One the final key pieces that I changed in my business when I attempted to overhaul the way money worked in my painting business was changing to weekly invoicing.
In the past I would take a large deposit - 25 to 50%, a progress payment on large projects, and final draw upon completion. I operated that way for 12 years or so. As mentioned in part one, the large deposit carries risk for both the homeowner and myself as the business owner. The large span between deposit and final payment also caused stress on cash flow because I often have little control on the project. There were times where general contractors would botch the scheduling or change specs and there went my profit. Other times homeowners would take 12 months to complete the other trades prior to me returning for final coat. Even with a 50% deposit, most of that goes to paint and materials, other job costs like fuel, business operating expenses and a little bit of labour. So I quickly found myself upside down on projects and that could last several months sometimes. Not ideal...
The decision to stop accepting large deposits had a ripple effect on the finances of my business in many ways.
The most significant adjustment that resulted was that I was no longer comfortable purchasing paint for my client's projects. It was too risky. Customers frequently change their mind, delay their projects, do it themselves, hire someone else, stop returning phone calls, or are indecisive about colours and sheens.
So with no or minimal deposits, it freed me from purchasing paint. This is a big change for a painting business. Most painting companies include paint in their quotes. This way they have more control over the materials they use and it can make things more convenient for the client.
But does it have to be this way?...
You know how there are certain author's you look forward to reading all their books...well I think Steven Pressfield's non-fiction books are up there for me. His very popular book The War of Art made a big impact on me and it is essential reading for anyone creating something new that they care about deeply - a business, a book, a work of art, etc.
Since then I've read several other books of his that expand on the concepts in The War of Art. Just finished Turning Pro and I wanted to share one of my big take-aways that relates to running a business...
I've been thinking lately that a transaction between a home owner and a painting contractor is a very meaningful exchange, perhaps more than most other transactions.
In a previous post I've discussed that what we, as independent painting contractors, are in the trust business. I still believe that. I still believe that what clients are looking to buy is trust - trust that you know what you are doing, that you can solve their problem effectively, that you can join the family for a couple of weeks. Home owners need to trust you with their money, access to their home, care of their valuables and assets, safety of their family members, their schedule, etc. That is a lot of trust that they are shopping for. And all that trust has a high value to them - they are willing to pay a premium to deal with a company or craftsman they have confidence in.
But I no longer believe that what we are selling is trust. We should be marketing trust, our customers should be buying trust, but that is not what we are selling - the thing that we are exchanging for money is not trust, but it is even more valuable...
SIMPLE > COMPLEX
TIME > MONEY
VALUE > COST
HEALTH > WEALTH
FAMILY > ENTERPRISE
PEOPLE > THINGS
FOCUS > BALANCE
STARTING > PERFECTING
FINISHING > STARTING
CHARACTER > EXPERIENCE
LIFE > RESUMÉ
TESTIMONIALS > PROMOTIONS
GIVING > GETTING
APPRECIATION > EXPECTATION
CHOICES > LUCK
There is an ancient book that many today see as merely allegorical, while others may consider it out of date. But I have found that the Bible contains business principles that are very simple to understand, practical today, and that add value to my work. Here are a few principles that have helped me confront the challenges of self employment and build a business that stands out a bit from the competition...
On this rainy West Coast Sunday morning I'm thinking about how many contractors I have personally talked to over the years that have told me that they grew their business to sometimes 2 or 3 dozen people, only to hit a major crisis (health, family, bankruptcy, lawsuit, etc) and decide to scale back, way back, to just themselves and a helper.
Like a cool Sunday morning rain, running a small business is just more laid-back.
Small is low risk. Small is low stress. Small is manageable. Small is profitable. Small is freedom...
Many opportunities await a hard working and self-motivated young person who is interested in starting a painting business...
So a few years back I was paying for my paint when my friend and colleague Mike walked in.
And that's when it hit me.
At the time I was busy and had a closing rate of about 1/3 of my estimates. But taking one look at my friend, I realized that if I was a customer, I would hire Mike, not me. Why?...
How do you know when it is time to make a change?
There is a theory that says people generally do not change until the pain of the status quo is greater than the pain of change.
“Change happens when the pain of staying the same is greater than the pain of change.”
- Tony Robins
That is why we hear people say things like: 'getting fired was the best thing that ever happened to me'. They likely hated their job, were to afraid to leave a stable paycheque, but since the decision was made for them they were then free to move in a direction of their choosing. We change. What made us happy and brought us satisfaction at 20, becomes different at 30, or 50.
So how do you know when it is the right time to make a move if you are unhappy about an aspect of your life? Do you have to wait for someone else to make the decision for you? Do you have to wait until you just can't take it anymore and you have a breakdown? When to initiate change is something I have struggled with over the years...
In an earlier post, I discussed the importance of Respecting Capacity.
But I've come to appreciate another facet of capacity that relates to our business - viewing capacity as an asset in your business and leveraging it for maximum profit.
Used to be that I got nervous if I was booked up for less than 3 weeks in advance. I was used to being booked 6 - 12 weeks out and that demand felt good, felt secure.
But these days...
If thinking of buying a home and of starting a business in the near future, it might be prudent to get the mortgage sorted while still steadily employed. Starting a business or financing a vehicle can be done anytime, but it is not always easy to obtain a mortgage. Doing things in the right order can help one reach goals years earlier.
If already self-employed, all hope of owning a home is not lost. Self-employment does make a lot of things in life more challenging, but by now you and I have honed our skills to become tenacious and creative problem-solvers!
Here are a few layman tips to increase the chances of approval. Use at your own risk.
1. Maintain a very good credit rating. Fix what you can, pay off outstanding and overdue accounts. If you need to improve your credit score, consider an RRSP loan. Most institutions will automatically approve RRSP loans where the funds are invested in a bank product. Make the loan payments regularly. Use the contribution to reduce your taxable income, this will generate a lower tax bill or a refund come tax time. Take the tax savings and pay down your loan, or keep building up that down payment. Once you are ready to buy, you can borrow your RRSP money to use as a down payment if you are a first time purchaser. In Canada you have 15 years to repay the money to your RRSP account. If you fail to do so you will need to repay the income tax to the government.
2. Save up a down payment. For most people a 5% down payment may be sufficient to qualify, but if you are self-employed and show lower income, or have less than ideal credit, you may need to have 10% or 20% to put down in order to get approved with a competitive interest rate. It is also wise to account for closing costs on your purchase, which can add up to a few thousand dollars. And don't forget moving and improvement expenses, hook-up fees, etc. A sound financial move would be to save 20 - 50% of the cost of your property as a down payment, and choose a shorter term mortgage of 10 to 15 years. Who wants to be in debt for 30 years? That is a huge burden to carry and it can restrict your choices in life.
3. Stay up to date with your financial statements - bookkeeping, income taxes, GST, NOAs, etc. Being able to show the stability of your business over several years and being up to date with your taxes will go a long way.
4. Find the right professionals to help you:
The idea for this list came from a list Chase Jarvis made for Creatives, which was a variation of a list Guy Kawasaki made titled What I Learned From Steve Jobs.
Here is what I believe when it comes to running a small painting business:
1. There is no substitute for craftsmanship. Be wary of jobs where craftsmanship is not valued. Quality work should be non-negotiable.
2. Work begets work. Not busy enough? Get out there and add value somehow. The easiest way to find work is to be busy working. Too busy doing jobs you hate for people you don't like? Stop doing that, otherwise you will get more of it.
3. Profit is a proportional bi-product of the value you create.
‘FOLLOW YOUR PASSION’ '
FIND YOUR PURPOSE'
‘DO WHAT YOU LOVE’
These have become the de-facto career advice you hear these days. It’s as if we all need to be doing something incredibly inspiring and challenging in order to feel time spent at work is worthwhile. Does work need to be a spiritual, higher-calling endeavour to be satisfying?
Oscar Wilde is quoted as saying, ‘Everything popular is wrong’. Could today's popular career advice be wrong?
What if, on the next 5 estimate site visits, instead of going in with a mindset of 'How can I get this job?',
we asked ourselves...'Is this my ideal customer?'.
It may be a more difficult question to answer, but it is the more important question for the success of our business and our personal well-being.
When we started our small contracting business, time is something that we invested heavily. Funds and experience and equipment may have been minimal, but time is something we all get an equal allotment of. If working for ourself is a priority, we will spend as much time as needed to get it off the ground.
The danger is that we stay stuck in departure mode. Imagine being on a long journey aboard a jetliner that was in lift-off mode for the entire 12 hour trans-atlantic flight. How stressful! Take off is exciting, but everyone's happy to sit back, take a deep breath and order a drink once everything is under control...
As entrepreneurs we must be effective problem solvers. Problems come in all variations: financial, health, technical, scheduling, staffing, etc. One type of problem that we will eventually encounter is people problems.
People problems can be particularly difficult to handle if you have an aversion to confict. Many people would rather experience just about anything but having to confront someone about a problem. I know, I used to be one of those people, and I still have to fight that tendancy. And that is a benefit of the road we travel as business people...it exposes our weaknesses and provides opportunity to confront them one way or another before you can achieve success. Learning to deal with people problems is one of the biggest hurdles facing a start-up. We all want to be liked and we all hope to get along with others, but things can go pear-shaped pretty quickly when mixing money, deadlines, personalities and expectations.
So here are 4 things I have found that help to difuse potential hot spots...
If each party in a transaction over-delivered by 5%, what room would be left for disagreement?...
"Oh, I don't really have a business, I just work for myself."
Is something often heard out in the field. It sounds like a simpler, more manageable way to work independently without all the hassle of running a business. Who wants the headache? Get work. Get paid. Repeat.
But getting stuck in that cycle is a problem...
Over the years I've noticed that there are 3 quick, free and easy things that most experienced painters refuse to do that holds their quality back from producing professional results:
1. Caulk with a wet finger or rag, prior to painting. This reduces drag, leaving a smoother finish on the bead of caulk. It also prevents building texture with drag lines and tiny chunks of semi-dry caulk. The caulking deficiencies only look worse once painted, so proper application will give a better paint finish. Caulking applied after the painting is done will eventually collect dust, discolour and look unprofessional in a short time. Caulking requires top-coating with paint...
The entrepreneurial struggle can arouse some powerful negative emotions - frustration, self-doubt, jealousy, anger, disappointment, exhaustion, conflict, confusion, and depression, to name a few. As a business owner you put yourself out there on a daily basis and face the world, hoping other people will accept you and your offerings. You face judgement and rejection. You battle threatening market forces that are out of your control - competitors, the economy, technology, weather, etc. Your entrepreneurial mind faces negative forces from within yourself, the people you deal with, and the circumstances you work in.
It can be difficult to navigate through challenges while keeping your head right...
You might be thinking about taxes at this time of year. And that maybe causing you some stress.
Or you may be feeling taxed by the stress of a busy painting season just ahead.
I've been thinking about work stress recently, particularly about the toxicity of stress and the toll it takes on our health, relationships and general job satisfaction. Stress is real. The effects of stress can be as simple as being more irritable to more complicated - like the inability to sleep properly, addictions, memory loss, a compromised immune system. Stress can even lead to heart attacks and death. My observation is that some of us don't consider stress enough when looking at jobs. For me, I need to be more intentional about limiting it's influence in my work life where possible.
We are just painters after all, not surgeons, so why all the stress? Is it necessary? What factors lead to some projects being more stressful than others?
Governments tax behaviours that they deem unhealthy for individuals or society, to reduce consumption/exposure and raise money to finance the side effects. So...why not tax stress in your life, particularly in your business? Add a surcharge to jobs that involve more stress, put a premium on that stress to discourage and reduce the amount of stress and raise money to deal with the consequences of stress (vacation, massage, therapy, date nights, exercise, healthy food, etc...).
With that in mind I created a Project Stress Analyzer and Tax Calculator. I fill it out as part of the process for every project I quote in 2017. In fact, I print a bunch of these sheets and use the back side to make my notes during the site visit. If a project has an average (or lower) anticipated amount of stress there is no premium tacked on. But for every degree of stress above average I add 2% to the quote, to a maximum of a 100% stress premium...
So one day about 8 years ago I went to a client's summer home to continue an exterior painting project. It was mid morning and the homeowner meets me at the front door with a serious look on her face and a glass of wine in her hand.
"Simon," she says, as she pulls me inside her house by the arm, "today you won't be doing any painting."
Have you thought about starting a small business but are afraid of either the challenges, or the thought of quitting your job? Or maybe you are already in business but are looking to transition into a different type of business - one that is more creatively fulfilling, is easier on your body, or that can provide a side income for travelling or savings. If you are ready for a new challenge, Chris Guillebeau just launched a project today that might just be for you...
This article is a guest post by Steve Maxwell, one of Canada's most read home improvement journalists and editor of Pro Painter magazine. Pro Painter has been an excellent source of support to my business over the years with technical tips, business advice and industry trends. Look for a re-vamped Pro Painter debuting in 2017.
Every painter wants a schedule full of great jobs, serving clients who appreciate good work and pay good money. But whether or not you actually get this kind of work depends on more than just your skill with a brush, a roller and your estimating book. All these things are critical, but success in painting, as in life, ultimately depends on deeper qualities like energy, honesty, selflessness and humility. Please forgive me if this sounds like a Sunday school lesson, but reality backs me up. A painter I know named Gary Walchuk reminds me how true it all is...