Profitable Painter Podcast
Profitable Painter Podcast is a rich resource for anyone interested in starting, running, and scaling a professional painting business, offering valuable insights, strategies, and interviews with industry leaders. Through case studies and in-depth discussions, we deliver a vivid picture of the painting industry, with a disclaimer that any financial or tax information is general and not a substitute for professional advice.
Profitable Painter Podcast
Helping a $600k Painting Business Owner Fix Their Offer and Cashflow
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We walk through why a strong revenue year can still feel like financial quicksand when margins, marketing ROI, and cash timing do not line up. We map out specific moves to improve close rate, raise gross profit, and stabilize cash flow without racing competitors to the lowest price.
•Revenue, gross margin, and the real “squeeze” between pricing caps and labor costs
•Close rate benchmarks and why raising prices too soon can backfire
•A step by step in home estimate framework that reduces sticker shock
•Building a more compelling offer with an on time on budget guarantee
•Using updated social proof and a video sales letter to support the close
•Improving GP to CAC ratio by increasing markup instead of squeezing subs
•Short term cash flow fixes through higher deposits tied to the guarantee
•Debt plan that prioritizes a two month cash buffer before extra paydown
•Why trimming small overhead rarely beats improving margin and cash intake
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Revenue Context And Margin Squeeze
SPEAKER_00Got your question in regards to fixed overhead, uh, debt relief management and refinancing, and also looking at uh marketing return on investment. If you could just give some context, you've done about six hundred thousand in the last 12 months in revenue, gross profits around 42%. What sort of uh issues have you been facing that's you think cuts to the core of the issue here?
SPEAKER_01Well, so there's basically three legs of the thing, right? One is how much you actually earn, so your gross income, right? Which is based on how much you can charge, right? I'm cut the cap of where I can charge. We're in the upper, upper middle, lower high end, and then how much you can that you pay out, right? So that's the money going out. Now, in between, there is where everything else lives. That's where the fixed cost versus the variable cost versus what fat I need to trim, what am I spending money on that maybe I could do without? That makes sense.
SPEAKER_00So basically, right now it sounds like based off of your analysis, you are at the higher end of what you can charge in your market. And then also you have what you're using.
SPEAKER_01Subcontractors, I hired a W-2 crew, um, and they're still in the training phase, so they're not bringing in any actual substantial income. It's more of an investment at this point.
SPEAKER_00Right. So you get your subs who are demanding a certain rate that you in order to keep them, you got to pay them. So you're getting squeezed on those two ends, and so you're trying to look at your fixed overhead to see what can you cut to to increase the profit margin. Is that right?
SPEAKER_01Generally speaking, yes. That's the only other place to look, right?
SPEAKER_00The those are the main areas now. Um, before we get into the fixed overhead, to just ask a few more questions for context. What is your close
Close Rate Limits Price Increases
SPEAKER_00rate right now for your estimating?
SPEAKER_01So I just got off a call with my fresh coat coach, and he said, year to date, my close rate is 42%. He said, I think that seems a little high, but I mean where'd you put it? If I would say it's probably closer to 36, somewhere in there. 35. But it's not too far off.
SPEAKER_0035 to 40 percent. That's a a good close rate to stay in that range. So based off of your current uh pricing and sales process, you are probably right in that you don't have much room in terms of raise prices right this second based off your close rate. So the other thing you could look at is just what is your sales process right now? Because if we were to raise prices to your point, your close rate is going to go down. And then going below 30% close rate is not very optimal because then you're driving around a lot and not closing many deals. Right. So we definitely want to stay in that range of 35 to 40 percent. The outside of price, we we have the lever of just how strong your sales process is. So I'm just gonna confirm a few things. You're you're presenting in-home, correct?
SPEAKER_0190% of the time, whenever possible, yes.
SPEAKER_00And when you're presenting in home, are you using a framework or a script in that process that you I have a framework laid out that I like to do, yes.
SPEAKER_01Could you just run me through that really quick? What is that framework? So it basically consists of one, getting the lead in, setting the appointment, a little bit of pre-positioning text back and forth, gathering a little information
A Practical In Home Sales Framework
SPEAKER_01through my CRM system, confirming the appointment, then sending a reminder for the appointment. So they're already familiar with me and they've seen my ads from painter marketing pros on Facebook. Sometimes I'll call, but generally it's a text. Most people like to be text. And then while I'll go out at the time that we're supposed to meet and try and make sure that they're there, them and any other decision makers, the wife, introduce myself, take a couple minutes to get a feel for them, uh vibe, and then start asking them questions about what they want to do, what their vision is, if there are any concerns or anything that they see going on in the house that they think needs immediate attention or they want to bring to my attention. We'll discuss those for a little bit. And then I'll let them build the vision of what a final finished product looks like so I can take them to that place in their mind. And then I, if it's something I can feel confident that I can get them there, I can get it, get them there, help them feel comfortable with me and that I know what I'm talking about. And then I'll start floating the idea of money. All right, so this looks like a pretty good project here. You want to do this and you want to do that, and there's some areas here that may need some concern. Have you guys put a budget together for what you think something like this will cost, or do you have any idea at all? Right? Because and then they'll be like, well, either one or two camps. We have a basic idea of what we think we want to spend, or no, we're just trying to gather some numbers that can help you with both of those, right? And then I will say, look, we've done projects similar to this in the past, and I've seen them range anywhere from $2,500 to $4,500, depending on the extent of the repairs. And if they don't flinch, I go, is that number kind of in line with what you had in mind? Like, that's right where we were. Or no, that's way too much. I'm like, well, if that's way too much, maybe we scale this project back a little bit, right? So I'm just planning the conversation of money so it's not a big gotcha at the end, right? So I'm like, all right, here's what I'm gonna do. I'm gonna take some measurements, I'm gonna take some pictures, I'm gonna put them in my project planning software. I'll do a little bit of math, all right, and then I'll compile all our notes that we talked about, and I'll be back in in a few minutes and we'll go over it. And they're usually like, oh, and then I'll go set put the notes together, put the whole quote bid together. I make detailed notes of everything we're gonna do, everything we're not gonna do, the paints that we're gonna use, the values, smart quote from fresh coat, minimizes it, and line items it. So then I'll go in and go, all right, hey, I got your numbers together. You want to have a seat? I generally have the best luck sitting on the front porch. You know what I mean? Because then it's candy griffith kind of thing there. But the kitchen table works good too. And I'll sit there with them and their wife if they're there and go, all right, so you talked about your things and expanded about where we discussed. And I'll go, you're gonna get a document like this and show them what the email is gonna look like. And I go, and the thing you want to find is the proposal. You don't want to beat around the bush. I can tell you you want to get right to the bottom line. So I'll scroll down, I'll go, I'll show you the number at the bottom, and then I'll show you how we got there. And so then I'll go down 3285, right? I'm like, all right, so I said it would be somewhere between 25 and 45. We're at 32. I got here's how we got there. And then I go through everything that we talked about and all the notes. So it's a nice detailed process. And then at the end, like is that number somewhere with something that you thought that you had in there? And they're like, it's a couple hundred higher than the other guys go. Well, I'm gonna go ahead and do these drywall patches for you. I'm gonna go ahead and upgrade your paint to duration at the super paint price. I will check, I'll be the one checking in on it, and you'll do a final walkthrough with me at the end. Have I built enough value in here? I try and close on the spot. But I also look, I respect the fact that this is $3,200. It's I bought plenty of cars that didn't cost that much. So I'm not trying to push you into a decision. A lot of times they're like, you know what, that sounds good, let's go do it. Or we still got two other guys to look at. And if they say that, I go, look, we're not the cheapest. We're gonna be on the high end of the middle. If we're really close, I appreciate if you give me a call back. Maybe there's something we can do. Maybe I can add something in or take something off, you know, just try and keep the conversation going, but no high pressure sales from me. And generally, oh, we really appreciate it. And a lot of times they'll call me back if they don't close right then and say, you know what, we really like you and we trust you, so we're gonna go ahead and go with you, even though you're $500 more. I had a guy say that last week. So that's basically the whole thing and trying to build value, trying to touch base on price, trying not to sticker shock them.
SPEAKER_00Awesome. That's great. I I think you have a good sales process. The thing that maybe we could take a look at is the offer of what you're offering, and how can we make the offer more compelling to close more people? So, some things to consider here. A lot of homeowners they have bad experiences with contractors. And so they'll have a contractor that'll come out, they'll start a project, they'll leave, they'll come back a couple weeks later, they'll they'll start working some more, they'll leave again, come back, and the project ends up dragging on for weeks to months. So that's very
Add An On Time Guarantee
SPEAKER_00common. Would you agree?
SPEAKER_01Yeah, I would agree. And I do dress that in my talk with them when I'm feeling them out. Because one of the questions I'll ask them if they have any questions, and they're like, How long does something like this usually take? A project like this, two to three days. I'm showing three and a half days with three painters.
SPEAKER_00Yep. So what you could do to make your offer more compelling is to offer a on-time, on budget guarantee. Say, hey, you know, you're this project to take three days. If we take longer than five days, or whatever, it could be whatever numbers you feel comfortable with there. If you think it's gonna take a week, you say two weeks. If it takes us longer than a week for this project, I'm gonna give you a 10% refund on the project because we have an on-time on budget guarantee where if we don't come on time and on budget, then we didn't leave up live up to our promise, and I'm gonna give you a 10% refund. Um, and so that could, you know, you control the the timeline. Like if you think it's gonna take a week, maybe say two weeks, right? So you can control that. However, it's gonna be perceived by like the homeowner, like, oh wow, this is kind of mitigating a lot of the risk. So he's a little bit more expensive, but if he doesn't live up to his promise, I get 10% back, which is about what I would have to pay for someone who doesn't have this uh guarantee. Um so you'll look at adding something like that to allow you to charge more, but uh some skin in the game, and it's not much skin again, because you are controlling what you're saying with the timeline. Uh is you're you have some confidence in your team to you know finish in a reasonable amount of time. Now, if it's an exterior, obviously you can put a caveat of inclement weather. Obviously, we can't patron house and a thunderstorm, uh, but you know, set our rain or inclement weather, you know, out towards the uh the on-time on budget guarantee.
SPEAKER_01No, I like that idea. I could sprinkle that in, you know, the you know, stuff to have it done by a certain thing. That's like, look, oh I tell you what, if I'm thinking it'll take three to four days, if it takes over five days, I'll give you 10% of your money back. So that's the guarantee that I'll we'll do whatever it takes to get it done in time for the graduation party or whatever the thing is, you know. Yeah, that's unreasonable.
SPEAKER_00Yep. I would uh try this for a short period of time to see if it should increase your close rate because you said your close rate is at 42% right now, which is oh yeah, 33-42 percent. So let's let's add on time on budget guarantee. This should bump up your close rate because it's it's it's more compelling of an offer for most folks. And then then once your close rate is consistently above 40%, let's start raising the prices because the main issue that I see with your profitability is that we just don't have enough margin to really cover your customer acquisition costs. Because right now, your your profit, the customer acquisition cost ratio is two to one, basically, where you put a dollar of marketing and and person spend in the business and you get about two dollars back, which is not a great position. That so as long as that ratio is below three to one, it's gonna be hard to make much of a profit. So uh we have to get the gross profit margin up to probably 50-55 percent to really get a decent three to one or but or better GP to CAC ratio. And so I think improving improving the offer, then get the close rate up initially after like uh a couple weeks as you see it trending over 40%, then start raising the prices. So going into smart quote and changing your markup from 100% markup, which which have have labor materials marked up by 100%, start inching it up by like 105%.
SPEAKER_01I think going in and putting it in at 110 on the back side, and then when discounts come up, I can take that 10% off and I'm still at the 100.
Raise Markup Without Paying Subs More
SPEAKER_01You know what I mean?
SPEAKER_00Okay. Yeah, you're I would so how how does the discount play in? When when are you doing that?
SPEAKER_01Well, when they're like, hey, do you offer senior citizen discounts? Do you offer military discounts? Everybody does. And I mean, it was just at a well, actually yesterday, did an N home quote and they had five-star painting quote right there. He's like, I'll show you what his quote was. He was $240 less than me. Right. You know, to match his price, we'll sign and give you a deposit right now. So I ended up matching his price, you know, and it was word for word. It wasn't like he copied my entire proposal, you know, was actually there first. So like he was a nice guy, but the art likes you better, you know.
SPEAKER_00Yeah, and why I think the offer is gonna really help because we don't want to just be competing on price because that's just a race to the bottom. So providing that on-time, on budget guarantee, uh, I think will really have you stand out in your area, and I think that will be really combat because this is not an um other folks have done this and tested this. This definitely works. So um yeah, I want to be competing on the price. Now, you you could say, hey, I if really like, hey, I want you to meet this price and I'll sign up with you right now. Like, I can do that, but I'm I can't commit to the on-time on budget guarantee. Um, obviously, he doesn't commit to that um because that's just you know some extra effort to make sure we really live up to that promise. Um so you can, you know, uh you know, you need to. So, but the idea would be get your clothes rate up above 40% once it's consistently above that, then start increasing the markup on your labor and materials so that and then um you know increase that margin from 42% to you know 50% or higher. Uh now using subs, so how are you paying your subs? Do you pay them like a based off of budgeted hours or do you pay them a percentage of the job?
SPEAKER_01It's based off of a budgeted hours, but it ends up being a percentage of the job. I think on average the payout is 42% for the subs.
SPEAKER_00But it's based off you you basically take the budget hours and multiply it by a um hourly rate.
SPEAKER_01That's that's how smart quote works. Yeah.
SPEAKER_00Okay. I would continue to do that. Don't increase the hourly rate. You know, add this on-time budget guarantee and you increase the markup. Uh don't dollar rate for your because we basically want those price increases to go directly to your gross profit margin.
SPEAKER_01Correct. That's what I'm doing on the back end, is I'm going in and just adding 110% to the margin side of it. And so they're still getting paid the you know for whatever it is, right? And I've tried sell out some cheaper subs, but I always pay and callbacks and bad reputation and stuff like that. So the ones that I've got are pretty good. I I really want to squeeze them too much more because I know they aren't making a whole heck of a lot of money. I count the hours they're working, you know, actually taking longer to do a better job than I have than smart budgeted. Yeah.
SPEAKER_00Yeah. Obviously, you want to good people because that's gonna make your life so much easier. I think what we need to do is just basically improve the offer. In addition to improving the offer, we could also look at including a video sales letter. Do you have one of those?
SPEAKER_01We we with um VRM with painter marketing pros, though when they click through and they hit the appointment, it shows a video. Um, I use a new one. I'm more updated with some different content, probably.
SPEAKER_00Right. I would definitely with the new offer, especially, uh you want to include that and updated social proof. Like the the bills letter can really sell you and and the company um in the clothes a lot easier and um potentially save you a little bit of time. And you can have them watch that during your when you're going out to the truck to do the the to get the price. You know, watch the video that goes through the full program that includes the the that you have and any warranties uh so they're fully informed for when you cover the proposal with them. Um and it'll also help when you have a salesperson too, because then you know, part of the script, you just it's pre-recorded, right? So it makes it easier to have a salesperson step in when you have that VSL supporting. And then one thing, you know, offer with this on-time on budget guarantee. When you went through your um sales process, I didn't hear this, you might be doing it, but I didn't hear you say it, which is overview past pain. So asking the question, hey, have you ever worked with a painting contractor before?
SPEAKER_01And and I do when I ask them about the price, we have an idea what they're hired a professional painter before. So, yeah, we'll on that a little bit.
SPEAKER_00And asking how was their experience with that? Because then that will bring out yeah, it was terrible. Or if you know, could that have that when you present the offer? You can say, like, I knew had issues with prior contractors, and that's why we have this on-time on budget guarantee. All right, the other thing I noticed looking at your numbers. Well, before we move on to something else, uh, do you think that's helpful for the your situation?
SPEAKER_01Yeah, I just gotta figure out how to do it exactly, but it's not the worst idea I've heard today.
SPEAKER_00I'm glad all right. So, you know, you your position is is not ideal. We want two months of overhead cost as cash, you're at about one month of overhead cost as cash. So cash is a little low, and that's the lifeblood of the business. So we definitely want to see what we can do to increase cash. Um and obviously increasing overall profitability will do that if you know talks about raising prices with the new offer, and that will you know, mid to long term increase overall profitability, but that doesn't really solve what's happening right now, which is you have a low profit margin, or sorry, a low low cash balance in the bank. So, in terms of what we can do right now to improve cash, before what are you taking as a deposit right now for what you close?
SPEAKER_01Generally 20 to 50 percent.
SPEAKER_00What is that based off of the total sales price?
SPEAKER_01So I mean 20 or 50, depending. Yeah, you know, I could get the whole 50 percent because the money gets spent uh before the job gets in, so it's going to pay yesterday's bills and stuff, you know. I a lot of people kind of bristle a little bit. So I'm like they do you take a deposit, like generally 20 to 50 percent, you know. And say it's 7500 bucks a like house and like take it, you know, just kind of a number. We don't have um a card deposit pay button that comes out, you know, present like a lot of companies do. I've been doing um price with some of my friends, so I've got over five or six different estimates on the exact same project from other painting companies here in town, and almost all of them have a deposit pay button that says, here's 20% deposit, click here to pay now and get on the schedule,
Fix Cash Flow With Bigger Deposits
SPEAKER_01kind of no. Smart group doesn't have that. I think that comes out of QuickBooks. I'm not exactly sure how to do it, but it's pretty slick.
SPEAKER_00Gotcha. Yeah. Um would look at increasing your deposit because that is just one very easy way to increase your cash. And what I would do is to pair it up with your offer and you know hit the on-time on budget guarantee, you know, the price when you're presenting. Uh, this is the price, and it's a 50% deposit so that we can allocate the funds to start it with your project and the allotted time that we agreed to. So you're kind of deposit to the on-time on guarantee. Uh, and you know, well, if the deposit's too much, you don't totally understand. You know, 50% down is is a little bit more than what you might typically see. And we can do it for 20. I just can't include the on-time on budget guarantee with that, uh, just due to the the nature of me having to pay my guys on timely matter. Um, so we can do a 30% deposit, uh, but it I just won't be able to include the on-time on budget guarantee. That way you can, you know, I would do that especially right now because you're not even raising prices. So you're just adding in the offer. So I would definitely increase the deposit now, but we're waiting on the price increase because um we'll see how it plays out with your close rate because we want to get your close rate above 40%. So, but I would raise your your because you do have this cash issue right now, and that's that raising the deposit right now in the short term will increase your cash flow, which will get you out of the red territory, you know, get a couple months of overhead costs as cash. And I would just tie the on-time on budget guarantee to to the 50% deposit.
SPEAKER_01Now, if you look at my numbers, and this is where you're getting your information, you're gonna see that my line of credit of $20,000 is at 18,000. Then my credit cards, I've got two or three of them that are at $30,000. So, do we pay that off or do we just keep hoping that that pays itself off?
SPEAKER_00We want to get at least to two months of overhead cost as cash. So right now you're you're yeah. So um you're at one month of overhead cost as cash right now.
SPEAKER_01And that'll be gone as the payroll goes through.
SPEAKER_00Right. So uh yeah, we want to have at least I I believe uh I think it was 20, 25,000 at least minimum for you. Um whatever your overhead cost is cash per month multiply multiply to two.
SPEAKER_01I think we need to have I don't really have a good grasp on what my actual overhead cost is. That's why I'm like, all right, that was one of my questions. Like, all right, versus variable, what's what it cut. Okay, because I you know out of business because their overhead's too high.
SPEAKER_00Yeah, just overhead costs, and this includes variable and fix, but just looking at the last four months of your overhead costs, um, you out $26,000 of overhead costs per month, and that's variable and fixed. So to be in a good cash position, we want to have at least $50,000
Hold Cash Before Paying Down Debt
SPEAKER_00in cash. Uh I'm sorry, I'm not $50,000, at least $26,000 in cash in the bank at any point in time. And once we have at least that, then we can start paying down debt, you know, uh extra cash to pay down the debt. So to answer your question, no, I would not use any cash to pay down debt at this time because your cash balance is just too low to do that. But once we start getting cash in quicker from the new offer and the higher deposit, then we can start using and producing some work, then we can start using that extra cash. Once we get above $25,000 in in cash in the bank and the business, then we can start paying down the debt and and tackling that.
SPEAKER_01Okay. So make the minimum payments.
SPEAKER_00Yes. And to because we the you've probably heard the saying cash is king. If we use our cash to pay down our debt, we potentially are putting the business at risk and not being able to pay our bills and pay our team, and and the business will grind to a halt. So cash is the absolute like we need to hold on to that for as long as we can. We need to be good stewards of it, but we need to hold on to it uh before we pay the debt off, get our ourselves, take care of the business first, make sure it has enough for an unforeseen circumstance to come along that you're prepared for that. Once you're prepared, you have that emergency fund of two months of overhead cost as cash in the bank. Then we can start paying off our and in tax. So we need $52,000 in the bank. Sorry, I misspoke. It was $26,000 because that's two months of overhead costs cash. The way I got that is on average, over the last four months, you've been spending about $13,000 in overhead on average. And so just multiplying that by two, we need $26,000 in overhead costs in uh in the bank, which will cover two months of overhead costs. And that includes marketing, all the variable stuff too, right? It's about $12,000. That's marketing, that's uh all the fixed and variable costs for your overhead the last four months. Yeah. Now do you see any fat in there that could get trimmed out? Really, the biggest thing is what I already said. Uh there might be some fat in there, but it I think the main focus is really what what I already covered, which is fixing the offer, getting your clothes rate up, and then increasing the prices, also getting more cash up front. Um, that didn't have the biggest impact on the business in the short and medium term. Um, are there things you're paying for that you might be able to cut? Yeah, maybe, but it's not gonna have as big of an impact as the things we've already covered. Um, just getting gross profit up, getting it more money down, more money quicker, that's gonna have an oversized impact. So if you just focus on the the thing we already talked talked about, that that I see it happen all the time where it just has an outsized impact. Um, looking at other expenses overhead-wise, I mean like super like wow, really paying a lot for XYZ with the exception of marketing. Marketing is high, however, we need to keep spending on marketing costs. The really the best uh solution here is to get gross profit higher
What To Cut Versus What Works
SPEAKER_00so that it can more easily cover marketing spend.
SPEAKER_01Right. And the the sales are going to continue to trend up the um just seasonal here, you know. I've got close to a hundred thousand in booked work in the pipeline right now. So those are good. There are they all 55% profit? No, yeah, no. I mean they're 40% gross margin on some of them, uh, you know, on that end of things.
SPEAKER_00Right. Yeah, and those the offer changes are gonna have to take a little bit of time for it to impact your financials because you obviously haven't implemented it yet, and then you have you're booked out a few weeks. So we're not gonna start seeing the results of that until July time frame or or or later, depending on how quick you get the offer on time on budget offer in there. But the taking a higher deposit that can impact you within the next couple weeks, just with with the next um you know, jobs that you close, you know, assuming you can get that offer in there and increase the deposit within a couple days.
