Build Your Painting Business

The Answers have Changed

noreply@blogger.com (Brian Phillips) — Thu, 24 Dec 2009 11:00:00 +0000

Much has happened in the world in the past year. Economic uncertainty abounds, and painting contractors across the country are concerned about their future. Leads have slowed and consumers have tightened their belt. As we kick off a new year, a story about Albert Einstein is worth considering:

Albert Einstein was teaching at Princeton University and had just administered an exam to an advanced class of physics students. On the way back to his office, the teaching assistant carrying the exams asked him, ”Dr. Einstein, wasn’t this the same exam that you gave to this same class last year?”

Dr. Einstein responded, ”Yes, it was.”

The teaching assistant, in awe of perhaps the greatest physicist of the twentieth century, then asked, ”Excuse me for asking, Dr. Einstein. But how could you give the same exam to the same class two years in a row?”

Einstein replied simply, ”The answers have changed.”

At the time, discoveries in physics were occurring rapidly. The answers were literally changing. The same can be said about the painting industry. What worked in 2008 may not be working today, and to continue to thrive we must adapt to the changing economic climate.

That change should not occur haphazardly--it should be carefully calculated and based on solid information. For example, if you lead flow has slowed, additional marketing may be required. But how will you decide where to advertise and what to spend? How will you determine what would be a good investment?

If you are like most contractors, you will throw money around and hope that something good happens. But if you track your leads and carefully analyze your marketing, you can make informed decisions. And your results will be much more predictable.

The answers may have changed, but the methods for finding those answers haven't. Solid business principles are timeless.

Three Feet from Gold

noreply@blogger.com (Brian Phillips) — Mon, 21 Dec 2009 12:47:00 +0000

Think and Grow Rich by Napoleon Hill is a business classic. Published during the Great Depression, the book provides an inspirational look at perseverance and the qualities of character that are necessary for success.

A recent book from the Napoleon Hill Foundation modernizes Hill’s book. Relating the stories of dozens of successful businessmen, Three Feet from Gold provides an abundance of pithy nuggets of wisdom. The title comes from the story of a prospector who abandoned a mine. Though he had found a small amount of gold in the mine, he eventually concluded that he had found the small amount in the mine and sold his property. The new owner dug three feet in a slightly different direction and discovered a huge deposit of gold. The original owner had literally stopped three feet from gold.

It is often the case that we abandon our dreams too quickly. Faced with seemingly insurmountable obstacles, it can be easy to give up. And often success was just another step or two away.

This does not mean that we should never abandon a goal. There are times when doing so is the rational thing to do. However, such decisions should not be made lightly or in haste. Anything of value requires effort and perseverance when times are tough.

Embracing Change

noreply@blogger.com (Brian Phillips) — Thu, 17 Dec 2009 11:00:00 +0000

Painting contractors, like most people, do not easily embrace change. To paraphrase Thomas Jefferson from the Declaration of Independence, most people will hold onto the known even when it is uncomfortable, rather than face the unknown associated with change. But improvement requires change--if we keep doing the same thing we are going to keep getting the same result.

Dan Miller addresses this in a recent post:

Change always presents the good news – bad news options. If you see change as threatening, you will likely see the bad news. If you believe progress always requires change, you will likely see the good news. If you can build your business in a way that embraces change, you will recognize ways to take advantage of change rather than feeling victimized by it. And it doesn’t matter if you are mowing yards, filling teeth, preaching sermons, writing books or building houses.

The fact is, progress does require change. Progress is the process of moving towards a goal, and if we are moving then something is in fact changing.

Business is a dynamic affair. Whether we like it or not, things are constantly changing. I-Pods, Facebook, and Tweeter did not exist just a few years ago. The Internet and email were fantasies when I started my business, and yet today they are a crucial component of many businesses, including painting contractors.

We have three options when it comes to change. We can completely reject it, refusing to do anything differently. The result is that the world will pass us by. We can reluctantly accept it, implementing change only when it becomes absolutely necessary. Or we can embrace it, recognizing that change can be good if it is the right type of change.

Eagerly embracing change may be scary. But if we do not change we cannot improve, we cannot grow our business, we cannot reach our goals. And that is a fact that will not change.

Imposing Our Values

noreply@blogger.com (Brian Phillips) — Mon, 14 Dec 2009 14:33:00 +0000

In working with contractors I am often amazed at how frequently they seek to impose their values upon their customers. Sometimes this occurs is small, subtle ways. And other times it occurs in a huge way.

One of the most common ways painting contractors do this is by declaring that customer's won't pay higher prices. The contractor responds by doing a multitude of things to keep the price down, such as using lower quality products, doing minimal prep, or only doing one coat. Regardless of the particulars, the contractor believes that the customer won't pay more and he subsequently refuses to offer more.

In doing this, the contractor is imposing his values on the customer. The contractor believes something to be true, and acts accordingly. He never bothers to find out if it is true of this particular customer. Rather than offer the customer options--and let the customer decide--the contractor offers one option and the customer must take it or leave it.

Over the years I have had many customers buy a paint job from me when I would have bet the farm that they wouldn't. Often, the reason is because I gave them options. I spent the time to learn what they want and why, and then offered a number of solutions to meet their needs.

I don't like others making assumptions about what I want. They may or may not be correct, but it is my money and I will decide how to spend it. We should do the same with our customers.

Good in Theory

noreply@blogger.com (Brian Phillips) — Tue, 01 Dec 2009 14:37:00 +0000

We often hear someone say, “That is good in theory, but it won’t work in practice.” The intended meaning is that some idea sounds logical, but in the “real world” it just won’t work. But the fact is, a theory that won’t work in practice isn’t a very good theory. Good theories make good practice. Ideas are our guide to action.

Many people—and contractors are certainly no exception—are loath to try new ideas. They get locked into a certain mindset and often refuse to consider new alternatives. They may not like the results that they are getting, but the comfort of the known is more powerful than the unknown of trying new ideas. When they hear a new idea, they are quick to reject it as “good in theory”.

I see this almost everyday. One of the most common examples is the claim by some contractor that his market won’t bear higher prices. “You don’t understand my market,” they argue. “My customers simply don’t have the money to pay $40 an hour for painting services.”

Such contractors often concede that they must charge $40 (or more) an hour to make a decent wage, but they refuse to consider methods for doing so. On paper (in theory) they agree that they can’t make money charging $25 an hour, but in real life (in practice) they can’t charge more.

Consider what this really means: The facts indicate one thing, but I am going to ignore those facts. I choose to cling to my old ideas, even though I am going broke. All of your fancy math formulas won’t change anything. Your ideas are good in theory, but they won’t work in practice.

If we consider the rate we charge in complete isolation of other facts (or consider only a few other facts), this might be true. But our selling price is not an isolated fact, divorced from many other considerations. Our selling price is a consequence of many factors; the market in which we operate is only one of those factors.

As an example, we have many options when it comes to buying a hamburger. We have McDonald’s, Wendy’s, Burger King, Jack in the Box, and other fast food restaurants. We have upscale burger joints like Fuddrucker’s. We might have local establishments as well. Each prepares their food differently, uses different condiments, and might even bake their own buns. In other words, each tries to do something different to differentiate themselves. If they didn’t—if their burgers were exactly the same—the price they charge would become the only difference, and consumers would make their choice solely on price.

But the fact that they offer something different adds another element to our choice. When choosing where to get a hamburger, we have other considerations, such as the flavor of the meat or the sides offered or the condiments used or the entire dining experience. We are willing to pay more for a burger at Fuddrucker’s than a burger at McDonald’s. And we expect more in exchange.

The same principle holds true of painting contractors and the prices we charge. If the paint job we offer looks just like the job offered by our competitors, price does become the deciding factor. If our company looks just like everyone else, then price is most important.

Now, you might think that this sounds good in theory, but the fact remains that your market simply won’t bear higher prices. But how do you know? Do you believe this simply because that is what others have told you? Have you truly tried to differentiate your company? Have you tried to become the Fuddrucker’s or are you stuck in McDonald’s mode?

The truth is, if you regard the theory as good, then you must put it into practice. A good theory leads to good results.

How is That Working for You?

noreply@blogger.com (Brian Phillips) — Fri, 27 Nov 2009 11:00:00 +0000

I generally try to avoid Dr. Phil, but I do like a line that he has made famous—“How is that working for you?” The basic idea is that if you are doing something that isn’t working out well, maybe you should try something different. We can usually see when someone else is spinning his wheels, but recognizing the same behavior in can be more difficult.

The proof, as they say, is in the pudding. Are you getting the results that you want? If the answer is no, then you need to re-evaluate your actions. And more importantly, you need to re-evaluate your thinking.

Ultimately, our ideas determine our actions. What we think determines what we do. If we don’t change our thinking, we can’t change our actions.

For example, I once was consulting a contractor who was having trouble generating leads. “I’m doing retention and proximity marketing,” he said, “but I’m not getting enough leads. I’m running out of marketing money.” I suggested that he do door hangers, which he did. But he didn’t follow my advice completely.

When I suggested door hangers, I meant (and said) that he should hand them out himself. He was sitting at home waiting for the phone to ring. Instead of spending the day twiddling his thumbs, he should have been pounding the pavement. However, he found it easier to hire someone else to do this, at a cost that quickly depleted his remaining marketing funds.

This particular contractor refused to question his own thinking. He believed that doing door hangers was a different approach to his problem, but in fact it wasn’t. He believed that throwing money at a problem was the solution, and so he continued to throw money around, even as it dwindled. He didn’t change his actions because fundamentally he didn’t change his thinking.

Piece Work May Bring You Peace

noreply@blogger.com (Brian Phillips) — Tue, 24 Nov 2009 11:00:00 +0000

In these tough economic times, everyone is trying to stretch their dollars just a little bit further. As painting contractors, our biggest expense is labor, and if you find your budget pushed to its limits, you might consider instituting a pay system that encourages productivity and caps your labor costs.

Piece work is such a system. Under a piece work pay system, a painter is paid for the work he actually performs, rather than a flat hourly rate. For example, you might pay $10 to paint a door. If the painter can paint 2 doors in an hour, he makes $20 an hour; if he only paints 1 in an hour, he makes half that.

Such a system encourages efficiency. When a painter knows that his pay is based on finding a better way to work, he will likely do so. Of course, you must establish certain standards that must be met in order for the work to qualify as "complete".

Piece work must be priced fairly. The painter must have a very reasonable chance to meet the production times you use, or he will quickly become discouraged. So if you find that your painters have increased their speed by 10%, don't cut your prices--that money is a bonus for the painters.

For you, a piece work system caps your labor costs. For example, if you are paying $10 for the door to be painted, your cost is limited, no matter how long the door actually takes. Again, your prices must be fair and reasonable if you actually wish to provide encouragement.

A piece work system can meet with a lot of resistance. Your painters may think that you are trying to become a slave driver. Good communications are imperative when setting up the system, and input from the painters themselves will help with the "buy in".

If you find that your labor costs are out of control, piece work is one way regain control. And it will also give you some peace of mind.

Assigning Yourself the Proper Tasks

noreply@blogger.com (Brian Phillips) — Fri, 20 Nov 2009 11:00:00 +0000

If you are like the typical small business owner, you never seem to have enough time. Between giving estimates, picking up paint, running a crew, doing the books, fixing the spray rig, going to the bank, and a myriad other tasks, the day seems to be over long before the tasks are.

There can be a lot of reasons for this, but I think one of the primary causes is simply trying to do too much. There are many tasks that can be outsourced, delegated, or simply dispensed with. As a simple example, I used to pick up all the paint for my crews. Invariably, I would arrive at the job only to be told that they needed a case of caulk. I wasted an incredible amount of time making multiple trips to the store. Since delegating this responsibility to the crew supervisor, I rarely set foot in a paint store and I don't have to worry about getting a gallon of paint at 5 PM so the crew can finish the job.

Just as you wouldn't assign a new apprentice to paint the customer's kitchen cabinets, you shouldn't assign yourself to tasks that are better suited for others. Concentrate your efforts on those tasks that truly require your attention and you might be surprised to discover that you have more time on your hands.

Go to Work for Someone Else

noreply@blogger.com (Brian Phillips) — Tue, 17 Nov 2009 11:00:00 +0000

I often see a new contractor ask for advice in starting his business. Invariably, he will get a number of suggestions telling him to go work for someone else in order to learn the business. This is about the worst advice that can be given.

Statistics show that 90% of the contractors in business today won’t survive 5 years, and nearly 99% will fail within 10 years. So what is to be learned from the typical contractor? You could learn all of the things that you shouldn’t do, but I can tell you many of those things right now. And you won’t have to spend years to learn it.

Here is a list of things you shouldn’t do:

Don’t depend on “word of mouth” for your marketing
Don’t concern yourself with the “going rate”
Don’t estimate by the square foot method
Don’t use “checkbook accounting”
Don’t think that good painting skills will make you successful

I could add to the list, but the above covers the big items. So now that you know what not to do, are you any closer to success? Learning what the mistakes are doesn’t tell you what leads to success, only what leads to failure.

Working for someone else is a good way to learn how to paint. But if you want to learn how to run a business, chances are very good you could spend your entire life working for someone else and never learn that lesson. If you want to learn to run a successful business, study successful businessmen.

How is that Working for You?

noreply@blogger.com (Brian Phillips) — Fri, 13 Nov 2009 12:56:00 +0000

I generally try to avoid Dr. Phil, but I do like a line that he has made famous—“How is that working for you?” The basic idea is that if you are doing something that isn’t working out well, maybe you should try something different. We can usually see when someone else is spinning his wheels, but recognizing the same behavior in ourself can be more difficult.

The proof, as they say, is in the pudding. Are you getting the results that you want? If the answer is no, then you need to re-evaluate your actions. And more importantly, you need to re-evaluate your thinking.

Ultimately, our ideas determine our actions. What we think determines what we do. If we don’t change our thinking, we can’t change our actions.

For example, I once was consulting a contractor who was having trouble generating leads. “I’m doing retention and proximity marketing,” he said, “but I’m not getting enough leads. I’m running out of marketing money.” I suggested that he do door hangers, which he did. But he didn’t follow my advice completely.

When I suggested door hangers, I meant (and said) that he should hand them out himself. He was sitting at home waiting for the phone to ring. Instead of spending the day twiddling his thumbs, he should have been pounding the pavement. However, he found it easier to hire someone else to do this, at a cost that quickly depleted his remaining marketing funds.

This particular contractor refused to question his own thinking. He believed that doing door hangers was a different approach to his problem, but in fact it wasn’t. He believed that throwing money at a problem was the solution, and so he continued to throw money around, even as it dwindled. He didn’t change his actions because fundamentally he didn’t change his thinking.

A Million Reasons to Fail

noreply@blogger.com (Brian Phillips) — Thu, 05 Nov 2009 11:00:00 +0000

There is no shortage of people who can tell you all of the reasons why you will fail in accomplishing your dreams. But such pronouncements are really a confession—they are telling you why they fail in achieving their goals and dreams.

When I was a teenager I played on the high school basketball team. I had always been a starter on the team, but one year several “friends” began telling me all of the reasons why I wouldn’t be a starter in the upcoming season. I hadn’t grown enough, I wasn’t fast enough to play another position, I simply wasn’t good enough. Such negativity began to weigh on me and I started to believe it. Ultimately it had an impact on my performance.

Some people do not like the idea that others harbor big dreams. It is a slap in their own face, a reminder of their own failings. But rather than re-evaluate their own conclusions and make the requisite changes, they prefer to drag others down to their level of misery.

While we cannot change such people, we can take steps to reduce their impact on us. We can refuse to deal with them. We can recognize the fact that their failures are no reflection of us. We can reject their self-pity and rise above it. Most importantly, we can associate with people who are not jealous of other’s success, but admire and encourage it.

What are you Waiting For?

noreply@blogger.com (Brian Phillips) — Tue, 03 Nov 2009 11:00:00 +0000

A recent “Thought of the Day” from the Napoleon Hill Foundation asks this question, and then points out:

Far too many people spend their entire lives waiting for that glorious day when the perfect opportunity presents itself to them. Too late, they realize that each day held opportunity for those who sought it out.

Waiting for the perfect opportunity is a futile endeavor—it will never arrive. As the quote states, every day holds opportunities, and the ones we take advantage of today will create additional opportunities tomorrow. A building—and success—is constructed one brick at a time.

There are countless ways in which contractors bypass opportunities. The most significant is not engaging in continuing education. Knowledge is a powerful tool—the more we know the more we can identify opportunities. And the more successfully we can take advantage of them.

For example, many painting contractors loathe sales. They know that they must sell jobs, but the entire experience leaves them filled with anxiety, dread, or boredom. They just want to paint. But each lead is an opportunity. Improving your sales skills allows you to take advantage of that opportunity and be more successful. Would you prefer to give 10 estimates to get 1 job, or get 4 jobs from the same number of estimates? Would you prefer to sell at the “going rate”, or get premium prices?

What we do today determines what we can or cannot do tomorrow. The bridge we build today can be crossed tomorrow. The bridge we burn today will leave us stranded tomorrow.

Dominated by Fear

noreply@blogger.com (Brian Phillips) — Thu, 29 Oct 2009 10:00:00 +0000

Too often, we let our fears dominate our thinking and our actions. It is not uncommon to let the possibility of failure stop us in our tracks. And in the process, the possibility of success is also stopped.

Failure is a part of life. No action is guaranteed to lead to the desired results. But the failure to act will most certainly keep us from achieving the goals we desire.

An effective way to overcome fear is through planning. Planning allows us to envision the end goal and the means to achieve it. Planning allows us to project possible obstacles and the means for overcoming them. Planning builds confidence—it is a kind of test run during which we can “practice” the steps needed to achieve our goals.

To use a simple example, let us say that you want to run a marathon one year from today. You are currently a couch potato and the thought of running 26+ miles seems impossible, and it probably is in this context. But if you develop a training plan the goal seems much less daunting.

With the marathon 12 months away you can plan specific steps to build your endurance. You can research suggested training methods, diet changes, exercise regiments, etc. You can map out milestones, such as being able to run 10 miles in less than 90 minutes within 3 months. Armed with this knowledge, and a plan, you will be more confident that you can actually achieve your goal.

The same is true of business goals (or any goal for that matter). And the bigger the goal, the more important it is to plan.

Accountability

noreply@blogger.com (Brian Phillips) — Mon, 26 Oct 2009 14:04:00 +0000

You have probably heard a lot about holding employees accountable for their actions. But how do you hold yourself accountable? After all, you make the rules for your business, and you can break them whenever you want.

One way to hold yourself accountable is to share your plans and goals with others. If you proclaim your intentions to the world, you are more likely to follow up on them. If you keep them “secret”—to yourself—it can be rather easy to let things slip.

It is quite easy to set goals and then promptly forget them. The details of running a business, not to mention life itself, can distract us or send us off course. We can make excuses and procrastinate. There is no shortage of reasons why we can’t actively work on our goals. And this is even easier when those goals reside solely in the inner recesses of our mind.

Many contractors start their business because they want “freedom”—they don’t want the restrictions imposed by a boss or large corporation. They want to be able to do what they want, when they want. But such “freedom” is not a recipe for success. Success is not gained by following one’s whims, but by setting goals and pursuing them.

Ultimately, we can only be responsible for ourself. We are the only person who can decide what we want out of life and how we will achieve it. And that requires that we hold ourself accountable.

We Get What we Expect

noreply@blogger.com (Brian Phillips) — Thu, 03 Sep 2009 10:00:00 +0000

We Get What we Expect
Dan Miller has an interesting story about a recent handyman experience. He was installing some lighting and:

Twice in this process I recoiled with the stinging shock of electric power surging through my arms – but wait – there was no power yet attached. I hadn’t connected the line to the power source. Just the “anticipation” of power convinced me I had already “felt” a serious shock.

I have witnessed the same thing with contractors, particularly when it comes to dealing with a complaining customer. When the customer calls with a problem, they immediately jump to conclusions—“The customer is just picky”; or “The customer just doesn’t want to pay”; or “You can never please some people”. In each case, the contractor has a certain expectation that may or may not be true. But he will invariably act as if it were true, which can often be a self-fulfilling prophecy.

If we approach the customer with a negative attitude we are establishing a confrontational situation. This will certainly not help the situation, and will most likely lead to an actual confrontation. We wind up getting exactly what we expected.

I’ve had customers call up and claim that “all of the paint is falling off of the wall” or something of the sort. Knowing that this is very unlikely, it would be easy to conclude that the customer is going to be a problem. But if I’ve seen it once, I’ve seen it a trillion times—customers can exaggerate. They just paid good money for a paint job and the slightest problem can become a huge concern.

Rather than jump to conclusions or set up expectations about the customer’s motivation, the proper approach is that of Lt. Friday from Dragnet: get the facts. Then, and only then, can we deal with the actual situation, rather than the fantasy we have created in our own mind.

Learning by Spiraling

noreply@blogger.com (Brian Phillips) — Mon, 31 Aug 2009 10:00:00 +0000

Learning seldom occurs in a linear line. For example, when we read a book, we might grasp the main points and a few of the minor points. But it is almost impossible to get every point in the book—it is too much to absorb at one time.

Spiraling involves re-visiting old ideas for the purpose of picking up nuances missed the first time. When we spiral we bring an expanded context of knowledge to the topic. We have integrated and applied certain information, and when we re-visit the topic we are able to see deeper meaning and wider application than we could before.

Even before I learned about spiraling, I often had the following experience: I would read something and think, “I get this.” Later, when I revisited the point, I would grasp it even better, and think, “Now I really get it.” And later still, I would see new applications and think, “Now I really, really understand.” The interesting thing is, no matter how many times I come back to these issues, it seems as if there is still something that alluded me before.

So dust off those old books and dive back in. You might be surprised what you learn.

Maintenance Programs and Differentiation

noreply@blogger.com (Brian Phillips) — Fri, 28 Aug 2009 10:00:00 +0000

One of the easiest ways to differentiate your painting company is to offer a maintenance program. The most basic program involves an annual inspection to identify problems with exterior painted surfaces, and then a recommendation for solutions.

The benefits to the customer can be significant. A maintenance program can help them keep their home looking good while also reducing maintenance costs. For example, some areas--such as window sills and fascia boards--tend to wear more than others. Keeping these areas properly painted can avoid wood rot, and the costs associated with repairs. Rather than wait for a complete repaint, it might only be necessary to repaint certain areas of the home.

For the contractor, a maintenance program can keep you in front of your past customers. Such a program can provide steady leads.

Of course, for a maintenance program to work, the contractor must be honest with his customers. He should not recommend work that is not needed. If something is optional, say so. Don't try to maximize today's work at the expense of future work by taking advantage of the situation.

While the specifics will vary depending on architectural styles, building materials, climate, etc. a maintenance program can include an inspection for failing paint, storm damage, rotting wood, broken caulk joints, gutter cleaning, and pressure washing. Many of these services are required on a regular basis to keep exterior surfaces protected and looking fresh.

A more elaborate program might include a long-term schedule and budget. This helps the customer anticipate future expenses, and is a service that few contractors offer. It is a great way to differentiate your company.

Desperate Times

noreply@blogger.com (Brian Phillips) — Tue, 25 Aug 2009 10:00:00 +0000

It seems that a lot of painting contractors are experiencing desperate times. Leads are down and they are not sure what to do. As their bank account slowly dwindles they are hesitant to spend money on advertising, but also know that without advertising their will not be any leads.

There is no easy fix, but sitting around watching Oprah isn't the answer either. If I were in such a situation, I would take two simple steps. First, I would contact past customers. Personally, I would (and do) use newsletters. These have greater shelf life, are more informative, and from my experience, are more effective than other media. A less effective option is to use postcards.

The second step I would take is to design and print fliers or door hangers and hit the streets. If I did not have a job, it would be my job to get one.

Handing out fliers is no fun. When I started I did it several times a week. But it works and it is inexpensive. You can target the areas where you want to work (assuming that fliers are allowed). More importantly, it is pro-active. Leads are not going to magically fall into your lap. If you want something, you must work for it.

Building a business isn't always fun. Sometimes it requires that we do things that we do not enjoy, or even hate. But sitting around crying in our beer isn't going to make the situation better.

And when you get a job, put 10% aside for future marketing. Develop a marketing plan and then implement it. Otherwise, you will find yourself back in the same situation at some future time.

Friday Night Lights

noreply@blogger.com (Brian Phillips) — Fri, 21 Aug 2009 12:59:00 +0000

About a month ago a friend gave me the DVDs for the television show "Friday Night Lights". The first few episodes were disappointing, and I almost quit watching. However, since my friend has never--and I mean never--given me a bad recommendation for a movie or television show, I stuck with it. And I'm very glad that I did.

The theme of the show is free will--the fact that each of us faces myriad choices in our lives, and the decisions we make determine the course of our lives. What I particularly enjoy about the program is that it clearly dramatizes these choices, and the ensuing consequences. The choices we make today determine the consequences and opportunities that we will face in the future.

As an example, in the third season several of the characters decide to purchase a home, rehab it, and then sell it for a huge profit. What ensues is entirely predictable, given the character of the individuals (based on their past choices and actions), their "plan", and their general approach to their business partnership. These last two aspects are particularly applicable to a contracting business.

Their "plan" is extremely vague. It basically consists of "rehab the house". They do not discuss specifics or develop a budget until after they own the home. Which means, they had no idea what kind of profit they would make because they did not know what their investment would be. In other words, they didn't know their numbers going into the deal.

This lack of planning materializes in dramatic fashion once they begin the rehab process. Each has different ideas on what should be done. Some make unilateral decisions and act on them, regardless of the time and expense involved. While one of the partners clearly takes the lead, the respective roles of the partners are not clearly defined.

This is a common problem in many, if not most, partnerships. The business begins with vague ideas and a general agreement. But the roles and responsibilities of each partner are often undefined. It usually doesn't take long for each partner to become disenchanted and frustrated, because his expectations are not being met. And they aren't being met largely because he never shared them. Such problems can usually be avoided by open and honest communications--before the partnership begins.

I've said it before--partnerships are much like a marriage, except in the end, only one person gets screwed. But it doesn't have to be that way. Just as a good marriage requires good communications, so does a good partnership.

Accounting Methods

noreply@blogger.com (Brian Phillips) — Mon, 17 Aug 2009 10:00:00 +0000

A recent thread on a contractor forum raised the issue of cash accounting versus accrual accounting. While most responses opted for accrual accounting, one poster insisted that cash accounting is better for tax purposes, while accrual accounting is better for financial reporting.

Wikipedia describes accrual accounting as: “the accounting method known as accrual basis, whereby revenues and expenses are recognized when they are accrued, i.e. accumulated (earned or incurred), regardless when the actual cash is received or paid out.”

Entrepreneur.com describes cash accounting as: “An accounting system that doesn't record accruals but instead recognizes income (or revenue) only when payment is received and expenses only when payment is made. There's no match of revenue against expenses in a fixed accounting period, so comparisons of previous periods aren't possible.”

The definitions, and actual practice, confirm that accrual accounting provides a much more complete and comprehensive picture of a company’s financial position. Liabilities and receivables are included in the balance sheet, which makes cash flow projections easier and more accurate. In addition, it shows whether the company is truly profitable.

But is cash accounting truly “king” when it comes to taxes? Those who advocate this position have some valid points--you don't pay taxes until the cash is actually received. So if you carry lots of receivables, you aren't paying taxes on money still owed to you. But if you don't carry receivables, sales/ revenues would be essentially the same under either cash or accrual accounting.

Similarly with payables. Under cash accounting, you would not expense an item until you actually pay for it; under accrual accounting the expense would be recorded when incurred. In this instance accrual would generally be beneficial, as taxes would be reduced for the current period.

As the above demonstrates, while cash accounting can have certain benefits on the revenue side, accrual accounting can have certain benefits on the expense side.

So, which is better? It depends on how you define better, and how your business operates. For some businesses, cash accounting will be preferable. For others, accrual accounting is better. Only your accountant knows for sure.

An Excerpt from Getting Out of the Bucket: Systems

noreply@blogger.com (Brian Phillips) — Fri, 14 Aug 2009 10:00:00 +0000

Every business will experience problems, no matter how carefully the owner plans. Every business will experience undesired results, no matter how rigorous the execution. Every business owner will experience frustrations, no matter how conscience his efforts.

Our goal with systems is to minimize the number and impact of these problems, frustrations, and undesired results. By developing and implementing systems we can achieve greater consistency in the results we experience, and greatly reduce stress and frustration.

Your systems should identify the most efficient means for achieving the desired results. In other words, if you want an employee to perform a task a specific way, document the steps involved. This becomes your procedure for that task.

Consistent results require consistent actions. When we identify and document the actions that will achieve our desired results, success becomes simply a matter of performing those actions.

A bottleneck is defined as anything that restricts or prevents us from accomplishing our goals. In general, bottlenecks manifest themselves in two ways.

Anytime we experience undesired results, a bottleneck is present. An undesired result may be as simple as not getting what we wanted or expected, or it may mean the development of a problem. In either case, the result is not what we desired. Examples include call backs, poor quality work, a project that goes over budget, and insufficient leads.

Another sign of a bottleneck is frustration. Frustrations may result in the absence of an undesired result. For example, improper planning may result in a material shortage that requires an emergency trip to get more materials. We may still get the desired result—a satisfied customer and profitable job—but the shortage creates a frustration. Another example would be employees asking unnecessary questions.

Most bottlenecks have one of two fundamental causes: a lack of systems and procedures, or the appropriate procedure was not followed.

A system could be defined as an integrated whole, in which each part is interdependent with other parts. Together, the individual parts contribute to the overall function of the item in question. For example, an automobile consists of many individual parts. If a particular part fails, the entire automobile may not function. In a business, if a particular function or task is not performed properly, the business may not meet its goals. In other words, a bottleneck will result.

Systems will help us reduce, eliminate, and/ or prevent bottlenecks.

To learn more about Getting Out of the Bucket, click here.

Gurus and Experts

noreply@blogger.com (Brian Phillips) — Tue, 11 Aug 2009 10:00:00 +0000

With the growth of the Internet and desktop publishing it has become quite easy for someone with a small amount of experience to instantly become a self-professed expert. For a painting contractor searching for help with his business, it can be difficult to identify the true experts from the pretenders. How can a contractor determine whose advice will be helpful and whose will be a waste of money?

There are many factors that go into answering this question. But one thing rings clear—there are no magic bullets. Simply purchasing a book or manual will not improve your business. No matter how clearly stated, extensive, and helpful an idea may be, it will not magically inject itself into your business. You must exert the effort to implement any idea.

Over the years I have spent tens of thousands of dollars on books, tapes, memberships, and other types of training. While some have certainly been more beneficial than others, one thing has stood out—the quality of the material could usually be determined before I ever made a purchase.

Many “experts” are quick to claim their expertise, but offer little evidence. They tell you how their book or program will make you tons of money, but give you no ideas that you can test—until you buy their book. Trust me, they say, and I shall deliver you to the promised land.

These “experts” may have good intentions. They may offer some good ideas. But if I am going to spend my hard-earned money on business advice, I want some evidence that it is actually going to be worth it.

I’ve found that those with the best information readily share much of it for free. Richard Kaller of the Certified Contractors NetWork was the epitome of this approach. He was a prolific poster on various forums, and the information he offered was extremely beneficial. He had such a wealth of information, ideas, and advice that he could afford to give away more than most contractors know.

I have tried to take a similar approach, though I would not begin to consider myself in Richard’s league. Through this blog and numerous forums I have written tens of thousands of words, explaining in my own words, the ideas that have helped me in my business. In short, rather than simply assert my expertise, I have tried to demonstrate it.

This is not to say that I have all of the answers. I don’t. But I certainly have a lot of them. And while some may take exception to that claim, only you can make that judgment as it pertains to your business.

The Problem and the Solution

noreply@blogger.com (Brian Phillips) — Sat, 08 Aug 2009 10:00:00 +0000

A visit to virtually any contractor forum will quickly turn up a plethora of complaints about the state of the painting industry. Between rising costs, low-priced competition, unskilled workers, and uninformed consumers, the complaints seem endless.

And so do the proposed solutions. Some claim that more government regulation is required—that somehow government controls and mandates will reduce costs, train employees, and educate customers. Some claim that we need a grass-roots movement focused on our competitors—if everyone is on the same page, we could all make better money. Some claim that the true professionals should just abandon the industry to the hacks. I think that all of these alleged solutions are wrong.

Having been in this business for more than twenty years, I have certainly experienced my share of frustrations with competitors, employees, and customers. But through all of the trials and travails, there has been one constant—me. No matter the problem, the one factor that was omnipresent was the man in the mirror.

This doesn’t mean that I was the cause of every problem. But as the owner, the buck does stop with me. As the owner, I have the power to make changes, implement rules, institute training and procedures. As the owner, I must take responsibility for my business.

This issue reminds me of the “Serenity Prayer”:

God grant me the serenity to accept the things I cannot change;
courage to change the things I can;
and wisdom to know the difference.

I have no control over what other contractors charge. I do have control over what I charge, the value I offer my customers, and how I educate my customers regarding that value. I could complain about my competitors and my customers, which would have no effect. Or, I can recognize what is within my control and act accordingly.

I could complain about employees and subs who do not have a good work ethic or the requisite skills. Or, I can develop better hiring and training practices, implement procedures, and create a better work environment.

In other words, I can complain about things that are out of my control, or I can take action regarding those things I can control. I can accept what I cannot change; I can change what I can. And most of all, I can develop the wisdom to know the difference.

An Excerpt from Getting Out of the Bucket: Estimating

noreply@blogger.com (Brian Phillips) — Wed, 05 Aug 2009 10:00:00 +0000

An estimate is a projection of the labor and materials required to complete a particular project. The accuracy of that estimate will determine the profitability of the job, and therefore, the success of the company. While an occasional mistake may not ruin our business, consistently under estimating jobs will ultimately put us out of business.

In terms of essentials, there are only 2 different methods for estimating repaint projects: the “eye-ball” method and a measurement based method.

The “eye-ball” method involves looking at the project and assigning some number to it. That number may be the amount of hours or days to complete the project, or it may simply be a price. Regardless, it is simply a guess. That guess may be based on years of experience, and it may be reasonably accurate a large percentage of the time. However, it’s very nature makes it very limited in its usefulness.

The “eye-ball” method relies completely on the experience and subjective evaluation of the estimator. The evaluation of one person can vary significantly from the evaluation of another person.

There are many components and variables that must be considered. The various substrates, their condition, the preparation required for each, and many other factors must be considered. When this is attempted with the “eye-ball” method, invariably many of these factors will be overlooked. The “eye-ball” method really comes down to a matter of personal opinion. You might think that it will take 10 hours to paint the front of the house, and someone else may think it will take 15 hours. How are you to decide? The answer to that question could be the difference between over pricing the job, or underpricing the job.

The problems with the “eye-ball” method go beyond merely differences in opinion. Since the job price is determined subjectively, there is no accurate method for identifying the cause when a job goes over budget. Such situations become a bickering match, as the crew blames the estimator and the estimator blames the crew. Both sides base their argument on their own opinion, and neither has much ground to stand on. The crew will argue that they weren’t given enough time, and the estimator will argue that the crew simply didn’t work efficiently. That’s not a very good situation to put yourself and your company in.

If the owner wishes to hire an estimator, the problems are amplified as another opinion is added to the mix. The estimator’s opinion can easily differ from the owner’s, and both may differ from the crew’s. There is no easy remedy to such a difference of opinion.

A measurement based method eliminates all of these problems. A measurement based method provides an objective process for pricing jobs, allows for the identification and correction of mistakes, and can easily be taught to others. In short, a measurement based method greatly reduces and/ or eliminates subjective opinion from the estimating process.

A measurement based system is based on the idea that it takes a certain amount of time to perform a certain task. For example, how long would it take you to prepare and paint a French door?

If it takes 45 minutes to prep and paint a door at Mr. Smith’s, it should take 45 minutes to prep and paint the same door at Mrs. Brown’s. In other words, if we know the time it takes to prep and paint this type of door, every time we see such a door we know how much time to allot. Guessing and subjectivity is removed from the estimating process.

If we do the same for every substrate and task on the job, the estimating process becomes very accurate. Estimating becomes a process of identifying each substrate and task, and how much of each substrate and task. So, if there are 10 of these doors on a job, we can easily calculate that 450 minutes will be needed to prep and paint those doors.

A measurement based system involves 3 basic components: the quantity of the task, the time required to perform a unit of that task (the production rate), and the degree of difficulty (access, difficult cut in, additional prep, etc.). We can attach a specific number to each of these, and in doing so, provide ourselves with an easy method for consistently calculating accurate estimates.

To learn more about Getting Out of the Bucket, click here.

An Excerpt from Getting Out of the Bucket: Starting a Business

noreply@blogger.com (Brian Phillips) — Sun, 02 Aug 2009 10:00:00 +0000

Starting a painting business is easy. Starting a painting business that will be successful isn’t.

There is much more to operating a successful painting business than putting paint on the wall. Issues such as marketing, estimating, sales, administration, and production management are all crucial components to success.

While each business owner will have different goals and expectations for his business, the basic principles necessary for success do not vary. Whether you want to have a one-man operation or a twenty man shop, sound business principles are a necessary component of achieving the goals you establish.

If I had to start my painting business all over again, I would take the following 5 steps:

1. Learn about owning a small business. There are many resources, including books, tapes, forums such as Paint Talk, and of course, Out of the Bucket.com.

2. Identify where I want to be in 1 year. For example, what kind of revenue, what kind of profit, what kind of income. And then I'd develop a plan for accomplishing this.

3. Invest in marketing-- signs, business cards, web site, and fliers/ door hangers. The bulk of the money would go into fliers/ door hangers and I would hand them out myself. I would invest at least $500, and more if I could afford it.

4. Learn to sell at the right price, which implies that I know what the right price is. I would learn more about the financial side of the business.

5. Develop some simple systems for the basics of the business. Such as, how will I prep an exterior job, how will I prep an interior job, etc. I would include some administration issues as well. And I would put this in writing.

These 5 steps do not exhaust the possibilities, but after 22 years in business I am confident that the above steps would save a tremendous amount of time and money.

There are certainly multiple paths to business success. It is possible to be successful and act in complete defiance of the above suggestions. However, the above steps are proven—they do lead to success. From my perspective, anything that makes the journey easier is certainly worth investigating.

To learn more about Getting Out of the Bucket, click here.