Guest Interview: Daniel Honan of Bookkeeping For Painters “Industry Partners” Series Episode 4
In this episode of the Industry Partner series of The Painter Marketing Mastermind Podcast, titled Bookkeeping Strategies For Painters, we host guest Daniel Honan. Daniel is the Founder of Bookkeeping for Painters. He specializes in bookkeeping, tax preparation, and automation services for painting contractors. Daniel will be discussing how to know your numbers and what they mean, how to save big on taxes, and how to streamline and automate your painting business.
If you want to ask Daniel questions related to this podcast, you can do so in our exclusive Painter Marketing Mastermind Podcast Forum on facebook. Just search for “Painter Marketing Masterind Podcast Forum” on facebook and request to join the group, or type in the URL facebook.com/groups/
paintermarketingmastermind. There you can ask Daniel questions directly by tagging him with your question.
paintermarketingmastermind. There you can ask Daniel questions directly by tagging him with your question.
Video of Interview
- how to know your numbers and what they mean
- how to save big on taxes, and
- how to streamline and automate your painting business.
Welcome to the Painter Marketing Mastermind podcast. The show created to help painting company owners build a thriving painting business that does well over one million in annual revenue. I'm your host, Brandon Pierpont, founder of painter marketing pros and creator of the Popular PC A educational series. Learn do grow marketing for painters. In each episode, I'll be sharing proven tips, strategies and processes from leading experts in the industry on how they found success in their painting business. We will be interviewing owners of the most successful painting companies in North America and learning from their experiences in this episode of the Industry Partners series, we are hosting Daniel Honan.
Daniel is the founder of bookkeeping for painters. He specializes in bookkeeping, tax preparation and automation services for painting contractors. Daniel will be discussing how to know your numbers and what they mean, how to save big on taxes and how to streamline and automate your painting business. If you want to ask Daniel questions related to, to this podcast, you can do so in our exclusive painter marketing mastermind podcast forum on Facebook. Just search for painter marketing mastermind podcast forum on Facebook and request to join the group or type in the URL facebook dot com forward slash groups forward slash painter.
Marketing mastermind. Again that URL is facebook dot com forward slash groups forward slash painter. Marketing mastermind. There, you can ask Andrew questions directly by tagging him with your question. Daniel. Thanks for coming on the show, man. Excited to have you. I'm excited to be here. Thanks Brandon. Absolutely. So tell us a little bit about your background, the motivation behind bookkeeping for painters, how to get started with this whole thing. Sure. Yeah, I guess it goes back to when, when I was a teenager, my dad had a painting business and during the summers I was working on the job site um helping his painting business out.
And then when I was in college, I did the college works painting uh where I basically had the opportunity to run a branch of college works painting uh while I went to college for accounting, um got my accounting degree, I went up, I ended up going into the military as a military intelligence officer for a while. Um and then ran a painting business in there. And then eventually in 2120, started uh bookkeeping for painters where I took kind of my, my accounting and intelligence background kind of fused that with my painting knowledge to um create a, a service for painting businesses so that they could know their numbers and what they need mean.
Save big on taxes. Streamline and automate their, their painting business so they could focus on what they do best. I love it, man. That's an impressive background where you, you know, when you started this business. 2130, obviously, it played well to your skill set. You had a background in painting intelligence, you know, accounting it pretty impressive uh combination there. Did you see a need specifically for painters? Did you see it? They didn't really know what they were doing or what was the motivation of the vision there? Basically, initially, it was because I knew what, you know, I had grown up working with my dad and with other painters and um I, I knew the, the being in the painting business industry was tough running my own business was tough, you know, you're, you're out on the job site, you're trying to make things happen, close deals, make sure production is going well.
Uh not a lot of time to, to sit in behind a desk and, and do your bookkeeping. Um So I just knew that, you know, that's, uh that was probably a need. Um And then I, I, I'm pretty analytical so I, I like the numbers and that kind of thing. That's kind of my strong suit. My strong suit is not going to, to do sales and, and kind of being on the go. Um But uh so I kind of knew that I was, my skill set was better suited for serving a painting business owner so he could focus on what he can do better do best while I kind of take care of his back end office and make sure that that stuff is squared away.
So, um I kinda figured there's a, a good, um my skill set set with what, what painters needed. There's probably a good fit there. Um Yeah, so that's, that, that was kind of my thinking initially. Um And it definitely was a lot more true than I probably thought it initially. But uh, yeah, yeah. No, it's great man, saw a gap in the market that happened to line up very well with what you do and who you are. Um Sounds awesome. So what at, at what point, obviously, entrepreneurship, everyone's journey is a bit different but at what point in a painting business should they be looking to, to potentially outsource their bookkeeping, their accounting things like that as opposed to just trying to do it themselves?
Uh Pretty quick, I would say, um, what, what ends up happening is, uh, you know, because most painting businesses paying business owners don't know how to properly do their, their taxes. I mean, they could do it online, um using turbotax or something like that. Uh But, but often, uh pretty quick that can get done incorrectly or not, just, just not done at all. Um We've had many penny businesses, you know, come to us after not filing for years and which is, you know, obviously that's not an ideal situation to be in, but it's totally fixable.
Um, so, you know, one thing I definitely say to someone like that that don't feel bad, you're not, you're not alone. Uh, there's a lot of pain businesses that go many years without taking care of the, the, you know, compliance side of things. Um, so we're used to, to getting those folks fixed up and, and taking care of. Um, so I, I would say the, the, the, the worst thing you could do is kind of bury your head on the, in the sand on that. Just, yeah, get a hold of us.
We'll, we'll take care of you and get you squared away. Um, so you free up the mental bandwidth is the biggest thing. You kind of have this worry in the back of your head like, oh crap. I didn't do my taxes last year or they're here before and then Reapers come in one day. Right. So, um, you know, that, that, that's what I would say. At least do the compliance taxes. You don't have to sign up for everything you like at least get your, your, your, yourself protected.
So the IRS isn't bothering you. So let's talk about this, this idea that some painting companies haven't filed for years. Obviously, taxes is nobody's favorite subject or thing. What happens when they come to you? They haven't filed for a few years. So maybe they have this liability built up. I mean, for me, I would be afraid that I'm gonna come to you and basically my business is going to go bankrupt because you're gonna tell me I owe, you know, 2130,215000 in back taxes. How do you handle that?
Right. So, first of all, we will get all the information, the full situation, um, and, and access we need, we put together to understand where we stand. Um Make sure that we're putting you in for all of the necessary deductions credits to limit the amount of taxes owed, first of all. And then, um and then once we get to the point where, ok, we know the damage, total damage to say the last five years, you didn't do tax returns. Uh You know, at that point, we can help you, um basically get with the IRS to do an installment plan.
So the, the IRS, you know, um basically has a program for folks that in this category where you just haven't done anything for many years, but you're trying to get on the right path. And so they'll, they'll work with you on, um, you know, a payment plan. Um And there's other things like things like an offer and compromise to kind of negotiate basically with the IRS to get to get your, uh your tax liability down. Um uh So there's different, there's, there's also entity selection, we can go back um uh a certain amount of time to make sure you're in the right type of entity being taxed in the right type of entity that's gonna lower your tax liabilities the most.
So for, for example, um you know, once you start profiting more than 2130 or $2130,2130 a year, you need to probably switch to being taxed as an escort in most situations on every situation. But like I'm generally speaking, of course, this is, this isn't tax advice. Uh, but yeah, um, disclaimer. Yeah, disclaimer there, formal tax advice. Right. But like generally speaking, if you're around 2130 or $2160,21100 in profit, you probably should switch to being taxed as an escort. So having your LLC tax as an escort instead of taxed on your personal return as a schedule.
C, um, so there's different things that we can do to try to limit the, the, the pain as much as possible and, and like I said, the payment plan and all that good stuff and that s Corp election that's basically for, for FICA, for social security, uh, Medicaid, things like that. Right. So, uh, as the default when you start your painting business, you know, whether you don't do an LLC or you do do an LLC by default, uh, your tax on your personal tax return schedule, c sole proprietorship or, um, a partnership if you have a partner.
And so for those types of entities, every dollar that is in profit, you know, net is getting tax, uh, self-employment tax, which is what, like you said, the, the FICA Social Security Medicare that is, um, 15.3% right off the top. So any dollar and profit you're making 15.3% is going to the self-employment tax. Um, and so that can, that's ok. You know, I guess it's in the beginning when you're making under $40,000 a year that, you know, that's what you're gonna be paying. You pay the 15.3% then you pay your income tax bracket, tax rate on top of that.
Um, but once you start getting 40 or 503 $50,000 in profit, at least you can elect to be taxed as an S Corp and then a portion, you, you can basically take a salary, so you'll be an employee of your business. You'll take a salary, a reasonable salary, um, as the IRS, you know, set calls it a reasonable salary. So basically what you would pay someone else to do the same thing, um, is another way to say that. Um, so maybe you take a, let's say you $50,000 was your total income.
You take a, a reasonable salary of $30,000 and then the other $20,000 in profit does not get that 15.3%. Uh, self-employment tax applied to it. Um, so you're saving a few $103 in taxes there. So, uh, that's, that's the basic idea. The reason why we say, you know, you have to make 40,000 or 50,000 approximately or more a year for this. To make sense is because when you have, when you are being taxed as a corporation, you do have um, some additional costs involved, like you have to submit additional tax return and escort tax return.
Um In, in addition to your personal tax return, which is about a, $1000 per year. And then you also have to run payroll for yourself as the employee in the escort, which um can run um depend depending how of how frequently you're running payroll $100 to a few $100 a year. Um So those those additional costs are going to uh you know, basically say you, you're gonna have to make at least $40,000 in profit in order for it to make sense for the additional cost of doing those things. Um So you sure do you have payroll solutions that you recommend you guys provide payroll?
What's your thought on that? Uh Yeah, so we, we do um help folks with payroll. So we run payroll, take care of that. Um We have people advisors that can advise you on benefits. So these are usually a little bit, a little bit larger painting businesses that are, you know, uh 203,000 to 10 million range. Sure, like once they start having employees, um you know, you know, obviously you running the payroll for them, but also advising them on what type of benefits they can employ workforce management, um, things like that.
Um, so we can do payroll. Um, but for, if you're just starting out and you're just hiring, you can still hire us to, to help you get set up and we've done that for folks, um, or you can go kind of do a self serve type of payroll, uh, solution. So, um, is a good one. There's Quickbooks online payroll, um as well, which is sort of convenient if you're using Quickbooks online, obviously. Um But those, those two gusto guess uh is good. Um It has, it's, it's, it's uh, has a lot of features to allow for um your team to get access to their pay stubs and has a good streamlined um way to onboard folks and their technology is pretty good.
It integrates with Quickbooks online. So I would say Gusto number one I would look at and then a Quickbooks online would be another one. Quick books online, payroll. Yeah, Gusto Quickbooks online. And then when they get to that 500,000 and mark really bookkeeping for painters would be a very good solution, right? If they don't want to have to worry about running payroll, they need, you know, assistance with implementing benefits, uh that kind of thing, we can definitely help them out. So you, so I, I was a CFO, so I, I have a pretty extensive financial background and some of the stuff that you are saying here really, in my opinion, goes beyond bookkeeping, right?
You're talking about entity selection. Um You're talking about negotiating with the I RSI mean, this is pretty heavy tax preparation stuff and really corporate planning stuff. Um financial planning. So I just want to point that out, right. So for anybody listening, this stuff's pretty in depth, uh it's definitely goes beyond just a bookkeeping service, the deductions, the credits you mentioned that, that there are certain ones that painters are really eligible for. Can you speak to maybe a couple of, of the major ones that you've come across?
Yeah. So uh the biggest one for the, the smaller painting businesses that are between uh zero and 2 52 150,000 is the being in the right entity which we kind of covered. Um Once you're, that's like the biggest lever you can pull. So, uh you know, getting in the right entity at that level, uh beyond that, um beyond 250,303, um you're needing to look at kind of your full per personal situation and, and, and to include your, your business. So, uh the reason why is because once you're an S Corp, you're, you're your flow through entity, meaning that your, your business isn't taxed, you're really, you're paying all the taxes on your personal tax return.
So, uh when we do tax spending sessions, we have to look at your entire entire personal situation. Um, and then that's going to basically highlight, ok, what can we do based off your situation? Some common ones that, uh, basically anybody can use, even if your smaller painting is, um, is, uh, what's called income deferment or, um, expense acceleration, which is just fancy of, you know, pushing, kicking the can down the road, like pushing the income into the next tax year or, and uh, accelerating how quickly you're, or um, increasing your expenses in the current tax year, you know, prepaying for things so that you can get those tax deductions.
Now, instead of waiting until you need them in the first quarter of the, the, the next tax year. So that's a kind of a, a cornerstone of, of tax planning is just to take the, accelerate your, um, um, I'm sorry, did I say that backwards, accelerate expenses, accelerate the expenses, the income. Yeah, defer the income. Yeah, sorry. Um So first starting with deferring the income. So the, this works for cash basis tax taxpayers. So this pretty much 99% of small businesses under 10 million are gonna be cash basis tax, you know, for, for tax purposes, meaning that when they get cash in their hand, um, that is counted as income when they pay cash out, that's a, a deduction.
So, um, you can use that to your advantage basically, you know, you could do some sort of special at the end of the year, end of the calendar year and say, hey, you know, we're doing a special for interior work where, um, you don't have to pay a deposit on, on services until January one or I'll do January 1st. Right. Don't, don't pay nothing down until January 1st. Exactly. So, it's like you're not getting that cash. So, you happy New Year. Right. So, so you're basically pushing off all that cash receipts into the next tax year.
So you're not getting taxed on that money. Um So that would be like a, a tax strategy you could do. Um And then expense acceleration is just basically looking at the first quarter and saying, ok, what do I need? I know I'm gonna have to spend money on this anyway because we would never advise like you buy something to get a tax deduction for no reason. Like doesn't make sense. That would be done. Yeah, it has to be, it has to make financial sense first. Um But yeah, you could look into the first quarter.
What do I need that? I know I'm gonna need, can I purchase it now um to get the tax deduction and, and that's the expense acceleration piece. Yep. Yeah. So at Pan American Pros, we do that, we'll look into essentially all the Softwares that we're going to need. And then Black Friday comes around and, and holiday specials and we'll essentially invest annually and just drop boatloads of money. Uh November, December to try to accelerate our expenses and there are similar things you know you could do in painting.
Um, ok, this is, this is great. I wanna touch on this, this idea of reasonable salary because I know this is something that I've thought about that, that a lot of people are like, all right, how, how far can you push the envelope with a reasonable salary you had mentioned if you're making 40 or 50,000 in profit, profit being net income here. So after your gross profit, after your overhead expenses, that 30 grand might be a reasonable salary. How, how tightly does, let, let's say you're making 200 grand in net income.
How tightly does the IRS kind of monitor this? How much can you push this? It is, it is uh, one of the red flags that the IRS has to, you know, um, it's a way to skyline yourself. I guess that's a military turn. But, you know, kind of raise your hand for an audit, like if you're not paying yourself a salary and, uh, you're making a bunch of money in your escort. Um, that's definitely a way to, to, to prompt a, an audit. Um, but as far as how aggressive you can get, um, what we do to make sure that you're covered, uh, is we'll, we run some, we, we can run reports on basically because the standard is, you wanna pay yourself what you would pay someone else to do your job.
So, what we basically ask you. So what, what do you do in the business? Do you do sales? Do you operations? Do you do both? Whatever? Um, where do you live? Ok. And then we'll pull the data for what a, you know, um, uh, you know, a sale, a sales person, uh, for a painting company in, you know, Wisconsin, how much do they get paid on a below average average, high average? So we pull that information, that report and then, you know, depending on how aggressive you wanna get.
We go, if you want to get aggressive, you, you take the low average if you wanna be really safe, take the, the high end. Um So that's the way we approach it. Uh, um, there's, there are some rules of thumb out there like pay 303% of your profit as a salary to yourself. Um, uh, we, we, but we want to kind of get more. Um, because when, when you go, if you look at the case law for this stuff, the IRS will look at that type of data, the ones the, the data that we pull.
So, um, you basically, if you, you have the reporting data for, for what I just described to back up your, your salary. Um, even if it's on a, you know, you're the low, the below average. Um, and you can justify why you're below average, maybe you didn't have a good year. Maybe you did so much expense acceleration and income deferment that it makes sense. Your business performed, you know, uh, in quote quotations below average because you're doing other tax strategies. Um, you know, you could take the low average at an aggressive, a lower salary.
Um, and, and, and it'd be, you know, more than justified to do so. Yeah, let's get into some more aggressive strategy. So, write off things of that nature. I do want to reiterate this is not official tax advice. Neither Daniel nor I are getting sued over this podcast episode for going to jail or anything like that. Right. But cars, right, vehicle expenses, uh personal expenses that people like to, to run through the business, whether that's a family vacation dining, right? There's all kinds of things that business owners do and capitalize on.
How do you go about doing that the right way. Yeah, the, the things, um, that the IRS pay pays the most attention to, um, when it comes to taking deductions, uh, especially for written evidence is vehicles. Um, and then meals and, um, so, uh for vehicles you, especially if you're using it for personal and business, um, having a mileage log to track, that is a, is a common thing that the IRS requires it. So it's annoying. But, you know, to, in order to make sure you're covered there, having a mileage log, um, to track the, the business mile miles versus the personal miles.
There's some apps out there like mile I Q. Um, as I know is one and there's a few others out there. But, um, uh, so for vehicles you wanna have written evidence for, for miles, um, there, there's things for on the vehicle side, depending on the type of vehicle you could get some, uh, bonus depreciation or section 179, like which is basically bonus depreciation, which is basic depreciation just means um it's a way to, it's a deduction um spread over many years. Um You know, if you, if you get, if you buy a vehicle that's for business, um you know, it's uh the, the virus, it or, and this goes for equipment too, virus requires you to, instead of taking the full deduction the year you bought it.
Um The general rule is that you have to depreciate it over several years, but there's different rules. If you buy a certain type of vehicle, usually the heavy duty, larger vehicles, um you can get a uh section 179 or bonus depreciation um deduction that allows you to expense more of it in the, in the first year you bought it, either all of it or a high percentage of it. So that could, you know, increase your deduction. Um So that's a, a key point for purchasing vehicles. Um And those are, those are over basically if it's over.
Uh there's probably more nuance to it but essentially if it's over £6000 you can capitalize on that and if it's a smaller vehicle you really can't. Is that right? Yeah. Yeah, there's, there's other things out there. But, yeah, basically, like, uh, you, you really have to dig into the, the, the descriptions of the different types of vehicles that apply for, like, section 179. It really gets into ridiculous. You would definitely want to be working with a professional on this. You do this yourself. Yeah, or have a really good, you like to read um I R publications or something like that.
But uh um so yeah, then for uh meals, um the way you kind of protect yourself there is, is uh is just making sure you have a written, you know, go going out and, and when you take your, your crew out to, to lunch or you take, you know, a, a customer or you do a sales presentation at, at uh on the weekend to your neighbors um to, to write off the, the barbecue that you did, um which can be legit, you know, you can do have a barbecue at your, uh you know, at your house, invite all the neighbors um and have a great time, but then do like a, a quick, you know, sales presentation pitch to them, like what you're doing in your business, you can deduct that.
Um But the key that the key for that is that you have it some documentation to back that up. So on the one of those home businesses you invite them all over and you hang out and then you try some Tupperware. Right. Yeah, exactly. So um you know, so you can do those things. Um the key is just having the, the proof that that was what happened. Um an easy way to do this on a regular basis is like um taking a picture of the receipt for, for those meals and just right on the receipt like, you know, uh you know, uh lunch, lunch for a crew, um, you know, you know, work, meeting whatever.
Um, and then keeping that receipt, uh saved either in Google Drive there, there's also a receipt management software like DEX, um, even Quickbooks online now has receipt management built in. Um, but, uh, just in case the Irish comes back, you get audited and really when you get audited is really, uh, is, is the question when you get audited, not if, because if you're in business long enough you could eventually get, get audited. Um, it's just a matter of time. So just having that kind of your mentality.
But yeah, uh saving those receipts for the meals, making sure that you document like on the receipt. Like, hey, this is for a sales presentation I did, um, you know, at my house and, and that kind of thing. Yeah, awesome. So aside from not filing taxes for years, what which is obviously not the best decision, but one that you can help painting company owners salvage. What are some of the other biggest mistakes that you see, painting company owners make with their bookkeeping and their taxes? Uh, so I, for bookkeeping, I guess, um, would be that they just don't know their numbers and what they mean.
They kind of use their, their bank account as kind of the guide on how they're doing. Yeah. So they'll look at their bank account. Ok, I have money in there, so I'm, I'm ok. Which I totally understand. I've been there as well. So, um, but, but not having a deeper understanding of what's actually going on or another thing is like, um, I'm do, I'm so busy this year. I was so many jobs but, um, I'm not seeing, I don't know where the money went because I'm not seeing like my bank balance is pretty much the same well enough, maybe. Right.
They, they, they don't know where the money is that they feel like their bank balance is pretty much the same as it was. They, you know, um, but they feel like they're super busy but they're not seeing the kind of reward for their work and, and that comes down to, they don't know their numbers of what they, they mean. So having financial statements like, uh, obviously profit and loss, it is gonna tell you if you're profitable, you're, uh, a statement of cash flows tells you where is the cash going in your business?
Like you know that question of ok, I doing a bunch of jobs don't know where this, this cash is going. Um, and then the balance sheet tells you, um, you know, are you, are you liquid? Meaning are you able to pay off debts in the short term? Um Are you solvent? Meaning are you able to pay off debts in the long term? So those three financial statements, um especially when you know what the painting industry benchmarks are for the, the financial statements being able to see those on a monthly basis will really help the um painting business owner understand.
Ok, where am I? Where am I now? What is the average? But also what is the, what are the top 20% of painting businesses where, what do their numbers look like? So you, you understand what your numbers are, what average is and what the best paying business numbers look like. So you have a good understanding of what, what do you need to do because the, the financial statement should be driving you to act, do something. Um, like as an example, you know, you look at your profit and loss, your gross profit is below 40% 40% gross profit is kind of like the average painting business.
If your gross profit and just define that real quick. A gross profit means what's left over of your, your, your top line revenue after you pay for direct materials, you know, paint and supplies and direct labor, which is the painters after paying for those two things, what's left over. So, the gross profit, uh, margin percentage is what I'm talking about. So, so if you have 5 $5000 painting project and you walk away with 50003 after paying the guys and paying for the paint, everything else, then that's your gross profit would be 40%. Correct. Correct. Exactly. Yeah.
So if you did, if your gross profit was below 40% that's telling me that you're below average. So they're, you're either not charging enough uh money for, for what you're doing or you are just being inefficient on the job side. So, um, so, so again, that's going to give you information. Now, now you need to figure out, ok, do I need to look at my estimating? Do I need to look at the job site? Uh a way you could do that in this specific instance is you could look at your materials percentage and your, your direct labor percentage as a percentage of revenue.
So the average painting business is painting business pays 15% of the job size for materials. So if you're over 15% that's indicating that you're either wasting, you know, uh material on the job or again, you might be undercharging for, for direct material for direct labor, the average is around 40%. Uh you know, paid to direct labor. Um So 15 15% plus 40% is 55%. So 303% minus 55% is 45%. So 40 to 45% is kind of the, the benchmark as on average. Um So basically you look at your direct labor and your direct materials if they're both high, that's telling me that you're probably undercharging if one is high and the other one's average or low, this is pro it's probably because you are being inefficient for with materials or your your crew is inefficient.
Um So that's one way you can kind of figure out, ok, my gross profit is low, is it because I'm not charging enough or I'm uh being inefficient on the job site, look at the material percentage and the direct labor percentage to kind of dive in deeper to see. Um But yeah, that, that's, that's what I would say to answer the question of what do painting businesses need to be doing is uh for the bookkeeping side is reviewing their reports monthly that are they a that should be accurate, obviously done correctly, looking at the profit and loss balance sheet, saving the cash flows to understand what their numbers and what they mean.
So they can actually make decisions in their painting business to uh either to scale um or and improve their profitability and bookkeeping for painters. You guys would set that up for them and walk them through and explain what it means. Right. Yeah. So, um we will definitely get their books accurate so they get accurate reporting. Um We have different levels of service. So you can either, uh we have a membership area that teaches you all this, that I'm basically some of the things I'm hitting on right now in a course so that you can either get it, you know, um on your own to do your self analysis or you can meet with somebody each month um or on a regular basis to, to kind of guide you through this stuff.
Um It, it just depends on what package you wanna do. Yeah. How do you guys define estimators, project managers? Is that direct labor? How are you breaking that up between the different projects? So in the benchmark data, estimators are overhead costs. Um So when I say, you know, uh 40 to 45% is the benchmark. Um that does not include estimators. Those are your painters. Yeah, those are just people on the job site painting in the materials. Um So everything else will be overhead costs. Uh But yeah, for the estimators, you know, typically it's like 55 to 10% per uh the percentage of revenue they're, they're paid.
Um Some people include that in, you can track it on as a cost of good sold. Um You just need to know that when you look at the benchmark data, it's, it does not include that. So, right. So then your, your benchmark might be 30 to 303% if you're throwing them in there, something like that. 35 to 40. And then what about project managers? Uh, same deal? So, um they are not able to 5 to 10%. Yeah, it's, it's, it's basically the same thing. So, you know, if you have a, an estimator and a project manager, they should together be paid at um 7.5% apiece and, and uh you know, those two positions should be about 15%.
Um So awesome. Ok, so just a quick recap on the P N L the, the profit and loss statement, income statement, they should be uh making typically between 40 and 45%. That's the average. Obviously, if you can do more, if you could be making 50% that's huge of the girl's profit, meaning whatever is left over after you pay the painters, after you pay for all the materials of the on the job site. That's what you bring home. Then the estimator and the project manager together, they should be taking somewhere around 303% home.
And then obviously you have additional expenses. It is bookkeeping, the software and in house staff that you have things like that. Is that right? What should they be looking at for for a total, you know, this, this net profit after all the overhead, after all their expenses, what should they be looking for, for their net profit. Yeah. So the, the average is 12%. Um So, you know, and so that's not, so let's say you have a painting business, you don't, you're not the estimator, you're not the production manager, you're kind of just like the CEO and just kind of overseeing things.
Everyone, everyone has a job, like you don't really have a specific job. You're just kind of the owner. Um 12% is the average which you should be making. Um for most, for no, for most painting businesses, you know, that are under uh two million. You're, you're not quite there yet. You're, you're doing something. Usually you're usually the salesperson, sometimes the production manager or both. So, you know, you take that 12% then you would add that, that 220% on there or that 230%. Um So depending on what all you're doing. So like, like let's say you're the sales person and you're the business owner so that 230% plus 25000% should be making close to 230% of before you pay yourself basically twe 230% cash flow to you.
So the profit goes to you and then the, if you're paying yourself a salary, um you know, 303% of the, the pay should be going to you. If you're doing the production management and the sales, the sales and you're the owner, you know, you should be making closer to 230 260%. Um, she should be going to you. Um, so does that make sense? Yeah, absolutely. You could be doing the, the bookkeeping. You could not pay for any software, you could do it on Excel, you could do the painting and then at that point you should be making somewhere close to 2100% is only going to get so big. Right. Right.
Yeah, exactly. Awesome. Ok. Uh What kinds of companies do you find? I know you briefly mentioned the 500,000 and up usually is a good fit for you guys. But what kinds of companies do you find are typically the best fit for bookkeeping for painters. We work with uh folks that are in the startup phase. So making nothing or close to nothing, you're just starting out up to 10 million. Um ok. Yeah, so we have different packages and not all the things I talked about today, make sense for, for uh every painting industry, uh painting business.
So we kind of craft a package based off what you need. Um So that, you know, you're only paying for what you need. Like obviously, if you're just starting out, you probably don't need all the bells and whistles with all the bookkeeping meeting every month, then you know, you probably need to get compliant with taxes. That's probably the the main thing. Um but, but once you get up to 10 million, you're obviously probably needing to meet monthly with like basically a CFO to to keep you informed on what's going on.
Um and then tax planning and all that stuff. So yeah, got it. Are, are there any regarding knowing your numbers? I think we, we did a pretty good rundown of the P and L are there anything that we should, we should know in terms of the balance sheet, the statement of cash flows, anything like that that we should touch on? Um I think the biggest thing um is the is cash, you know, cash is king probably heard that before. So doing what you can to keep, especially in this kind of economic climate right now, we kind of up in the air, not sure is demand gonna go down for paying services, that kind of thing.
Um a a focus on cash and cash flow. Um So, you know, the way that impact your cash flow is comes down to kind of two things is one you want to get paid as quickly as possible. And then two, you want to delay any outgoing cash for as long as possible to keep your cash in your pocket as long as as long as you can. So for the first one, you know, get as much cash as you can, as quickly as possible. Um Pretty much all cases, it does not make sense to take no deposit.
Uh So you want to be taking some sort of deposit. Um at least 30%. I would say 30% deposit to 603%. Um because that's going to allow you to, to cover your costs uh for doing the job, but also to get that next customer to pay for, you know, the marketing for that next customer. Sure. Exactly. So, um that's a lose you for a second. Daniel. So I'll let you know, we, we just paused the recording for a second. So you had said Tasha's King uh get paid as quickly as possible, delay your payments.
Obviously, if you're working with painter, marketing pros or bookkeeping for painters, you're not gonna delay those payments because that's not gonna happen, but delay your payments. Um And then, then you, you cut out for a second and then we talked about by taking a 30 to 50% deposit on your projects to make sure you cover costs of marketing. Was there something in between there that, that we missed? That was important? Um Yeah, so the basically taking the biggest takeaway here is that you, you need to take a deposit.
Uh If you're, if you're focused on keeping cash and you're not taking a deposit or you're only taking a 10% or 20% deposit, really consider increasing that to at least 30% and 30% is, is because you want to be able to pay your, your workers. Um because yeah, you wanna be able to get your next customer be also wanna be able to pay your folks um um with the money that you got from the deposit. So uh so that's, you know, for keeping cash in your pocket. The number one thing I said taking AAA good deposit is, is kind of a big lever.
You can pull take a good amount, a good size deposit. Then the next thing would be like, you know, um to, you know, for change orders for up sells taking the full amount of the, of the cost of the Upsell or the, the change order on the spot instead of just adding it to the bill. That's another way you can get cash, you know, as quick, quicker. And then the last one would be collecting as soon as the job is finished after the walk around your final walk around with the customer and collect payment right then and there do not just send an invoice via email and hope that they pay it, you know, um you know, with an email follow up or whatever, like when you're in front of them, have you, you or your team collect that payment as soon as possible.
Um And that's going just getting your cash, you know, a few days earlier makes the biggest difference. Um because, you know, if you think about you have to run payroll every week or every other week, you know, having that extra $5000 in your bank account versus not having it in your bank account is a big difference and, and days matter. So, and then number two, the uh um delaying cash expenses, you know, using your vendor accounts like with Ron Williams Home Depot, um using those credit lines that they extend to you.
Um So that buys you 30 days of not having to use your own cash and then, then you can use a credit card uh as well. That's obviously the vendor accounts are better for interest rates usually in most cases um in, in flexibility there. So you want to prioritize using those first, but then credit cards uh a strategy you could use is use your credit card to pay down the Sir William balance or your Home Depot balance. So that you get an extra 30 days of time, you know, time where you're not having to outlay cash because you put on your vendor account, you got 30 days, then you paid your balance off with the credit card and then extend another 30 days.
So you just bought yourself 60 days of keeping your cash um and, and paying very little interest because usually you're only charged interest when you're late, um still paying off the full balance. So, um yeah, so delaying delaying expenses. Um Another way you could do it uh with you. If you're using subs, you could have an agreement with your sub like, hey, you don't get paid until I get paid incorporating that in your subcontractor agreement with employees you could. Um And this is just a lever as an option is to decrease the frequency at which you run payroll.
So instead of doing it weekly, do it biweekly or bimonthly. Um So those are just some options as you, you know, kind of take on the this economy. And if you're worried about cash flow, those are some tactics that you could use to, to keep a good amount of cash in your business. Yeah, that's awesome. And I do wanna wanna just kind of touch on the fact that there are companies. It's, it's been a pretty common thing that they actually grow themselves out of business because they don't do exactly this.
They, they end up taking on uh a lot of projects where you have to outlay cash for those projects. And if you're not collecting deposits, you're not doing anything like that. You can actually bankrupt yourself through your own sales and marketing success. Uh Another thing I wanna touch on is is I've spoken to quite a few painting company owners who they view that as, as a, a big selling point, a big competitive advantage that they don't take a down payment, right? So we, we don't take any money until the project's over and that can be a selling point.
But I would urge you to look for other selling points like a, like a warranty, a competitive warranty that's above market, right? And if you can actually stand behind your workmanship, which you should be able to, then it's not really going to negatively impact you. Um Some, some sort of, you know, 100% satisfaction guarantee, right? If you can, you can essentially offer similar things to other painting companies, but get really good at positioning it and marketing it and good at the sales process to where you can convey that value and you don't necessarily need to do the, the zero money down.
Uh As Daniel is talking about here. Uh All right, Daniel, I appreciate you sharing all that. So one other thing I know that you do is is as part of bookkeeping for painters, you have another service called automation for painters and it helps to streamline painting companies operations. Can you speak to that a little bit? Sure. Yeah. Um A lot of paying businesses, they, they have a, a lot of different Softwares and they're having to do data entry across all the different things. Um or maybe, you know, for, for when a lead comes onto their website to fill out the intake form and then that goes into their email, but then they gotta put it into their estimate rocket or Pain Scout, like type it again or have their admin, type it in it again.
Um Then they have to manually create a deposit invoice when the customer signs on, then they have to send follow up emails to get the colors. Um You know, badgering the customer to give you the colors that you need to, to order the time listening to this man, right? Yeah, so there's just a lot of things like admin tasks. Um So basically what we do is we sit down with you, we we come up with a holistic automation uh plan, we help you streamline and automate like all those admin tasks that's just burning up a bunch of time.
Um so that you can, you and your team can focus on the high value activities. Um And we can also improve your sales process like uh with touch points using direct mail, automated, direct mail, automated text email, um ring less voice mails. Um and then automate color capture once they sign on as a customer automate sending out that initial deposit invoice we were talking about. Um So you get paid quicker. So uh that's kind of the gist of what we do there. Yeah, that's great man. So for people who are listening, who, who, you know, want to grow, want to professionalize their business.
Obviously, most of our listeners are, are really interested in growing and, and being the best painting company they can be if they are interested in reaching out to you learning more about your services and whether or not you're a fit uh for what they need, how, what, what's the best way to contact you? Uh Bookkeeping for painters dot com um right on the main page you can uh schedule a console free uh complimentary console just to see what, what makes sense for your business, like how to see if there it makes sense to work together.
Um And uh yeah, we'll, we'll get you squared away. Awesome. So bookkeeping for painters dot com, Daniel, this has been incredible. Is there anything else before we wrap this up that you want to share? No, that's it. I think we covered it. I, I appreciate your time, Brandon. Uh It was fun and um yeah, yeah, I appreciate you coming on the show, man. It's, it's definitely been a lot of fun. Thanks for being in the Facebook group. Again, if you guys aren't in the Pan American Mastermind podcast for Facebook group uh on Facebook, obviously, you should join and then you can tag Daniel uh directly.
I mean, I know I, I got educated today. This is a big black box for a lot of people, but it's also really important box that a lot of people are wasting a lot of money on. So Daniel, thank you for your time, man. Really appreciate it and can't wait to have you back. Awesome. Yeah. Thank you, Brandon. If you want to learn more about the topics we discussed in this podcast and how you can use them to grow your painting, business, visit painter, marketing pros dot com forward slash podcast for free training, as well as the ability to schedule a personalized strategy session for your painting company.
Again that URL is PainterMarketingPros.com/Podcast. Hey there, painting company owners if you enjoyed today's episode, make sure you go ahead and hit that subscribe button. Give us your feedback. Let us know how we did. And also if you're interested in taking your painting business to the next level, make sure you visit the painter marketing pros website at PainterMarketingPros.com to learn more about our services. You can also reach out to me directly by emailing me at Brandon at painter marketing pros dot com.
And I can give you personalized advice on growing your painting business until next time. Keep growing.