Helping a $650k Painting Business Optimize Their Customer Acquisition Cost

Is your home service business growing fast but seeing margins shrink due to rising ad costs? In this strategy session, we break down the financials of a painting business doing $650k–$700k in annual revenue. We discuss how to balance aggressive growth with profitability, the effectiveness of combining Meta ads with outdoor media like billboards, and how to improve your customer acquisition cost (CAC).

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Keywords: Painting business finance, customer acquisition cost for painters, speed to lead for contractors, video sales letter for home services, contractor sales training, increasing gross profit painting, Meta ads for painting companies, billboard advertising for contractors, risk reversal guarantee.

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

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

Marketing Spend Question And Baseline Numbers

SPEAKER_01 0:20

All right, awesome. So I know your question is how much can I afford to spend on marketing during a heavy growth phase? And how much should I be making? Just to give some further context, your last 12 months you've done about $650,000 in revenue looks like. Your gross profit looks super strong, about 58%. However, recent months, your your customer acquisition cost, your marketing has gone up significantly to about 30% of revenue. And your discretionary earnings, however, is still relatively strong at 16%. And uh was there anything that you wanted to add to that? Additional context? Not really. I saw that your your primary acquisition channel over the last few months is Meta. So Facebook is 45% of where your leads are coming from. It looks like your average cost per cost per lead is $110. And but then you also added in something called outdoor media, which I believe is billboards or something like that. Yep. So looking at the meta numbers, they look

Billboards As Brand Trust Builder

SPEAKER_01 1:26

really strong, and we can go into detail on what I mean by that. Can you tell me more about the outdoor media?

SPEAKER_00 1:32

We're we've got about 18 different locations up around West Michigan, the areas that we service. And pretty much, yeah, it's just it's more of a long-term thing since it's not a direct lead generator, but just getting our name out there, and it's really more of like a trust builder and recognition more than what you would get from Meadow or clicking on a link to book an estimate right then and there.

SPEAKER_01 1:55

Gotcha. So for the the outdoor advertising, it's it sounds like it's more to a long-term play to get branding and awareness. So it sounds like you're you're thinking about the right way because it's gonna be hard to attribute leads to you on the showboard. So attribution is gonna be difficult. I know you spent uh a pretty good chunk in April and May on that. Is that gonna be an ongoing amount, or is that like a one-time thing?

SPEAKER_00 2:23

And then no, right now our current campaign that we're doing started in March. So it's March, April, June, July. March, April, May, June, and July, five months. Um doing about 10 grand a month. And then we haven't really signed any anything new to start in August, but I haven't gotten that far yet.

SPEAKER_01 2:44

Cool, that helps with the context. So, what I would say looking at your Facebook, we'll start with that since that's your primary way of getting leads. Your your average job size for further context is about $8,300, which is really strong. Like I said before, you have a strong gross profit. The how much you're spending on average to close a deal is around $690

Meta CAC Math And Scale Targets

SPEAKER_01 3:05

on Facebook to close one deal. So that's that's pretty good. It's especially considering you have a 58% gross profit margin and your average job size is $8,300. So what just a pull up calculator to calculate this more specifically, we have $690 divided by $8,300. So we're looking at about an 8% cost of marketing for Facebook right now. And then and then you're you're doing the the sales still, right?

SPEAKER_00 3:38

Uh I'm actually in the middle of training a sales rep, but yes, I'm still doing the sales with him.

SPEAKER_01 3:45

Gotcha. So we'll just use a plug number of eight percent for the salesperson, because usually a salesperson gets around eight percent of what they close. So eight percent for marketing on Facebook ad spend, and then eight percent for the salesperson. So it's about 16% customer acquisition cost, and uh compared to your gross profit of 58%, that's that's a 58% divided by 16 is 3.6 to 1 ratio. So that's a really strong GP to CAC ratio. We usually want to see at least a 3 to 1 ratio when you're trying to scale aggressively, which you have been growing very aggressively over the last year. So you're you're at 3.6 to one with with meta. So that seems to be working pretty well. If you had asked me before you spent the money on the outdoor media, I would ask you, why not just turn up the ad spend on meta? That would that would have been my question to you if I had talked to you earlier. Because it does seem to be working well. You have a solid gross profit, you have a good set rate, good close rate for roughly 40% and 40% respectively, and you're getting a 3.6 to 1 GP to CAC ratio. So meta seems to be working pretty well for you. Was there a reason why you didn't just turn up the spend on meta?

SPEAKER_00 4:58

We've turned it up before and hasn't made a huge difference, really. The cost per lead goes up quite a bit. Sure. And I will say I I do attribute a lot of our success in our meta ads to billboards. Almost every person we called is like, oh yeah, I saw you on a billboard, and then your ad came up on Meta, and we're like, so it is definitely at least that's reassuring. Again, this was kind of like a trial run for us. So tough to say, I wish there was an easier way to measure that so we could know how to proceed going forward, but it seems to be helping in our other marketing.

SPEAKER_01 5:38

That makes sense. So they're seeing on the billboard, they're also seeing on meta multiple places. So the the the you're building trust that way. The the main issue that I'm seeing is when we incorporate the outdoor media, it's your your GP to CAC ratio is more like two to one, which is it's usually not a great place to be. And it's really cutting into your pretty significantly. So that's why I'm a little concerned. Now, usually when customer acquisition cost goes up, you can you can do a couple things. One, you can look at getting your gross profit higher, which you're already at a pretty high. Do you shoot for like 60% gross profit? Is that your target?

SPEAKER_00 6:16

Or 55. 55. Hopefully closer to 60 moving forward. 50 is like our bare minimum.

SPEAKER_01 6:24

I would say I think your new

When Outdoor Media Breaks The Ratio

SPEAKER_01 6:26

bare minimum should be 55% with with the how aggressive you are with the marketing spend, and to really try to push for 60% gross profit. And then on the so that's one lever you have is to work gross profit. And that could be either just simply increasing prices. Maybe you need to improve your sales process or take a look at your offer and how you can improve your offer to command higher prices, or maybe it's the compensation of the team if there's any room to make that more efficient and to squeeze a little bit more margin out. But then the other side of things is the customer acquisition costs. Your your set rate is like 40% from for Facebook. So I would I would just ask the basic questions of are you doing speed to lead and are you able to get to leads within three minutes of them providing their information on Facebook?

SPEAKER_00 7:19

That's definitely something that we're focusing a lot more on. The leads that come in on the weekends too, they'll get an automated message, but you they're usually not getting called within three minutes.

SPEAKER_01 7:30

I would definitely focus since you're spending so much on this on outbound marketing. I would really make sure that speed to lead is very dialed in. So because if you can just get your your set rate, it's at 40% right now, if you can just get it to 50%, that will have a dramatic in decrease on how much you have to spend to acquire a customer. So if you just to do some math here, if you're current, you're currently spending $690 to generate a new customer on Facebook. But if we back that up, and you have to spend $110

Raising Gross Profit To Fund Growth

SPEAKER_01 8:15

to get a lead, roughly. So if you have a 40% set rate, that means you have to spend $275 to get an estimate. But if you have a 50% set rate, that means you're only spending $220. So that's $55 less per estimate. And then if we do $55 divided by 0.4, so that's $137 reduced on the overall spend. So you can get your cost per job book from $690 to $130, about $555. Just by moving your set rate from 40% to 50%, you can basically cost cut your costs per acquired customer on Facebook from $690 to $500, $500. So it can be a very dramatic improvement just by focusing on that one thing of speed to lead. So speed to lead, uh your close rate's already pretty solid. It's actually considering you're hitting that those higher gross profit margins, um, I was impressed. You so you know, I'm assuming you have a pretty good sales motion. Like you you present in home, you try to close on the spot, you handle objections. Is that right?

SPEAKER_00 9:36

Honestly, we we do provide the estimates in person most almost every time, but I wouldn't say that I have the best sales process. I still have a lot to learn. I think just what I'm really good at is that a lot of other painting companies, sale their sales reps, don't know as much about painting because they didn't do the painting for that's how I grew my business. Is I've done every responsibility that there is. So I'm I think I'm really good at navigating and making the process easy for the homeowner, but I definitely

Speed To Lead To Cut CAC

SPEAKER_00 10:12

have a lot of room to grow with projection handling and structuring the sales process in an efficient way. If that makes sense.

SPEAKER_01 10:22

So it sounds like you have a lot of domain knowledge in for painting, and so you're able to build trust with your leads because you have that that vast knowledge base that know how to solve problems with when it comes to painting.

SPEAKER_00 10:37

Just knowing the right questions to ask, too, and not just being the guy to that's gonna show up and give a price because there might be some things that the homeowner hasn't considered because this is their first time hiring a painting contractor. And for them to feel more comfortable moving forward, we got we want them to feel like they know exactly what's going on, almost as if they could do the job themselves if they had to.

SPEAKER_01 11:02

So that's that's that's great. And uh I think the challenge you might face is that with the new salesperson you're bringing on board, are they do they have that painting knowledge?

SPEAKER_00 11:12

No, they they don't, so that will that will be a challenge. So we're trying to be pretty extensive with our training there and also understanding that, like, yeah, he's not gonna be quite at the level that I am right now in that regard, but hopefully getting him better at objection handling and some of the other stuff that I'm not as good at.

SPEAKER_01 11:31

So I I think one of the ways you can improve your your close rate is definitely to pay attention to the sales motion, which is the words you're saying and the actions you're taking throughout the sales process, which comes down to a good script, maybe even having a a video sales letter. Are you familiar with that?

SPEAKER_00 11:51

Something you send before you show up. Right, exactly.

SPEAKER_01 11:55

Where a video sales letter, which you could create, and it would be sort of part of the script, but it's easy because you could just record it once, have a really well-done, professional-looking video sales letter where you basically give the offer, and this might be your warranty, the quality paint that you use, the process that you use, whatever that offer is that you provide to customers. And that will also make it easier for your new salesperson. So they can basically say, Hey, I'm gonna take some measurements while I'm doing these measurements. Do you mind taking a look at the video that we pre-recorded for you that goes through our offer and everything? And also maybe have some testimonial added to the back of that video as well to have some happy homeowners talking about the great job that you guys did. And that can do a lot of the selling for your salesperson and take some of the burden off of them.

SPEAKER_00 12:47

So yeah, go ahead. Do you think it's more beneficial to send that before even showing up so they have some time to digest it? Because what if it's like we offer more than one thing and we're not always doing the exact same everything on every job? Sure. And then they're ready to have that discussion versus just going right in there and starting to grab measurements. And what do you think about that?

SPEAKER_01 13:13

Right. Absolutely. You could send it beforehand. If you have multiple z VSLs, that's even better, where you can have a specific specific VSL for exterior painting or interior painting or cabinet. If you have a specific

Sales Process Gaps And Rep Training

SPEAKER_01 13:25

VSL for each service line, that would be ideal. And uh sending it beforehand is great. And then you can also build into the script, ensuring that they actually watched it, where the salesperson said, Hey, did you have an opportunity to watch that video we sent you? And they might say no and say, Oh great, no problem at all. I'm gonna go ahead and take some measurements here. If you if you do me a favor and go ahead and watch that now. So if you have any questions, they'll just save us some time. So I would do both. I would send it beforehand and also bring it up and make sure they sometimes you might do a walk around with the customer. So yeah, building, you know, clarifying their needs and stuff like that. That I wouldn't say cut that part out. Continue doing that if that's what you're referring to. But what when you have to go back to the truck to just to do the final bid or whatever time you need to just put everything together, having them uh actually watch that video. Talked about increasing gross profit. Now it's an increased gross profit. I think having that strong sales process will help. Also, putting in that VSL would help as you get a new salesperson in. The other thing you can take a look at is your offer. So, what is your current offer to your the homeowners that you're working with? Like, do you have a warranty? Do you have a guarantee? Do you have, you know, what are you telling the homeowner to make you stand out from other painting businesses?

SPEAKER_00 14:49

So we don't have we haven't really identified anything um specifically because so like you know, having good communication, project manager, warranty, all that stuff, like is great, but we don't really bring that up unless that seems to be an area of concern for the homeowner when hiring a painting contractor. Um, because I think if we just walk in there and they're like, Yeah, we're really good at communicating, we have this warranty. Like, well, some of that stuff might not even matter to them. So asking them, trying

Using A Video Sales Letter

SPEAKER_00 15:25

to figure out what matters, and then if they're like, Oh, yeah, like we the last time we got painted, like it started peeling after two years. Okay, great. Well, all their exterior projects are covered by three-year warranty.

SPEAKER_01 15:37

So yeah, that's that's good. I think incorporating those offer pieces into the to the sometimes they might not bring it up, and they did have that bad experience, but maybe the salesperson didn't ask that specific question or whatever, and then seeing the VSL, like, oh okay, they had that thing, that's cool. Uh warranty, um, one thing you could look at is having a guarantee. Do you have any risk reversal guarantee?

SPEAKER_00 16:04

Not really familiar with that.

SPEAKER_01 16:06

Is okay. So basically, right now, your current offer, it sounds like a pretty standard professional painting contractor offer, which is which is fine. And it will differentiate you from Chuck in the truck, which is which is great. And Chuck in the truck, I mean like a fly by night painter that doesn't have insurance, they're maybe not very professional, they don't have uh a warranty or anything like that, and maybe not very reliable. So you're differentiating yourself from them for sure. Now, what you might run into is you're not quite differentiating yourself from other professional painting businesses that have insurance, that have a warranty. It's pretty standard to have a two, three, four, five-year warranty. And you know, they background check their painters, they use high-quality paints like Sharon Williams or Benjamin Moore, they do drop cloths on all the areas, etc. Though that's a very standard offering for a painting business. So one way you can differentiate yourself is to actually have a risk reversal guarantee on top of that. And so that will help allow you to stand out. So an example would be an on-time, on budget guarantee. Basically, you say, Hey, you know, this proposal that we're giving you, this is an accurate proposal. It's not an estimate. So this is the price that we'll we will charge you. And in addition to that, based off

Stronger Offers With Risk Reversal

SPEAKER_01 17:40

of the size of this project, I anticipate we're not going to take any longer than two weeks. So we have an on-time on budget guarantee where if we do not only charge you the amount that is stated here on the proposal, and also we fail to complete the project within, or if we fail to complete the project within two weeks, you get a 10% refund on the total job price. That's our on-time on budget guarantee. And so a lot of painting business, I'm sorry, a lot of homeowners have bad experiences with contractors in the past where they come to the job site, they take longer than it was supposed to, they leave, they come back, they leave, they come back, and it ends up taking multiple weeks or months when it should have only took a week or two. And so you have that on-time guarantee. And then sometimes you have contractors that will give an estimate, but then they'll come back and say, actually, you know what, it's gonna cost more than this because uh, you know, for whatever reason. And so they end up having to pay more. Now, this is a conditional guarantee where you can list in your uh in your proposal, like there are some conditions. One, weather, you know, you can't control the weather, obviously. Two, access to the property, they have to provide access for you to be able to do the work. Three, if there's other contractors that are gonna get in the way of you have you know painting, like a draw drywall installation, obviously, those are the conditions there. Uh, so you it's a conditional guarantee. Uh, but most of the risk, so you can mitigate most of the risk to you in terms of you control what time you say. So if you think it's gonna take a week, you can say two weeks to give you that buffer. You can add it in those conditions to make sure that you're not, you know, if there's bad weather or uh the you don't have access to property, that sort of thing. That's mitigated there. But that having that on-time, on budget guarantee can really set yourself apart from other painting contractors that don't have that type of guarantee, and you'll be able to potentially increase your prices a bit and get to that 60% gross profit we talked about, which will leave more room for that marketing spend.

SPEAKER_00 19:53

Okay, yeah, I could see that being a good tool for trying to close on the spot too, where that's like something we only offer um if they sign while we're there.

SPEAKER_01 20:04

Yeah, absolutely. You could tie it to that, you could tie it to taking a larger deposit or maybe even a prepayment down, uh, like paying the for the project up front, assuming that your state laws don't prohibit that. You're in Michigan, right? Yeah, yeah. So I don't I don't think Michigan has a law against that, but um just double check. And uh yeah, you can you can definitely tie that to price increase, taking more money up front, or or closing the job. Cool.

SPEAKER_00 20:34

So just to sum up, sounds good go for it. What was what were you gonna say? Uh I just had a quick question because I know I asked you guys before, but like any recommendations on like um sales training for my new sales rep. Like, obviously he's learning a lot from me, but I would recommend uh contractor freedom,

Sales Training Recommendations And Wrap Up

SPEAKER_00 20:54

Jason Phillips.

SPEAKER_01 20:55

Are you familiar? Um I'm not. Yeah, he has a good program, a good sales boot camp program. Uh Jason Phillips also, Brandon Lewis Academy for Professional Painting Contractors has a good sales process as well. Those are those are two programs that uh you might take a look at. Yeah, are these online? So Brandon Lewis has an online uh course that can be taken, and then Jason Phillips is a boot campus in person.

SPEAKER_00 21:31

Jason Phillips. And then Brandon Lewis was the other one. Correct. Yeah, thanks for your time.

SPEAKER_01 21:46

Was this helpful? Yeah, it was helpful. I appreciate it. All right, good stuff. I appreciate your time. Gabe, I wish you the best in uh season.