How a Residential Plumbing Company Went From a $33,866 Monthly Loss to Nearly 19% Net Profit
The Results
A residential plumbing company in business since 1972 came to me by referral. It was busy and losing money. In one month, it lost $33,866 on about $161,000 in revenue, a net margin of -21%.
Within a year, the company held a consistent net profit of 19%. Revenue more than doubled.
One Number Hid Everything
Monthly revenue ran $150,000 to $200,000. The owner assumed that volume meant profit. It did not. Results swung hard, and even the good months were thin.
The owner could not see why.
Service, installation, and maintenance, all rolled into one profit-and-loss statement. Three very different businesses, one number. Whatever was losing money disappeared into the total.
What the Breakout Showed
We split the company into three divisions: service, install, and maintenance. Each got its own profit and loss statement. For the first time, the owner could see what each one earned and lost.
The numbers exposed three problems:
Pricing. Prices were set by what the market seemed to bear. The fully loaded cost of putting a technician on a job (wages, payroll taxes, vehicle, insurance, overhead) was never built into the price. Work was sold for less than it cost to deliver.
Leadership. The manager was measured on total revenue, so he chased it. No one owned net profit in any division.
Team. There was no standard for how a job got quoted, staffed, or costed. Every job leaked profit in a different place.
What We Changed
Every division got its own net profit target.
Prices were reset so each division covered its full cost and hit that target.
The manager's goal changed from revenue to net profit, division by division, numbers he could directly move.
Each division got one standard for quoting, staffing, and costing, plus clear key performance indicators, so everyone knew what they owned.
The Result
From -21% to 19% net profit.
Revenue more than doubled. Same trucks. Same trade. A profitable company.
The Takeaway
This company never had a revenue problem.
It had three divisions buried in one number.
Once each division stood on its own, the problems had nowhere to hide, and the net profit became visible.