Starting A Plumbing Company? Don’t Start Without These Tips
Starting A Plumbing Company? Don’t Start Without These Tips
There’s a misconception that squirrels bury hundreds of nuts and then forget about them. According to Britannica, food storage is a serious business, and squirrels don’t bury nuts randomly and carry out a proper plan.
Starting a plumbing company works the same way—if you forget some basic tips, you’ll waste time, money, and energy. From budgeting to inventory to taxes, you need to take care of certain aspects.
So, before diving in, read through these must-know tips for a few minutes. They’ll help you organize like a squirrel and start a business on a high note.
Best Practices for Starting a Plumbing Company
By 2029, the US plumbing industry’s worth will go beyond $158 billion, with more than 130,000 businesses competing for a slice of the pie. That’s a huge market—but also a crowded one.
To stand out, stay profitable, and avoid the all-too-common rookie mistakes. You need a solid foundation in the business side of plumbing. That’s where these best practices come in.
We’ve broken them down into simple, bite-sized sections so you can grasp every single detail.
1. Know the Difference Between Cash and Accrual Accounting
Before you pick an accounting method for your plumbing business, it’s important to understand how cash and accrual accounting work.
With cash-basis accounting, you only record money when it actually comes in or goes out. It’s simple and easy to follow, perfect for tracking your cash flow.
Accrual basis accounting, on the other hand, records income and expenses when they happen, not when the money changes hands. It gives you a fuller picture of your finances, which is helpful if you’re dealing with inventory, long-term projects, or more complex operations.
While the cash method might work for smaller or strictly cash-based businesses, accrual is usually the better fit for plumbing businesses that need more detailed financial tracking. Plus, knowing the difference is important when it comes to taxes—some rules only apply depending on which method you choose.
If you are interested in learning more about accounting methods, you can check our detailed guide here.
2. Plan with Forecasting
If you’re starting a plumbing company, one of the smartest things you can do early on is start forecasting. That means looking ahead and estimating how much money you expect to make and spend over a certain period.
Forecasting gives you a clearer picture of your future income, expenses, and overall cash flow. It helps you build a solid budget and make better business decisions based on real numbers instead of guesses.
It’s also key if you’re thinking about growth. Say you want to apply for a loan—having a forecast can show lenders that your business is headed in the right direction.
You don’t need fancy tools to get started. A simple spreadsheet in Excel or Google Sheets works just fine. But if you’d rather save time, you can use accounting software like QuickBooks to do the forecasting for you.
Not a numbers person? No worries. You can always hire a financial expert or accountant to handle it. That way, you can focus on running your business while they take care of the financial planning.
3. Set a Realistic Budget
Think of your budget as a financial game plan. It’s your way of estimating how much money you’ll bring in and what you’ll be spending in the coming months. A good budget keeps you focused on your goals and helps you stay on track financially.
Start by looking at all your income sources. How much money is coming in each month? Then, pay attention to patterns.
Does your income dip before the holidays? Do things pick up during winter when frozen pipes and heating issues are more common? These seasonal trends are important to spot—they’ll help you plan for slower months and stay prepared year-round.
A solid budget isn’t just about planning for what’s expected. It also helps you manage your cash flow, stay on top of debt, and build a cushion for surprise expenses.
4. Figure Out Your Break-Even Point
Break-even analysis sounds fancy, but it’s just a way to figure out how much you need to sell to cover your costs. At break-even point, you’re not making a profit yet—but you’re not losing money either.
To do a break-even analysis, you’ll look at your fixed costs (like rent and salaries), variable costs (like materials), and how much money you make per job. Put it all together, and you’ll get a clear number: the number of sales you need to break even.
Break-even analysis is super useful when you’re setting prices or deciding how many jobs you need to book. It helps you answer big questions like: “Is this price going to keep me afloat?” or “Can I afford to hire someone new?”
If your costs go up or sales slow down, you’ll see the impact right away, and you can adjust before things get tight.
5. Keep a Close Eye on Cash Flow
Cash flow is what keeps your plumbing business running. It’s all about tracking the money coming in and going out. Without enough cash, it’s tough to pay your team, cover materials, or take on new projects.
You’ll want to regularly check your incoming payments from clients and compare them against your outgoing expenses like tools, equipment, supplies, and labor.
Staying on top of this helps you avoid surprises and keeps your business running smoothly. It also helps to look ahead.
You can use your past financial data to predict what’s coming—when you’ll likely get paid, when bills are due, and whether you’ll hit a cash crunch or have a bit of a cushion. This kind of planning makes it easier to handle payroll, buy inventory, or pay off loans without scrambling.
Good cash flow forecasting gives you more control. It helps you make smarter decisions and keeps your business financially healthy.
6. Know Your Cost of Goods Sold (COGS)
COGS might sound technical, but it’s just the total of all the direct costs that go into providing your plumbing services. That means materials, labor, and other job-related expenses you can directly tie to a service you delivered.
Understanding your COGS is key when it comes to pricing your services. You need to know exactly what each job costs you so you’re not undercharging—or worse, losing money. Tracking this helps you spot areas where you might be overspending. Maybe you’re paying too much for materials, or your labor costs are higher than expected.
Knowing your numbers gives you the power to make changes, improve your margins, and boost your bottom line.
7. Don’t Forget About Depreciation
If you’re buying big-ticket items like vans, tools, or heavy equipment for your plumbing business, you won’t feel the full hit all at once—at least not on your books. That’s where depreciation comes in.
Depreciation is spreading out the cost of those assets over the years you’ll use them. So, instead of showing one huge expense upfront, it lets you match the cost of those items with the revenue they help generate over time.
There are a few ways to calculate it—like straight-line depreciation, where the value drops evenly each year, or accelerated methods that take a bigger chunk in the earlier years. The method you pick depends on how you use the asset and what makes the most sense for your taxes.
Getting this right matters. Depreciation affects your profits, tax bill, and even how healthy your business looks on paper. So, make sure it’s accounted for properly.
8. Keep Expenses in Check
Running a plumbing business involves many expenses—tools, parts, labor, vehicles, insurance, and the list goes on. Keeping those costs under control is key to staying profitable.
That means tracking where your money goes and being smart about spending. Look for deals with suppliers, avoid waste, and keep an eye out for areas where you might be overspending.
The better you manage your expenses, the more money you get to keep. It also puts you in a stronger position to reinvest in your business, whether upgrading equipment, hiring more help, or expanding your services.
9. Stay on Top of Financial Reporting
Financial reporting might sound like a chore, but it’s one of the best ways to keep your plumbing business in check. It’s all about pulling together reports like your profit and loss statement, balance sheet, and other key numbers to see how your business is doing.
These reports help you track performance, spot trends, and make smarter decisions—like when to grow, where to cut back, or how to price your services.
If you are curious about how you can automate financial reporting, you can check out our guide here.
10. Keep Inventory Under Control
If you’re storing plumbing parts, tools, or equipment, you need to manage that inventory carefully. You want to have what you need on hand without going overboard and tying up too much money in stock.
Good inventory management means knowing what you have, what’s being used, and when to reorder. It helps you avoid delays, save on storage costs, and keep your cash flow healthy.
11. Make Time for Taxes Year-Round
Taxes aren’t just a once-a-year thing. Staying on top of them all year can save you a lot of stress and money.
Between income tax, sales tax, and payroll tax, plumbers deal with their fair share of filings. And since the rules can vary depending on where you’re working, it’s important to know what’s expected.
By regularly setting aside time to handle your tax paperwork, track deductions, and keep your records clean, you’ll feel more in control and be less likely to encounter surprises during the tax season.
Final Thoughts
Starting a plumbing company is about building a business that can grow, stay profitable, and handle whatever gets thrown its way (including leaky clients and slow seasons).
By following these tips, you can launch your business and keep it profitable in the long run. It might feel like a lot at first, but trust us, taking the time now to lay a solid foundation will save you from a ton of headaches down the road.
And hey, no one builds a business alone. Don’t be afraid to ask for help. Fortunately, you don’t need to open another tab for help.
Tangent Consulting is your go-to source for outsourcing your accounting department. We can help you start a plumbing company by understanding what you need. So, you don’t sleep worrying about your business accounting.
P.S. If you are reading this, it means you can have access to our free consultation for your business. Avail this for free today before we change our mind
FAQs
What are the startup costs for a small plumbing business?
Startup costs typically range from $10,000 to $30,000, depending on equipment, licensing, and whether you’re working solo or hiring help.
What do I need to start a plumbing company?
You’ll need a plumbing license, business registration, insurance, basic tools, a reliable vehicle, and a plan for managing finances and customers.
How much do plumbing companies profit?
Profit margins vary, but small plumbing businesses can see net profits between 10% and 20% once up and running.
