How to Double Your Money for Strong Painting Job Profits
Sometimes its hard to make good gross profits on every painting job.
Often painting contractors work very, very hard on completing projects and making clients happy. However, when the dust settles, painting job profits are low.. In this video, I unpack how to maintain gross profits of 50% or better using production rates, job costing and a basic understanding of pay rates, charge rates and material markup.
You can read the full transcript here:
Hey guys, Brandon Lewis here, and I’m going to talk to you about how to double your money on every painting project, or as we refer to it in our program, we call it 50% gross profits. I know you can split hairs on margins, profits, whatever, I’m just going to say you double your money, and/or you have 50% gross profit. I apologize for my appearance, I put this on my list of things to do today, and I forgot to take a shirt off the doorknob at the house, and so you’re just getting me as I would go to the gym, I take my daughter to a little obstacle course racing class on Thursdays, and this is how you’re going to get me, because sometimes you just got to get things out the door.
So, I have done 2,200 or so individual assessments of painting businesses, and I have this very specific way that I diagnostically go through a painting business when I’m on the phone with people if they’re considering joining our programs, and the first thing I do is just, “How did you get started in the painting business?”
We go over operations in great detail, then we go over customer reactivation, retention, sales, time management, net new lead generation in that order, and we spend a lot of time in operations, and what I have found is when companies aren’t very profitable for the owner, when they’re not making a lot of money, and we like you to be at 30% cash flow to owner, and that means that if you’re running a million-dollar painting business, you should be making $300,000 if you are not personally in the field. If you run a $500,000 painting business, you should be at $150,000 in cash flow to owner, okay?\
Painting Job Profits
So if you don’t make twice your money, if you don’t make 50% gross profits in the field, then you’ll never hit that 30% number, because you got 20% that goes to overhead and a lot of other things, so that’s really what we’re focusing on here today. And just as an aside, something simply to think about, is that people over-complicate running a painting business, they really do. I talk to very, very smart people that aren’t making any money, and they just over-complicate their painting business, so the first thing is this. You buy labor wholesale, and you sell it retail for a living, okay? Let me just tell you again, you buy labor wholesale, you sell it retail for a living, okay?
Now, there are about 2,000 labor hours in a year for your typical painter, do you follow me? 2,000 labor hours, that’s 50 weeks, not 52, times 40 hours a week, 2,000 hours. If you’re painting, if you’re just a painter just out in the field, and you charge $50 an hour, okay? I know some of you can charge more in your markets, some of you might have to charge a little less, not many of you, but a few, then you should make $100,000 in gross profits, just you painting, and if it’s just you painting, you should not have much overhead.
So when people make less than $100,000 in a painting business, I’m like, “How does that happen?” Because there’s only 2,000 hours, and if it was just you, then you should make $100,000. If another person that is working for you is paid on average $25, and you charge $50, then you should have $25 left over in gross profits, so that’s $50,000. That’s $150,000, just you and a buddy painting, right?
Average Painter Income for 2000 Hours
So the first thing I always do is I look at people’s average income, and sometimes they’re actually painting in the field 20 hours, 30 hours, 40 hours, and they’re running their business and they’ve got other people working for them, but when they’re making less than $100,000, I always know that they’ve got problems in their painting business because it just doesn’t make any sense. I mean, it’s basic math, okay? You’re buying and selling labor hours, you buy labor wholesale, you sell it retail, that’s what you do when you own a painting business. You’re not a painter anymore, and the skills that you learned, brushing, rolling, spraying, those aren’t your skills anymore when you own a painting business, this stuff is your skillset, okay? Marketing, sales, operations, hiring, recruitment. Those are your skills now, okay?
So, how do you double your money on every painting project? So, the first thing is this. You have your average pay rate, okay? Average pay rate. And let’s say we got somebody on your crew that’s making $30, we got somebody on your crew that’s making $20, but your average pay rate with labor burden, which is usually about 20%, let’s say that your average pay rate is $20 an hour before labor burden, you multiply that by 20%, that gets you to $24, I’m going to round up to $25 for simple math, so your average pay rate’s $25. You’re going to charge the client $50 per hour, okay? I think you just take your average pay rate and you double it. That is a perfectly reasonable, proven number. 450 painting contractors later, you can get 50% gross profits, I promise.
Now, that’s your average pay rate, so your average charge rate needs to be double that, $50, okay? So that means if you quote a job and there are… It’s a $10,000 job, when it’s all said and done and the smoke settles, you should be able to keep $5,000 in gross profits for the company, okay? Now of course, you got to take overhead and all that stuff out of there, administrative staff, marketing to a degree, depending on how you count it, salespeople, gas for running estimates, things like that, okay? So that’s $50.
Painting Material Markup
Now, you also got your materials. And we got a lot of guys that just mark their materials up times two. They get a really good rate, they mark it up times two, and it’s still less than what a… It’s still less than what the client could get it for if they went and bought it retail, but your material needs to have a markup so that it’s giving you a contribution margin when you go to paint a project, right? You need to be marking it up. So you can multiply that up times two, okay? So let’s say you had $100 worth of job, of materials rather on a job, you’re going to charge $200 for those materials.
So, now this all sounds well and good, right? Everything I just said. All I got to do is double everything, and that’s what I’m going to present to the market, right? Well, yes and no, okay? Here’s where it gets a little tricky, okay? We’re going to talk about where it gets a little tricky, and this is where people end up losing money, okay? Let me erase this. We’ve got folks in the office in here working today, so if you hear a bunch of noise out in the hallway, I can’t help it, I’ve just got to get this thing in the can, because I’ve been talking to people about this so much, I thought, “I need to get this video out.”
Production Rates for Painting Contractors
So, we got everything right, we’re going to double it. So number one, the first thing is production rates. Here’s where you can really lose your shirt, no pun intended here. Production rates, and I’ve done another video on this, you can go check it out, it’s called Production Rate Estimating. When you have production rates, that means you go into a room, there’s 1,200 square feet of wall, you know that your guy can paint 120 square feet per hour on average, based upon field data that you’ve collected over the years, and if you do not have production rates, we have a production rate module here at the APPC, I suggest you develop your own.
I don’t suggest using production rates that are found in software, I don’t suggest using industry production rates, because they’re rarely exactly what you want, and if you’re going to do something for your entire career, with production rates, you really need to make sure that they’re accurate, and you need to test them, and it’s very simple. If you want to know how long it took to run a mile, you’d go out to a track, and you’d set a timer, you’d run a mile, you’d stop the timer, you’d know exactly how fast you ran a mile, you’d never guess how long it took you to run a mile.
Writing Accurate Painting Estimates
If you’re guessing, none of your estimates are going to be accurate. “Well, I kind of know based on experience.” No, you don’t. I’ve tested hundreds of painters on this, nobody knows. You couldn’t go into your back yard, put a 10-foot board on a sawhorse and cut it exactly six feet without a tape measure, so to think that you can go into a home and look at 50, 60 different surfaces and guess them all is just crazy talk, okay?
Production rates. When you have production rates, it reduces the variance. Production rates can take your variance from 25% or 30% down to like 5%, okay? You’ve got to have that variance taken out if you’re going to double your money on every painting project, so production rates. You’ve got to guess your labor hours, so for example, let’s say that you do production rates, you got a production rate for doors, windows, linear feet of trim, square feet of siding, square feet of ceilings, et cetera, you know them all, so you go out to a job and you decide, once you do all the calculations, the division and multiplication, there are 100 labor hours in that project.
Your charge rate is $50, okay? So that means that you’re going to charge $5,000 for that project, and let’s say that your materials are $500, we’re going to multiply those times two, that’s going to be $1,000, and that means you got $6,000 that you’re going to charge on your project. You following me so far? $6,000. You got your production rates, you figured it out, you got your labor hours, you multiply that times your charge rate, you know what your average pay rate’s $25, so… Right? We got that from previously, so it’s $5,000 plus $1,000, $6,000.
Now, here’s where the next step comes in, and this is critically important. We got our production rates, so we know that we’re not guessing anymore, that’s accurate, here’s the other thing you got to do. Other thing you got to do, job costing. Job costing is very simple. We have a job costing module at the APPC I typically give to people when they enroll because they need it, along with the production rate module, and it’s where you put all the data about your project on the top of the form, it’s very simple.
Budgeting Labor for Painting Jobs
How many labor hours were allocated? How big of a material budget was allocated? How many days, how many men are going to be on it? Name, date, start date, et cetera, just simple stuff, probably takes two minutes to set this up. So all the data goes up here, and then every day, you’re going to log the materials that are purchased. Let’s say, remember we had a $500 labor budget? So the first day, maybe we buy $350 of material, it’s a two-man job, so that means 16 hours were taken out this day, 16 hours were taken out this day, 16 hours were taken out this day, 16 hours were taken out this day, and then we come over here, and we had to buy another $100 worth of material. So we got six times one, two, three, four, what is that? It’s 24, plus 40.
Let’s do another 16 here. One, two, three, four, five, that’s zero, right? So now we got that, that’s 30. So one, two, three, four, five, plus 30 is 80 hours, okay? So up to this point, we got 80 hours on it. Every day, you’ve got to be job tracking. The crew leaders need to be job tracking out in the field, the operations manager or the owner need to be job tracking, and you need to be talking to them about labor budgets and material budgets every day. If the crew leader does not fill the operations budget, and if the operations manager does not fill and own the operations budget, and if it does not happen in real time, and if it is not super simple, the job costing doesn’t happen, you go over-budget, you don’t make your 50%.
But let’s say that we have one more day, we put another 16 in here, which means now we’re at 96 labor hours, and we got four labor hours left, which means we came in four hours under budget, and we came in $50 under material budget. So what that really means is four times your $50, which is your charge rate, is $200, we got another $50 here that we made, so we really ended up making $5,250 on this project, which means our gross profit’s probably really a lot closer to 52%, so we made 52% on this job.
So number one, if you’re not making the money that you want on your jobs, and if they’re continuously going over budget, or worse yet, you don’t do job costing, so you just kind of work and work and work and work, and you hope that there’s some money left in your bank account, which is remarkably dangerous and cavalier and irresponsible, and you’ll never make a bunch of money doing that, and if you don’t understand that there are 2,000 labor hours per year per painter and this is really a simple business, it’s going to get you in trouble. I see people all the time that make less money than their crew leaders, because they don’t understand this simple math, and they don’t understand how money is made in painting.
So, let’s recap here real quick. This is what we’re going to do, number one, so if you’re… The steps, we’re going to talk about the steps to make double the money. Number one, if you really want to think about it, number one, this is the order I do it in, one. Number one, start job costing. Start job costing. Go back to the last two or three jobs you’ve done, and plug in the information post-mortem, after it’s done. See what you get. Are you making money, are you not making money?
Number two, anything you’re presently doing, go back and backtrack, start job costing, and anything you’re going to do, go job cost. Are you getting 30%, 50%, 20%, 60% gross profit? You’ll never know unless you do job costing. So job costing is going to tell you if you’re winning or losing. If you’re not doing job costing, you might as well quit your painting business, it’s pointless, you’ll never get ahead. It’s essential, it’s important, it’s non-negotiable, okay? Just as if a painter told you he couldn’t brush, spray, or roll, you’d laugh in his face and tell him he’s not a painter. When an owner tells me that they don’t job cost, I almost want to laugh in their face and say, “You’re not a business owner, dude.” This is essential, this is basic, this is 101.
Number two, production rates. You’ve got to determine these. Go in a room, measure some surfaces, set a clock, paint, stop the clock, do a weighted average. If you paint five doors and you do an average, you know how long it takes to paint five doors, you don’t have to guess it anymore, you just go in and you count. Your job is not to guess when you go to a project, your job is to measure and do division and multiplication, based on production rates.
And again, we have these modules, if I can help you, if you want to set up a diagnostic call, I can explain all this to you in greater detail and give you the tools to do it with so you don’t have to reinvent anything from scratch. So that’s start job costing, production rates. Now, here’s an advanced thing. Once you start job costing, and once you start doing production rates, your crew leader will know where they are on labor budgets, they’re going to have a labor budget to hit. You’ll know, and they’ll either hit it, or they won’t, and you can give them feedback and coach them to get them moving in the right direction.
Incentivizing Painters to Perform
But there’s one other thing that you can do, and if you do this, it’s really important, and it makes your business run in a way that’s almost self-policing, okay? And that is this. We call it a saved labor bonus program. Very simple. You got 100 hours. You come in at 90 hours, means you got 10 hours left over, right? 10 hours. That means that you charged the client $500 in labor, remember? $50 an hour, but you didn’t actually incur the expense on this $500, you just charged it, but you didn’t pay it, does that make sense? So with that being the case, now you’ve got this money left over you can use to encourage your guys, and here’s what I suggest you do with it. Give them half of it.
So you got $250, you got a crew leader, and you got one painter. I prefer two-people crews in residential, easy. I want one crew leader, one helper. The projects rarely go over budget. Will they take a little longer? Yeah, but you don’t make any more money off of a four-man crew painting a house than you do two two-man crews painting two separate projects, because the cash flow’s the same every day. The billable labor hours are the same. It’s a myth that bigger crews cash flow faster, they don’t.
$250. So the way I like to do this is something like this. Crew leader gets $150, helper gets $100. Now, there’s a specific ratio I’m using here and I’m not going to get into all that, but you need to give your crew leader a little bit more, because he is the crew leader, and you give it to him proportional to the number of hours they’re working on the job, which means that at every crew meeting that you have, and you should have them weekly, you do a few things. Number one, you review every single job that just got completed.
“All right, we got the Johnson job here. It came in at 90 hours, it was a 100-hour job. Great work, guys.” Everybody make a big deal of it. “And looks like y’all got a bonus here of $250,” and you hand out two checks. “All right, well let’s look at the customer satisfaction survey. Looks like you got a nine on this, a 10 on this, a 10 on this, an eight on this, we got a seven here for appearance. What happened? Well, you wore a tank top to the job, they didn’t like that,” whatever it is. “What could we do a little better?”
Managing Painters for Performance
Same things with jobs that go over-budget, you got to have those conversations about why they go over-budget because this kills painting job profits. Then in addition to that recognition, we also recommend you have a wall of fame for a monthly contest, that you give away awards and recognition with some kind of monthly thing they can win, and you let your crews compete against one another. A lot of these men have never had any recognition since high school, they don’t get a chance to compete, and they’re not publicly appreciated, and that’s something that really motivates people.
So, I know I’ve breezed through this, but this is how it works. I would urge you, urge you, plead with you, that if you’re not doing job costing, you don’t have production rates, you don’t have a saved labor bonus program in place, to do those things, and to go see if you’re making… You’re doubling your money in what you’re putting in in labor and material, see if you’re making 50% gross profits, and if you’re not, fix it, because it’s your money, it’s your family’s money, it’s your future, it allows you to grow, it allows your company to be stable.
Don’t neglect this stuff, don’t think because you’re a painter and you became a painting contractor that all of a sudden, that you don’t have to acquire different skills and a different outlook. You will fail in this business financially, and your day-to-day life’s going to be a hectic mess if you don’t put these systems in place. Just as I told you before, you learned to brush, roll, and spray to become a painter, you’ve got to learn different skills once you become a business owner. And I can’t paint, I’ve never painted, but I built up a large painting business and sold it, and I’ve helped hundreds of painting contractors do the same, but it’s not my painting skills that’ve helped me, and it’s not the painting skills that have made people successful that I have seen. In fact, most of the time, those painting skills are a detriment, because it makes you focus on the jobs instead of on the business.
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Brandon Lewis, Painter’s Academy, Painter’s Weekly. I appreciate you very much, I’ll see you next time. And if you ever need any help, okay? You need some help, you don’t know what’s really going on in your business, you don’t have time to reinvent the wheel, email me, Brandon@paintersacademy.com, we’ll set up a diagnostic, I’ll review this stuff with you, and I’ll coach you through systems, and all of our systems have audio and/or video instructions, done-for-you templates and tools.
We get together with our group once a month if you have any questions, we start you off with a quick-start call, we do monthly trainings, there’s a members-only Facebook group, we get together once a year at the summit. Don’t run your business by yourself, it’s crazy. It’s crazy to run your business by yourself. Email me, we’ll set up that diagnostic call, and hopefully we can help you. Take care, guys, talk to you next time.
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