Doing Whatever it Takes, Part One

Years ago, I had an experience that I still remember vividly. When I met with the customer to look at her project, she said that she wanted the walls painted the same color. I bid the job for one coat, and that was clearly stated in the estimate.

When the crew arrived to do the work, she informed them that she had changed her mind on the colors. We told her that one coat probably wouldn’t provide sufficient coverage. She told us to do one coat and she’d decide how it looked.

She wasn’t happy with one coat, and I provided a price for a second coat. She didn’t want to pay us more for a second coat. We completed our work, got paid, and moved on to the next project.

The customer later posted a review of our company online, stating that she had hired another company to finish the job because they would do whatever it takes.

In other words, the other company was willing to do a two-coat job for a one-coat price. That might make the customer happy, but it is a sure way to go out of business. I will say more about this in the next post.

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.

Your prices and your image

Nobody likes to pay more for a product or service than they need to. Each of us loves to find a good deal. But as a painting contractor we must always remember that our pricing conveys a certain image about the services we are selling.

While consumers certainly like to think that they are getting a good deal, they also know that they get what they pay for. When you visit McDonald’s you do not expect the same hamburger that you will get at Fuddrucker’s. If you want more value, you understand that you must pay a higher price.

The same is true of your customers. If your prices are half of your competitors, consumers would be suspicious. They would wonder about the quality of your work. They would be concerned whether you would even be in business if they have a problem in the future. Your price would convey a specific image regarding the quality and stability of your business.

This is not to say that we should charge outrageous prices simply to convey quality. Our services must truly offer value. If we charge more, we must also offer more. And we can offer more in a variety of ways, from better quality to greater convenience, from superior service to a broader selection.

Certainly there are consumers who are more price conscious than others. And there are products and services–commodities for example–that are more price sensitive. But this doesn’t change the fact that cheap prices can convey an image of cheap quality.

Do you know what to charge?

It is not uncommon for a painting contractor to state that he wants to make $X per day. Let’s say $200 a day, which is $25 per hour for an 8-hour day. He believes that if he charges the customer $25 per hour, all will be fine and dandy.

I hate to be the one to spoil the fun, but it won’t work out that way. If he wants to make $25 an hour, he will likely need to be charging the customer $45 to $50 an hour.

If the only cost associated with a paint contracting company were labor, the above might work. But there are many other costs incurred by a business—insurance, advertising, depreciation, office supplies, etc. If these costs are not built into the selling price they will ultimately come out of the owner’s pocket.

Let’s say a contractor decides that he will charge $25 an hour for a particular job. He gets the job and everything goes smoothly. He winds up making his $25 an hour. And then what? He doesn’t have money for advertising—it’s not in his price. He doesn’t have money to pay his insurance (if he has it)—it wasn’t in his price. He doesn’t have money to maintain his equipment—it wasn’t in his price. The only thing in his price was his wages.

When these other expenses come due—and they will sooner or later—the money must come out of his pocket. Slowly his $25 an hour is lowered as he pays these expenses.

Some may say—but I’m only going to do this to get my business going. But how will you get it going if you don’t have money for advertising, insurance, etc.? How will you build your business if you are simply working for wages? The fact is, you won’t.

Your wages are only one part of the pricing puzzle. If you don’t understand that, and price your services accordingly, you are in for a very rude surprise. What you want to make, and what you actually make will be very different numbers indeed.

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