From Residential Painting to Commercial Painting: How to Expand Your Business (Part 1)
What do you think of when you hear commercial painting?
- Blow and go
- Low Quality
- Slow Pay
- General Contractors
My name is Scott Lollar and I am a DYB coach and I want to talk a little about the misconceptions contractors like you have about the commercial painting market and how it might be worth opening up your mind to this very important market segment.
I want to first define what I mean by the Commercial Painting. The easiest definition for me is painting something that someone is not living in.
So the interiors of units of a HOA or Condo Building would not be considered commercial to me but the hallways and exteriors would, and of course offices, manufacturing facilities, retail, restaurants.
Anyplace that is not a residential dwelling I would consider commercial.
The exception to this rule would be ground up, new construction. Before anyone lives in it.
As you can imagine, this includes lots of surfaces in lots of areas on lots of building, both inside and out.
Benefits of adding commercial painting to your mix of work
First of all, it has less seasonality especially for those that have cold winter months. Things need to be painted when they need to be painted. It doesn’t matter if it’s snowing.
It doesn’t matter if it’s Christmas.
In fact, some customers, like manufacturing plants, for instance, want upgrades done during the holiday season when their plant is closed for the holidays and maintenance.
Secondly, commercial projects tend to be larger. Would you say it is easier to mobilize and manage one $30,000 commercial project or ten $3,000 residential projects? Exactly.
Because of their size, it is easier to increase crew sizes as needed which can assist in growing your painter count.
So when you hire the new apprentice level painter or level 1 painter, they can be partnered with more senior people and there are more than enough tasks to train them on a larger commercial project.
Increase or reduce crew size
These are also jobs where you can increase or reduce crew size to accommodate other project demands without crippling the project.
You can increase or decrease the pace of many projects without any consequence or concern by the customer.
Nobody is babysitting you.
The people you are working for have better things to do than to monitor your headcount.
As long as you hit your targets, everyone is happy.
Additionally, buying decisions are not as dependent on price.
The grip on money is not as tight in the commercial world.
Now we are talking about everyone but GC’s here (Most GC’s are evil and should be avoided like garlic to a vampire but we can talk about them later).
Most of the people you will be working with are not spending their own money.
It does not keep them from a new car or a nice vacation.
It has been budgeted and is expected to be spent. That’s it. No emotions.
No “we can get this done for half price and spend the rest at Disney World” behavior. It is a much more stable market with solid transactions and dependable outcomes.
Capital budgets and maintenance budgets
In addition, many of your customers have capital budgets and maintenance budgets. These are expected to be spent.
A corporation knows maintenance, remodeling, and expansion are part of keeping them operational and growing so they allocate money to do just that. To maintain. Remodel. And Expand.
And it’s not uncommon to find these folks scurrying around at the end of the year trying to spend their money and you should only be too happy to take some of it.
It’s a use it or loss it proposition. They are supposed to spend it!
Commercial customers have different criteria that determine a good customer experience and a quality job.
The quality of the finished product is not scrutinized like a living room is.
This is not to say the standard is that much lower. I believe the uses are different. Commercial projects are often in high traffic areas where durability might override ascetics. Function might trump appearance.
But don’t give me the attitude that commercial painters aren’t good painters.
I love when I hear painters boast that they are “High End”.
I think high end is more for themselves than for a customer.
Is the process of painting drywall and doors really any different in an office than in a home?
I think declaring yourself “High End” is really irrelevant to many people.
If everything had to be “High End”, we wouldn’t have Chevrolet!
What we need to deliver is just a little more than the customer expected no matter what the surface and no matter who the customer is.
And I would suggest the commercial client might just be demanding a higher customer experience than most residential customers.
They want the product they expected while dealing with the public and employees and bosses and crabby subordinates that are inconvenienced and get headaches from the smell of whatever it is you are applying on the walls.
If you can make facility or property managers look good with little or no blowback from anyone and a quick turnaround at a fair price, well believe me when I say they will not be getting three bids for their next project.
You have just made it that much easier for the facility manager to conclude you are the best choice of painters.
These folks don’t want to go out to get multiple bids every time they need something done. They want to call a trusted vendor. Be that vendor.
Another benefit is a more frequent customer.
A great residential customer where you paint their entire interior or exterior will not call you again for many years. Maybe as many as 8 on an exterior.
So you did an amazing job. Everything was great. And you won’t hear from them again for 8 years? Bummer.
A property manager can bring you significant projects many times per year every year. It’s like a fruit tree. You work hard to plant and nurture the tree and as soon as it bears fruit, it keeps bearing fruit over and over and over and over.
It takes a little while until you start getting fruit but once it does, it keeps producing.
So what are some of the challenges?
Existing management structure
One may be your existing management structure.
Larger projects, especially in occupied spaces, may require a higher level of planning and onsite communication and management.
So while you grew to a significant size as a residential contractor by utilizing your foreman and lead painters, here you’re very likely going to need a non-producing overhead position like a superintendent or project manager.
This will require some space in your budget and some planning and management.
Your marketing message will be different. Your beautiful website full of residential pictures and testimonials don’t scream commercial capabilities and expertise.
And it will take some time for you to build up those pictures and testimonials unless you buy stock photos because you have never painted any commercial yet.
To increase your commercial painting opportunities, networking will be critical to add to your marketing calendar.
The cost of this activity will be time versus money.
It will require a significant commitment of time in order to intentionally connect with people that are a good fit for what you provide.
And some of them will have projects that are too complex for your skill set right now which is fine.
Remember the apple tree. Plant the seed. Water and nurture.
Different payment structure
Another challenge is a different payment structure than it’s enjoyed in the residential market. You are expected to perform the work prior to invoicing and then they have their typical terms.
None of this behavior is unreasonable. In fact, they might argue it is unreasonable for you to ask to be paid for something before it happens! If you target management companies or direct to owners, it will be possible to get a reasonable deposit.
But a 30-day net payment is pretty common. The bottom line here is you will need to have strong cash flow projections and be prepared to carry receivables for 30 days at least.
This can be by cash reserves or with a line of credit.
So as you plan, complete a budget and figure out what this capital number is and make a line of credit or cash reserves a priority to eliminate the stress of a high receivables level.
Other things to consider
It is almost certain that commercial buildings will want to see limits much higher than you were advised to have in your residential re-paint company. I have seen 2 million on the low side all the way to 5 million.
Talk to your insurance broker but these limits are easily obtained by adding an umbrella to get you to the limits required. You may need some additional training on equipment like lifts or product training on epoxys or high-performance coatings.
Attention and training on safety will be elevated along with increased communication and documentation around the moving parts of projects.
Working with General Contractors
Now I want to pause and address working with General Contractors. In my opinion, I feel the same way about them of both residentially and commercially.
It is a pretty difficult place to have a properly sequenced and profitable experience.
Most GC’s simply don’t operate in a way that is stable and consistent and that delivers a predictable outcome for you. So I would steer clear of them especially as you merge into this area.
It will be tempting as there are plenty of “opportunities” for you to be one of 52 bids on a new Taco Bell being built by some contractor out of El Paso. Run.
But there absolutely is an opportunity to make money with GC’s and plenty of our painting friends are doing it so this is not a personal attack on their choice of the customer. My belief is there are so many opportunities out there to build a multi-million dollar business without dancing with GC’s that I would.
So I hope I answered a few questions and maybe opened you up to expand your vision and your mix for your painting business.
And make sure you check out the companion video on how to market for commercial opportunities.
If I can serve you in any way, feel free to e-mail me at scott@DYBCoach.com or better yet, schedule a strategy call at https://calendly.com/dybscott/15min.