Plumbing Business Profitability - How to Grow Your Profits
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Plumbing Business Profitability Guide: 9 Ways to Grow Your Profits

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With rising material costs, plumbing business profitability is harder to achieve than before. You have to change your strategy to operate a profitable plumbing business, including adjusting your pricing model and automating tasks to reduce overhead costs. This might sound like an impossible task, but with the right plumbing business software, you can get the results you want.

First, learn the average plumbing business profit to see where you stand. Then, get actionable tips on raising prices, cutting costs, and getting more value from each service. We’ve got you covered with 9 wasy to ensure you have a profitable plumbing business.

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What Is The Average Profit Margin For A Plumbing Company?

Plumbing business profit margins vary greatly. Still, plumbing companies’ average net profit margin ranges between 10-20%. To determine your net profit margin, subtract the direct and indirect costs of each job from the amount you make. This will show you how profitable your company is.

What’s Considered A Healthy Profit Margin?

A plumbing business profit margin of 20-35% is considered healthy by industry standards. Even so, some companies have profit margins that are twice as high. With the right pricing model, you can increase your revenue stream while still attracting customers.

How To Ensure Your Plumbing Business Remains Profitable

Plumbing business profitability can change at a moment’s notice if you’re not careful. You might make a good profit one month, only to lose money the next if you don’t know the numbers, market demand, and overhead costs. You also must choose a favorable pricing model to ensure long-term profitability.

Know Your Numbers Inside & Out

You need to do a detailed assessment of your company’s financial standing to determine where you’re currently and where you’d like to be. Taking a broad look at your company’s profits and expenses is a good starting point, but don’t stop there. You need to go further to see if your company is financially healthy.

“In the realm of business operations, I’ve come to understand that growth and profitability are tied to knowing your numbers inside and out. This means having a comprehensive understanding of all financial aspects of the business,” states Jason Birdsong of JT Services in Northern Oklahoma, when asked about the biggest lessons he’s learned in running a successful, profitable business.

“Housecall Pro has helped us to improve our internal operations significantly, leading to increased efficiency both on the job site and in the office. Features like reporting, pipeline, and the voice feature that we currently use were not available in our previous CRM. Housecall Pro continues to provide us with invaluable insights into our business’s financials, tech performance, and marketing through one single platform.”

You have to review your least and most profitable plumbing jobs, the time and resources spent traveling, and the hours dedicated to administrative tasks. Also, consider material expenses and other overhead expenses to understand your finances.

Analyze True Market Demand

To ensure your plumbing business remains profitable, analyzing market demand is crucial. Start by understanding your target market—who are your ideal customers, and what are their needs? Identifying your customer base helps tailor your services and marketing strategies effectively. Assessing the competitive market is also vital. Knowing your competitors’ strengths and weaknesses allows you to develop a robust business strategy to gain a larger market share.

Market demand and business profitability go hand in hand. Densely populated high-income areas with new construction projects are most likely to have the highest demand. If the market demand in your current area of operations is low, you might need to expand into new cities and zip codes.

Gathering and analyzing customer feedback provides insights into what clients value and where you can improve. Satisfied customers are more likely to recommend your services, expanding your customers for plumbing services organically. Regularly reviewing these factors and adapting to market changes ensures your plumbing business stays ahead and maintains profitability

Decide A Sustainable Pricing Model

Your pricing strategy significantly affects your profitability. First, you need to determine how much to charge and then which model to use.

Start by analyzing the current going rate in your market. While you don’t have to charge the same price, you don’t want to price yourself out of the market. Additionally, it’s vital that you don’t undersell your service and lose money.

Then, determine the type of pricing model you want to use. You can choose from various models like time and materials or flat-rate pricing. Common plumbing pricing models include:

Time and Materials Pricing

The time and materials pricing model provides the most control. With this method, you’ll bill customers based on the cost of the materials used and the hours of labor your technicians provide.

  • The customer is charged based on the time spent on the job (hourly rate) plus the cost of materials used.
  • Typically calculated as ((Total Job Hours x Hourly Rate) + Materials Cost) x Markup = Total Price.

While you can estimate the time and materials costs, you can’t give customers an exact price before beginning work. Because of that, some customers hesitate to agree to services when this pricing model is used. This is especially true when dealing with new customers who haven’t used your service.

Flat Rate Pricing

You can attract more customers by using a flat-rate pricing model. With this method, you’ll calculate the cost of the materials and the projected labor hours before the job begins. Then, you’ll lock in the cost of the service before starting work. Many customers prefer this method since there aren’t any surprises when reviewing their bills.

  • A fixed price is quoted upfront for the entire job, regardless of how long it takes.
  • Factors in labor costs, materials, overhead expenses, and desired profit margin.
  • Provides pricing transparency and predictability for customers.

We recommend using a flat rate price, as this provides the most transparency. Use Housecall Pro’s plumbing flat rate pricing template for guidance. With this tool as a guide, you can have a fair yet profitable pricing model.

Hybrid Pricing

A hybrid pricing model combines time and materials pricing for larger, complex jobs. it uses flat rates for smaller, more straightforward services like drain cleaning or appliance installations. Offers flexibility in pricing different types of plumbing work.

Project-Based Pricing

This model offers comprehensive pricing for larger plumbing projects or installations, providing clients with a detailed estimate that outlines all costs, including labor, materials, and potential additional expenses.

It’s particularly suitable for extensive renovations, new construction, and both residential and commercial plumbing projects. By clearly communicating costs upfront, you build trust with customers and ensure that your business covers all expenses, leading to more accurate and profitable pricing.

Determine Your Preferred Margin & Account For Overhead

Some plumbing businesses have profit margins that exceed 60%, so you don’t have to settle for the average margin. Still, make sure you consider your overhead costs when setting a profit margin goal. Then, set an achievable goal while still netting a nice profit.

Related content: Download our free plumbing price book template to help you keep technicians and pricing consistent and calculate markup.

9 Ways To Increase Your Plumbing Company’s Profitability

You don’t have to allow your company’s growth to stagnate. Instead, you can take measures to increase your plumbing business profitability. Implement these strategies if you’d like to increase your net profits.

1. Consider Raising Your Prices

Raising prices is a scary prospect for those in the plumbing industry. You’re afraid you’ll lose customers, but underpricing your services hurts your bottom line. A properly implemented price increase can boost revenue while still allowing you to attract customers.

Before raising your prices, look at your company’s close rate to determine if you’re charging enough. Your close rate is the percentage of jobs you’re hired to complete based on the number of plumbers you dispatch.

For instance, assume you dispatch plumbers to 200 locations, and 185 of those trips turn into paying jobs. In this instance, your close rate would be 92.5%.

A close rate of over 85% indicates you’re underpricing your services and losing profits. Bump up your prices and continue analyzing your close rate. It will likely drop slightly after the price increase, but as long as it’s in the 85% range, you have competitive pricing.

You want to raise prices wisely, so don’t try it yourself. Instead, use the plumbing price book template and other tools provided by Housecall Pro (HCP).

Housecall Pro’s plumbing business software helps you analyze your pricing strategy by providing detailed job costing and profitability reports. You can create price books and adjust prices, knowing exactly how it will impact your bottom line. The HCP software also allows you to easily update pricing across your services, ensuring consistency and transparency with your customers.

Related content: How to Announce a Letter of Price Increase

2. Focus On Higher-Margin Services & Recurring Revenue

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Some plumbing company owners and contractors think their business is healthy as long as the appointment book is full. In reality, not all plumbing services are created equal, and some offer higher profit margins than others.

Focusing on high-margin services and recurring revenue will help you grow your profits while providing a stable source of income. You might need to add new services to your business or double up on advertising for existing high-margin services you offer.

Determining high and low-profit margin services can be challenging if you try to figure it out on your own. Housecall Pro enables you to identify and prioritize higher-margin services through detailed reporting and analytics dashboards. There’s no slow season with HCP as it supports recurring service agreements and saves cards on file for automated invoicing, helping you establish a steady stream of income all year long. The customer portal helps you give recurring customers an easy-to-use dashboard where they can see weekly, monthly, or annual upcoming appointments, pay for services, check job progress, and more.

3. Expand Your Offerings Into New Service Areas

You can only grow as large as your existing service area allows, explaining why so many plumbing businesses experience stagnated growth. By expanding your service area, you can reach new customers, offering them the high-profit margin services that generate the most revenue.

The key is to expand your service area into places with limited competition. Use Google to search for plumbing companies in your area and expand the map. Review the existing companies in the surrounding areas and choose the best place to expand. Start the expansion slowly and build if you have the resources to do so.

With Housecall Pro, you can seamlessly add new service areas and track their performance. HCP’s marketing tools help you reach potential customers in new regions through targeted campaigns and promotions.

4. Create Automated Systems To Streamline Efficiency

Housecall Pro pipeline feature automation settings

It should come as no surprise that running a business involves many moving parts. With so many systems and processes to keep a hold of, finding ways to manage it all can seem like fighting an uphill battle.

Manual tasks such as scheduling and dispatching take up a lot of time and don’t generate revenue. Automating certain tasks will free up your technicians and the rest of your team to focus on profitable actions, such as completing jobs. Task automation also eliminates the risk of human error, which can cut into profits and hurt your company’s reputation. That’s why plumbing entrepreneurs need to invest in streamlining these tedious tasks or at the very least in finding someone to handle them.

That’s where you might have to consider a plumbing management software that centralizes these tasks for you. From automating scheduling, dispatching, invoicing, and payment processing, reducing your business’s administrative burden should be one of your top priorities. 

Justin Sachs, owner of Hometown Plumbing in Southern California, has this to say about how software from Housecall Pro helped reduce his business overhead costs. “Having HCP has allowed us to scale our operations and manage multiple technicians across a very large territory. We have streamlined our billing, dispatch, and account management into one system that has allowed for a drastic reduction in overhead if we had a less sophisticated system.” 

HCP’s automation features freed up precious time, allowing Justin to focus on more important business processes that reduced his operational costs. 

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Learn how to improve productivity, master financial planning, and scale your operations with our free Unlock The Full Potential Of Your Plumbing Business Ebook.

5. Offer Customer Financing Options To Increase Ticket Sizes

Pro using wisetack consumer financing on mobile phone

Focusing on high-profit margin jobs will help you increase revenue, but some customers will balk at large ticket sizes. It’s not that they don’t want the service, but they might not have thousands of dollars for a new tankless water heater or another high-ticket service.

Many of the customers who can’t or won’t pay large bills upfront will agree to finance the charges. You can add these customers to your schedule by offering customer financing.

Housecall Pro integrates with Wisetack, enabling you to offer flexible payment options to your customers. Easily increase average ticket sizes by making higher-cost services more accessible. Financing is automatically added to invoices and estimates between $500 and $25,000. HCP’s financing feature is seamlessly integrated into the invoicing process, ensuring a smooth experience for both you and your clients.

6. Increase Your Business Cash Flow

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Inconsistent cash flow will prevent your plumbing business from being financially healthy. You can improve your cash flow by asking for longer payment terms on invoices from suppliers, ensuring you complete jobs before paying for materials. You can also apply for plumbing business financing if you need additional funds.

Finally, prioritize collecting customer payments on time to improve your cash flow. Delayed payments hurt your overall financial health and force you to spend resources chasing down payments.

Housecall Pro’s invoicing and payment processing accelerate cash flow by enabling real-time invoicing and instant payment collection. Automated payment reminders ensure no payment opportunity falls through the cracks.

Nick Wills, owner of VIP Sewer and Drain Services, Inc. in Irvine, California, shares his experience: “Our small plumbing company was looking for ways to add some cash flow in order to expand and buy more needed equipment. Housecall Pro’s partnership with Stripe Capital made it so easy to get approved, and the way money is paid back makes it even easier. We appreciate Stripe and Housecall Pro helping us take our small business to the next level.”

James Carter from Byway Plumbing in Arkansas also praises the financial solutions offered by Housecall Pro: “Stripe loan with CC transaction percentage payoff is a business saver. Fundbox is great. Really, HCP has made me a successful business all around. I’ve opted into almost every extra niche it has to offer.”

By leveraging these cash flow strategies, your plumbing business can achieve a steady cash flow, ensuring long-term financial stability and profitability.

7. Double Down Your Marketing Efforts

Many plumbing companies come up short when it comes to investing in marketing. Companies should establish a marketing budget to drive customers to their business. Just throwing a little money toward marketing won’t do the trick. In fact, HVAC and plumbing companies devote an average of $2,500-$12,000 per month to marketing.

If you run a small plumbing company, you might not be able to spend that much. Instead, you can put 6-12% of your gross profits into the marketing budget.

Housecall Pro has marketing tools, including email and SMS campaigns, Google Business Profile online booking integration, and reputation management. These tools help you attract new customers, retain existing ones, and build a strong online presence. Our reporting dashboards provide insights into which marketing efforts are most effective, allowing you to maximize ROI.

8. Invest In Training Employees To Upsell & Cross-Sell

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Many plumbing technicians complete the job as scheduled without recommending new products or services. You’re leaving money on the table if your technicians aren’t trained in upselling and cross-selling. Invest in their training so they can identify upselling and cross-selling opportunities.

Housecall Pro supports training and performance tracking for your technicians. You can monitor job performance and provide targeted training to help your team identify upsell and cross-sell opportunities. “Good, better, best” sales proposals allow open opportunities for upsells. Property profiles let you access past service history and customer preferences, enabling you to personalize service that enhances customer satisfaction and boosts sales.

Christina Stollwerck of Stollwerck Plumbing LLC in Mukilteo, Washington, highlights the ease of training with Housecall Pro: “HCP provides just what we need, and you can order the extra marketing ‘a la carte’ if you want to use them. Intuitive use on both desktop and handheld devices make training employees a snap.”

With Housecall Pro, your technicians can become proficient in upselling and cross-selling, turning every job into an opportunity to increase sales and improve customer satisfaction. This targeted approach ensures your business capitalizes on every interaction, driving profitability and growth

9. Analyze Company Data To Find Costs Worth Cutting

You can’t avoid all overhead, but unnecessary expenses erode profitability. It’s vital to review your expenses to see if you can cut any costs. For example, assume you pay a late fee on supplies because you don’t pay the invoice on time. Changing the payment terms or paying on time would save you money each month.

Housecall Pro’s detailed reporting and analytics tools provide visibility into all aspects of your business operations. By analyzing this data, you can identify areas where costs can be reduced without compromising service quality. This raw data helps you make informed decisions, providing deep insights into possible cost savings that will increase profitability.

Plumbing Software That Keeps A Close Eye On Your Profits

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Ensuring the profitability of your plumbing business is within reach with Housecall Pro’s comprehensive plumbing software. Equipped with service agreement templates, price books, automated scheduling, and other powerful features, Housecall Pro helps you streamline operations and achieve your financial goals. Start your free 14-day trial today and see how Housecall Pro can transform your plumbing business into a more efficient and profitable enterprise.


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Last Posted July, 2024
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