaining financial health.

This threshold ensures that there is enough margin left to cover other essential expenses like overhead, marketing, and unexpected costs. If the prime cost exceeds 60%, it can squeeze the profit margins and make the business financially vulnerable.

However, this percentage can vary depending on the specific nature of the plumbing project.

For instance, a project involving high-end materials might naturally have a higher prime cost, but this should be balanced by charging a premium price. Conversely, simpler projects with standard materials should aim to keep the prime cost well below 60% to remain competitive and profitable.

Allocate 1-2% of the project budget for tool maintenance and replacement annually

Allocating 1-2% of the project budget for tool maintenance and replacement annually is crucial for plumbing services to ensure that tools are always in optimal working condition.

Plumbing tools are subject to frequent wear and tear due to the nature of the work, which involves exposure to water, chemicals, and physical stress. Regular maintenance helps in preventing unexpected breakdowns that could delay projects and increase costs.

Additionally, having a budget for tool replacement ensures that outdated or inefficient tools can be upgraded, improving overall productivity and service quality.

The percentage of the budget allocated can vary depending on the scale of the project and the specific tools required. For instance, larger projects with more complex plumbing systems might require a higher allocation due to the increased use and complexity of the tools involved.

Successful plumbing projects maintain a change order rate below 10% to ensure profitability

Successful plumbing projects maintain a change order rate below 10% to ensure profitability because it helps control costs and manage resources effectively.

Change orders often lead to unexpected expenses and can disrupt the workflow, causing delays and increasing labor costs. By keeping the change order rate low, plumbing businesses can better predict their financial outcomes and allocate resources more efficiently.

However, the acceptable change order rate can vary depending on the complexity of the project.

For instance, larger commercial projects might have a slightly higher threshold due to their inherent complexities and the involvement of multiple stakeholders. On the other hand, smaller residential projects typically aim for an even lower change order rate to maintain tight budget controls and ensure customer satisfaction.

Inventory turnover for consumables should occur every 30 days to avoid excess stock and ensure cash flow

In plumbing services, maintaining an inventory turnover for consumables every 30 days is crucial to avoid excess stock and ensure a healthy cash flow.

Consumables like pipes, fittings, and sealants are essential for daily operations, and having too much of them can tie up capital that could be used elsewhere. By turning over inventory every 30 days, plumbing businesses can keep their stock fresh and reduce waste from items that might become obsolete or damaged over time.

This approach also helps in responding quickly to market demand and customer needs, ensuring that the right materials are always on hand.

However, the ideal turnover rate can vary depending on factors such as the size of the business, the types of services offered, and the seasonal demand for plumbing work. For instance, a larger company with more extensive operations might need a faster turnover to keep up with high demand, while a smaller business might manage with a slightly longer cycle.

It's common for plumbing projects to lose 2-4% of revenue due to material wastage or theft

In plumbing projects, it's common to lose 2-4% of revenue due to material wastage or theft because these issues are often overlooked or underestimated.

Material wastage can occur when plumbers cut pipes incorrectly or use more sealant than necessary, leading to excessive consumption of materials. Theft, on the other hand, can happen when materials are left unsecured at job sites, making them easy targets for opportunistic thieves.

The percentage of revenue lost can vary depending on the size and scope of the project, as larger projects may have more materials at risk.

Additionally, the level of project management and oversight can significantly impact these losses; well-managed projects with strict inventory controls tend to experience less wastage and theft. Implementing preventive measures like secure storage and precise material tracking can help reduce these losses.

Overhead costs, including rent and utilities, should not exceed 10% of total revenue to avoid financial strain

In the plumbing services industry, keeping overhead costs like rent and utilities below 10% of total revenue is crucial to prevent financial strain.

High overhead costs can eat into profits, leaving less room for unexpected expenses or investments in growth. By maintaining a lower percentage, businesses can ensure they have enough financial flexibility to handle emergencies or take advantage of new opportunities.

However, this percentage can vary depending on factors like location and business size.

For instance, a plumbing business in a high-rent area might find it challenging to keep overhead costs below 10%, while a smaller operation with a home office might easily achieve this target. Ultimately, the key is to balance overhead costs with revenue to maintain a healthy financial position and ensure long-term success.

Upselling additional services during project execution can increase revenue by 15-20%

Upselling additional services during plumbing project execution can boost revenue by 15-20% because it leverages the existing customer relationship and trust.

When a plumber is already on-site, customers are more likely to consider additional services, such as water heater maintenance or pipe insulation, because they see the value in addressing multiple issues at once. This convenience factor, combined with the expert recommendations from a trusted professional, makes customers more open to spending more.

However, the success of upselling can vary depending on the specific case and customer needs.

For instance, a customer with an older plumbing system might be more receptive to additional services compared to someone with a newly installed system. Additionally, the plumber's ability to clearly communicate the benefits and necessity of the extra services plays a crucial role in the decision-making process.

The average profit margin for plumbing service calls is 20-25%, higher than for large projects

The average profit margin for plumbing service calls tends to be higher, around 20-25%, compared to larger projects.

This is because service calls often involve quick, straightforward tasks that require less time and resources. Additionally, these jobs typically have lower overhead costs and can be completed by a single plumber, which helps maintain a higher profit margin.

In contrast, large projects often involve more complex planning and coordination, which can increase costs and reduce profit margins.

However, the profit margin for service calls can vary depending on factors like location, competition, and the specific nature of the job. For instance, emergency calls might command a higher rate, while routine maintenance could be priced lower, affecting the overall margin.

Service call volume should grow by at least 5% year-over-year to offset rising costs

In the plumbing services industry, a 5% year-over-year growth in service call volume is often necessary to counterbalance the rising operational costs.

These costs can include things like increased wages for skilled plumbers and the higher prices of materials and equipment. If the volume of service calls doesn't grow, the business might struggle to maintain its profit margins.

However, the need for a 5% growth can vary depending on specific factors such as the local market conditions.

For instance, in a rapidly growing urban area, the demand for plumbing services might naturally increase, making it easier to achieve this growth. Conversely, in a more stable or declining market, businesses might need to innovate or expand their services to meet the same growth target.

Ideally, a plumbing business should maintain a current ratio (assets to liabilities) of 1.5:1

In the plumbing business, maintaining a current ratio of 1.5:1 is considered ideal because it indicates a healthy balance between assets and liabilities, ensuring the company can meet its short-term obligations.

This ratio suggests that for every dollar of liability, the business has $1.50 in assets, providing a cushion to cover unexpected expenses or downturns in business. A higher ratio might indicate that the company is not effectively using its assets, while a lower ratio could signal potential liquidity issues.

However, the ideal current ratio can vary depending on the specific circumstances of the plumbing business, such as its size, market conditions, and growth stage.

For instance, a smaller plumbing company might aim for a higher ratio to ensure it can handle fluctuations in cash flow, while a larger, more established firm might operate efficiently with a lower ratio due to its stable revenue streams. Additionally, during periods of economic uncertainty or rapid expansion, businesses might adjust their target ratio to better align with their strategic goals and risk tolerance.

Effective project management can reduce project duration by 10-15% by optimizing resource allocation

Effective project management in plumbing services can significantly reduce project duration by 10-15% through optimized resource allocation.

By strategically assigning tasks and scheduling work, project managers ensure that plumbers and materials are available exactly when needed, minimizing downtime. This approach not only speeds up the process but also helps in avoiding unnecessary delays that often occur due to poor planning.

Moreover, effective management involves continuous monitoring and adjusting of resources to adapt to unexpected challenges that may arise during the project.

However, the extent of time reduction can vary depending on the complexity of the project and the initial efficiency of the team. For instance, a straightforward residential plumbing job might see a more significant reduction in duration compared to a complex commercial project, where the scope and scale require more intricate coordination.

A plumbing project should allocate 0.5-0.75 square meters of storage space per worker to ensure efficiency

A plumbing project should allocate 0.5-0.75 square meters of storage space per worker to ensure efficiency because it provides enough room for essential tools and materials.

Having adequate storage space means that workers can easily access their tools and supplies, reducing the time spent searching for items and increasing productivity. This allocation also helps in maintaining an organized workspace, which is crucial for efficient workflow and safety.

However, the specific storage needs can vary depending on the complexity of the project and the types of tools required.

For instance, a project involving heavy-duty equipment might require more space, while a smaller residential job might need less. Ultimately, assessing the specific requirements of each project will help in determining the most effective storage allocation for optimal efficiency.

Safety inspection scores can directly impact client trust and should stay above 95%

Safety inspection scores are crucial for plumbing services because they directly influence client trust and should consistently remain above 95%.

When clients see high safety scores, they feel more confident that the plumbing service is reliable and professional. This trust is essential because plumbing work often involves access to private spaces and the potential for significant property damage if not done correctly.

However, the importance of maintaining high safety scores can vary depending on the specific type of plumbing service being offered.

For instance, a company specializing in residential plumbing might find that clients are more concerned about safety scores than a company focusing on commercial projects, where other factors like cost and speed might be prioritized. Ultimately, maintaining high safety scores is a universal way to demonstrate commitment to quality and ensure client satisfaction across different contexts.

Plumbing businesses in urban areas often allocate 2-3% of revenue for transportation and logistics

Plumbing businesses in urban areas often allocate 2-3% of revenue for transportation and logistics because these costs are essential for maintaining efficient service delivery.

In densely populated cities, plumbers need to navigate through heavy traffic and cover short distances between jobs, which can still be time-consuming. This means that even though the distances are short, the time spent on the road can add up, necessitating a budget for transportation.

Additionally, urban areas often have higher fuel costs and parking fees, which contribute to the overall logistics expenses.

However, this percentage can vary depending on factors like the size of the business and the specific geographic location. For instance, a larger company with a fleet of vehicles might have different logistics needs compared to a smaller, single-operator business.

Marketing should take up about 2-4% of revenue, especially for new or expanding businesses

Marketing should typically account for about 2-4% of revenue for new or expanding plumbing businesses because it helps establish a strong market presence.

For a plumbing service, this investment is crucial to build brand recognition and attract new customers, especially in a competitive market. New businesses need to allocate this budget to effectively communicate their unique selling propositions and reach potential clients who may not yet be aware of their services.

However, the percentage of revenue allocated to marketing can vary depending on factors such as the local market size and the level of competition.

In areas with high competition, a plumbing business might need to spend more to stand out, while in less competitive regions, a smaller budget might suffice. Additionally, established businesses with a strong customer base might spend less on marketing compared to those that are just starting or looking to expand their reach.

Seasonal service promotions can increase sales by up to 20% by attracting repeat customers

Seasonal service promotions can boost sales by up to 20% for plumbing services by enticing repeat customers.

These promotions often create a sense of urgency, encouraging customers to take advantage of limited-time offers. Additionally, they can help build customer loyalty by providing added value during times when plumbing issues are more common, such as winter or rainy seasons.

For instance, offering a discount on pipe insulation services before winter can attract homeowners looking to prevent cold-weather plumbing issues.

However, the effectiveness of these promotions can vary based on factors like geographic location and the specific needs of the customer base. In areas with milder climates, promotions might focus more on preventative maintenance rather than emergency services, which can still drive repeat business.

Establishing a material cost variance below 3% month-to-month is a sign of strong management and control.

In the plumbing services industry, maintaining a material cost variance below 3% month-to-month indicates strong management and control because it reflects the ability to effectively manage resources and predict expenses accurately.

Plumbing services often deal with fluctuating material costs due to market changes, so keeping this variance low shows that the company can adapt to these changes without significantly impacting their budget. This level of control is crucial for maintaining profit margins and ensuring that the business remains competitive.

Moreover, a low material cost variance suggests that the company has implemented efficient inventory management practices, reducing waste and optimizing the use of materials.

However, the acceptable level of variance can vary depending on specific cases, such as the size of the project or the type of materials used. For instance, larger projects might naturally have a slightly higher variance due to the complexity and scale, while specialized materials might have more price volatility, requiring more flexible management strategies.