Pipe dreams: Efficient funding strategies for plumbing businesses
Owning and running a business is one of the most rewarding aspects of career growth, but it isn’t without challenges. Tradespeople like plumbers often end up owning a company after a long career, but it requires perseverance, entrepreneurship skills, and, most importantly, funding. There are many ways to start a business financially, but some may be more feasible. In this guide, learn about common expenses to prepare for in a plumbing business and how to pay for them.
Non-debt funding
You want to take on as little debt as possible when facing significant business expenses. Debt is money you owe, and it lowers your net worth and can shut down your business if it grows too high. Taking on some debt when starting or running a business is normal, but you shouldn’t be drowning in it. There are ways to fund your startup without taking on debt, however.
Gifts
Friends and family may offer financial gifts to help you start your business. Gifts can be as small as buying you a plunger, but they can really add up when you’re trying to avoid debt. Gifts often come in the form of cash, which can be deposited in a designated business account.
Savings
Ideally, you should have a significant amount of savings for a business startup. You can stow away a percentage of your paycheck in a savings account. High-yield savings accounts can also help you save faster. Automated savings transfers are a hands-off way to grow a savings account.
Investors and partners
You may want to start a business with another person to reduce individual costs. A partnership is a great way to start a business if you don’t have the finances to do it all yourself. An investor is another option; investors give you money, typically in exchange for a percentage (or equity) in your business. Investors differ from partnerships, as an investor may not provide hands-on help in your business outside of funding.
Grants
Some counties or cities offer business startup grants to boost the economy. A grant is money gifted to you for a particular purpose. When applicable, grants can also help fund education, such as trade school. You do not have to pay grants back.
Debt funding
Most businesses must incur debt to start, but it can take several forms.
Plumbing business lines of credit
Lines of credit allow you to access a certain amount of funding as needed. They are different from loans as you can continuously have access to a set amount of funds as long as you don’t maximize your credit limit. Credit cards are typical examples of lines of credit.
Factoring for plumbers
Factoring involves selling your plumbing client invoices to a financial company for instant cash payment. Some clients may take a while to pay their invoices, and factoring eliminates the time it takes to receive payment. However, factoring will require you to pay a small convenience fee, typically a percentage of the invoice. It’s also short-term debt, as you will owe the financial company that bought your invoices until the client pays them.
Plumber business loans
A business loan is a lump sum of cash given to you to pay for business funds or startup expenses. You will pay off the loan slowly with interest as a monthly payment. Interest is the cost of the loan and is usually dictated as a certain percentage of the total loan, compounded monthly or annually. Each loan and lender is different, so comparing your options and rates is essential.
Plumbing business expenses
Schooling, training and licensing
While licensing prep and fees aren’t as costly as other business expenses, licensing types, training, amounts, and education can add up. You can take up exam training with programs like RocketCert to reduce the risk of paying more than once for exam fees. Scholarships and grants can help fund trade school if desired. Formal schooling, training employees, and licensing all requires tuition and fee costs.
Equipment
Plumbing requires a lot of equipment, from simple tools like drain snakes to major electric drain cleaners. This equipment usually won’t break the bank, but you’ll need a large quantity of each type, and they should be professional grade, which can cost more.
Marketing
Through marketing, such as social media profiles, search engine optimization, and ad space, many customers will become aware of your business. Hiring professionals and running marketing campaigns costs a significant amount of money.
Vehicles
Plumbers require vehicles to travel to job sites and store equipment on the go. Vans and trucks cost thousands of dollars, and you’ll need multiple if you have other employees.
Offices
If you’re not running a business out of your home, you’ll need a specific commercial space to conduct your office activities and host your employees when they’re not on the job. You can rent or buy a space, but it will cost you at least a thousand dollars a month, regardless, excluding utilities and other costs.
Employees
When you hire employees, you obviously have to pay them. Payroll, including benefits and insurance coverage, can take up a significant portion of your profits. You must take into account these expenses when running a business.
Conclusion
Like other tradespeople, plumbers often start a business of their own when they’ve obtained enough experience and savings. Starting a business is costly, but costs can be mitigated through a substantial savings account, gifts from friends or family, or any applicable grants. You can also take on debt to start your business, but you’ll need to be cautious about how much you take on. Many expenses are involved in running a business, such as equipment, vehicles, and payroll, so be sure you’re prepared for these costs.
