• Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
  • ENGINEERS
  • RADIANT & HYDRONICS
  • INSIGHTS
  • MEDIA
  • RESOURCES
  • EMAGAZINE
  • SIGN UP!
cart
facebook instagram twitter linkedin youtube
  • CONTRACTORS
  • BATH & KITCHEN PRO
  • BUSINESS MANAGEMENT
  • HIGH EFFICIENCY HOMES
  • TECHNOLOGY
  • WATER TREATMENT
  • PMC COLUMNS
  • PMC COLUMNS
  • Dave Yates: Contractor’s Corner
  • John Siegenthaler: Hydronics Workshop
  • Kenny Chapman: The Blue Collar Coach
  • Matt Michel: Service Plumbing Pros
  • Scott Secor: Heating Perceptions
  • ENGINEERS
  • CONTINUING EDUCATION
  • DECARBONIZATION | ELECTRIFICATION
  • FIRE PROTECTION
  • GEOTHERMAL | SOLAR THERMAL
  • PIPING | PLUMBING | PVF
  • PME COLUMNS
  • PME COLUMNS
  • Christoph Lohr: Strategic Plumbing Insights
  • David Dexter: Plumbing Talking Points
  • James Dipping: Engineer Viewpoints
  • John Seigenthaler: Renewable Heating Design
  • Lowell Manalo: Plumbing Essentials
  • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
  • RADIANT COMFORT REPORT
  • THE GLITCH & THE FIX
  • INSIGHTS
  • CODES
  • GREEN PLUMBING & MECHANICAL
  • PROJECT PROFILES
  • COLUMNS
  • SPONSOR INSIGHTS
  • COLUMNS
  • Codes Corner
  • Natalie Forster: Editorial Opinion
  • Guest Editorial
  • MEDIA
  • PODCASTS
  • VIDEOS
  • WEBINARS
  • RESOURCES
  • INDUSTRY CALENDAR
  • DIRECTORIES
  • EBOOKS
  • PM BOOKSTORE
  • CE CENTER
  • MARKET RESEARCH
  • CLASSIFIEDS
  • EMAGAZINE
  • EMAGAZINE
  • ARCHIVE ISSUES
  • CONTACT
  • ADVERTISE
  • PME EMAGAZINE ARCHIVES
search
cart
facebook instagram twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
    • BATH & KITCHEN PRO
    • BUSINESS MANAGEMENT
    • HIGH EFFICIENCY HOMES
    • TECHNOLOGY
    • WATER TREATMENT
    • PMC COLUMNS
      • Dave Yates: Contractor’s Corner
      • John Siegenthaler: Hydronics Workshop
      • Kenny Chapman: The Blue Collar Coach
      • Matt Michel: Service Plumbing Pros
      • Scott Secor: Heating Perceptions
  • ENGINEERS
    • CONTINUING EDUCATION
    • DECARBONIZATION | ELECTRIFICATION
    • FIRE PROTECTION
    • GEOTHERMAL | SOLAR THERMAL
    • PIPING | PLUMBING | PVF
    • PME COLUMNS
      • Christoph Lohr: Strategic Plumbing Insights
      • David Dexter: Plumbing Talking Points
      • James Dipping: Engineer Viewpoints
      • John Seigenthaler: Renewable Heating Design
      • Lowell Manalo: Plumbing Essentials
      • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
    • RADIANT COMFORT REPORT
    • THE GLITCH & THE FIX
  • INSIGHTS
    • CODES
    • GREEN PLUMBING & MECHANICAL
    • PROJECT PROFILES
    • COLUMNS
      • Codes Corner
      • Natalie Forster: Editorial Opinion
      • Guest Editorial
    • SPONSOR INSIGHTS
  • MEDIA
    • PODCASTS
    • VIDEOS
    • WEBINARS
  • RESOURCES
    • INDUSTRY CALENDAR
    • DIRECTORIES
    • EBOOKS
    • PM BOOKSTORE
    • CE CENTER
    • MARKET RESEARCH
    • CLASSIFIEDS
  • EMAGAZINE
    • EMAGAZINE
    • ARCHIVE ISSUES
    • CONTACT
    • ADVERTISE
    • PME EMAGAZINE ARCHIVES
  • SIGN UP!
Columns

Thanks, But No Thanks (Frank Blau)

By Frank Blau
September 28, 2000
The modern generation seems not so intent upon continuing the family legacy.

Family firms handed down from generation to generation have always dominated the PHC industry. I take a great deal of pride in watching my sons operate Blau Plumbing & Heating with minimal input from me these days, and I know a great many of you know that same feeling. It's a good thing, too, because business entrepreneurs aren't exactly clamoring to enter the PHC field with its tiny profits, huge risks and regulation burdens. If not for the traditional family businesses of our industry, where would the American public go to satisfy its needs for health, safety and comfort?

Lately, I'm beginning to wonder if this tradition isn't in danger of unraveling. Two conversations in recent months got me to thinking that way.

Both concerned plumbing firms operated by aging contractors who were counting on retiring by passing on the business to their kids. In both cases, the kids took a pass. Despite working as plumbers for the family firm, they decided they didn't want to buy the business from their parents. Or, more accurately, it was precisely because they worked in the business that they didn't want to buy it.

One of the contractors was pretty devastated by the news. He had been counting on his son buying the business, using funds from the purchase to help support his retirement. Somewhere along the way there appeared to be a lack of communication. When it came time to discuss the transition, the son, who had been working for his father in the business, said no. Instead of buying out his dad, he ended up going to work for a larger, more successful contractor in another state.

Can't say I blame him. He makes more money as an employee than he would presiding over the family business and the financial burden of buying out the founder.

Same story with the other contractor. He ran a fairly sizable service company, doing about $1 million a year in sales, but he was burdened with debt. The owner paid himself an income of $75,000, while two sons working in the business made about $40,000 apiece. But they wanted no part of taking it over.

They'd just as soon continue working as plumbers for $40 grand a year, either with their father's company or somewhere else. They know enough about the finances of the company to understand that by the time they paid off all they owed to various wholesalers, along with payments to their father, they'd be in worse shape economically than they are working as plumbers, and with many more headaches and responsibilities.

The contractor called me for advice on helping him shape up his business to make it economically attractive to his sons. It's late in the game to do that, but at least he is willing accept the fact that he has served as a poor role model throughout his years in business.

Retirement Plans: The two gents referred to in this article typify what passes for retirement planning in the PHC industry. The typical plumbing contractor has no retirement fund to draw upon. His retirement income consists only of social security payments, which barely are enough to pay the bills, plus whatever buyout arrangement he can negotiate with his kids or employees who remain in the business. Maybe he can squeeze out a few extra bucks selling his home and moving into smaller quarters.

A buyout plan often includes a continuing salary or "consulting fee." Often this means the owner is semiretired at best, still being counted on to contribute advice and his good name to help run the business. In addition to these regular payments for services rendered, he typically expects his kids or employees to make regular cash payments in return for a percentage of equity in the business, until they end up owning it in full.

Making these payments can be a tremendous burden. It sucks so much money out of the business that the new "owners" can't afford pay raises for themselves and other employees, or make any expansion plans until they pay off the original owner, which usually takes many years.

This is not to say that the owner doesn't deserve fair compensation for the business he built. Sure he does. The issue is where the money comes from to buy him out.

That Dirty Word

There's a lesson in here for all of you family business owners. It has to do with that dirty word: profits. Most family businesses in our industry earn very little in the way of profits. This is part of an intentional strategy of tax minimization. You don't want to pay any money to Uncle Sam, so you squeeze every penny you can out of the business as income and operating expense.

Yet, profits are necessary for any business to prosper. You need profits to support capital expansion, retirement plans and other benefits, and, ultimately, as a transition from one generation of ownership to the next. Without profits, business transition must be funded in one of the following ways, all of which entail onerous consequences:

1. Using operating income, which hampers the ability of the business to adequately reward employees and service customers in a professional manner.

2. Using personal savings, which few people in our industry have in abundance.

3. Using a bank or other lender, which must be paid back with interest.

When the business owes a significant amount of money to a bank, wholesaler or other creditor, as was the case with one of the contractors who inspired this article, it becomes that much harder for the new generation to pay off those debts and support the former owner. It comes as no surprise when, if they know anything at all about business arithmetic, the kids decide to take a pass on the "joy" of business ownership.

It all boils down to the same old story - you need to make enough money to pay the owner and employees the kind of income they deserve, with profits left over to provide for future growth of the company. In both cases referred to here, the fundamental problem with the business was the same as with 90 percent of the firms in this industry. The owners simply didn't understand their costs of doing business, and thus they didn't charge enough to cover costs and earn a decent profit.

Now they expect their kids to make the same mistake. Many do. But it appears that some are catching on that this business isn't worth being in at the existing economic structure. And this makes me very concerned about the future of our industry.

Share This Story

Looking for a reprint of this article?
From high-res PDFs to custom plaques, order your copy today!

Frank Blau can be reached at Frank J. Blau Jr. & Associates, 12221 W. Fairview, Milwaukee, WI 53226. 1-800-FLAT RATE. Fax: 414/258-3307. Web site: www.blauplumbing.com

Recommended Content

JOIN TODAY
to unlock your recommendations.

Already have an account? Sign In

  • Worker using the Milwaukee Tool SWITCH PACK drain cleaner

    Pipeline profits: Drain cleaning, pipe inspection create opportunities

    Drain cleaning and inspection services offer lucrative...
    Green Plumbing and Mechanical
    By: Nicole Krawcke
  • Uponor employee, Arturo Moreno

    The reinvestment in American manufacturing and training

    Plumbing & Mechanical Chief Editor Nicole Krawcke and...
    Plumbing News
    By: Nicole Krawcke and Natalie Forster
  • March 2024 Women in Plumbing hero image of woman engineer overlayed by circle of hexagon shapes with numbers from 1 to 10

    Celebrating 10 Influential Women in the Plumbing Industry

    Celebrating Women's History Month and Women in...
    Plumbing News
    By: Nicole Krawcke
Subscribe For Free!
  • eNewsletters
  • Online Registration
  • Subscription Customer Service
  • eMagazine
  • Manage My Preferences

NIBCO Press Solutions

NIBCO Press Solutions

AI can boost efficiency and profitability for plumbing, HVAC contractors

AI can boost efficiency and profitability for plumbing, HVAC contractors

Bell & Gossett Illustrates Path to Net-zero at AHR Expo

Bell & Gossett Illustrates Path to Net-zero at AHR Expo

IPEX celebrates grand opening of new Florida distribution center

IPEX celebrates grand opening of new Florida distribution center

More Videos

Sponsored Content

Sponsored Content is a special paid section where industry companies provide high quality, objective, non-commercial content around topics of interest to the Plumbing & Mechanical audience. All Sponsored Content is supplied by the advertising company and any opinions expressed in this article are those of the author and not necessarily reflect the views of Plumbing & Mechanical or its parent company, BNP Media. Interested in participating in our Sponsored Content section? Contact your local rep!

close
  • J.J. Keller CMV vehicles on road
    Sponsored byJ. J. Keller & Associates, Inc.

    The dash cam game-changer for small business safety

Popular Stories

Figure 1 is a sketch of the flow problems of the current plumbing system.

Hydronic heating glitch solved: Why adding a circulator won't fix primary loop flow issue

The interior of a government building.

President Trump signs executive order promoting skilled trades and apprenticeships

Underfloor heating installation with drain sewer hole in bathroom close up on water floor heating.

Using hydronics to leverage time-of-use electrical rates

PM BEMIS June 25 Free Webinar: Optimizing Plumbing Solutions for Single-Family, Multi-Family & Public Spaces

Events

November 13, 2024

Future Proofing MEP: Navigating the 2026 High Efficiency Water Heating Standards

Join our deep dive into DOE’s new standards so you can future-proof your MEP practice.

EARN: 0.1 ASPE CEU; 1 AIA LU/HSW; 0.1 IACET CEU*; 1 PDH

View All Submit An Event

Poll

Will business be up or down in 2025?

Do you anticipate business in 2025 to be up or down in comparison to 2024?
View Results Poll Archive

Products

The Water Came To A Stop

The Water Came To A Stop

See More Products

Download the FREE Water Conservation, Quality & Safety eBook: Plumbing Trends Increasing Safe Water Availability

Related Articles

  • Forget Dollars -- Zoom In On Percentages
    Frank Blau

    See More
  • Why I Don't Like Commissions, Either

    See More
  • The Ultimate Profit & Loss Statement

    See More
×

Keep your content unclogged with our newsletters!

Stay in the know on the latest plumbing & piping industry trends.

JOIN TODAY!
  • RESOURCES
    • Advertise
    • Contact Us
    • Directories
    • Store
    • Want More
    • Supply House Times
  • SIGN UP TODAY
    • Create Account
    • eMagazine
    • eNewsletter
    • Customer Service
    • Manage Preferences
  • SERVICES
    • Marketing Services
    • Reprints
    • Market Research
    • List Rental
    • Survey/Respondent Access
  • STAY CONNECTED
    • LinkedIn
    • Facebook
    • Instagram
    • YouTube
    • X (Twitter)
  • PRIVACY
    • PRIVACY POLICY
    • TERMS & CONDITIONS
    • DO NOT SELL MY PERSONAL INFORMATION
    • PRIVACY REQUEST
    • ACCESSIBILITY

Copyright ©2025. All Rights Reserved BNP Media.

Design, CMS, Hosting & Web Development :: ePublishing

search
cart
facebook instagram twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
    • BATH & KITCHEN PRO
    • BUSINESS MANAGEMENT
    • HIGH EFFICIENCY HOMES
    • TECHNOLOGY
    • WATER TREATMENT
    • PMC COLUMNS
      • Dave Yates: Contractor’s Corner
      • John Siegenthaler: Hydronics Workshop
      • Kenny Chapman: The Blue Collar Coach
      • Matt Michel: Service Plumbing Pros
      • Scott Secor: Heating Perceptions
  • ENGINEERS
    • CONTINUING EDUCATION
    • DECARBONIZATION | ELECTRIFICATION
    • FIRE PROTECTION
    • GEOTHERMAL | SOLAR THERMAL
    • PIPING | PLUMBING | PVF
    • PME COLUMNS
      • Christoph Lohr: Strategic Plumbing Insights
      • David Dexter: Plumbing Talking Points
      • James Dipping: Engineer Viewpoints
      • John Seigenthaler: Renewable Heating Design
      • Lowell Manalo: Plumbing Essentials
      • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
    • RADIANT COMFORT REPORT
    • THE GLITCH & THE FIX
  • INSIGHTS
    • CODES
    • GREEN PLUMBING & MECHANICAL
    • PROJECT PROFILES
    • COLUMNS
      • Codes Corner
      • Natalie Forster: Editorial Opinion
      • Guest Editorial
    • SPONSOR INSIGHTS
  • MEDIA
    • PODCASTS
    • VIDEOS
    • WEBINARS
  • RESOURCES
    • INDUSTRY CALENDAR
    • DIRECTORIES
    • EBOOKS
    • PM BOOKSTORE
    • CE CENTER
    • MARKET RESEARCH
    • CLASSIFIEDS
  • EMAGAZINE
    • EMAGAZINE
    • ARCHIVE ISSUES
    • CONTACT
    • ADVERTISE
    • PME EMAGAZINE ARCHIVES
  • SIGN UP!