Today, we are going to talk about three steps to calculating an accurate estimate. Okay? There’s so much to selling painting services that has nothing to do with the price that you come up with, but a large part of it does. Today, I’m going to specifically address this in a longer video than I would typically do, and I’ve even brought some notes because I want to make sure that you understand exactly what you need to do.
I’m going to ask you to bear with me because I’ve got a cold of some sort, but I’m pushing through to make sure that the Painters Weekly goes out this week, so I appreciate your patience and your indulgence.
When you can’t calculate an estimate accurately, it creates all kinds of problems. If you just show up and guess, “Well, I guess the number of days. I kind of know what it’s going to be. I guess the hours. I take measurements and then I guess.” Whatever type of guessing you are doing, even if it is an educated guess, it’s still a guess. Okay? We’ll talk about that as we go through here. When you guess your estimates and you do not calculate them using this three-step process, you will lose money on some jobs, you will make money on some jobs.
It will be remarkably hard to hold your painters accountable. And I will tell you this; guessing does not scale. It does not scale. So if you hire an estimator and you’ve always guessed, and now, you’re going to teach him to guess, good luck. That does not work out. I’ve never seen it work out. It puts the blame all over the place because a guess just ends up in a bad situation.
So the first thing before we get into the technical aspects that I want you to come to grips with are a few fundamental key concepts about what you really do for a living. Okay? What you can do and what you can’t do. So let’s talk about what you really do for a living.
You, for a living, and you can write this down if you’re taking notes, you buy labor wholesale from your painters in bulk, and you sell it retail, job by job, to the end user. It could be the client. Could be a general contractor. Could be a commercial client, homeowner. Doesn’t matter. You buy labor in bulk, wholesale. You sell it retail to the end user.
What this means is that you’re really in the business of buying and selling labor. Okay? Yeah, you may paint. You may be a painter, but you’re in the business of buying and selling labor if you have other people that work for you, and in fact, even if you just work by yourself.
If somebody bought hats for a living and they sold hats for a living, they would know exactly what they paid for the hat. They’d know how many hats they had, and they’d know how many hats they sold. They’d never say, “Well, I kind of guess how many hats I got, and I kind of guess how many hats they bought, and I’m pretty good at guessing the number of hats. I just look at the tractor-trailer. I look at the box. I can kind of guess how many hats are in there.” You would look at that person like they were crazy because you know you’re supposed to count things. Right? That’s what you’re in the business of doing.
Let me tell you what you can’t do. If I gave you a 10-foot long board, and I sent you into your backyard with a Skilsaw without a tape measure, and I asked you to guess a 10-foot board to be exactly six feet, and to do that five times in a row, and then bring it to me so I could build a stud wall that’s shorter. You couldn’t do it. You might be two or three inches off. You might be a half inch off and then as you cut the boards, they’re all going to be off. If you can’t guess something that simple, a simple measurement in your backyard, you cannot guess how long it takes to paint a house or a commercial project because it is a series of complicated guesses all stitched together, and if their basis is incorrect, it’s not going to work out for you. Okay?
I’ve tested this over and over again. I’ve brought seasoned painters into a room, owners, had them guess, had the next person guess, had the third person guess. All three guesses would be different. I’ve also taken those same owners, put them in rooms that are identical from a dimension standpoint, but that look and feel different, and I get different numbers, then from these educated guessers who’d been guessing for 20 years. You probably feel like your guess is better than the next painter. I’m here to tell you it probably isn’t. Not only is it probably not better than the next painter’s, it’s probably not better as you go from project to project. It’s all over the place.
Guessing doesn’t work. Doesn’t scale. Causes you to lose money. Makes you feel uncertain. One other thing that guessing an estimate, no matter how you guess, if you don’t use this process, does is it makes you nervous about presenting an estimate, and it keeps you from doing it on the spot. Meaning you’re going to email this thing in later, which is the worst way to try to close a very expensive transaction, which most painting transactions are several thousand dollars, on average, $3000. So this guessing stuff just costs you all kinds of money.
Now, another thing you should never ever do, before we get into this process, is to take someone else’s price. “How much would you charge for this?” If you don’t know what they’ve come up with in these three steps, you don’t take their price. In fact, the only thing you really want to know from them is what this is. We’ll get into what this is in a second.
Also, square footage prices are crazy because they have all three things involved. Most people don’t know how any of these three things were calculated by the person that they come from, and unless you are painting the floor, a square footage price is pointless. Why would you measure the floor and then paint the walls and the ceiling and the windows and the doors? Floor has nothing to do with the other surfaces that you’re painting. It’s illogical.
We’re going to talk about how to do this, going through a three-step process. It’s real simple. The first metric on this chart, if you’re writing this down, is the production rate. A production rate is how long it takes someone to paint a discrete item or how many square footage of a certain surface or linear foot of a certain surface a painter can paint per how.
Now, why does this matter? Think about it. When you pick up a can of paint, it says something like, depending on what you’re painting, 300 square feet average coverage. Why do they put that on a can of paint? Because a can of paint is finite in how far it will go. An hour of a painter’s time is finite into how much he can paint. So on the side of every can of paint, excuse me, there is a coverage rate. Well, on the side of every painter there is a coverage rate for particular surfaces. He can only cut in so far. He can only paint so many linear feet of trim. He can only paint so many square foot of walls. So you need to know because you buy and sell labor for a living. You need to know how far that labor goes just like you have to know how far your paint goes.
Once you calculate your production rates, they stay constant pretty much forever once you feel comfortable with them. They don’t change. The production rate is the bedrock for all of your calculations. Okay? We’ll get into the other two metrics in a minute, but this production rate is the bedrock.
So first things first. Production rate. What does that mean? Say, for example, you determine that a painter can paint 100 square feet an hour, brushing and rolling, in most residential environments that are occupied. Okay? Not new construction. Grandma’s bedroom, a living room, whatever it is. How do you come up with a production rate? Well, there are two ways. Both of them are real simple. I prefer, if you’re writing this down, that you use a production rate diary.
A production rate diary is just where you show up, you get the job set up, you take a measuring tape, and you figure out that, okay, in this room, there’s 1200 square foot of walls. I’m starting at 8:00 in the morning. I’m going to start brushing. I’m going to start rolling. Not in a hurry, but not dragging my feet because that’s what your employees will do, and I’m going to see how far I get. I’m going to start the clock, I’m going to end the clock, and I’m going to see how far I get. Let’s say in 10 hours, you get all 1200 square feet painted. Well, that means that really it’s 1200 square feet per hour. You repeat that same exercise for that particular surface, walls, three or four times, and you start coming up with averages. After a while, you’ll start seeing that your numbers go back and forth, but you will see an average. Maybe it’s 112, maybe it’s 98, whatever it is for you.
You do the same thing with linear foot of trim. Okay? What’s the perimeter of trim in this area? Set your clock. Paint it. See how long it took. Set your clock in the next room. Paint it. See how long it took. Same thing with doors. Set a clock. See how long a door on a frame takes. Set a clock. See how long the next one takes. After, maybe a week, you will have the production rates and some sort of really good, real-world average for every surface that you paint.
Now, most painters, if you’ve tuned out, tune back in, are too freaking lazy to do this for one period in their life. Too lazy. They would rather be wrong for 20 years than to think real hard for 20 minutes or two to three days and get these rates chronicled. If this is you, you can’t be helped. You’re never going to find a good way to come up with an accurate estimate. This is the only way. They’re driven by production rates.
Now, you can buy production rates from industry organizations. Sometimes production rates are preloaded into estimate software, but I have found that owners quote with confidence when they determine these rates in the field and figure out if they’re accurate or not. It’s really weird to go out and quote stuff if you don’t know if the rates are accurate for you or your painters. Now, if you don’t paint, like me, for example. I own a big painting company, never painted. If this is the case, then you have to get with your lead painter, explain the process, give him a production rate diary log, real simple. You can do it in a Word document, and then y’all get together and meet, and then maybe he gives a couple to the crew members, and you figure out what this is going to be. You explain to him, “You can’t go too fast, you can’t go too slow because this is going to be the measuring stick. If you go too fast, I’m going to hold you accountable on every estimate and we’re going to go over budget. If you go too slow, we’re going to lose work because we’ll be over-priced.”
So why do you do this? It’s because a gallon of paint only goes so far, a painter’s labor hour only goes so far. You need to know how far it goes, and your job, when you go to do an estimate, is really not to estimate at all. Your job is to measure the surfaces with simple tick sheet, to plug it into an estimating program, or plug it into an Excel sheet, and just do the division or the multiplication, and see how is this come out, how many labors hours. So at the end of a job, say, for example, you look at three-bedroom project, and you look at all of it. You do your division, your multiplication, your addition, and it’s 37 hours. 37 hours. Maybe there’s 12 hours in walls, 12 hours in ceiling, and the remainder’s in trim. So you know how much labor is required on each surface and in each room. Production rates, they are the foundation, the cornerstone. You don’t need to know anything about two and three if you never calculate production rates in number one. Okay?
Number one, production rates. If you don’t have production rates, you are not a business owner. You’re just guessing. You’re a trades person who’s guessing. This is not how you run scalable companies that make money. Production rates. Okay?
So once you determine your production rates and how long it takes to paint a project, and you get really to where your job is just to show up and measure …
One minute before I move on. People are going to say about this video, “Well, every job is different. Everything is different. What if you’re painting duh duh duh duh duh?” This is what’s going to come. Every job does have some weird things to it. Say for example, if you come up with production rates for the exterior of a home, and then there’s a home that requires a ton of scraping and priming and you’re going to have to guess that a little bit. Okay. That’s fine, but here’s the thing. There’s no need to guess the entire project.
When the prep is the only thing that is a wild card, when the prep is the only thing that’s a wild card, you know with a production rate, that once the house is prepped that the siding’s going to be painted at the same rate. Soffits and fascia are going to be painted at the same linear foot rate. Windows are going to be painted at the same rate of number of depending on the type. So then you come down to, maybe, scraping, priming, glazing, carpentry. Well, it’s better to have 85% of every project to be fixed not a guess, than it is to go, “Well, I can’t figure out 85% of it. I can’t figure out 15% of it, so I’m going to guess the whole thing and risk being really wrong.”
It’s about reducing the margin. It’s not about you’re never going to run into a unique situation. Say for example, what if it’s the first time you’ve ever painted exposed ceilings in a commercial situation? Well, you may have to guess. You may have to ask around, but then guess what? You start the clock, you set your production rate diary, you figure it out. Now, you’ve got a log of that particular surface and situation, so the next time you see that in your painting career, you’re not surprised. You’ve got evidence. Field-tested evidence of what your production rate is.
So for all you people that are too lazy to do this, who just want to guess, don’t post, don’t comment, don’t cry. Just put, “I’m sorry. I’m too lazy to do this. I would rather suffer for eternity than to do some hard thinking and some math for a short period of time.” Okay? So that’s the whole deal with production rates. So never ask, show somebody a picture of a house and go, “What would you charge?” Ask them, “What are your production rates for the various surfaces on this house?” That would actually be helpful, then figure out how they calculated them because number two and number three is going to be different for you. IT’s never going to be the same for every painter, so asking for a price when it really has three things in it, and the only thing you can really get that’s helpful from somebody is the production rate.
Okay. So number two is your pay rate. This is what you pay a painter per average hour. Okay. What you pay a painter per hour. The pay rate. Now, there are different components to the pay rate. There are really three big ones. Most companies only have one component. Okay? That is we pay you a flat hourly rate, doesn’t matter how fast you paint, doesn’t matter how slow you paint, unless you really suck and we fire you. If you’re excellent, we’re not going to pay you any more. And that’s it. Okay. There’s just an hourly, flat pay rate. Period.
For sophisticated companies, you’re going to have a pay rate, but you’re also going to maybe employs something like a saved labor bonus program where you pay your painters based upon the percentage of labor hours they save on every job so that everybody’s speaking this common language of labor hours. Okay? Labor hours, your pay rate.
There’s the hourly rate, a bonus structure, which if you pay with a saved labor bonus structure, you’re really paying bonuses out of labor that was never billed to the client or that was rather never used by your company, but billed to the client, so it’s a free way to incentivize your painters. Saved labor bonus program. It’s a free way. You’re just paying them out of hours that were charged to the client, but never actually consumed. And then the third one is this. This is a hard one. It’s everything you do to make sure that painters want to stay at your company. Personal gratitude, group recognition, private recognition, contests, walls of fame, company outings, benefits, whatever it is that you do that makes painters want to stay and work for you when they really want to leave most other painters.
So let’s say in this example, we run all of our numbers for our production rates. We get number one. It’s 100 hours. Let’s say our average pay rate, all-in, with taxes, etc., benefits, commission is $20 an hour. That’s $2000 in labor. Right? 100 hours, $20 an hour, $2000 in labor. That’s what it’s going to cost the company. Labor just to do the job. Not materials, just the cost of the labor. Now, here’s the beauty. When you measure surfaces to get your pay rate or how much labor’s in a job, you can also do the materials exactly because you’re not guessing anymore. You just applied the production or the coverage rate of the paint to the same surfaces that you use for the production rate to get the pay rate, and that’s a good thing.
$2000 in labor. Now, we’re down to the charge rate, what we charge the client. Most people are just guessing all over the place, so they don’t even know what their charge rate is. They don’t know what they typically get. They got no idea. Most painters only really know what they pay their painters, or most owners, rather, only really know. The only number they know is what they pay their painters. They don’t know the production rate. They don’t know why or how they should have a charge rate.
Charge rate is what you pay the end user or rather what you charge the end user. If it’s 20 here, maybe you charge the end user $55 an hour. Now, the charge rate is based upon three things. The first two you’re not going to expect, and that’s fine. The last one you’re going to think is the only thing that matters, and it matters very little.
So the first thing is this. The ability for the market to support your charge rate is based on three things. First thing is your relationship with the client, the lead source. Are they a repeat customer, a referral customer, or a cold lead? If you don’t have systems in place for customer reactivation, retention, monthly newsletters, reactivation campaigns, retargeting on social media, your clients will just forget you. You’ll be at the same level of sales forever, in which case the amount of charge rate you can get in the market’s going to be really low comparatively speaking. So how much you can charge, first, has to do with your relationship with the client. Were you referred? Were you a repeat client? And you want to have business systems in place that boost that percentage of lead source in your business.
Second thing is how persuasive is your sales process? Is there pre-positioning, presenting, post-positioning, follow-up? Do you provide lots of tangible third-party proof, handouts, stuff being sent to them in advance, the way you do a sales presentation, on a template or through a flip book? Do you do your estimate on the site or do you email it in, which is awful? Does your follow-up process follow the full 90 the 120 days it often takes to close a very large repaint project? That affects your close rate, rather, your close rate and your charge rate.
And then finally, the market. You would think it’d be first, but it’s not. In every painting market, there are people getting, for this same scenario, some people are getting $55, $60, $65 an hour, and I kid you not, I get on the phone with people that are like $35, $40 an hour. They are so below market, it’s ridiculous. Out of the 850 some odd diagnostic calls that I have done, the vast, vast majority of painters are under market, not over market, but the problem is because they don’t know what their production rate is, and they don’t track their labor hours in any kind of organized fashion, they don’t really even know any of this. They’re just guessing. They’re hoping that as they go from project to project, that some money piles up in the bank account. That’s it.
So if you want to know how to accurately, in a three-step process, produce estimates that are on budget and that you can reproduce, independent of your sales system and your marketing for your past customers, referrals, etc., including B2B referrals and commercial, major account selling. If all you’re worried about is just getting the price right, then step one, is to calculate, in the field, your production rates or to borrow them from somewhere else and cross your fingers that they’re right. Number two is to figure out what your pay rate is, all-in, for one labor hour of painting. It may fluctuate a little bit from painter to painter. If you have to use a weighted average, that’s fine. It’s better than not tracking it at all. And then finally, your charge rate. Are you doing all the things in your painting business that will help you maximize that charge rate at the optimal close rate?
So, I hope this has been really helpful. The main reason I did this video is I see so many people in chat rooms asking, “What would you charge for this? What would you charge for that?” If you don’t know the production rate, and neither does the person you’re asking, and if they don’t know their bill rate and neither do you, and if you don’t know what their market will bear, and you don’t know how persuasive their sales process is or who they’re selling it to, asking somebody for a price is detrimental, probably not even helpful. Okay? The production rate. That’s the only question you should ever ask of another painter. “Can you tell me your production rates for this surface?” And when people say, “I don’t have a production rate,” you know they are not the type of person to take advice from.
Spend a small time of your painting career coming up with this and using this formula so that you can be accurate, so you can scale, so you can present with confidence that you know what you’re charging is correct. At least you know the number of labor hours it will take to finish the job more accurately as you go.
I’m Brandon Lewis with the Painters Academy and Painters Weekly. If you haven’t yet, consider attending the 2019 Painting Profit Summit. We’re going to spend an entire pre-day, four hours, on the persuasiveness of sales processes, and using the PowerPaint Presentation Process you’ll leave complete with tools, templates, etc. Fantastic training opportunity. I hope that you’ll go to our website, check out the Summit button, and register.
I’m Brandon Lewis with Painters Academy and Painters Weekly. Leave me a comment. Follow this station, subscribe to it, and let me know if this was helpful. Thanks so much.