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Plumbing Service

Plumbing Service
Matt's Plumbing and Air Conditioning

4120 Highway 43
Gull Harbour, Florida 33994

Gerald Rekve
Once becoming a fully registered plumber, Matt Plank's employer approached him about opening a plumbing and air conditioning service location in the adjacent town. This business plan outlines the research and planning involved in this decision
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EXECUTIVE SUMMARY

Market Analysis

In 2004, Matt Plank had completed his journeyman's ticket and was now a fully registered plumber. His employer asked if he wanted to go into partnership with him and open a second location in the town close by. After hiring a management consultant to do research and market analysis on this business opportunity, Matt and his business partner decided to open a second location.

The strength of the business opportunity outweighed the risk of investment loss. Along with the help of the consultant, it was determined that there was also an opportunity for a retail store selling plumbing supplies and fixtures. This store would be share the same location as the plumbing company's office and would be built in conjunction with the office.

The plumbing business is built on trust. By showing their clients the investment they are willing to make in the market, the new owners will be able to grow their business from day one. The investment will come from the partners and a local bank, which has worked with the senior partner for over thirty years.

Customers

The town has a population of fifty thousand people and only one plumbing shop with six journeyman plumbers. The shop seems to be always behind on their work and the locals call out of town shops to complete projects.

The birth of the town happened in 1875, which makes the town over 130 years old. Therefore, many homes have an old infrastructure. The result of this is a steady stream of new business, for everything from new pipes to furnaces and complete renovations.

The medium income for the region is $54,000 and an average of 2.7 people per household. Based on 2003 statistics, the average home spent $350 per year on home plumbing repairs, including clogged pipes. This average does not include the major repairs like new furnaces and air conditioning repairs. The average price for these repairs is $2,500.

Upon review of the revenue that is generated from a town this size, it can be expected that we will generate approximately $300,000 in our first year, and then for each journeyman we hire, we will generate another $200,000.

The local town has already indicated they will give us three-year tax abatement; the reason for this is twofold. First, we will be constructing a 10,000 square foot building on a tax-zoned area for growth and development. Secondly, the town feels our services are desperately needed in the town, to better serve the region. We agree and feel we will prosper from this town.

Competition

Plumbing Shops

A few years ago, another plumbing shop was in business. However, the owner passed away, the crew was hired by the competing firm, and the shop closed. At the time, none of the crew wanted to start their own shop, because they were older and just wanted to keep their lives simple.

The local plumbing shop, who already has been in business for more than forty years, says our plan is great news. They already tell clients to call shops in other cities, if the clients need the work done sooner than the shop can achieve. The list below details the services offered by this shop.

Competitor's Services

  • Water heaters
  • Repairs
  • Furnace repairs
  • Air conditioner installation and repairs
  • New home construction

Due to the limit in market competition, the local plumber can just about charge whatever he wants. The local market is captive to these rates. If clients want, they can hire plumbers from other regions and pay their travel fees. Travel fees are an average of $250, regardless of the type of job.

The current national average hourly rate for a plumber is $125 an hour; the local shop owner enjoys a rate of $150 an hour. Based on our research, we have determined that this rate will be our hourly rate. We do not want to get into a pricing war, so we will maintain all the same fees. The only area where we will be very competitive is service. We will offer 24/7 service at the same rate, with no off-peak hourly charges and only overtime charges for jobs that take longer than eight hours in one day.

Independent Service Providers

Most of the projects that are small tend to be done by untrained independent repairers. Based on our market research, we have determined that most clients are not happy with these untrained repairman. In most cases these clients had to call in a professional plumber to get the job done properly.

These contractors, while trying to do a great job for every sector, tend not to be trained in a specific home profession. This small community has gotten wise to these providers and only call on them when absolutely required. This will put us in the winning sector with these clients.

These independent providers charge anywhere from $30-$75 per hour. We do not feel these contractors will be a major competitor to us, as they have little impact on the only plumber in the market.

PRODUCTS & SERVICES

While we want to take this market by storm, we also want to be very careful to only offer clients the services and products in which we have expertise. This is part of our mission statement.

Services Offered

  • New construction
  • Furnace installation and repairs
  • Air conditioning installation and repairs
  • Bathroom renovations
  • Kitchen renovations
  • Water heater repair and replacement installation
  • Fireplace installation

To separate ourselves from our competitors, we will also offer a full line of plumbing fixtures and supplies. This retail store will be a focus of our business, simply because it will show our clients that we know what we are doing. The store also will be a profit channel for our business. The local chain store will always be a major competitor for us. However our goal is to keep our prices fair and show our clients that it is still less expensive to use us, than to do it themselves or hire a third-party contractor who may not have the required training in this field.

The retail store will be beside the commercial division. The merchandise will house about 70% of the space. The office as well as the management will be based in the retail store, allowing the clients easy access to qualified staff. The store hours will be 8:00AM-6:00PM daily and Saturdays from 9:00AM-5:00PM.

OPERATIONS

Necessary Equipment

  • Four vans for our service staff
  • Tools for all services
  • Three computers
  • Three printers
  • Two fax machines
  • One POS system
  • Four desks
  • Three four-drawer filing cabinets
  • Five racks for pipe retail supplies
  • Store shelving as needed

Retail Store Inventory

We will inventory all basic items found in your typical retail store. While we have not supplied this list in this plan, we will supply the list for the banker's approval of the operating line of credit.

FINANCIAL ANALYSIS

Building of location—$400,000

Store fixtures—$40,000

Inventory—$160,000

Van maintenance—$30,000

Operating line of credit—$100,000

Special tools and equipment—$50,000

Total required operating funding—$780,000

Cash invested by partners is $100,000 with the balance coming from operating lines of credit and mortgage on building.

Monthly payroll is as follows:

Matt Plank—$5,000

Albert Wills—$1,000

Patricia Turk—$3,000

Journeyman—$4,800 x number of staff

Fixed monthly Costs

Van Fuel—$1,200

Van repairs—$200

Office Supplies—$200

Telephone—$250

Yellow Page Advertisement—$500

Utilities—$500

Staffing Personnel

  • Matt Plank: CEO. Matt will run the day-to-day operations of the business. He will also go out on calls as required to service clients. Matt has just gotten his journeyman's ticket and is fully licensed.
  • Albert Wills: Co-owner and silent partner. Albert will assist in the financial management of the company and will work two days a week in the store.
  • Patricia Turk: Store manager and accountant. Patricia is Matt's wife and has an accounting degree and specializes in retail management. Patricia worked for a large hardware store for four years prior to taking on this role.
  • Journeymen: Four journeymen will be hired; two will be transferred from the home location while the company ramps up.

BUSINESS STRATEGY

Matt's Plumbing and Air Conditioning will continue the alliance they already have with Breezy Air Conditioning and Furnaces, Inc. Also Matt's Plumbing and Air Conditioning will strike alliances with local new home manufacturers and home renovation firms. These will be negotiated and referral fees will be paid to these firms. Research on the market determined that there were no referral fees offered, and most of the time clients had to search out the trades individually. Our goal is to change this by working closely together with other firms looking to grow their business and who share our values for client services.

It may seem that retail shops need to provide niche products or services or be a "big box" in order to succeed. This being said, the trades can be a little different. It was found that one out of every ten clients left a "big box" home improvement store very disappointed with the shopping experience.

Here are some of the reasons:

  • Store format is too large; a lot of walking was required
  • Lack of staff presence (no one to ask advice of)
  • Lost leader prices were good; however other items seemed to be higher

While our strategy is not to be everything to everybody, we will focus on our product lines and provide the best service to our clients as possible.

Some of the products we will sell in our store will be:

  • Bathroom fixtures, sinks, toilets, bathtubs, etc.
  • Jacuzzis and whirlpool tubs
  • Saunas
  • Hot tubs
  • Air conditioners and furnaces
  • Some electrical supplies related to plumbing
  • Copper pipes and parts
  • Plastic PVC pipes and parts
  • Basic plumbing supplies

After we are established, we will hold Saturday morning teaching sessions for a small fee of $5 each. These sessions will focus on the do-it-yourself clients.

Initial Do-It-Yourself Class Topics

  • Installing a tub surround
  • Replacing kitchen or bathroom taps
  • Unplugging clogged sinks
  • Replacing a toilet
  • Installing a hot tub
  • Installing a bathroom in a basement

We will add and subtract classes as they are required; this will keep us in touch with the market. We will also work with local electricians to offer classes in electrical repair.

Our goal for this retail store will be one of total customer interaction. We strongly believe, and our market research maintains, that our clients will support our store based on the model we have outlined in this business plan.

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