Maximizing the first year profits with a painting company takes intent, and attention to detail. Starting any business from scratch takes a lot of work, long hours, and no one grows a business with any significance without getting some battle scares.
Legally, I cannot give a rate even a range of how much you can make in the first year because I could be held liable. What I can do is I can give you a formula and show you what the averages are in the industry are and how if you follow this formula you can maximize first year profits with a painting company.
And from tthe example a will layout you can strapulate, what you what it would you would need to do have an income of say 100 $200,000 or more?
The first thing we need to take a look at is, how many estimates are required to reach a certain income? An established painting company could easily have 6-8 estimates scheduled a week and twice that many during busy times of the year. It certainly isn’t unheard of, but a new company that’s just getting started is might only be averaging about three and a half estimates a week. With an aggressive marketing campaign, certainly a first year company could avaerage more than 3.5 estimates a week, but in this scenario with a moderate marketing budget of say $1,500 a month, 3.5 is realilistic number of estimates.
3.5 estimates a week comes out to 182 estimates a year.
The average job size in the painting industry is $4,500.
182 estimates multiplied by $4,500 gets us to $819,000 worth of work that was estimated.
Now we’re not going to close everything we estimate. The industry average is 30%. A first year business owner might not close 30%. But not everyone will. IA bad close rate is 10% and a master saleperson might be 60%. But the industry average is 30%.
Under this scenario a 30% close rate means closing $245,000 worth of work.
What is the net profit? Industry averages are between 15% and 25% but I know owners who do much worse than 15% and some people who do better than 25%, but the the average is between 15 to 25% your results may vary, but for the case of this scenario, which is just a scenario, I’m choosing 20%.
20% profit of that $245,000 gross sales is $49,000.
There’s five factors that really influence whether your margins. Estimating a job in no way guaranntees that your will get it.
Paying performance based on a flat rate or piece rate will help maximize first year profits.
Too often when people are paid by the hour there is little hustle and effort to save time. Most people work more diligently when getting a flat rate.
Paying a fair flat rate generally works out best for all parties including the customer.
As a Klappenberger & Son franchisee, estimates are calculated by enetring measurement and quantities into a Klappenberger & Son Excel Spreadsheet. The spread sheet has hundreds of production rates for a multitude of commonly painted surfaces.
As the information is added the Spreadsheet calculates the hours, materials, profitability, and total cost.
In this example, to keep things simple, we’re going to say this job takes 100 hours. and 10 gallons of paint.
Whether you use in house painters or subcontractors, the typical hourly rate for a skilled painter is between $25 – $35. However, we are not going to pay at an hourly rate, but rather a fixed price based on an hourly rate.
The benifits of a flat strongly out weigh the negatives. The benifits include:
The disadvantage are:
To maximize first year profits, we to recognize and avoid pitfalls. I have 17 years of experience paying at an hourly rate and 12 years paying at a flat fixed rate. There is no debate in my mind, flat rate works best for, the owner and the painters.
In this scenario, the 100 job would have a payout of $3,000 to the painters if hourly rate was based on a $30.00 per hour.
Regardless of how long the job took, the payout would be $3,000 divided amonngst the painters.
I reccommend marketing up the materials 50%.
The customer is charged $65.00 per hr. x 100 hrs. = $6,500
Materials are $500.00 x .50% = $750.00
This leaves a gross profit of $3,750.00.
There are other expenses besides your labor and materials. Insurance, gas, marketing, royalties, all kinds of things that are going flush net profit in the 15 to 25%. Whether you use subcontractors or employees when paying at a piece rate, as opposed to an hourly rate, you lock in your profits and minimize the risk.
Now, let’s talk about how to improve your close rate so we can get more jobs. Whether you use employees or subs, the quality of the crews out there doing the work will both directly and indirectly affect your close rate and the profitability of inconsistent average painters. Believe it or not, they need to be replaced.
You need to upgrade continually to get rid of inconsistent workers. Inconsistent workers meet or exceed customer expectations 60-80% of the time. The temptation is to keep them and hope you can convince them to improve their weaknesses. Unfortunately, this rarely works. I absolutely believe in giving second chances, additional training, and trying to correct problems. However, if I see little change, they must be replaced immediately. As a friend of mine said, “When someone shows you who they are believe them.”
A second thing that will directly impact how much money a painting company makes in its first year is how professionally written your proposals are. A professionally written proposal not only has a detailed list of what’s included, but it also has what’s excluded. This will eliminate gray areas, for example, whether the closets were included or not, which will cost you time and written proposals cost time, money and hurt the relationship and cause the customer to question the integrity of the company.
A good, well-written proposal will include details specific to the customer’s needs, such as whether the job is time-sensitive or how much prep work needs to be done. Taking a few extra minutes to detail the proposal shows that you are listening to the customer.
Now that you have your well-written proposal, get it out promptly. Time kills deals. While you are doing something other than getting that proposal out, your competitors are getting it out, and they’re closing the jobs. Companies that send details promptly close a lot more jobs than those that do not.
So far, all these these three things are all under the franchisee’s control:
The fourth practice is also under your control, but less so than the first three. It involves getting Google reviews every week.
Google reviews are so important for organic lead generation, in other words, for free work. Our franchisees have business cards with QR codes that take customers directly to the Google Review site. This increases the chances of them taking a few minutes to write something positive.
The final piece of the puzzle is sales. It does not matter how many leads you get, how well-written the proposal is, or how quickly you get it out; if you haven’t built value, the customer just might not be interested in your proposal. Think about it. At some point, the customer will be looking over the 3 estimates, and if none of the painting contractors built any value, then the customer will make their decision based only on price and maybe time.
Value can be built through peace of mind or fear in the painting business. If value has not been created in the customer’s mind, the only alternative is to win on price.
The salesperson who built the most value has the highest chance of closing. Why should that customer pick you? How to build value. It’s so important.
At Klappenberger & Son we teach and preach how to build value. Whether is through warranties, testimonials, or many other ways.
Owning a Klappenberger & Son franchise is a great way to maximise first year profits because we have the tools you need to:
For more information about franchising call 843 306 2107
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Email: dklappenberger@klappenbergerandson.com
Address: 902 Bluff View Dr. Myrtle Beach, SC 29579