A local residential painting contractor can make over $250,000.00 a year in net profit if they serve a typical metro area of two million residents or more.
In this article, we’re only going to be talking about residential painting contractors. Commercial painting contractors can make much more because they often have service areas that expand multiple states as well as hire subcontractors to take on more work than they could with employees.
Steps to finding out how much does a painting contractor make a year:
Step 1. What’s the sales price of the average paint job?
Step 2. What are the expenses involved in acquiring and fulfilling the average paint job?
Step 3. Subtract those costs from the sales price to find out the average profit per job.
Step 4. Find out how many jobs a painting contractor can get per year in a typical metro area.
Step 5: Multiply the number of jobs per year by the profit per year.
1) What’s the Sales Price of The Average Paint Job?
My own residential painting company sells some jobs for as low as $500-$1000. These would be 1-day jobs such as exterior shutter painting or painting the walls of 1 small room. We also do some jobs as high as $20,000 on larger homes. These bigger jobs often include both interior and exterior painting or specialty services such as cabinet painting or popcorn ceiling removal. But what’s the average? For us, the average price of a paint job is about $2800. That’s usually not enough for a full paint job, but remember this average takes into account all of the small jobs we do.
2) What Are The Expenses For a Painting Contractor to Acquire & Fulfil a Job?
It turns out, there are quite a lot:
Most painting contractors I talk to claim between 40% to 50% as their labor costs as a percentage of revenue. That means that in a $5000 job, about $2000 to $2500 will be the amount needed to pay the employees doing the actual painting, including employment overhead costs such as payroll taxes. Sometimes they are employees, sometimes they are 1099 independent contractors working for the painting contractor as a “subcontractor” (Related Article: Painting Subcontractor Agreement).
Materials such as paint and tape make up about 10-20% of most jobs. At my company, it’s almost always around 15%. The percentage doesn’t really change much if low-quality paint or high-quality paint is used since companies that use cheap paint usually have to charge lower prices, and the companies that use expensive paint usually charge more.
A project manager at a painting company usually earns about the average salary and can manage about 5 average-sized jobs per week. They will usually visit 3 job sites per day. If a project manager costs $5000 per month (salary plus vehicle & travel expenses) and we divide that by 20 jobs managed per month, we get a project management cost of $250 per job. That’s about 9% in project management costs if the average job has a sales price of $2800.
Up until 2020, I had not come across a painting company that did not have estimators, except for my own. We were the only company I knew of that did our estimates “virtually”, meaning that our office staff did them, without visiting the customer’s homes. Fast forward to the social distancing of 2020 and I now see lots of painting companies doing their quotes virtually. But most still seem to hire estimators. When I say estimators, I’m referring to employees that visit the customer’s house in order to gather the information needed to quote the job, as well as to be a salesperson and try to persuade the customer to hire them.
An estimator will typically visit 5 houses per day on average. They usually earn a base salary plus commission. When taking into account their vehicle and travel expenses we might end up with a total cost of $6000 per month.
They can typically close about 35% of their quotes which will result in about 35 jobs per month if they quote 100 jobs a month. 35 jobs at $2800 is $98,000 in sales per month. Which means that their $6000 cost is about 6% of revenue.
Now you might be wondering, why would a painting company hire estimators when they could have their office staff provide virtual estimates like my company? Because there’s a trade-off, virtual estimates have a much lower closing rate.
Most painting companies only need one office person unless they’re in the top 1% revenue-wise. A single office person can easily handle the administrative work required for more than two million in yearly revenue. An office person will typically earn slightly below the average salary. But the more jobs the company does, the higher their salary needs to be to compensate them for the added workload. Their duties include the following:
- Answering phone calls from prospects and setting them up with appointments with the estimators.
- Scheduling jobs and assigning crew leaders and project managers to jobs.
- Payroll and sometimes invoicing (at my company, the project managers invoice the customers).
- Preparing reports.
- Sometimes light marketing work such as posting on social media.
If a painting company does less than 2 million in yearly revenue, a part time office person is usually enough. Expect total office staff costs to be about 3% of revenue.
This is the category that tends to vary the most, between 3% to as high as 20%.
It varies for a few reasons:
- The bigger a company gets, the more marketing channels they need to employ as they exhaust existing channels. For example, there is only a limited amount of leads a company can get through Google Ads. So after Google Ads is unable to produce any more leads, they will need to run another marketing channel. Since they will choose to market on the channels that produce the best ROI at first, that means that over time, as they grow and need more channels, they have to move on to lower ROI channels. And thus the total marketing cost as a percentage of revenue will grow as the company grows into more marketing channels.
- But if a company has been around for a long time and has a system in place for getting referrals (such as incentives) and repeat work (such as email marketing) this will help lower their marketing costs since referrals and repeats are the least expensive marketing channels.
- Some companies are just better at marketing. Marketing can get pretty nuanced with small changes in a marketing campaign having big effects over time.
- Companies with great salespeople (estimators) need less leads to get the same number of sales as a company with less experienced salespeople. So they will need to spend more on marketing.
- Some companies are not able to hire fast enough to make use of the extra leads from more marketing.
To give an example of the variance, when my painting company started out, we spent about 18% on marketing in the first year. This is because we didn’t need to make a profit, we just put all leftover money back into marketing. Every year that percentage dropped. Today, we only spend about 1% on marketing, just enough to keep the bare essentials such as our website, business cards, branded T-shirts, etc.
About 1-3% will cover other overhead such as software, financial service fees, office rent, insurance, and legal/compliance fees such as state registrations & renewals. Some companies don’t charge their customers for paying with a credit card so those fees become another cost (pro tip: charge your customers a convenience fee for paying by card, it will not decrease your closing rate by anywhere near as much as it’s costing you to pay those fees out of pocket).
For most companies (probably more than 99% if I had to guess) this just means the owner’s salary. Most managers/owners work full time (40 or more hours). The manager’s responsibilities include the following:
- Delegating or dealing with unexpected things such as lawsuits, insurance claims, large contracts, violations, etc.
- Delegating or managing the marketing channels.
- Delegating or managing hiring and HR.
- Building new systems and auditing existing systems.
- Setting company goals.
- Make resource allocation decisions based on reports from the office staff, accountants, and marketers.
Companies in “growth mode” typically require motivated CEOs that work more than 40 hours per week. More established companies with efficient systems in place usually need a lot less managing.
3) Subtract Expenses From Revenue
Let’s tally up the expenses we just went over. But remember these vary a lot, so some companies will have very different numbers here:
- Labor: 45%
- Materials: 15%
- Project Manager: 9%
- Estimator: 6%
- Office Staff: 3%
- Marketing: 9%
That gives us a total of 87% without counting the manager’s salary. Or to say it in reverse that gives us a total profit of 13% without paying the manager.
For most painting companies, the manager is taking on some or all of the duties of one of the employee roles, such as doing all of the project management or all of the estimating. That means they get to earn their salary there and keep the 13% from this example as pure profit.
4) How Many Jobs Can a Painting Contractor Do?
I’ll provide insight based on my painting company which serves a metro area of about two million people.
These are the average amount of leads we get per month from the following marketing channels (when we run them):
- SEO & Map Pack: 65 leads per month
- Google Ads: 21 leads per month
- Facebook Ads: 12 leads per month
- Facebook Groups: 4 leads per month
- Nextdoor: 3 leads per month
- Craigslist: 5 leads per month
- Instagram: 2 leads per month
- Homeadvisor: 30 leads per month
- Thumbtack: 12 leads per month
- Yelp: 5 leads per month
- Porch: 3 leads per month
- Lawn Signs & Car Signs: 1 lead per month
- Direct Mail: 4 leads per month
- Referral & Repeat: 7 leads per month
- Billboard: 1 lead per month
- Realtors: 3 leads per month
- Other Contractors: 6 leads per month
That’s about 184 leads per month. We never actually get that many leads in a single month and that’s because we never run all advertising channels at one time. In fact, today we don’t run any of them anymore except for SEO & Map Pack. And of course referrals and repeat which is the only marketing channel that runs itself.
But the point is that a painting contractor could run all of those channels. None of them are difficult to run. And there are a lot more (magazines, trade shows, paint stores, networking events, etc.) that we never tried.
If a painting contractor runs all of those marketing channels resulting in 184 leads per month and is able to have the estimators close 35% of them, then they’ll do about 64 jobs a month.
5) So How Much Can a Painting Contractor Make a Year?
Now we can take an average job sales price of $2800 and multiply it by 64 jobs per month to get a total monthly revenue of $179,200.00 which is $2,150,400.00 per year.
I only know a few residential painting contractors that make much more than two million in revenue per year.
But there’s another way to get there. Many painters actually have a much higher average sales price than $2800. But they do fewer jobs per year. So as you can see, there are many ways of getting to two million. No two contractor’s P/L sheet will look the same even if the total revenue and profit is the same.
Now we can take that 2.15 million in yearly revenue and multiply it by the 13% net profit I suggested in step 3 and we end up with $279,552 net profit per year.
That’s if you stay local. Now expand your operations across the country and you have a real cash cow on your hands.
And that’s before you even get into the real money maker: commercial painting.
If you want to chat more about these numbers or scaling a painting business, email me at firstname.lastname@example.org or text me at 707-622-5821.