Mastering the Shift from Residential to Commercial

Michael Murray: Hi everyone, welcome back to the Price Sell Paint podcast. Today Jon and I are joined by Chris Elliott. Chris is, I would say an industry titan at this point. He is very involved in the PCA, he's on the board. He has a very successful residential and commercial painting company in Indianapolis. And I would say first and foremost, Chris, thank you for your service. I read in your bio Army Ranger, so I appreciate all that you did for our country.

Really excited to chat with you today. So tell us a little bit about yourself and maybe a little bit about your background, how you got started in this crazy industry.

Chris Elliott: Man, you just did a far better intro than I could ever do. So yeah, no, that was really great. Yeah. As you mentioned, I went in the military after high school. I actually signed up two months before 9/11. So things got interesting really quickly. But after the military, I went into the fitness industry, which eventually brought me to Indianapolis.

Michael Murray: Try to keep it short and sweet.

Chris Elliott: And somehow landed in the painting industry actually through coaching youth football.

Jon: One does very common normal path, yeah.

Michael Murray: Makes sense.

Chris Elliott: Yes, yes, normal path. And so I worked with a national commercial painting contractor for about three years and then exited and launched our company and got rocking in residential repaints. Did that until about 2020 and started transitioning to commercial.

Jon: Yeah, which is awesome. We want to talk to you a little bit about that. It's a pretty common question, interest area for most people these days. So should we talk about that now or should we get more background here, Mike? What do you think?

Chris Elliott: Yeah, now let's rock.

Jon: Let's do it. Okay, let's go. Yeah. So how many years have you guys been doing this now?

Michael Murray: Yeah, let's hear about that transition.

Chris Elliott: So we will be at a decade in April. Yeah, nine years, almost seven months.

Jon: Decade, awesome. And going with a pretty sizable company, from what I understand. Part of that was that journey, I'm guessing, started residentially, and then moved to commercial. Maybe fill people in on the story, just so we can get kind of a 10,000 foot view here.

Chris Elliott: Yeah, so I had never done anything residential, no exposure to it at all. But as I exited the organization I was a part of, it was a very clean, good exit. And I just wanted to respect that relationship. And so instead of focusing on commercial, I focused on residential. It was also—I knew you get far more reps and be able to build out—build our team, build our processes. I felt it was a little bit better path to the transactional nature of residential. You just get a lot more reps. We can also build relationships and partnerships, banking relationships, access to capital, all that.

So we focused on growing and scaling the residential division very quickly. We got it up to where it's at now, probably by year two and just stabilized, started working on marginal improvements. By 2020, we felt like we were ready and kind of created some distance from the company that I was a part of where we felt like we could start our commercial division and do it in a way that we felt great about.

So we sold a bunch of contracts. We actually gained some momentum quickly, then COVID hit and we lost them. And then luckily they all ended up coming back through. So we've been keeping residential stable and working on profitability and growing our organic traffic and getting our customers excited about working with us again and referring us to friends.

And then on the commercial side, we're building, establishing relationships, nurturing those relationships, finding out what market vertical we are the absolute best fit for. So we've been on that journey and we feel like we're in a really good space with that. So we're going to continue to lean in and grow and scale. As we look into the future for our organization, we see the growth coming from our commercial division. We're really excited and passionate about that right now.

Michael Murray: Chris, I'd love to just keep talking a little bit more about that. You currently are doing both. I know you guys have a pretty full sales team. You've got different people kind of focused on different parts, but what are the differences in terms of marketing and selling specifically? Not necessarily on the producing side, but marketing and selling for commercial versus residential. What are some of those differences?

Chris Elliott: Yeah, great question. And they're quite different. And as an organization, we really do run them as separate divisions. So different people, different processes, different approaches. It makes my strategy planning really interesting every year because I have to plan for the company, and then we have to plan for each division.

From a marketing approach, the way that we look at residential is we want to focus on three areas. So we're looking for brand oriented marketing efforts—helping with our brand awareness. We want to make sure that we're getting some direct response marketing in there. And then also that we are engaging the warmest audience—people who have worked with us and loved us and want to either come back and do repeat business with us or refer us to their friends and family members.

Everything we do is repaint, residential and commercial. Obviously with those efforts, we're focusing on homeowners. And over the last 10 years, we've gotten very good at knowing exactly who our target audience is, what those buying personas are. We're geographically—we cover a 30 mile radius of Indianapolis, but 75% of what we do comes from the northern suburbs. Some of that's intentional, some of it's incidental. It just happened that way.

And then we also work on realtor relationships. Obviously that's more business development, relationship development, but then very little cost. But then those relationships can grow and you get a lot more repeat business. We also put a fair amount of effort on business alliances, forming relationships with other businesses who kind of see the market, see the world as we see it, share a value system and have a similar customer so that we can refer and feel great about it.

I think just like anyone else, you always kind of cringe a little bit when you share a referral because that becomes a representation or an extension of you. So those are three—homeowners, realtors, and business alliances are our focus. When we're focused on our actual marketing spend, it's brand awareness, it's direct response, and it's organic engagement.

And then on the commercial side, we used to not spend any marketing. There was no marketing spend at all. It was all business development prospecting. So we would identify a target audience—let's just say that's managed commercial properties, so property management companies with commercial assets. And we would establish a focus, a top 12 or a top 15 or top 25 list, whatever you want it to be. And we'd start building those relationships, getting very focused.

So we have just learned over time, whether it's residential or commercial, I think like everybody, when you start, you're willing to do everything for anybody, no matter where they're at. And over time and as you evolve and mature as an organization, you understand that it needs to be sniper, not buckshot. So it's like, who exactly is our residential target and who exactly is our commercial target? And I feel like every year, every month we've started to understand that better.

Jon: Do you have a lot of—you mentioned a little bit of business development. Do you have that expectation from your sales reps on the residential and commercial side? Or is it leads come in? How does that work?

Chris Elliott: Great question. Yeah, so we have—on the residential side, the appointments have always been driven by our marketing effort and any business development effort was either done by me or leadership oriented roles. As we go into this year, we've actually reestablished roles, responsibility, deliverables, expectations. And so we are going to ask that our residential reps get more involved.

We've joked in the past that those dogs don't hunt, right?

Michael Murray: Good luck. Let me know how that goes.

Jon: Yeah.

Jon: Is that how you're going to present it at the meeting, Chris? "I don't have high expectations of you, but give it a shot."

Chris Elliott: Yes, that's what typically works best. So I think it's important enough for us to try. So it's actually a really funny topic because we internally say our best sales reps residentially have really been kind of more operations guys and gals with a great personality.

So somebody who is very friendly, can build that rapport and trust with the client, but has enough attention to detail that they can put together a great proposal and do a great takeoff. We have not found that that personality profile is exceptionally great at prospecting and business development. They either don't have the interest or they don't have that skill set.

But again, I think being active in networking groups like BNI, getting active with realtors and different associations is important. And when we evaluate our capacity at a high level, we feel like the capacity is there. We just got to find the right people to do it. But I will let you know how it goes.

Jon: Please. It's funny because I actually think it's a problem with the industry where we just don't expect that from sales reps. If you go to any other industry, we require it from our team and it's been really proven to be very successful. So you have to have a certain amount of activity per week. We track what activity that is. It has to be productive for networking. And if you just don't do that, you're not going to get the big juicy leads that you need. You're going to get a lot of small stuff coming off leads, but the ones where you get the best return are through relationship, I think.

Chris Elliott: I strongly agree. And I think the piece in there that makes it—I think that maybe makes the industry believe for residential—is that estimating piece, right? Because most sales positions don't have that layered in. That one does, which requires a little bit different personality profile than a typical sales rep who loves to go in a room and gains energy from the people in that room.

The residential sales estimators that we've had don't necessarily gain energy from a group. They gain it from that individual interaction multiple times a day through our customers. But then on the other side of the business, it's a totally different personality profile. It typically is more of a hunter type and someone who does get excited about being a part of trade associations and networking groups and can go out and make relationships and really see the value, especially the long term value of establishing a network and building relationships and nurturing them through time.

Jon: It's interesting you say that it's different people. I'm fascinated by that because I think too often I've thought it's the same person, but you've found that it's actually a very different personality, residential commercial, for prospecting and doing it.

Chris Elliott: It's my belief and it's my experience, but I'm challenging this year. So I think we should follow up in six months.

Jon: Done.

Michael Murray: I tend to agree with you, Chris. I think it does take that hunter versus that farmer kind of analogy. I think it's hard to find somebody whose skill sets are both. And I think what I would imagine—if you find that person and they're really good at that hunting, and you have them in the residential side, is it only a matter of time until you move them to the commercial side where there's those bigger opportunities and things like that. What are your thoughts on something like that?

Chris Elliott: No, that's a great point. Originally, our idea with residential was that it would be—I grew up playing football and wrestling. And with a lot of great wrestling programs, it's a feeder system. It starts with the elementary and the elementary are teaching the same takedowns and the escapes that the middle school is teaching and that the high school is teaching. And it kind of flows through and we anticipated that being our residential division.

Our residential division would be the entry into the business. You get a lot of reps, a lot of at bats, and then you would transition. That was the thought. It's not been the reality. So the reality is we've had to go out and actually look for a different person.

Now with project management, we actually have seen that—going out, running residential jobs, getting a lot of experience through managing three to 500 jobs in a year really helps prepare them to take on bigger and larger jobs.

So I think that the other piece with that residential role is typically if you're going to do—say you want a rep doing a million and a half a year, there is a volume of appointments that they have to do. And one of you mentioned conversion rates. So the one thing I love about residential is I think both sides, it's math, right? Eventually you can distill it down to math.

I know on the commercial side, if I do this much prospecting, at this point in my skill level right now, I will get—if I knock a hundred doors, I'm gonna get five opportunities to talk to somebody, whatever, and you can take that all the way down to a sale.

But for residential, we have found that it is literally—we put this amount of money in the marketing machine and it's going to spit out this many leads and this many leads at 85% conversion rate generates this many appointments. At this many appointments at a 50% success rate generates this many sales. This many sales at $5,000 average job size is this much revenue.

And then you can figure out from there—you can figure out how much gross margin, here's my costs. What should be my price based on my current level of overhead and whatever. So I love the predictability on the residential side because I can literally come in and say, "I want to do three and a half million. I'm going to spend seven percent projected revenue in my marketing spend. That's going to give me this many leads." And I can just extrapolate it based on my conversion rates from there. And I can almost forecast the year down to the dollar.

Commercial has been a little bit less predictable but we are really working on that because as I mentioned, I think at the end of the day it's just math.

Jon: What kind of metrics do you think you'd want to—or sorry, quick question. So the metrics, Chris, that you're talking about for residential, those are dialed in. You said it's not for commercial. Where do you think it should land? Do you have a sense of that?

Chris Elliott: Yeah. So I think that what we're finding with commercial—both sides, we track leads, we track qualified leads, and we're trying to close that gap. We take qualified leads to appointments and that conversion rate, and we're trying to close that gap. So we're actually seeing similar conversion rates when we're talking about leads. But I found a more important metric, if you will, to follow is pipeline.

So we're focused on—if we put $10 million in the pipeline, because the difference is with residential, it's a very predictable average job size. Commercial's not. We're doing anywhere between $1,000 and $1 million jobs. And so three opportunities can skew the numbers quite a bit as far as average. So we look at how much we're putting in the pipeline and then what that pipeline conversion is, which I think is the biggest difference between the two.

Jon: What do you think is a good number to shoot for?

Chris Elliott: What conversion are you asking specifically?

Jon: Pipeline conversion. Like if you got 10 million in there, what do you expect to convert?

Chris Elliott: Yeah, so we're seeing somewhere between 30 and 45%. And so again, everything we do is repaint. And then our primary focus is property management through multifamily or managed commercial. But we find ourselves in a niche. So I had mentioned earlier, we mainly only do business development and prospecting, but we have started to layer in more marketing efforts on the commercial side, which doesn't translate to the same—pay per click is almost irrelevant on commercial. We just have not seen any movement there at all.

But we have seen some success with cold outreach efforts. So we are spending marketing dollars now. And it really hasn't shaken out to skew our conversion rates too much. Again, if we wanted to sell 3.5 on commercial, we would look to put 10 million in the pipeline.

Jon: Gotcha. Cool, thanks.

Michael Murray: Feels like one of the big differences is just the sales cycle. Your residential stuff is going to flow through that pipeline pretty quickly, a few weeks, whatever. Where your commercial stuff—we don't really do a lot of commercial. Jon, you definitely do more than we do. It sounds like Chris might do the most on this call. But to that point, am I accurate here that some of the metrics there are a little bit different because you might be working on a deal for six months, a year or whatever until you can actually close it. Am I following that right?

Chris Elliott: Oh, very accurate. Yeah. So a lot of the work, a lot of the big work we did—let's say jobs that were over 250,000 this past year—we've actually started working on those two years ago. And so there was distance.

What we typically see, and again, I think this is very vertical focus. So with these property management companies, typically they have some period of the year where they start capturing quotes to be able to establish a budget for the upcoming year. And then when they get to that year, the budgets get cut and they allocate how they feel like they need to best protect the asset.

And so a lot of times what happens is—"Hey, I need this quote. I need it by October. We're about to turn in for our budgets." And then March hits. And even though they had submitted for that 400K to go to painting, it just couldn't happen that year. And so then it pushes to the next year.

So the way that we have found to best handle that is being very intentional with our pipeline. So we actually measure different temperatures of the pipeline. So what's our hot pipeline? What's our warm? What's our 2025 or 2026 budget year pipeline? And what's our cold? And then we've created—we obviously have effort from our team, but then we've also created automation that's relevant for each stage of the pipeline.

So if it's warm, what can we automate? What touches can we automate in that warm stage? Which is obviously gonna be a bit different than the cadence and how we engage the cold pipeline.

Michael Murray: That makes sense.

Michael Murray: I just want to touch on something—a question that came up in my mind is, you mentioned it sounds like you've got those residential numbers dialed in. You kind of walked through that and it's really just a marketing machine. You put money in the end, you kind of have a predictable outcome. Why did you not just keep scaling that? What was the thought behind, "Let's kind of keep that going steady," it sounds like, "but really put that focus on the commercial"?

Chris Elliott: Yeah, great question. So the front end is kind of that sales marketing effort and it becomes very predictable. The backend and the operations of it become—our team member wise, our operations is three times the size of our commercial operations for the same revenue. So it just takes a lot more, especially as—the way I see residential, over time it can be—our CFO would kill me if I ever try to get rid of residential, which I've tried now. It's very—it's become very predictable and it's become very profitable and it's become very profitable because of what happens on the backend.

We're very intentional with the delivery of our services because that is in turn lowering our marketing costs over time because we get more of that organic repeat and referral business. And so I think that just like any business, you have different stages and seasons of the business. And eventually you hit a maturity stage. And I think that for us, we chose that we wanted to get our residential division to a maturity stage and refine and make it the best delivery of services and the best profitability and the best people and processes that we can put in it at a certain revenue size.

And then we continue to lean into the growth on the commercial side, just because so early in my career, I said, I went into fitness. I'm fairly good at sales. And so I started a personal training business. And so I was a technician. And so I went and I sold a bunch of clients. And then I realized I had to serve every one of those clients. And I only have so many hours in the day. So I was very limited based on capacity. And residential is similar.

I mean, you can keep scaling those operations. And I know there's some very large residential repaint companies. But they are also—for us in Indianapolis, it's somewhere between a $4,000 to $5,000 average job size, where commercial is for a similar effort, less operations, and the job size can be north of a million. I saw the path for growth and scale more appealing with that.

Not that residential isn't attractive. Like I said, we have a fractional CFO and he absolutely loves our residential repaint division.

Michael Murray: Yeah, cash flows a lot better, I would imagine. Yeah, you're not waiting.

Chris Elliott: Yeah, it diversifies us. It creates great cash flow. Obviously, as you go into commercial, capital is a conversation that you have or is something that you have to be very well aware of and have access to. We obviously have a line of credit to help support that, but also residential—that cashflow coming in really helps expand our financial capacity to take on more.

Jon: It's kind of interesting. I hear a lot of people who just strictly do commercial—when it gets hard in commercial or payment terms get extended, they're like "Man, I just want to have some residential." And then people who are residential are like "Man, I just want the bigger job sizes." And so it sounds like you're kind of in a sweet spot there.

Chris Elliott: It's trying to be but it does present its challenges because you just cannot run both divisions the same. They really are—we have found it really is different people, different processes, different strategy, different marketing approaches, campaigns. And we want to be very good at both. And to do that it requires a lot of intentionality. But I do think it has diversified the business well.

Jon: Chris, it seems like you know a thing or two about the painting industry. What if people have questions for you? How do they pick your brain?

Chris Elliott: Good question. Wasn't prepared for that. Let's do this. I will share my...

Jon: Chris, this is a setup by the way. I think you know the answer. It starts with an "A."

Chris Elliott: Yeah. Yeah. So I have a second company where we help painting contractor business owners through peer advisory groups. So my role in the organization is to facilitate the meeting and obviously add value where I can. It's a very structured, high velocity—very unique, I would say it's crossing between a peer advisory group and small group coaching.

It's probably brought me more fulfillment than anything I've ever done. I'm really enjoying it. We launched it last year. It's a very special group. If someone wanted to land on the website and reach me, it'd be ascendpeergroup.com. But if anybody really just genuinely had a question, I'm happy to share my email which is just my first initial and last name at onettepainting.com.

Michael Murray: celliott@onettepainting.com. Got it. That's awesome.

Michael Murray: So you're on the PCA board. I think, I don't remember if I mentioned that in my intro, but that's obviously a big part of you giving back to the industry. I'd love to just hear about what made you decide to do that and what's that experience been like?

Chris Elliott: You guys are asking great questions. I have very interesting—maybe it's interesting—I feel it's interesting history with PCA. So started the business, joined the PCA like a year in just to get the brag badge to put on the website. So it's just a sense of authority. Had no interest in participating. And then saw an expo was marketed, signed up, went and it wasn't a great experience. Part of it was me and who I went with. And we just didn't overly engage. Made a couple of connections. Oddly enough, they were people in my market. And so made a couple of friends.

Didn't go to the next one. And then went to the 2020 Phoenix, Arizona Expo and met and built relationships that are some of my best friends in the world now. It was really—you hear "life changing" and I'm not one to say that a lot, but it was quite impactful.

It was also about the time that we were a couple years in and we were really starting to gain success in the industry. I was starting to build a team where I had a bit more capacity. And I just felt like I never saw myself ending up in the painting industry, but I did. And we've been lucky enough to find some success. And so I just felt like it was the right thing to do to find a place to contribute.

And that event was impactful enough where it seemed very obvious to lean into the PCA. And so yeah, I've been on the board for a couple of years. I'll be the commercial chair helping with the commercial event this year. And I just—I have yet to find an organization or association that does such a good job between members and vendors of just getting the right people. The vibe is just so good.

And we all find ourselves in our markets where you don't find people that necessarily want to network and share information and best practices. And my experience—I found almost anyone at the expo is just ready to help and share. And so yeah, it's been a great opportunity to be able to contribute to that mission. And I just feel very privileged.

Michael Murray: And you've got Nick Slavik bossing you around on the board as the board chair.

Jon: He's a great guy.

Chris Elliott: He tries. Yeah, he's so great. Yeah, and he's doing a great job with the board. And our new executive director Jill is just phenomenal. And yeah, Nick's done a great job building the board. We've added a couple of additional board members and very excited for the future.

Michael Murray: Awesome. Any—you mentioned the commercial event. Is there anything you can share? You know, we're recording this year right at the beginning of January, probably will come out February or March. So I think this will come out after the PCA Expo at the beginning of February, but all of us are going to be there. I know we're excited for that. But what other kinds of things can we look forward to from the PCA and the commercial event and talk to us a little bit about whatever you can.

Chris Elliott: Sure. So I think the PCA does a great job with events. I think they do a great job with education and obviously trying to find relevant resources. So I don't know what's been officially announced. I know that the goal, the aim is to announce every event that we're going to have this year at the expo.

So I anticipate there being a residential event, again, a Women in Paint, a PCA en Español, and then of course the commercial. So very excited about that. I was a part of the commercial committee last year and lucky enough to attend that event. It was incredible, absolutely incredible.

Jon: Did you ride a bull, Chris? So were you part of that group?

Chris Elliott: I heard—so I was there. So Jesse Ramos is actually a member in the Ascend peer group and a good friend. And it was such a fun event. And I was very excited until I saw the first bull ride. And then I got very worried for my friend. It was very intense. I've never seen a bull ride before. And I was very relieved when it was over.

Jon: Yeah. I got a couple of videos sent my way and it was like, "Wow, this is actually happening." Like what is the liability of this?

Chris Elliott: It was real bull riding. That's what we were thinking. It was like going to be a grandpa bull or small—they came out and it was really bull riding. And so my wife—I wouldn't say I'm the most cautious of individuals, but my wife literally looked at me because Jesse wanted me to do it with him. And she was like, "If you do this, I'm flying home." And she's never said anything like that to me before. It was very intimidating. Her, not the bull.

Michael Murray: I have a new rule for life that I just made up. If it intimidates the Army Ranger, I'm not doing it. Yeah, that sounds pretty crazy.

Chris Elliott: Fair enough. Yeah. But we may not have bull riding, but I'm sure we'll have something.

Jon: That was wild. Fantastic, man. Cannot wait. I mean, it sounds like the first time you got excited about PCA also had a rodeo there too. I think in Phoenix. And for those who don't know, if this comes out before the PCA expo, great. But there is a fantastic event that Sherwin Williams and Benjamin Moore throws. Don't miss it. Because the first time I went, I just totally didn't realize it was happening. And then everyone came back with cowboy hats and I was like, "Where'd you guys go?" There was a rodeo and I was like, "Oh my goodness."

Chris Elliott: I think that was the best, in my opinion, the best Sherwin party for an expo that I've been to. It was awesome. So you missed out.

Michael Murray: That was, I think that was Jon and both of our first PCA expo. Jon and I met at that 2020 expo, Chris, that you were talking about. So you talked about some life-changing relationships. Jon and I are testament to the same. So that event was paramount for our industry.

Chris Elliott: Yeah, yeah. And what timing too, right? Like right before COVID happened and to have those relationships to go through that period of adversity was very good timing. So, and I've heard that from so many people about that event. It must've been a little magic in there.

Michael Murray: Yeah. We got to go back to Phoenix, I think.

Jon: What's the theme?

Chris Elliott: Yeah, yeah.

Jon: Cool. Well, Chris, maybe we'll wrap it up here. Make sure you got anything else interesting. This has been great and we would love to have you back on sometime, man. It's super fun for us to talk to people like yourself who just actually understand this. We're all in this together. It's fun to go through this journey with people that get it and we appreciate you for that. So thank you very much for your time, your expertise, your knowledge and hopefully for those listening, this has been helpful.

As we always say, like and subscribe. We know a lot of you guys listen, but don't subscribe. So now's the time to do it. And Chris, hey, thanks very much. I appreciate you.

Chris Elliott: Thank you guys, it was a blast.

Michael Murray: Yeah. Keep kicking butt, Chris. I'm excited. It sounds like you're a big thinker in our industry and I think we need more people like you just kind of sharing ideas and things like that. So appreciate you giving back and appreciate you being a part of what we're doing today.

Chris Elliott: Very kind of you to say. Thank you. Appreciate what you guys are doing. Thanks.

‍