Plumbing companies can be highly profitable whether they run on service agreements or emergency calls alone, but buyers view those two business models very differently. The following fictional case study compares two similar Florida plumbing companies, one built around thousands of maintenance service agreements and one relying entirely on emergency and one-time calls, to show how that difference affected buyer demand and price.
The companies below are fictional, but the underlying pattern is explored further in our article on whether service contracts matter when selling a business.
Reliable Plumbing Solutions had spent over a decade building a maintenance membership program. Technicians visited enrolled customers on a regular schedule, which created predictable recurring revenue and frequent opportunities to identify additional repair needs.
Rapid Response Plumbing generated similar revenue almost entirely through inbound emergency calls. The business was efficient and well-run, but every month started from zero, requiring continuous marketing spend to generate new leads.
| Factor | Company A | Company B |
|---|---|---|
| Recurring Customers | 2,000 service agreements | None |
| Monthly Revenue Predictability | High | Low, dependent on lead flow |
| Buyers Who Made Offers | 6 | 3 |
| Valuation Multiple | 3.4x SDE | 2.6x SDE |
| Final Sale Price | $3,026,000 | $2,262,000 |
A buyer evaluating Rapid Response Plumbing summarized the concern clearly: “If we stop advertising for even a month, revenue drops immediately. There’s no built-in customer base carrying the business forward.” Reliable Plumbing Solutions faced no such concern, since its 2,000 service agreements provided a dependable revenue base regardless of marketing spend.
A large base of recurring service agreement customers functions similarly to a subscription business. It reduces customer acquisition costs, creates natural cross-selling opportunities for repairs and replacements, and gives buyers confidence that revenue will continue with minimal disruption after a change in ownership, a pattern also seen clearly in our HVAC recurring revenue case study.
If your plumbing business relies primarily on emergency and one-time calls, consider introducing a maintenance membership or service agreement program well before you plan to sell. Even converting a portion of your customer base to recurring agreements can meaningfully increase buyer interest and support a stronger valuation.
Both fictional plumbing companies generated similar revenue and profit, yet the service agreement-based business sold for over $760,000 more. If you would like to discuss how recurring revenue might affect your own plumbing business’s value, contact Truforte Business Group today.
To see how these dynamics played out in a real transaction, browse our archive of sold Florida businesses.
For more real-world (fictional) examples of how deal factors affect outcomes, see: Case Study: Two Pool Companies and the Value of Recurring Service Accounts, Case Study: Two Landscaping Companies and the Value of Monthly Maintenance, Case Study: Two Electrical Contractors and Their Customer Mix.