How To Go From Low To HIGH/RIGHT Pricing!

Paul Burns

To figure/track how high we could go, we used a VERY sophisticated computer program that my brother developed. Just to give you a little of his qualifications, his family nickname in the 1960’s was “computer” and was one of the first if not the first to write programs for those robots that you have seen at auto manufacturing plants. He also wrote into some of those programs for Ford these games for employees to increase motivation and they worked like a charm!
Anyway, my brother ended up staying with us around 1995, and GOK’s why, but he became very interested in my little paint company. He would ask me to show him how I did things (business stuff) and he would turn around and automate it for me. In the end we had a program that would track EVERYTHING that was important to track. It would print out pre- estimate, post estimate, time running out letters, surveys, daily schedules and reports, and more that would all print in the middle of the night and be laying in my printer tray each morning. Oh ya, before it printed those things and more, it would upload all of the data from that day - proposals and such that I had done in the field each day on my mini-laptop and then download the information onto our main desktop computer for the company.

All of this was done using ONE estimating form. The estimating form would also change into a work order for the crews, and we could enter in change orders. This was great because it had our company, our crews, and our clients working off of or looking at the EXACT same specs, etc.. In other words, all 3 entities had the EXACT same information. The only difference was that the clients would see dollar amounts next to each task, but our crews would see how many hours those SAME tasks were estimated to take to accomplish, and they could multiply those hours by 15.00 each to determine or figure out how much money they were making. Note – today we use Quick Books to do a lot of this stuff and we have SEVERAL variations of how we pay piecework to whoever we have doing jobs for us.

That is how I got to know how high we could go with our pricing, which shocked most people including myself, and that was after we had been charging 45.00 per hour for several years and most painters were charging 25 - 30. To put that in relative terms, in today’s market, the average paint contractor is charging 35-40.00.

One of the reports that it spit out was our closing rates, and comparable with our hourly charge for each particular job. See what he did was to put in a fixed hourly charge, which started at 45.00 per hour. So MOST jobs were estimated using the 45.00 per hour as it’s multiplier. BUT, once every 6-10 proposals the program would automatically CHANGE the multiplier number to a lower or higher number. So, although our base number was 45.00, 1 out of 10 proposals would be figured at anywhere from 40.00 per hour, up to around 60.00 per hour. I didn’t even know what it was using as the multiplier while doing the estimates. That is the only way to get true statistics. Things need to be random, and the person testing it (in this case anyway) should not know what is happening or I could have just swayed/skew the numbers myself. That would give false information/stats.

It takes like 30 proposals before you start to get anything meaningful, but it just gets more and more accurate with each proposal you do from then on. I can still remember looking at the first report that I had pretty good confidence in, maybe 75 proposals or so. Whatever it was, it showed that we were closing just as many jobs or more when pricing at 57.50 per hour, as we did at 42.50 per hour! Now, it didn’t take a rocket scientist to figure out that it was time to raise prices. So we moved the default number from 45.00 per hour, up to 55.00 per hour, or something like that. We used this program for 3-4 years I guess. I remember seeing the graph with pricing and closing rates, and watching it stay the same or even improve until it reached 67.50 per hour, and then it just dropped like a lead balloon! This was all before the turn of the century and into 2001, I think.

There are other things that you HAVE to do along the way. I mean if you are charging that kind of money, your crews better not be jumping out of a 20 year old station wagon wearing blue jeans and tank tops and the first thing they do is turn the radio on while chips from the inside of a balled up dropcloth being unfolded are scattering all over this million dollar home’s foyer! Ya know what I mean?

What I did, was to picture/vision a Sears commercial with painters, estimators etc. in it.

Then, if you use a piecework or some other similar variation of, your finish prices will go even higher than your estimated prices.

So what it all boiled down to was that although we KNEW that our lowest number was 45.00 per hour, once we got so for BEYOND that point, that it just didn’t make sense to do all of that the tedious, complicated stuff that those 1000’s of volumes written about estimating, tracking, etc. and people still drive themselves almost crazy trying to figure out. Of course there are still important numbers to track, but they are EASY and FUN, not confusing and difficult, and wanting to be avoided!

The other thinking that goes on, is taking ALL of the variables possible in your business, and making them FIXED or non-variable! This alone will take your blood pressure and stress from the ceiling to the couch, in no time!

The BIGGEST variable number is labor costs. So once you move passed that one, things get MUCH better. And it doesn’t matter if you are in VA, or FL, or anywhere else, and whether you use employees piecework or variations of along with how many benefits you give them, or subs, the costs to your company stay the SAME. It is just the percentage of the totals that change. IOW,s you may have to pay employees 30% of total, but licensed and insured subs may get 40%.

This is the point where a contractor KNOWS exactly how much money he will put in his/her pocket every time the phone rings. And it doesn't even matter if they get the job or not. It's all just numbers that are FIXED, the closing rates are known, etc.. This is why I have been saying forever that it all boils down to 5th grade math. If you can do that (5th grade math) you can run a very profitable paint company.

Most contractors will shutter when they are told that their prices are HALF of what they could or should be. To answer that, I just tell them to go slow then and just raise your prices by 5-10% at a time. It will just take you longer to get from point A to point B like that, but if that makes you comfortable, by all means……...They just have to realize that if they lose their first 5 estimates, that doesn’t mean that the price is wrong. First off, it is NOT enough data. The time of year could be wrong. They may not have made the adjustments to look or sell their jobs properly.
Shoot for the highest pricing possible, and everyone INCLUDNG your clients, will be happier. Warning – These systems will fail almost immediately if used by the dis-honest or greedy person. Of course, ANY systems will fail for them!

That is also the point to where you can focus MOST of your attention to marketing and sales and even more employee incentives. Sorry, but I walked around with my chest out for 12 years, backed up with work for months and NEVER spent a dime on marketing. I thought that I was the ****. But now I know why I never made much more money than the painters I worked next to. Shoot, a lot of the time I made less!

Hope this helps along with the other posts. I love to hear success stories, so……..

Paul
p.s. You don’t need sophisticated computer programs anymore. A lot of what I said above is ancient today!

AAPaint

Thank you for that insight, Paul. I'm starting to really grasp how I can make this happen.

__________________
-AAPaint

AA Quality Painting & Pressure Washing LLC
Jacksonville Painters
Jacksonville, FL.

Dave Mac

AA didnt i tell Paul is da man .

Paul you are right I need a new system, I will be the first to admit, I have been lucky having hourly guys that work. And if they left me tomorow, I would be swinging a brush again , and probaly have to go through twenty painters again to find a good one. I have become way to comfortable with my current situation, and need to get motivated to expand, a little bit, thats why i have been stopping by here, more then usuall, and seeing you posting always is a motivating thing


dave mac