5 Ways To Improve Your Plumbing Business Profitability

A guide on how to blow your profit margins out of the water.

Let’s face it, as a plumbing contractor these days there’s an AWFUL LOT that’s out of your control.

Lowball competitors. Salary expectations. Tricky customers. Screeching inflation.

With all these factors in the works, estimating can feel more like a guessing game than the vital business function it is, and making ANY profit can seem good enough.

But you’re not just ANY plumber, are you?

Deep down you know your company can do better financially, if you just knew which taps to turn…

Well, we’re here to tell you that your instincts are completely correct, and there are some ready-made systems that can help get your profits flowing.

What are good plumbing profit margins?

To begin, it’s worth knowing the average profit margins for plumbing companies. This gives you a benchmark for comparison and lets you know where you stand against the rest of the industry.

These numbers are based on the data Breakthrough Academy has collected from analyzing hundreds of plumbing companies, and you’ll notice they’re broken out by levels of achievement.

Most plumbing company profits land squarely in the “Average” category, but we’ve also provided benchmarks for those “Awesome” plumbers who aim higher, as well as those who could, “Ahh… maybe do a bit better…”

We’ve split the benchmarks by workstream, realizing there will be some plumbing companies who engage in both. If that’s you, it’s worth tracking your profit margins for each stream and comparing them accordingly.

Gross versus net plumbing profit margins

In case you could use a refresher on the difference between gross profit margins and net profit margins, here you are:

💲Gross profit margin – This is the money you bring in from your projects or services BEFORE you pay any overhead costs, such as salaries (including your own!) and office expenses. Carefully managing your gross profits is a great way to increase overall profitability.

💲Net profit margin – This is what’s commonly referred to as your “bottom line.” It’s what’s left after you’ve paid ALL your expenses, including project-related costs and overhead. Your net profits can be reinvested into your business to fuel growth.

This article will walk you through how to calculate your profit margins, if you haven’t done it in a while (or ever!).

How to increase your plumbing business profits

#1 - Create a budget

If your budget currently consists of scribbles on the back of invoices or a collection of convoluted spreadsheets, you need to sort that situation out, stat.

A clearly defined budget helps you make strategic plans for the future and navigate business decisions. It’s a key component in your financial system, allowing you to:

• Track the financial health of your business
• Calculate metrics like your gross and net profit margins
• Set up a cashflow and payments schedule
• Keep your overhead from overflowing

Need a better budget system? This Budget Tool will have you crunching your numbers in no time.

#2 - Make job costing routine

Job costing is one of the most finicky parts of financial management. Stay on it, and you’ll be richly rewarded. Let it lapse, and it can be detrimental to your plumbing business profits.

The task of diligently tracking all the various costs on a project can feel time-consuming, though it doesn’t need to. While many of you will already be using software to help with this, if you aren’t, never fear! We’ve got a template that can help – book a call and we’ll set you up.

Once you’ve got your job costing system in place though, the work doesn’t end with just tracking costs. You also need to analyze how the project’s final numbers line up to the estimate.

Yes, this is sometimes painful. But that’s how you – and your profit margins – grow.

#3 - Be selective about your projects

If you’ve succeeded in building a plumbing company that can stand on its own two feet by now (however shaky it may feel at times), you’re probably in the enviable position of often having more work than you can feasibly take on.

It’s a good problem to have, but how you handle it can have a drastic impact on your profit margins. So choose wisely. 

Which projects tend to provide your business with the largest gross profit? Prioritize those.

Then, run them smoothly. Doing things right the first time not only saves your business money, it alleviates a ton of stress and frees you up to focus on other methods for augmenting your profits.

#4 - Hire thoughtfully and train well

Your hiring system may feel somewhat removed from your financial system, but hear us out on this one. 

Payroll and labor costs tend to eat up massive portions of a plumber’s budget. Good talent comes at a higher price tag, but it’s worth it – you WANT good staff and crew because they know how to do quality work efficiently. The alternative is a team that makes costly mistakes.

Hire good people and then put systems in place to train them properly. Your bottom line will thank you, as will your family because you’ll be able to spend your evenings with them instead of behind your computer, frantically cleaning up the day’s latest project messes.

#5 - Invest in your people

This one might seem counterintuitive at first – spending more on your team as a means of saving money? But it falls in line with the previous step. Good people are worth spending on because they do better work, faster. 

So, how should you invest in your team? First, set up an accountability system so they’re crystal clear on the expectations and goals they need to achieve. Then, provide performance pay to incentivize them to meet their targets.

For roles where it’s appropriate, make profit-protecting behavior a part of their job description. This is a great motivator for talented project managers tasked with ensuring a project stays within a set gross profit margin.

There you go. Five steps to pumping up your profits. Each has its merits, though they all begin with a solid budget. They say the first step is always the hardest, but not this time. We’ve made it easy to get started with this Budget Tool. Download it here!

If you’d like to wring maximum profit potential out of your business – and work fewer hours while you’re at it – find out more now!

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