Do you want to start plumbing business

Are you planning to start plumbing business? The plumbing industry in the U.S. has been on an upward trend for the last decade. In 2009, plumbing revenue in the U.S was approximately 100 billion dollars. Professional plumbing is a key subcontracting industry that is important for both residential and non-residential buildings. Plumbers install systems both for new constructions as well as do repairs and maintenance of existing structures. As a critical service sector, venturing into this business is a great idea so long as you have a good business plan in place to guide implementation.

Executive Summary

2.1 The Business

The plumbing business will be registered as Greenhouse Plumbing and shall be located in Lower Manhattan, New York. The business is owned by Graham Johns who is an experienced professional plumber.

2.2 Management Team

Graham Johns, Owner of Greenhouse Plumbing is an experienced plumber with more than 15 years of experience in the plumbing industry. Before starting a plumbing business, Graham dedicated his expertise to the corporate industry by working for numerous companies in the United States.

2.3 Customer Focus

Given his deep industry experience, Graham has vast knowledge of plumbing that is a great asset to help him set up Greenhouse Plumbing and target the right customers.

2.4 Business Target

Graham knows the plumbing industry well and how to go about getting the right customers to bring in the anticipated business revenue. With the right set of strategies, he hopes to penetrate the market and get good business.

Plumbing Business Plan - 3 Years Profit Forecast

Company Summary

3.1 Company Owner

Graham Johns is an experienced plumber whose successful career in the plumbing industry has lasted almost two decades. As a leading expert, Graham has worked on large-scale plumbing projects which has equipped him with knowledge on how to run a successful plumbing business.

3.2 Aim of Starting the Business

With the growth of both residential and commercial real estate industry, a lot of opportunities have been created as plumbers play a key role in constructing, repairing and maintaining plumbing systems. Having been in the industry for long, Graham knows too well the future of plumbing is bright and this informed his decision to start Greenhouse Plumbing.

3.3 How the Business will be Started

Armed with extensive plumbing experience, Graham is a successful plumbing professional with vast technical experience of how to run the business. He clearly understands what needs to be done to setup but has also engaged financial experts to come up with a comprehensive financial analysis.

Plumbing Business Plan - Startup Cost

Start-up Expenses 
Legal$4,000
Consultants$6,000
Insurance$16,000
Rent$8,000
Research and Development$10,000
Expensed Equipment$9,000
Signs$3,000
TOTAL START-UP EXPENSES$56,000
Start-up Assets
Cash Required$100,000
Start-up Inventory$25,000
Other Current Assets$12,000
Long-term Assets$4,000
TOTAL ASSETS$16,000
Total Requirements$18,000
START-UP FUNDING$0
START-UP FUNDING$80,000
Start-up Expenses to Fund$20,000
Start-up Assets to Fund$15,000
TOTAL FUNDING REQUIRED$0
Assets$10,000
Non-cash Assets from Start-up$7,000
Cash Requirements from Start-up$0
Additional Cash Raised$25,000
Cash Balance on Starting Date$14,000
TOTAL ASSETS$0
Liabilities and Capital$0
Liabilities$0
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$0
Other Current Liabilities (interest-free)$0
TOTAL LIABILITIES$0
Capital$0
Planned Investment$0
Investor 1$5,000
Investor 2$40,000
Other$0
Additional Investment Requirement$0
TOTAL PLANNED INVESTMENT$60,000
Loss at Start-up (Start-up Expenses)$30,000
TOTAL CAPITAL$20,000
TOTAL CAPITAL AND LIABILITIES$15,000
Total Funding$90,000

Services for Customers

Greenhouse Plumbing offers a wide variety of services for clients in the greater New York area. In order to effectively know how to start your own plumbing business, it’s a great idea to identify services to be offered. To penetrate an established industry which already has other plumbing companies, Graham John plans to focus on excellent service delivery and professionalism to grow plumbing business. With diversified services targeting all types of clients, customers will be able to enjoy a vast number of benefits all under one roof. Greenhouse Plumbing intends to offer the following types of services to both residential and commercial clients in New York.

  • General plumbing services that include repair, maintenance and setting up of new plumbing systems
  • Streamfitting and piping services
  • Gas plumbing and appliance repair
  • Installation of septic tanks, lawn sprinkler and hot water systems

Marketing Analysis of Plumbing Business

Plumbing is a key service sector that plays a vital role in both the residential and commercial real estate industry. Builders who come up with numerous projects are often in need of professional, experienced, reliable and well-priced professional plumbers who can offer excellent plumbing services. With the rapid expansion of New York’s real industry, Greenhouse Plumbing has an incredible opportunity considering Graham has vast knowledge of how to run a plumbing business.

5.1 Market Segment

For Greenhouse Plumbing to meet its financial objectives, this plumbing company business plan explains in detail the customer target and which marketing strategies shall be used to woo prospective customers. Identification of the target market is vital to ensure customized marketing strategies are adopted in order to yield the desired results.

Plumbing Business Plan - Market Segmentation

5.1.1 Individuals and Households

With a population of over 8 million people, New York is the largest city in the United States meaning it has the highest number of households than any other city in the U.S. Because of this, the largest source of customers for Greenhouse Plumbing is expected to be individual households that are in need of professional plumbing services. This plumbing business plan lays out emphasis on what needs to be done to effectively reach out to this market projected to be a key revenue source for Greenhouse plumbing. From the onset, Graham and his team must find ways of connecting with local households in various New York residential neighbors.

5.1.2 Corporates

New York is a corporate hub with thousands of commercial buildings that host corporate companies. Whether it is fixing plumbing systems for new buildings or doing maintenance and repairs for existing structures, the corporate industry is a lucrative market for Greenhouse Plumbing. Corporates award large long-term plumbing maintenance and repair contracts which are lucrative and a great revenue source for the company. The corporate industry is keen on getting the best professional plumbing services and therefore, Greenhouse plumbing needs to implement strategic marketing policies that attract corporate clientele.

5.1.3 Real Estate Owners and Developers

New York is among top U.S. cities with a vibrant real estate sector which is one of the biggest customers for the plumbing industry. New York is home to some of the largest and most popular real estate companies in the United States. Due to the large number of real estate firms, Greenhouse Plumbing has to know how to market a plumbing business to various New York real estate owners and developers. Among the priority target markets should be focus on how to penetrate the real estate industry.

5.1.4 Government Agencies

Government is a major customer segment with a good capability to provide Greenhouse Plumbing with a good source of revenue. Even though government jobs aren’t easy to secure, the business stands a good chance to secure business from various federal agencies.

Market Analysis
Potential CustomersGrowthYEAR 1YEAR 2YEAR 3YEAR 4YEAR 5CAGR
Individuals and Households30%6,0008,00010,00012,00014,0005.00%
Government Agencies27%9,00011,00013,00015,00017,00011.00%
Corporates25%10,00012,00014,00016,00018,0009.00%
Real Estate Owners and Developers18%12,00014,00016,00018,00020,00014.00%
Total100%15,000 17,000             19,00021,00023,00016.00%

5.2 Business Target

Greenhouse Plumbing has plans to offer a superior plumbing service that will cut out the business from the rest of its competitors. New York being a large city with diverse types of customers is an advantage for the business. Despite the presence of established plumbing companies, the company has formulated a clear business operational plan that will help realize an annual sales increase of 20%-25%.

5.3 Product Pricing

When thinking about plumbing business start up costs, Greenhouse Plumbing has come up with a pricing structure which takes into account market rates and what competitors are charging. Ultimately, the plan is to ensure the correct pricing mechanism is put in place for the business attains its revenue targets.

Strategy

With the right strategies put in place, there is a lot of revenue potential for Greenhouse Plumbing to tap. A host of creative marketing strategies will be helpful in aggressively marketing the plumbing business. To start a plumbing business that will be successful, it is imperative to have the right strategies in place.

6.1 Competitive Analysis

Greenhouse Plumbing has extensively studied the market and identified areas it can capitalize on to generate revenue to outsmart its competitors. New York is a large city with plenty of opportunities that can only be identified through consistent market analysis and research efforts.

6.2 Sales Strategy

For Greenhouse Plumbing to penetrate the market and win loyal customers as well as keep attracting new clients, the sales strategies below will be used to advertise the business.

  • Distribute introduction letters, company materials and brochures to targeted customer segments in an effort to market and create awareness about the new plumbing company
  • Organize an opening party and invite stakeholders as well as prospective customers from key industries such as real estate professionals and managers. This forum is a great networking opportunity to create rapport with customers.
  • Attend exhibitions and events that bring together plumbing companies.
  • Advertise the business in local print and broadcast media such as television, radio and newspapers
  • Adopt digital marketing strategies such as Google Ads, Facebook and Twitter as many clients now seek plumbing services through the internet
  • Market the business in listings such as the Yellow Pages
  • Word of mouth marketing

6.3 Sales Forecast

For Greenhouse Plumbing to achieve its goals, below is a detailed sales forecast which has been formulated to guide the business on a path towards success.

Plumbing Business Plan - Unit Sales

Sales Forecast   
Unit SalesYear 1Year 2Year 3
SteamFitting and Pipping150,000170,000190,000
General Pipping services130,000150,000170,000
Gas plumping and appliance repair100,000120,000140,000
Installtion of septic tanks80,000100,000120,000
TOTAL UNIT SALES460,000540,000620,000
Unit PricesYear 1Year 2Year 3
SteamFitting and Pipping$100.00$110.00$120.00
General Pipping services$80.00$100.00$120.00
Gas plumping and appliance repair$50.00$60.00$70.00
Installtion of septic tanks$30.00$40.00$50.00
Sales
SteamFitting and Pipping$130,000$140,000$160,000
General Pipping services$110,000$120,000$140,000
Gas plumping and appliance repair$90,000$110,000$120,000
Installtion of septic tanks$70,000$90,000$120,000
TOTAL SALES
Direct Unit CostsYear 1Year 2Year 3
SteamFitting and Pipping$1.50$2.50$3.50
General Pipping services$1.25$2.25$3.25
Gas plumping and appliance repair$1.00$2.00$3.00
Installtion of septic tanks$0.80$1.80$2.80
Direct Cost of Sales
SteamFitting and Pipping$120,000$130,000$140,000
General Pipping services$100,000$110,000$120,000
Gas plumping and appliance repair$80,000$90,000$110,000
Installtion of septic tanks$50,000$60,000$70,000
Subtotal Direct Cost of Sales$350,000$360,000$380,000

Personnel Plan

Greenhouse Plumbing understands too well the importance of having skilled, experienced and reliable employees. Hiring personnel is a key component of how to start a plumbing business. Plumbing is highly technical and the success of this business depends on the caliber of staff hired to work on various systems.

7.1 Personnel Plan

For Greenhouse plumbing to operate effectively, the following staff will be hired to work in various areas of the business. For starters, Graham Johns who is the owner of the business will also be the Chief Executive Officer. In addition, the following staff will hired to offer a helping hand.

  • Technical Manager
  • 2 Sales and Marketing Executives
  • 1 Accountant
  • 1 Customer Service Assistant
  • 5 Plumbers and Handymen

Successful applicants will be taken through intensive training to familiarize themselves with plumbing company operations.

7.2 Average Salaries

Greenhouse Plumbing intends to compensate staff the following salaries within the first three years of operation.

 Personnel Plan   
Year 1Year 2Year 3
Technical Manager$30,000$32,000$34,000
2 Sales and Marketing Executive$40,000$42,000$44,000
1 Accountant$15,000$17,000$19,000
1 Customer Service Assitant$10,000$12,000$14,000
5 Plumbers and Handymen$100,000$120,000$140,000
Total Salaries$195,000$223,000$251,000

Financial Plan

Green Plumbing has come up with a detailed financial plan that will help steer the business to development. One of the key things to think about when starting plumbing business is to have a sound financial strategy. A bulk of the capital will be raised from Graham’s personal savings and two investors who are his close friends. Additional funding will be sought through a bank loan to finance the remaining budget deficit. Using this detailed breakdown of financial parameters, the business will be best positioned to fully harness plumbing business opportunities for the sake of growth. The following is a detailed financial breakdown for Greenhouse Plumbing.

8.1 Important Assumptions

The financial forecast for Greenhouse Plumbing is based on the assumptions below.

 General Assumptions   
Year 1Year 2Year 3
Plan Month123
Current Interest Rate8.00%12.00%16.00%
Long-term Interest Rate7.00%7.00%7.00%
Tax Rate9.00%11.00%13.00%
Other000

8.2 Brake-even Analysis

Greenhouse Plumbing brake-even analysis is shown in the graph below.

Plumbing Business Plan - Brake-even Analysis

 Brake-Even Analysis 
Monthly Units Break-even5000
Monthly Revenue Break-even$150,000
Assumptions:
Average Per-Unit Revenue$100.00
Average Per-Unit Variable Cost$1.20
Estimated Monthly Fixed Cost$250,000

8.3 Projected Profit and Loss

Profit and loss information for Greenhouse Plumbing as calculated on a monthly and annual basis is indicated below.

 Pro Forma Profit And Loss   
Year 1Year 2Year 3
Sales$200,000$220,000$240,000
Direct Cost of Sales$25,000$30,000$35,000
Other$0$0$0
TOTAL COST OF SALES$225,000 $250,000 $275,000
Gross Margin$210,000$230,000$250,000
Gross Margin %25.00%25.00%25.00%
Expenses
Payroll$180,000$200,000$220,000
Sales and Marketing and Other Expenses$3,000$5,000$7,000
Depreciation$2,000$3,000$4,000
Leased Equipment$0$0$0
Utilities$4,000$6,000$8,000
Insurance$2,000$3,000$4,000
Rent$7,000$9,000$11,000
Payroll Taxes$10,000$15,000$20,000
Other$0$0$0
Total Operating Expenses$150,000$160,000$180,000
Profit Before Interest and Taxes$20,000$24,000$28,000
EBITDA$15,000$17,000$19,000
Interest Expense$0$0$0
Taxes Incurred$10,000$12,000$14,000
Net Profit$80,000$90,000$100,000
Net Profit/Sales10.00%20.00%25.00%

8.3.1 Monthly Profit

Plumbing Business Plan - Profit Monthly

8.3.2 Yearly Profit

Plumbing Business Plan - Profit Yearly

8.3.3 Monthly Gross Margin

Plumbing Business Plan - Gross Margin Monthly

8.3.4 Yearly Gross Margin

Plumbing Business Plan - Gross Margin Yearly

Profit and Loss Analysis for Greenhouse Plumbing is illustrated below.

8.4 Projected Cash Flow

Below is a summary of Pro forma cash flow, subtotal cash received, subtotal cash spent, subtotal cash from operations and subtotal cash spent on operations.

Plumbing Business Plan - Projected Cash Flow

 Pro Forma Profit And Loss   
Year 1Year 2Year 3
Sales$200,000$220,000$240,000
Direct Cost of Sales$25,000$30,000$35,000
Other$0$0$0
TOTAL COST OF SALES$225,000 $250,000 $275,000
Gross Margin$210,000$230,000$250,000
Gross Margin %25.00%25.00%25.00%
Expenses
Payroll$180,000$200,000$220,000
Sales and Marketing and Other Expenses$3,000$5,000$7,000
Depreciation$2,000$3,000$4,000
Leased Equipment$0$0$0
Utilities$4,000$6,000$8,000
Insurance$2,000$3,000$4,000
Rent$7,000$9,000$11,000
Payroll Taxes$10,000$15,000$20,000
Other$0$0$0
Total Operating Expenses$150,000$160,000$180,000
Profit Before Interest and Taxes$20,000$24,000$28,000
EBITDA$15,000$17,000$19,000
Interest Expense$0$0$0
Taxes Incurred$10,000$12,000$14,000
Net Profit$80,000$90,000$100,000
Net Profit/Sales10.00%20.00%25.00%

8.5 Projected Balance Sheet

Below is a Projected Balance Sheet for Greenhouse Plumbing that indicates assets, liabilities, capital, long term assets and current liabilities.

 Pro Forma Balance Sheet   
AssetsYear 1Year 2Year 3
Current Assets
Cash$100,000$120,000$140,000
Accounts Receivable$10,000$12,000$14,000
Inventory$3,000$5,000$7,000
Other Current Assets$2,000$2,000$2,000
TOTAL CURRENT ASSETS$115,000 $139,000 $163,000
Long-term Assets
Long-term Assets$8,000$10,000$12,000
Accumulated Depreciation$10,000$12,000$14,000
TOTAL LONG-TERM ASSETS$2,000 $4,000 $6,000
TOTAL ASSETS$135,000 $165,000 $195,000
Liabilities and CapitalYear 1Year 2Year 3
Current Liabilities
Accounts Payable$12,000$16,000$20,000
Current Borrowing$0$0$0
Other Current Liabilities$0$0$0
SUBTOTAL CURRENT LIABILITIES$12,000 $16,000 $20,000
Long-term Liabilities$0$0$0
TOTAL LIABILITIES$12,000 $16,000 $20,000
Paid-in Capital$20,000$20,000$20,000
Retained Earnings$15,000$20,000$25,000
Earnings$80,000$90,000$100,000
TOTAL CAPITAL$150,000 $160,000 $170,000
TOTAL LIABILITIES AND CAPITAL$180,000 $200,000 $220,000
Net Worth$210,000$230,000$250,000

8.6 Business Ratios

The following is the Ratio Analysis, Business Ratios and Business Net Worth for Greenhouse Plumbing.

 Ratio Analysis    
Year 1Year 2Year 3INDUSTRY PROFILE
Sales Growth5.00%12.00%16.00%4.00%
Percent of Total Assets
Accounts Receivable7.00%6.00%5.00%11.00%
Inventory5.00%3.00%2.00%10.00%
Other Current Assets6.00%2.50%2.00%23.00%
Total Current Assets100.00%125.00%130.00%45.00%
Long-term Assets-4.00%-12.00%-20.00%50.00%
TOTAL ASSETS80.00%100.00%100.00%100.00%
Current Liabilities5.00%5.00%4.00%18.00%
Long-term Liabilities0.00%0.00%0.00%20.00%
Total Liabilities4.00%2.00%1.00%35.00%
NET WORTH60.00%70.00%90.00%30.00%
Percent of Sales
Sales100.00%100.00%100.00%100.00%
Gross Margin50.00%75.00%78.00%0.00%
Selling, General & Administrative Expenses55.00%60.00%65.00%70.00%
Advertising Expenses2.00%3.00%2.00%3.50%
Profit Before Interest and Taxes16.00%28.00%31.00%20.50%
Main Ratios
Current816201.4
Quick2432361.5
Total Debt to Total Assets2.00%2.50%2.00%60.00%
Pre-tax Return on Net Worth55.00%85.00%90.00%5.3.0%
Pre-tax Return on Assets50.00%70.00%72.00%9.00%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin10.00%20.00%23.00%N.A.
Return on Equity45.00%58.00%62.00%N.A.
Activity Ratios
Accounts Receivable Turnover4810N.A.
Collection Days80100105N.A.
Inventory Turnover141922N.A.
Accounts Payable Turnover91619N.A.
Payment Days232424N.A.
Total Asset Turnover2.33.63.9N.A.
Debt Ratios
Debt to Net Worth0-0.08-0.04N.A.
Current Liab. to Liab.000N.A.
Liquidity Ratios
Net Working Capital$120,000$260,000$290,000N.A.
Interest Coverage000N.A.
Additional Ratios
Assets to Sales1.33.24.2N.A.
Current Debt/Total Assets4%5%3%N.A.
Acid Test203236N.A.
Sales/Net Worth2.531.5N.A.
Dividend Payout000N.A.