Paint Contractor's Manual
Introduction
Organizing Your Business
This
book is written for painting contractors. If you've been working as a painter
for several years and want to go into business for yourself - finding clients,
selling the job, supervising the work, and collecting the money when it's due -
this book is for you. If you've been running a paint contracting business for
several years and want to compare notes with another paint contractor, this book
is also for you. I'll let you look over my shoulder to see how I run my company.
I expect that you'll learn enough to make the time you spend with this volume
worthwhile.
Before
I begin, let me explain a little about how I got into the business. Some of my
experiences may sound familiar to you.
My
partner and I have been in the paint contracting business for a total of 20
years. We learned the business through trial and error, asking questions, and
determination. When we went into paint contracting, it seemed simple. All we
needed were a couple of brushes and rollers. We learned very quickly how naive
that was.
Our
first job was an expensive home in an exclusive area of Malibu Beach,
California. When doing custom work, you have to know a lot about preparation,
color selection, paint application and, most important, getting the right price.
My partner and I knew absolutely nothing about any of these subjects. So you
could say we were bound to get off to a bad start. In fact, we lost our shirts,
to say the least.
You
might ask how we got a big custom job in the first place. Well, there's an old
saying in the business world: "They saw us coming." Because we knew
almost nothing about paint contracting, our first client knew he could get the
job done for peanuts. He also knew we would have to do over anything he didn't
like. Inexperienced paint contractors end up doing the work over and over again
until the client agrees to pay up. Of course, we weren't licensed. So we
couldn't sue to collect.
Naturally,
the job took forever. We had to paint everything at least three times before the
customer was satisfied. But there was one payoff on that job that we didn't
expect. We learned more in that first month than on all the jobs we did in the
next year.
Having
launched myself into a career in paint contracting, I decided to find out as
much about the subject as possible. I soon discovered that little has been
written on the subject. I searched libraries, book stores and technical schools
for anything that would help. What I found had almost no practical value to a
paint contractor. So I used the only method available. I kept working and asking
questions.
During
those early years, my partner and I would
start many mornings over a cup of coffee at the paint store. Usually we met some
old-timers there who would share their knowledge of painting with us. If we ran
into a problem on a job, we would be at the paint store early the next morning
trying to pin one of these guys down. This worked more often than not. But we
soon learned that no one knew exactly how to solve every problem. Old-timer Joe
would tell us to mix our paint one way. A few minutes later, old-timer Bob would
tell us that Joe's method would never work. We should do something else. This
usually left us with only one alternative. We listened to everything the old
pros said. Then we went out and started experimenting until we got the right
result.
We
also discovered that employees working in paint stores knew less than we did
about applying paint. Most paint store employees have little practical
experience. Some are working as clerks because they couldn't make it as
painters. Most knew enough to help the average homeowner, but quickly got lost
on the finer points that concern a professional painter.
We
did, however, find a couple of retired painting contractors who were working in
paint stores. Without them I'd probably be in some other business today. There's
no substitute for years of experience on a job. Those guys knew more tricks and
time-saving methods than we could imagine.
Our
business grew over the years. We went from a little two-man company operating
out of the trunk of a car to a full-service painting business with 18 employees.
We've done every type of paint contracting: custom residential, new custom
homes, industrial, commercial (like banks and stores), tract homes, apartments,
remodels, new construction and large condominium projects.
Over
the years we've worked hard and learned a lot. We've worked many 18-hour days
and seven-day weeks to get the job done. We've worked with general contractors,
architects, homeowners, and interior designers. We've learned that every type of
work requires specialized know-how - knowledge of the best and quickest way to
get the job done. Using an 18-man crew to paint 185 condos is an entirely
different business than doing a custom home for a designer.
Running
a painting contracting business can be good work. You can make a nice living at
it. And there are advantages to working for yourself. As the business grows,
you're building an asset that grows in value. Of course, there are also
disadvantages. It's demanding work with risks and potential problems on every
job. And you have to meet and deal with the public every day. But I enjoy my
work and expect that you could also.
I'm
not going to explain the basics of painting here. Several books are available
that describe all a homeowner needs to know to apply paint and coatings. But I
am going to suggest ways a paint contractor can improve accepted application
techniques. There's a difference between a Saturday afternoon craftsman who
enjoys putting a coat of lacquer on a cabinet and a paint contractor who's
coating hundreds of square feet of casework. I'll explain the way production
painting has to be done to make a profit. And I'll also show why production
painting doesn't have to mean a sacrifice in quality.
Most
of this book covers the "how-to" of running a paint contracting
business. It takes both good painting skill and good organizational skills to
build a paint contracting company. You're not going to make it in the painting
business if you don't understand production painting. And you're never going to
make it as a production painter if you can't run a painting business.
Emphasis
will be on what distinguishes a successful paint contracting business from a
company that bumps along year after year, doing O.K. in most years, but never
really becoming an established name in the business. In the years I've worked as
a painter and paint contractor, I've noticed that the most successful, most
profitable painting companies seem to have a lot in common. That's what I'm
going to dwell on: what it takes to establish and build a successful painting
business.
Before
we get started, I want to warn you that I refer to "he" and
"him" rather than "she" and "her" throughout this
book. I do this for two reasons. First, most professional painters and owners of
painting companies are male. I realize that women make good painters. And I know
several women that are running successful painting companies. But men are still
in the majority. The second reason is convenience. It's easier to stick to one
pronoun. And I'd rather not invent a pronoun like he/she that would cover
all the bases.
So
don't think that my choice of gender is intended to exclude anyone. Every
reference to the male of the species is intended to include the female. Maybe in
the second edition of this book I'll
make all my pronouns female just to balance the scales.
Having
covered these preliminaries, let's get down to business.
Setting
up a system of organization is the subject of this chapter. Good organization is
the foundation of every successful business. So that's where we'll start - with
the foundation.
Getting Organized
The
main difference between a freelance painter and a paint contractor is
organization. It doesn't matter whether a freelance painter has his paperwork
organized. He's paid for his time and craftsmanship. Organization may be
irrelevant. But for everyone else in the painting business, organization is
essential. Once you put that first employee on the payroll, you're running a
company, and that company has to have procedures, standards and objectives.
That's organization.
The
foundation of every professional company is good organization. Good organization
is just having a place for everything and putting everything in its place. It's
deciding who does what job, what procedures to follow, and setting up guidelines
for your company's success. Without organization, you have misdirected effort,
confusion, neglected opportunities, waste, theft, and jobs half-completed or
never started. Organization is essential in the painting business, from
maintaining the company files to estimating, from painting a room to making
phone calls.
How
do you organize a business? Actually, it's a simple process. It starts with
setting some goals. One major reason why many businesses fail in their first
year is that the owner didn't have a business plan, some goals to shoot for.
Reaching the goals is the reason for putting in all those long hours. If your
goals aren't clear, your effort may be misdirected, wasted, or both.
Company Goals
Have
you ever asked a small boy what he wants to be when he grows up? Usually you'll
get an answer like, "I don't know," or "I want to be a doctor. Or
maybe a plumber, like Daddy. But I'd like to be a cowboy, too. Or maybe a
pilot!"
Now,
that's fine for a child, but when you're talking about your business, your
livelihood, your future, you should be more precise. A lot of maybe's and I'm
not sure's will add up to no direction. Take my advice. Make your decision.
Decide exactly where you want your business to be in ten years. There's nothing
that says you can't change your goals as you go along. The important thing is to
have an express goal as a guide.
You
could start off in the painting business wanting to do top quality custom work
and nothing else. After a few years, you might decide to expand and take on new
construction, possibly dropping custom work altogether. That's perfectly all
right, as long as you continue to set new goals and define them precisely.
Set
optimistic goals. But also be realistic. Most beginners in the painting business
want to have the largest, most profitable company they can imagine. That's fine.
But with scope like that come problems of the same size: employee problems, cash
problems, accounting problems, legal problems, and many more. Maybe you'd be
more comfortable with a slightly smaller company with a few less problems.
Setting
goals is even more important if you have a partner. Both of you should agree on
exactly where the company is going and how it's going to get there. Bungling
these initial steps - establishing company goals and ideals - is the most common
cause of failure in partnerships. If you've got one or more partners, get an
agreement on goals. If you don't, you'll end up with two partners in the same
harness but pulling in opposite directions.
Here's
an example of a company goal:
I will have eight to ten qualified painters
working for me. The company will have two vans, three trucks, and all the
tools and equipment necessary to do our work. We'll have a fully-equipped
office with a secretary. We'll have well-established contacts in the business
community and established credit where needed. There will be enough work to
keep most crews busy nearly all the time. Annual volume will be $500, 000 and
our after-tax profit will be 5% of gross.
That's
a reasonable goal. We could start working on it today. But to be sure we're on
the track all the way, let's break that ten-year goal down into some
intermediate goals that happen a little sooner:
After one year we should be 10% of the way
to the final goal. After two years we should be 20% of the way there, and so
on. After two years volume should be
$100,000, we should have two painters on the payroll, and profit after tax
should be 5% of $100,000, or $5, 000. If
you hit an intermediate goal sooner than expected, that's great. Simply adjust
the remaining intermediate goals so they still reach the final goal at the
time you established.
The
final step in the goals program is to type up a neat copy of the finished
product. Post it near your desk or on the back of a closet door. Study it once a
week to see how you're doing and to remind yourself what your next move should
be. If what you're doing is getting you closer to the goal, keep doing it. If
what you're doing isn't taking you there, determine what changes need to be made
that will get you there.
Money to Meet Your Goal
So far
so good. We haven't talked about how we're going to get there yet, but at least
we've established the direction and have a yardstick to measure success or
failure every year along the way. Now, let's get practical. A $500,000 painting
company is a pretty good-sized business. It will take some money to keep that
business running. Let's figure how much.
You'll
need four or five trucks, some office equipment, some specialized painting tools
and equipment, and probably a small inventory of materials and supplies. The
biggest investment will be in receivables and work in progress.
If your
company is like many other painting companies, you'll need an investment of
about $200,000 to run a yearly volume of $500,000. That probably seems like a
lot of money. But a successful painting company needs that much working capital.
Here's a breakdown. Allow $80,000 for receivables. At a $500,000 annual volume,
you're taking in over $40,000 a month. If bills are paid about 60 days after
they're sent out, that's $80,000 owed but not yet paid. Work in progress may eat
up another $20,000 to $40,000 in labor and material advances before the job is
finished and can be billed out. So receivables and work in progress together
come to about $100,000.
You'll
need roughly another $100,000 for equipment, supplies and materials. Five
trucks, painting equipment, and tools will probably tie up about $75,000. Figure
on spending about $25,000 for office supplies, equipment and a small inventory
of painting materials.
Do you
think you can get along without this $200,000, or with a lot less? I doubt that
you can. I've seen some painters try. It's a constant struggle to run any
business without adequate capital. And a painting business is no exception. The
slightest little upset and lawsuits and lawyers become thick as flies around
watermelon rotting in the August sun. Don't bet that you'll need one cent less
than $200,000 in working capital to run a $500,000-a-year business.
Where
are you going to get this $200,000? You can borrow some of the cash required.
Banks will lend about 80% of the value of the trucks. The maximum loan is
probably about $60,000. Material suppliers will bill you for materials and you
can take 30 or 60 days to pay the bill. That's known as trade credit. It's like
giving you a loan. But trade credit will be only $10,000 to $20,000, even for a
fairly large paint contractor. That still leaves you about $130,000 short.
Where's that money going to come from?
Fortunately,
there's an answer. Most successful painting contractors have discovered that a
profitable company will generate its own working capital. Remember our goal of a
5% profit after tax? Let's make some assumptions about the business and see how
that 5% profit adds up during our ten years of growth.
We'll
assume that business volume grows at $50,000 a year, reaches $500,000 at the end
of ten years, and that profit averages 5% after taxes. Run that through your
calculator and you'll discover that profits total just short of $140,000 for the
ten years. That's the cash you need! The money's found!
But
describing the process is easier than doing it. The hardest part is making that
5% after-tax profit. The next hardest part is leaving the profit in the
business. Taking all the profit out of the business each year makes sustained
growth impossible. Resolve right now to earn a 5% profit after all expenses
(including your salary) and taxes are paid. And then resolve to leave that
profit in the business, no matter how much you would like to have a new truck or
some office furniture.
It's
important to keep in mind that in the example we just covered, we are looking at
a business that could, ten years down the road, be a $500,000-a-year operation.
Don't let the large figure of $200,000 in operating expenses throw you off. This
is a long-range goal and is accomplished by an increase in volume, production
and profits on a yearly basis.
The
first-year goal is 10% of the $500,000 volume, or $50,000. That's a realistic
goal for someone just starting out. Your operating expenses for a $50,000-a-year
volume will be approximately $15,000 to $20,000 for that first year.
Remember
that this is a step-by-step process. Set your long-range goals and build each
year to accomplish them.
Once
you've made those resolutions and have a clear goal in mind, you're ready for
the next steps.
Using
the Numbers
I'm
sure you've seen advertisements that show a group of executives in three-piece
suits seated around a conference table. At the end of the table is a large easel
that holds a graph with some lines or bars or pie charts. You're supposed to
infer that these executives are making an important decision based on some set
of company figures.
I don't
know whether decisions are made this way in large corporations. But I do know
that every painting contractor needs to know what's happening in his business.
And the best way to follow day-to-day activity is to keep track of the key
indicators that show how the business is doing. These indicators can be like a
road map that shows where you've been. Even more important, they're predictors
of what's going to happen. Find a set of key indicators (numbers) that are easy
to compile, easy to use, and easy to understand. I guarantee that these
indicators will help you avoid a lot of grief and show the way to new
opportunities.
The
indicators you use should show how each area of your business is doing:
promotion, estimates, jobs sold, production, work completed, and receipts. The
system doesn't have to be complicated. In fact, the opposite is true. The key
indicators should simplify your job.
I
recommend that you keep track of only about six key indicators. These are
explained in the following paragraphs. You may select slightly different
indicators or decide to use other figures. But it would be foolish to keep track
of 20 or 30 statistics in a small company. You don't want to spend any more time
than necessary doing paperwork. The idea is to find the most important areas in
your business and watch them like a hawk.
The
indicators I follow are:
- Promotion:
Dollars spent on promoting company services.
- Estimates:
The dollar value of estimates completed and submitted to the customer.
- Jobs
Sold: The dollar volume of contracts signed.
- Production
Hours: The number of hours worked by painters.
- Work
Completed: The contract value of work finished in the period.
- Gross
Income: Dollars billed out (on invoiced work) and cash received (on
cash-on-completion jobs).
Pick a
cutoff time for your key indicators. Anything that happens after that day goes
into the next period. You'll probably want to use a one-month period. But some
figures are so important that you may want weekly tallies.
Notice
that these indicators follow in a logical progression. First, you advertise. The
ads produce inquiries that result in estimates. Successful bids result in signed
contracts. Then the painters begin to work on the job. The job is finished and
payment becomes due. Finally, payment is received. If one indicator is falling,
you can expect the indicators downstream to drop off shortly. If one area is
doing well and the indicators are going up, the indicators that follow should
head up in a week or two. Figure 1-1 shows how the various indicators generally
correspond with each other.
Here's
an example: Let's say you've been skimping on the promotion budget for several
weeks. You were just too busy to do any new promotion: no letters sent out, no
phone calls to contractors, and so on. What happens? You can expect fewer
requests for estimates. A week or two later, the value of contracts signed will
fall. The following month your painters will have less work to do. Less work
will be completed. Finally, receipts will drop off.
Here's
another example: You're looking at the figures for production hours. It's
running at about normal. But sales and estimates are up more than 50%. You've
probably developed a hefty work backlog. Some customers are waiting for work to
begin. That's a bad sign if the wait is getting too long. Maybe you need to add
some manpower temporarily until production is in line with sales. Suppose the
reverse is true. Sales are down but production hours are steady. It could be
that your crews are stretching out the work because they suspect a layoff is
coming. Closer supervision may be in order.
You can
see how useful these indicators are. With a little practice, you can read them
like a book. And as you develop more than one year of figures, the numbers
become even more valuable. Month-to-month comparisons aren't always valid
because of normal business fluctuations during the year. For example, you would
expect December production and receipts to be below October production and
receipts. That's normal. But if December of this year is a lot slower than
December of last year, you should know why.
If
you've never had your own business before, or if you're not crazy about
paperwork, don't panic. Collecting numbers needed to track the key indicators
doesn't take much time. And it can make your company much more efficient and
profitable.
The
indicators help you spot problems before they happen. Sometimes the owner of a
business will get so busy that he can't see the forest for the trees. I know
that happens to me. The key indicators help you step back and see the big
picture. They keep you in contact with the vital signs of your business. You can
see what's happening right there on paper. You don't have to rely on impressions
or hunches. But be realistic about the indicators in your business. For example,
just because your promotion expense suddenly jumped 50%, don't expect estimates
to jump 50% the following week. The pattern of the response you get will look
more like Figure 1-2. It takes people time to read those letters and respond.
Not everyone who's going to respond will call in the first week or two.
Use
the key indicators correctly and you'll have an excellent tool for measuring the
performance of the most important areas of your business. That's a key step in
getting your business organized.
The
Organization Board
Look
at Figure 1-3. It's an organizational chart for a painting company. Joe and
Frank have identified the five major areas of responsibility in their company
and either Joe or Frank has been made responsible for each. Under each area of
responsibility is a list of the duties in that department. I call this chart an
organization board, and I think every painting company should have one.
An
organization board is an X-ray picture of your company's structure. It shows who
has what job and what that job includes. In a larger company, the Org Board
will be a very complicated diagram with lots of sub-departments and functions
listed under each major division. In a smaller company, the board could be as
simple as our example. The only important thing is that it makes clear who does
what. It should show at a glance every significant function in your company and
identify who has responsibility for that task. If you're
going to be productive and show profits year after year, your organization has
to run smoothly. An Org Board is designed to help it do just that.
Start
your Org Board on a piece of posterboard. Keep it neat. Leave plenty of room for
expansion in the tasks listed. Post the board in your office. If you don't have
an office, make the Org Board small enough to carry on a clipboard or in a
briefcase.
The
nature of an Org Board is that it keeps growing and getting more specific. Every
time there's a problem in an area that isn't listed on the board, add
responsibility for that task under someone's name. If there's a question on who
has responsibility for some function, change the Org Board so it answers the
question. When someone new is hired, he or she should be added to the board. The
board is never complete. It just keeps getting better and better in defining who
does what in your company.
If
you're running a one-man company, making an Org Board will identify the range of
tasks that have to be done. The Org Board will help you divide your time among
all the tasks. Some time has to be reserved for each task each week so that all
bases are covered.
Many
small painting companies neglect promotion, let bank statements accumulate
unopened for several months, or fail to complete estimates because no one took
charge of getting the work done. The Org Board will solve problems like that. It
places responsibility clearly on some individual and makes that delegation clear
to everyone in the company.
Getting Things Done
If you
have the opportunity, watch a successful, highly-productive person work. As
likely as not, you'll notice something about the way he tackles each problem.
First, his method is probably both organized and efficient. Work follows a
logical sequence.
There's little wasted motion or idle time. But notice something else. He
probably keeps working on each task until no further action is possible. And
that's the key, completing work on each task before starting the next,
even if there isn't enough time to finish all the tasks.
What
does this mean to you? I'll explain it this way. Imagine that you're at your
desk and have an hour to work on an accumulated pile of correspondence, bills,
notes, advertisements and phone calls that have to be returned. There isn't time
to finish everything. What's your way of handling this problem?
A
less-organized person would pick through the pile, pulling out something here or
there that seemed interesting, working more or less at random and finishing work
on little or nothing. If that's the way you usually tackle a pile of accumulated
mail, there's a better way.
Let
me suggest the way it should be done. First, do the easy part. Discard or file
everything that doesn't need any further action on your part. Throw out the
advertisements, file the receipts, sort out what has to be given to others so it
can be passed on to them later. Just doing that should reduce the pile by half.
Notice that you've completed all that can be done on each item discarded, filed
or collected for others.
Next,
set some priorities. There's only an hour available and five minutes is gone
already. Set aside what can wait until more time is available. That may reduce
the pile by half again. You're probably left with a small pile that needs your
immediate attention. That's the place to concentrate your effort.
Work
on each problem left in the pile until work is finished or nothing further can
be done.
Review
each invoice for accuracy. If correct, write the check, put it in an envelope
with a stamp and put the envelope where you'll remember to take it to a mail
box. Then file your copy of the invoice. That finishes it.
Answer
phone inquiries one at a time. Return the call, answer the question or make the
appointment as appropriate. When you hang up, note the time and date in your
appointment book or send a confirming letter or quote immediately. File a copy.
That finishes it.
If
you're reviewing the monthly bank statement, scan the checks, find the total of
outstanding checks and deposits, reconcile the statement, sort the checks into
numerical order and file them. That finishes it.
Keep
going like this, finishing as many items as possible, clearing them completely
off your desk and into a file, the trash can, or a pile that you're going to
give to someone else. Finishing a limited number of tasks completely is always
better than working a little on all tasks. Finishing part of any job is
inefficient. Time is wasted whenever you look at something and decide to do
nothing or leave it half completed. To get things done, adopt this rule: If
you start it, finish it.
This
rule doesn't apply just to office work. It's true of all activities throughout
the day. Starting something you don't complete leaves a little bit of your
attention stuck there, whether you're conscious of it or not. Do this several
times a day, day after day, and you've accumulated piles of distractions
everywhere you turn. That makes reaching goals more and more difficult.
Painting
is usually more efficient if you finish each part of the job before going on to
the next. Assume that the job is to paint one room. First, drop it out
completely. Cover everything. Use masking paper where necessary. Second, prep
the room. Dig out all the cracks. Fill all the holes. Prime all the raw wood. Do
your finish sanding. Dust everything. Third, paint. I know that drying times,
some primers, and use of scaffolding make this impossible sometimes. But when
possible, it's more efficient to complete what you start before going on.
If
you aren't using this system now, try it. And encourage employees to do the
same. You'll notice the improved productivity.
Company
Meetings
Once
a painting company has more than two or three employees, company meetings will
prevent problems, resolve disputes and improve coordination. These meetings
could be weekly or monthly. They could even be held only as needed. How often
isn't important. What i
Your Shopping Cart:
