Five Minutes a Day to Know Which Painting Jobs Make (Or Don’t Make) Money

A Big Sales Number Doesn't Mean You Made Money

I've been running a painting company for about 15 years. Over that time, I've had summers where we sold a lot of work, kept everyone busy, and appeared to be doing extremely well.

Then, at the end of the season, I'd sit down with the accounting, go through all the numbers, and realize we had made considerably less money than I thought.

Sometimes we'd been profitable overall, but one exceptionally profitable project accounted for a large portion of that profit. Other jobs had barely made money, and some had lost it.

I've also had consecutive seasons where the second produced almost 20% less revenue but easily 20% more profit.

That's a pretty good lesson about the difference between revenue and profitability.

The problem wasn't that I didn't understand how to estimate painting jobs. We always worked with labor budgets. We knew approximately how much paint a project should require and how many hours the painters should need.

The problem was that I wasn't always disciplined about tracking what actually happened.

Some summers, I'd tell myself that I didn't need to calculate the profitability of every individual job. We'd simply do our best to keep expenses down, make sure the painters worked efficiently, and everything would work out.

It sounds reasonable until you actually look at the numbers.

I've noticed a direct relationship between how consistently I maintain my job-costing records and how profitable my company is.

And I don't think that's a coincidence.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 2 When I track every dollar, I run a tighter operation. When I stop tracking, I get lazy.

That's the real value of job costing. The spreadsheet doesn't make money. The accountability it creates makes me a better operator.

When You Don't Track Expenses, Wasting Money Doesn't Hurt Enough

Here's something I've learned about myself.

I hate checking my results and discovering that I did a bad job.

When I know I'm going to review my numbers, I make sure I'm doing things properly. I'm more careful with purchases. I question unnecessary expenses. I pay closer attention to production budgets.

Because I know I'm going to see the result.

When I wasn't tracking, I'd sometimes spend money just to make an annoying problem disappear. Maybe we'd order another $500 worth of paint without really questioning whether we needed it.

I'd tell myself it wasn't a big deal.

And in the moment, it didn't feel like a big deal. The money came out of the company account, the problem went away, and we moved on.

But when you maintain your job-costing records, that $500 has to go somewhere.

It shows up on a project. It reduces the margin. It appears in the totals.

Now I have to look at it.

If I expected a project to make $10,000 in gross profit and it made $8,000, I want to know where the other $2,000 went.

Maybe the painters spent too much time on preparation. Maybe we bought more material than necessary. Maybe I made a mistake estimating the job.

Whatever happened, I have to face it.

And because I know I'll have to face it, I'm more likely to prevent it in the first place.

That's the point of tracking your numbers. Your mistakes should hurt enough that you want to stop making them.

It works the other way, too.

Sometimes I know a job went badly and expect it to have cost us $1,000 in lost profit. Then I calculate everything and discover it was actually $2,000.

That makes me considerably more motivated to figure out what went wrong.

Other times, I expect a $1,000 hit, and the actual damage is only $500.

Well, I'll sleep a little better that night.

Either way, I know what happened instead of guessing.

A $40,000 Job That Made Almost Nothing

One of the worst mistakes a painting contractor can make is confusing a large contract with a good contract.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 3 I've had a $40,000 project that was supposed to take two weeks.

It took four.

We expected to use approximately 50 gallons of paint. We ended up using around 120.

And when everything was finished, we had made essentially no gross profit.

Imagine that.

You sell a $40,000 project. You're excited. It's a big job. Your schedule looks full, your sales numbers look impressive, and you're feeling pretty good about yourself.

Then the work starts.

The preparation takes longer than expected. The material consumption is much higher. The painters are still there when they should have been starting another project.

Two weeks become three, then four.

You finally finish the job, and the numbers tell you that you've spent four weeks producing almost no gross profit.

Good for vanity, bad for sanity.

The worst part isn't only the money you failed to make on that project.

It's the production capacity you lost.

Those painters could have spent the additional two weeks working on other profitable jobs. Instead, they were occupied finishing a project that wasn't generating meaningful profit.

And during a seasonal painting business, you can't always recover that time.

I've seen this happen with large, very old houses.

One particularly bad summer, we had several big projects involving old houses and carpentry work. We expected the carpentry to take two or three days on each project.

Instead, some of it took two or three weeks.

We were charging the carpentry by the hour, so that work wasn't necessarily losing money. But two of our best painters were doing carpentry instead of producing painting work elsewhere.

Then the houses themselves required endless preparation.

The projects generated revenue, but they consumed enormous amounts of production capacity.

Looking back, those jobs were a major reason that summer was so disappointing financially.

Does that mean I won't paint old houses anymore?

Not necessarily.

There's a price at which I'll take almost any reasonable project.

That $40,000 job that made no money? Offer it to me again for $80,000, and I'll gladly consider doing it.

The problem wasn't simply the type of work. It was the relationship between the price and the resources required to complete it.

The purpose of job costing is to understand that relationship before you repeat the same mistake.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 4

My Job-Costing System Is Just a Spreadsheet

I don't use complicated software to calculate profitability on every painting job.

I use Excel.

The master spreadsheet has one line for every completed project and columns for the information I need.

The main columns are:

• Client name and completion date

• Contract amount

• Budgeted labor hours

• Actual labor hours

• Actual labor cost

• Paint, materials, and rental expenses

• Applicable foreman or project-manager bonuses

• Gross profit in dollars

• Gross profit percentage

• Labor-budget variance

The basic calculation is straightforward:

Contract revenue - actual labor cost - materials and other direct job costs - applicable bonuses = gross profit.

Divide gross profit by revenue, and you have your gross-margin percentage.

For example, if a $20,000 job costs $8,000 in labor and $2,000 in materials, it produces $10,000 in gross profit.

That's a 50% gross margin.

Of course, that's not what the company takes home.

We still have to pay managers, rent, insurance, marketing, vehicles, fuel, and all the other expenses required to operate the business.

But it tells me how efficiently we produced that particular job.

And because every job is on the same spreadsheet, I can compare them and see the overall result.

Labor Hours Are the Most Important Number

When we estimate a painting job, we calculate the labor required to complete the work.

We multiply those estimated hours by our charge rate and add the materials calculated for the project.

Our gross revenue often works out to around $100 per budgeted labor hour, but that's an observed average, not the formula we use to price every job.

Labor is our biggest direct expense and the one we have the most control over.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 5 Materials are usually reasonably predictable. A properly managed painting project might spend around 10% of its revenue on paint and supplies, although that varies with the products and work involved.

Labor is where things can really go wrong.

If I budget 100 hours and the painters finish in 90, that's good.

If they take 110, we've consumed some of the profit we expected to make.

If they take 200, something has gone horribly wrong.

And the sooner we know, the better.

I also calculate the actual labor cost using each painter's hourly wage, because not everyone earns the same amount.

But I don't manage production by trying to put the cheapest painters on every job.

One of my best painters, Max, earns considerably more per hour than some of the others.

That doesn't mean he's more expensive to produce a job.

Suppose Joe earns $25 per hour and needs 100 hours to complete a project.

That's $2,500 in wages.

Now suppose Max earns $38 per hour but completes the same work in 60 actual hours. Under our productivity-bonus system, he might receive compensation equivalent to 80 hours.

That's $3,040 in labor cost.

Yes, it's more money.

But Max completed the work in 60 hours instead of 100.

That means the project finishes faster, we free up production capacity, and we can move on to the next job.

He's also more likely to produce good work, keep the customer happy, avoid unnecessary material waste, and require less supervision.

The additional labor cost can be more than justified by the extra production capacity.

A cheap painter who takes twice as long isn't cheap.

That's why I care so much about the hours required to complete the work.

How We Record Every Hour

Our painters report their hours every day.

We have a Messenger group used exclusively for time reporting.

When the crew leaves a job site, the person sitting in the front passenger seat of the van sends a message.

It looks something like this:

Monday, October 1 | Johnny's house | Max, Joe, Billy, and Donnie | 8:00 a.m. to 5:00 p.m. | 9 hours each

That's it.

No conversations, no jokes, no unrelated messages.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 6 We have another group for that.

The time-reporting group is strictly for recording who worked, where, and for how long.

When I enter the hours into the spreadsheet, I acknowledge the message so there's a visible indication that it has been processed.

We also maintain our payroll time records by job.

Instead of having only one time record for a painter covering the entire pay period, we organize the hours according to the projects they worked on.

If a painter worked 30 hours on Job A, 20 on Job B, and 10 on Job C, I want those hours assigned correctly.

That gives me the information I need to calculate actual labor cost for every project.

And it doesn't require the painters to fill out complicated paperwork.

They're simply reporting what they did that day.

How We Track Materials

Materials are even simpler.

Every time we receive an invoice from the paint store, it gets assigned to a job.

We have a rule: one invoice belongs to one job.

There might be several invoices for a particular project, but we don't mix purchases for multiple jobs on the same invoice.

Our project manager receives the invoices, and we record the amounts under the appropriate project in Excel.

At the end of the job, we add them together.

That's our actual material expense.

We also have an internal account called *Stock*.

This is where we record expenses that aren't directly attributable to one customer project.

For example, we buy sandpaper by the case, along with brushes, rollers, and other consumables that will be used across multiple jobs.

We also record miscellaneous labor that doesn't belong to a customer project, such as having someone clean and organize the workshop.

Stock appears as a separate line in the same job-costing spreadsheet.

It has zero revenue and expenses assigned to it, so it produces a negative result.

That's intentional.

Those expenses are real, and they have to reduce our overall gross profit.

If we spend $30,000 on shared supplies and miscellaneous production labor, that $30,000 can't simply disappear because it wasn't purchased for one specific house.

Sometimes we also buy materials for several jobs at once.

For example, we might order a large quantity of white paint that will be used on three upcoming projects.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 7 In that case, one job might show a disproportionately large material expense while the next two show very little. We'll document that so we understand the combined result.

The individual material figures won't always be perfectly representative, but the overall expense still needs to be accounted for.

Five Minutes Every Morning

This is the part that surprises some contractors.

Maintaining these records takes me about five minutes a day.

Our painters are expected at the workshop at 7:30 a.m.

They gather their equipment and usually leave between 7:45 and 8:00.

Once they're gone, I go inside.

The first thing I do is answer my emails.

The second thing I do is update the job-costing spreadsheet.

I enter the hours reported the previous day, assign the latest material invoices, and make sure everything is in the right place.

By 8:30, my emails and financial entries are generally done.

Every single morning.

That's the routine.

I'm not spending hours trying to reconstruct what happened three weeks ago.

I'm just recording what happened yesterday.

And because I do it every day, I always have a reasonably accurate picture of where our jobs stand financially.

I review the results at least once a week, often twice.

When a project is completed, I calculate its final labor cost, materials, bonuses, and gross profit.

Then I add it to the master spreadsheet.

The information is already there. Finishing the calculation takes very little time.

The important thing is consistency.

You Should Know a Job Is Going Badly Before It Ends

A job-cost card should never be the first place you discover that a project went horribly over budget.

That's what production management is for.

Your foreman should be monitoring progress. Your project manager should know how many hours have been used and how much work remains.

If a crew has spent 40 hours completing work that was budgeted for 60, that's excellent.

If they've spent 80 hours completing work that should have taken 40, we have a problem.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 8 We should know that while the job is underway.

This summer, I had a small project finish with approximately a 1% gross margin.

It was a disaster financially, even though it technically made a little money.

I had estimated the project myself. It was raining when I visited, and I rushed through the estimate.

I underestimated the size and difficulty of the work.

When the painters started sanding, the preparation turned out to be much harder than expected.

The job that should have taken roughly one day ended up taking around three.

We also had a new painter who was extremely unproductive. Her contribution was so poor that we ended up letting her go.

Then we discovered that the surface required primer, and the project consumed considerably more paint than expected.

I managed to get the customer to pay for the primer, which helped a little.

But nearly everything that could go wrong had gone wrong.

I knew we were in trouble when I expected to hear that the first coat was underway and instead learned that the crew was still sanding.

At that point, there wasn't some magical management technique that would make the remaining work disappear.

We had to finish the job properly.

So we minimized the damage, completed the work, and moved on.

The customer was happy with the result.

The job-cost card simply confirmed how much money we'd given up.

And afterward, I could identify the causes: a rushed estimate, unexpectedly difficult preparation, poor employee performance, and higher-than-expected material consumption.

Some of those problems were preventable.

Others were ordinary risks of painting work.

But at least I knew exactly what had happened.

The Spreadsheet Tells You What Happened. You Still Have to Figure Out Why.

When a project finishes with a disappointing margin, the first question is simple.

Why?

Was it estimated incorrectly?

Was the job poorly organized?

Did the painters work inefficiently?

Did the preparation take longer than expected?

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 9 Did we underestimate the access requirements?

Did the surface consume more material than anticipated?

Or did something genuinely unpredictable happen?

The spreadsheet won't answer all those questions.

It tells me how many hours we used, what we spent on materials, and how much gross profit remained.

It's my responsibility to understand the reasons behind those numbers.

For example, I once discovered a problem in my estimating grid.

A formula wasn't properly accounting for the second coat on certain jobs.

Because I'd rushed through some estimates without reviewing everything, several projects had been severely underpriced.

That's not bad luck.

That's a system problem.

We needed to correct the calculation and improve the estimating process so it wouldn't happen again.

Other times, a job goes over budget because preparation is much more difficult than expected.

If that's happening repeatedly on similar surfaces, our estimating assumptions might be wrong.

Sometimes I'll even go to a job site myself and spend five minutes trying the preparation work to see how difficult it actually is.

Access can also create major overruns.

Complicated setups might require two people to assemble and move equipment, or one painter may need to remain in a supporting role while another works.

Those hours aren't spent painting, but they're still labor hours.

They need to be included in the budget.

And sometimes there's nothing to fix.

A surface might unexpectedly absorb more paint. Another project might use far less paint than estimated.

Both happen.

This summer, we completed a $25,000 staining project using a product that cost around $120 per gallon.

I'd estimated approximately 25 gallons.

We ended up using about five.

That was a pleasant surprise.

But it doesn't mean I'll automatically estimate the next similar project at five gallons. The opposite can happen too.

The point is to identify patterns rather than overreact to every unusual result.

If something consistently takes longer than budgeted, the budget is wrong. Change it.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 10 If a type of job consistently beats budget and customers are willing to pay our prices, I'm certainly not going to lower those prices.

I'll enjoy the higher margin.

Your Average Margin Matters, but the Individual Jobs Tell the Story

Our target is approximately 50% gross profit on production.

That doesn't mean every job should finish at exactly 50%.

Some jobs might produce 70%.

Others might produce 30%.

Occasionally, something goes horribly wrong and a job produces almost nothing.

That's part of operating a business.

What matters financially is the overall result.

If we produce $500,000 worth of work and generate $250,000 in gross profit after all our direct production expenses, we've achieved a 50% gross margin.

But I also want to understand how we got there.

Maybe most jobs performed reasonably well.

Or maybe one exceptionally profitable project compensated for several poor ones.

Those are two very different situations.

The quickest way to identify problems is to look at the gross-margin percentages and spot the outliers.

I once had a business coach look through my job-costing spreadsheet.

He pointed to one project with a low margin.

"What happened on that one?"

Then he pointed to another with an unusually high margin.

"Why did this one do so well?"

Those are exactly the questions an owner should be asking.

And you should be able to answer them.

When a job is exceptionally profitable, I want to know whether there's an opportunity to get more work like it.

Maybe that type of project is easier to produce efficiently.

Maybe a particular crew is especially good at it.

Maybe we have a competitive advantage that allows us to charge a good price.

Whatever the reason, I want to understand it.

When a job is unusually unprofitable, I want to know whether we need to change the estimate, organize production differently, charge more, or avoid that particular type of work.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 11 That's how job-costing information becomes useful.

It influences what we sell, how we price it, and how we produce it.

Your Job Costs Need to Match Your Accounting

The job-costing spreadsheet tells me how much gross profit we generated from production.

But that's not the end of the financial picture.

I use QuickBooks to manage the rest of the company's accounting.

We have monthly budgets for our operating expenses, including management salaries, marketing, rent, insurance, vehicles, fuel, and other overhead.

Some of those expenses are extremely predictable.

Rent is rent. Insurance is generally known. Marketing is planned in advance.

Other expenses vary somewhat, but we still have budgets for them.

At the end of each month, I review the actual expenses in QuickBooks and compare them with what we expected to spend.

The job-costing spreadsheet and accounting system should also reconcile.

If the spreadsheet says we spent a certain amount on labor, that should agree with our corresponding payroll and accounting records, allowing for timing and classification differences.

The same applies to materials.

If the numbers don't match, I find out why.

There shouldn't be one version of our expenses in Excel and another in QuickBooks.

They're the same expenses.

The spreadsheet explains where the production money went.

QuickBooks gives us the broader financial picture.

Once we've accounted for production costs and the remaining operating expenses, we can determine what the company actually earned.

And because I budget those expenses as well, I can see where we performed better or worse than expected.

This year, for example, we came in under budget on essentially every major expense category except labor, where I'd set a particularly optimistic target.

I know that because I tracked it.

I don't have to wait until the end of the year and wonder where the money went.

You Cannot Reconstruct an Entire Summer Properly in One Afternoon

I've tried.

During summers when I wasn't maintaining the job-cost cards consistently, I'd eventually sit down and try to catch up.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 12 I'd look at the accounting system and pull out total labor expenses.

Then I'd look at our CRM and see how much work we'd produced.

Then I'd check how much we'd spent at the paint store.

And I'd start putting the numbers together.

Usually, I didn't like what I found.

I'd realize we'd spent much more than expected on labor or materials.

I'd remember jobs that had gone over budget.

And I'd discover that the overall financial result was worse than I'd thought.

The problem is that adding everything up afterward doesn't give you the same information as tracking it properly while it happens.

You might know how much labor cost for the month, but not precisely which projects consumed those hours.

You might know how much you spent on paint, but not where the excess went.

You might remember that a project went badly, but you won't necessarily remember every expense or exactly how much of the problem was avoidable.

You can't just throw all the ingredients into a pile at the end and expect to reconstruct the recipe.

You have to put each ingredient in the right place as you go.

That's how you get an accurate picture.

And more importantly, you can't go back and fix a job that finished six weeks ago.

If you were tracking it properly, you might have noticed the problem while there was still time to reduce the damage.

The Real Benefit Is That Tracking Keeps Me Accountable

This is the biggest reason I maintain these records.

When I'm tracking profitability every day, I care more about the result.

I don't want to see a bad number.

I don't want to look at a job that should have produced $10,000 in gross profit and discover we made $3,000 because I wasn't paying attention.

So I pay attention.

I question expenses.

I follow up on production.

I make sure people understand their budgets.

I investigate when something isn't going according to plan.

And when we get a good result, I want to do even better next time.

It's like keeping score in a game.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 13 Once you start tracking your performance, you naturally want to improve your statistics.

I've noticed that in business and in plenty of other things I do.

When I measure something consistently, I tend to put more effort into improving it.

When I stop measuring, it's much easier to become complacent.

That's what happened during some of my less profitable summers.

I wasn't necessarily making one enormous mistake every day.

I was making lots of small decisions without properly facing their consequences.

An unnecessary material purchase here.

A labor overrun I didn't investigate there.

A project that dragged on longer than it should have.

A few expenses I accepted because dealing with the underlying problem seemed more annoying.

Individually, none of them seemed catastrophic.

Together, they consumed a significant amount of profit.

And because I wasn't looking at the precise numbers every day, I wasn't feeling the consequences strongly enough to change my behavior.

The summers when I tracked everything closely were different.

I was more disciplined because I knew I'd have to account for every expense.

That's why I say the spreadsheet helps me run a tighter operation.

Not because Excel has some magical ability to improve margins.

Because I know I'm going to have to look at the results of my decisions.

Less Revenue, More Profit

One of the clearest examples came from two consecutive seasons.

During the first, we had a lot of work, including several large projects that were far less profitable than expected.

The sales numbers looked impressive.

But production wasn't managed tightly enough, some projects consumed far too much labor, and our actual profit was disappointing.

The following season, we produced almost 20% less revenue.

But we made easily 20% more profit.

We avoided the kind of major unprofitable projects that had hurt us the previous year, and the operation was much better controlled.

I'm not claiming that maintaining a spreadsheet alone caused that improvement.

It didn't.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 14 We made better operational decisions, managed production more carefully, and avoided expensive mistakes.

But that's precisely what consistent tracking encourages me to do.

When I know where the money is going, I manage it more carefully.

And when I stop paying attention to the numbers, my results suffer.

Five Minutes a Day Is Not an Unreasonable Demand

Sometimes contractors tell me they're too busy to track their job costs.

They're running crews, estimating projects, dealing with customers, ordering materials, and solving problems all day.

I understand that.

I've done all of it.

But you're not too busy to know whether you're making money.

You're the owner.

That's literally one of your most important responsibilities.

Find five minutes.

If you have an office employee who can maintain the spreadsheet, that's fine. If you have a manager who's excellent with numbers, let them handle the entries.

But the owner still needs to review the results.

You should know which jobs are making money and which aren't.

Once the spreadsheet is properly maintained, spotting the unusually high and low margins takes less than a minute.

And the potential financial impact is enormous.

Suppose you're running a painting company doing $2 million in annual revenue.

If tighter management allows you to improve your gross margin by five percentage points, that's an additional $100,000 in gross profit.

I'm not saying everyone who starts job costing will magically find an extra five points.

But it's entirely possible that a company that hasn't been tracking its costs properly is leaving substantial money on the table.

And without accurate numbers, the owner has no way to know.

Five minutes a day to understand where your money goes seems like a pretty reasonable investment.

Every Number Should Lead to a Better Decision

I don't track numbers just to have reports.

I track them because I want to improve something.

If a job loses money, I want to understand why and prevent the same mistake.

PAINTING CONTRACTOR OPERATING SYSTEMS | CASE STUDY 07 15 If a job is exceptionally profitable, I want to understand why and find more opportunities like it.

If labor is consistently exceeding budget, I want to improve production or correct the estimating assumptions.

If material costs are creeping upward, I want to know what's happening.

If overhead exceeds budget, I want to identify the expense and decide whether it's justified.

And if everything is going well, I want to know that too.

Because then I can focus on repeating what works.

After 15 years in this business, I've learned that generating revenue is only part of the job.

You also need to keep the money.

I've had summers with impressive sales and disappointing profits. I've had seasons with lower revenue and much better financial results.

And I've repeatedly seen the same pattern in my own management.

When I track the numbers closely, I run a tighter operation.

When I stop tracking, I get lazy, make worse decisions, and eventually discover that I've made less money than I thought.

You don't track profitability simply to find out how much money you made. You track it to make yourself accountable for making more.

These are results and experiences from my own company, not promises of what will happen in yours. AI helped organize the writing; the operating experience, reasoning, and final responsibility are mine.