Latest / Scaling Up with Fexingo: How Small Businesses Become Mid-Market Companies / How a Painter Scaled to 20 Million by Fixing Estimating
Transcript
- Lucas: If you run a painting business, or really any trade that bids on jobs, there is one number that determines whether you're scaling smart or scaling yourself into bankruptcy. That number is estimating accuracy. Luna: I have a feeling you're about to tell me about a company that was winning a ton of work but still bleeding money. Lucas: Exactly right. Let me tell you about a residential painting company in the Pacific Northwest. By 2022 they were doing about 12 million in revenue, growing fast, but their net margin was under two percent. The owner told me they were what he called 'profit-blind.' They'd celebrate landing a 50-thousand dollar repaint and never calculate what it actually cost. Luna: That's terrifyingly common. I've talked to plumbers and electricians who operate the same way — revenue up, bank account flat. Lucas: Right. So this founder decided to fix estimating first. Not marketing, not hiring — just how they priced projects. He hired an operations consultant who ran time-in-motion studies on their crews for eight weeks. They measured every variable: prep time, spray time, cut-in time, drying time, cleanup. They built a model with five inputs: square footage, number of colors, surface condition, height access, and crew experience level. Luna: Five inputs. That's it? Lucas: That's it. But the key was they stopped letting individual estimators 'feel' the price. Before, they had four estimators all using different mental math. One would underbid because he was afraid of losing the job. Another would overbid because he included premium materials as default. The new system forced every estimator to enter the five variables into a spreadsheet that spat out a minimum price, a target price, and a premium price. Luna: So the estimator still had discretion, but within a range. Lucas: Exactly. And here's the concrete result: within twelve months, their close rate actually went up — from 38 percent to 44 percent — and their average job margin went from negative on forty percent of jobs to a consistent fifteen percent net. They were winning fewer jobs than before? No, they were winning more jobs that actually made money. The problem before was they were low-balling to get in the door, then eating the difference when prep took twice as long as quoted. Luna: That's the classic 'we'll make it up on volume' trap. Except you can't make up negative margin with volume. Lucas: You cannot. And this was a company that grew from 12 to 20 million over the next two years, almost entirely through that margin improvement and reinvestment. They didn't add a single new crew. They just stopped losing money on jobs. Luna: I want to push back a little, though. Doesn't this approach risk being too rigid? What about a client who wants a custom finish or a tricky surface? Do you just say 'our system says no'? Lucas: That's a fair question. The way they handled it was by creating a 'special project' track. If a job fell outside the five-variable model — say, a historic home with hand-painted wallpaper removal — it went to a senior estimator who had authority to build a custom quote using a separate, more detailed template. But that track was only about eight percent of their total bids. The other 92 percent ran through the standard system. Luna: So they didn't eliminate flexibility. They just forced the exception to be the exception. Lucas: Right. And that's actually the harder part — getting the culture to accept it. The founder told me the first three months were brutal. His best salesman-estimator quit because he felt the spreadsheet was 'taking away his craft.' But six months later, that same guy came back and asked for his job back, because his freelance bids were all over the place and his wife was tired of the financial stress. Luna: That's a powerful story. So the system didn't just improve margins, it improved quality of life for the estimator. Lucas: Exactly. And this is something we see a lot across different service businesses. The ones that scale well tend to pick one operational metric and get obsessive about it. For this painter, it was estimating accuracy. For the junk removal company we covered in episode 89, it was routing efficiency. Same principle, different lever. Luna: Speaking of which, I want to mention something here. These episodes take a lot of work to research and produce — and they stay ad-free because a small group of listeners chips in monthly through buy me a coffee dot com slash fexingo. If these conversations have moved your work forward in some small way, that's the simplest way to keep them coming. Lucas: Yeah, and we really appreciate that support. It's what lets us dig into stories like this painter's without any sponsor pressure. Okay, back to the estimating system. The other thing they did was tie estimator compensation to margin, not just revenue. Before, estimators were paid a percentage of total job value. So they had an incentive to price high, which sounds good, but it also encouraged them to quote on every job, even the ones they had no chance of winning — just to pad their pipeline. Luna: And that wastes a ton of time. Lucas: Huge waste. They calculated that before the change, estimators were spending about 60 percent of their time on bids that lost. After they switched to a compensation model that paid a smaller base plus a bonus on the margin of closed jobs, suddenly estimators started qualifying leads better. They'd ask: 'Is this a five-variable job or an exception?' If it was an exception and the client wasn't willing to pay a premium, they'd walk away. Luna: So the system forced them to be more disciplined about which clients to chase. Lucas: Exactly. And that's a lesson that applies way beyond painting. If you're a founder listening and your margins are thin, your estimating process is probably the single biggest lever you're not pulling. It's not about working harder. It's about pricing for reality. Luna: And having the data to prove what reality is. Lucas: Right. The time-in-motion data gave them confidence to say 'this job takes 40 hours, not 28.' And when a client says 'the other guy quoted $3,000 less,' the estimator can say 'here's why: we include two coats of primer, we prep all surfaces, we guarantee clean-up. That other quote might not.' Luna: That's a better sales conversation than 'we're just more expensive.' Lucas: Much better. And it builds trust. The founder said their referral rate actually increased after they raised prices, because clients felt they got what they paid for. Before, they'd get complaints about dust or missed spots. After, those complaints dropped by half. Luna: Because they had time to do the job right. Lucas: Because they priced for the actual work. So the story here isn't 'we raised prices and got away with it.' It's 'we learned what our work really costs and started charging for it.' And that's a much more sustainable way to scale. Luna: I'd love to know — what was the hardest part of implementing this? I imagine changing estimator behavior isn't a one-week training. Lucas: The founder said the hardest part was getting the data in the first place. The time-in-motion studies were tedious and crews initially resisted being watched. But once they saw the numbers — like 'you spend 15 minutes per room just moving furniture' — they realized it helped them. The other hard part was the compensation switch. That took two quarters to fully roll out because they had to grandfather some existing pay structures. Luna: So the payoff took patience. Lucas: About 18 months before margins consistently hit double digits. But once they did, the company never looked back. And now they're at 20 million, planning to open a second branch in a neighboring state. And the first thing they're doing with that new branch? Building the same estimating model into their CRM from day one. Luna: That's the smart way to scale — not just replicating the revenue, but replicating the discipline. Lucas: Exactly. So if you take one thing from this episode, it's this: before you spend another dollar on ads or hire another salesperson, spend two weeks tracking how you price your jobs. You might find your next ten million is hiding in the bids you're already winning. Luna: Great advice. And that's a wrap for this one.