It’s one of the toughest lessons in our business:
Getting paid doesn’t mean you made money.
There are a ton of land mines out there that can cause you to win the battle only to lose the war.
Production rates can be a little tricky, especially when we are estimating work that we will not actually do until two to three months later due to our own scheduling realities.
[Losing Customers? Find them HERE]
In two to three months, we may not even have the same employees we have today. That is why following your numbers — your production rates over time — is so important.
How Do You Know How Much to Charge?
Painting contractors who are running businesses with well-defined expenses and overhead are able to arrive at an hourly rate for estimating production. This is not a guessing game, but actually an important business concept.
In other words, it is essential to wrap ALL of your business expenses into your rate structure, to name a few:
- Insurance Coverages
- Office Expenses
- Professional Services
- Vehicle Maintenance and Repairs
With a good bookkeeping system (my company uses QuickBooks) it is pretty easy to track expenses and identify how much it costs each week, month and year just to keep the doors open. All you have to do is make sure that everything is being entered into the system, and accounted for. Keep in mind, the info that comes out is only as good as what you enter in.
How are you doing on that?
One of the toughest lessons in the #paintingbusiness : Getting paid doesn’t mean you made money…
— Topcoat Review (@TopcoatReview) November 26, 2016
Degrees of Difficulty
Sometimes contractors have an actual rate structure based on the type of services required on a project. It is not unusual to charge more for spraying than for brushing and rolling. Or to charge more for pressure washing than for manual cleaning with buckets and scrub brushes.
This is why, when we look at a project at the estimating stage, it is important not to miss anything.
The best estimators I know are methodical about it—asking a lot more questions than they answer. Hopefully, your marketing and branding have done some of the selling for you before you even walk through the door.
You should always be promoting and differentiating your company at every stage of the sales process, but not at the expense of missing critical details while estimating.
During the estimate, I take a lot of photos (with the homeowner’s permission) and notes in Evernote.
I used to do the note-taking on legal pads, but have found that using Evernote on either a cellphone or an electronic notepad helps me to be more concise in documenting what I see.
What to Look For
Defining the scope of work with the customer is the critical first step:
- How much painting are they looking to get done?
- What is their goal?
- Is it just a simple color change?
- What is the current condition?
- Is the decision to paint motivated by deteriorated surface conditions?
- When was the surface last painted?
- Was it done professionally or DIY?
It is much more productive to get the customer answering these questions — to get them talking — to learn what their expectations are. Sometimes, their answers will raise red flags. If they are just looking for the lowest price among several estimates, it will likely come up here.
Things you need to remember:
• No two paint jobs are exactly the same.
No matter how many dining rooms or front doors you have painted, they are all slightly different, so you have to look at them uniquely in terms of getting surfaces from their current condition to your professional result.
• It doesn’t matter if it is going to take three painters four days to complete the job or four painters three days.
Production rates are, literally, how long it takes to get things done:
- How long does it take to brush one coat on a door?
- How long does it take to protect and roll out one coat on a 12-by-12 ceiling?
- How long does it take to scrape, sand and prime one side of a capestyle exterior gable end?
A legitimate answer to all of these questions is: “It depends.”
Looking Back to Go Forward
It is all too easy to take the check from the customer, deposit it and move on to the next estimate. Believe it or not, there are lower-order paint contractors out there who have the mindset that if they have just been given a $1,200 check, then they have just “made” $1,200.
Nothing could be further from the truth. If it cost you $1,500 to get the $1,200 check, then I would call that failure.
No cash flow would be better than negative cash flow. The best way to bridge gaps between your estimating and the actual production that occurs later on the project is through job costing.
A very basic example is as follows:
If it is a $1,200 job, using $150 in materials, and your goal is to hit a 15 percent profit ($180), then you have $870 in labor. If you estimate at a rate of $50/hr., then you have 17.4 hours to complete this job.
- One guy for two days?
- Two guys for one day?
- Can it be done in one day, given dry times?
These factors all come into play from your first look at the project until the day you complete it. Failure to consider all possible eventualities is the difference between actually making the $50/hr. that you estimated, or making $35/hr.
The smaller the project, the faster you can lose.
Create both accuracy and accountability. Raising employee’ awareness of how long they are taking to complete tasks is essential to efficiency.
Take the time to review each project upon completion, and then share the results with your crew in meetings — and this means not just a review of how nicely rolled the walls were, but a review of how the numbers worked out. Gather up the final costs for the project and hold this number up against the numbers predicted in the estimate.
- Did the crew do it faster than anticipated?
- Were materials right on?
If so, you may have exceeded your target profit margin. More importantly, if production could not match the estimate, you really need to know. If you are estimating at $50/hr. and a 15 percent margin, and most jobs are coming in below that, there is an imbalance that needs to be corrected.
The worst thing you can do is get mad at your crew, or even ask them what the problem is. I have employed enough painters to know that the simple answer you will get is that you need to charge more. Sometimes that is true, but if you are already consistently selling higher prices than your competition, then it is definitely time to look at creating more efficient processes for field production.
Pricing should be pretty well set and not driven by how badly you want or need to get the job. It is the job of the production team, ultimately supervised by YOU, to go out and demonstrate how badly we all want to continue making a living doing what we enjoy and excel at.