Guest Interview: Jason Paris of Paris Painting “A Painter’s Dream” Series: Episode 3
In this series titled “A Painter's Dream,” Jason Paris will be discussing what makes the painting industry so attractive to ambitious entrepreneurs, and how painting company owners can capitalize on current and future opportunities. It is a 4-part series.
In episode 3, Jason will outline what you need to do in order to make your painting company sellable, allowing you the option for a lucrative exit.
Video of Interview
Episode 3: Building with the end in mind
– making your company sellable
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 and 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 series titled A Painter's dream and Jason paris will be discussing what makes the painting industry so attractive to ambitious entrepreneurs and how painting company owners can capitalize on current and future opportunities.
It is a four part series. In episode one, Jason discussed macroeconomic trends and how the ebbs and flows of the economy should affect decision making and planning within your painting company. In episode two, Jason dove into the influx of young talent into the industry and what that means for all painting company owners. In episode three this episode Jason will outline what you need to do in order to make your painting company sellable, allowing you the option for a lucrative exit. And in the final episode episode four Jason will elaborate on his philosophies of business on how they apply to you and your painting company.
If you want to ask Jason questions related to anything in this podcast series. You can do so on our exclusive painter marketing Mastermind podcast form on facebook. Just search for painter marketing mastermind podcast form on facebook and request to join the group or type in the U. R. L. Facebook dot com forward slash groups forward slash painter marketing mastermind again at U. R. L. Is facebook dot com forward slash groups forward slash painter marketing mastermind. There you can ask Jason questions directly by tagging him with your question.
So you can see how anything discussed here applies to your particular painting company. Jason is the chair of the board of directors of the P. C. A. And founder of paris painting, the most successful painting company that painter marketing pros has worked with to date. Jason. Thank you for conducting this great series for us. That's a great intro here we are. It's it's always that half hour intro. Right? But we get through it and it allows the opportunity to take a little nap. Alright so so Jason, how do you sell a painting company?
What do you have to do to make that work? Um So we talked about kind of the genesis of this is starting with the end in mind. And so that's a little counterintuitive to most trades based companies. It's kind of most people enter the trades as we talked about in our last series our last episode um by finding it not seeking it. Right? So very few people are thinking about all the options available to them on the platter of of graduating with a business degree and choosing to start a trade based company, a painting company.
Most people, the origin story is uh painted with my family or painting to college and then fell into it right? For a variety of reasons. They didn't want to pass a drug test or or didn't want to work for anybody. I didn't want a boss, you can be your own boss in that sense. So that's kind of the genesis of this. If you're going to be intentional, starting with the end in mind, uh you need to think about what you are going to create, right, and what you're ultimately going for.
This is based off of Stephen Covey's seven habits of highly effective people. Let's be habit number two. Um that idea that everything is created twice uh first gets created mentally in your mind and then it gets created physically or practically uh in the world or however you're creating it. Um So you want to think about, what do you want this business to look like? What are the end days gonna look like? What is the end? And then once you have an established vision, you can start to make decisions that move you closer to that vision as opposed to farther away.
We kinda have like the hook of a lucrative exit, right? The rally is the exit can look, you know, there's, there's many, many different ways that an exit can look for for a founder or a business owner. Um you know selling the company, you can sell it out right now and get a one time cash payout and we'll talk through all the all the factors that go into evaluation, typically whether you're working with a broker or or anybody else. Um but maybe you want to sell it to your your your Children, right?
And it's like, well how does this become something that's actually valuable for them to take on? Um Or maybe you want to sell it to some of your staff that you're building up, right? So you're gonna build up a president who's going to take over the company once you're ready to retire. And and whether they do a full buyout or partial buyout or majority buyout, how do you build something that's actually going to hold inherent value for that individual? Right? And now the dollar price is one aspect, the dollar price is really a reflection of what is actually important, which is stable passive income, right?
So you're gonna build a company to have a lucrative exit. I think the most lucrative exit you can have is one that continues to spit out cash in a stable passive way, right? You can always sell your company outright. Uh However, there are many challenges with that, you're gonna get a 2 to 4 X multiple of Ebola assuming that you're doing under a million dollars of profit, you can get a little bit higher when you start to do a little bit more because that inherently is going to have more management structure which gives us the end goal of stable passive income.
You get that 2 to 7503 X. Multiple. You're gonna pay a brokerage fee. Typically maybe you get out of that, you're gonna pay capital gains tax, you're gonna pay taxes on that, that's coming in uh And now and now you're left with whatever is left of that sale. And the question is how do you get a return on that cash? Right? Because the secret in life is not how much money you make, that's how much money you keep, Right? And then it's actually not how much money you keep.
But what kind of return do you get on the money that you keep? And that is gonna be a very very hard thing to compete with Equity and a painting company, right? So when you have Equity and painting company, let's say it's spinning off a half million dollars cash, let's say your uh three X. Multiple cut in the middle. So you get a $1.5 million valuation. You gotta get like a 30. You gotta get a pretty good return on your cash to equal what you'd be making in profits per your what that equity is valued at, right?
So that's that's the inherent challenge that comes with selling the company. But the reason a lot of people will sell their company is because it's not a passive endeavor right? It's not something that's gonna be stable or passive in the long term. So they want to bring on a key employee, they want to bring in their Children or this new concept that's kind of entering into the marketplace to bring out an operating partner that can continue to stabilize the company all you'd be passive and spit out of cash.
So that's kind of the framing of the philosophical why starting with the end in mind, what's the end goal? How's this thing kind of ramp down close out, You know, the typical or the typical end story is you sell your, maybe you sell some lead lead flow and your equipment, right? That's typically what happens. Or maybe you do a complete a complete sell, uh, with some kind of a tail on it, somewhat short. I think the real prize is to be able to sell a portion of your equity that continues to contribute stable passive income for the rest of your life. Yeah. Yeah.
So I want to circle back to a couple of things because Jason you move fast. So to is earnings before interest, taxes, depreciation, way of saving profits. Painting companies actually aren't that complicated. So we say it like we're an agricultural or, or manufacture were a private equity firm over here. This is how businesses are traded right there traded based off of a multiple of profits. Now if you're like a crazy, so like residential companies repaint companies aren't that complex where you have to do like memorization and net profit.
This is not your gross profit. So after they paid for their puts and takes with that number. So we usually come to like an adjusted profit number when you look at that. Yeah. So well adjusted profit is because there's usually two weird things that are happening in a painting company won the founder is wisely not paying more income accidentally need to right? So they're reducing their W. Two and increasing their K. Nine. Which is a fancy way of just saying that they're paying themselves like 40 to $60,000 a year to be the president.
Top sales rep and whatever other has they're paying right versus the market wage for those compensations maybe $100,000 right? So it's a $60,000 gap. The company is showing 0003,000 more dollars of profit because they're not paying a market wage for the roles. Which is smart because they're gonna pay less, pay less taxes on the profits than they are gonna pay on their payroll taxes, right? That's the smart thing to do but just kind of artificially inflates the profitability of a company. But then a lot of painting business owners will have these kind of discretionary earning expenses, right?
So they're like the top sales rep. So they take them and their family out on a vacation to uh you know good job on your sales now. Is that really a business expense or is that personal expenses being paid pre pre tax for the business, Right? Or you've probably seen the company that uh you know, they'll do a big training exercise uh in their basement. Uh it's called the basement remodel, right? And their training their crews on how to explore these different trades of of drywall and framing and all these things.
But the company does it as a loss. Uh but it's really a personal expenses being paid pretax write. So that's artificially deflating the probability company. Let's say there's $100,000 of expenses that get pushed through their business in a year on that. So you've got $60,000 that's artificially inflating $100,000 that's artificially deflating right? Unit that out. You've got about $40,000 that you want to deflate the profits to show a true adjusted Ebitda. Yeah. And I want to also, I'll just say, yeah, there's a lot there. Um I think that's that's awesome.
And uh obviously if if anyone has questions on this, you know, everything he says makes perfect sense. But but maybe if you're listening, maybe you don't have the financial background kind of, if you lost a little bit, just tag him in the group in the facebook group and and you know, I think I think we'll be happy to answer. Um but I want to, I want to touch on this idea of passive income too because I was actually thinking that when you said, you know, the reason people want to get out of the company is I think a lot of the reasons they kind of get tired of working there, but if you set the company up, you don't really have to keep working there and you can still benefit from it. Right?
So that's the that's the the golden prize, right? The golden prize of capitalism is stable, passive income. Right? And how do you grow that? And so that's a hard thing to achieve. Very, very few companies achieve that on their own. Most do it through some form of partnership where that's giving uh, you know, key incentives or equity to the stakeholders of the company. So people that you're bringing up within your company, sometimes people bring family members in or there's a domain expert in the industry, they may take on an operating partner on a fractionalized roll.
Those are all different options on how you achieve that stale passive income, but it's really about, and this is how companies ultimately are valued if we will get to live different variables and factors, but it's ultimately was the likely performance of future profits. Right? How certain are those future profits? Right? So are different things that are gonna be drivers and strangers on that, right? By far the number one. So this is like the most important thing, if you're looking to uh just set your company up for success, make your company uh enticing to be bought, whether it's on a full purchase or a partial purchase purchase um or if you're gonna be buying a company, this is ultimately what you would be buying is like the real value is the core management in place and plan to continue for the foreseeable future. Right.
Is this a company that's going to manage and run itself? This is a company that needs people to step in and manage it after the purchase. Right. And that is like almost all painting company purchases transactions, right? All the ones that I've been a part of, all the ones that I've seen consulted on or came in on the back end and told them. Yeah, you got a really bad deal. That was a bad purchase. Now you're stuck and I can't help you. Uh They're coming in and they are running the company right?
The purchasers coming in and run the company. Maybe there's a few key roles in place. Uh but typically it's not a stable passive asset. That's the number one driver evaluation is is the core management team in place. They plan on continuing for the foreseeable future. Right. Was the flight risk of those core people involved is what you would want to take a look at? Yeah. And that's that's um great because it's also when we're talking about this past, you know, let's say the trailing 203 month profitability uh and how it's going to sell maybe 2 to 3 to four times depending on where you're at.
The reason that they're they're paying, that is not because of the past 12 months, right? You're already taking working capital, whatever cash you have in the business that's already being accounted for in the purchase price. What why they're focused on the past 12 months or 24 months? Because that's an indicator of of the likely, you know, next 3 to 5 years. That'd probably be the number one, the number two driver, that's number one is the management team in place. Number two is how stable and how diversified all the profits, right? So stable.
It is important. So stable, stable. It's kind of like uh you know, last year we made a million bucks in profit, awesome. The previous three years averaged $200,000 Right? And you're like, hmm, that's like, interesting. You want to dig into that, right? And then you might find out like, uh oh shoot, you know, we had a one year spike because of a commercial project those farm for three years and it's not going to continue. Yeah, it was a one time thing. And so like that's not really stable profits kind of on the same on that same edge.
How diversified other profits, Right. So are all your profits coming from one source or one target or is it pretty well, pretty well, pretty well spread out anything, is any, is any single source surpassing that 33% threshold of. Hey we have one relationship with the G. C. That's 30% of our profits um You know that's not very diversified. Uh It just inherently brings more question and more uncertainty when you look to purchase an asset or sell it. Right. What is the likelihood of continued performance of the profits? It's not very diversified.
You would you would call that a little higher risk and something that has more diversity in it. Yeah. And risk is always going to reduce. People need a higher return to take on risk like the stock market or anything else. The risk there is the higher return they need. And the way that they get a higher return is that they pay you a lower purchase price. Yeah. Yeah that would be like your R. O. E. Your return on equity. Right? And that there's two ways to move that lever.
One of the ways you would move the levers on the purchase price. Right? And just accurate reflecting it. Lot number three. I say there's like four. There's a million different ways. But we just talked about four third would be account based revenues or just the likelihood of consistent revenues increase continued to be incurred for the foreseeable future. Right? So if you like an account is like a account means a lot of different things to different people because one of my colleagues likes to say but you could say repeat referral work would be like the most the account that you can look at, right?
So if you, you have a company that has a great reputation, you know, have a higher amount of referral and repeat. Uh that's a channel account that's pretty consistent, that's likely to continue for the foreseeable future. Right? If you like have this weird google hack, that's getting you, you know, 30% of your revenue, um that's that's gonna that's gonna that's gonna introduce a little more uncertainty into this asset because google is going to change their algorithm, you know, likely in the next 18 months. And so then you have to, you know what you look at the past history of business, of the company that innovates consistently and stays up with the current trends or is this an anomaly that were there, were, you know, walking into right now that could, could introduce some risk. Yeah.
And I wanna kind of dive into number three a little bit. So this account based revenues, you know, the consistent repeat referral. Those are going to be the best kinds of leads. So if you're good at cultivating and obtaining those, that's good, what do you think about just a customer list in general? How valuable is that? I mean it depends on who the list is. I mean if it's a company that has low profits, it's like great, here's a list of low profit buyers, right? And so it really depends who the list is.
Um, you know, if you were, if you were to structure a sale where like this is what a lot of companies will do is just like sell the list or sell their name or sell the brand and then you're really looking at what is the replacement cost of that marketing, Right? And I think companies are kind of all over the map and what they spend on marketing. I think you're going to advocate a very high percentage. Uh So I don't know what I can say that would not be offensive to you.
Let's just say, let's say it's a 253% cost on cost of marketing revenue. And then you say like, well, I'm not gonna pay then you say like you buy a company for their leads and their and their flow like, well, I'm not going to pay you more than 22022% of the revenue, please to come in because I could, I could, I could spend that somewhere else to get the same return, right? Why do I pay you 22020% when I can pay 2750% over here. So that's uh, that's how a lot of like, that's the way that like really simple basic companies get structured as trying to harvest some of the equity in their sale.
Um, there's not a ton of equity value. So it's hard to harvest it. Um because I didn't start with the end in mind as we talked about, we're talking about on the show. Yeah, exactly. You know, we, we typically recommend an investment of 2000 to 220%. We're also working with companies that have very ambitious growth goals. Yeah, There's differences in growth markets and, you know, just being stable and how long has the company been in business? And what is there the revenue that comes in from the repeat referral work based off their reputation for how many different years?
And are we in a recession? Are we in a boom economy? You know, all those things are gonna be variables and like I said, I'm not gonna step on your toes there. Yeah. No, No problem. And speak freely, please. Um, so you, you said basically there are four, I'd say that. Yeah, so I'd say the fourth one. So this is just in general, like, is there anything novel or unique that you're purchasing? You know, proprietary technology elements, culture, um, things would be hard to replicate if you do a startup. Right.
And so, you know, for us, we've, we've, we've gone the, there's, there's a million different things that you could look at it. Like, is it, do they have custom software that they're operating? Uh, you know, unique, unique, unique operating system through? Uh, maybe they have a learning management system that's, um, that's, that's, that's novel and how they onboard and scale up their people. Um, you know, you're kind of starting to squint at some of these things, you'd say like, is there a culture that's hard to replicate?
Uh, is there something that's proprietary about the brand that's going to be novel to it? Right? They have a three decades of history or something like that. Yeah, It's kind of that, that last bit is what are the, what are the intangibles to be hard to replicate if someone were to start up to compete? Yeah. And I wanna kinda comment there, it's very common for really small business owners in general, but painting company owners as well to overvalue certain things to think that because they've been in the market for a long time or their brand, you know, it's your baby.
So, so you're gonna tend to value it more than somebody who is not their baby and they're gonna look at it and maybe maybe a little bit more objectively. The funny thing is, is sometimes people find buyers that like to get swindled and I've talked to a handful of them that have been like, hey, they like reach out to me and like, hey, I know you're like involved in, in person portions of companies and helping them scale and like, can you like save this for me and we look at it and we're like, yeah, that's like a bad buy.
That was like, you got swindled and uh, not swindled, but they just didn't make an educated purchase And uh, I mean, ultimately you want to look at, you know, what is the likelihood of future performance, what are you actually buying? Um It helps when you're a buyer that can step in and be very, very active in the business that you're making a purchase in. Right? So that's what we do at all. Holdings would come in as a, as a minority partner and become very involved in a fractional business because you know, the, the, I can think of three people I talked to in the last quarter.
Um, they all came in thinking, you know, basically being sold what a great business this was. Uh, and they were not operators, right? They were not domain experts in running and scaling and painting company and they came in, got way over their skis and unfortunately they're not paid a market wage price. You know, they paid an inflated price, uh, that any educated buyer would would pay. So I'll just say that like, hey, there are good stories out there. Uh, you know, you're gonna likely pay a brokerage fee, but the brokers are there to just make a transaction happen and sometimes it does work.
Um, you know, kind of sit with yourself and say like, oh, shoot, you know, kind of screwed somebody over and kind of sleep at night. I think the best sales are one where everyone maintains some skin in the game and you can do a partial equity sale as a founder. Uh, I've actually, so I've sold paris painting, I've sold portions of my company three times right in the last five years and every time it was, you know, the purchase price was inconsequential in my mind. I wanted to be fair, but I was never gonna push back on what the price was.
The real prize was stable passive income. Yeah, I think, I think, you know, when I'm making this sale is getting me towards that goal of stable passive income, is it something that I can and we can talk about all the the values of partnership, but is that something, can I achieve it on my own? Was the likelihood was the speed and what's the quality of life? Um But that but yeah, starting with the end in mind was the goal. Uh You said you typically painting companies are trading in that 53 to 25 X multiple of Ebitda uh which is like a sober, sober reality for all of us in this industry of the market does not value what we do very highly, right?
It's never worth it to sell your company. Uh If you're just looking for the cash right? Because hopefully you're spitting off at least 20% profits of revenue right? At least. Uh And then you're only trading at a, let's say you get two for X multiple of those profits because very few painting companies are turning more than million dollars of profits, which is where you start to maybe go over that a little bit but never gets too high. If you look at even just national transactions and so it's like, well if you're gonna sell, why like why would you ever sell, I mean the best investment you can make is to keep your cash in the painting company, this generating profit based off your equity, right?
But the reason these companies and it's not because the underlining economics have broken suddenly, it's because the founders gotten disenfranchised, they're burnt out. They don't want to continue, Right? That's what that's what that's what stops the merry go round from happening. Yeah, that makes a lot of sense to you. Just kind of recap the options here and I want to dive into number three in more depth and also figure out how people can reach out to you. Um So number one, you can sell out right? Again, a lot of times it's not gonna make a lot of sense because you would make the same amount of money if you sell it for two or three times and two or three years, you would make that amount of money, right?
So financially that doesn't really make sense to you can basically create a legacy. It's better than nothing. So if you're if you're like I'm done, if you're done, odds are this company's gonna stop making money in the next year or two. Yeah, at least you're getting something if you're done. Yeah, that's fair. Yeah. If you're emotionally just checked out, then the company's gonna go downhill if you don't sell it um to legacy rights. So selling or somehow passing off to Children, um or workers employees and then three, this minority partnership and I know that all of holdings, um does this really, really well.
Best I've ever heard of. Um and I wanna just, how can people reach out to you? Obviously, I'm always promoting the facebook group. Great group, but this is a bit more of a sensitive matter. People might not want to tag in that group. What's the best way to reach out to you about this? Yeah. Dm me on a social media channel. Uh that's probably the best way my emails, Jason at all of the hyphen MGmt dot com. All of his A L E P H, the first letter of the hebrew alphabet.
The pictograms, an ox uh, means a lot of different things, A lot of different people as as one of my colleagues likes to say. Uh but ultimately the kind of the spirit of our partnerships is we like to come in and bear the yoke with the companies were making an investment in, right? So we kind of, we talked about in the previous episode about painting the industry's kind of that Wild west and the Wild west needs to get settled and you settle the land by plowing it and all of we view ourselves as the ox that yolks up with The founders were also ox and plow that field.
Beautiful thing when you yoke up two oxen together, it's not just the two X multiple of what they're able to produce, that synergy effect. It's for X. So two ox yoke together can carry four extra load of a single ox alone. Yeah, well especially the, the industry and technical know how and everything that all of holdings has. So this is like, this is like one oh one. Uh, if you're looking to partner in any industry, right, you want to say, you know, what is the likelihood that I may get there?
Does this, does this partner carry some domain expertise that I don't currently have. Right? That's gonna get me there faster. Uh with a higher, highly likelihood of success with a lower incidence of mental or emotional trauma. Alright, so if you can find someone that's a domain expert, uh that's willing to be active in your company, um that's kind of like the golden uh option of taking on a partner. Uh, you know below that would be someone who's strictly advisory. You know, at that point, you're really hiring a coach, but you have a coach with skin in the game.
So it's not a bad option and then probably the lowest tier would be dumb money, especially in painting because painting is not very capital intensive business. But there are, there are other industries where that makes a ton of sense where you say, hey, I just need someone to bring the cash that's actually really important in this business? I don't need your advice. I don't need to be active. I just need your cash. Right? But her painting company, if you can someone, someone that brings skin in the game, is it gonna help pour some some uh, some gasoline on the fire for growth also is a domain expert.
So he's been there, done that recently and that is willing to be active and engaged in your company, right? Has built the band with, has built the infrastructure to take active roles in these companies to fill the gaps that you as a founder probably have because most founders don't, most founders don't lack knowledge. They know what to do. They just, they're not gonna do it. Yeah. Yeah. I kind of have to be a jack of all trades when you start a company. Um, but then higher, you know, higher all star player.
We talked a lot about the team I think last time. So that evaluation to recap because I also have a follow up question for you evaluation number one likely performance of future profits. Most important, number two, stable and diversified revenue revenue for a lot of over 225% coming from one customer. And then that's concentrated and it's risky because if we lose that customer, you lose a lot of revenue. Number three Is account-based revenue. So basically customer list, repeat referral business or is that activated active and all those good customers high profit.
And then number four is, do you have anything novel or unique whether it's a crm, you know, whatever it is to your business that would be valuable, maybe can't be easily obtained elsewhere. Are developed elsewhere. One question I have for you that I think is really common. I think people, a lot of painting companies underestimate. Um and you touched on it, but I want to figure out where, where it applies exactly is the idea that they are, they are instrumental to the business, right? They want to sell, They want to get out and and if they want to get out because they're burned out, then they're probably doing a lot.
And if it's if it's their name on the painting company. If people, let's say that number three account-based revenue, the referral, they know that that person, is it gonna be the same or someone new who comes in, are they going to now have disadvantages because they're not the owner because that's a problem. For sure. For sure, 100%. So a lot of times what I've seen in my own company or other companies have made investments in. Sometimes you trade off um you call it efficiency for effectiveness, right? And so like we're never now.
Okay, so I'll start with myself, no one could ever sell like I could sell right? I'm like mr paris out there doing bids. Like I just I know all the quirks and the tricks of like how to, how to instill trust in the client and I got all these all these things no one could ever sell, like I could write um Now, okay, so we'll start with that premise and then you say like, well, but uh you know how how scalable is Jason doing bids right? How many bids can I do in a week, right, and how sustainable, how long do I want to do bids?
You can get it to over 10 million yourself, right? Maybe I don't want to, I don't know, I don't know. And then the likelihood that that's gonna happen is very, very low. Um So that's like, you can't scale it and you can't sustain it long term, you know, super, super efficient but not very effective for the end goal. Where we talked about, that's why that's the whole Stephen covey reasonable, You set a vision and you start saying, are these decisions moving me towards my vision or away from my vision, if the vision is to make a great lifestyle business or I'm pulling out a lot of cash over here and I'm investing that cash, another vehicle, you know, another real estate, other assets, um that's great, there's nothing wrong with that, that's a great vision to have make those decisions if you have a different vision, you wanna make sure you're moving moving towards that direction.
Um But yeah, you say those two things, but then the reality is, you know what I found is that I was not a god of selling, I was good, I was pretty good. But I can hire people who have certain uh specialized skills and characteristics where they're they're like only good at selling, right? They can't run production, they can't do the office admin. Uh they can't be the leader of the company, but they're really, really good at sales. And I had to be all those things would be all those things and I was like, I was good at a lot of things, but they're just specialized in it and that's all they do every day, That's all I think about, right?
So if someone's like specially tailored to be something and that's all they do every day, they're probably better than you are, the pit, the pit bulls of the company, uh what do you call him? I want to say golden retrievers or something. But yeah, I don't know if you, have you been to Michael's class on like the have not, okay, we're gonna go and they're gonna bring it back. Yeah, you have like different skill sets of their dog of some kind, you have like the, he doesn't, he does it in a funny way, but if you haven't gone to his class, you go to a paint by numbers in midsummer, okay, But the odds are they're gonna be better and then even if they're not a team of people is always going to perform you, it's gonna be more scalable and more sustainable.
So those are some of the things start to look at. And then like as we've come into companies, you know, founder will, especially someone's been entrenched in their company for a while and they've gotten just very, very, very, very, very efficient at what they do. It's just, it's kind of like quirky and they got their unique things. Uh, it's not scalable, it's not sustainable. And those are the two prizes that we're trying to achieve together. And so we'll come in and sometimes it means taking a step back in efficiency, Right?
So that's not the goal. We want more profits, not less profits. Again, we're also trying to build something that is sustainable and scalable, right? As we have sustainability is, we have scalability. Now we can start to fill in some of those profits to picking up those efficiency points once again, Right. But those are like the exercises of, you know, just keep coming back, we'll start with the end in mind, where is your goal? Uh there's this beautiful prize at the end of a painting business, is life, uh where you can have stable passive income for the rest of your life, right?
That's how most that is. That is the carrot that drives most high quality talent into running and owning a company, right? Painting businesses have a very, very hard time realizing the value of their equity. It just isn't typically harvested, right? It's never built that way. There isn't that vision, there's not that, that end goal of that path. People aren't making decisions that move them closer to that goal, right? I think part of it's just a paradigm or just a thought or a concept of this is an option, but this is something that's real.
Then once it's an option that's real, it's very, very hard to create that because most people don't write and most people can't, most people don't want to or just doesn't work out. Right? So say like, uh, well that, that's where, that's why you would take on either, you know, elevating or attracting really, really top talent by bringing them in as a, as an equity holder, as a partner or if you can take on a minority partner, that means in a fractional basis you get there faster, much higher likelihood, less mental trauma.
It's more likely that you put those three things together more likely that that business is going to turn to an actual asset, right? It's, that generated generation of businesses into assets. I think it's gonna be the biggest tide riser in the industry. You talk about like professionalization to the clients. We're talking about our first episode, to the clients, to the employees, to the business, right? All those things. The site starts to rise because now these are assets that people are viewing of building as opposed to just lifestyle businesses were trying to pull out cash.
Yeah, yeah. Very, very few people doesn't make sense for them to stay on their own. Very few people are going to recognize the same level of success. It can happen over, over generations or, you know, sometimes decades. Uh, but just it comes down to those three elements of what's the likelihood I'm achieving on my own. How long is it gonna take? And what's the life trauma? Right? What's the, what's the sacrifice of the consequences of that decision? I like that word, that that's uh, calling a spade a spade, right?
There's a lot of trauma. The trauma. Yeah. Well, kind of, uh, someone we've all listened to, it talks about, you know, founding a company, being an entrepreneur is like staring into the dark, dark abyss while chewing on glass. Right? It's not motivating, right? It's like, this is not a beautiful vision to be looking at. And I'm like chewing glass, uh, that is not an enjoyable thing. So it's like, I'm chewing glass, I'm looking at something that's very depressing and uh, you know, welcome to some point and starting a company, right?
And it's like, well, if you can make it through that, you know, that's, that's, that's the goal. And there are many of those tranches on the way to professionalization, right? So as companies scale up largely driven by, you'd say like the infrastructure maximization, the infrastructure and then re ending up? But you kind of, it's never a linear growth of profits, stability, well being, it's like you go up and you go down and you gotta grow through that toronto right here to go up down, up, you gotta grow through that tranche until you start to feel like the end of the world.
It can feel like you're losing it all when you, when you hit that, you gotta go through that four or five times, right? There's these different ante up points in scaling a business to stability. We can start to afford all the infrastructure roles that don't necessitate the day to day involvement of a single founder or owner. Yeah, yeah. I wanna, I wanna also touch, I try not to make this this podcast to inspirational, but I also think this is actually really effective and important. Um this Stephen Covey seven habits of highly successful people.
This idea that you have to accomplish something twice because, and I'm guilty of this too. I just go out and try to do it, but you need to almost materialize your reality. So you have to create that reality inside your head and what it looks like. And then your odds of creating it in the actual physical world are far superior. Yeah, I'm a big fan of fan of vision boards uh in every area of your life? Right? But just clearly mapping out what is this going to look like, right, What do I want this to look like?
Can i is it real? Is it tangible? Uh get to work? You know, get quirky or weird as I think you uh what would you say? You confessed to calling me weird or something on another podcast? I confess yes, I was have a podcast with chad Sherman of the P. C. A. First industry Partner series podcast and I called you a weirdo. Yeah. But no, I mean people don't really have magazines now, but go online. Get some pictures, cut them out, piece them together, Photoshop your head on it, right?
And put it on a dream board. Uh creative, visually, like no one goes and builds a house or a city or a building or a company without First creating a blueprint, right? It's chaos, right? And now to the extent that the blueprint is adaptable and malleable, uh you know, that's going to change based on the time horizon of your vision, right? So if its 20 year, you know, you're looking like you're getting really generic and these are not like smart goals, this is how it feels and how it looks and what the destination is.
You know, as you get closer and closer you start to get more and more of a specific measurable, actual realistic time phase goal towards, highly, highly measurable, but the farther out, you know, don't be don't be when you're setting a long term vision is kind of like a little tangent support uh setting a long term vision. Don't be afraid to get a little little mercurial little uh little hazy, a little soft because uh the odds that it's going to be that in 20 years is very, very low, but you do want to know what direction you're heading in.
Let's let's touch just for people who don't know what a smart goal is. Can you walk us through that action? Sure. Uh I some people use different words. I use specific measurable, actionable, realistic time phase. I think there's a different spin on that that a lot of people use specific would mean, you know, is this a goal that is clearly defined? Right? Is it like a generic, like, I think I just want to be good. Uh so like, it's almost, I think this will be released around New Years time, but let's talk about like fitness goals, right?
So specific would be, you know, I want to run a marathon, it's very specific. It's not, I don't wanna be good at running specific. You want to do measurable would be like, well, I don't do I know if it's a success or not. So a marathon is very measurable. 26.2 miles running is a little vague, right? Like most people start running versus walking around, I think it's 13 minutes a mile give or take. So you say like, well, here's, here's a time constraint, I want to do the mile at the marriage on in, I don't know the math on that.
03 times 13. Just figured out. Let's, let's say, let's say it's a four hour goal. So, you know, your specific you have measurable is this action elicits a goal? I can take action on, right? Is it something like basically another way of saying, do I have control over this goal? Right. Well, yeah, you can, you can do an exercise routine, You can get into a running plan. You can do, uh, eat well, all those, all those different soft skills, not something that's just up to the world to dictate that's going to happen or not.
You say like I have a specific goal. If I want, you know, an asteroid to hit brazil, right? Why would you want that? Who knows? But that's not within my control. Right? That's not something I can take an action on realistic would be like, is this, is this a goal that's within the realm of your achievement? You have a past history of achieving this goal. If you've never run a marathon, maybe four mile for you never run a five K before? Our marathon might be a little tough.
Maybe you just want to say, I want to finish a marathon, Maybe it's five hours, maybe it's six hours, maybe you're walking a good portion of it, right? A two hour marathon would not be realistic for pretty much almost almost most people, I think maybe that is the one that the market hasn't been hit yet. So it's like, well, don't set a goal is unrealistic, right? Last one is time phased, Right? So it's like, I wanna I wanna run a marathon under four hours in your life and your life is the time.
That's fine. Uh in your thirties, uh this next calendar year, you know, in Q one, uh making it time time face. But those are all the elements of something that's really specific, which also comes down to accountability. Can you hold yourself accountable? Can hold your team accountable, can you hold the organization accountable, hitting the goals or not? As you move farther out on the time horizon for myself and my personal life, my goals get less smart. Less specific to get more descriptive in general. Yeah, Yeah. Setting goals that don't have, those attributes tend to basically be irrelevant, right?
Yeah. They're not goals, their objectives, right? So these are like destinations or directions, right? And then goals or look at the guide posts on the way there. So, you know, very clearly in my moving in that direction, right or not? But yeah, goals should be very gold. Or if it's not if it's not smart, it's not a goal, it's like description. Yeah. And and be measuring it. There's another saying I like what you measure expands, right? So if you're actually measuring it and focused on it, that means that's where your focus is?
And we recently filmed an episode with brad Allison of Allison painting. He's very focused on sales numbers. So those sales numbers grew right wherever you focuses you tend to succeed. They're so we have paris painting here. We like liberations. I like you treasure what you measure right acceleration. So whatever you're measuring that's ultimately gonna be. Treasuring kind of look at where your mental bandwidth is and what you're focused on and that's that's a good mirror to reflect on what you treasure in your life. Yeah. Okay. So we've talked a lot about the how you value a painting company.
The important attribute some of the downfalls of um of painting companies that that are you know the majority of painting. Cos I want to kind of get to the nitty gritty of this. If somebody's listening and early on in their paintings they've been going for a while. But they don't really feel like they're they're they're um what steps should they take? And my guess is this is gonna probably lead into systems or processes or something like that. But what steps can they take today over the next year to try to change this. Yeah.
Uh So like the foundation of any companies know your numbers right? You kind of say like getting that compass in place uh would be step number one right? So do you know your numbers? Do you have KPI s uh do you know if you're profitable or not? Do you know what kind of jobs are profitable? You know what your sales metrics looks like? What your marketing things That be step # one. And then you're kind of like on the race, getting your core three in place, right? And so your core three would be, you know, someone who's heading up marketing and sales, uh someone who's heading up, you know, production and coordination and then it's kind of like your office admin person, right?
There's like the core three of company. And then I just say from a residential repaying company, you're probably close to getting pretty close to that $3 million mark. We can start to afford some of the infrastructure right now. You have like like the base that's like startup, that's like startup, rush number one, right? The sprint to three million or whatever the number is, two to afford those infrastructure pieces right now, you're looking at uh how do I how do I start to grow, how I start to scale, right?
Kind of in that 3 to 53, five. So now you're looking at, you know, how do you recruit top talent? You can start to build a foundation of scale. Uh you're formalizing your coaching because now you're not just getting key people in key seats, but you're really getting the productivity out them out of them. It's really coaching up those roles, coaching up those people um you know adopt, how do you get everyone to adopt the systems and implemented to their fullest? Right Then after five million, you know, now you're kind of throttling the growth a little bit, you're looking for stable, consistent cash flow and a healthy net healthy net margin right now, you're starting to like scale in a very healthy way.
Uh now you're not just interested in in affording the revenue to pull out cash, you're really interested in how stable and passive is that, is that cash gonna be over the long term? Yeah, so you would say above five, I mean obviously you kind of need to be trying to set up these systems along the way, but above five million will be where your primary focus really becomes internally setting up your systems. There's yeah, there's kind of like a reality of um it's great if you're like stable passive from day one, but you have to get the revenue in the door to afford the infrastructure pieces and there is like, you're gonna be the funnel, you gotta work hard, you got a great, you gotta grind, you gotta, you gotta rush, you gotta work, you gotta, I mean all those things that high pain tolerance, you get to the revenue mark, we can start to afford to keep people in the key seats which allows some of the freedom to now start working on the company right and then you can start to afford to attract top talent, right?
Then when you get the top talent in the door now, you want to really put an emphasis on coaching and development because you wanna get the maximum R. O. I. From every role in your company, right? But there's it's kind of like uh that concept of specializing versus generalizing. So this is like, let's say you have a vision to specialize in just painting white kitchen cabinets, right? And it's like all you want to do, but you can't afford to just do that because you don't have the revenue to pay the bills.
So now you're standing decks, you're painting fences, you're paying the outsides of houses inside the houses. Suddenly you have more demand for your services and you have capacity to achieve. So you start cutting out the stuff that doesn't fit your vision, right? So now you're not staining decks or painting fences, right? And pretty soon you're not paying the outside of the house is right. And then pretty soon you're not painting ceilings and you're not painting walls and then you're not paying any other trim in the house.
And then you're not painting cabinets unless they're white, right? But you can't afford to do that day one because you likely don't have the revenue coming in the door to survive. And what point you start to shear stuff off or cut stuff off, It's going to be dependent on your capacity, right? And your vision, Yeah, I mean, you got to talk about really streamlining the operations here simplifying the scale. So I want to bring up again and I don't plug things that I don't believe in, but it's worth having a conversation with all of holdings.
Even if even if you're not wanting to move forward, you think you don't want to move forward, at the very least you will probably receive some advice, right? Any company. So it's kind of where I'm putting my next energy and effort, uh, time into is this of all holdings, which is pretty, it's very, it's novel and residential painting. It's not novel in the economy at whole, right? There's a blueprint that you're following and you're bringing into this industry, here's a group of domain experts that have very recently, you know, stay scaled and stabilize the painting company, right?
To where the equity holders can be completely passive in the business, right? And we've now built out the bandwidth and infrastructure to lean into other painting companies on a fractionalized role. Right? We do that by making investments, getting skin in the game and now having a mutual incentive to both scale and stabilize that business. Right? So it's pretty novel. There's no one else doing it. There's a lot of, there's a lot of different types of this going out there. There's people that don't have skin the game.
Um, there's, there's a great option of, like consultants and coaches right, which do provide a gap to the industry, uh where they trade, you know, service or advice for cash, but they aren't bought in in the same way to see it through to integration, which is like the most important element of a company's stability and growth is truly integrating. Uh, the advice that gets laid out from my experience, I wanna um explore what kinds of painting companies are a good fit for this. So it's kind of three avatars that we partnered with and seen.
And so, so we are recording this. So, people know, we're recording this at the end of 2022, that what, but this again released in early uh years as it gets released in early 2020 is not live, this is not a live shot. Uh, so we came into the goal the year with the goal of taking on of making three investments. So we want to find three companies, we feel like we're good fit to make investments in that we could lean in on the fractions role. We ended up finding six that fit that category this year.
And so, uh, with that came a lot of investment in our band with an infrastructure they can fill in fill in those seats and start to fill those roles. But this was our first full year into it. I don't think it's fully uh, entered the zeitgeist, where people have realized what's happening, uh, because it is pretty novel, it is pretty unique. You know, if I had had this option uh five or six years ago, I've been like, what for Sure. I want to engage in this. The companies that we ultimately look for though, are, you know, are you open to taking on a partner?
Are you willing to make changes in a doctor company? Do we have the shared vision of stable passive income for the rest of our lives? Right. If that's not a shared vision, it's not a good fit. Uh, there's kind of three people we've partnered with people that are pretty early early on in their journey. So I'd say minimum threshold is maybe $750,000 in revenue. And that's really us taking a flyer on the individual, right? The founder and the driver. Uh, but we've done that and then we have more than two x their company in one year together.
Both them and us, we've partnered with people that are kind of stagnating. So we've been in business for 20 years, they've achieved great success, phenomenal lifestyle business, but they know that they're not the person to take it to the next level and they see the opportunity in their team. So they decided to go to the outside market, finding operational partner that can lean in and help scale their business, right? And then the third avatar would be someone, there's, there's two people that we've talked to with this, but they're looking to exit the next 3 to 5 years, right?
And they see the path, they're going to sell their business for one time cash payout. But they're really intrigued by the option of maintaining a portion of the equity for the rest of their life and getting a distribution from a business that's being operated by others. Yeah, so it's kind of those, so I kind of like, there's like the philosophical alignment that needs to be there and then there's the different stages of a company where we've seen it work well. Um, but really it's more about is that vision there.
And then the question is, you know, do you think you can do it on your own? Uh, do you want to do it on your own? Right. And then are you willing to go through the sacrifice that's gonna require? Right. Yeah. So those are kind of the three decision matrix is that people go through again. If you listen to this and you think this might be a fit. If you'd like to discuss it. The best way to reach Jason is by direct messaging him on social media or you can also send him an email Jason at Olive a L E P H dash mgmt dot com.
Now everybody's a good fit to and that's just calling space bait. And I talked to a ton of painting companies every single week and a lot of times just giving them advice and I'm happy to do that to just say you know, first of all what's your vision? So let's get clear on that somebody doesn't know their vision. That's like let's get that figured out first because now we're gonna start making decisions that move you towards your vision and that's a principle, whether it's in your business or your life or your marriage or your fitness, you need to know where you're going before you start moving there.
But yeah, I'm happy to talk to people. Um I'm pretty, pretty entrenched in the painting industry. Obviously been around a lot of success. I've had a lot of success and making connections with painting contractors. Yeah. If you're listening to this and you haven't reached out to Jason, why wouldn't you write like this this again particular to the painting company? I would say very rarely in an industry, can you reach out to thought leaders and leaders and most successful people in the industry in the country and have them just want to help you that's kind of unique to painting.
It's an underserved industry so take advantage of it. So it might be a unique period of time. I just have a lot of bandwidth. I'm not I don't I'm not active in the painting in paris painting uh as you record this, I'm getting ready to hand off my chair role as the P. C. A. And then I'll still sit on the board and be the X. Chair. But uh I do have a pretty uh flexible lifestyle right now that does allow me to do those things, well appreciate that Jason.
So do you have anything as we wrap up this podcast? Anything else to discuss with building with the end in mind making your company sellable? So I say I kind of want to recap, you know making sure you have a clear vision of where you want to get to and how important that is before you start doing action. So there's an old saying um you know, action without vision uh is a nightmare right now. Vision without action is a daydream. But action without Vision is a nightmare.
And I think that's where a lot of people find themselves in entrepreneurship and small business ownership is uh the business owns them right? They don't own a business that business owns them. And so establishing a clear vision and there's neither a right or wrong but making sure you know what you're moving towards. If you want to have a great lifestyle business that you can pull a ton of cash out that requires active energy. Um and you invest in other vehicles and other assets, there's there's nothing wrong with that.
That's the american dream. God bless America. If you want to build an asset that's gonna be stable and passive for the rest of your life. Uh Just make sure that that's very clear on what you want and think about how you're going to get there, You know, I'd say that's number one, you know, once you set, once you set that vision will assume the second route, start thinking through, you know, what do you need to get in place and where the action steps you're gonna be taking as a driver of this business to get there um explore.
Are you the right person to do that on your own? Are you going to be the person that scales the company from 0 to 25 million? Are you gonna you gonna want some help along the way and then through what, what was the real need of help? You need someone to tell you what to do? Uh Do you need some advice? Do you need some people leading with services or do you need an operating partner? Um Those are kind of different decision matrix is do you want to go through?
Um Yeah, I'd say the whole the whole purpose of this podcast starting with the end in mind, just getting that concept of that vision of a lucrative selloff is, is one option. Uh Most of the market does not value painting companies to be super, super valuable, especially if you compare it to mean any other industry, manufacturing, tech, medical, etcetera. But how could you turn this into a true assets can be stable and passive for the rest of your life? That's really the the end goal, that's like that's like the golden liquidity moment of harvesting your equity. Yeah.
And if you're kind of early on and you think that you're not yet potentially the right fit for all of holdings. There's a book by Michael Gerber e myth revisited very popular. Check it out because I will also kind of show you what setting up systems and processes can do for you and how to do it. Yeah. Great book M. S. Is uh E meth traction rich dad, poor dad. Those would be like the top three. Yeah. Rich dad poor changed my life. That's why eventually I have painted marketing press two years ago.
So Jason. Thanks man. This was, was an awesome episode three camp. I'm kind of afraid of the next episode. I don't know what it's going to be in the business. I think it's gonna be your favorite one. Yeah, they think episode two was the Wild west. Wait til episode four, thank you for your time, Jason appreciate it man. 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 you are l is painter marketing pros dot com forward slash 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 Painter Marketing Pros dot com to learn more about our services. You can also reach out to me directly by emailing me at Brandon at Painter Marketing Pros.com and I can give you personalized advice on growing your painting business until next time.