"According to government statistics, there are roughly 200,000 plumbing and air conditioning contractors," stated Service Roundtable CEO Matt Michel. "Just over half are sole proprietorships or partnerships without a payroll. Our estimates are that nearly a quarter of non-payroll contractors close annually. Overall, one out of five close every year, only to be replaced by new starts."
Michel said, "There's fairly solid data on larger shops, but little is available for the smallest contractors. They're overlooked by nearly everyone. They are the industry's underclass."
According to Michel, the statistics reveal that one of the surest ways for a contractor to increase his or her business success rate is to grow. The closure rate drops rapidly with contractor size. For example, only 6 percent of contractors with five to nine employees close every year.
"As an industry, we should be doing more to help the smallest contractors. The large contractors of tomorrow are the small contractors of today. While growth isn't a requirement of success, it does increase the odds. There are many successful small contractors. There are also many small contractors who fail or operate just well enough to hang on. These contractors are less likely to pay their suppliers and more likely to underprice their services. This hurts everyone."
The white paper, "Business Closure Rates For Plumbing & HVAC Contracting Companies," is available on the Service Roundtable Web site at www.serviceroundtable.com.
Publication date: 02/28/2005