Painting Profit Benchmarks At Every Stage

We map a painting company’s profit and loss from solopreneur to a $3M+ sellable machine and share the benchmarks the top 20% hit. You learn where gross profit should land, how overhead shifts, and what healthy owner pay looks like at each stage.

• defining revenue, direct costs, gross profit, overhead, and discretionary earnings
• solopreneur realities and hidden labor on the P&L
• off the brush stage targets with crews or subs
• adding back office help and holding 50% gross profit
• hiring the first production manager and key KPIs
• building a sales team and lifting GP to fund growth
• sellable machine economics and leadership costs
• core takeaway that margin must rise as complexity rises

Hit subscribe and comment below what stage you're in solopreneur off the brush, back office help, production manager, sales team, or sellable machine, and keep the conversation going

This episode was originally recorded as a video for YouTube.

If you hear me say things like “in this video” or reference visuals, don’t worry —
the content still works perfectly in audio form.

And if you ever want to watch the video version, you can find it on the
 Profitable Painter YouTube channel.

https://www.youtube.com/@BookkeepingForPainters

Transcript

Defining Stages And Key P&L Terms

Solopreneur Benchmarks And Caveats

Off The Brush: Adding Field Labor

Back Office Help And 50% GP Target

SPEAKER_00 0:20

In this video, I'm going to show you what a healthy painting contractor, profit and loss, should look like by stage of business from solarpreneur all the way up to a$3 million plus sellable machine. So you can stop guessing whether your numbers are good and quickly see what healthy looks like and why it changes as you grow. If you clicked on this video, you're probably wondering the answer to these three questions. One, what should my gross profit be at my revenue stage? Two, what overhead is normal and what's a red flag? Three, what should be left for me as the owner when my business is healthy? Let's walk through this growth model together. All right, so this growth model I developed over the last 10 years working with hundreds of painting businesses. And what it shows is what the top 20% of painting businesses hit in their business on their profit and loss. So at the top, we have the stages of a typical painting business from solopreneur all the way up to sellable machine. And then on the left, we have the categories of a typical profit and loss. So revenue, labor, materials, production manager, salespeople, overhead costs. And then finally at the bottom, we have discretionary earnings, which is basically your net income plus any officer salary if you run that as an S-Corp officer. So first, let's start with the solopreneur stage. So at this stage, you're wearing all the hats, which is why you see a lot of hat icons on this stage. And this is because you're doing everything. You're painting on the job side, you're selling the jobs, you're producing the jobs, you're doing the admin work, and you're also the business owner leading the company. So you're wearing all the hats. So that means you don't have any employees, and all of the pay is really going to you as the owner. So we see a very high discretionary earnings. The folks that are in the top 20% in solopreneur, they're making around 66% of revenue is going to them. So if they do$100,000 in revenue,$66,000 is going to them as the owner. And you'll also notice that gross profit is very high. It's 85%. And that's because when you look at your profit and loss as a solopreneur, you won't see your labor being captured as a direct labor cost since you don't pay yourself through payroll at this stage. So we're really, we only have materials as our direct cost on the profit and loss at this stage. Let's take a look at the next stage, which is the off the brush stage. And this is typically from$150,000 to$350,000 in revenue. And what makes this stage stand out is the fact that you, as the business owner, are no longer painting on the job site. So you either have employees or subcontractors that are actually doing the work on the job site. But you're still the production manager, you're still the salesperson, you're still doing admin work, and you're also leading the business as the business owner. So as far as discretionary earnings, you should be making 31.5% if you want to be in the top 20% of painting businesses. 31.5%. So if you're doing a million dollars of revenue at this level, that means you would be making over$300,000. Now it's difficult to do with$3 million when you're still doing all these roles of production manager, salesperson, admin, and the uh the leader of the business. It's possible, just very difficult. Because at some point, you'll need some admin support, which brings us to our next stage, which is the back office help stage. So this is where you hire an administrator to help you send those invoices, manage those back office tasks for you. So you can focus on sales and production management. So those are the two main rules you have. You're also leading the business as the business owner. So at this stage, if you want to be in the top 20% of painting businesses, you would want to be taking home 27%. Now you'll notice that these two stages, the off the brush and back office help, they're right around pushing up against 50% gross profit. So that's really the starting point if you want to be in the top 20%. At these stages, you want to be shooting for 50% gross profit, which is basically charging your customers twice of what it costs you to produce the work. Now, if you shoot for 50% gross profit, things will go wrong and you might end up hitting around 47.5%, like is shown here. All right, let's take a look at the next stage, which is the first production manager stage. So this is about$500,000 in revenue to$1.5 million in revenue. And this is where you hire your first production manager. So you've already got admin, you already have an admin. Now you're bringing on a production manager as well. And so that leaves you just with the sales role and you're the leader of the organization and the business owner. So at this level, you would want to still be bringing home 22.5%. Now you probably noticed at this point, as we get larger and larger, our percentage of what we take home is actually going down. However, we're getting a smaller piece of a larger pie. So we're growing the pie bigger overall as we grow in revenue, but we're just taking a smaller slice of a larger pie. So overall, we should be making more money. It's just the percentage is going down. So 22.5% in discretionary earnings. So that'd be a combination of owner salary and net income there. And you notice we are now at 50% gross profit. And you'll also see that as you get larger and larger, you're constantly improving that gross profit, which brings us to the next tier, which is the sales team stage. And this is 1.5 million to 3 million in revenue. And once again, we have gross profit going up to 53%. So you're always trying to improve that gross profit to bring you more earnings so you can pay for your sales team, pay for your overhead costs, and most importantly, paying for your profit. So once you have a sales team in place, you take that salesperson hat off. So you are no longer doing sales and you're just the leader of the organization, making sure everything is running the way it's supposed to run. And at this point, you should to be in the top 20%, you want to be hitting around 18.5% discretionary earnings. So if you are a$2 million business at this point, you should be taking home right around$370,000 in profit and owner comp between those two things. And then finally, we have our sellable machine stage. This is where you're at$3 million plus in revenue. And you'll notice you actually have the option to not be involved in the business at all outside of owning the business. So at this stage, you could be sipping Corona on the beach while you have a team running the business completely for you. This includes a leader in place that's actually running the business for you. So you'll notice gross profit once again has gone up to 56%. To be in the top 20% at this stage, you need to be hitting 56% gross profit or higher. And there's folks that we work with at Profitable Painter CPA that are hitting 60, 65% gross profit. So it's definitely possible. And then from there, you are paying out all those different roles the salesperson, the production manager, the administrator, and also the C-suite. So 5% is allocated for the CEO, CFO, COO, etc. And then finally, what's left over for you to be in the top 20%? You want would want about 17.5% left over for you, the business owner. Here's the big picture. Early on, your PL profit can look great. That's because your owner pay is hidden because you're actually not running payroll. Once you hire labor, a healthy company usually lives around 50% gross profit or higher. As you scale, try to improve gross profit. Don't stop at 50%. As you grow, customer acquisition costs usually increase as well. So you must increase your gross profit to keep profitability high, which brings me to my next point. As you grow, overhead also rises because you're building management, sales, and infrastructure. Another reason to continue to improve gross profit and your owner discretionary earnings typically compresses from really high in solopreneur mode to the high teens in a true sellable machine because the business is paying for leadership instead of just relying on you. In my next video, I'm gonna break down four numbers every painting business must know the ones that tell you if you're winning or just staying busy. So hit subscribe and comment below what stage you're in solopreneur off the brush, back office help, production manager, sales team, or sellable machine, and keep the conversation going. I'll see you next video.