Maximizing Profits During The Painter Labor Shortage

Hey guys, Brandon Lewis here. Let’s talk about “Maximizing Your Profits During The Painter Labor Shortage. Right now, thanks to the government, subsidizing people to the point of sitting at home with terrible programs. And the first thing they did is create an economic catastrophe and then “helping” made it worse, which is typically what the federal government does. They create a crisis and then they try to fix the crisis by making the crisis worse.

Nonetheless, when you have fewer painters, that means that there is less cashflow in your painting business, because what you really do for a living is you buy labor wholesale and you sell it retail. You buy at your average pay rate, plus your burden, and then you sell it at your average charge rate. And you really want to try to hit a 50% gross profit on your jobs and a 30% cashflow to owner in your business. So what do you do when there’s a real labor shortage? Not an imagined labor shortage, not a bull-crap labor shortage, like a lot of painters talked about pre-pandemic, but the real one that we’re experiencing now, a true labor shortage.

Painter Labor Shortage

So number one, you need to recruit like a crazy person. Here at the Academy for Professional Painting Contractors, we have lots of different hiring and recruitment resources. And so we’re able to equip our people to do better in a market like this, than your average painter. And a lot of our owners have met their labor needs, but they’re having to spend twice as much time and twice as much money to get one painter. But, for example, if you pay your average painter $25 an hour, and you charge $50 an hour … And we’ll say, for example, for simpler math that you pay your average painter with burden $30 an hour, and you charge $60 an hour.

Well, $30 an hour is what you’re going to clear in gross profits, times 40 hours a week, which means for every painter you’re down, you lose $1,200 a week. If you’re down three painters, that’s $3,600 a week that you’re losing. So you can afford to spend a couple of thousand dollars a week, no joke on fixing a labor problem. And you’ll get that money back by next week if they’re productive.

So, just because there’s a labor shortage does not give you permission to quit recruiting. And there’s not one way to find 10 painters next week, but there are 10 ways to find one. And if you don’t have a diversified strategy, or you need one, email me at brandon@paintersacademy.com and we can talk. So that’s number one. You can’t give up on recruitment.

Job Cost Every Job

But, while that is happening, because you have fewer painters in the field, the second thing I’m going to ask you to do is make sure your job costing. This is one of the first things I try to help painters learn how to do when they join my program, because most painters don’t job cost and it costs them, I guess, a ridiculous amount of money. And if you want to get 30% cashflow to owner, you can’t be making 30 or 40% on your projects. You got to be making 50%, because at 20% goes to overhead, in advertising, sales and whatever else you got to pay. And what insurance gets rolled in primarily into your cost when I say 50% gross profit. And it gets rolled into that average pay rate with burden.

But you’ve got to make sure that your profits are strong on every job. You’ve got to be tracking labor hours daily, materials daily. You got to be talking to your painters about it. You’ve got to be having regular crew meetings that talk about the labor budget job by job, along with customer satisfaction. And then you need to incentivize, through a save-labor bonus program or other program, how to keep your guys on budget. And that’s not just by paying them every job when they come in under budget, although you should. But that’s personal recognition, private recognition, rewards, contests, building that culture of accountability, so that every time you do a $10,000 job, there are $5,000 in gross profits.

Improve Your Sales Process

So, third thing that I’m going to encourage you to do, and you may think this is a crazy, but it’s 100% accurate, and that is to improve your sales process. Why would you want to improve your sales process? And we teach our guys to do pre-positioning, presenting, post-positioning and follow up with a variety of tools, using a variety of mediums in our power paint presentation process. Because when you do that, your close-rate goes up. And you be like, “Well, I have so much work. I can’t get to it.” Well, that’s fine. Hold on a minute. When you increase your closing-rate, the other thing you can do is then raise your price to get your closing-rate back down. And you can find that maximum ethical-charge rate with the optimal, not maximum, close-rate.

And I know lots of our guys right now that went from 60 to 65 to 70 to $72 an hour, because they’re booked out and it’s the middle of the peak season, and they’re still selling and closing those jobs. And now those jobs have instead of 50% gross profits, they have 60 or 62 or 65% gross profits.

Well, when you’re at a 30% gross profit business, or net profit business or cashflow-to-owner business, that extra 10 or 15% is anywhere from 33% to 50% more income on every job, that ends up making it through the end. But you can’t just raise your prices arbitrarily, without increasing the persuasiveness of your sales process. Because then your close rate is going to go down. Then you’re going to have to spend more time doing estimates to get the same throughput.

The other thing increasing the persuasiveness of your sales process does, is it increases your average transaction size. It increases your average transaction size. People with crappy sales systems, instead of having a 4,500 or a $5,500 average job, they’ve got 2,200, 2,300, 3,200. So you want a bigger transaction size that’s tied to sales.

Watch Material Cost and Pricing

Materials. We run a painters purchasing group, where we have negotiated very good prices with a fantastic manufacturer, and our guys see significant savings. And, they’ve kept their prices the same on paint or bumped them up a little bit, because when you have less labor and you’re processing fewer labor hours, and you make your money buying and selling labor hours, you’ve got to find a way to make up for that. And often increasing your prices on materials is a good way to do it. And if you can’t just increase your prices, lowering your prices that you pay, while increasing the process that you charge, means that you can get better margins. And if you ever wonder how to do that, or you have questions about our purchasing group, again email me brandon@paintersacademy.com. All of you have my email address.

Reactivate Your Past Clients

One other thing, and you’re going to think this is crazy, too. You’re going to put this in the well “Brandon’s nuts” in the category of sales. You need to reactivate your past clients. You’ve got to pass client list, full of people that have bought from you previously. You need to run them through a reactivation campaign, mail, email, phone text, and a compressed 30-day period in multiple waves. And why do you want to have a larger number of repeat business and referral business, which will come from reactivating your clients and using newsletters in between for the entire year, if you’ve got more work than you could do?

Screen Your Prospects for Estimates

Well, that’s because of the next thing, which I’ve never recommended and probably never will again. But I’m doing it temporarily, and that’s to screen your prospects for estimates.

Now, many of you spend money on crappy services, like Home Advisor, Angie’s list, Thumbtack, House, whatever. And that’s okay when you first start your painting business. But the reason people have to be hooked on that and addicted to that long-term and have to bid against multiple painting contractors with people that do not know them and have small jobs sizes, and have to drive all over town, seeing people, and have to pay through the nose for leads, is because they’ve never reactivated, and they’ve never retained their past clients through some kind of consistent marketing program, that doesn’t treat their clients like an ATM machine.

So that means that when leads come in through the phone, if you’ve got limited estimating capacity, which many of you also do, and you have limited production capacity, it means what you really need to be focused on is seeing fewer estimates that are of higher quality. And that means being very discriminatory about how you market, and very discriminatory about how you run estimates and to whom you run estimates with.

So when you’ve got limited capacity, number one, okay, we’ve got to recruit like crazy. We cannot abdicate our responsibility to recruit and to hire. Number two, we’ve got to do job costing. We got to make sure we’re coming in at 50% gross profits. We got to keep our eye on that every single day. We’ve got to put it in our meetings, we’re going to have save-labor bonus programs. We’ve got to improve our sales process, so we can increase our transaction sizes, and so that we can raise our charge rates. We’ve got to save money on materials, but maybe raise our prices a little bit.

Or at least keep them the same, so we can drive more margin through there. We’ve got to reactivate and retain past clients, and then we need to cut off low conversion leads sources, typically paid-lead services. Okay? And then we’ve got to screen prospects for estimates if we have limited time, which I hate to say. That’s one of the laziest things you could ever do.

Focus on High Quality Leads

And if you still got estimating capacity, you need to go see every estimate. But if for some reason you’ve just done everything under the sun and you can’t get to all of them … Because we do have about an extra, in my opinion, six months’ worth of work that’s built up from the year when everybody went COVID crazy.

And it’s coming into 2021 now, from 2020. So we’re really trying to cram in a year-and-a-half’s-worth of work in one year with 30% fewer painters. That’s tough. And that’s why we’re having to do this. The government’s created this issue. It won’t last forever. But, while it’s here, we’ve got to consider these things.

Listen, if all of this sounds well and good, but you know you need help with it, email me brandon@paintersacademy.com. I’d be happy to set up a diagnostic call with you and walk through your business step by step to see how I can help you. I’ve done 2,200 of those and I’ve worked with 450 painting contractors. I just tell you like it is. And if I can help you, I will. And if I can’t, I’ll tell you that too. Brandon Lewis at Painter’s Academy and Painter’s Weekly.

Thank you so much for watching. Share this with other painters you know who are struggling with the painter labor shortage. Like, and follow us here. Subscribe, hit the subscribe button. I’m supposed to say all of this at the end of the video. I’m terrible about it. But do subscribe to our channel, please. And if you know of anybody that could benefit from this, post it in painters groups.

Post this video to people that are in painters’ groups online and Facebook for folks that are struggling to fix this very problem right now. And I promise you, if people watch this and they follow through on it, they’ll thank you, because this is exactly what I tell people to do and it works. It works.

A lot of our guys are having their best income year ever, and they’re down 20% on their painters. So you got to roll with the punches. Right? Brandon Lewis, Painter’s Academy and Painter’s Weekly. Talk to you next time. Take care, guys.

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