My name is Daniel . I'm a CPA that works exclusively with painting businesses , helping them from startup to 10 million . In today's podcast , we're going to talk about what to pay your team , and so this reminds me of a book by Brad Jacobs called how to make a few billion dollars Really great book .
Definitely recommend you read it and a significant portion of the book . It talks about how to treat your team , how to compensate your team , how to think about the levels of your teammates .
One of the thought experiments that Brad Jacobs had in the book that was really impactful to the way I thought about this was he said basically you had A players , b players and C players . He said basically you had A players , b players and C players .
And to figure out which of each of your teammates fall into which category , imagine that they come into your office and say , hey , I'm quitting my job . Evaluate what your emotional reaction would be . And in the case of a C player , your emotional reaction would be okay , that's fine , I'll , I was going to fire you anyway , so not a big deal .
That would be a C player . If you have that emotional reaction , if your reaction is oh , this , this really sucks , this is going to take a month or two to get somebody to replace this person . It's going to be really inconvenient , but I think I might be able to get somebody . That's better anyway , so it's not completely terrible .
That would be a B player , whereas it's inconvenient , takes a little bit of time to recuperate from that , but in the end it might actually turn out better . That would be a B player , then an A player .
If they come into your office and say that they're quitting , you immediately panic and start wondering what went wrong , worrying that you won't be able to find someone as good as this person ever again . That would be an A player . So I think that's really helpful in classifying your team .
And if you look through countless biographies of CEOs and founders that are killing it like Steve Jobs , brad Jacobs , henry Ford they're looking for A players , only A players , getting A players in their organization and trying to make sure that they avoid hiring B and especially C players .
I think Steve Jobs says something of the effect of you're going to get some B players . If you're trying to only hire for A players , you're going to probably get some B players , but you got to be really careful because when you get those B players in . They're going to start when they get in management .
They're going to start hiring C players and then you'll get what's called a bozo explosion where you're just you have a whole bunch of bozos in your organization Not a good thing . A bunch of C players . Your organization not a good thing much of C players .
So understanding that when you're hiring in your business , you really need to look for A players so that they can grow safely without risking a bozo explosion , as Steve Jobs would say and along with this , there's another idea in Brad Jacobs' book is compensating your team For A players .
You shouldn't hold back on compensating them Because an A player is going to give you such outsized returns . They're going to create raving fans of your company if you're bringing in A players Because they're going to create such a great experience for your customers in A players because they're going to create such a great experience for your customers .
So don't withhold a couple dollars per hour because you're trying to stay within a budget . If it's truly an A player , don't hold back on compensation . So when we go through what you should pay your team today , keep that in mind . These are rough guidelines , but if you truly have an A player .
You might need to compensate them more , but what you're going to get in return should be a huge amount of value that you wouldn't otherwise get from a B or C player . All right , so let's first look through a direct labor . So this is job site labor . What should you pay your painters ? So right here I'm sharing my screen .
If you're not watching this on YouTube , you're just listening there . You can check out the YouTube version . We'll have this growth model on the screen , but if you're just listening , I will try to explain it , so you don't need to see it necessarily .
All right , so looking at painters generally , you want to keep painters somewhere to 33 to the high end , very high end 40% of what you're charging your customer . So if the project's $10,000 , you wouldn't want to pay your painters more than $4,000 . And that would be like if they're subcontractors , but most of the cases you're having employees somewhere around 3,500 .
Of that $10,000 job should go to your painters , and so this is a little bit variable in terms of the hourly rate that I see across the US , but it's somewhere around $20 to $30 an hour roughly speaking , depending on what area of the country you're in . But kind of the . The big thing is that you're not paying them more than you know .
35 to 40% of the job with fully loaded burden accounted for . So , fully loaded , the fully loaded rate would be like your payroll taxes . On top of that , let's say you're paying someone $25 an hour .
You should multiply that by 1.3 to add in the additional burden because you have payroll taxes , you have workers' compensation , all those different fees added in there . So it usually comes up to somewhere around 30% . So it usually comes up to somewhere around 30% . And so when you multiply $25 per hour times 1.3 , that's actually $32 and 50 cents .
So that's a fully loaded loaded rate . So when we're talking about fully loaded rate , that should come in below 40% of the total price of the job . After you multiply , you know how many hours are on the on the job and everything . So that's that generally works . Um , assuming your materials are around 15% . Now , sometimes materials are a lot less .
Um , in that case you might have a little bit more for of a labor budget . Or maybe the materials are a lot more and that case you might have a little bit more of a labor budget . Or maybe the materials are a lot more and so you'd have less of a labor budget because usually folks are shooting for somewhere between 40 and 50% gross profit margin .
All right , so those are some rough guidelines for painters . Now let's go to salesperson . How much did you pay a salesperson ? So for a salesperson , this is typically somewhere around 8% of what they close . Now this is after , again , payroll burden .
So if you want to pay someone 8% of what they close , all costs built in that fully loaded rate , probably need to pay them somewhere around 6.15% of what they close goes to them . Then you add in the payroll burden is going to come out around 8% of what they close . So that's typically a decent framework for salespeople .
Obviously you can do it a little bit less , a little bit more , but that typically it's somewhere around 8% . Now let's take a look at like an admin person . So office workers , admin person , admin person this kind of this definition of what a office person does fluctuates business to business , but typically you know the office person is doing the invoicing .
They're invoicing the customers after the job . They're potentially scheduling crews . So once the proposal is signed by the customer , the office person might reach out to that that new customer . Get them scheduled , facilitate getting the colors . Those are the types of tasks that the office person typically does . Uh , some maybe light , light bookkeeping .
Uh , like , paying the bills , invoicing customers , onboarding new customers , onboarding new customers , scheduling crews . That's typically the job description of an office worker and usually they're paid somewhere around 3% to 4% of revenue , of revenue . So if you're doing a million dollars in revenue , no-transcript , now this could be less or more .
Maybe they might have more responsibility . Maybe they need to get paid a little bit more . Maybe they have less responsibility . Maybe they would be paid less , all right . Oh , and I forgot another thing Office workers often are doing setting as well . Like , if a lead comes in , they'll set that estimate appointment , all right , so that's office workers .
Now the next one is production managers . So production manager and office workers sometimes they have , depending on who you're talking to , they might have overlapping duties and responsibilities , like for scheduling . Sometimes the office workers scheduling crews . Sometimes it's the production managers scheduling the crew , sometimes the office workers scheduling crews .
Sometimes it's the production manager scheduling the crew , sometimes the office workers facilitating bringing new customers on board . Sometimes it's the production manager that takes on , like , getting colors and and scheduling the crews .
So it kind of depends on how you're um , defining what each role does , but typically you'll see production managers paid somewhere between five and 7% of what they produce , and they might be on the low end of that , you know . They might be closer to 5% Maybe if you have an admin person that's onboarding the new customers .
They're getting the colors , they're scheduling the crews and then they're handing it off to the production manager . So the production manager will have less to do . And then another thing to consider is maybe you have really strong crew leads .
Maybe your crew leads collect the check at the end of the job and you have a high amount of confidence in your crew leads . They're very strong , they have high-quality work , they can talk to the customer and do the final walk around and collect checks . So there's less need for a production manager .
So if you have really strong crew leads , maybe you don't need to pay your production manager as much because their roles and responsibilities will be reduced in that case .
On the other hand , if you have crew leads that need to be QC'd they need someone to communicate with the customer , do walk-arounds at the end of the job Maybe you need a stronger production manager who's getting more of a percentage of what they're producing , so they might be closer to 7% .
So those are some rough guidelines for those key positions for direct labor , for a salesperson , for a production manager , for an office worker , admin person . So hopefully that was helpful . Love to hear your thoughts on any ideas for future episodes . If you haven't done so already , go to grow your painting business on Facebook group . Go to Facebook .
Grow your painting business , join that group . Join the discussion . Love to hear your thoughts . See you next week .