# Buying a Plumbing Supply House

What a plumbing and PVF supply house is worth, why fill rate decides whether contractors come back, and what dead stock does to the price.

Source: https://searchspheresource.com/guides/buying-a-plumbing-supply-house

## The Trade Behind the Trade

A plumbing supply house sells to the contractors this site already covers, which makes it the same market seen from the other side of the counter. It carries no license, dispatches nobody, and takes no callback risk on work it did not do. The 2022 Economic Census counts 5,917 establishments across 2,107 firms, close to three locations apiece and the most consolidated of the supply trades here, moving 97.81 billion dollars through 81,233 people. Read the code carefully before you read a comparable: it covers plumbing and hydronic heating, while metal pipe sits with the metal service centers and fluid power sits elsewhere again.

## What Plumbing Supply Houses Trade For

There is no published band for a plumbing supply house by name, so the closest published band is the wholesale and distribution class it sits inside. Sold listings across that class run 2.00x SDE at the lower quartile to 3.44x at the upper, with a 2.68x median and 199 days on the market. It is a main street dataset, and a size-banded survey of brokered sales reads nearer 3.1x SDE between one and two million dollars. Inside either range the deciding number is what the shelves are actually worth, so ask for the aging schedule and the write-off history first.

## Fill Rate Is the Whole Relationship

A contractor with a crew waiting does not compare prices, they compare whether the part is there. Fill rate on the first pass is therefore the number the trade actually competes on, and it is the number a seller is least likely to have measured. It is also expensive to hold: every point of service is inventory that is not turning. The pattern to look for is a house whose fill rate is high because the buyer is disciplined, and not one whose fill rate is high because it has never thrown anything away. Those two look identical on a service report and nothing alike on a balance sheet.

## What Is Actually on the Shelf

Dead stock is the trade's characteristic problem, and it hides well. Project residue, discontinued fixtures and superseded fittings all sit at cost until somebody decides otherwise, and a house that has not counted in a while does not know what it owns. Cycle counting, where a slice of the warehouse is counted every week and not the whole of it once a year, is the practice that tells you whether the number on the balance sheet has ever been tested. Ask when the last full count was, what the adjustment was, and whether anybody signs off on writing something off.

## What to Verify in Diligence

The value is in stock that turns and accounts that pay, so read both against their own history. Verify:

## Financeability Notes

This is an inventory loan wearing a business loan's clothes, and lenders treat it that way. The stock is collateral and it is also the working capital the buyer carries from day one, so the facility has to fund the purchase and the float. Expect the inventory valuation to be tested against turns and not against cost, and expect questions about contractor concentration, since one builder going quiet moves both the revenue and the receivable. Model debt service after a market wage for the person who runs the counter and the warehouse.

## What this guide verified

- The 2022 Economic Census counts 5,917 plumbing and heating equipment and supplies wholesale establishments across 2,107 firms, with 97.81 billion dollars of sales and 81,233 employees. (2022 Economic Census, NAICS 423720 Plumbing and Heating Equipment and Supplies (Hydronics) Merchant Wholesalers: https://www.census.gov/programs-surveys/economic-census.html)
- The federal size standard for this code is 200 employees, counted with affiliates, and not a figure in dollars of receipts. (13 CFR 121.201, SBA table of small business size standards: https://www.ecfr.gov/current/title-13/chapter-I/part-121/subpart-A/subject-group-ECFR882d0d17e0a5c56/section-121.201)
- The May 2025 OEWS puts the national median wage at 72,080 dollars for sales representatives in wholesale and manufacturing other than technical and scientific products, and at 107,230 dollars for transportation, storage and distribution managers. (BLS Occupational Employment and Wage Statistics, May 2025: https://www.bls.gov/oes/)

## Terms of the trade

- **PVF**: Pipe, valves and fittings, the industrial piping half of what a plumbing supply house carries. It is worth knowing as a category because it behaves differently from fixtures. PVF is bought by the job, substituted freely between brands, and priced against a moving metal cost, so its margin swings with commodity prices in a way a boiler's does not. A house heavy in PVF is running a small commodity book whether it thinks so or not. Ask how prices are set on it, how often they are reviewed, and whether the last two years of gross margin were earned or simply inherited from a rising market.
- **Fill rate**: The share of ordered lines a house ships complete first time, the line-fill form of the measure. This is the number contractors actually choose on, because a crew standing still costs more than the part does. It is also the most expensive number in the business, since every point of it is inventory that is not turning. Two houses can report the same rate for opposite reasons, one because its buying is disciplined and one because it has never written anything off, and only the aging schedule tells them apart. Ask how it is measured, on which lines, and what it cost to hold.
- **Dead stock**: Inventory with no movement and no likely buyer, usually project residue or a superseded part. It is the trade's characteristic problem and it sits at cost until somebody decides otherwise, which means the earnings a seller quotes rest on a judgement nobody has audited. The test is not whether dead stock exists, because it always does, but whether the house has a habit of finding it. A written write-off policy, a rotation program with the manufacturers and a recent count are the three signs. Where none of them exists, discount the inventory and not the multiple.
- **Cycle count**: Counting a slice of the warehouse on a rolling schedule instead of the whole of it once a year. It is the cheapest signal there is about whether a balance sheet has ever been tested. A house that counts a slice of the warehouse every week finds its errors while they are small and knows what its stock is worth on any given day. A house that counts once a year, or has stopped counting, is quoting a number nobody has checked. Ask when the last full count happened, what adjustment it produced, and whether anybody is authorized to write something off without the owner in the room.
- **Backorder**: An ordered line the house could not ship complete, owed to the customer until stock arrives. A backorder is a promise made with somebody else's schedule, and it is the point where a supply house's service reputation is actually decided. It also distorts the revenue picture, because an order booked is not an order shipped and a house under stress can carry a growing backorder while its sales look flat. Ask for the open backorder report, its age, and how much of it depends on one manufacturer, since a single allocation problem upstream can hold a quarter of the book.
- **Stocking dealer**: A distributor a manufacturer requires to hold agreed inventory in return for carrying the line. The arrangement is why a supply house can promise same-day parts, and it is a commitment and not a courtesy: minimum stock, sometimes minimum purchases, sometimes a territory. It binds the buyer's working capital in a way a plain purchase agreement does not, and it usually needs the manufacturer's blessing to continue after a sale. Read every stocking agreement for its minimums and its termination notice, and ask what the house would have to buy in the first year to stay in good standing.
- **Contractor account**: A trade credit line a house extends to a builder, secured by little more than a history. Selling on account is how the trade works and it is where the money is lost. The account carries no collateral in most cases, its risk moves with one builder's own project pipeline, and the remedies when it goes wrong are liens and bond claims that take time and counsel. Read the aging by account and not in total, find out how much sits with the largest five, and ask what the house does at sixty days, because the answer describes the credit culture you are buying.