Jon Bryant: Hey guys, what's up? Welcome to the Price, Sell, Paint podcast where Michael and I examine, oh fuck, we'll do this again. Okay. Hey guys, welcome to the Price, Paint, and Sell podcast where we try to help painting contractors price job more profitably to grow their business and get back to the life that they got into business to live. I'm Jon.

Michael Murray: I'm Michael.

Jon Bryant: And we're here today to talk about, what are we talking about, Mike?

Michael Murray: Yeah, I want to talk about production rate estimating. I'm seeing some confusion. I've always thought this was really clear and obvious, to be honest. I thought it was kind of like the only acceptable answer, but it seems like there's a lot of different views on it. And I would love to just define what production rate estimating is. I think you and I aligned pretty well on production rate estimating and you know, the benefits of it. But I think there's. A lot of confusion, there's a lot of, you know, really intelligent, successful business owners that have maybe other ways of doing estimating. And I think it would be good to, you know, at least just have a clear definition as to what we're talking about and why we—

Jon Bryant: Yeah, totally. Yeah, I mean, I think it's a great thing to start with. And obviously, being powered by Paint Scout, production rate estimating is really the foundation of the product. And so I think it's worth talking about, not only that, but I'm super passionate about this topic myself, because I remember the moment where I actually learned what this was and how it worked. And it honestly changed our business for in so many ways, it gave us such a foundation to actually make money, understand what we were doing. And it was really just the, it was, it was like a light bulb moment for me to be able to grow a successful business. And so, it's something that isn't talked about enough. I think people don't have a clear idea what it is. I think there's a lot more questions than there is answers. So I don't think we can cover it all today, but man, I would love to at least, you know, just kind of uncover a few of the basics and why. It brings the benefit that I think both you and I would agree it brings for our businesses. So yeah. So maybe you can start like for people listening in, you know, really what is production rate estimating in your mind?

Michael Murray: Yeah. I mean, so again, this goes back to my story. When I was in college, I worked for a company called student painters, very similar to like a college pro and ran a small painting business. And when we did that, you know, we had to learn how to price jobs. And so we were literally given a piece of paper that said how long it was supposed to take for something to be painted. And to me, that is kind of like the basic understanding of what production rate estimating is. It's the only thing I've ever known, never done, for over 20 years. And, but yeah, so really what it comes down to is how long should it take for an average painter to be able to paint something, or something that we can measure. So it might mean, you know, one window, or it might mean, you know, 100 square feet of siding. But some unit of measure that we can then apply to whatever house or building, whatever it is, to then say, okay, well, if one window takes one hour, 10 windows takes 10 hours. And we can kind of go from there. And then we can figure out, okay, if we know how long it's going to take, and we know how much it costs to pay somebody to do that, we can then figure out some of our other costs and apply that as a sales rate to the total number of hours to come up with a price.

Jon Bryant: That sounds pretty straightforward to me. Obviously, I understand this. Is there anything you'd want to explain to somebody who maybe is the first time hearing about it or has a lot of questions or reservations about this term production rate estimating? So it sounds pretty scary, I think, when you first hear about it.

Michael Murray: I think what's intimidating is trying to figure out how long does it take to paint things, right? And I think where a lot of people get stuck is every house is different, and that is true. But we're not looking for perfect. Whenever we hire a new sales rep, that's one of the biggest things that I need to teach is that this is math. And when we were in middle school, high school, whatever, like going back to math class, there was one correct answer and it needed to be exact. And you had to show your work. But when we're doing production rate estimating, it's okay if it's not exact. I always like to say we're not cutting wood, we're painting. It's okay if, whatever, this section of the house is 30 feet wide instead of 28 feet and four inches. It's going to be okay. So I think like that's where maybe some of the reservation comes in is, you know, being intimidated by the idea of like having to be too exact, which you definitely don't need. What are your thoughts?

Jon Bryant: Totally. Yeah, I mean, it's, you know, estimating for me has always been about, it's about good, not perfect. And, you know, people might fight me on that a little bit and say like, well, if it's not perfect, how do you know your price? And it's like, well, I'm trying to run a business here. You know, like the goal here is to do hundreds, if not thousands of jobs. And if I'm going for perfect, that takes a level of of detail that's going to take me a long, long time. And I think that in this type of scenario, you have to be comfortable with that this is a science and an art and those two things together are going to result in there being some interpretation that you have to make, some judgment calls. You actually have to estimate some stuff, but at the same time, the power of production rate estimating is that you get a baseline. Baseline of something to work off of in order to know that you're not going to get, you know, you're not going to screw over your business at the end of the day. And that you can confidently and effectively price jobs quickly, get prices in the hands of customers, win jobs, and have something at the end of the day to pass along to your crew in order to produce the job properly. So now you've got profit in the mix. And I, you know, personally, I think when I first heard about the term, it scared me because of what you said. Yeah, I don't know how long things exactly take. And two, I'm putting my hands, I'm putting my, my number, my, my estimate, my price in the hands of math. And that sometimes feels like it's out of your control once you, but it, it took a while to realize that it's actually more in my control, right? Those numbers are, you can change, you can work with them and there's huge benefits to that to having that baseline to work off of. So yeah, I mean, I think I'm agreeing with you. Am I agreeing with you? I guess, yeah.

Michael Murray: I think the two points that you made that I want to highlight is, you know, quickly. And that, like, we, so in my mind, it's like, we want to make the production rates allow me to do things quickly. But if I try to get to the point of like 100% perfect and, you know, no art, right, so go back to the other point you made of art and science. I think like what production rate is doing is trying to get rid of as much of the art as possible. And I feel like that's maybe where the conversation or the debate can come in is, we're not saying you're going to get rid of a hundred percent of that art. I'm not, I'm not saying that. And I don't think you are. There's, there is some of that. And at some point, like it does take some training or experience or otherwise to be able to do that. But the more I can eliminate that the more I can scale my business because it doesn't involve years and years and years of training and experience, where, you know, let's say again, if it was 80% art form, like that takes a long time to see so many different houses and so many different substrates versus maybe if I can hold for 10 or 15% of the whole quote is going to be based on art, if you will, to use your words of just like some of that experience and a little bit of that like guesstimating based on previous knowledge.

Jon Bryant: Totally. Yes.

Michael Murray: Yeah, I mean, we want to be able to get the job, the quote out quick. Like, you know, again, like we're, this is not meant to be a, like calculus class. It's meant to be like in, again, using good software, certainly paint scout. And you know, and there's other good software out there that is based on production rate estimating, allows us to do this in a relatively efficient manner. I mean, we're talking minutes here, you know, 10, 20 minutes, we're not talking hours to quote most residential painting projects.

Jon Bryant: Totally. So, you know, given that you and I both align on this concept, I think digging into some of the benefits are probably key. We've looked at a couple of them, but, and maybe we should also just really quickly define what this isn't. Like production rate estimating, like what is it not? It's not square footage pricing. And I think a lot of people get a little bit sidetracked with that.

Michael Murray: Yeah, I was just thinking that.

Jon Bryant: Square footage pricing can work. It's just really complicated to adjust over time. How it works, yeah, I mean.

Michael Murray: I don't understand how it works. I'm going to be honest with you. Well, I mean, like I get the concept, but I've heard people do that. Yeah. I remember, you know, like when we were, you know, transitioning into doing some commercial work and stuff, you know, whatever, like general contractors would ask like, oh, what's your square footage price? And I just, I don't, I don't, I don't understand the question. Like, like, what are we painting? I don't know. Square footage on walls? Like, you know, yeah, I can give you that, but it's like, there's, what about the trim? Are we doing trim or no trim? I don't get it. I don't understand how that works.

Jon Bryant: Yeah, true, true. Yeah. I think there's also a lot of what is square footage pricing? I mean, there's a lot that is misunderstood about it, because I think if you were to go, and if somebody said like, especially contractors who are saying, you know, what's your square footage price for, it's a 2000 square foot house, how much is this going to cost per square foot? That's a really, in my mind, ridiculous question. Like we're not painting the floors, are we? Are we painting the walls, the ceiling, the trim, the doors? Like, how do you get down to a price for floor or on a floor basis for everything. Like, I remember asking early on in my painting career, asking someone like, well, what would be the right price for this? And the guy was like, well, how much does a bag of groceries cost? And it's like, yeah, that actually makes sense. Like, I don't know what's in the bag of groceries. And with square footage pricing, what's that? Exactly, right?

Michael Murray: Filet mignon. You get some filet mignon and some nice Cabernet.

Jon Bryant: And so like when somebody says like, what's your square footage price? My response now is, well, how much does a bag of groceries cost? Because they don't understand what they're asking. Now, when I say that product like square footage pricing can work, it's really as a reflection of production rate estimating. So if you backtrack, how long does it take for you to do say a hundred, like say you can do a hundred square feet of drywall an hour, two coats of paint. If you want to backtrack that, you can figure out your square footage price based on your hourly rate. But it's like going three steps too far. Whereas in production rate estimating, it is not square footage pricing. What it is, is it's using square feet in order to figure out your pricing. And that's a very different approach.

Michael Murray: Is my understanding that square footage pricing is meant to be like the floor? So it's like, I have a 3000 square foot residents that somebody needs to paint. You know, what do you guys charge? And it's like, oh, we charge two to $3 square foot. So it's going to be six to $9,000. Is that—

Jon Bryant: That's what I believe it is. Like, and that to me has never made sense. In fact, that's like, I think a big reason that holds our industry back, is that number right there that's thrown around when you go to the paint stores or you talk to different people and they're like, what's your price? That number, by the way, like having started 15 years ago in the painting industry has not changed. I don't know if you've realized this, but like, yeah.

Michael Murray: I think of that. Is there like always like two to four dollars or I don't even know. It's something like that. Let's see that all across.

Jon Bryant: It's like guys, inflation has been like through the roof. Prices have changed. Like people are getting paid a lot more and you're still charging like your customer $2 a square foot for a floor space for walls. That like, you don't know if they're eight, 10, 12 feet with like, it's wild. It's wild. I'm with you on that. Like I am generally confused. And I remember like going back to like early, early days trying to figure this out for myself. That was what was presented to me. And I remember just like sitting at home being like, oh, I don't know. I don't know how to do this. And then you give someone a price and it's like way out to lunch, you end up losing your shirt on the job. You're like, okay, well, maybe if it wasn't $2, maybe it's 250 is the right number. And so now you're just like wildly guessing. So anyways, yeah, that's all that said.

Michael Murray: So this is just slightly on topic, but I remember when we were first asked this and I had a sales rep and I didn't even know what it meant. So I literally went and asked our Sherwin Williams rep. I was like, all right, stupid question, but we give you a lot of money, so you're just going to answer my stupid question. And we're working on this big quote for a general contractor on this, whatever, I don't know what it was, commercial project or whatever, something we probably had no business quoting. And I need some help and he wants to know what our price is per square foot. And I'm like, he's obviously really intelligent. I don't want to ask him. And so he explained what we're talking about. And I was like, huh? It's like, okay. And so I remember we went and like, we tried to figure this out by looking at like, past quotes that we had done with production rate. And I was like, we're coming up with these numbers and they're all over the place because every house, everything's different. Like, oh, well, on this house, we painted the ceiling. So like, with this house, we only painted the walls and this house had, you know, a lot of trim in it. And it's like, and so it was just like this wild, like middle, like thing. And it, I didn't remember, we didn't obviously win the job. Thank God. I remember we spent hours, we like spent hours in the office, like calculating this. And I was, and I was more confused after.

Jon Bryant: Yeah, dodged a bullet there. Yeah, jeez. Come home with hand cramps, you can't pick anything up at the end of the night. Yeah. Yeah, so what you're saying though is like, it's absolutely true. Like I think there's no reason, like that argument to me doesn't hold much weight. That it doesn't, it takes too long. Because the counterpoint is that, and this has happened on so many bids that I've done, is I'll come into the house, you know, have the iPad out, we do in, put in the dimensions, then I'll show back up and talk to the customer and I'll say, okay, like I'd love to chat with you just a little bit about this. That's okay, we sit down. Like do you have another five or 10 minutes? And they'll say, what were you doing? I'll say, well, I was just itemizing, counting, getting all my measurements. That took me about 15 minutes total. I've got the contract written up, everything's good to go. And they'd said, well, and I'd say, well, you kind of ask. The way you're asking makes me seem like you're confused that I'm here that long. And they're like, well, the last two guys that came stood in our front entryway, looked around, said, how many square feet is this? And left. And the question I had was, well, who do you feel more comfortable with? Who do you think it was, Michael? Who? And so.

Michael Murray: Well, John, I actually just charge people based on the type of car they have. So if you got a nice car, you get charged a lot of money. And if you charge a not nice car, then I charge less.

Jon Bryant: I mean, as you should. Yeah. I mean, great point, but what does a lot and a little mean to you?

Michael Murray: Well, it just depends on how much work we have.

Jon Bryant: Yeah, right. Right. Exactly. If I won or lost in the last job. But like that is what our industry is doing is like, it takes too long. So in order to combat that, I'm going to take five seconds. I'm going to drive to your house, say hello, ask the square footage and leave. Therefore using a method of estimation that is making our industry look bad, making us look unprofessional. And then saying like this. Well, this guy's cheaper and it's like, what are we doing? Like it really cuts the core of me in those types of conversations. Cause I'm like, as a customer, how do you feel when someone does that to you? It doesn't feel good.

Michael Murray: I think, I don't know. So first of all, I agree. Yeah. I'm going to agree a hundred percent obviously, but I think more of the point it's like, don't, you know, don't do this. Cause we say so it's like evaluate if, you know, if, if somebody's not doing this in their business is wildly profitable. Great. Like who are we? Like that's awesome. But our industry is not, there, you know, there's not a whole, there are companies, don't get me wrong. There are companies in our industry that are extremely successful that I look up to and I aspire to be like when I grow up. But that's not like the main, the most common experience in our industry is somebody, business owners are working way too hard for way too little pay. And I would like to see that stop. I think we have way too many really hard working really talented people in our industry that are owners and employees that are underpaid. And I think one of the most important things to solving that is pricing. We don't charge enough and we don't accurately charge. It's not just simply raise prices, although that's part of it. But we need to accurately charge so that we're not charging more to the guy with the nice car and charging less to the guy with the not nice car or the big house or whatever it is. It's like, that is not how you run a professional business. I don't think anybody's really making that argument. And with production rate estimating, it's just easier. Like it is just more predictable to know that we're going to make a profit. It's not a guess. Running a business is hard, but it's not overly complicated. It's actually relatively simple. Our industry is relatively simple. What you have to do to run a successful, profitable business is not easy, but it's not complicated.

Jon Bryant: Right. And lots of people have done it before, right? Like we can kind of learn from them. All right, I should also say, yeah, like you've made a great point there that people do this a lot, like if you are running a successful business and you're doing it using a different method, like I'm really passionate about this method because I've seen the success that I've had, but that doesn't mean that you can't do it another way. Like there's absolutely, there's a lot of ways to skin the cat here. And I just, I've had a hard time finding a better one than this. And so, you know, if you, I think if you do it differently, man, I would love to chat at the end of the day, like, please, you know, if this is on YouTube, leave a comment. If not, you know, shoot us a message and be like, look, this is how I do it and it works really well. I'd love to hear it because it's, this is such an interesting topic to me, as I'm sure it is to you, Michael. Like, I don't want to be blind to the fact that like, there are really successful companies running on a different method and that they're out there. I just want to understand it. And this is the only one that's really been able, this method is the only method I've had that has been able to consistently, effectively priced jobs. So that's my experience. That's what I can speak to. And I think, you know, it's important to make the distinction that it's not the only way. But with that said, I have one kind of devil's advocate question for you too, Michael. And that's that a lot of, there's a lot of discussion about hourly rate out there that I've seen. So how could you possibly know your hourly rate?

Michael Murray: I'm like, how could you not know your hourly rate? All right, so how could you know your hourly rate because there's too many variables or what's the, like help me understand the, somebody be coming from.

Jon Bryant: Yeah, because, like, is it, is it reflective of your area? Is it reflective of like, break it down a little bit here? Like why? Cause I, yeah.

Michael Murray: It is. Yep. So, okay. So there's two, two or three parts to production rate estimating, depending on how you want to do materials. So at Textbook, we do materials as a separate piece. You guys do materials as part of your hourly rate.

Jon Bryant: That's been my method, yes.

Michael Murray: It's small difference, doesn't matter. We could easily do the same thing, just like you could easily do, pull out your materials. It's the same, we're very much the same. So really what we're coming down to is how many hours, how much per hour, and does that how much per hour include the materials, or do I need to add that in on top? That's it, that's what we're both talking about. And so really we've talked a lot about how do we come up with the hours, and now we're trying to figure out how much do we charge per hour. And you asked you know, one way you might think of that is, is it based on the market and things like that. I think, so I would say yes, it is based on the market, but not in the way most people think. It's not based on, well, how much do my competitors charge? Therefore, I'm going to charge more or less. I don't care. At the end of the day, like, I don't care what my competitors charge because I want to run the type of business that I want to run. I want to give our employees full-time benefits. I want them to drive decently nice vehicles, not like a rust bucket, falling apart thing. I want our staff to have an okay decent office. You know, yeah, like this place is not the Taj Mahal, but it's like, I like coming here to work every day. It's you know, whatever, it's a decent place. And it costs, you know, decent money to rent. And all of those things, right? I like to have like a decent cup of coffee. So we have like a, you know, okay coffee, it costs a couple bucks here in the office, right? And so it's like, what I'm going to figure out is what are all of those things cost? And then from that, I'm going to figure out how much do I need to charge to be able to afford those things? I'm not going to go out to my competitors and say, well, if you guys charge $40 an hour, I'm going to charge 30. And then I'm going to try to figure out how the heck to afford a business after that. Right. Cause then that's where you end up with like a business that sucks to run. It's like, no, we, I know we have spent money on marketing and benefits. But let's go back to that market. The reason the market matters is because of it's the labor market. And that's the biggest part of this cost. How much does it cost to hire the good quality labor that the good quality team members that we need, that I want to work with, that I'm going to be proud to send them to somebody's home, and all of those things. And so in some markets, that might be 20 bucks an hour. In other markets, that might be 30. Just like, if you want to come to Cleveland, if you go buy a 2000 square foot house in Cleveland, it doesn't cost the same as it does in San Francisco. We all know that. And it's for that reason, the cost of labor in San Francisco is higher than it is in the cost of Cleveland. And so the market matters, but not in the sense of like, well, how much do my painters charge? And I guess I'll just, or my competitors charge, I should say. And so therefore I'm just going to adjust based on that. Cause the reality is they have no idea what they're doing. They don't know how to charge. They're not making money. For if like if I could just say that one more time for everybody, for the one person that might be actually listening, stop looking at your competitors to see what you should charge. They're not making any money. Don't copy off of them.

Jon Bryant: Yeah. I'll add to that just a little bit. And that's the, you know, I think the one question we get a lot, especially kind of being on the software side of things is, you know, how much is an hour? How much do I get my hourly rate? And we do have videos on that too. So there's some help out there, but the initial thing is that it's complicated. Like it feels overwhelming. And like to go through all of your business costs and try to break that down into an hourly rate feels overwhelming and it feels like a barrier because it's math. I think a lot of people are just like, oh math, oh my goodness, my head's spinning. Getting my financial statements, like that's an F word. In some people's lives, like it's like, how do I break all this down? Like, thanks guys. And so we, like, it's, I think a lot of people has hesitation about, okay, great. Like, I've got some production rates, but how do I figure my time? And And what's interesting is, I think we've talked about this before, just like, there's some kind of general rules of thumb you can use to figure out really quickly if you're charging even remotely the right amount of money per hour. Like you can probably go to your accountant or whoever does your books and say, look, take all my costs and divide it by all the hours that our employees worked, our team worked, and tell me how much each one of those hours cost. Because that is the more accurate way to do it. It's not really forward thinking, but you can see the past. But we've talked about this before that like, if you're looking at just simply a quick evaluation, what's the average cost of labor for most, most painting contracts percentage wise of their revenue? What would you say?

Michael Murray: But well, so without burden, about a third, I would say if you're again, for the sake of simplicity and like somebody can say it's 35% and whatever, fine. I'm not disagreeing, but for down and this isn't the way that you, again, to your question of like, is this the most accurate, best way to calculate your price? No. Is this a really back of the napkin way to do it? Yeah. I would say about—

Jon Bryant: About a third, yeah. Maybe with burden you're talking about like 40%. So, yeah. And so, you can reverse engineer pretty quickly off that number. Cause you're like, okay, add up all of, just take the staff you have. What do you pay them per hour? Add all that up, divide that by the number of staff. That's your average hourly wage. Assuming they all work full-time. That's just, if they're all working, that's what you're paying per hour.

Michael Murray: Simple.

Jon Bryant: And in what you're saying is if you keep burden out of that, then you just multiply that by three and just see if you're roughly charging three times what that average hourly wage is. And so to me, that argument has always been, to me it's been like just a misunderstanding of how the business runs that might be driven from not understanding the percentages, which aren't really wildly available, right? Like what the percentages of a successful painting company look like. But it also could be driven from the fact that like, yeah, financial statements are a little bit intimidating, math is intimidating. But let's go back to that basic principle. If you do that for your business today, are you charging roughly three times your average hourly wage?

Michael Murray: Or more.

Jon Bryant: Or more, or more, yeah, correct, or more. Because if you are great, if not, seriously consider raising your rate. Right? It's that simple. The other argument here too, people say is like, well, what's my time worth? If I'm working, what do I charge? Well, you just got to look at what it's going to cost to replace you, really. So is that, a lot, yeah. So now, yeah.

Michael Murray: Lot. For most, yeah, seriously though, for most painting company owners, like they're their best, you know, especially if they're still out working on jobs, which is fine, you're probably better than somebody that you could hire. Right. And so it's, you need to account for that in a way that's, you know, reality. You couldn't replace yourself with a $20 an hour person.

Jon Bryant: No. Now let's reverse this back into like a production rate type scenario. The reason why people get paid more is because they do things faster. They achieve the quality faster, right?

Michael Murray: That can be one of the reasons. I don't know that that's the only reason.

Jon Bryant: I guess if we're talking about, okay, well, there'll be another reason.

Michael Murray: You know, so I would say like, what's the other value that they might be providing? So if they're managing more like a team, you know, right. So they might not be the fastest painter on the team, but they're a good manager and they're able to do that. Or they provide good customer service, you know, and things like that. I would also think like, what are the things that maybe they're taking away from the owner having to do? Right. So maybe they're capable of ordering materials or you know, picking up the materials or getting the final payments from the customers. Those are great. Then as the owner, maybe I don't have to go do that. So I can go spend that time doing another bid and selling more work. And, right. And so it's just like, yeah, that person—

Jon Bryant: Yeah, thank you for bringing that up. Cause you're absolutely right. I was more so thinking of like, it's purely the painting side of things that like, when you, because this argument also exists, like what are you basing the hours on? Like what's the time based on? Is it based on the fastest person, the slowest person? Like who is this? And usually, it's the average, like it's kind of the like, a time that's like comfortable in order to do it. And so if somebody can work faster, you're able to pay them more. And if they work slower, you kind of pay them less. And so that's been the kind of way that we've thought about over the years. And so if you look at kind of the owner, going back to the initial kind of hesitation, it's like, well, if you're now taking yourself into more of a managerial role, is that overhead? Is that something else versus production? That's where we, we need to kind of think about our wages. That's where it's important. So, cool. Let's, take a look here. We've got, I think it's pretty much going to wrap things up for today. All right, guys, thanks for tuning in.

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