How to Boost Your Painting Profit Margins

Give your painting profit margins a lift by freshening up your financial system.

Is your painting company successful?

How do you know? What metric are you using to determine success?

The length of your days? The number of jobs on the go? The size of the fires you’ve dealt with today? Maybe you haven’t even had time to consider the answer, you’re so busy getting pulled back on the brush.

Here’s the thing. Being busy isn’t a metric of success, but we can give you a metric that is: profit margins.

If you don’t know yours, or don’t know how yours stack up against your competitors, this article lays it all out.

What are average profit margins for painting companies?

Breakthrough Academy has analyzed thousands of trades businesses over the years and gathered a vast amount of information on the painting industry. All this data has put us in the unique position of having clear insights on what differentiates painters’ success.

We’ve been able to create profit margin benchmarks for painters at various levels, from “Awesome,” to “Average” to “Ahhh… that’s painful.”

Take a look at the chart below to see where your painting company lands.

We’ve split the benchmarks between residential and commercial painting services, though you’ll notice the numbers are pretty similar between the two. 

If your business does both, we recommend tracking your margins separately for each type of painting project so you can readily see how each impacts your business.

Gross versus net painting company profit margins

If you could stand to brush up on how to calculate your profit margins, this article walks you through what to do.

For now, what’s important is understanding the difference between the two main metrics of your painting business’ financial health:

💡Gross profit margin – This is your revenue AFTER accounting for a painting project’s labor costs (painters) and materials (paint, rollers, ladders, etc.) BEFORE you pay any overhead.

A strong gross profit margin gives you a competitive advantage and makes your painting company more likely to survive downturns.

💡Net profit margin – This is basically your “bottom line.” It’s what remains after you’ve paid ALL your expenses, including project costs, overhead and salaries (including yours!). 

You can reinvest your net profits into your painting company to help grow the business. 

4 ways to improve your painting business profit margins

If your profit margins aren’t where you’d like them to be, here are some tips on how to enhance your painting profitability.

#1: Use a budget

Sounds simple enough, doesn’t it? Use a budget. Yet you’d be amazed how many painting business owners don’t have a defined and deliberate budget for their business.

What do we mean by ‘defined’ and ‘deliberate’? 

A budget should have intentional numbers that reflect how your business actually operates and represents a plan to achieve your company’s goals.

A budget is like a base coat for your overarching financial system. Once you have that set up, you’ll be able to keep a close eye on your profitability. You’ll also be able to:

• Track your expenses and reduce overspend
• Manage your cashflow
• Ensure your overhead doesn’t get out of control
• Plan for the future strategically
• Make good business decisions

Awesome painting profit margins begin with a clear budget. Start building yours with this Budget Tool.

#2: Review your job costing – regularly!

Job costing is the process of tracking the specific expenses associated with individual projects. In practice, it should be relatively straightforward. One method involves assigning each job a code and whenever a project expense is input to your accounting system the relevant job code is entered alongside it.

However, tracking project costs is only the beginning. The job costing process shouldn’t end there. At the close of each project, make a habit of comparing the final costs against the original estimate to see how things fared. 

Why is this important? Two reasons.

• Accurate estimating – Based on the costs of previous projects, you’ll gain a better understanding of exactly how long it takes to prep a wall, the number of painters needed and the amount of paint required for the surface area.
• Increased profitability – If you’re able to accurately predict a job’s actual cost, you can then tack on a markup that covers your overhead and gross profit for the project. 

Making job costing part of your routine means you’ll be able to calculate a gross profit margin for each project. Before a project starts, you’ll have a defined and expected margin. After the project ends, you’ll be able to calculate whether you hit your target or not.

Your gross profit margin becomes an intentional goal, not just “whatever’s left over.”

#3: Invest in your people

You’re probably familiar with the phrase about needing to spend money to make money. Nowhere is it more true than when it comes to your team. 

Turnover is expensive and time-consuming. There’s all the searching, interviewing, onboarding, training, and if the new person doesn’t work out… you’ve got to do it all over again.

The better approach is to find great staff and then KEEP them. 

How? Give them what they need to excel. Here are three effective places to start:

• Provide consistent training – Standard operating procedures save headaches for everyone. Your staff learn the same processes and have accessible reference materials, which reduces mistakes and frees you from explaining things repeatedly.
• Create goal accountability – Goal Setting & Review (GSR) sessions clearly lay out the expectations and responsibilities of your staff on a weekly basis, which provides focus and efficiency. Everyone knows what they need to get done.
• Offer performance incentives – People stay where they’re appreciated, and a great way to show appreciation is by rewarding them for a job well done. Whether it takes the form of a bonus or a cut of the surplus for bringing a project in under budget, the investment will have a substantial return: loyal staff.

#4: Increase your charge rate

For Sam Bennet-Cumming and Nik Palladino of Phinney Ridge Painting, business and life had become so intertwined they couldn’t tell them apart. Communication was chaotic. Roles overlapped. Work days ran 12 to 16 hours. 

After joining Breakthrough Academy, they learned to understand their cost structure and realized they needed to increase their rate by $20 per hour. The following year they had 12% net profit margins.

Raising your rates can feel nerve-wracking. What if it chases customers away?

It’s a valid concern for painting contractors, but it can be managed by staying focused on the value your painting business provides as opposed to the dollars you’re charging. Treat this as an opportunity to position yourself higher in the market.

Also keep in mind the following:

• If you’re going to stay afloat as a business, you need to at least keep pace with inflation.
• Adding 1% to mid-to-large jobs will make a huge difference to you, but will barely be noticeable to the customer.

Ensure your painting services live up to it, and charge what you’re worth.

While many factors about running a painting business are beyond the control of your brush, profitability doesn’t have to feel unpredictable. Get a handle on your numbers by downloading this Budget Tool today.

‍