Tips for Plumbing BusinessWe at Dutton Plumbing are extremely proud of the fact that we’ve been in business for 26 years and counting. Longevity is a mark of distinction for any small business because the vast majority of them don’t stand the test of time. Plumbing has a particularly high rate of turnover. Studies have found that plumbing and HVAC firms have the highest rate of business failures after five years.
The main reason for this is that most plumbers who go into business for themselves may be fabulous mechanics but don’t have a clue about business economics. While working for someone else their eyes get big seeing how much the company charges compared to what they get paid. They think that by going into business for themselves, I can keep it all! Let’s examine this stinkin’ thinkin’.
Starting out, most plumbers try to gain customers by charging ultra-low rates. They think they can cut overhead to the bone by working out of their homes and scraping by with second-hand tools, vehicles, and equipment. Sure, that saves money but it’s hardly a formula for success.
For instance, a lot of self-employed plumbers start out with an old truck. But the more beat up, the more money they have to sink into maintenance and repairs. And what happens when the vehicle breaks down and they can’t make it to jobs? They lose not only the money spent on repairs but, even more expensive, also credibility with customers. That’s no way to succeed in business.
Insurance, tools, advertising and so on cost more than most new business owners imagine going in. They also tend to go into considerable debt. Licensed plumbers buy most of their materials and supplies from plumbing supply houses, which offer them trade discounts and the ability to buy on credit. The supply house wants to get paid on time, usually within 30 days. If a plumber can’t pay his bills on time eventually he will get his credit cut off at the supply house. Then he will have to pay cash for everything he buys and will also lose discounts enjoyed by plumbing firms that pay their bills promptly. So then he is battered on two sides – not enough revenue because he charges lower prices than competitors, while at the same time being forced to pay higher prices for his supplies than those competitors.
One solution might be to start charging more but most upstart plumbers are afraid to raise their prices out of fear of losing business. In many cases, the fear is justified, because if someone operates in a bare-bones manner the only thing he has to sell is a low price.
Customer service is an afterthought. The cut-rate plumber can’t respond to emergencies quickly because he’s probably the only employee and is tied up with other jobs. He can’t afford modern tools and equipment that enable him to work more productively and produce better quality work. He can’t afford to join a trade association and attend conferences that enable him to keep up with new technologies and techniques of his trade. He probably can be reached only via answering machine or voicemail offering to call you back who knows when. But if your sewer is backing up or water is gushing all over the house, you’ll simply call someone else.
Thus begins the death spiral. The newly independent plumber is locked into low prices and can’t pay his bills, so he cuts corners. He starts doing band-aid work that will result in the plumbing problem repeating itself before long. Most newcomers to the field charge not by the job like us, but via hourly labor rates. The temptation becomes great to jack up those charges by slowing down on the job. I’m not saying all struggling plumbers do this, but desperation sometimes leads even basically honest people to indulge in lies and cheating. Eventually, customers get fed up, word gets around and the phone stops ringing, even if the firm charges the lowest prices in town.
How has Dutton Plumbing managed to avoid this fate? Early on we focused our business model on providing the best possible customer service via highly motivated employees. Then we figured out what kind of prices we need to charge to deliver that service and enable our people to earn decent livings.
I don’t think we are the highest priced plumbing firm in our market. We constantly seek to hold down our prices by lowering costs and improving productivity in areas that don’t impact the way we treat our customers and associates. At the same time, I’m darned sure we’re not the lowest priced plumbing firm around. If we were, we’d be out of business like so many of our industry’s bottom feeders.
Instead, our longevity and high rate of repeat customers – including thousands of “Family Plan” service agreement clients – tell us that we’re doing something right. We are thoroughly convinced that putting customers and employees on a pedestal is the way to succeed in the plumbing business – or any business!