Beyond Residential: Is Commercial Painting Your Next Growth Frontier?

Welcome to the Profitable Painter Podcast. The mission of this podcast is simple: to help you navigate the financial and tax aspects of starting, running, and scaling a professional painting business. From the brushes and ladders to the spreadsheets and balance sheets, we've got you covered. But before we dive in, a quick word of caution: while we strive to provide accurate and up-to-date financial and tax information, nothing you hear on this podcast should be considered as financial advice specifically for you or your business. We're here to share general knowledge and experiences, not to replace the tailored advice you get from a professional financial advisor or tax consultant. We strongly recommend you seeking individualized advice before making any significant financial decision.

Welcome to the Profitable Painter Podcast, the show where painting contractors learn how to boost profits, cut taxes, and build a business that works for them. I'm your host, Daniel Honan, CPA, former painting business owner, and your guide to mastering the numbers that drive success. So let's dive in and make your business more profitable one episode at a time. I'm super excited today. I'm here with Mike from Rise Next Level. He's a coach for marketing and sales strategies. He has a large, very large business out of Michigan, a painting business out of Michigan. He employs over 70 painters and he has several other service-based businesses as well. I'm super excited to have him on the podcast. Welcome to the podcast, Mike. How's it going?

Daniel, first of all, thank you so much for having me on the podcast. I'm super excited. You know, this is an honor to be on here and to discuss with you, you know, the painting business and, you know, everything from, you know, soup to nuts, from marketing to closing out the books at the end of the year. Things are going great and nice, beautiful day out there. And I'm happy to be here with you talking about business.

That's awesome. Yeah, I'm excited to get into it. So if you could just give folks, listeners, an idea of where you're coming from. When did you get started in the painting industry and what have been some major milestones along the way?

Yeah, so I got started in 1999 in the painting industry. Um, you know, the first year, um, was basically a year I got started with a friend of mine that I met through basketball, and I knew nothing about the painting industry and was kind of learning the ropes for the first year or two. And, you know, once I learned the ropes and once you're in the, you know, swimming, you start learning things really quick. And I had a deep desire to succeed. I didn't succeed in basketball. Michael Jordan didn't succeed in basketball. No point intended. But, you know, when that happened, I did have a deep desire to succeed in business. you know, help my family out and, uh, you know, uh, live out goals that I had in life at that time, which have changed since then. But, um, you know, throughout the years, you know, major milestones in business was, you know, uh, getting my first office. Um, you know, my first office, you know, I think we picked up right in about 2002. And, um, you know, we looked for the cheapest rent, rental space, and you know, we only did it because we needed at that time where people were coming and picking up their checks. And, you know, we started to want to have a physical address to look, you know, you know, more professional to the customer and all that good stuff. And, you know, you know, that was a major milestone to me, getting that office. I think when you do that, you kind of, you know, you felt like, wow, okay, I'm going to an office, you know, at 7:30, 7:00 in the morning every day. Uh, so that kind of, you know, sparked some things up. And then, you know, the next major milestone was I hired a blueprint estimator because at the time, um, you know, uh, blueprint estimating was and still is huge. So that was a big milestone, you know, hiring that, you know, first, you know, blueprint estimator, that first salesperson. So those are big ones for me because you're spending money And at that time, you're trying to save up as much money as possible and, you know, go towards building up, you know, into investing into marketing and a staff that could really perform and create a name for yourself.

That's awesome. So 2002, you get your first office. When did you hire that first salesperson, the blueprint? Blueprint Estimator.

So that was in 2002. Um, it was, uh, separately a salesperson that I basically took everything that I had learned in, uh, 2000 and 2001, because 1999 was a year of like trial and error and, you know, things that work, that didn't work, and all that good stuff. And I found that in the first 3 years, I learned so much about where to spend my time, where not to spend my time. And I was fortunate enough to know a gentleman that played on my basketball team in college. I played college basketball, and he at the time had graduated and was looking for a job. So he was like a sponge and wanted to learn. And, you know, every day I would give him different tasks. And, you know, he started, you know, I would sit down with him for hours, train him. And sometimes I would get from him, 'Mike, you know, this company is not going to work with us. They said they're already set with painters.' Now tell them, 'Hey, how about this? I guarantee you we will work with this company.' So, and it was funny, I would call the, you know, the company, and my approach would be a little bit different. You know, they would tell me, 'Oh, we already got painters.' I'd say, 'Oh, no problem. No, I respect that. Obviously you guys are a great company already in business and doing great work. Is there any way I could just drop off my info?' hand at a time, you know, emails weren't being used so much and whatnot. Can I drop off my info? And, you know, guys, just keep it on hand in case you ever do need, you know, a hand with a painting job or a small painting job that your other guys can't get into. And I started using— I started showing them that obstacles are just illusions, you know. And if you think that it's an obstacle to get into that company, you beat yourself. Don't do that. Figure out ways, you know, create this list of all the customers we are going after and the ones that are hard to get into or harder to get into. We will find a way to get in with them and start working with them through being persistent, through being honest, through showing that we want their work, through showing the quality of work we do. And then also, you know, telling them, listen, you know, you know, how can we get a chance? You know, can I even paint, you know, some walls in your office for free? So, you know, it was a lot of different techniques that I taught him. And, you know, he started thriving. He got up to the point when he was selling about $1.2, $1.3 million for me. And that was a big milestone. And then that Blueprint Reader, he also helped take us to the next level because now we weren't telling construction companies and general contractors that we can't work with them anymore because, or we can't do, their, their blueprint reading. Um, so we were able to take those on. So we're doing residential work, repaints, all that good stuff. But I also want to go after the bigger jobs. So that was a big milestone that I got through and, um, you know, learned a lot from. And, um, you know, feel that that's something that is a obstacle for a lot of painters in the industry now. But, you know, it's easily taught on how to get through that. And if they say, well, I can't hire a blueprint reader now for $80,000, $90,000, $100,000, there's multiple routes to get those blueprint, blueprint read, you know, and, you know, put on a form that is very respectable to bid for, uh, general contractors now. And I find that a lot of people get held up with that, but it's not a problem anymore with having a world climate and being able to, uh, utilize technology.

Yeah, so, so in— back in 2002 when you first got this Blueprint Estimator, you were already going after commercial, or, uh, or were you doing mostly residential and you're just trying to get into commercial at that point, or Yeah, we were doing repaints and, you know, we said, okay, we want to keep doing repaints.

And at that time you had no Facebook. Facebook wasn't even invented yet. You know, it was 2002, 2001, 2000. So we wanted to look at how can we scale, how can we get more? You know, you do the flyer thing, you knock on doors, you go after your inner circle, the network that you have, you go after property management companies. Used the Yellow Pages at that time, used flyers at that time, used coupon companies at that time. So we were doing all those options and we were hitting all those options of bringing in leads. So we wanted to expand. We wanted to get into commercial work. And, you know, that's where we started, you know, even knocking on doors of commercial buildings. And, you know, some of it worked, some of it didn't. But I left no stone unturned back then, just like I do now. And, you know, I like to always explore. And, you know, to me it's an investment. You don't always make money on that investment, but I'm able to help individuals and other painters and other companies, you know, see where they want to get as far as their goals and tell them what works and what doesn't work so they get there faster. So You know, that's, uh, that's some of the things that we did back then. And then we got into blueprint reading because, hey, who wouldn't want a 30 or 40 or 50,000 square foot, uh, ceiling to spray out and block walls? Started getting into that work.

So over the last 25 years, what marketing, uh, has worked to get a hold of those decision makers in, in the commercial space to get those commercial jobs? I'm sure it's kind of different 25 years ago to now. How has that changed over the last couple decades?

Immensely. Um, so back then it was more of, uh, knowing general contractors, knowing building owners, knocking on building owner doors, uh, being— going— being part of organizations, a lot of organizations, a lot of trade shows, which is great. You still use those things now. But in today's market, in today's world, today's technology, you know, there's so many other routes to, you know, get to that avatar client of the building owner, the building manager, the building maintenance manager, stay in front of them and, you know, get leads on a constant basis. And that's things that we've designed in our marketing strategy and our marketing blueprint in our framework. To be able to stay in front of them on a regular basis. And once we get in front of them, and once we get that job and we do a super job, you know, we made it a point to, hey, take before and after pictures every time, do before and after videos every time, get that, you know, reference letter every time. You know, sometimes people are hesitant to do so, but you ask and, you know, you try to do what you can to do that, uh, to get that letter as a validation for the next building or or, um, you know, the next project you're going to bid on. But also talking to that person, they know other people, and, you know, getting into their network. And next thing you know, you're getting a referral from them, you're getting another referral. Next thing you know, in a commercial space, you know, we have 11,000 people on our database that are individuals that we call on. And, you know, now what you're doing is you're saying, hey, who's my A— in my A-list, my B-list, my C-list And then, you know, let's spend— you know, there's a rule, 80/20 rule, right? You know, you get 80% of your business from 20% of the people you're going after, and then you get 20% of your business from, you know, you get 80— you get 20% of the business from the other 80% that you're going after. So it means concentrate on what's working great. And that's what we do. And, you know, at the end of the day, I can't express how important it is to really exemplify and show trust, communication, quality workmanship, because those are the things that people remember. And then what happens is they become a salesperson, a mouthpiece, an advocate for your services. And really, that's what we've done throughout the years. But I will say this, I don't care how much business anyone's listening, that is listening, has. Henry Ford has a statement, he said, "Never stop advertising. Stopping advertising is like asking, you know, a clock to stop." And I truly believe that even when you're loaded with business, you could turn down the funnel a little bit if you do Facebook or Google or, you know, if, uh, if you're doing, um, you know, outbound calling, if you have virtual assistants that are doing outbound calling, or if, you know, you have— if you want to slow down the leads a little bit, but don't ever stop. Don't ever stop. You always want to be seen out there, known out there, and you want to create an image of professionalism, trust, and deliver every single time.

So it sounds like for marketing to commercial even though technology has changed a lot, I mean, it sounds like you're doing a lot of the things that you were doing back in the day. It's, you know, talking to people, networking, building trust, getting testimonials. Not that stuff is pretty much the same. And it sounds like that's kind of the core of what you need to do for getting into commercial space. Is that right?

That is correct. But then nowadays, um, you know, you have websites, for example. Back then there was websites too, but not to the level they're at now. So SEO is very important. You know, a lot of people don't, you know, maybe put so much time into SEO because it's a longer play and they want instant gratification through Facebook leads or Google leads or Google LSA leads or, you know, whatever it may be. But, you know, SEO, ads on Facebook, ads on Google, you know, taking care of your GMB, making sure that, you know, you're, you you know, optimizing your Google Business Profile, you know, outbound calling, email campaigns, video marketing campaigns. You know, there's so much of that stuff that you could do. And then there's special tools and systems out there that can get you the right data to target your avatar client in the commercial space. And then what do those clients want to see? What do those customers want to see? They want to see a customer that's capable, and you got to validate yourself. So they want to see someone has the right insurance, workers' compensation. They want to see someone that has done work for many facilities or customers similar to them. So, you know, that's done in, you know, proof of concept through reference letters, you know, through pictures, through videos. And most important, when they talk to you, they're going to know if you know what you're talking about. They're going to know if you know how to, you know, paint a ceiling that, you know, is really dirty, has, you know, is contaminated, has to be cleaned prior to painting, has a lot of peeling. So it has to be blown down or sandblasted and, you know, primed with the right primer, painted with the right top coats. So when you do get that opportunity from the avatar, you know, client that you're going after in the commercial space or the industrial space, it comes down to the person talking to them them and letting them know that they know how to do it. They know how to— let's say it's part of a facility. They know how to tarp off and contain the section that they're working in so the rest of the factory or warehouse or industrial facility could continue work. And that's what they want. They want to have someone that understands the process and the system to use, the right equipment to use. And the right products to use. Even though I'm talking a lot about industrial and commercial, our business does a ton of residential. So it was just like back then, we said, let's do as much residential as possible. It's wonderful for cash flow. You get down payments, you get paid right when you're done. In the commercial industrial space was something that took us to the next level. So it was something that was able to scale us up higher, and we still utilize that philosophy. And with commercial industrial, people sometimes might say, oh man, we don't get paid for 90 days or whatever. No, you can talk to them, you can get a down payment, you can get draws, all that good stuff. Everything is open for discussion when you validate yourself as a professional and someone that the customer wants to work with.

Excellent. Yeah, that's a common thing. So a lot of folks in residential, they're used to having great cash flow because like you said, you know, you can get 50% deposit down and then, you know, a week later get the other 50%. And so you're never— you don't really even need that much debt, if any at all. Whereas commercial, those type of situations, sometimes it will you know, you'll have net 30, net 60, net 90 turns, plus you got retainage in some, some cases, right? Could you talk about how, how do you manage? Because you do mostly commercial, right? You do like 70% commercial and like 30% residential, is that right?

Exactly, exactly.

So how do you manage cash flow on the commercial side, uh, to ensure that you're, you're going? And you mentioned a couple things off the bat is negotiating with your your customer. But, uh, could you talk a little bit more about that?

Well, yeah, absolutely, Daniel. It's a great question. And first of all, not too much negotiation, because after a while the customer could get scared and, and, you know, just say that, you know, they can't handle the, um, you know, the, the burden of materials and labor, uh, the financial burden. So you got to be careful. Don't negotiate too much. You know, it might be a conversation But, you know, your question is, you know, how do you handle it? How do you do jobs that are, you know, $30,000, $50,000, $100,000? You know, I'm working on a project right now that is going to be over $2 million. So, you know, the way you do it is, first of all, hopefully you're making a ton of money throughout the years and you build up to that. If you're new in the business and you're getting into that, It's just not something to get into when you first start. I would not suggest that for someone. If I was coaching that individual, I would build you up to that point for you to be able to handle those projects. And then I would also take that individual and I would build them up through you, Daniel, on their books to be able to go to a factoring company and to get assistance from a factoring company to be able to do large-scale projects like that. And for those who don't know what a factoring company is, a factoring company basically is a company that will pay you prior to getting paid from the customer. So they're, they're, they're, they're your intermediary lender. They're your short-term lender, your 30, 60, 90-day lender, and they're going to charge you points every single month. But it's worth it. And at the end of the day, it's a small fee to pay when you're, when you're doing, you know, a job where you're going to make $30,000 or $40,000 in a week or, you know, in some cases more, some cases less. So a factoring company is a solution for people that do want to get into the commercial industrial space, but they don't have the money to do so right now. Yeah.

So they're basically— you show them your accounts receivable and they basically buy your accounts receivable from you. And so it's— you get your money quicker and at a cost of interest, basically.

So, so it sounds like that, Daniel, and that's where you come in, because someone like you that has, you know, an amazing process to keep the books clean, the P&L clean, and show exactly where you're at to that date, it makes it so easy to take your financials and to show it to that company. So I'm sure, you know, for example, with me, I tell you, hey, Daniel, you know what? Here's, you know, I introduce you guys on an email. You send them the information. It's clicks of buttons. But not everyone always has that. And sometimes their books are so out of shape where you're not going to get factoring. You're not going to be able to get that line of credit from the bank. So not saying it just because you're on here, Daniel, but guys, books are so important. To keep your QuickBooks properly in order, to keep your financials in order. So important for whether you want factoring or whether you want to get that credit card or that line of credit.

Mm-hmm. And so would you say line of credit or factoring, is that pretty much required going into commercial if you're working with larger jobs?

Unless you have a couple million dollars saved up or $1 million saved up or whatever that job amount is. Um, yeah, you're not going to be able to do it without it. And that's why sometimes, um, everyone knows, uh, that's listening to this call, all the painters out there, that they're subcontractors. Well, that's why people sometimes never become a main contractor and they're always a subcontractor, is because they don't know how to manage their money, they don't know how to manage their books, they don't know how to create a great, uh, resume profile reputation, you know, and they're always going to be a subcontractor, so they're always going to be working for you or others or myself. And, you know, that's holding themselves back when it's almost an easy fix if you surround yourself with the right people because you want to have a brand. You know, I have a brand out there. Here's my brand. So Everywhere I go, if I go to a factory, if I go to talk to construction companies, if I go to talk to property managers, we get ITBs, invitations to bids, all day from so many different companies. We have a brand. So the subcontractor that never has a brand never even gets to the point of being able to make that kind of money because they hold themselves back because they don't surround themselves with the Daniels. They don't have that right person that could, you know, that's been there, done that, that could help guide them to that point. And what is the value of that? It's priceless, because, you know, they might spend X dollars, and what if they're making 4 or 5 times whatever they're paying for the, you know, an accounting service or a coaching service, and they make it for the rest of their life? What's the value of that? Hard to put a value on that.

Yeah, so it sounds like big thing to— before you go into commercial, make sure you have cash lined up, whether it's yours or someone else's, and then make sure you have good books, uh, especially in order— actually, probably should reverse that. Make sure you have good books so that you can get some financing from a, from a lender or something before you get into commercial. Now, from a marketing perspective, if you— if somebody came to you, uh, that's doing residential repaint, maybe they're doing 1 to 2 million in, in revenue as residential, and they feel like they want to get, get into commercial. What, from a marketing perspective, what would you— what recommendations would you make to them on how to get into that?

Well, first of all, you know, you would have to tweak your, your marketing strategy a little bit, um, and, you know, let, uh, you know, on your website first and foremost and, you know, let people know that you do residential, commercial, industrial. You would want to maybe start changing your keywords on your, on your Google advertising. Facebook is not a place for anyone to market for commercial industrial. Sure, you might get that, you know, 95% of it, 96% of it to me is like, you know, residential, which is great. But if you're going after commercial, it's got to be, you know, Google Ads. That's great inbound, high-intent leads for work that commercial industrial people want to get done. And I would suggest commercial prior to industrial. If you're taking the steps up from residential, I'll go commercial, then I'll go industrial. Then I would also do a lot of outbound stuff, you know, start getting involved in a lot of organizations where you can network with a lot of commercial people. And, you know, I'm going to really, really emphasize that commercial is important to get into first prior to industrial because it's like a stepping stone. Industrial is like really, you know, tough and really, you know, equipment intense, which you can rent. And, you know, but it's a ton of money. You know, your margins are bigger. You know, some people in the painting industry shoot for 40%, 45%, 50% margins if they're doing residential and they don't think that there's anything more than that. Well, you could possibly make 60% when you're doing direct-to-industrial work, 65%, because it's harder work and the margins are larger and there's less competition in that space. So commercial is a stepping stone to get in there. I would also recommend lowering prices. Don't worry about how much you're going to make in the beginning. Build your resume, build your track record, and then your prices can start going up when you prove that you are wonderful in that space, you're trusted in that space, your quality of work is great. You build that rapport with people that know that your service is excellent, your communication is excellent, and you start getting that in writing. And then you start using that and, you know, maybe take a salesperson of yours and say, hey, listen, I want to dedicate you towards, you know, commercial sales and industrial. And, you know, you dedicate that salesperson towards it, have them have a ton of inbound leads coming in, but also have them create a ton of outbound leads too, which they're calling on. And that's a great way to get started in the commercial/industrial space.

Okay, so it sounds like, first of all, tweak your, your marketing copy on your website and on your Google ad keywords that you're more catered towards commercial, commercial folks. So, and then also do outbound with networking in those groups where those commercial owners are.

Yes.

And phone calls, in-person meetings. And then you mentioned also when you are first getting started in that space, maybe having a little bit lower prices to build trust and, and earn that reputation so that you can further get, you know, referrals and, and network further into it and then start raising your prices back up. Is that right?

100%. And I want to add to that, you know, there's only so much we can, we can talk about in a matter of 30 or 40 minutes, but you also want to look at, you know, some people, um, you know, have some certain accreditations they could get. You know, some companies are woman business owned. You know, that's a huge benefit. So you may be able to, you know, get state or federal work that way. You know, some companies are minority business owned, so you can use that to your advantage. Some companies are disabled veteran business owned. So when I tell you for 26 years eating, breathing, sleeping this, you know, all the strategies and all the routes to get into business or get different leads coming in and, you know, build the business up. That's what I've done. So, you know, each individual, each company has different avenues and, you know, that they could utilize to, you know, to have an advantage. And if you do have those advantages, those are things that you want to make sure that is exemplified on your marketing material, when you talk to people, on your letterhead, on your bids, all that good stuff. So those are also things that could help you get into commercial industrial where it's not so important in residential. You know, if some— someone's a woman, business owned or not, you know, a residential customer is going to take, you know, normally, number one, who they feel is most qualified. And number 2, then they're going to look at the price. You know, that's how I think it goes. It's quality, then price. So for the commercial industrial space, any advantage you could have, utilize it. And if you're not, if you don't have those accreditations, sometimes you could do, you know, SPVs, special purpose ventures, where you could partner up in a joint venture and a side business and, you know, run that business and run business through that company and be able to give, you know, the general contractor or the facility the necessary participation they need from a woman business owned or company or minority or a veteran, a disabled veteran company.

Nice.

One of the things you mentioned was, you know, for commercial you actually see higher gross profit margins than you do on residential, that you're getting like 60%, 70% gross profit margins on commercial, which is amazing. Um, could you go talk a little bit more about that?

Well, I would say, uh, you know, um, I would say that those kind of margins are more on industrial And those kind of margins are more on projects that are more difficult. So, you know, the higher level of difficulty on a project is the more the project pays. And that's where you could make more money. Also, when you have a solution for a customer on a way to get something done, you know, price is not as important as much anymore in the industrial space. So I would say that that is true on the industrial end. And I look at the way to win business, even just a sales strategy in general. If you could provide someone a solution to a problem, or if you can prove to someone that you're the most qualified People do business with who they know, like, and trust. And if you could accomplish that in a matter of 10 to 30 minutes when you have time, you know, when you're in front of that residential or commercial customer, you're going to do a lot of business. And that's what I specialize in over the years. Man, you got to understand that every customer is different. Every customer, you know, some customers are looking to talk about sports, you know, half the time when you're there, or or other things. You know, you have to learn that, you know, one of the biggest attributes in sales I would say that a great salesperson has is the ability to listen and the ability to paint the picture to the customer of what they're going to be providing to them and then actually provide it to them. And that's where you get higher margins in any space. But to, to you know, go above that 50% is more in industrial space.

Got it. Okay, awesome. Well, I feel like we could keep going, uh, but I want to be respectful of your time, Mike. I really appreciate it. Um, do you have any, uh, any asks of the audience or anywhere you'd like to point them to if they want to get a hold of you? Um, I'll let you take it away.

Oh yeah, I mean, you know, yeah, I, I, I love, you know, I love talking about business in general, talking about the painting business, talking about growth, talking about sales, talk about marketing. It's really not a job to me. I love it. I'm passionate about it. I just— it's just what I love to do. So, you know, I get together and I have, you know, free webinars all the time. And, you know, you get on a webinar and chat about, you know, different strategies, different challenges. Individuals are chasing, you know, facing, or different obstacles, you know, that, you know, the, you know, or ceilings that they've hit, they can't overcome that ceiling. So if you want to ever email me, you could email me at, um, at, uh, Rise Next Level. So it's mike@risenextlevel.com and email me and, you know, I could get you on our, uh, next, you know, webinar. And, you know, I try to do it on a regular basis where I get a bunch of business owners on there, aspiring business owners, struggling business owners, thriving business owners, and we have great conversations. And that's where, you know, we see, you know, if someone, you know, needs help and what kind of person they are, because I love working with individuals that want it more than I want it for them. Because if I'm working with someone, you know, I want, I want, I want them to say that it's the best investment they've ever made in life. And that's where I think I get it for a little bit of it from basketball because I'm very passionate and I tell them, hey, listen, if you're not okay with someone being honest with you, I'm not the right, you know, coach for you. If you're not okay with someone, you know, maybe being a little rough on you in a respectful way, I'm not the right coach for you. But if you want to get— if you want to maximize your individual self and not, you know, say, I want to be what that guy is or do what that guy does or do what that company does. I want to look at myself and maximize myself. You know, that's what I do. That's what I specialize in, and that's what I love. And I get a kick out of people telling me, Mike, I never imagined I can get to this point. And I tell them, you're not even fully where you could be yet. That's a great thing about it.

Awesome. Well, I really appreciate your time, Mike. And for the listeners, definitely check out Risenextlevel.com or send Mike an email, mike@risenextlevel.com to get linked in with those webinars that he's running. I think it's a great opportunity to learn from someone who's been in the business for decades and has grown a massive painting business up in Michigan. So definitely take advantage of that opportunity. And with that, We will see you all next week.

Daniel, thank you so much. Audience, hopefully I gave you a little bit of something that can help out your business. It'd be an honor to help you out in any way possible. Hopefully we get you on some webinars, and I'd love to assist in your growth.