Knowing When to Shut Up

Customers don’t really care how great you are. They want to know what benefits they will receive by doing business with your company.

Why are You Losing Money?

If your business was losing money, would you simply conclude that you need to raise prices and do so by some arbitrary amount? Or, would you sit down, analyze your finances, and determine a specific cause for the loss? In other words, would you just take a wild guess or would you approach the problem scientifically? Unfortunately, many contractors take the guessing route.

Certainly, not charging enough is a primary cause for contractors to lose money. But that fact alone does not tell us why a contractor isn’t charging enough. Perhaps he doesn’t know his true costs and isn’t recovering his overhead and labor burden. Perhaps jobs take longer than he expects. Perhaps it’s a combination. But he won’t know if he simply guesses.

While guessing may be fun at a carnival, it seldom is an effective business strategy. This is true whether you are trying to determine what you should charge for labor or whether you are trying to determine how long a job will take. To make accurate decisions, you must approach each aspect of your business scientifically, and this is particularly true of estimating.

Fundamentally, estimating comes down to identifying the time and materials required to complete a particular job. But we must do this before we ever open a can of paint. We have a choice when we are estimating a job: either we can guess, or we can approach it scientifically.

If you are estimating a simple job, such as a single bedroom, you might be able to accurately guess how long it will take. There are few substrates and other issues to consider. A small error won’t be financially catastrophic. But what happens when you are estimating a complete repaint of a 3,000 square foot house? The number of substrates, preparation and access issues, and other considerations rises significantly. A few errors could have a significant financial impact.

You wouldn’t paint this house in one fell swoop. You would approach it in a systematic manner—remove or cover furniture, prep the surfaces, paint, and then put things back. You would follow a series of steps to complete the job. The same approach should be used for estimating.

All things being equal, a painter should complete a specific task in the same amount of time, whether he is working at Mr. Brown’s or working at Mrs. Green’s house. If you know that time, then estimating becomes nothing more than a process of identifying which tasks must be completed and how much of that task is involved.

Of course, all things are seldom equal. Preparation will vary and access will be different. Surface textures will vary and other variables will come into consideration. But we can attach numbers to these variables, just as we can count the number of doors or windows.

Just as we attach a number of our financial activities—we identify how much of each expense occurs—we can attach a number to our production activities. By doing so, our estimating can become as scientific and objective as our finances.

In this regard, I am proud to announce Estimating Paint, a new project dedicated to helping contractors develop an estimating system.

The Eye-ball and the Low-ball

At one time or another, most painting contractors have used the “eye-ball” method of estimating. They simply look at the job—eye-ball it—and come up with a price. While this method can be reasonably accurate at times, it is fraught with potential problems. It can be easy to overlook details of the job, it is not systematic, and it lacks any scientific precision.

If you have been in business long, you have likely lost a job to a competitor who offered an outrageously low price—a low-baller. While there are certainly exceptions, low-ballers generally share much in common with eye-ballers (and indeed, they are often one and the same). Both fail to recognize the crucial role of understanding their numbers.

As a general rule, low-ballers do not understand their financial numbers. They claim that they have little or no overhead, and thus believe that they can charge low prices and still be profitable. As a result, they do not charge an accurate price, that is, a price that allows them to recover their actual costs.

Similarly, eye-ballers do not understand their production numbers. They don’t know how long it takes to prep and paint a particular surface or perform a specific task. As a result, the time they allot to a particular job is often inaccurate, that is, they do not charge for the time that is actually required.

The low-baller cannot properly correct his errors until he better understands his financial numbers. The eye-baller cannot correct his errors until he understands his production numbers. Both need to understand the vast improvements that they can make by measuring certain aspects of their business.

A measurement is simply a quantification of some characteristic or action. But it does considerably more than just tell us how much there is of something. It allows us to make informed, objective decisions. It allows us to separate fact from fantasy.

Consider the low-baller: If he really understood his numbers, he would realize that $25 an hour isn’t enough to pay for marketing, insurance, office supplies, depreciation, and other overhead. And he could do something about it before it is too late. Similarly, if the eye-baller really understood production rates, he would realize that he could produce consistently accurate estimates.

It may seem like a lot of work to learn one’s numbers. And it can be. But running a successful business isn’t always easy. Knowing your numbers makes it more so.

Click here to learn more about estimating paint jobs.

Two common mistakes when estimating paint jobs

Paint contractors often make two important errors in relation to how to estimate painting jobs. Both of these are efforts at a short-cut, and neither will be profitable over the long term.

One mistake is to fret about the “going rate”-what others charge. To get directly to the point: Your bidding should the pricing of other contractors. Their pricing has no impact on what your price ought to be-your production rates, your expenses, and your monetary objectives are all that matter.

If other painting companies are willing to labor for less than you want to make, will that mean that you should? If your competition is clueless in regard to estimating and the price they should charge, does that mean that you ought to go along with their lead? If other painting companies are gradually going bankrupt, do you truly want to emulate them? If your reply is no, then what difference does it make what they charge?

Undoubtedly your competition has an influence on your business. If another company offers comparable service and value for half the price, the customer will probably go with the lesser price. But it is very doubtful-if not unfeasible-for a business to provide superior value at cut-rate prices.

The price you must charge for a particular project should include the following: labor costs, paint and sundry expenses, indirect costs (overhead), and profit. Every one of these can vary widely from business to business. To be anxious regarding what others are charging is to overlook these facts.

A second mistake, which is very similar to the first, is to estimate by the square foot. On the surface, this may seem plausible. Nevertheless, the square foot concerned is on the floor, rather than a paintable surface.

This form of bidding is common in new construction. It provides an easy (and I might add, lazy) approach to bid. I say this since the size of the floor has zero to do with what is being painted.

Think about the following illustration: 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.

Regardless what you charge per square foot, the previous illustration demonstrates that the floor has hardly influence on the real work. But if you estimate according to the floor area, your price will not precisely reflect the real work to be performed.

Pricing paint projects isn’t heart surgery. But it shouldn’t be done with blind guesses, tarot cards, or Dart boards either. Numerous aspects must to be considered when pricing a job. But the size of the floor isn’t one of them.

You might think, “But everybody does it this way. Surely it isn’t that awful.” First, everyone doesn’t do it this way. Second, 90% of the painting contractors beginning business this year won’t be around in 5 years. So if you want to do it similar to everyone else, you are probably going to end up like everybody else-burned out, disillusioned, and bankrupt.

It is never too belated to learn proper estimating practices. And if you are just starting a painting business, now is the moment to study how to estimate paint jobs.

Click here to learn more about estimating paint jobs.

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