How to Improve Profit Margins in a Plumbing Business: Advice from a Plumbing Business Coach

If your plumbing business is experiencing growth but your profit margins are not increasing at the same pace, you are not alone. Many owner-operators find themselves in this exact situation. The good news is that with the right strategies, you can improve your profit margins without compromising on quality or overburdening your team. In this article, I will share practical advice based on what has worked for the top-performing plumbing contractors I coach via plumbing business coaching.

Hi, I am Ashley Thomson, a plumbing business coach at Tenfold Business Coaching. I work with established trade businesses across Australia to help them grow sustainably and profitably. With over 20 years of experience coaching plumbing contractors, I have seen what works and what doesn’t when it comes to improving margins and building a business that operates smoothly and efficiently.

Know Your Numbers; Really Know Them

Profitability in your business starts with a clear and accurate understanding of your financials. If you’re not fully aware of your job costing, labour efficiency, and overhead expenses, your business is effectively operating without a clear direction. It is common to see businesses that keep busy and appear productive but are not generating healthy profits. This often occurs because they are underquoting or failing to accurately track billable hours. Tools like SimPRO or AroFlo are excellent for managing these aspects, but only if you make the most of their capabilities. I strongly recommend that my clients review their gross profit on each job every week and make necessary adjustments to their quoting strategies. Doing so can significantly enhance their profitability and overall financial health.

Price for Profit, Not Just to Win the Job

Many plumbing businesses in Australia fall into the trap of pricing their services simply to match what their competitors are charging. However, if those competitors are not profitable themselves, then matching their prices only means that both businesses will struggle to stay afloat. I advise my clients to set their prices based on the value they provide and the outcomes they deliver, rather than just on the time spent and materials used. This approach requires taking into account the company’s overhead costs, the profit margin they aim to achieve, and the true cost of labour, including the time spent on tasks that cannot be billed directly to customers.

Streamline Operations to Reduce Waste

Profit leaks often stem from inefficiencies in scheduling, inventory management, and communication procedures. In one instance, I worked with an Australian client who was losing thousands of dollars each month because of poor coordination between the office staff and workers onsite. To address this, we introduced a straightforward scheduling system and offered training to the team on proactive communication strategies. The improvements resulted in fewer follow-up jobs, more efficient use of time, and a noticeable rise in profits.

Build a High-Performing Team

Your team can either help boost your profits or deplete them. Investing in the right people and providing them with the necessary tools and training to succeed really pays off. I coach plumbing business owners on establishing clear expectations, monitoring performance carefully, and rewarding results appropriately. When your team understands what success looks like and how they contribute to it, they tend to be more engaged and productive.

Fostering a strong and capable team is crucial for business success. This means not only hiring the right staff but also investing in their ongoing development and ensuring they have the right equipment and resources. By setting clear goals and maintaining open communication, you help your team understand their roles and how their efforts directly impact the business. Recognising and rewarding good performance goes a long way in maintaining high morale and encouraging ongoing improvement. When everyone is aligned on what success looks like and how each person contributes to the bigger picture, productivity and job satisfaction tend to increase significantly.

Say No to the Wrong Work

Not all revenue is good revenue. Taking on low-margin or high-hassle jobs can tie up your best resources and hurt your bottom line. I help my clients define their ideal job profile and build the confidence to say no to work that doesn’t align with their goals. This frees up capacity for the jobs that are profitable and aligned with their long-term goals.

In the Australian business environment, it’s important to recognise that not every dollar earned contributes equally to your success. Accepting jobs with low profit margins or those that cause excessive complications can drain your valuable resources and have a negative impact on your overall profitability. I work closely with my plumbing business coach clients to help them understand what their ideal projects look like and to develop the confidence to decline work that doesn’t match their criteria. Doing so allows them to focus their efforts on more lucrative opportunities that support their long-term growth and sustainability.

Plan for Growth, Not Just Survival

Improving profit margins is not solely about cutting costs. It is also about building a business that has the ability to grow and expand. This involves having effective systems in place, a clear and achievable growth strategy, and the right people in the right roles to support that growth.

I work closely with my plumbing business coach clients to map out what their business needs to look like at the next level of development. Then I help them reverse-engineer the necessary steps to reach those objectives.

Take the Next Step with a Plumbing Business Coach

Improving profit margins in a plumbing business is not just about working harder; it’s about working smarter. With the right strategies and support, you can build a business that is not only profitable but also sustainable and rewarding. If you’re ready to take your plumbing business to the next level, I’d be happy to help you get there.

FAQs

How do I know if my plumbing jobs are turning a profit?

Start by tracking your gross profit on each job. That means your revenue minus direct costs, such as labour and materials. If you’re unsure how to work it out, a business coach can help you set up the appropriate systems.

What is considered a good profit margin for a plumbing business?

It depends on your specific business model, but as a general guideline, aim for a gross profit margin of between 40% and 50%, and a net profit margin of at least 10%. If your margins are below this, it is a good idea to review your pricing and operational processes.

How can I reduce labour costs without having to cut staff?

Focus on improving productivity. This could involve better scheduling, clearer job scopes, or investing in staff training. Often, small adjustments in how your team operates can lead to significant gains in efficiency.

Should I consider raising my prices?

If your profit margins are tight and you continue to provide good value, then increasing prices could be the right move. Many plumbing businesses undercharge because they are worried about losing work, but the right clients will pay for quality and reliability.

What is the first step towards improving my profit margins?

Get a clear understanding of your financial figures. Without accurate data, it is difficult to make informed decisions. Once you have this information, you can identify the issues and implement strategies to address them.