By Craig Lourens: ActionCOACH Business Coach
Plumbers are problem solvers. You do not guess when a pipe bursts, a drain blocks or a geyser fails. You look into it, measure it and diagnose it before you fix it.
However, interestingly enough, many plumbing businesses are operated with far less exacting precision than the plumbing systems they put in place. A plumbing business owner called me recently and had a concern. His company was a lot of work. The phones were ringing. His team was busy every day. But for some reason, it was like the bank account never seemed to reflect all those efforts at the end of the month.
“Craig,” he said, “we’re flat out busy, but I don’t really believe the business is getting better.” More often than we think, this is the case. Many plumbing businesses are more based on activity than on numbers. Without the numbers behind your business, you can work hours away and still not achieve the results you’re worth.
There are five numbers every plumbing business owner should know and track routinely.
1. Revenue per job
Do you know the average value of each job your team has done? Few plumbers care at all about more than how much work they do each week. But the question is, how much value does each job deliver?
Two plumbing companies can perform 50 jobs in a month. One job averages R1 200 per job, the other R2 500 per job. The second business is generating over double the revenue with the same number of jobs. This number allows you to optimise pricing strategy, identify opportunities to upsell, job selection and technician productivity. If your revenue per job grows, your entire business grows more profitable.
2. Gross profit margin
And revenue does not tell the whole story. You must also know how much profit is left over after deducting materials and direct labour costs. This is the gross profit margin. For the majority of plumbing companies, that figure should generally be 50–65%, depending on the work being performed. Anything below that would indicate that prices are too low, materials are not being controlled, jobs are taking longer than planned, or technicians are not working efficiently.
Without keeping track of that number, it’s very easy indeed for profit to just vanish quietly.
3. Labour efficiency
Labour is one of the largest costs in every plumbing business.
However, are the hours you pay for producing billable work worthwhile? For instance, if a technician is paid eight hours at the present rate, but only five of them are spent on work that can be charged for, then the productivity is declining.
Monitoring labour efficiency allows you to identify scheduling problems, travel inefficiencies, quoting mistakes and gaps in training. Even minor advances in labour efficiency can make a world of difference to profitability.
4. Conversion rate
How many of your enquiries end up being paid jobs? Many plumbing businesses never make a record of this number, but that indicates a vast amount about how the business is doing. If 100 people call your business and 40 are converted to customers, your conversion rate is 40%.
Improving this number might mean better calls, faster responses to enquiries, better quoting processes or more customer trust.
More of the time, one of the easiest routes to profitability is not generating increased leads but converting more of your existing enquiries.
5. Cash flow
Profit matters, but cash flow is what keeps a business alive. You need an idea of how fast customers are paying, what is owed and how much money is leaving the business. For a profitable business, late payments, sluggish invoicing or poor control of credit can quickly become a headache.
Successful plumbing businesses have weekly-based cash flow tracking, not just month end.
Why these numbers matter
Are you are trying to repair a plumbing system without pressure readings, measurements or diagnostics? In fact, running a business without numbers looks much like this. You may work harder and harder, but by lacking clear measurements, you’re guessing rather than managing.
Numbers provide clarity. They reveal where problems are, where opportunities are hiding and what requires attention now.
There’s something profound that happens when business owners begin tracking their key numbers. Decisions are clearer, performance improves and the business feels more under control.
A simple challenge
If you run a plumbing business, ask yourself this simple question: Am I aware of these five numbers in my business today? If the answer is no, move forward with that. You don’t have to know a lot of complicated systems to start. Even a simple weekly spreadsheet can unearth insights that impact the way your business functions.
Because in business, like plumbing, what gets measured gets fixed. And once you can see your numbers, your business stops running you… and starts doing the work for you.
| About the author:
To get help with how to set your business up for success, contact Coach Craig. Craig is an internationally certified, award-winning coach who coaches people to unlock their potential and take action to run successful businesses. +27 (0) 79 388 5709 craiglourens@actioncoach.com | www.craiglourens.co.za |
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