The Financial Foreman Insights – Plumbing Part 4

The Final instalment in the series, if you would like a summarised guide click here and subscribe to receive more helpful hints. We will focus on the key numbers form all plumbers operating in the plumbing industry, giving you a true indication of how you stack up.

Profit – 12%

For every $100 in sales, the business should have $12 the bank left over. Is this your profit margin? If not let’s see why it’s different.

Wages – 28%

For every $100 in sales, $28 should be going to Wages. Be sure to include owner wages or what you should be playing yourself in this figure.

Purchases – 37%

For every $100 in sales, $37 should be going to Materials.

“Sole Proprietors drawing an income from profit can inflate industry profit margins and wage costs”

Other – 20%

Other is made up of all other expenses that make up the costs of running the business. I.e. Subcontractors (10%), Motor Vehicle Expenses (5%), Insurance, Repairs and Maintenance, professional fees etc.
For every $100 in sales, $20 should be going to Operating Costs.

Depreciation – 2%

Decline in value of equipment.
For every $100 in sales, $2 should be from the depreciation of equipment (non-cash item).

Rent – 1%

Most small contractors don’t rent out an office or warehouse space, so if you don’t you should see this amount left over in the bank.
For every $100 in sales, $1 should be going to rent.

What to do next

These benchmarked ratio’s give a good indication for improvement areas for your business. If Wages are too high, are your staff spending more time travelling to pick up supplies too frequently? If Materials are too high, have you got your Materials to mark up right? Or you might have issues with wastage of Materials. As accountants we love numbers, so if you have a question or something doesn’t quite add up feel free to get in touch and we can help get to the bottom of it.

Download your free cheatsheet to improving your plumbing business.

Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your Accountant for help.

An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.

The Financial Foreman Insights – Plumbing Part 3

Previously we focus on the future growth prospects of the plumbing industry, now let’s focus on the current opportunities that you can take advantage of. Call it the easy wins, it will generate returns faster for your business.

Licencing

Further training to upgrade or acquire new plumbing licences permits the business to operate in a larger variety of segments. Such as resource infrastructure, equipment and solar technology opening up new opportunities and revenue streams for your business.

Gas Fitting

Specialise in gas fitting, this segment of the plumbing industry has been growing over the last 5 years increasing its revenue share in the plumbing industry. The growth in the share of the population with access to natural gas as a source energy is driving this demand and will continue to grow. In comparison to general plumbing services, gas fitting services offer a high sales per job ratio.

Roof Plumbing and Drainage

An increase in domestic water tank installations and wider use of steel roofing on single-unit houses and multi-unit apartments has seen a rise in roof plumbing and drainage services. A particular focus on those that are environmentally conscious can reap rewards.

“Growing markets create opportunities and new revenue streams for your business”

Skilled Labour

It’s no secret that finding good skilled labour is a difficult task a problem that is not unique to the plumbing industry but seen right through the construction industry. There are a few ways you can use this to your advantage:-

• Build a good relationship with training providers and apprenticeship organisations. This should give you access to staff with a good mindset and the right attitude before they become available in the employment market.
• Build a relationship with schools to have work experience students through your business, this again is a great way to great future staff with a good mindset and the right attitude.

This way you are able to mould your staff to your business way of doing business, with its values and representative of your brand.

What to do next

Larger contracting firms are currently offering a broad range of services, a one-stop shop if you will. Contrastingly smaller contractors are increasingly specialising into specific service categories (hot water service, gas, solar heating etc.) allowing them to capture contracts across a larger geographic area. Think about your experience in the industry and particularly what your business does well that is where the greatest opportunity will be.

Download your free cheatsheet to improving your plumbing business.

Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your Accountant for help.

An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.

The Financial Foreman Insights – Plumbing Part 2

The plumbing industry is changing, a change in the types of dwellings we are constructing. This has a flow-on effect to the number of plumbing amenities per dwelling unit and exposed roof areas. So as we look to the future, what is the industry moving towards?

Switching household demand

Some plumbers have adapted to a changing household demand and found a successful niche by offering specialist installation service to facility households switching from traditional gas or electric hot water systems to more environmentally friendly solar hot water systems. A demand that is expected to grow in the near future.

New residential building and renovation work

The recent increasing demand for plumbing work for the installation of fixtures and fitting in new buildings and renovation work on the existing buildings is expected to continue. The rise in household discretionary income will support this demand.

Plumbing emergency and maintenance work

The demand for plumbing emergency repair and maintenance work in the housing market will remain solid, supported by trends in household discretionary income and consumer spending. Smaller plumbing contractors will continue to derive the bulk of their revenue from this work, however, an increasing share of this market will be met by contractors operating through franchise arrangements or innovative schemes, such as Emergency Home Assist (EHA) and programs offering by insurance organisations.

“The growth in Emergency Home Assist (EHA) and programs offering by insurance organisations shouldn’t be ignored”

Non-residential building construction (commercial) work

Strong demand is forecast for plumbing installation work on new office, retail and warehouse construction projects. Demand is expected to strengthen for work in the institutional building market (educational facilities and hospitals).

Infrastructure work

Moderate improvement in demand for infrastructure markets over the next few years. Reflecting the recovery of investment in water supply, sewerage and pipeline developments to cope with the expanding population base and improve water security.

What to do next

One eye should be kept in the future growth of the plumbing industry and expected revenue streams. The strategic decisions on the future direction of your business should be based on this data and give you an advantage over your competition.

Download your free cheatsheet to improving your plumbing business.

Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your Accountant for help.

An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.

The Financial Foreman Insights – Plumbing Part 1

Do you want to improve and grow your plumbing business? The first step is to look at your successful competitors and see what they are doing. Powered by Research and our knowledge, insights and experience we know the most successful plumbing business do the following very well:-

Market your business plumbing business effectively

What does that mean?

• You have a steady stream of referrals from existing and past customers
• You consistently receive leads through a local business directory
• You have the phone ringing from an ad in the local paper
• You have enquires from a mail out campaign
• You have an online presence and a combination of paid advertising and social media activity results in new leads
• You sponsor a local club (ie footy club) and receive a return on that investment- You develop and maintain a good relationship with equipment suppliers and project developers

The key word is you market your business ‘effectively,’ you should be tracking where your leads are coming from (ie referrals, ad in the paper etc.) and the relative marketing spends. That way you are able to measure what gives you your best bang for your buck and invest more accordingly. It is worth noting marketing is not a one size fits all approach, the demographic profile of your customers varies from business to business and the method to market to the customers should be varied accordingly.

“The key word is you market your business ‘effectively,’ you should be tracking where your leads are coming from”

Ability to compete with other plumbing businesses

How do you give yourself a leg up on your competition:-

• • Your relationship with plumbing suppliers and more specifically the price your supplies
  • Ability to offer your services in packaged deals, customers like fixed prices.
  • Specialising in a segment of the industry (list segments), excel in one segment quote jobs accurately and do the work more efficiently by focusing on one segment.
  • Broaden your skills and be a specialist in a variety of segments.

Ability to change with the market in the industry

How do you give yourself a leg up on your competition:-

The successful plumbing business are able to adapt to the needs of the consumers. For instance:-

• • • Market demand for Hot Water Systems spike in winter, the successful plumbing businesses know this and market promotions around these seasonal fluctuations
    • Differentiation of the services, adapting the business to suits the needs of their consumers. IE. Adding gas fitters to service the increased demand for gas installations.

“The successful plumbing business are able to adapt to the needs of the consumers”

Ability to quickly adopt new technologies

Although the industry has been slow (relatively to other industries) in implementing new technology. The same can be said for construction as a whole, the successful plumbing business is quick to innovate adopt new technology that makes services more efficient and streamline workflows.

Having a good reputation

Successful plumbing business can bank on having a good reputation and reap the benefit of that.

• Those businesses have a recognised band. Customers, Staff and Suppliers know that brand and the values associated with it (quality, professionalism or reliability as examples)
• Those businesses also collaborate with like-minded trades (carpenters, builders, painters).

What to do next

That is a lot of information to process but it’s important to not be overwhelmed or try to bite off more than you can chew. Write out a list of 10 ideas from this insight, put the list somewhere you will look at it every day and just implement one new idea a month if your an ace you can go harder later but start off slow and tick the idea off after each month.

Download your free cheatsheet to improving your plumbing business.

Disclaimer: This article should not be intended as your primary source of Tax, Accounting or Financial Advice. Always contact your Accountant for help.

An accountant with nearly a decade of industry experience, Joshua has worked extremely close with his clients, educating and guiding them with through building, growing and preparing their businesses for the future.