Water Tubes will be focusing on a specific niche in the plumbing market, new homes. The company will target both volume builders of new homes as well as customer builders.
Through a combination of networking activities and advertisements, Water Tubes will increase their visibility among home builders allowing them to gain market share.
Water Tubes will target two distinct segments in the plumbing market:
The plumbing market (excluding direct to the consumer jobs) is a highly networked industry where everyone knows everyone and jobs are won or loss by who you know. With this in mind, Don will work hard to establish himself as an experienced, professional plumber who is concentrating on the residential new builds market. This will be done in part through networking with all home builders. The networking will be an important method to increase visibility of Water Tubes because most home builders are always looking for professional, high-quality plumbers. It is advantageous for Water Tubes to position themselves as solely working with the residental new build market because it is attractive to builders to form a relationship with a plumber that is specializing on the new build market and not trying to do a little of everything. Water Tubes will be marketing themselves with an advertising campaign in the local home builders journal.
The plumbing industry is state regulated. The state regulates the industry through a licensing process based upon the Universal Building Code. The code is state specific and is a comprehensive code for all building issues. There are three skill levels of plumbers. The first is the apprentice who is basically a skilled laborer. In Eugene, apprentices earn from $8-$12 an hour depending on experience level. The next level is a journeymen. To achieve the journeymen license you must past the state journeymen test. Journeymen in Eugene typically earn from approximately $18 an hour. The last step in the plumbing hierarchy is a master plumber. A master plumber is a journeymen with more than 10 years experience and their earning potential is from $35-$50 per hour.
In order to do work in the state, it is required that a deposit is made into the workers compensation fund of $4,000 during the first year. This is only for new companies that have no record of revenue, and no record of worker compensation history. After one year of no claims, $1,000 is refunded per year and after five years the entire amount is refunded. In essence, this is acting as a bond for newly formed companies.
The timetable for work in this niche is as follows:
Please note that within the industry ratios' the gross margin for the industry is significantly lower than what is forecasted for Water Tubes. The variance can be explained by the fact that the industry ratios are for repair plumbing as well as new construction. The repair work is more parts intensive and has skewed the gross margin ratio.
The plumbing market is quite competitive, and consequently in order to reap decent profits, large quantity of work must be done. Competitors can be broken down into three groups:
The buying habits of the target segments is based primarily on networking. Once a relationship is established, the builder will typically give the plumber one to two jobs to display their work before any type of long-term contract/relationship is developed.