Five steps to starting a successful painting business: Estimating

For a new contractor, estimating poses one the great mysteries of owning a painting business. (Estimating is also a great mystery to many seasoned painting contractors.) Yet, estimating is crucial to the financial success of the business.

An estimate is nothing more than a projection of the labor and material costs required to perform a specific job. An error as small as 10% can have a huge impact on the profitability of the job.

Many painting contractors–both new and experienced–believe that a painter should be able to look at a particular project and know how long it will take. This is the “eye-ball” method of estimating. And it is prone to numerous problems. Two of the biggest are that it relies entirely on the experience of the estimator and mistakes are almost impossible to identify.

But what if you could eliminate these potentially profit-destroying problems? What if you could estimate jobs accurately and consistently? The good news is, you can. If you have an estimating system.

A system is a specific series of steps that you take to achieve a desired result. If you desire consistent and profitable estimates, then having a specific process for estimating jobs goes a long ways toward making that a reality. (The quality of your results will depend on the quality of your system.)

Certainly, the “eye-ball” method can be accurate in many situations. If you are estimating a 10′ x10′ bedroom, an experienced painter will have a good idea how long it will take him to do the job. But on a typical job, with dozens of substrates and variables, this becomes almost impossible. Estimating is little more than a trial and error endeavor, and too many errors could prove fatal to your painting business.

Producing accurate and profitable estimates from the start of your painting company is possible if you have a system. However, even with accurate estimates, you must still sell the job. And that will be tomorrow’s topic.

Click here to learn more about estimating paint jobs.

Five steps to starting a successful painting business: Knowing your numbers

There is perhaps no area of a painting business that is more important than finance and accounting. And yet, this is the one area that painting contractors are typically the weakest. If you don’t know your numbers, you can’t charge the right price. And if you don’t charge the right price, you won’t be in business for long.

I regularly hear painting contractors claim that they have no overhead. This means one of two things: They really don’t have a business, or they don’t know what they are talking about. Neither bodes well.

The contractor who makes such a claim typically explains that he has a home office (no rent), relies on word of mouth (no advertising), has no employees (no labor burden), etc. However, overhead consists of much more than the items listed.

Overhead consists of insurance, vehicle and equipment maintenance, depreciation on equipment, postage, office supplies, professional fees, training and consulting, owner’s salary, and much more. A contractor who truly has no overhead has no insurance, no equipment, does not pay himself a salary, and does not use a lawyer or accountant. Without insurance or equipment, can he really call himself a contractor?

Understanding your overhead is crucial to identifying the selling price you need. If you do not recover your overhead in your selling price, it will come out of your wallet. Which means, you will make far less money than you think you are.

Another common misunderstanding relates to profit and owner’s salary. Many believe that the two are synonymous. They are not. Owner’s salary is what you are paid for the investment, time, and effort you exert on behalf of your business. Profit is what is what is left over after paying all of your bills–including owner’s salary.

A further confusion relates to gross profit and net profit. Gross profit is what remains after paying job related expenses, such as labor and materials. Net profit is what remains after everything–including overhead–is paid.

These numbers can vary widely between companies, and therefore, it is imperative that you understand your numbers. If you don’t you cannot establish a profitable selling price. If you don’t you cannot estimate profitably. Tomorrow we will look at estimating.

Five steps to starting a successful painting business: Systems

While I advocate having systems and procedures for every task in your business, this usually isn’t practical or even possible for a business that is just beginning. However, there are some systems that are imperative. These systems involve:

  • Marketing
  • Finance
  • Estimating
  • Sales

The last 3 of these will be covered in more detail in the coming days, so my examples today will focus on marketing. But first, let us examine why systems are important and how they will help you implement your plan and accomplish your goals.

Systems provide specific directions for accomplishing a particular task. For example, if you wish to balance your check book there are specific steps that you must follow. The same is true for your painting business.

A crucial component of accomplishing your goals is to measure your actual results. Doing so provides historical data that can be used to make informed decisions and project future results. Let us look at marketing as an example.

There are an abundance of ways to market a painting company–yellow pages, door hangers, direct mail, magazines, newspapers, lead services, and much more. How do you decide where to spend your advertising money? And how to you determine if that money is being spent profitably?

To answer these questions intelligently (that is, which actual data rather than your “gut”) you must consistently obtain certain information. You must have a way to record and analyze this information if it is to be useful. You could spend hours at the end of each month going through your records and constructing the data. Or, you could have a system in place to record the requisite information as it comes in. The former can be time consuming and prone to errors; the latter is efficient and generally more accurate.

To illustrate further, let us say that you use 4 different methods for generating leads. Each generates a different number of leads, has a different closing rate, and generates different levels of sales. A system will allow you to quickly and easily compare these different methods–despite the fact that every number associated with them is different. A system will allow you to identify which you should continue and which you should discontinue.

The same is true in every area of your business. Systems provide you with a tool to consistently achieve the results that you desire. Tomorrow we will look at finance–knowing your numbers.

Five steps to starting a successful painting business: Planning

The first step to starting a successful painting business is to plan for success. Business success does not occur by accident. It requires both intellectual and physical action. It requires that you identify what you want from your business, and how you will achieve it.

Many painting contractors think that planning is a waste of time. They view planning as nothing more than idle dreaming. They want to get out there and put paint on the wall. After all, that is what brings in the money. But before you put paint on the wall, you must generate leads, estimate accurately, sell at a profitable price, and much more. You must identify how many leads you need, what price is profitable, and much more. Addressing these issues is what the planning process is all about.

Let us say that you have modest goals–you want to make $40,000 a year. How many jobs will you need in order to make this? How many man hours will this require? How many leads will you need to generate in order to sell those jobs? How will you generate those leads? At what price do you need to sell in order to make your desired income? These are the types of questions that must be answered. (And to answer most of these questions, there are many other questions that must be answered.)

The refusal to answer these questions–or as is more common, the refusal to even ask them–is an invitation for stress, frustration, and failure. If you don’t know the answers, how can you possibly take the actions that will create the results that you want? In short, you can’t.

Even the best of plans will not go perfectly. There are many variables and unknowns in owning a painting business. But the lack of planning makes almost every aspect of the business an unknown, and therefore, uncontrollable.

To illustrate, let us take one of the issues listed above–the number of leads you must generate. If you know this number then you can develop a plan to accomplish it. You can establish a marketing budget. You have a benchmark by which to measure your success as you move forward.

If, for example, you need to generate 10 leads per month, you have a specific number to shoot for. You can determine how many door hangers to distribute, how many postcards to mail, etc. You can determine what this will cost.

Planning is not a magic pill. Plans seldom work out exactly as we intend. However, they provide you with a road map to where you are going. And that will get you far closer to your intended destination than if you choose to drive blindly.

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