Crossover: Boosting Your Gross Profit & Lowering Costs Ft Daniel Honan (Profitable Painter Podcast)

And actually, an important thing for anyone who's on the tools, you need to consider yourself a painter in the business, and you can't just take the profit for you. You need to charge yourself out at the same rate that your other employees are being charged out at so that you can— because I'm assuming if you're listening to this type of podcast, you want to get off the tools one day. You need to charge yourself out so that you can replace yourself as a painter one day, because I've said this a million times, painting is the least effective, the least productive thing you can do in your painting company as a business owner. Is the worst thing that you can do if you want to get off the tools. Nothing wrong with painting, but if you're trying to chase profit, which is— what is this called— the Profitable Painter Podcast, you got to get off the tools. What's up everyone, Mike Grochikman here, founder of paintergrowth.com, and you're listening to a crossover episode of the Painter Growth Podcast. Now this podcast is also being, uh, streamed today on Daniel Honan's Booking for Painters podcast. Called The Profitable Painter. So you can go check him out over there. Highly recommend. He's got a lot of really fun episodes. But what we talk about is both of our shared experiences going to the Alex Hormozi Mastermind, some of the key takeaways that we had, including the number one financial metric that will allow you to grow your company profitably called the LTV to CAC ratio. Now it's a super dense number that has a lot of different moving parts to it, but we're gonna jump into it all. In this, uh, episode. It was an awesome conversation, had a lot of fun with Daniel. Looking forward to having him and his brain on in the future. And with that being said, let's jump into the episode. Enjoy, guys, I know you're gonna love it.

This is Daniel, the founder of Bookkeeping for Painters, and today I'm here with Mike Gore-Hickman, the founder of Painter Growth. Super excited to have him on today. Actually, this is the second time I've had you on.

Yes. Second time. Not enough times.

Not enough. Let's just, let's do this every day. Just jump on a call and just go through.

The thing about bookkeeping is that, and like bookkeeping and accounting and having a money guy is that most people don't bother taking care of their money. Like you spend all this time and energy looking after money or like making money, but you don't spend any time and energy looking after money. It's like, why not? It's like taking time to make kids, but then not looking after your kids. Like, you got to do it.

Yeah, it's super important. I think, I think I recently heard Alex Hormozi say something to the effect of, if you don't know your margins, you don't know your business, which is a good segue. I think both of us went to one of Alex Hormozi's events. He's doing these little workshops. I don't wanna say little, but yeah, pretty big.

Yeah.

They're big workshops in Las Vegas. And I got a chance to go to one and you went to one, was it back in July or?

I went start of August where it was like 48 degrees Celsius, 100 and whatever, 15 degrees Fahrenheit. There's wild. It was fun.

Yes. Yeah. It was like in the parking lot, it was like 9 o'clock or probably 8:30 in the morning and I was just drenched in sweat just from standing out there for like 10 minutes waiting.

But they had those little like sorbets out front. That was nice.

Yeah. Awesome. Well, one of the big things that came outta this was the LTGP to CAC ratio, which is a bunch of, you know, letters and acronyms there. And I know that was something that we were both kind of pumped out pumped about coming out of that event. Could you, what are some of the takeaways that you had in regards to that event and that ratio?

Yeah. So I listened to, like before the event, I listened to a ton of his podcasts and YouTube videos and stuff. And this, this one metric kept coming up and it's like the number one metric that will allow you to scale your business, which is, yeah, it's like GP for the sake of painting contractors, it's like GP, which is gross profit over CAC, which is cost to acquire customers. And it's a ratio. It's like a, it's like a singular number, but it's a heavily packed number, meaning there's like a lot of things that go into figuring out what this number is. But once you know what your ratio is, it's all become, it all becomes a game of how can you maximize that ratio so that you're enabled to scale. And I mean, a lot of people think in the way of like, my marketing spend is at 5% or marketing spend is at 10%. And that accomplishes a, like, I think that gets you most of the way there, but a lot of people kind of forget about gross margin, gross profit when it comes into calculating marketing expense. Like you can pay, you know, get 10 to 1 for a job on revenue, but if your profit margin's only 20%, then you're only, you know, only making it 2 to 1. So Um, that's really it. It's like, how can you decrease your cost to acquire a customer? Fully, fully considered cost to acquire, which is like your, your, uh, whole marketing department and your sales rep if you have one and your sales costs. Um, and then your gross profit per, uh, over a period of time, not even per job, but like over a month or something like that. So this is like on a monthly basis you can calculate this number.

Yeah, it's a really elegant way to just boil things down if you just want to know show me one ratio that's going to tell me whether I'm profitable or not. Like, this is the— this is what you want to look at. If you only have, you know, 5 minutes to look over your financials, if you could just have your admin person or whoever just boil everything down to this ratio over, like, like you said, this past month or this past quarter, this is like great because it really just tells you what you need to know if you're on track or not.

Yeah, so, um, I mean, from your perspective, like, what do you think is the first thing that someone should dig into when it comes to figuring out— figuring it out?

Yeah, so the— I mean, gross profit is the first part of it, right? So this— just to— we probably should define terms. I don't want to assume knowledge here, but, um, gross profit, you know, is the revenue money coming in minus the cost of goods sold. So this would be your— what you pay your painters and the materials for the job site. So when you subtract those two things out, what's left over is your gross profit margin. And then to most folks, when they talk about gross profit margin, they're saying in a percentage because you're taking that gross profit margin, dividing it by the revenue to get your percentage there. So that's first is understanding what GP means. That's, that's gross profit. And then the other part is the customer acquisition cost, which is really your marketing costs, everything you need to get leads, and then plus your sales costs, everything to close the deal, basically paying your salesperson. Usually folks are paying them, either it's you or Maybe you're paying your salesperson commission or base salary with commission. So marketing costs plus sales costs is your customer acquisition costs. So everything you need to spend money on to close the deal is essentially what that is. And then the relationship between these two things, like, like you said, I think Alex Hormozi recommends a 3-to-1 ratio, which makes sense to me. And, and that's basically to, to kind of illustrate the example would be like 45% gross profit margin and 15% customer acquisition costs. And so if you, if you had that, you'd have a 3-to-1 ratio because 15 goes into 45 3 times. So that would be, and that's kind of like a typical, a healthy painting business, you know, somewhere around there. But That's kind of the way I interpret his approach.

And you want it between, like, I think between 3 and 5, right? Because a 5x LTGP or GP to CAC would be a 10% marketing spend on a 50% gross margin. And like, that would be super clean. And then a 10 to 1 LTGP to CAC would be a 5% marketing cost with a 50% gross margin. And I'd be like, if you had those kind of margins on marketing, you can just like scale up your, what you're doing and, um, and double down on it and get, yeah, way more to be and still be profitable.

Right. And, and customer acquisition costs would typically include the marketing and the salesperson. So if you're a, I guess it's a good point because like a lot of folks listening, they might not have a salesperson, so they might not have really a, like on their profit and loss, they might not have a salesperson on their profit and loss because it's them. So really you would just have marketing costs on your profit and loss. And so, you know, you could either basically do what you did, like just look at your marketing spend and compare it to your GP. And so like you said, like a 10%, 10% marketing spend of revenue, you know, compared to your GP, you get like a 5 to 1. If you want to make sure you have enough room For it, because maybe you want a salesperson because you want to grow. Maybe you do a plug number for the salesperson. Like typically the folks that I'm working with that are, you know, have $2 million businesses that are paying salespeople, they have, they're paying about 8% of revenue of whatever the salesperson closes, about 8%. So they're paying them like maybe a bit of a base salary with some commission, and it comes out to about 8% of what they close with all the payroll burden and everything put, put in there. So if you're, if your marketing spend is at 10% and then you're the salesperson, you could use that 8% plug number so you have room for when you do hire that salesperson. And so your customer acquisition costs altogether would be like 18%. And then you can use that as a, as a guide. Does that make sense?

Yeah. Then like at a 2.5, then at a 50% gross margin, you're at like a 2.5 LTGB to CAC. Anything over 2 is scalable. But Alex recommends it being like between like above 3, above 5 is excellent. And he said the most money in his life that he's ever made is when those numbers were outsized. So like a 40 to 1. An 80-to-1, I think you saw for a little bit during Jim Launch.

Crazy. Crazy.

Facebook doesn't really allow for that type of returns anymore, which is why he sold it at the perfect time.

Yeah, yeah. But, uh, I think for, like you said, a 5-to-1, I think that is super hard, but I think that is completely, uh, feasible. Um, it's feasible, a lot of hard work, uh, but I know some painting businesses that are doing like $10 million revenue and their GP is like 68%, which is crazy high.

That's great.

And, you know, their, their customer acquisition costs are below 15%. So that's right around that 5x. So it's possible a lot of folks might not realize, like, these numbers, they sound crazy, but they are actually achievable. So.

I think backing up, like, if someone wants to get started in this, to figure out what their GP to CAC ratio is, is they need to start with getting financial statements on a regular basis. And so many painters just like don't love the idea of looking at financial statements or look at it and it feels like Greek. But like, you need to learn to read a financial statement. They're not very difficult once you kind of get oriented with them. I'm sure Daniel's got some trainings on them, but like It's like for pro— the only one you need to look at is like your income statement or your profit and loss, same thing. Um, and you just like literally line by line add up like on a monthly basis, you get your month-end P&L, which means profit and loss, and it's like add up everything associated with marketing and sales. So like your Facebook ads, okay, add it up. Your Google ads, okay, add it up. Your sales commission, okay, add it up. Your flyer printing cost, add it up. You get that total and then you look at your gross profit, okay? How much your gross profit should be a pretty clear line item. And then you just take your gross profit divided by that totally fully considered marketing and sales, you know, acquisition cost, and that will give you your ratio. So when I first calculated, I looked at my last month, my last 3 months, and then my last 12 months and found that they were all a little bit different. But it allows you to kind of spot trends when you're looking at it kind of that way in a more like holistic, longer-term approach. Mm-hmm. Yeah.

And once, once you kind of get this ratio down, it basically determines like, okay, if I put this much money into my business, I'm going to get this much money out. And it becomes a formula that you can, if you have your processes dialed in with marketing and you have a good production process, it's basically you're changing your business into a money printing machine where you know, okay, if I put $1,000 into my business, I know I'm going to get $3,000 out in gross profit. And so it's, it's kind of a powerful ratio and concept once you kind of wrap your head around it. And like you said, do the analysis and see where you are. And then I think what we should probably talk about next is how do you actually improve it? Now that I know where my gross profit to customer acquisition ratio is, maybe I'm at 2 to 1. How do I get it to 3 to 1 or 4 to 1?

Yeah, yeah, we can talk about it because like you, you got numerators, which is your gross profit, and then you got denominators, which is your cost acquisition. And so you want to reduce your numerator and increase your, increase your denominator. So reduce the— no, sorry, increase the numerator and decrease denominator. So increase the gross profit, decrease the cost to acquire. And so you have levers for both of them. Um, so we could definitely jump in. I saw my workbook here that I was looking through just to see if there's any other notes I wanted to add, but like Do you want to start on the top, on the gross profit side of things?

Yeah, let's do it. Gross profit. Uh, I think there's a couple levers here that you could probably pull. Price, and that's the, that's the big obvious one. Uh, if you want to improve your gross profit, increase your prices. It's easier said than done. I think mentally a lot of folks have, you know, um, kind of certain stories they tell themselves about how much they can charge, but That's one, in theory, easy way you can increase your gross profit is simply look at your pricing, how you're pricing things.

Did you get that profit book or the pricing book from Alex?

I don't think so. I just got the— looks like you had the workbook in your hand, the purple one.

Yeah, I got the workbook. But as a bonus for signing up for like the next thing, he gave me— he gave us a— not he, his team gave us his— it was like a pricing book. It's like the ultimate guide to pricing. Right.

I didn't get that.

Well, you'll have to text him. You probably got his number. No, I'm just kidding. So a really cool concept is say you have a— so pricing is your biggest lever to increasing profitability. Like that's his like dead stop. If you have a 15%, it's— this is a lot easier when you see a like a, on a, like a drawdown, but like if you have a 15% net profit and you increase your prices by 5%, your net profit increases to 20%, which is 25% increase in net profit. So 5% increase in price equals a 25% increase in net profit. And so that's just like one example of how you can get an outsized return by just increasing your prices, keeping all of your other costs the same.

Yeah, it's super powerful. And it's, uh, just yesterday went through this, um, with a painting business owner where their gross profit was like at 35%. And first thing I always look at is how are you pricing? So we walk through how are you getting your price And they, they were doing their charge rate right. Like they were charging twice of what it cost them for labor. So the, I think the, it costs them like $33 an hour after you incorporate payroll taxes and workers' comp, $33 an hour for a painter. And then they were charging the client, their charge rate was like $66 or $68. So they were good there, but found out that the materials, they weren't marking up 100%. They were only marking it up like 10%. And so it was like, that's your, that's your issue right there is that you're not marking up your materials. And so that's why, you know, you're, you're not hitting your, your, your gross profit margin target because you're not pricing it right.

Yeah.

So a simple change, you know, now moving forward, hopefully they'll get closer to 45% or maybe even 50%.

Yeah, I think you're right. Earlier on you said that people tell themselves a story on how much they can charge. Right. And like very easily you can blow that away by just testing different things and being confident about it. The way I like to look at pricing, um, is through charge rate. So you mentioned charge rate, like at $66 plus material. Um, if you take, like, we do it like on a, like after basis. Um, you can take like a $10,000 job and say it takes, uh, 120 hours to complete, right? So you take that $10,000 divided by 120. And you get your total. In this case, it's like 83.33. I just did that earlier today. I didn't do it in my head. So $10,000 job takes 120 hours. That's an $83 charge rate. Now, in a healthy business, you want your charge rate to really be between $75 and $90, depending on your cost of labor and cost of material. But like you said, it, it, it equals like doubling your cost of labor and doubling your materials and potentially even adding an extra 15%. and that will get you to the charge rate where once you pay off your paint, once you pay off your labor, you will have about a 50 to maybe even a 52% gross margin. Mm-hmm.

Yeah. There's different methods to arrive at the, the, the numbers. Like I've heard, you know, dividing by 0.5 or point whatever, 0.45. The key is to simply state it is, is you got to charge your customer twice of what it costs you if you're shooting for a 54% gross profit margin, or maybe even a little bit more if you want to give yourself some buffer. But you got to charge the customer twice of what it costs you, at least, um, maybe a little bit more.

And actually, an important thing for anyone who's on the tools, you need to consider yourself a painter in the business, and you can't just take the profit for you. You need to charge yourself out at the same rate that your other employees are being charged out at so that you can of— because I'm assuming if you're listening to this type of podcast, you want to get off the tools one day. You need to charge yourself out so that you can replace yourself as a painter one day. Because I've said this a million times, painting is the least effective, the least productive thing you can do in your painting company as a business owner. Is the worst thing that you can do if you want to get off the tools. Nothing wrong with painting, but if you're trying to chase profit, which is what is this called, The Profitable Painter Podcast, you got to get off the tools. Yeah.

Exactly, great point. Yeah, all these little things you can't forget about. So you're providing immense value to your business, so you got to include yourself in the cost of that. So don't— yeah, so include what you would— your— the fair market value of if you had had to hire a painter to replace you, or like we're talking about the salesperson, if you had to hire a salesperson to replace you, include that into your calculations so that you have the margins built in so that you can get to the next level because you have enough, enough profit available to pay that person, even if you're doing the job right now.

Yeah, exactly. Um, okay, so increasing your pricing, that's one. So that is a way to increase your top line. I guess the other way is like decreasing your costs. So in gross profit, there's pricing, but there's also like your costs, your labor costs, your materials costs. So you can decrease your labor costs. You can pay your painters less. You can train them to be more efficient so they paint faster. You can put them on a piece rate system so that your labor costs are fixed. I'm not going to get into how to do that today, but you can put them on a piece rate system. Um, you can create a bonus system so you can motivate them to get the job done quicker. Again, so you're not paying overages on labor. And then decreasing material costs, you can also bonus your painters on, uh, your painters or your job site manager or your crew leader, whatever, on materials as well if they keep it under 15% or keep it under 10% or whatever, uh, in order to make them more efficient. Also training them on how to like actually use the paint at the bottom of the can instead of calling in another gallon when they're just finishing the last bottom corner. Like, help them be creative and give them some ownership over the cost of the materials on a project, or else they're going to just be wasteful, and that's really what you want to avoid. Did you know you can reuse rollers? Like, just like a roller sleeve, you can reuse rollers for like 10 projects. You can just wash it and reuse it, but most people just huck them away and use like multiple per job.

Yes. Yeah. Trying to figure out a way, like you're saying, to, to tie their success with uses of materials. I, I know some folks have used, like, if they're using subcontractors, they'll, um, they'll say, hey, uh, I've allocated $5,000 for the labor and materials for this project. And you're required to, so you're required to buy these, you know, Super Paint or Emerald or whatever, like these products, so they don't just like go buy the, you know, the cheap stuff. But here's, here's the required materials that you're supposed to use. I'm giving you $5,000 for the project once it's complete. It's up to you to manage the budget of the materials. So if you're As long as you're using the right products and you're efficient, you know, you'll get more money for your labor if you're efficient with materials. And you can do that even if they're using your charge account, right? Because you can track if they're using your Sherwin-Williams charge account, you would just track what they purchased on your Sherwin-Williams charge account and then subtract that from what you pay them. So if you told them you were paying them $5,000 for that project, and they spend $1,000 on materials, you give them $4,000, the difference. So I know folks have done that for subcontractors, but to your point, like, the biggest thing is paying your folks or incentivizing them and paying them correctly, not overpaying them, and figuring out creative strategies to incentivize them to get things done efficiently.

Yeah, I mean, I've worked— we're working with tons of painters right now, and it is like, it surprises me how many guys call themselves professional, but they're just like, they're still paying their painters a day rate at the end of each day. Like, that's just what they get. The painter gets a day rate, they get paid every single day, and like, they have no incentive to work harder or faster or manage their materials well. It's just like, they get their day rate and that's it. And maybe it's $500 a day and, uh, and that's all. So it's bonkers to me. Um, I, uh, actually, no, it wouldn't be $500 per day, it would be Uh, it would be more like, uh, yeah, like between $200 and $300 a day. I was thinking for a crew. Um, yeah, like $200 to $300 a day. Um, but yeah, you got to compensate for the behavior that you want. And if you don't even consider the behavior, which is be cost efficient and get done fast with high quality, then you're never going to get those behaviors. Or if you do, you're getting lucky. Yeah.

Another, I know another big thing that folks run into is with subcontractors and even with employees is like, um, where they come back and say, especially for subcontractors, I should say, the subcontractor comes back and says, oh, I think this isn't enough money for this job, like, I need more money for, for this job. So they like agree and then they start the project and then they're like, oh, I actually need more money. Um, and I'd love your thoughts on this one. What I'm, what I kind of say is Tengo no más dinero para tú. What's that?

Tengo no más dinero para tú.

That, absolutely. Like developing, if you have budgeted hours, like using production rates, and you have budgeted hours on your work order, that, you know, especially if you're using something like Dripdrops or PaintScout where you can show the budgeted hours by surface and say like I've budgeted you know, 20 hours for the siding, 10 hours for the windows, 5 hours for the railing, all these, everything's broken down by hour. And if the sub comes back to you and says, oh, this, you didn't, you're not paying me enough, you can point to the work order and say, okay, where specifically did I not budget enough money? Like, are you not able to paint the windows quickly enough? Or because a lot of times I, it seems like subs or just have a feeling that they're not getting paid enough. But, you know, if you force them to actually tell you where specifically they're not paying you enough, they—

and I think a lot of people hire subs but don't like just hire subs and assume that they know how to paint well, right? They don't like— it's trust but verify. You should actually be on site with them, make sure that they're minimizing time between tools, that they know how to apply paint properly. Like they're representing you and your company. So if you've never even seen them paint, like I know people who have subs, they've never even seen them paint. They just like assume the job gets done and like cross their fingers and hope that it went well, right? Like you got to get on site, work with them, watch them work, make sure they're following your process and not their process. Like, how do you get— how do you get your job painted? Do you do first coat prime or do a first coat and then patch and then spot prime and then, and then paint? Or do you wall sand and then patch and then spot prime and then 2-coat and then go around? Like, how do you do it? And like, make sure that they're following that process. They can't just go, you know, cowboy their own way. You sold a specific job with a specific process. Like, are you using— are these in plastic or paper or drop sheets or tarps? Like, what are they using? Make sure it's done your way because you're selling a product to a client, a solution to a client. Make sure that you're delivering on that solution the way that you sold it.

Yeah, you just— when you were saying that, I just got like a sinking feeling in my stomach. It reminded me I was running a, my, I was, did the CollegeWorks internship in, in, in college and, uh, I hired a crew like, and didn't vet them at all and just threw 'em on a job site. And as you might expect, it went horribly. They were just like resting their rollers against the, the brick home, like not even just, just completely trashed the, in the job site in like 30 minutes. And that took me many hours of just like with a wire brush on, on brick and concrete. It was a nightmare. So I still wake up in a cold sweat every night.

Yeah. Thinking of that similar thing I do. I had two girls working for me once and they were good painters, but I never properly trained them how to spray. They were, they were W-2s, but I never properly trained them how to spray. And like, I was going away for the weekend and I wanted to get them set up on this job site. And actually, it's really embarrassing because it was the outside of a Sherwin-Williams. So we actually got the job to paint a Sherwin-Williams, and I set these girls up with a sprayer. They never sprayed before. And then I get a call from my rep. I'll never forget that call. He's like, Mike, these girls you put on the site, like, do they know how to spray? I'm like, oh yeah, yeah, they got it. I'm like, well, I'm looking at the wall right now and it's like there's a lot of thick spots and like it's really not done. I'm like, oh, it's still, it's still drying. He's like, no, I know what I'm looking at and it is not good. You should come here. And I was on the highway. I was going away for the weekend. I'd had to turn around and drive home.

Oh man.

Yeah, it was not good. Yeah. But don't assume your team knows how to do something that you've never actually seen them do.

Yes. Lessons learned the hard way. Uh, so let's, let's talk about the strategies to, so we talked about strategies to increase your gross profit, pricing, efficiency. Paying your workers in a way to incentivize. Let's talk about strategies to decrease your customer acquisition costs. That's the other part of the formula to improve that ratio. What are some things that we can do to decrease customer acquisition costs?

You have better marketing or better sales. So marketing, you can be more efficient at your marketing. So if you're running ads, you know, you can split test more creatives. You can try some video creatives, image creatives. You can try different offers, 10% off at time of booking, free color upgrade, free color consultation, a free paint, paint upgrade rather, I should have said. You know, just like test out different offers continuously and see which ones are bringing you the lowest cost of lead, lowest cost per estimate. For offline marketing, what we— and I'm honestly, offline marketing, we find you get way better return on investment than online marketing. So things like door-to-door teams, flyers, door hangers, strategic partners, things like that. You need to get clear on your current cost of acquisition per channel. So like, where are you actually spending your money? Where are your leads coming from? So doing your best on like a weekly basis to keep track of that, doubling down on your lowest cost channels, you know, cutting your highest cost channels. Um, and again, testing. I'm a really big fan of like niching down in your marketing campaigns. So like doing a flyer campaign and a door-to-door campaign around like stucco homes where we just advertise— we knock, we just advertise stucco homes. We have a stucco-specific flyer, we have before and after picture for stucco, we just target stucco homes. Like high average job size, um, high gross profit, my guys are really good at it, we know how to like you know, churn them out. Then maybe in the winter season we'll do a cabinet campaign and interior painting campaign. So we're just going to be targeting interiors and cabinets, um, and just like showing people before and afters of the projects that we're trying to get. Well, things like that get pretty good, uh, return on investments. Um, and like knocking, you can't really beat knocking, door knocking when it comes to, uh, cost acquisition. And then sales, like a lot of the times people don't formalize their sales process. I actually did a webinar earlier today And I asked who's presenting on the spot versus who's like texting the client the price later on. And like over half the people that were in this webinar who've been following us for a while were still not presenting their jobs on the spot.

Hmm.

And like, this is a cardinal sin in my mind. Like you are missing out on so much opportunity if you're not just like doing up your numbers in your vehicle, going back in and presenting your job and your proposal to the client. All you have to do is like, people are like, it takes too long to do my numbers. It's like, okay, tell the homeowner, hey, you know what? This is a big project. It's going to take me about 45 minutes to write out the proposal. So I'm just going to run to my truck. I'm going to write out the proposal, get my numbers, get you an exact price, come back in, show you the price. If it looks good, we can book you in. How does that sound? Great. They don't want to follow up another time. They don't want to text. They're going to have questions like, when else have you made a $10,000 decision without having someone to talk to? So why are you expecting them to make a $10,000 decision without having the opportunity to talk to you? Yeah.

Yeah. This kind of harkens back to our conversation about pricing, like the mental things we tell ourselves like, oh, I can't, the market's not going to take that price or whatever. But that's, those are the, probably the same people that are not presenting on the spot. And so yeah, they probably can't charge, you know, the rates that they need to charge to hit 50% because they're just sending an email, you know, and, and not presenting it and building trust and, and building value in the sales process and then just sending an email like 3 days later or something.

I mean, I just thought about this, like if you, if you get 10 estimates and say those 10 estimates cost you, um, $5,000— not $5,000, $1,000 to get, $100 bucks. So 10 estimates costs you $1,000 to get, and you book 3 jobs for $5K each. Okay, so you got $15,000 for $1,000, so say $7,000 of gross profit. You're a 7:1, um, LTGB to CAC. Now if you follow a really, really great sales process and ask for the job and pre-frame the clients and like send them sales literature and then ask for the job and do all that stuff, and you go from 3 jobs out of 10 to 5 jobs out of 10, Well, you just went from $15K to $25K for that same $1,000, almost doubling your sales efficiency, bringing that GP to CAC ratio from a 7 to 1 to a— what does that bring it to? A $25,000, $12.5K, $12K, like over a 12 to 1. Yeah.

Yeah.

And that's just on the sale. That's, that's a sales thing. That's not spending any more money. That's just changing what you're doing.

Yes, exactly. Yeah. And this kind of reminds me of the— our friends over at Base Coat Marketing and Painter Marketing Pros, you know, uh, Austin and Brandon, that where they have clients that are paying them for, you know, run Facebook ads. And, uh, the painting business owners will like say, oh, these leads aren't any good. But a lot of the times it's not the that the leads aren't good. It's just that their, their process, their sales process isn't effectively converting their leads to prospects and then effectively converting the prospects into closed deals because they're just losing, you know, they're not being efficient with what they're getting. Uh, it's so, like you said, improving your sales process will make those the same. You're spending the same amount of money, you're just improving your sales process and you're getting more, more return on your investment from your marketing because your sales process is dialed in.

Yep. Yep. Huge. And that's like, that's just a sale, but like also calling your estimates more frequently, right? Some people like, hey, my Facebook leads suck. Well, how many times did you call them? Well, I just texted them once. Well, like I was talking to Gene, Gene Harris. He owns a company called Who's Your Admin? They do admin calling for for companies and sales calling and stuff, and they call new leads, I think it's 24 times in the first 72 hours, and they have like an 80% lead estimate conversion rate for Facebook leads. But like, just call them over and over and over and over and over and over. And if you don't, like, don't, don't assume it's a no until they tell you no. Just assume it's a, hey, that you caught them a bad time. Like when my dentist calls me, they need, she needs to call me like 100 times to get ahold of me. I'm always in meetings or doing podcasts or like just busy with my kids or whatever. But like my dentist calls me and I'm like in that like 5-minute period where I'm like, I feel like talking to my dentist or the secretary or whatever. So I pick up, I'm like, yeah, sure, let's schedule the appointment. Okay, bye. So it's not like I don't want it, but it's just like I have other priorities. I'm busy. Everyone's busy. And like, let's just like do them the service. They reached out, they wanted something. So be persistent. And then convert that lead. Just going to take some time. Right. Earn it.

Yeah. And I think a lot, again, going back to the mental game of this, I think people feel like, oh, I'm, I'm annoying somebody by calling them over and over again, but they reached out to you to get something done. So you're helping them connect with you so that you can help them further by providing a service. So You're really helping them. So it's just, I think, a mind shift change with some folks is you're not annoying people. They reached out to you first. You're just trying to connect with them to help them further.

Yep.

Awesome. Cool. Well, I think anything else on GP to CAC ratio that we haven't covered yet?

So increasing gross profit, right? We have labor and materials. We have decreasing, um, cost to acquire customers with being more efficient on your sales process, your marketing process, your setup call, uh, scripting. I mean, if you were able to do even a few of those things, I think you're your GP to CAC ratio would go down considerably.

Yeah, yeah, it's— and then once you get your, you know, ratio of at least 3 to 1, uh, or better, I mean, you're— you can basically turn up your marketing, you know, because a lot of folks ask like, uh, should— can I— should I push the gas on growth when we're reviewing their profitability? And it's like Unless you're hitting like a 3-to-1 ratio or better, you probably shouldn't start pouring a bunch of money into marketing yet because we got to fix your gross profit. We got to make it a little bit higher so you have more room, you know, for your profit and paying your overhead costs or fix your gross profit or reduce your cost of acquire. Exactly.

More efficient with your sales and marketing process.

Exactly. Yeah. Before you, I guess one of the takeaways would be before you push the gas to try to scale your business, make sure that this ratio is looking good over a month or maybe a couple months. And then once you feel comfortable, like you can maintain a 3-to-1 ratio or better, then you can really start pushing the gas to scale to the next level.

Yep, nailed it, man. Cool.

Well, awesome.

Pretty important, uh, number. And I think that if everyone here just like made the effort to get their profit and loss statement over the last 3 months and just calculated it, that would be a huge win.

Yeah, good stuff. Well, uh, I appreciate your time. How can, uh, folks learn more about the great stuff that you're doing over there at Painter Growth? I know you just had an event And I know you have one coming up in October, a whole bunch of cool stuff that's going on at Painter Growth.

Yeah, you're going to be there.

I'm going to be there.

Yeah, which is sick. Yeah, doing a presentation on, uh, I'm—

I can't even remember actually, on cash flow management, knowing your numbers, all the important stuff. Yeah.

Um, so what I'll actually do, um, this is a little gift, is we have a— we have a sales mini course. So if you're looking to reduce your, uh, your GP to CAC ratio and improve your sales process, Um, we actually like have a sales mini course we typically charge for, but I'll give anyone who listened here to the end it for free. So if you, I'll send over the link after and you can put it in the chat or in the description or whatever. Um, and it has like the setup call framework, the estimate framework, like all the downloads and spreadsheets and everything. And, um, so that way, um, you can just like learn how to increase your, uh, your sales efficiency. Um, just like what we talked, but actually have the training behind it. Yeah.

Awesome. Yeah. And definitely recommend you take a look at the notes in the show notes to get that link. Every time I see Mike's stuff, it's amazing. His events, the free stuff that he's given out is really top notch. So definitely download that and get that stuff. It's great. So cool. Well, I appreciate your time, Mike. Any last thoughts before I let you go today?

That was great, man. Thanks for having me on. Let's do it again. Absolutely.