How do I tell what a plumbing company owner actually takes home?

In a plumbing company, the owner often works as a plumber and draws pay in a mix of salary, dividends and expenses. The tax return shows one picture and the day-to-day work shows another. A buyer who wants to know what the business really earns for its owner has to separate the owner’s labour from what the business itself produces.

Hours on the tools

Ask how many billable hours the owner works each week. If the owner is running calls, the buyer will either do that work or hire a plumber to do it. That wage is a real cost that the current books may not show. The owner salary page explains the general idea.

Trucks, tools and family pay

Owners often run a personal vehicle, fuel, phone and tools through the company. Family members may be on payroll for work they do not do, or may do real work for less than a stranger would be paid. Neither is wrong, but each changes the picture. Go through payroll and expense records line by line with your accountant.

On-call and emergency work

Plumbing emergencies do not keep office hours. Many owners cover nights and weekends without extra pay. Ask who answers the after-hours line, how the callouts are paid and whether the owner would expect a buyer to do the same. A company that depends on an owner who never says no can look better than it will under a new owner.

• A weekly schedule showing where the owner’s hours go.
• Payroll records for every family member.
• A list of personal expenses paid by the company.
• The on-call roster for the past year.

The seller’s side of this question is covered in selling a plumbing business as the only plumber.