Selling a plumbing company has one problem most other businesses do not have. The license that lets the company work is often held by one person, and in a small shop that person is the owner. If you want to sell your plumbing business, sort that out first. Then turn to everything else a buyer will check.
This guide walks through what buyers look at, how plumbing deals are paid, who buys plumbing companies, what to fix ahead of time, and the Colorado rules that matter.
The master plumber question
In many states, a plumbing contractor needs a licensed master plumber attached to it. Colorado is one of them, as explained further down. When the owner is that master, the buyer has three choices: hold the license themselves, hire a master, or keep you on until someone else qualifies.
Each choice affects your deal. If you must stay on to keep the license active, the buyer may ask you to stay longer than you planned. If the company already has a second master on payroll, the hand-off is simpler and you are free to leave sooner. Look at this two or three years out, while there is time to train or hire someone.
What buyers look at in a plumbing company
Service work versus new construction
Plumbing companies tend to fall into two camps. Service and repair shops answer calls from homeowners and businesses: leaks, clogs, water heaters, sewer lines, remodels. New construction shops rough in and finish plumbing for builders.
Buyers usually prefer service work. The customers call again, the jobs are smaller and paid faster, and no single builder controls the schedule. A new construction shop can still sell well, but expect more questions about who the builders are and how steady the pipeline is.
Repeat customers and memberships
A customer list with years of repeat calls is valuable. A buyer will want to see how many customers you served, how many came back, and where they live. If you sell maintenance memberships, such as yearly water heater flushes or drain checks, track how many renew. Those plans show a buyer that customers stay with you.
Commercial accounts like property managers, restaurants and schools can be steady too. Just watch how much of your revenue comes from any one of them.
Your plumbers
Licensed plumbers take years to train, and a buyer cannot replace them quickly. Expect questions about how many journeymen and apprentices you have, what you pay them, and how long they have stayed. A shop that trains its own apprentices up through the license levels shows a buyer the crew can grow.
Trucks and stock
Plumbing trucks carry a lot of inventory. A buyer will count what is on the trucks and in the shop, and will look at the age and mileage of each vehicle. Specialty gear such as sewer cameras, jetters and locators gets listed too. Know which vehicles are owned, financed or leased.
Phones, booking and records
How do calls come in, who answers, and how fast does a tech get there? A buyer wants a system that works without you on the phone. Field service software that shows job history, pricing and tech performance helps a buyer trust your numbers.
How a plumbing sale is usually paid
Your price will likely arrive in more than one piece.
Most of it should come at closing, in cash. Individual buyers often fund that with a bank loan, which may be backed by the U.S. Small Business Administration. The lender will look closely at the company's tax returns, which is one more reason to keep them clean.
A portion may come as a seller note. You agree to be paid part of the price over a few years, with interest. This is common and can help a buyer get financing, but you are taking on some risk that the buyer pays late or not at all. Your attorney can add protections.
Some offers include an earnout, which pays more if the company hits targets after closing. Make sure the targets are clear and within reach, and that you know how they will be measured.
Finally, there is your time after the sale. A transition period lets you introduce the buyer to key customers and suppliers. If you hold the master license, that period may need to last until a new master is in place.
Who buys plumbing companies
The usual buyers fall into four groups.
- Individual buyers who want to own a trade business. Some are plumbers ready to run their own shop. Others come from management jobs and will rely on your crew and your transition help.
- Competing plumbing companies that want your techs, your customers or your service area.
- HVAC or electrical companies that want to add plumbing, so they can offer homeowners one call for all three.
- Investor-backed groups building a network of home service companies. They have been active in plumbing in recent years.
Each buyer brings different terms and different plans for your crew. Pick the one whose plan fits what you want.
Preparing to sell in the next one to three years
- Settle the license plan: train or hire a second master plumber.
- Keep personal spending out of the company books, and make sure the books match your tax returns.
- Build a membership or maintenance program, even a small one.
- Hand customer relationships and estimating to a manager or senior plumber.
- Write down your pricing, dispatch and warranty process.
- Keep up truck maintenance and replace vehicles that are near the end.
What brings the price down
A plumbing company loses value when the owner holds the only master license and plans to leave right away, when most work comes from one builder or one commercial client, when the books are mixed with personal costs, when the crew is thin or likely to leave, and when the trucks are tired. Each of these makes a buyer offer less or push more of the price into a note or an earnout.
Selling a plumbing company in Colorado
Plumbing in Colorado is licensed at the state level by the State Plumbing Board, which sits within the Division of Professions and Occupations at the Colorado Department of Regulatory Agencies (DORA). The board licenses residential, journeyman and master plumbers, and plumbing contractors must register with it.
Under state law, a plumbing contractor must either be, or employ full time, a master plumber who supervises all of its plumbing work. A master plumber can be responsible for only one plumbing contractor at a time, and must notify the board within fifteen days of ending that role. For a sale, this means the buyer's company needs its own master plumber of record in place, and you need to file your notice on time if you step out.
Permits are pulled from local building departments in most of the state, and some cities keep their own contractor registration as well. Make a list of every place your company pulls permits so a buyer can check what carries over.
Check the current rules with DORA and your local building departments before closing, because they can change.
How we help
We use four steps: a private first call, an honest range for what your company is worth, a quiet search for a buyer, and a clean close with your accountant and attorney. See how a sale works for more. The first call costs nothing. Call (983) 900-6537 and you will reach the founder.