Beyond $1,000,000 Podcast

Scott: [00:00:00] My name is Scott Lollar and I'm a 35 year veteran of the painting industry where I've been part of growing several multi-million dollar painting companies. I have worn all the hats and have experienced everything you have experienced our experiencing or will experience. There is lots of chatter about getting to a million dollars.

But what very few focus on is what it takes to blast through Death Valley and create the multi-million dollar company of your dreams. We don't focus on fads, tricks or shortcuts. We focus on solid foundational business principles and data that deliver results. This is the Consulting4Contractors Beyond $1,000,000 Podcast.

All right. Welcome back to another C4C podcast. Today we have some Q&A with Mike Katounas, some questions that we've gotten from people in our community and outside. And just to let you know, if you have something you'd love to hear our feedback on we'll put a link in the show notes, but you can send it to scott@c4c.team, [00:01:00] scott@c4c.team, and be glad to talk through it and give you some feedback. See if it might help you.

Let's talk a little bit about what are some things that you can do when your schedule gets soft? A lot of people, especially with the economy being a little bit squishy with uncertainty, are finding a normally steady, robust schedule a little bit soft. And so again, for those that have some weather circumstances that keep them from being outside during the winter we get a lot of people asking us, "How do you fill up your schedule when it's not full?"

"What happens when my backlog's down to a week or two? That's a great question, Mike, what would you say to that question?

Mike: In terms we certainly deal with that here. I still remember, back in 2005 when I started the business, my father had run a painting business for a couple of decades, and I can always remember, he would be home a lot more [00:02:00] during the winter months.

And then when spring came, it's like he was gone most days and didn't come back till late most of the time. So I knew what I was getting into and what to expect from the very get-go. And I already started thinking about that from day one. And it's one of those things where you may have heard this before, but if you start trying to market when you're slow, it's already a little too late.

So that part is certainly, you gotta do some planning ahead of time, get it out there that, in terms of your marketing. To try to bring in more leads. One thing we've done since probably over a decade now is we do run a winter promotion as we call it. We don't call it a winter discount, but it essentially is a discount.

We do 10% off, and I talk about it at any point of the year, whether it's the middle of the spring or summer or early fall, and especially if I have an interior client that is not in a rush to do a job [00:03:00] I might in the middle of May say, "Hey, just a thought here, but if you're not in a rush to do the job and you wanna save a few bucks, would you think about scheduling this job in December or January and I can save you about 10%?

Because, if I don't do that job in the middle of May, that's not gonna hurt me because our backlog is usually pretty big and pretty, it's filled up. We're not gonna miss a beat there. But, even though I'm taking a little bit off, it's gonna help me a lot more by doing it, seven or eight months later, versus doing it at that moment.

And some people have taken that and we actually have what I call our winter customers who are a little bit more budget conscious and may not normally pay what we charge for interior work. So they'll call us in November or December and say, "Hey, I got a couple of rooms I wanna paint. Can I get that winter promotion?" And we're like, "Sure." So we'll talk about that at any point of the year. And one thing I, do make very clear in the contract [00:04:00] is, I put in what our actual price is for the job, and then show, "Here's what the winter promotion is and you have to schedule it between certain dates, between usually mid-December through mid-March in order to receive this discount."

Otherwise, if you're outside of that three month parameter it's gonna be normal pricing, so that way people don't try to take advantage of us and try to get the same price, in the middle of the spring. The other thing we do, we do a monthly email newsletter that we send out and we actually start talking about that winter promotion in there, probably about August or September. Sometimes, we'll even as we get colder, we'll send out a few more newsletters a little more regularly instead of once a month. We might do it twice a month or, I think in the past I've had times where I've done it weekly.

And then another way is just going into your CRM and going back over the last year or so, and looking at every interior job you lost. And just reaching back out to those [00:05:00] customers and saying, "Hey I know you didn't hire us. Did you get the work done? Or if not, do you wanna revisit it? We'd love to still be able to do the job for you and we could schedule it here in the next week or two if you have any interest." You're not gonna get a ton of return on it, but even if you just get one person, it's worth it, those are a few different avenues that we use.

Scott: The one thing Mike said is very key that at least by the first part of the fourth quarter, you better be marketing for winter.

Even then might be slightly behind what I prefer, but you need to be planning and what I'll tell people is, once you get into the second quarter, the next six months are pretty much easy street for most people. The phone's ringing off the hook. You've got more work than you know what to do with.

And so that's autopilot, right? That's not tough. That's not where you make or break your business. You make or break your business in the first quarter, and some of the fourth quarter depend on where you're at. So you need to be telling people and talking to [00:06:00] people and figuring out how to get them to call you and plan for those cold weather months because Christmas happens.

They're not thinking about it. It's busy. They don't really want a painter around. So really teeing up that promotion or some kind of hook that gets 'em to call you and work with you in the winter. You need to do that well in advance of when you need it because if, like Mike said, if you start when you need it, it's way too late.

Secondly is you have to have a process to, quickly and easily, reach out and reactivate people that didn't say yes. Most times people are not getting a no, they're just getting a ghosting and they don't know what happened. So the idea of, in your CRM to be able to reactivate these and go, "Hey just reaching back out, here's a promotion. We have some gaps," whatever it is, because those are people that have already reached out to you. And so they're [00:07:00] very likely candidates for a project, we just don't know if they did 'em before. And I will tell you personally, I'm one of those people that enjoys a sales process. Okay. I love it when someone I'm trying to buy something from pursues me, and I'm also that guy that when it's not urgent, and especially if it's a little more money than I wished it was, I can sit on that for a while, so I didn't go with somebody else, and I guarantee you I have a preferred person I'd like to work with, but I'm just sitting on it.

I'm actually a little bit stuck in that moment. I'm stuck because what I need is for someone to nurture me and sell me and say, Hey, Scott, let me do this for you. I'm gonna do an amazing job. You're gonna love it. And I'll say, okay, let's go. That's what I need. So what happens oftentimes is we're so busy with people that say yes, that we don't focus on the people that say no or say nothing.

But if you don't have that process, whether that's in the C4C system, it's monday.com. You could do it out of Paint Scout, you could do it out of Estimate Rocket. Or you could do out of MailChimp. There's lots of ways you [00:08:00] could send this kind of connection or email out. But if you don't have that set up in advance, you're not gonna be able to do that on a dime.

So that would be the other thing I would say is if at this point you don't have something like that's set up, you have about seven months before you need to have it. So use the next seven months to get your systems right. And of course we could help you with that if that's something we you wanna talk about.

But if you don't have those systems, I would get those done.

Mike: Yeah. And I would just Piggyback on that first point you brought up is we can sometimes get so busy in the spring and the summer and we're working long days and long hours that you don't think you need to think about marketing at that point, but, that's where you could get trapped and you're just so focused on right now and not looking towards the future. You really gotta make sure you carve out some time, whether it's weekly or biweekly, monthly, something where you're still focusing on your marketing. Even though you may be slammed or your [00:09:00] backlog may be pretty long, because you can easily start to see it dry up pretty fast if you don't have a plan in place.

Scott: Awesome. Thanks. All right, here's the question. If I have a big backlog, people sometimes decline appointments or don't sign because I can't get to them right away.

What can I do about that? So that has long been one of the badges of contractors that talk about how many months or years or decades. I'm just kidding how long their backlog is. We actually have a different viewpoint on that. Mike, what do you think an optimal backlog is?

Mike: An optimal backlog for me I would say where like I, I'm not stressing, would be somewhere in the two to three week range. And I know some people are gonna hear that and go, that's insanity. And I think one of the ideas that I've always[00:10:00] subscribed with being a business owner is, get comfortable with being uncomfortable.

It does force me to push myself a little bit. It also allows me to be more profitable because, If you're booked out, I've heard people talk about being booked out three months, four months, six months, even, a full year sometimes. And there's just so much money that's being left on the table.

And I think you gotta have a concept of like dynamic pricing involved in your business. So if you're charging say $65 an hour, when you have a normal backlog if you reach a certain point of say for you, you wanna say a two month backlog, raise your price, raise it to $70 an hour, raise it to $75 an hour.

Yes, that means you'll probably get some more nos, but the ones that do bite you'll make more money. And you know it also will give you some protection there in terms of any of your vendors raising their prices as well. I just think if you're booked out that long, you're gonna lose jobs just by mere [00:11:00] fact of being booked out so far.

And the other idea too that in terms of scheduling that I think about is I try to leave some gaps in the schedule as well in case I get a good repeat customer who might be saying, "Hey, I've got my in-laws are coming into town. I need to paint a couple of bedrooms before they get here, they're coming in two weeks, can you get me in?" We wanna make sure we have some flexibility. That doesn't happen all the time, but I think it's always easier to leave a gap there and then come back and backfill it with some jobs that are scheduled later versus telling customers you gotta push some stuff back.

You definitely wanna keep that in mind as well.

Scott: I love what you said, dynamic pricing. So, if you surpass, I'm gonna say four weeks backlog, at the high end, then you need to start raising your prices because this is simple supply and demand. And one of the things we talk about a lot is that business is more science than it is emotion, and yet [00:12:00] a lot of entrepreneurs can be very emotional. And so unfortunately they might have great vision. They could rally the troops, but the, but they're nuts and bolts of business. They're terrible at it. And so what's happened is people are saying yes to future work. And so you're selling future work at today's prices and that's just crazy.

If you're in business just to have everyone like you, then I guess give it for free if you want. But the reality is this is a business for all stakeholders. That would be your employees, your subs, your vendors, yourself. And to do that, you should be maximizing what you have to sell, which is capacity, hours.

And so Mike is absolutely correct. Dustin Wilson, Flying Colors, a friend of mine from Tacoma, Washington actually Everett Is one of the people that I've does this the best. He will bump prices all summer long, all the way he won't stop until he hits that ceiling. And he feels that resistance and the backlog shrinks and the acceptances shrink.

And then he comes back down. [00:13:00] Every year he does that, and he's been doing that for probably close to 40 years now. And what happens is you maximize your capacity, you maximize your bill rate, your actual revenue per direct labor hour, and you work with the best people. And so I think to get out of your head that you owe it to someone to operate at a lower price point is really just head trash and that you should just use dynamic pricing, I couldn't have said it better myself, by just keep pushing that bill rate and managing.

The other thing that I will say about scheduling is a lot of people think it's first in, first out, and I think that's nonsense. Somebody could sign with you today and you could say, "Great, could we come there in August?"

And they might say, fine, I don't really care. So you've sold the work, but you haven't filled up your capacity. So you have all these gaps and just stacking customers because they were the first, [00:14:00] unless you've made a promise, or if they have a timeline, I would always try to push them out and extend your schedule and leave room.

The reason why is just like you can see on the shelves of a grocery store or the nonsense that we just went through with toilet paper. If you don't have any time, then you can't sell something. So you might stand in front of someone that, says I have some pain, which is, I have a bridal shower in four weeks. Can you paint my house? And your answer is, Yes I can. So you might be double or everybody else or who knows what, it doesn't matter. You can do the job and all your counterparts that are all, booked two months out, they can't even talk to this person. And you have an opportunity to make money.

And I think the flexibility in your schedule will give you opportunities to sell work that otherwise you won't have. In the same vein for people that are using online schedulers, and we are totally advocates of that, you have to be careful of what that scheduling calendar looks like. When someone opens up your website, goes to book an appointment, and [00:15:00] sees no appointments for two to three weeks, I can tell you for one, I'm out, personally, I'm out because you've just told me something, which is you're freaking busy and I'm probably never gonna get you here. I'm, I can't even see you for four weeks. I can't imagine how long it's gonna take for you to come here. We'll talk about that another time. As far as, how many appointments should you be doing and should you say no to some of 'em, but the idea of your appointment schedule having some flexibility and making sure their slots open or opening up some slots so people can do appointments is very important because if there's nothing available, then your phone's gonna stop ringing.

And I think while it wasn't your intention, it's gonna happen. So your lead flow drops even though your marketing worked. And so that wasn't your marketing, that was you. I think that appointment scheduling system is also very important to keep that open so people perceive you're available, you're professional, you can talk to 'em, and it just opens up the discussion for the [00:16:00] experience that they're looking for,

Next question: is it okay to have a minimum and why? What is the appropriate minimum? That's a great one.

Mike: So we do have a minimum and I will say there are times where I will, not enforce the minimum if we feel like we need to just get some work in. But our minimum is $1,200 that essentially covers two guys for a day, probably even a little bit more.

And the reason we do that is, logistically, it can sometimes be a nightmare to schedule a really small job that's, less than two guys for a full day. I don't have a van for every single painter, and so it's not like I can move guys around really easily. I've got a few vans but not to.

Be able to get one person here for four hours and another guy there for four hours. And the amount of work, it, it can take on our office side to put together a 600, $700 job can sometimes be just as much if not even more than jobs that are $5,000. [00:17:00] So we're really not getting a lot of bang for our buck.

And I think most customers are pretty understanding of that. We've gotten several calls in the past where somebody might say, Hey, I've gotta do this, I've gotta do that. And we'll say our job minimum's 1200, do you think it's gonna meet that price range? And sometimes people will say no, and that's not what I'm looking for.

And so we can already eliminate somebody who's might be price shopping. On the other side of it, you might get somebody who says it may not, I wasn't thinking it would cost that much, Why don't you come out and take a look and I, I might find some other things that I think we can get done so we can meet your minimum or maybe even go a little bit above it.

It's ever since we've incorporated that, I think it's helped us eliminate at least a good bit of price shoppers. And especially when you get into that busy season, you're fighting for your time and you just don't wanna lose it, looking at painting a door or two or something like that.

Scott: Yes, exactly. And when you're growing your business and the [00:18:00] most of what we're working with is our people that are in the million to 5 million range. But of course, even smaller clients, they think that they have to serve everybody because they might develop into something bigger someday. And that feels a lot like the customer that says give me a good deal on this one because I have a lot of work down the road.

And you know how those work, right? Yeah. They never seem to work out. That to me is a mindset. So when I hear this, but Scott, you don't understand, they're a good client then, and I say then that's exactly why you allow them to have a $1,200 minimum because other people, you won't even talk to them.

Or for some people that say insist on a painter for a day, and I think there's places for that. I hear, but they're a good client and they only need a little work done. I said, great. Here's what you say. Because you're a great customer, we will go ahead and let you [00:19:00] schedule an eight hour day for us, and that rate needs to be in excess of what your normal rate, because typically you're sending most likely a company vehicle fully stocked and one of your most talented staff. So you can't bill your lowest rate for your best guy, you or female or male, either one. You have to bill a top rate and the idea here is I will help you, I don't give this to everybody, but for you, I'll send you one person for $700 for the day or something of that nature. And that actually is a blessing that is going, we'll do this because you're special. And I like the idea of a minimum. The other thing that, to Mike's point is I think we feel like it's our job to fit into every client's budget or timing or whatever. And I. I just equate that to food, restaurants. Everyone knows how you can go out and get a $70 [00:20:00] steak and everybody knows you can go to McDonald's and get a $1 hamburger.

Either one will work and you've made a choice to get the one that fits you. And so you don't have to be all things to all people. You have to do whatever is best for you and your vision for your company. Cuz if you don't then you're gonna get stuck running around doing little jobs. And sometimes, you know, these people also can be the biggest challenge.

I actually like a minimum. And I like that published. And as you get larger, what Mike just said is true, you're gonna have less time to focus on the little things, you have to focus on the big thing. So a minimum really works. I am reminded that sometimes I feel like the painting industry is behind other industries.

I recently had an HVAC contractor here to replace a whole house humidifier. To have him ring on the, my doorbell cost me $89, and he did not yet step inside my house. And then [00:21:00] he came in, looked at my need and charged me to what I can figure by how long he was here, cuz I already had the item purchased somewhere around $250 an hour to do what he did.

He did not apologize, he's not gonna send me a Christmas card. He just did it, sent me the bill and went on his way. And I understand he's got a whole lot of different things. He's an expert. He's got a vehicle, he's got a call center. I understand his business. He didn't need to explain to me why his bill rate was so, in my opinion, high.

I paid it. He went on his way and we're all both happy. So I think sometimes us feeling like our number's too high, that we have to accommodate everybody is really our own head trash. And I would encourage you to think through why you think that way. Map out your target customer. Who's good for you and who's not.

Who are the people you need to cut outta your life? Who are the customers you need to fire? And then boldly go there and just say, Hey, that's not a good [00:22:00] fit for us. It's not you, it's me. We don't do that well. When we do things like that, we find our customers frustrated and we don't want you to be frustrated.

So if it's okay with you, I'm gonna decline this appointment. We know there's some great people out there will help you. And that's the way I approach it so that you don't feel like you're insulting them that everyone's happy, but at the end of the day, you don't owe it to 'em. So stick to your guns.

Anything else on that, Mike?

Mike: I agree with you there as far as, you gotta find your ideal customer. And I think back to the time where my business grew tremendously was around the 2010, 2011 timeframe where I think, in those two years we like nearly doubled in revenue.

And I remember one of the most powerful things someone said to me was, you gotta tell people no. And for me at that point, it was very scary to, to tell them no. I'm like, what are you talking about? I'm gonna lose business that way. But, it's funny how I learned to get comfortable saying no to people, and yet [00:23:00] my business still grew and it's because I was eliminating a lot of people who were not gonna hire me, and I was putting more time and investment into those who were going to hire me. So saying no is not a bad thing at all.

It can actually help you grow. And the other thing I wanted to add onto is, we talked about the painter for a day thing and you know that we actually do have a painter for a day. We don't advertise it on our website. I look at painter for a day as more of a a marketing instrument.

And what I mean by that is I only use it as a donation for like silent auctions at local schools. There's a handful of schools where I live, there's a few elementary schools, there's some private schools. And they reach out to me constantly about donating. And so I will donate a painter for a day and . What's really cool is I've been to a couple of silent auctions and you start seeing people like fighting over this painter for a day and you're seeing the interest grow in your company, and that's how I [00:24:00] look at it. It's almost like a marketing expense. And I only do maybe about 10 or so a year.

But I know I'm not gonna make money off of that because it's one, it's a donation but, I'm getting a lot of eyeballs on my business and what we have to offer. And sometimes I'm actually going out to, to look at a home next week for a silent auction winner, and she knows that the work she wants to get done is worth more than the painter for a day, but it's just gonna be applied as like a credit to her contract. So I'm gonna get some work and it may end up at least paying for itself, but at the same time, I've now exposed my company to several people in the local community. And it also shows us as a company that's willing to give back. It's like a win-win there.

It's logistically, it's not the greatest, but I can tell you I've got a number of repeat clients through donating painter for a day.

Scott: Thanks again for joining us on the Beyond a Million Dollar Podcast. [00:25:00] If anything you heard on the show today, intrigued you, or if you're just interested in getting in touch with Scott, please visit the show notes.

You can click on the discovery call link to get started. We'd love to find out more about you, your company, and how Consulting4Contractors can help you grow your business to a million dollars and beyond.