Beyond Brushes: The Strategic Mind Behind a $5M Painting Company

WEBVTT
00:00:00.281 --> 00:00:02.505
Welcome to the Profitable Painter Podcast.
00:00:02.505 --> 00:00:13.771
The mission of this podcast is simple to help you navigate the financial and tax aspects of starting, running and scaling a professional painting business, from the brushes and ladders to the spreadsheets and balance sheets.
00:00:13.771 --> 00:00:14.862
We've got you covered.
00:00:14.862 --> 00:00:26.745
But before we dive in, a quick word of caution While we strive to provide accurate and up-to-date financial and tax information, nothing you hear on this podcast should be considered as financial advice specifically for you or your business.
00:00:26.745 --> 00:00:34.496
We're here to share general knowledge and experiences, not to replace the tailored advice you get from a professional financial advisor or tax consultant.
00:00:40.780 --> 00:00:43.671
We strongly recommend you seeking individualized advice before making any significant financial decision.
00:00:43.671 --> 00:00:51.412
Welcome to the Profitable Painter Podcast, the show where painting contractors learn how to boost profits, cut taxes and build a business that works for them.
00:00:51.412 --> 00:00:58.027
I'm your host, daniel Honan, cpa and former painting business owner, and your guide to mastering the numbers that drive success.
00:00:58.027 --> 00:01:07.070
So let's dive in and make your business more profitable, one episode at a time, and this episode, I'm super excited because I'm here with Brad Ellison.
00:01:07.070 --> 00:01:09.980
Welcome to the podcast, brad hey.
00:01:10.022 --> 00:01:11.739
Daniel, thanks for having me, man, yeah.
00:01:12.561 --> 00:01:13.243
I'm super excited.
00:01:13.243 --> 00:01:17.852
A lot of listeners probably have heard of you before you had.
00:01:17.852 --> 00:01:25.629
I mean, we'll get into it, but you've built an amazing business in a very short amount of time, so I'm super excited to get into your story.
00:01:25.629 --> 00:01:30.031
Could you kind of give folks just what has been your journey?
00:01:30.031 --> 00:01:37.914
What are some major milestones in your, what brought you in the painting industry and what are some major milestones that you've hit in the last few years?
00:01:37.914 --> 00:01:39.159
Yeah, sure.
00:01:39.661 --> 00:01:45.112
So I actually stumbled into the painting industry about eight years ago.
00:01:45.112 --> 00:01:55.730
My wife and I had been recently married, we quit our jobs and decided we didn't want to work for anyone else ever again and we launched a health insurance business together, which was my background.
00:01:55.730 --> 00:01:59.409
But the health insurance industry is very seasonal.
00:01:59.409 --> 00:02:04.888
We have really three months a year that we really had work to do and so we're like, well, what are we going to do?
00:02:04.888 --> 00:02:11.301
We got pregnant right after our wedding.
00:02:11.301 --> 00:02:13.929
We had a baby on the way and didn't seem reasonable or responsible to not work the other nine months of the year.
00:02:13.929 --> 00:02:21.151
So we thought, well, I should find a seasonal sales job, maybe something in the trades.
00:02:21.151 --> 00:02:21.651
It makes sense.
00:02:21.651 --> 00:02:24.062
And that was on a Saturday night.
00:02:24.062 --> 00:02:33.776
The next morning I met a local painter that owned a pretty decent sized company here in Metro Detroit that was looking to bring on a sales guy and then ultimately someone to buy his business.
00:02:33.776 --> 00:02:35.967
So met him on a Sunday.
00:02:35.967 --> 00:02:38.127
By Tuesday we came up with a partnership agreement.
00:02:38.127 --> 00:02:47.092
He hired me to essentially run, sell for his business and run his business, which I did for the next four and a half years with the intent of buying it.
00:02:47.092 --> 00:03:01.021
A push came to shove we decided to not move forward with purchasing his business, and so, April 1st of 2022, we launched Ellison Painting Ellison Painting.
00:03:01.021 --> 00:03:03.889
Since then, we just had our three-year anniversary.
00:03:04.950 --> 00:03:07.157
That first year, that first seven months, we were in business.
00:03:07.157 --> 00:03:10.066
We we sold and produced about a million dollars worth of business.
00:03:10.066 --> 00:03:14.807
Uh, 2023, we sold and produced about 3 million.
00:03:14.807 --> 00:03:17.854
2024, we did 5.1 million.
00:03:17.854 --> 00:03:22.831
So, within two and a half years, we had scaled up to a $5 million a year painting business.
00:03:22.831 --> 00:03:24.844
Um, so it's been a wild ride.
00:03:24.844 --> 00:03:57.502
I've been really fortunate to be kind of right place, right time, right relationships with the right people Though I think there's a conversation to be had around whether that's luck or creating opportunities or recognizing opportunities but I've been fortunate to get plugged in with a lot of the kind of leaders in the painting industry, including leaders of the Painting Contractors Association, and now I'm honored to serve on the board of directors for the Painting Contractors Association as of end of 2024.
00:03:57.502 --> 00:04:01.633
So, yeah, pretty, I think it's a pretty impressive business.
00:04:01.633 --> 00:04:07.211
There hasn't been too many people maybe any that grew their residential painting company as quickly as we did.
00:04:07.211 --> 00:04:11.651
Though, even if we are the first, we definitely won't be the last.
00:04:11.651 --> 00:04:13.304
I'm already seeing some of that.
00:04:15.471 --> 00:04:26.562
Yeah, I mean, I've worked with hundreds of painting businesses and there's definitely been folks that have grown their business to do a million in the first year or close to that.
00:04:26.562 --> 00:04:37.507
Um, I can't think of a business that did three million in this in the second year, I think that's, and then, let alone five million in the third year.
00:04:37.507 --> 00:04:50.391
Um, I mean, there's people that have gotten close, maybe two million or two and a half three million, so there could be maybe someone I'm just like not thinking of but to hit five million in the third year.
00:04:50.391 --> 00:04:55.012
For sure there's nobody that I know of that that has done that.
00:04:55.012 --> 00:05:00.382
Um, not to say there's, there hasn't been anybody, but obviously there's at least one person.
00:05:00.382 --> 00:05:04.107
Um, so, yeah, it's super impressive.
00:05:04.107 --> 00:05:15.471
I mean, I just like you must have been, just like, what was your day-to-day like during those three years?
00:05:15.471 --> 00:05:21.928
Um, and maybe it hasn't stopped, maybe you're still in the grind, but like, is it, uh, as much work as it seems?
00:05:21.928 --> 00:05:22.569
Or did you?
00:05:22.569 --> 00:05:26.610
Do you have some sort of secret that, uh, you can share with us?
00:05:27.160 --> 00:05:29.178
But that's just like a huge amount of growth.
00:05:29.178 --> 00:05:35.233
I think people are surprised to hear that it's not near as much work as they think it would be.
00:05:35.233 --> 00:05:43.274
And during the past three years I've probably worked a lot less than other companies that are struggling to get past that one one and a half million.
00:05:43.274 --> 00:05:46.502
What is the secret?
00:05:46.502 --> 00:05:47.125
I don't know.
00:05:47.125 --> 00:05:53.565
I would say if there is a secret, it's that I don't allow myself to work more than I want to work.
00:05:53.565 --> 00:05:55.670
I'm not passionate about working.
00:05:55.670 --> 00:06:00.869
I'm passionate about building a business that allows me to not have to work if I don't want to.
00:06:01.310 --> 00:06:06.910
And so, even from the get-go, that first year, when it was just me and my wife I'm, I'm managing all the sales and marketing.
00:06:06.910 --> 00:06:08.632
She's managing production for the.
00:06:08.632 --> 00:06:12.850
You know, for that first six months, even then, I was still getting to the gym every day.
00:06:12.850 --> 00:06:19.192
Even then we were home with our daughter for family dinner, um, every night.
00:06:19.192 --> 00:06:25.451
It wasn't like I was working 70 hours a week and we were both running around with our like a chicken with their heads cut off.
00:06:25.911 --> 00:06:32.790
It's certainly stressful and there were some after hours and handling emails and stuff on the weekend, but now we kept.
00:06:32.790 --> 00:06:40.793
We were pretty strict about keeping our schedule more focused on our family than it was on the business, and that's always been the case for me.
00:06:40.793 --> 00:07:09.985
So you know I I'm a pretty darn good salesperson and so I was able to sell, you know, 40 to 45% of the estimates I gave pretty smart when it comes to marketing and partnered with agencies that were delivering decent quality leads and a high enough volume that I could do 25, 30 estimates a week and just kind of feeding that that machine, uh yeah.
00:07:09.985 --> 00:07:13.353
So work-life balance for me has always been super important.
00:07:13.353 --> 00:07:15.161
I don't it's it's.
00:07:15.161 --> 00:07:21.043
It's not as stressful or as time consuming as people might imagine from the outside scene how quickly we grew.
00:07:23.007 --> 00:07:29.326
Yeah, it sounds like you, like you had your wife helping you with production, so you had the sales and marketing.
00:07:29.326 --> 00:07:33.411
Your wife was pretty much like the office production manager.
00:07:33.411 --> 00:07:34.745
Did you guys use subs initially?
00:07:35.841 --> 00:07:36.846
So we only used subs.
00:07:36.846 --> 00:07:39.327
We've always only used subs, okay.
00:07:43.343 --> 00:07:46.365
So that's a common constraint.
00:07:46.365 --> 00:07:52.793
Where folks find is that if they don't have someone else in the business, they don't have a partner or they don't have a wife.
00:07:52.793 --> 00:07:56.697
That is awesome, as your wife apparently that can run production.
00:07:56.697 --> 00:07:58.242
You know they're they're.
00:07:58.242 --> 00:07:59.906
They hit that constraint of they can.
00:07:59.906 --> 00:08:04.629
Only they're doing sales and production simultaneously and they kind of run around.
00:08:04.649 --> 00:08:20.464
You know, 700 000 for sure, which is why, as you know, so many guys hit that one million, one and a half million dollar ceiling and they will sometimes never get beyond that right because they haven't effectively off-boarded some of the responsibilities.
00:08:20.464 --> 00:08:27.019
We, you know, we launched in a different um, in a different situation than most.
00:08:27.019 --> 00:08:39.561
I did have a wife that was willing to give me six months of her time to be my project manager, and we did have some money that we had been saving that we used for a really healthy marketing budget right out of the gates.
00:08:39.561 --> 00:08:49.370
We budgeted thirteen thousand000 a month for marketing, starting from day one, so I had the funds to pay an agency to get those leads.
00:08:49.370 --> 00:08:56.037
It wasn't like I had to go around knock on doors or cold call or do a bunch of community networking.
00:08:56.037 --> 00:09:11.490
We had paid marketing leads coming in right off the get-go and there's no way that I could have sold a million dollars in that first seven months without those two things the marketing and the project manager.
00:09:11.991 --> 00:09:15.006
People always ask me all right, well, if you were me, you know I'm stuck in a million dollars.
00:09:15.006 --> 00:09:15.489
What do I do?
00:09:15.489 --> 00:09:30.350
Well, either choose either sales or project management to be your focus and hire someone else to do the other piece and if they, if you don't do that, you are never going to push through that plateau like ever.
00:09:30.350 --> 00:09:30.951
There's no way.
00:09:30.951 --> 00:09:35.908
Yeah, I have a higher capacity than most, I think, but I couldn't.
00:09:36.428 --> 00:09:42.370
One and a half million dollar business with me doing all the sales and all the project management that is my nightmare scenario.
00:09:42.370 --> 00:09:52.976
That is, 80 hours a week with no family time and, even if it's a profitable business, have no opportunity to enjoy the profits.
00:09:52.976 --> 00:09:54.660
Right, because you're always working.
00:09:54.660 --> 00:10:05.892
So I think people make the mistake of not hiring that person and they make it even worse by saying things like well, once I can afford it, I will hire a project manager.
00:10:05.892 --> 00:10:10.991
Well, if you wait until you can afford something in your business, you're never going to do it.
00:10:10.991 --> 00:10:14.629
Right, I'll wait to start spending money on marketing until I can afford it.
00:10:14.629 --> 00:10:18.791
Well, until you start spending money on marketing, you're not going to be able to afford it.
00:10:18.791 --> 00:10:35.490
So you just take the leap, trust that you have the right systems in place, and you know it's a calculated risk, but it's a calculated risk that so many people before us have made that we should have pretty predictable results.
00:10:35.871 --> 00:10:37.995
Yeah, Great stuff.
00:10:37.995 --> 00:10:46.943
So first, Initially, the thing that jumps out is when you first got started, you were doing paid ads immediately.
00:10:46.943 --> 00:11:00.321
You weren't afraid to spend on marketing, which I feel like a lot of folks when they're getting started or under $500,000 in revenue.
00:11:00.321 --> 00:11:10.798
They're basically just doing referral and repeat work and they're afraid to spend money on Facebook ads or direct mail or door to door, because there's some risk there.
00:11:10.798 --> 00:11:19.278
Like you said, like you do have to figure something new out, maybe not familiar with and that can be a little scary, but it sounds like you pretty much.
00:11:19.278 --> 00:11:27.600
You took that risk immediately, did not hesitate and went in with a marketing agency that knew what they were doing, apparently.
00:11:28.549 --> 00:11:31.639
For sure, and I had run that other painting business locally, right.
00:11:31.639 --> 00:11:39.673
So it was a kind of similar structure, similar type of business as Ellison Painting is, though we used very different paid marketing channels.
00:11:39.673 --> 00:11:43.039
That business existed almost completely off.
00:11:43.039 --> 00:11:47.783
It was HomeAdvisor and then became Angie Leads, but we would spend $200visor.
00:11:47.783 --> 00:11:55.178
And then it became Angie Leads but we would spend $200,000 a year on Angie Leads and we would generate $2 million worth of business directly from that.
00:11:55.178 --> 00:12:10.523
So I understood that paid marketing in the painting world worked, but we had never done Facebook ads, we'd never really done Google ads, but I spoke to people within our industry you know people that you know as well that said, yeah, here's the data here, you spend this, you get this.
00:12:10.523 --> 00:12:21.875
We you and I both know all the same marketing agencies that were around three years ago and I had proof of concept from friends and colleagues that are to use them.
00:12:21.875 --> 00:12:23.899
It didn't feel like a big risk.
00:12:23.899 --> 00:12:28.033
It just felt like I have to be willing to spend the money to get the reward.
00:12:29.176 --> 00:12:35.375
Yeah, yeah, no, knowing the numbers and knowing what you're looking for Like.
00:12:35.375 --> 00:12:58.746
If I feel like a lot of the folks being afraid of spending money on marketing and also you mentioned making a new hire is that they don't know what they should be paying for, what kind of return on investment they should be getting from marketing, or how much do they pay in compensation for their new hire and how is that going to affect their.
00:12:58.746 --> 00:13:05.363
So it's often the fear is rooted in just not knowing what to look for.
00:13:05.363 --> 00:13:12.477
So did you have a pretty good understanding of what the marketing numbers should look like, like what you should be spending?
00:13:12.477 --> 00:13:19.110
You mentioned you know it's $200,000 in angel leads to get $2 million in revenue, which is about a 10x return on investment.
00:13:19.110 --> 00:13:22.458
Is that pretty much kind of your rule of thumb there?
00:13:23.601 --> 00:13:23.782
Yeah.
00:13:23.782 --> 00:13:40.717
So we had if you talk to N Slavik, you talk to Jason Paris, they say kind of the same thing that companies are trying to grow aggressively which obviously that was what we were trying to do should be willing to spend up to between eight to 10% of their target revenue back into marketing.
00:13:40.717 --> 00:13:47.280
So if I wanted to do I wanted to, I wanted to operate as if we were a one and a half million dollar a year company right off the get.
00:13:47.280 --> 00:13:47.421
Go.
00:13:47.421 --> 00:13:55.703
Well, divide, you know, 150 or 1.5 million times 10%, is $150,000 divided by 12.
00:13:55.703 --> 00:13:56.345
What do you got?
00:13:56.345 --> 00:13:58.457
12,500 bucks or something like that.
00:13:58.457 --> 00:14:00.899
It's close to that $13,000 a month.
00:14:00.899 --> 00:14:07.254
So I was willing to spend up to 10% of my target revenue back into marketing, and it was.
00:14:07.254 --> 00:14:20.549
It was partly because of my experience running the other painting company, but also because these guys and gals that I knew and trusted that were running painting companies said hey, you want to grow aggressively, you got to invest 8% to 10% back into marketing.
00:14:21.191 --> 00:14:29.164
And what we found is that first year, the first calendar year I think we spent, we were at 8% cost of marketing.
00:14:29.164 --> 00:14:36.243
And then the year 2023, when we did $3 million we dropped down to about 7% cost of marketing.
00:14:36.243 --> 00:14:37.244
And then we did $5 million.
00:14:37.244 --> 00:14:39.289
We were at 6% cost of marketing.
00:14:39.289 --> 00:14:43.735
So, like the bigger that we get, the cost of marketing has continued to drop.
00:14:43.735 --> 00:14:46.339
The cost of marketing has continued to drop, but I'd still, even to this day.
00:14:46.339 --> 00:15:04.597
You know we're trying to take a big, big jump this year without me selling as actively as I was last year, and so I'm willing now to spend 10%, 10%, and if we're trying to do 7 million, that's $700,000 just into marketing alone I'm willing to spend it.
00:15:04.597 --> 00:15:12.673
I don't want to right the goal isn't to spend 700,000, but the goal is to spend as much as we need, but hopefully as little as possible to hit our sales goals.
00:15:13.595 --> 00:15:19.172
Yeah, and I bet you know you mentioned the cost of marketing kind of goes down as you grow.
00:15:19.172 --> 00:15:31.308
I bet when you were super small, like in the first few months of operating, when you were spending that 13 grand on marketing, your marketing percentage was probably a lot higher of a percentage.
00:15:31.308 --> 00:15:33.836
It might have been 15 or maybe even higher.
00:15:34.778 --> 00:15:35.761
Only the first month.
00:15:36.224 --> 00:15:36.946
Only the first month.
00:15:37.386 --> 00:15:41.056
The first month we spent that 13,000 and I sold like 60 grand.
00:15:41.056 --> 00:15:46.359
But then, starting after that, I think every month after that I sold at least 150,000.
00:15:46.359 --> 00:15:49.725
So I was under 10% by month two.
00:15:49.725 --> 00:15:52.495
That's awesome, but that's again.
00:15:52.495 --> 00:15:53.700
I'm a decent sales guy.
00:15:53.700 --> 00:15:55.716
I was fully invested in the business.
00:15:55.716 --> 00:16:03.201
I'm like this is my family's survival on the line and so, even if I wasn't working a ton of hours, you bet your butt I was hustling and working hard.
00:16:03.789 --> 00:16:08.868
Yeah, yeah, and you know, for those folks that are small, I think it's a good point.
00:16:08.868 --> 00:16:20.022
Just to highlight, what you said was you wanted to hit out $1.5 million and so you said, okay, that means I need to spend $150,000 and I'm going to divide that by 12.
00:16:20.022 --> 00:16:21.475
And that's what I'm going to spend on marketing.
00:16:21.475 --> 00:16:34.514
It wasn't like you didn't look at okay, I'm doing, you know, $10,000 a month right now, so I need to spend a thousand dollars on marketing because some people all about your target revenue.
00:16:34.533 --> 00:16:35.456
Right, exactly.
00:16:35.456 --> 00:16:39.126
So that's a big point.
00:16:39.126 --> 00:16:44.385
And it can be a little scary again because you're not at when you first started.
00:16:44.385 --> 00:16:49.274
Obviously you had zero revenue, but even in the second month you might not had a lot of revenue revenue.
00:16:49.274 --> 00:16:56.519
So it can be scary, but it can work, not to say you just hire a marketing agency and then it just works.
00:16:56.519 --> 00:16:59.149
There's definitely work to be done in that um.
00:16:59.149 --> 00:17:14.997
Um, could we dig into this a little bit like uh to you know that we want to have a 10x return, but what things should we really be focused on, especially with working with a marketing agency, like you did, with set rates, close rates?
00:17:14.997 --> 00:17:20.490
What should we be trying to do to make sure that we're getting a good return on investment with the marketing dollars that we're spending?
00:17:21.711 --> 00:17:22.893
Yeah, great, great question.
00:17:22.893 --> 00:17:34.159
So our goal and I'll admit, the first the first eight, nine, 10 months I we didn't have an admin at all.
00:17:34.159 --> 00:17:40.942
It was me and my wife and so any lead that came in I was handling and I answered the phone.
00:17:40.942 --> 00:17:45.944
When someone called, four times, right, and that's the worst.
00:17:45.944 --> 00:17:54.516
We at Rollout Marketing, the agency that I run now, we're like you got to call and you got to answer the phone, like that's rule number one.
00:17:54.516 --> 00:18:06.577
But I didn't have the really bandwidth when during working hours I didn't want to answer the phone, I wanted to be going out and selling jobs, and so we set up some autoresponders.
00:18:06.577 --> 00:18:11.801
If someone called in, they automatically got a text back saying hey, sorry, we couldn't answer the phone.
00:18:11.801 --> 00:18:16.057
If you're calling to schedule an estimate, click this link, and it was a link to our DripJobs estimate request form.
00:18:16.057 --> 00:18:19.861
As soon as it came through I would call back or schedule it and do it.
00:18:21.390 --> 00:18:29.662
So the way I operated then is a little different than we operate now, but we're aiming for a set rate of at least 70%.
00:18:29.662 --> 00:18:39.780
So of the estimates that come in people that reach out via Facebook, website, phone call, whatever 70% of them we want to schedule into estimates.
00:18:39.780 --> 00:18:45.535
If we do that, then we are and the numbers continue to work out in terms of closing rate and all that.
00:18:45.535 --> 00:18:49.837
We will get the return that we need on our marketing.
00:18:49.837 --> 00:18:52.099
And that varies seasonally.
00:18:52.099 --> 00:18:59.727
During the spring months, when everyone wants to get their house painted, everything's hot, our set rates higher.
00:18:59.727 --> 00:19:10.277
During the winter months, when people are more passive, or maybe end of fall, where they're reaching out for exterior estimates but they don't really want it done this year, they want it done in the spring, the set rates start to drop then.
00:19:10.277 --> 00:19:19.609
But overall we're looking for 70% and at Ellison Painting in general we're averaging between 75% to 80%.
00:19:19.609 --> 00:19:22.239
So we're outperforming what our expectation is generally.
00:19:22.239 --> 00:19:27.612
So that set rate when it comes to you know if we're talking about closing right now.
00:19:27.692 --> 00:19:30.919
On sales, our goal is 35%.
00:19:30.919 --> 00:19:34.893
So 35% of the estimates that we deliver we want to turn into jobs.
00:19:34.893 --> 00:19:52.653
That's a little lower than other companies aim for, but we do such a high volume of estimates that we found that that number works really, really well for us because it allows us to continue to charge the rate that we want to charge, a really profitable rate, which then allows us to pay our subcontractors really well.
00:19:52.653 --> 00:19:54.376
It allows us to pay healthy sales commissions.
00:19:54.376 --> 00:20:00.095
But if we had half the leads, we would not be able to.
00:20:00.095 --> 00:20:04.842
We'd have to be closing at 55 to 60% in order to continue to operate Right.
00:20:04.842 --> 00:20:06.644
But 35% is what we aim for.
00:20:07.329 --> 00:20:11.238
Yeah, that that's a really good set rate.
00:20:11.238 --> 00:20:25.378
And uh, cause I I see folks that they're using, you know, paid social and their set rates are like 33%, you know, and that that can really drive up your, your marketing costs.
00:20:25.378 --> 00:20:34.750
So if you're looking at your profit and loss and you see like 15% for marketing, 20% for marketing, that might be the problem.
00:20:34.750 --> 00:20:36.493
This, your set rate is too low.
00:20:36.493 --> 00:21:02.498
And and just so, if you're listening set rate, what the heck is that the amount of folks that get on that, that come in as a lead, that you actually get on the schedule to do an estimate for so, the so it sounds like Alison painting is doing, you know, of 10, 10 leads that come in you're you're putting seven or eight, uh, estimates on the calendar, correct, um, and what is that?
00:21:02.498 --> 00:21:04.060
Uh, what's your mix Like?
00:21:04.060 --> 00:21:04.342
Is it?
00:21:04.342 --> 00:21:07.253
Do you guys mostly do paid social or is a lot of?
00:21:07.253 --> 00:21:10.741
You're getting probably a lot of referral and repeat now too.
00:21:12.631 --> 00:21:12.871
Yeah.
00:21:12.871 --> 00:21:28.346
So I mean, if I'm, if I look at our stats, I would say like organic Google is probably around 20 percent of our sales and leads paid Facebook last year leads Paid Facebook last year I think we did $1.2, $1.3 million just from Facebook ads.
00:21:28.346 --> 00:21:40.513
From Google ads we did another, I don't know 800,000 or so.
00:21:40.513 --> 00:21:41.796
Referrals, 900, about a million.
00:21:41.796 --> 00:21:46.223
So we have a pretty good mix and the set rate definitely varies based on those sources.
00:21:47.732 --> 00:21:52.844
Our set rate on Facebook ads I'm looking at last year, let's see about 55%.
00:21:52.844 --> 00:21:56.160
Our direct mail campaigns 86%.
00:21:56.160 --> 00:22:01.742
People that just saw us like maybe saw one of our vehicles driving 78%.
00:22:01.742 --> 00:22:04.029
Organic Google 72%.
00:22:04.029 --> 00:22:09.163
So the set rate is a lot higher for some lead sources than others.
00:22:09.163 --> 00:22:22.070
But with my marketing background and my sales background, we have a culture of if we're going to spend money on marketing we need to get every penny we can get out of those marketing dollars.
00:22:22.070 --> 00:22:28.220
And certainly there's some leads that come through that will never, ever set for an estimate.
00:22:28.220 --> 00:22:30.763
We'll never get a hundred percent set rate right.
00:22:30.763 --> 00:22:50.625
But if we're really working our systems and we have really good follow-up systems and we're reaching out to these people time and time again until it's clear that they're never going to schedule, then we're making our marketing dollars stretch way, way further, and that's how we go from budgeting 10% and only spending 6%.
00:22:52.035 --> 00:22:52.897
Yeah, that makes sense.
00:22:52.897 --> 00:22:58.442
Yeah, and yeah, the set rates are really strong.
00:22:58.442 --> 00:23:11.396
And I think the general rule of thumb is to shoot for a 50% set rate for Facebook, because it's more of like an outbound people aren't looking for you, so it has a lower set rate, but you guys are exceeding that there.
00:23:11.396 --> 00:23:17.295
And then the inbound stuff, like coming from the website or from Google, it's higher, you know.
00:23:17.295 --> 00:23:18.538
So that makes sense.
00:23:18.538 --> 00:23:35.195
And so the other piece of that was the close rate, which you know 35%, you're good with, and that seems the close rate which you know 35%, um, you're good with, and that, that seems, you know, reasonable, one out of three, approximately, uh, very doable numbers, but it seems like the.
00:23:35.195 --> 00:23:49.403
The thing I think that probably sets you apart from a lot of other businesses is that set rate, cause I would imagine, well, I, based on my experience, the close rate is usually not the issue Most folks can get a close rate of around that, you know.
00:23:49.403 --> 00:23:53.638
But the set rate, I think, is the big thing.
00:23:53.638 --> 00:24:02.123
That is really impressive about your company is probably why you have such low cost of client acquisition.
00:24:02.123 --> 00:24:11.351
Yeah, I agree, 100% client acquisition.
00:24:11.351 --> 00:24:12.013
Yeah, I agree, a hundred percent.
00:24:12.034 --> 00:24:16.130
Um, so, year one focus was on not a friend, you know, you weren't afraid to spend on marketing and you blew it up from there.
00:24:16.130 --> 00:24:26.419
And then year two, uh, then you needed some help with hiring someone to focus on production, so you could focus on sales and marketing.
00:24:26.419 --> 00:24:29.755
And you mentioned not being afraid to spend money on that person.
00:24:29.755 --> 00:24:34.076
Did you have a, I guess?
00:24:34.076 --> 00:24:34.717
Why was that?
00:24:34.717 --> 00:24:35.979
You just knew that it worked.
00:24:35.979 --> 00:24:38.643
Did you have a compensation plan in place?
00:24:38.643 --> 00:24:40.986
Were you using a framework or something?
00:24:40.986 --> 00:24:44.590
What made you so confident in that big hire there?
00:24:45.494 --> 00:25:02.832
Yeah, I mean, we just followed industry benchmarks and all the data that you and I have available to us says that in our market, for what we charge, for every $1.5 dollars worth of sales, you need one sales guy and one project manager.
00:25:02.832 --> 00:25:08.448
So, going into 2023, when the goal was to sell three million, what's the math?
00:25:08.448 --> 00:25:11.242
Two sales guys, two project managers.
00:25:11.242 --> 00:25:13.442
So I was one of the sales guys.
00:25:13.442 --> 00:25:16.825
My wife transitioned out of the business October of 22.
00:25:16.825 --> 00:25:26.461
I hired my first project manager then and then in the spring, when we started ramping up for exterior season, I hired my second project manager and hired my second salesperson.
00:25:26.461 --> 00:25:35.130
And uh, 2023, we also had a uh, another, another project manager that came on didn't work out.
00:25:35.130 --> 00:25:36.093
We covered for him.
00:25:36.093 --> 00:25:38.835
2023 was a miracle that we got to 3 million.
00:25:38.835 --> 00:25:40.799
We just had a lot, a lot happen.
00:25:40.799 --> 00:25:44.508
It was that was the hardest transition year, I think.
00:25:44.508 --> 00:25:47.742
And then we hit our 3 million.
00:25:47.742 --> 00:25:52.377
We still hit it right and it was very, very profitable because I was still selling a lot.
00:25:52.397 --> 00:26:03.676
2024, the goal is 5 million and what I did was I knew that at some point I was going to hit a ceiling.
00:26:03.676 --> 00:26:08.016
The company was going to hit a ceiling because I had a ceiling, and I didn't know what that ceiling was.
00:26:08.016 --> 00:26:21.526
Again, I think I'm more capable than most, my ceiling's probably higher than most, but I knew I was going to hit the ceiling at some point, and I'm not the kind of guy that is, you know, just for ego's sake, wants to see how far I can push it without help.
00:26:21.526 --> 00:26:24.364
And so I made the decision to bring on a partner.
00:26:24.364 --> 00:26:28.835
And so this is a guy that I had known since he was in eighth grade.
00:26:28.835 --> 00:26:32.625
We had worked together at a marketing agency for a couple of years after he graduated college.
00:26:32.625 --> 00:26:36.746
Really smart, really capable and a complementary skill set to me.
00:26:36.746 --> 00:26:43.198
So the goal was 5 million, based on our math.
00:26:43.198 --> 00:26:44.000
We needed three sales guys.
00:26:44.000 --> 00:26:44.781
We needed three project managers.
00:26:44.781 --> 00:26:45.442
So I was still selling.
00:26:45.462 --> 00:26:48.757
I brought him on to lead all of production At that point.
00:26:48.757 --> 00:26:52.826
We had a project coordinator that was scheduling all the projects.
00:26:52.826 --> 00:26:58.428
We had an estimate scheduler as well, so we had a team of eight to get us to the 5 million.
00:26:58.428 --> 00:27:09.785
I might have been able to get to 5 million without my partner, but it would have been very, very difficult, right, and I may not have gotten there.
00:27:09.785 --> 00:27:14.539
Uh, so bringing him on board at that point was definitely the right decision.
00:27:14.539 --> 00:27:19.895
Um, so that, yeah, that last year was actually the most profitable too.
00:27:19.895 --> 00:27:22.923
We had the most overhead, uh, biggest staff.
00:27:22.923 --> 00:27:28.384
But if you look at, if you look at my books like sellers, discretionary earnings we, we did.
00:27:28.384 --> 00:27:32.297
We sold 5.1 million and STE was over a million dollars.
00:27:32.297 --> 00:27:37.728
Wow, so it was super profitable, even through all, all of all of this growth.
00:27:37.728 --> 00:27:42.095
Wow, so it was super profitable, even through all, all of all of this growth.
00:27:44.875 --> 00:27:50.471
This year is really going to be the test, I think, because now I have a team of three full-time salespeople not me and I'm I'm selling a fraction.
00:27:50.471 --> 00:27:52.678
I sold two and a half million of the 5 million last year.
00:27:52.678 --> 00:27:55.645
The goal this year is to sell less than a million.
00:27:55.645 --> 00:28:05.894
Me personally, and I'm only doing, I'm only taking referrals and repeat business, stuff like that, and my partner is also trying not to actively be managing the projects either.
00:28:05.894 --> 00:28:13.063
So now we have two full-time project managers, one part-time project manager, two project coordinators, estimate scheduler.
00:28:13.063 --> 00:28:27.567
This is this will be the big test whether Ellison painting is a real business that can sustain without, you know, big bad Brad selling, um, or whether some of the magic was me selling, who knows?
00:28:27.867 --> 00:28:32.654
Yeah, yeah, so I love this Um.
00:28:32.654 --> 00:28:40.209
So you, you brought on a partner in that third year because you knew that you had some blind spots.
00:28:40.209 --> 00:28:47.047
We all have strengths and weaknesses and it sounds like he's more production oriented and you're more sales oriented.
00:28:47.047 --> 00:28:53.907
And how did that come about with vetting your partner?
00:28:53.907 --> 00:28:55.741
How did you know he was the right fit?
00:28:55.741 --> 00:28:59.201
And then how did you structure that partnership?
00:28:59.201 --> 00:29:02.588
Cause that's a that can be a super messy thing.
00:29:02.588 --> 00:29:12.226
I've definitely seen this where, if you don't have the right, you know, understanding expectations and also documented kind of like contract.
00:29:12.226 --> 00:29:19.727
Uh, you know, it's basically like getting married to somebody, so it can be very draining, um, if it doesn't work out.
00:29:19.727 --> 00:29:29.821
And uh, do you have any thoughts on um, on how to properly set up a partnership, and what did you learn that worked there?
00:29:30.644 --> 00:29:35.252
Yeah, so well, the vetting had been done for the 20 years leading up to the partnership.
00:29:35.252 --> 00:29:53.292
Right Again, I've known him since he was 13, and everything I'd seen of him from 13 to 34 or however old he was when he started working with me was and we had worked together as well pointed to the fact that he's the type of person that I would be willing to partner with, and I've said this before.
00:29:53.292 --> 00:29:57.500
There's only three people in my life that I would feel absolutely comfortable partnering with, without a question.
00:29:57.500 --> 00:30:03.450
One is my wife, One is my little brother and one is Tim and I.
00:30:03.450 --> 00:30:06.788
When I launched Ellison, I told him listen, I'm launching my own company.
00:30:06.788 --> 00:30:09.338
Now, Eventually, I think you should come partner with me.
00:30:09.338 --> 00:30:12.778
Now's not the time, but let's keep talking and I would keep throwing out feelers.
00:30:12.837 --> 00:30:21.955
And he had this fancy corporate consulting job where he's traveling around the country working with fortune 500 companies on systems and culture and all this stuff and make it really good money.
00:30:21.955 --> 00:30:28.253
And he was always like nah, nah, nah, you know painting new gross, and.
00:30:28.253 --> 00:30:36.676
But then he had his first kid and the traveling around the country wasn't as much fun as it was, and so he's like all right, I think this might be the time let's start talking.
00:30:36.676 --> 00:30:44.781
So the vetting was done, but then it was like all right, well, how do we partner or how do we structure this and how do we protect each other?
00:30:44.781 --> 00:30:48.124
Jason Paris is a great friend of mine.
00:30:48.124 --> 00:30:53.288
He's him and his partners have kind of laid a foundation of how to partner with people.
00:30:53.288 --> 00:31:06.378
People, and even though I know Tim so well and I trust him so much and he feels the same about me like we are, this is all going to be in writing.
00:31:06.378 --> 00:31:07.382
We're going to agree on everything.
00:31:07.382 --> 00:31:13.137
We're going to think about as many contingencies and roadblocks as we can and get it all written and agreed upon ahead of time.
00:31:13.137 --> 00:31:17.086
And we also agreed that the first year was actually going to be a trial.
00:31:17.086 --> 00:31:25.069
So 2024, he operated as a partner, but he was an employee and I paid him a salary.
00:31:25.069 --> 00:31:35.122
I paid him a $75,000 a year salary, which is what I paid myself, and then his compensation was an additional 20% of profit on top of that at the end of the year.
00:31:35.122 --> 00:31:51.980
And we both agreed at the end of the year, if 2024 went well and I'm thinking, yeah, Tim is a great partner, and he thinks, yeah, Brad's a great partner, Then we move forward and actually sign the contract, but we had negotiated all the terms right off the bat.
00:31:54.023 --> 00:32:09.961
So one of the signs that I knew it was going to be a good partnership is, in the first negotiation meeting that we had, we found ourselves arguing for the other person, and what I mean by that is let's.
00:32:09.961 --> 00:32:11.104
I would say well, let's.
00:32:11.104 --> 00:32:17.146
Hypothetically, I have a brain injury and evil Brad appears and tries to take advantage of you.
00:32:17.146 --> 00:32:19.297
What are the ways in which I could do that?
00:32:19.297 --> 00:32:23.067
And so I started pointing out all right, I could do this, I could do that.
00:32:23.067 --> 00:32:25.221
We need to make sure that the contract addresses that.
00:32:25.221 --> 00:32:28.623
So I don't have the ability to do that, and then he would do the exact same thing.
00:32:28.623 --> 00:32:38.088
You know well, you deserve to be a minority or majority owner, and so, with that, I think you should have the power to do this, this and this, even if I disagree with you.
00:32:39.220 --> 00:32:58.650
All right, so we were really operating and discussing in good faith, trying to look out for the other person more than ourselves which is how Ellison Painting operates and that's part of why we've had so much success is if we are putting the best interest of our subcontractors ahead of our own or the best interests of our customers ahead of our own.
00:32:58.650 --> 00:33:07.136
The goodwill pays off, right, and we don't do it so that we can benefit more, but that's just a result of that.
00:33:07.136 --> 00:33:14.977
So we we had all the contract terms laid out, we had the contract drawn up end of the year.
00:33:14.977 --> 00:33:26.642
We're like, yeah, this is a no brainer, the business is very profitable, we're working really well together, and so we we made the deal and he is now officially a 30% owner of Ellison painting.
00:33:26.642 --> 00:33:29.570
Um, and our roles, our roles, changed.
00:33:29.570 --> 00:33:32.058
He's, he's essentially running the business.
00:33:32.058 --> 00:33:36.921
I'm CEO Uh, I'm serving in like the visionary role but he is managing all of the people.
00:33:36.921 --> 00:33:45.208
He's technically managing the salespeople, he's managing the production and which then freed me up to run rollout marketing as well.
00:33:46.996 --> 00:33:47.175
That's.
00:33:47.175 --> 00:33:48.181
That's awesome.
00:33:48.181 --> 00:33:51.642
I love the fact that you guys red teamed your.
00:33:51.642 --> 00:33:54.709
Your your like evil Brad.
00:33:54.709 --> 00:33:56.678
What could I do?
00:33:56.678 --> 00:33:59.045
That's a really so many people do.
00:33:59.065 --> 00:34:00.779
I mean, you've I'm sure you've seen the horror stories.
00:34:00.779 --> 00:34:03.159
Everyone's like, no, no, we, we don't really need anything on paper.
00:34:03.159 --> 00:34:06.859
We know each other, we trust each other, and then it all falls apart.
00:34:06.859 --> 00:34:10.961
Someone gets screwed, relationships are destroyed, financial futures are destroyed.
00:34:10.961 --> 00:34:21.280
Like, let's just, we believe in each other, we believe that we are both operating in good faith, and even so, let's just have it all in writing.
00:34:22.384 --> 00:34:40.436
Yeah, it makes sense and I think it's a good exercise to go through, obviously, document and get a signed contract and a clear understanding and a clear understanding.
00:34:40.436 --> 00:34:42.222
But I love the adding in the what could I do to mess this up?
00:34:42.222 --> 00:34:44.831
And like discussing that with the partner ahead of time or the potential partner.
00:34:44.831 --> 00:34:45.193
That that's a.
00:34:45.193 --> 00:34:45.976
That's a good one.
00:34:45.976 --> 00:34:46.376
I love it.
00:34:46.376 --> 00:34:48.523
So was it.
00:34:48.523 --> 00:34:59.996
So it sounds like it was basically an option to buy in 30 by 30% at the end of the trial period and and then he had the had the option to buy in or not, based off of how that first year went.
00:34:59.996 --> 00:35:00.476
It sounds like.
00:35:01.460 --> 00:35:06.938
Yep, and the way we structured the purchase price was also a really healthy.
00:35:06.938 --> 00:35:11.083
We each gave in a little bit.
00:35:11.083 --> 00:35:27.800
He wanted to buy 40%, I wanted to sell 20%, we agreed on 30%, but rather than just straight up 30% on the valuation of the business at the end of 2023, what we did is I said, all right, I'll sell you 20% at the 2023 valuation.
00:35:27.800 --> 00:35:43.068
The next 10% is going to be based on the valuation at the end of this year when we're working together, and so what ended up working out is his 20% actually cost him less than the next 10%, which was good.
00:35:43.068 --> 00:35:48.701
When you look at the total value that he's receiving.
00:35:48.701 --> 00:36:00.248
He's already positive equity and I felt honored that I wasn't selling my business a portion of my business at like a really really discounted rate Right wasn't selling my business a portion of my business at like a really really discounted rate Right, so we locked in a portion of it.
00:36:00.248 --> 00:36:06.722
Because we worked hard in 2024 and we were really profitable, I was rewarded with the extra payment on the 10%.
00:36:07.585 --> 00:36:17.347
Yeah, that makes sense, and, in a lines, incentives as well, like, yeah, so get you guys moving in the same direction, so that that makes a lot of sense.
00:36:17.347 --> 00:36:18.956
No, I appreciate you sharing that.
00:36:18.956 --> 00:36:20.719
Uh, I feel like partners.
00:36:20.719 --> 00:36:22.463
It's it.
00:36:22.463 --> 00:36:38.347
Uh, it can get really messy really quick and it sounds like you guys did it the right way with really making sure the match worked, red teaming ahead of time, getting everything documented and then having a, a compensation plan and a option to buy.
00:36:38.347 --> 00:36:42.420
That made sense for both of you and aligned your incentives.
00:36:42.420 --> 00:36:45.625
So, no, that sounds great, um, cool.
00:36:45.625 --> 00:36:52.106
Well, I'd probably I could talk to you for the next couple hours, but I don't want to steal your time.
00:36:52.106 --> 00:36:55.498
But, uh, this has been an amazing conversation.
00:36:55.498 --> 00:37:05.815
I really appreciate you spending the time to discuss, you know things, marketing partnerships scaling from zero to 5 million over the last three years.
00:37:05.815 --> 00:37:16.965
Do you have any asks of the audience or any tips or anything anywhere that, if you want to connect with them, the floor is yours?
00:37:17.909 --> 00:37:21.280
Yeah, so we we operate pretty open-handedly at Ellison painting.
00:37:21.280 --> 00:37:32.657
So we have we have a lot of resources that we've developed sales brochures, subcontractor info packets, really good playbooks for sales and project managers.
00:37:32.657 --> 00:37:33.920
We kind of share that stuff freely.
00:37:33.920 --> 00:37:37.159
So if anyone wants to reach out to me for any of that stuff, I'm happy to share it.
00:37:37.159 --> 00:37:47.722
No real ask, other than if you're not a member of the Painting Contractors Association, I would say for you that would be a benefit.
00:37:47.722 --> 00:37:50.927
Connect with like-minded contractors.
00:37:50.927 --> 00:37:56.282
The PCA has a ton of resources to help businesses, big and small, new and old.
00:37:56.282 --> 00:38:06.876
And you know I just I love the PCA and it's it's been instrumental to my growth and in particular the relationships I've made through the PCA.
00:38:06.876 --> 00:38:09.643
So I don't benefit if you join.
00:38:09.643 --> 00:38:17.907
You know it's not like I get paid to be on the board of directors, but the industry does better when we all do better, as our friend Nick Slavik says.
00:38:17.907 --> 00:38:23.806
So join the PCA, reach out to me if there's any way I can help, and happy to do that.
00:38:25.168 --> 00:38:25.429
Awesome.
00:38:25.429 --> 00:38:27.061
I really appreciate your time, brad.
00:38:27.061 --> 00:38:33.403
I definitely echo everything you just said with the PCA Great resource and always has amazing events.
00:38:33.403 --> 00:38:39.365
Really appreciate your time, brad, and for the listeners with that, we will see you next week.