It is important to realize that there is not a one-size-fits-all solution when it comes to pricing a painting project. Your company is unique, and therefore you need to understand what price is right for your business.
To do this, you need to understand what costs your business has and how much profit you would like to make. One of the easiest and most accurate ways of doing this is by understanding the hourly rate you need to charge (including or excluding materials) and using this with a production rate estimating system.
When you follow this approach, you'll gain valuable insights into the project's duration, ensuring accurate production planning. It'll also help you set the right pricing to ensure consistent profitability for your company.
Check out the video below for an introduction on how to calculate your hourly rate:
Guide to Determining Your Hourly Rate
Step 1: Average hourly direct labor wage
This is the average price paid per hour to your production team to produce the project. This does not include any other staff that are not directly producing the project such as sales, admin, and management. This rate should include employer contributions for payroll taxes, employment insurance, paid time-off, and any other benefits that would apply to the wages of the people doing the work.
Start by listing all your painters and how much you pay them per hour. Then take the average of these rates to find your average hourly rate.
For example, your company has 3 painters with varying skills, responsibilities, and wages:
Name | Wage/hour |
Jake | $18.50 |
Sam | $22.00 |
Anna | $24.00 |
Total | $64.50 |
Average Wage = Total hourly wages for # of painters
$64.50 / 3 = $21.50/hr
The average wage for this company is $21.50 per hour
Step 2: Average paint and sundries (P&S) spend per hour
This is the amount you are paying per hour on average for paint and sundries (small tools, supplies etc). You can include this in your hourly wage or add paint and sundries on a project-to-project basis.
To get this number, you will need to consult your financial statements. Take your paint and sundries spend for the longest period you have accurate historical financial information for, and then divide that by the number of hours worked by your painting team (only painters producing projects) in that same period.
For example, in the last 3 months, you spent $13,932 on paint and sundries. Your painters worked 1,440 hours in that period. So, you will divide $13,932 by the 1,440 hours your painters worked in the year, which gives you an average of $9.68/hour spent on paint and sundries.
Step 3: Average overhead cost per hour
⚠️ To do this calculation, refer to your financial statements for the same period you used to calculate your paint and sundries average hourly rate.
Combine all of your overhead costs - which includes payroll for all staff that are not directly involved in the production of the projects (management, sales, admin), and essentially everything but painters’ wages, paint, and materials. This could be insurance premiums, rent, loan payments, marketing, vehicles, owner pay, etc.
Once you have your total overhead costs, divide that number by the total hours your painters worked in that period. This will give you the total cost per hour you need to charge to cover your overhead.
Using the example above, this is what the calculation will look like. And please note that this is over 3 months - the same period used in the previous calculation.
3 Months Overhead Spend Expenses: $32,508
Hourly Overhead Rate = Expenses / Total hours worked
$32,508 / 1,440 = $22.58
Your overhead hourly rate is $22.58 per hour
Step 4: Profit margin %
The profit markup refers to the amount of profit you would like to make from your work. This is an important number as every business must make a profit to operate successfully.
Once you have decided on the amount of profit you would like to make, use the other hourly numbers to find your all-in hourly rate by adding all of the hourly rates together and dividing by 1 minus the percentage of profit you wish to make.
For this example, we will use a 10% profit margin
All-in Hourly Rate = (Average hourly wage + P&S hourly rate + Overhead hourly rate) / (1- 0.10)
= ($21.50 + $9.67 + $22.58) / (0.90)
Your all-in hourly rate is $59.72 per hour
Final Thoughts
Pricing painting projects can feel tricky since, ultimately, it’s both an art and a science. However, once you understand the basis for your hourly rate, you can start to feel confident with the prices you charge for your projects.
Now that you have broken down your hourly rate from your company’s historical information, it will give you the chance to make adjustments as your business grows, seasons change, and for any other factors that affect your business.
Pair this hourly rate with a production rate estimation system and PaintScout, and you will be able to build consistently priced painting estimates you can trust and get the profit you deserve.