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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.
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 business experts to come up with a comprehensive financial analysis.
| 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.
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 Customers | Growth | YEAR 1 | YEAR 2 | YEAR 3 | YEAR 4 | YEAR 5 | CAGR | ||
| Individuals and Households | 30% | 6,000 | 8,000 | 10,000 | 12,000 | 14,000 | 5.00% | ||
| Government Agencies | 27% | 9,000 | 11,000 | 13,000 | 15,000 | 17,000 | 11.00% | ||
| Corporates | 25% | 10,000 | 12,000 | 14,000 | 16,000 | 18,000 | 9.00% | ||
| Real Estate Owners and Developers | 18% | 12,000 | 14,000 | 16,000 | 18,000 | 20,000 | 14.00% | ||
| Total | 100% | 15,000 | 17,000 19,000 | 21,000 | 23,000 | 16.00% | |||
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.
| Sales Forecast | |||
| Unit Sales | Year 1 | Year 2 | Year 3 |
| SteamFitting and Pipping | 150,000 | 170,000 | 190,000 |
| General Pipping services | 130,000 | 150,000 | 170,000 |
| Gas plumping and appliance repair | 100,000 | 120,000 | 140,000 |
| Installtion of septic tanks | 80,000 | 100,000 | 120,000 |
| TOTAL UNIT SALES | 460,000 | 540,000 | 620,000 |
| Unit Prices | Year 1 | Year 2 | Year 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 Costs | Year 1 | Year 2 | Year 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 1 | Year 2 | Year 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 for business plan 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 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 8.00% | 12.00% | 16.00% |
| Long-term Interest Rate | 7.00% | 7.00% | 7.00% |
| Tax Rate | 9.00% | 11.00% | 13.00% |
| Other | 0 | 0 | 0 |
8.2 Brake-even Analysis
Greenhouse Plumbing brake-even analysis is shown in the graph below.
| Brake-Even Analysis | |
| Monthly Units Break-even | 5000 |
| 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 1 | Year 2 | Year 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/Sales | 10.00% | 20.00% | 25.00% |
8.3.1 Monthly Profit
8.3.2 Yearly Profit
8.3.3 Monthly Gross Margin
8.3.4 Yearly Gross Margin
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.
| Pro Forma Profit And Loss | |||
| Year 1 | Year 2 | Year 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/Sales | 10.00% | 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 | |||
| Assets | Year 1 | Year 2 | Year 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 Capital | Year 1 | Year 2 | Year 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 1 | Year 2 | Year 3 | INDUSTRY PROFILE | |
| Sales Growth | 5.00% | 12.00% | 16.00% | 4.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 7.00% | 6.00% | 5.00% | 11.00% |
| Inventory | 5.00% | 3.00% | 2.00% | 10.00% |
| Other Current Assets | 6.00% | 2.50% | 2.00% | 23.00% |
| Total Current Assets | 100.00% | 125.00% | 130.00% | 45.00% |
| Long-term Assets | -4.00% | -12.00% | -20.00% | 50.00% |
| TOTAL ASSETS | 80.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 5.00% | 5.00% | 4.00% | 18.00% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 20.00% |
| Total Liabilities | 4.00% | 2.00% | 1.00% | 35.00% |
| NET WORTH | 60.00% | 70.00% | 90.00% | 30.00% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 50.00% | 75.00% | 78.00% | 0.00% |
| Selling, General & Administrative Expenses | 55.00% | 60.00% | 65.00% | 70.00% |
| Advertising Expenses | 2.00% | 3.00% | 2.00% | 3.50% |
| Profit Before Interest and Taxes | 16.00% | 28.00% | 31.00% | 20.50% |
| Main Ratios | ||||
| Current | 8 | 16 | 20 | 1.4 |
| Quick | 24 | 32 | 36 | 1.5 |
| Total Debt to Total Assets | 2.00% | 2.50% | 2.00% | 60.00% |
| Pre-tax Return on Net Worth | 55.00% | 85.00% | 90.00% | 5.3.0% |
| Pre-tax Return on Assets | 50.00% | 70.00% | 72.00% | 9.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 10.00% | 20.00% | 23.00% | N.A. |
| Return on Equity | 45.00% | 58.00% | 62.00% | N.A. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 4 | 8 | 10 | N.A. |
| Collection Days | 80 | 100 | 105 | N.A. |
| Inventory Turnover | 14 | 19 | 22 | N.A. |
| Accounts Payable Turnover | 9 | 16 | 19 | N.A. |
| Payment Days | 23 | 24 | 24 | N.A. |
| Total Asset Turnover | 2.3 | 3.6 | 3.9 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | 0 | -0.08 | -0.04 | N.A. |
| Current Liab. to Liab. | 0 | 0 | 0 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $120,000 | $260,000 | $290,000 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 1.3 | 3.2 | 4.2 | N.A. |
| Current Debt/Total Assets | 4% | 5% | 3% | N.A. |
| Acid Test | 20 | 32 | 36 | N.A. |
| Sales/Net Worth | 2.5 | 3 | 1.5 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
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