Bidding low to get the job

Brian Phillips

I occasionally hear a painting contractor ask if it makes sense to offer low “introductory” prices to help build a new painting business, or “get their foot in the door”. I vehemently discourage using a low bid for such purposes for several reasons.

First, statistically 90% of the painting contractors starting business this year will fail within 5 years. One of the biggest reasons is not charging enough. A low bid will not make you money.

Second, charging low prices will develop you a reputation as the “cheap painter”, which is hardly an effective means for charging a reasonable rate. A low bid gives you an low price reputation.

Third, once you have “introduced” yourself at low prices, you will have a hard time raising your prices for past customers.

The bottom line is that low bids aren’t good for the bottom line. In the short-term you won’t make money, and in the long-term you will have a difficult time getting the prices you need to make money.

Long term success is achieved by offering superior value to the consumer. If you try to compete on price– even for a short period– you are inching toward the unemployment line. Instead of offering low prices, offer greater value.

Market your company as superior in customer service, dependability, convenience, or something else. Differentiate your company by offering better value, not lower prices. And then learn to communicate the value you offer and sell at a higher price.

If you look like your competitors, you will likely wind up in the same place they will.

June 2nd, 2010 | Tags: , | Category: Estimating, Sales | Comments are closed

Marketing your new painting business

Brian Phillips

A frequent question from those starting a new painting business is how to obtain work. With few, if any references, no market presence, and often little money for advertising, the new business owner is in a quandry.

While I would recommend developing a business plan (including a marketing plan) prior to launching a new business, this does little good for someone who has already opened the doors.

Perhaps the easiest and least expensive method is door hangers. When I started my business 22 years ago I distributed thousands of door hangers. When I didn’t have a job to do, my job was handing out door hangers. It wasn’t fun (particularly in Houston’s very hot summers) but it worked.

The following can serve as a crude marketing plan:

Select a small area to target (1,000 to 2,500 homes). Get the door hangers out as quickly as possible. When a job is sold, get a sign in the yard immediately and leave it there as long as possible. At the same time, market to the neighbors with more door hangers or direct mail. This provides consistent and regular exposure in a small area and increases the effectiveness of each piece. Rinse and repeat.

As money permits add the following to your marketing plan: vehicle signage, customer retention, and newspaper ads or inserts. Again, keep your marketing focused on a small area to maximize exposures.

No marketing plan is perfect. Nor will the results be immediate. But persistence and consistency will produce results in time.

June 2nd, 2010 | Tags: | Category: Marketing, Starting | Comments are closed

The myth of estimating by the square foot

Brian Phillips

It is not uncommon for a painting contractor to ask what price he should charge per square foot. In and of itself, this may seem like a plausible question. However, the square foot involved is on the floor, rather than a paintable surface.

This type of pricing is common in new construction. It provides an easy (and I might add, lazy) way to estimate. I say this because the size of the floor has nothing to do with what is being painted.

Consider the following example: A room that is 20’ x 20’ with an 8’ ceiling has 400 square feet of floor space. The wall area is 640 square feet. There could be 80 linear feet of baseboards and 80 feet of crown moulding. If that room were divided into 4 equal size rooms of 10’ x 10’, the wall area would double to 1,280 square feet. Similarly, baseboards and crown moulding could also double.

No matter what you charge per square foot, the above example shows that the floor has little bearing on the actual work. But if you charge according to the floor area, your price will not accurately reflect the actual work to be performed.

Estimating paint jobs isn’t rocket science. But it shouldn’t be done with blind guesses, tea leaves, or Ouija boards either. Many factors need to be considered when pricing a job. And the size of the floor tells us nothing about those factors.

You may think, “But everybody does it this way. It can’t be that bad.” First, everybody doesn’t do it this way. Second, 90% of the painting contractors starting business this year won’t be around in 5 years. So if you want to do it like everybody else, you are probably going to wind up like everybody else—burned out, disillusioned, and broke.

Tea leaves make a nice beverage. Ouija boards can be a fun party game. But neither is a good method for making important business decisions. And neither is estimating by the floor area.

June 1st, 2010 | Tags: | Category: Estimating | Comments are closed

Why do businesses fail?

Brian Phillips

According to the Small Business Administration, more than 90% of small businesses fail within 5 years. Of those that survive 5 years, another 90% will fail within another 5 years. After 10 years, less than 1 out of 100 small businesses remain open.

Why do so many businesses fail?

Among the most common reasons cited are insufficient starting capital and poor planning. Both can certainly contribute to the failure of a business. However, neither is a necessary cause of business failure—a business can survive with insufficient capital and/ or poor planning.

A business is a dynamic entity. New products, new technology, economic conditions, consumer trends, and much more makes change a certainty in the world of business. Successful companies adapt to this ever changing business environment. Indeed, leading the change is often the path to success. This change has 2 components—one mental and one physical.

The mental aspect involves conceiving of or embracing new ideas. It involves changing one’s perspective of the marketplace, procedures, or some other aspect of the business. It involves obtaining new information and knowledge. The physical aspect involves implementation—acting on the new ideas, information, and knowledge. It involves putting that new perspective into action.

The failure to do this is what causes most small businesses to close shop. The failure—or refusal—to embrace new ideas and then implement those ideas is the primary cause of business failure. (Ideas without action are useless.)

What then, prevents businesses from embracing and implementing new ideas? Why, given the statistics, do business owners refuse to expand their knowledge, and then act on that knowledge?

The answer is—ironically—an idea, or more precisely, a set of ideas.

Change necessarily involves an element of the unknown. While research and planning can certainly mitigate the risks involved, we cannot predict with absolute certainty the consequences of changes. Uncertainty breeds fear, and fear leads to paralysis.

Fear is a natural response to the unknown. We fear what we do not know. A noise in the middle of the night can instill fear if we do not know its source. Our fear will vanish when we identify the source as a tree limb bumping a window. In other words, we overcome fear by obtaining information.

On the surface, it may seem absurd to say that small business owners are paralyzed by fear. After all, owning a business is risky. But remember, most small businesses fail. It is one thing to take the risk of owning a business; it is another thing to succeed at it.

There is a vast difference between uncertainty and ignorance. While we may not know for certain the outcome of an action, we are not totally ignorant of the consequences either. For example, we may not be able to predict the precise results of a particular marketing campaign, but we can make reasonably valid projections based on past experience (either our own or that of others).

Successful businessmen learn to overcome their fears by obtaining the necessary information. Knowledge is power. Knowledge reduces uncertainty, and with it, fear. But knowledge alone is insufficient. We must act on that knowledge.

The failure to act is a sign of remaining uncertainty. The failure to act is a sign of lingering fear. The failure to act is a consequence of not trusting one’s own judgment.

Confidence is a crucial part of overcoming fear. A confident businessman evaluates the available information, makes a decision, and then acts. He takes calculated risks. He understands that failure is a possibility, but he takes measures to reduce the risk of failure. He trusts his own judgment, and acts accordingly.

This does not mean that he never makes a mistake. Quite the contrary—he makes many mistakes. But he also keeps his eyes open as he moves forward, constantly obtaining new information, and re-evaluating his results. He is not afraid to act (or overcomes that fear when it exists), because he is armed with an ever growing body of knowledge.

Businesses fail because of fear. Businesses succeed by seeking knowledge and having the confidence to act on that knowledge.

June 1st, 2010 | Tags: | Category: Systems | Comments are closed
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