# Profit Margin



## finishingtouch1 (Apr 19, 2011)

We just finished up a few jobs and after doing the numbers, the company is averaging 40-45% profit. What kind of profit margins are painters in this forum working with? I want to increase the profit margin, but I do not want to bid so high that I lose the jobs. I also do not want to sacrifice quality or product-quality used. Is 65-75% realistic? I would appreciate your expert answer and opinion.

Sincerely,

Issy


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## 6126 (May 9, 2010)

Awesome and congrats. Personally, that doesnt even seem realistic to me. If your making that kind of profit after overhead, labor, materials and all other expenses I dont see how you wouldnt be more than satified?


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## finishingtouch1 (Apr 19, 2011)

I appreciate your honesty and that lets me know I am on the right track. I have to admit, I was getting a bit discouraged about the painting business. This forum really represents the level of professionalism and brotherhood in the industry.


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## jacob33 (Jun 2, 2009)

finishingtouch1 said:


> We just finished up a few jobs and after doing the numbers, the company is averaging 40-45% profit. What kind of profit margins are painters in this forum working with? I want to increase the profit margin, but I do not want to bid so high that I lose the jobs. I also do not want to sacrifice quality or product-quality used. Is 65-75% realistic? I would appreciate your expert answer and opinion.
> 
> Sincerely,
> 
> Issy


Just curious as to how you are calculating your profit margins? Are you a one man operation, do you sub out, or run employees?


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## Dave Mac (May 4, 2007)

gross profit maybe???


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## PatsPainting (Mar 4, 2010)

I think if you are doing %15 or above net profit then your doing pretty well.

Pat


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## vermontpainter (Dec 24, 2007)

Nice to see a profitable discussion. Mr Tambasco shall be along soon.


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## kerk (Oct 14, 2009)

40-45%? If that's net, you may want to go public, as I'm sure many would like to buy your stock. That is, if there's some decent dollar figures to go with it. But I'm assuming your stating your 'gross'.

Like Pat said........15% 'net' is well run, as far as 'percentage' goes. But without 'dollar' figures, 'percentage' is a bit ambiguous.

I could show 100% net profit for the year, but only made $5000, for whatever reason. So, dollars and percentage tell you little by themselves.

I could also show a 'gross' profit of $100,000, and still have lost money.

And you must differentiate between 'gross' and 'net'.........net being the one that 'really' matters. It's the only one that tells you if 'the company' made money, not counting what your company paid 'you'.


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## finishingtouch1 (Apr 19, 2011)

Thanks for the responses. 40% net-profit after paying employees and materials and 10% for overhead. If I break it down hourly, It pays me well. I guess I just answered my own questionJ


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## finishingtouch1 (Apr 19, 2011)

Thanks Pat.


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## straight_lines (Oct 17, 2007)

Those are some nice figures. Do you mind me asking what market you are in? Both geographically and service market? Thanks.


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## vermontpainter (Dec 24, 2007)

This is a tough venue for profit discussion. It's renounced by some and celebrated by others. It's unattainable for some, while others wish profit would stop accumulating. It's different for everyone, but I think most would agree that some profit is ok. Or, at the very least, it's better to be profitable than not, at least in most cases. 60% generally garners some excitement. At the same time, we have guys here who make 100%. That's frowned upon though.

Welcome to painttalk.


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## KLaw (May 8, 2009)

straight_lines said:


> Those are some nice figures. Do you mind me asking what market you are in? Both geographically and service market? Thanks.


 
I agree - please share - even if it is fiction. Let's say you do a job for $100 bucks. What is the breakdown? Thanks.


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## vermontpainter (Dec 24, 2007)

KLaw said:


> I agree - please share - even if it is fiction. Let's say you do a job for $100 bucks. What is the breakdown? Thanks.


We already have about 85% of the story. 15 to go.


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## vermontpainter (Dec 24, 2007)

finishingtouch1 said:


> We just finished up a few jobs and after doing the numbers, the company is averaging 40-45% profit. What kind of profit margins are painters in this forum working with? I want to increase the profit margin, but I do not want to bid so high that I lose the jobs. I also do not want to sacrifice quality or product-quality used. Is 65-75% realistic? I would appreciate your expert answer and opinion.
> 
> Sincerely,
> 
> Issy


It's good that you are tracking numbers. A few jobs isn't enough to have a true sample. I'd do about a hundred jobs and then take a good hard look under the hood and see what you can do that is consistent and predictable. Use that as your data baseline.


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## daArch (Mar 15, 2008)

finishingtouch1 said:


> Thanks for the responses. 40% net-profit after paying employees and materials and 10% for overhead. If I break it down hourly, It pays me well. I guess I just answered my own question


I was following until this post, now I'm a tad confused. Are you paying yourself BEFORE figuring your profit ? Or are you paying yourself WITH the profit?

(past long discussions about that)


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## kerk (Oct 14, 2009)

daArch said:


> I was following until this post, now I'm a tad confused. Are you paying yourself BEFORE figuring your profit ? Or are you paying yourself WITH the profit?
> 
> (past long discussions about that)


My guess is it is with everyone else paid, except him. If so, that's stating a profit margin that reflects one free laborer. 

But like I said, if that's after 'everyone' and 'everything' is paid for.........start selling shares.

Goldman Sachs, or Microsoft, doesn't see that kind of percentage return.

So I still hesitate to buy those numbers.


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## finishingtouch1 (Apr 19, 2011)

vermontpainter said:


> It's good that you are tracking numbers. A few jobs isn't enough to have a true sample. I'd do about a hundred jobs and then take a good hard look under the hood and see what you can do that is consistent and predictable. Use that as your data baseline.


I Agree.:thumbsup:


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## finishingtouch1 (Apr 19, 2011)

daArch said:


> I was following until this post, now I'm a tad confused. Are you paying yourself BEFORE figuring your profit ? Or are you paying yourself WITH the profit?
> 
> (past long discussions about that)


I am paying myself with the profit.


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## finishingtouch1 (Apr 19, 2011)

kerk said:


> My guess is it is with everyone else paid, except him. If so, that's stating a profit margin that reflects one free laborer.
> 
> But like I said, if that's after 'everyone' and 'everything' is paid for.........start selling shares.
> 
> ...


 
That's correct. That is before I get paid.


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## finishingtouch1 (Apr 19, 2011)

KLaw said:


> I agree - please share - even if it is fiction. Let's say you do a job for $100 bucks. What is the breakdown? Thanks.


$100 gross

$30 labor

$20 Materials

$10 overhead

$40 profit.


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## aaron61 (Apr 29, 2007)

me thinks something is a miss???? There are some "small" projects where profit is huge.Larger projects where profit is smaller. You need to look at an entire year before you get a real picture. But like has allready been said,for us, profit is what is left after Everything else.


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## PressurePros (May 6, 2007)

finishingtouch1 said:


> $100 gross
> 
> $30 labor
> 
> ...


Its common for one man shows to believe their profits are in the 40% range. They are, for the time being. If you are a one-man show (meaning you are half of labor force), what you missed are owner salary, the replacement salary for your own labor, and your company net profit (the money you need to sustain and grow cash flow). 

Your labor and materials are 50%... maybe a little high if it only factors one employee. Does your 10% overhead factor customer acquistion cost (advertising+ estimating expenses), all insurances, equipment and vehicle depreciation?

I try to parlay to guys how important it is to pay yourself first and save money for the company. That's the only way you can run a business as opposed to a hobby.


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## George Z (Apr 15, 2007)

finishingtouch1 said:


> I am paying myself with the profit.


Nobody gets paid with the profit

You get paid by the labour expense if you painted.
You get paid by Overhead if you didn't paint.


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## paint2ski (Jan 20, 2011)

For a service business %50 and above should be the gross profit. FOr products 20 or less is reasonable. Oil companies for instance make %12 net profit. AS paint costs soar we make less but in reality my overhead as a painter is really low for any business. 50 bucks in paint can make me a 1000. Add insurance, equipment, labor, taxes, etc it drops significantly. I started painting cause what other business could you get off the ground with a single downpayment on 1 job? I also only work solo. Hiring people puts my prices through the roof. And when I do a bid people are crapping themselves at how cheap I am yet I am still pulling 4-600 a day.


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## 6126 (May 9, 2010)

I would like to get my overhead down to 10%. Im not even close. And without employees I dont see it happening.


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## Dave Mac (May 4, 2007)

paint2ski said:


> For a service business %50 and above should be the gross profit. FOr products 20 or less is reasonable. Oil companies for instance make %12 net profit. AS paint costs soar we make less but in reality my overhead as a painter is really low for any business. 50 bucks in paint can make me a 1000. Add insurance, equipment, labor, taxes, etc it drops significantly. I started painting cause what other business could you get off the ground with a single downpayment on 1 job? I also only work solo. Hiring people puts my prices through the roof. And when I do a bid people are crapping themselves at how cheap I am yet I am still pulling 4-600 a day.


 
Most companys I know that hire more people are able to bring their cost down by spreading overhead among more workers


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## finishingtouch1 (Apr 19, 2011)

aaron61 said:


> me thinks something is a miss???? There are some "small" projects where profit is huge.Larger projects where profit is smaller. You need to look at an entire year before you get a real picture. But like has allready been said,for us, profit is what is left after Everything else.


I agree. Thank You.


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## finishingtouch1 (Apr 19, 2011)

PressurePros said:


> Its common for one man shows to believe their profits are in the 40% range. They are, for the time being. If you are a one-man show (meaning you are half of labor force), what you missed are owner salary, the replacement salary for your own labor, and your company net profit (the money you need to sustain and grow cash flow).
> 
> Your labor and materials are 50%... maybe a little high if it only factors one employee. Does your 10% overhead factor customer acquistion cost (advertising+ estimating expenses), all insurances, equipment and vehicle depreciation?
> 
> I try to parlay to guys how important it is to pay yourself first and save money for the company. That's the only way you can run a business as opposed to a hobby.


Thank you for the advise.


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## pmi1 (May 10, 2011)

another contractor once told me that he was at a roundtable for this sort of talk and they said your gross proffit needs to start at 67%. There is a formula that if you start at that percentage that by the time it works its way to net that you are looking at about a 12% net. I do not know the formula though. Gross profit wise, Bigger jobs I try to get 30 to 50 % and smaller jobs 40 to 70%. I emphisize the word try! but some jobs can turn out 80-100% gross profit. Just depends on the job and customer and the times we are in at that time. As for frowning on someone for getting too much. All I have to say is follow me around for a couple weeks and I tell them to see If they can keep up as in 4:00a.m.working on computer to 9 p.m. finshing up on a job and on to the next day.


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## daArch (Mar 15, 2008)

finishingtouch,

I am not sure if you have fully understood and taken to heart what is being said here. But I could be wrong. On the chance I am correct, allow me to use your $100 example as a base.

You worked a job with a helper (is that correct?) which you paid $30. Your direct material costs were $20. (I know all these are hypethetical). And you figured your overhead (insurance, gas & tires, tolls, phone, postage, vehicle, tool depreciation, incidentals) was $10.

Leaving you $40 which you are calling profit.

How much did you pay your estimator?
How much did you pay your bookkeeper?
How much did you pay your secretary?
How much did you pay your supervisor/foreman?
How much did you pay yourself as a laborer?

All these jobs are being done by someone, I have a feeling they are being done by you, but you still need to be paid for ALL your work related time. 

If you paid yourself $30/hr for all the time you spent on that hundred dollar job (estimating, paper work, phone calls, picking up supplies, sending invoice, bank deposit, at the wall, etc) I'll bet you a Starbucks latte that you are now in the red on that $100 example.

This is NOT trying to make you look bad, this is to make you look better at the numbers and be more profitable.


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## George Z (Apr 15, 2007)

pmi1 said:


> another contractor once told me that he was at a roundtable for this sort of talk and they said your gross proffit needs to start at 67%. There is a formula that if you start at that percentage that by the time it works its way to net that you are looking at about a 12% net. I do not know the formula though. Gross profit wise, Bigger jobs I try to get 30 to 50 % and smaller jobs 40 to 70%. I emphisize the word try! but some jobs can turn out 80-100% gross profit. Just depends on the job and customer and the times we are in at that time. As for frowning on someone for getting too much. All I have to say is follow me around for a couple weeks and I tell them to see If they can keep up as in 4:00a.m.working on computer to 9 p.m. finshing up on a job and on to the next day.


100% gross profit is perfect.
zero paint, zero labour, but you do need one of these
an active imagination helps too.
Oh, you need someone to pay you some revenue for not painting.


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## daArch (Mar 15, 2008)

George Z said:


> 100% gross profit is perfect.
> zero paint, zero labour, but you do need one of these
> an active imagination helps too.
> Oh, you need someone to pay you some revenue for not painting.


Sounds like something out of Animal Crackers

Spaulding: What do you fellas get an hour?
Ravelli: For playing, we get-a ten dollars an hour.
Spaulding: I see. What do you get for not playing?
Ravelli: Twelve dollars an hour.
Spaulding: Well, clip me off a piece of that.
Ravelli: Now for rehearsing, we make special rate. That's-a fifteen dollars an hour...That's-a for rehearsing.
Spaulding: And what do you get for not rehearsing?
Ravelli: You couldn't afford it. You see, if we don't rehearse, we a-don't play, and if we don't play (he snaps his finger) - that runs into money.


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## kerk (Oct 14, 2009)

pmi1 said:


> another contractor once told me that he was at a roundtable for this sort of talk and they said your gross proffit needs to start at 67%. There is a formula that if you start at that percentage that by the time it works its way to net that you are looking at about a 12% net. I do not know the formula though. Gross profit wise, Bigger jobs I try to get 30 to 50 % and smaller jobs 40 to 70%. I emphisize the word try! but some jobs can turn out 80-100% gross profit. Just depends on the job and customer and the times we are in at that time. As for frowning on someone for getting too much. All I have to say is follow me around for a couple weeks and I tell them to see If they can keep up as in 4:00a.m.working on computer to 9 p.m. finshing up on a job and on to the next day.


A good point you bring up, and 'that' is another deception created when only looking at profit %, profit $, or even both.

By that I mean, and as I mentioned in another thread, every hour of your life has a $ amount to it. And the easiest way to determine what yours is, is how much you average per hour in 'creating income'. This will include both what you are paid, and company 'net'.

That amount can also be viewed as the 'value' of your 'non work' time, as by choosing 'not' to work at those times means you have chosen to incur the 'opportunity cost' of using that time 'not' to create income.

Now there can be some fluctuation here, as maybe you are taking a week off, but you have a crew producing income. In such case you are only giving up your paycheck, not the net being generated by the crew.

But for the sake of example, in this hypothetical, you do not take time off, or you do not have 'a crew'. 

So point being, the deception of 'gross', 'net', etc., is that it hasn't been divided by the number of hours that you 'traded' for it'.

I.E., one guy 'nets' 20,000 in a year, and does it with an average of 50 hours a week personal work time, another does it, but it averages out to 60 a week, who's better paid?

The former showed a 'per invested hour' net profit 17% better than the latter. And theoretically, if the former put in the same amount of hours as the latter, he would show overall net $ 17% better. Which to me, equates to better management.

So.........what are 'you' doing with your next hour?

Aren't numbers fun? :thumbup:


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## One Coat Coverage (Oct 4, 2009)

paint2ski said:


> For a service business %50 and above should be the gross profit. FOr products 20 or less is reasonable. Oil companies for instance make %12 net profit. AS paint costs soar we make less but in reality my overhead as a painter is really low for any business. 50 bucks in paint can make me a 1000. Add insurance, equipment, labor, taxes, etc it drops significantly. I started painting cause what other business could you get off the ground with a single downpayment on 1 job? I also only work solo. Hiring people puts my prices through the roof. And when I do a bid people are crapping themselves at how cheap I am yet I am still pulling 4-600 a day.


 Are you saying that you make anout $500 per day after all exspenses?

If you work a normal 5 day work week, that would put you at $2500 per week.

Which would put you at $10,000 per month.

Which would put you at $120,000 per year.

So, as a one man show, you are making $120,000 a year?


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## PressurePros (May 6, 2007)

paint2ski said:


> For a service business %50 and above should be the gross profit. FOr products 20 or less is reasonable. Oil companies for instance make %12 net profit. AS paint costs soar we make less but in reality my overhead as a painter is really low for any business. 50 bucks in paint can make me a 1000. Add insurance, equipment, labor, taxes, etc it drops significantly. I started painting cause what other business could you get off the ground with a single downpayment on 1 job? I also only work solo. *Hiring people puts my prices through the roof. And when I do a bid people are crapping themselves at how cheap I am* yet I am still pulling 4-600 a day.


Warning: Harsh commentary below.

Major misconception. You are pricing yourself into owning a job. If you get hurt, your income will fall, deadpan, to zero. No way to sugarcoat it.. that's not a business. Its a well paying job that can have its life hanging by a thread at any given moment. 

You choose not to factor having employees. That's fine as an owner choice, but all it allows you to do (in your mind) is be cheaper. Eventually you will run out of hours in a week and that's where you are stuck. Grinding out billing $500/day and wondering why you are always broke or have to get family funds to pay for materials or new gear.

Another misconception of sole proprietors is that overhead is higher for companies with employees. Without getting long winded, that is not the big picture. Overhead is reduced because it is divided by more jobs paying into it. Employees are not only paying for themselves, they are generating company earnings on top of each man hour. That additional gross $$ far exceeds what some perceive as increased overhead. 

Overhead, gross billing, material costs.. none of those singularly tell the story of a company's health.


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## daArch (Mar 15, 2008)

What Ken says is (as always) full of truth.

BUT, some of us choose NOT to own or be a company. And there ain't nothing wrong with that. Many artisans are solo props and don't think and do business in terms of "the company" and "profits". Which is cool.

In the past, there has been ...... shall I say ...... "tension" ..... between the solo's and the business owners. But there shouldn't be. We all are involved with the same trade, yet we have chosen different ways to work within the trade. 

IMO, the miscommunication begins when solo props pretend to be something they ain't, or when the business owner pretends he's an solo artisan. 

Know your desire and be honest with yourself, your limitations, and your goals. Don't get confused or puffed-up about what you are. 

But, for EVERYONE to be financially viable, we need to know our numbers and what to charge to make the desired level of income. That's the common ground that we should embrace.


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## Ole34 (Jan 24, 2011)

daArch said:


> What Ken says is (as always) full of truth.
> 
> BUT, some of us choose NOT to own or be a company. And there ain't nothing wrong with that. Many artisans are solo props and don't think and do business in terms of "the company" and "profits". Which is cool.
> 
> ...


 

I think you hit the nail on the head right there with the ''tension'' issue between solo guys and shops with multiple employees etc etc and I think that's more evident now then ever before when you look at the actual amount of participating members here as opposed to the amount the ''lurkers'' ..id wager then the majority of the lurkers are solo shops and its not rocket science to realize that in today's economy the ''solo prop'' has morphed into a viable and lucrative alternative to the the larger more regulation hampered shops that seem to be dying off in droves..or maybe ''shedding'' would have been a better term?? either way today's trends seem to be more about downsizing and streamlining then growing and slowing now granted nothing wrong with growing while remaining productive but for arguments sake we will stick with the 2 extremes and I think maybe the administration here needs to take a more pro active approach and support this emerging trend ......maybe then this forum can grow and not just be the same 10-12 guys crying all the time and ''thanking'' each other ........there will always be room for both but as they say ''out with the old in with the cold'' ...............beer commercial??? lol whatever you get the point


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## paintr56 (Jan 21, 2010)

I try and keep a close eye on my numbers, but this thread has me a little confused. I am not sure what is meant by gross profit. I thought profit was what was left after every thing was accounted for. Including such items as money set aside for growth, for equipment care and replacement, etc. What does not come off before gross profit is figured?

Jim Bunton


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## George Z (Apr 15, 2007)

> ''solo prop'' has morphed into a viable and lucrative alternative to the the larger more regulation hampered shops that seem to be dying off in droves..or maybe ''shedding'' would have been a better term??


No numbers to support this claim.
There are plenty of numbers that claim that the small "Ma & Pa" businesses are dropping like flies. In any industry.

I don't like it myself, but facts are facts.



> I think maybe the administration here needs to take a more pro active approach and support this emerging trend ......maybe then this forum can grow


No emerging trend just always been like this in the forums I have been involved with. 
Do you know PaintTalk hasn't grown? I think it has.



> and not just be the same 10-12 guys crying all the time and ''thanking'' each other ....


This is an accusation to the people that are not like you, or your model. 
Thank you is a nice thing to do



> ....there will always be room for both


There always was. Small or big, some of the best are in this forum here.

Ole, there is nothing wrong or unusual with your business model. 
Just because you do it, you are not a crusader for the small guy.
Any seemingly large shops are still small business in the business world.
Most of us have started your way and some of us are still there.
Me, I have been where you are for over 20 years, 
painting way more than you can imagine.
I was one injury away from going out of business. 
Besides this body has had it. I have nothing to apologize for, nothing to defend.


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## straight_lines (Oct 17, 2007)

George said:



> Most of us have started your way and some of us are still there.
> Me, I have been where you are for over 20 years,
> painting way more than you can imagine.
> I was one injury away from going out of business.
> Besides this body has had it. I have nothing to apologize for, nothing to defend.


 I will be exactly there in ten to fifteen years. There is no way I can do the things I do now when I get older. I only hope to be able to build my business were I can get out of the bucket and assume a different role in my business. I also hope that I can stay healthy till I reach that goal.


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## nEighter (Nov 14, 2008)

I have this seminar that I put together with Micheal Stone.. he could set you straight on all of that. Sign up and come to the class. It is friday, you only have 24hours to get signed up though.. hotel needs to know how many people for food 

http://www.painttalk.com/f4/building-successful-contracting-business-13009/


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## PressurePros (May 6, 2007)

daArch said:


> What Ken says is (as always) full of truth.
> 
> BUT, some of us choose NOT to own or be a company. And there ain't nothing wrong with that. Many artisans are solo props and don't think and do business in terms of "the company" and "profits". Which is cool.
> 
> ...


Bill, I have absolutely no issue with owner operators. 90% of them still use a helper though. many hire a third and fourth person to foprm a larger crew. The gentleman whose comment I quoted and commented upon says he prices so low people are shocked to get such a good deal. That's a dubious flag of accomplishment to fly and what I was addressing.

I certainly don't want to add fuel to the fire by making this observation but I'm on a roll.. The animosity and resentments seem to come from inferiority complexes rather than company status.


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## daArch (Mar 15, 2008)

Ken, sorry if I implied or caused you to infer that I thought you had issues with other business models. I know you don't. 

My point was that there is a perception that there is some uneasiness between the two schools, and I would say that Ole's post confirms that perception.

I have learned a sh!t load from the "big boys" (that term is to lighten the mood :thumbup: ). I think all solo's can learn from the "businessmen" here. I wish I could return the favor, but I know I can't. 

My goal is to have everyone proud of how they operate, be accepting of others who do it differently, and to learn from those with experience who are generous enough to share. 

And if it isn't working the way you're doing it, then listen up bunkie, people are here to help.


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## One Coat Coverage (Oct 4, 2009)

I think that the main thing that Ken was trying to get accross is that if you are on the solo misssion, and you get hurt, then you are DONE, at least until you are healthy again.

I only have three guys working at the moment, nothing big. If I get hurt, my guys can still do the work.


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## daArch (Mar 15, 2008)

Well that was ONE of his points.

we all know that being a solo has it's challenges, as does owning a business. Whichever you choose, make sure you know the perils you face and take appropriate action. There are insurance policies that can cover your ass if you get it in a sling. Or just marry money :thumbup: And make work a hobby :whistling2:

And if you're a business owner, you are responsible for the livelihood of your employees, so make sure if you become incapacitated, you have contingency plans. I know too many businesses that could not last more than a week on auto pilot if the boss was unable to run the company.


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## plainpainter (Nov 6, 2007)

What kills me about these discussions, whether or not you choose to understand what cash flow is, gross profits, net profits - or you just choose to balance a checking account. How come more guys just don't 'inch' up their pricing over time? I raised my pricing for '11 by 3-4% from last year. Now I didn't do a full quickbooks analysis on how to price my work over the years - I've done lots of guess work to come up with pricing. It's only the past year or so that I am going back and refiguring out everything with more analysis.


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## kerk (Oct 14, 2009)

plainpainter said:


> What kills me about these discussions, whether or not you choose to understand what cash flow is, gross profits, net profits - or you just choose to balance a checking account. How come more guys just don't 'inch' up their pricing over time? I raised my pricing for '11 by 3-4% from last year. Now I didn't do a full quickbooks analysis on how to price my work over the years - I've done lots of guess work to come up with pricing. It's only the past year or so that I am going back and refiguring out everything with more analysis.


Plain, I think that even with a full 'quickbooks' analysis, you'll always find that your experience with that 'guess work' will always outweigh any type of analysis.

But on the other hand, I suppose that someone starting out might find a program analysis helpful. 

To me, there are 'so many' variables from job to job, i.e. customer, economy, contractor personality, season, contractor work load, competition, etc., that factor into that 'guess work' (i.e. experience), and will determine the price you are willing to do the job for, that I couldn't give a hoot about an analysis by a program. 

The same applies to raising prices........I don't need an analysis. I don't need to know my 'Point of diminishing returns'. (My minor was economics, BTW, and that's one of the 'few' things I still remember) All I need to know is that if I am TOO busy.......I can raise my prices (or be choosy about my jobs). Or, if I am twiddling my thumbs........I better make some deals (and take whatever job comes along).

It ain't rocket science........the market will figure it out for every individual.

In a nutshell, the more you are in demand, the more you can raise your price. The less you are in demand, the more you 'must' lower your price.

Is this a great country, or what? :thumbsup:


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## plainpainter (Nov 6, 2007)

Kerk, while I agree with what you say - the thing is if you get less than a 1,000 RFQ's in a season, you do need analysis to tell you whether or not if you are doing ok. Last summer, I lost 16 estimates in a row, yet my closing rate was 48% all season long. The fewer RFQ's you get, the more of these so-called winning and losing 'streaks' you will run into. They are meaningless, yet can scare a guy who doesn't track his data into thinking that demand is low and thus lowers his price. 

Ken Fenner awakened me to this phenomena many moons ago - and I have since then been a desciple of tracking my data. To be truthful, with the amount of RFQ's I get in a season, I don't know if I was too expensive or too cheap until the very end of the year. And rather than changing my price which can greatly alter or altogether remove my profit margins - I choose to find new ways to gain more and more RFQ's. The more people calling me for more work - translates into more closed jobs no matter what my closing rates are.


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## Dave Mac (May 4, 2007)

If your closing 48% your price is to low:jester:


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## plainpainter (Nov 6, 2007)

Dave Mac said:


> If your closing 48% your price is to low:jester:


You kill me Dave.


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## Dave Mac (May 4, 2007)

Dan your expertise is needed in the hourly rate thread and dont hold back lol


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## plainpainter (Nov 6, 2007)

Dave, I am staying away from that thread. If guys want to pretend they don't have overhead, there is nothing I can say.


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## daArch (Mar 15, 2008)

Is my ceiling fan overhead?


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## Dave Mac (May 4, 2007)

Bill that right their is funny:yes:


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## vermontpainter (Dec 24, 2007)

New guys don't have years of solid numbers to look back at. Even if you don't scrutinize them, if you are running a business, you probably have some idea how much you've sold each year and how much you've made. New guys don't have that. None of us did when we were new (except gabe). 

I think in any business, you have to see it perform over time to know what you've got. Guys who jump the gun usually get in trouble. It's not a sprint. It's an endurance race. We're all logging miles.


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## kerk (Oct 14, 2009)

plainpainter said:


> Kerk, while I agree with what you say - the thing is if you get less than a 1,000 RFQ's in a season, you do need analysis to tell you whether or not if you are doing ok. Last summer, I lost 16 estimates in a row, yet my closing rate was 48% all season long. The fewer RFQ's you get, the more of these so-called winning and losing 'streaks' you will run into. They are meaningless, yet can scare a guy who doesn't track his data into thinking that demand is low and thus lowers his price.
> 
> Ken Fenner awakened me to this phenomena many moons ago - and I have since then been a desciple of tracking my data. To be truthful, with the amount of RFQ's I get in a season, I don't know if I was too expensive or too cheap until the very end of the year. And rather than changing my price which can greatly alter or altogether remove my profit margins - I choose to find new ways to gain more and more RFQ's. The more people calling me for more work - translates into more closed jobs no matter what my closing rates are.


OK, I got ya, it's an analysis of 'your' past jobs. I can see the value of that.

I was thinking it was a program to give you a projected analysis based on 'industry' data that you fed to it. 

Obviously I'm not familiar with the software, as I tend to be about as IT sophisticated as Jeb Clampet.


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## Harry (Aug 4, 2008)

finishingtouch1 said:


> Thanks for the responses. 40% net-profit after paying employees and materials and 10% for overhead. If I break it down hourly, It pays me well. I guess I just answered my own questionJ


I'd like to see that.
Either you're mistaken and don't know how to break down the job or you're holding your customers hostage, lol.
Seriously, I'd like to see the numberz because as others have said...if you do have this much profit, we want to buy your stock...


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## Harry (Aug 4, 2008)

plainpainter said:


> Kerk, while I agree with what you say - the thing is if you get less than a 1,000 RFQ's in a season, you do need analysis to tell you whether or not if you are doing ok. Last summer, I lost 16 estimates in a row, yet my closing rate was 48% all season long. The fewer RFQ's you get, the more of these so-called winning and losing 'streaks' you will run into. They are meaningless, yet can scare a guy who doesn't track his data into thinking that demand is low and thus lowers his price.
> 
> Ken Fenner awakened me to this phenomena many moons ago - and I have since then been a desciple of tracking my data. To be truthful, with the amount of RFQ's I get in a season, I don't know if I was too expensive or too cheap until the very end of the year. And rather than changing my price which can greatly alter or altogether remove my profit margins - I choose to find new ways to gain more and more RFQ's. The more people calling me for more work - translates into more closed jobs no matter what my closing rates are.


Closing rates are not meaningless.
If, ultimately, you end up with a 48% closing rate, most likely, your numbers are too low.

And if you lost 16 jobs in a row, then won enough to end up with that 48% closing rate...then you either analyzed your numberz after the 16 losses (dropped your price) or you simply don't know what you're doing...


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## Harry (Aug 4, 2008)

kerk said:


> Plain, I think that even with a full 'quickbooks' analysis, you'll always find that your experience with that 'guess work' will always outweigh any type of analysis.
> 
> But on the other hand, I suppose that someone starting out might find a program analysis helpful.
> 
> ...


Good stuff and simple...as it should be.
I deal with contractors, from the residential to the commercial and industrial sectors and none of them use analytics.

However, analytics are indeed great and can give you the upper edge. It's a whole ballgame in itself and somewhat confusing, with numerous charts.

Charts are great if you live in an area where there are no outsiders bidding as you can track real, consistent data. It doesn't help much to keep losing jobs to many different unknowns because the lack of consistency skews the numbers.


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## plainpainter (Nov 6, 2007)

Harry said:


> Closing rates are not meaningless.
> If, ultimately, you end up with a 48% closing rate, most likely, your numbers are too low.
> 
> And if you lost 16 jobs in a row, then won enough to end up with that 48% closing rate...then you either analyzed your numberz after the 16 losses (dropped your price) or you simply don't know what you're doing...


I didn't say closing rates are meaningless, I said losing/winning streaks are meaningless. I never changed my rates all last year - I have a degree in mathematics Harry and know all about statistics. I can run monte carlo tests with certain assumptions about closing rates - and I can show you will have winning streaks and losing streaks in your data. Having the occasional streak of 11-12 losses for the small shop doesn't mean he's pricing too high - it could easily be just a meaningless losing streak. And is why I said it's important to have loads of RFQ's - the small guy losing 13 times in a row could trick himself into thinking he's overpricing and then make a fatal mistake about lowering his price. I know some guys that get only about 70-80 RFQ's in a season, if they go through 15 losses in a row they'll go into a panic. Once you achieve 250 RFQ's per season, things really start to change. 

If it was up to me, I'd say all small shops of 2-3 guys would have to advertise enough to get 500 RFQ's in a season - and then they would realize that's it's not about, price. It's about having enough inquiries that will boil down to having enough customers at the price you want. To me it's absurd when some guy that only gets 60-70 phone calls a year try and gauge whether he's too expensive or not. Or going to each homeowner and trying to price it to get the job, instead of relying on iron clad pricing.


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## NEPS.US (Feb 6, 2008)

Perhaps it is the quality of your RFQ's that you should be concerned with.


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## daArch (Mar 15, 2008)

Now there is thought for consumption

As a paperhanger, I do many small jobs. Lots of one man-day powder rooms, lots of two or three man-day halls or master bed rooms. Yes I get five man-day jobs often, but my schedule is not full of them.

I have a feeling that most of you painters do not have many one or two man-day jobs. Can you imaging your estimating work load and overhead if that was bulk of your business? 

If I were to win only 75% of my proposals, I would be spending too much time estimating and not earning money. My RFQ's need to be HIGH quality with a high probability that they'll choose me. My closing rate needs to be *well* above 80. (90% even depresses me - and it has little to do with my rates) I can't do that by casting a huge net and running after trailer trash.


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## Harry (Aug 4, 2008)

plainpainter said:


> I didn't say closing rates are meaningless, I said losing/winning streaks are meaningless. I never changed my rates all last year - I have a degree in mathematics Harry and know all about statistics. I can run monte carlo tests with certain assumptions about closing rates - and I can show you will have winning streaks and losing streaks in your data. Having the occasional streak of 11-12 losses for the small shop doesn't mean he's pricing too high - it could easily be just a meaningless losing streak. And is why I said it's important to have loads of RFQ's - the small guy losing 13 times in a row could trick himself into thinking he's overpricing and then make a fatal mistake about lowering his price. I know some guys that get only about 70-80 RFQ's in a season, if they go through 15 losses in a row they'll go into a panic. Once you achieve 250 RFQ's per season, things really start to change.
> 
> If it was up to me, I'd say all small shops of 2-3 guys would have to advertise enough to get 500 RFQ's in a season - and then they would realize that's it's not about, price. It's about having enough inquiries that will boil down to having enough customers at the price you want. To me it's absurd when some guy that only gets 60-70 phone calls a year try and gauge whether he's too expensive or not. Or going to each homeowner and trying to price it to get the job, instead of relying on iron clad pricing.


No problem plainpainter, I changed my words to "losing streaks aren't meaningless"

They're not meaningless when you need work, are they? lol

I think you're all wet. I've dealt with HUNDREDS of contractors through the years and let me tell you...there isn't enough time or money to go around when it comes to sitting out a 13 bid losing streak.

When you have a company to run, you need to make your moves. I suggest working two sets of numbers and watching them...but NEVER put all your eggs in one basket when feeling out the situation.

For instance...the next two bids...bid one at normal losing streak and another at a lower profit and see what happens. This way...you can still play the game AND EAT.

I don't care how many degrees you have or what Monte Carlo whatever you have. I've been bidding jobs for over 30 years.

You've got to have better tools...you can't just sit down and WONDER whether it's a losing streak because of numberz...


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## CliffK (Dec 21, 2010)

daArch said:


> Now there is thought for consumption
> 
> As a paperhanger, I do many small jobs. Lots of one man-day powder rooms, lots of two or three man-day halls or master bed rooms. Yes I get five man-day jobs often, but my schedule is not full of them.
> 
> ...


 I run a smaller custom shop and feel the same way. My leads need to be high quality. I do understand the idea of having a better chance at getting "your" price when you have many, many leads. The odds may be better, however, you need to take into consideration the $ it costs in advertising to generate those leads and the time and energy it takes to estimate all the additional job possibilities. There is nothing more I hate at this point in my career than running all over town looking at jobs that turn out to be a waste of time. I spend my time concentrating on servicing quality repeat customers and the referrals that those repeat customers generate. Many times with this approach I am not put in a position where I have to compete with another contractor. I'm in no way saying this is the "right way" or the "best way". I am just saying this is the direction I have steered my business over the years and it has worked well.


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## vermontpainter (Dec 24, 2007)

Let's be honest, there are thresholds at which number analysis aren't going to have much meaning. I know Dan has degrees in math, physics, engineering, statistics and marketing, but based on some of the volume revealed, not even in terms of gross sales, but just in terms of number of jobs completed and avg sale, he probably doesn't have a relevant data history to contribute a very meaningful contribution for paint contracting businesses. 

I think it all circles back to the fact that every business has a life cycle, from the moment of inception.

If you are dead set committed to being a solo show, it's easy enough to figure your personal production rates, material preferences and pricing, and price accordingly, targeting your ideal demographic. There are many on pt whom I respect greatly who have adhered to this model and built good businesses, aware of the risks of the model. 

It is when a contractor chooses to have a crew larger than him or herself that things become more complicated. If it's you and a helper, your production rate history is no longer relevant. If you want a crew of 3-5 and to not be painting much, then your production rate history for estimating is further irrelevant and becomes totally meaningless as you navigate the learning curve of managing a crew while marketing, estimating and selling enough work for 6000 man hours in a year at a price point that can carry you out of the bucket. 

There's no shortcut.

THE BIGGEST weakness that paint contractors have is a dreadful inability to train and manage.

Sorry.

It's true.

I respect guys who know that's not how they want to spend time, and so they choose to stay solo.

It's harder to respect technicians with Gerber-esque entrepreneurial seizures who hire, don't train, manage or establish crew based production rates and pricing...

...and then just sit around and bitch about how it's not possible.

Anything is possible. This is just not an industry where hanging a shingle comes with any kind of entitlement.

Success has to be earned. If that's not compatible with your value system, then frustration and mediocrity breed a whole lot of misery in paint contracting.


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## Harry (Aug 4, 2008)

vermontpainter said:


> Let's be honest, there are thresholds at which number analysis aren't going to have much meaning. I know Dan has degrees in math, physics, engineering, statistics and marketing, but based on some of the volume revealed, not even in terms of gross sales, but just in terms of number of jobs completed and avg sale, he probably doesn't have a relevant data history to contribute a very meaningful contribution for paint contracting businesses.
> 
> I think it all circles back to the fact that every business has a life cycle, from the moment of inception.
> 
> ...


I don't think Dan's problem is his production rates, I think he's trying to drink champagne on a beer budget so to speak.
He can sell his work for any amount he wants but I believe that he's being unrealistic in his goals. Matter of fact I know people in his area who are jam packed with work...and guess what? They golf and take vacations. They just don't try to put their kid through college in 4 jobs or so.

Dan is determined to not budge it seems...


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## daArch (Mar 15, 2008)

Scott said:


> THE BIGGEST weakness that paint contractors have is a dreadful inability to train and manage.


So true.

But let's not hold painters as the only ones who have this inability.

This is a necessity to be successful in the business world. Almost ANY business. 

I learned I don't got this ability. Maybe it's my personality, maybe it's my ADD, maybe I never learned, whatever. All I know I couldn't and didn't do it. 

Having realized and accepted that natural inabilty, I am now quite comfortable in my real skin and have continued in a role that is more "me".


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