Here is a bigger picture to look at if you want to understand more the operating costs of a paint contracting business mentioned earlier in this post… There are some well thought out responses by those that treat this trade as a business and not just a means to get by.
My husband and I have been in the paint business for over 25 years in Washington State. I hope that the responders to this question somewhere specified that square footage does not mean the floor space but rather the actual wall/ceiling square footage? Materials and your time are a function of wall sq footage and linear feet of trim. Cabinets are a whole separate pricing system that take into consideration many different factors as are floors. Small square foot homes can be labor intensive to paint when the trim package is extensive. Most of our clients live in million dollar homes and some occasionally in the multi million range. The work we do has to be perfect and so it would be fair to say that our clients our more concerned about results than they are price. They are wonderful folk to work for and they are always happy with our work. This might seem to be an ideal situation to be in for any painter except for the fact that this particular market is relatively small. Jobs are few and far between. We do work in lower housing areas BUT WE DON'T MOVE OUR PRICING for anyone except family members,unless the market has a proven history of not being able to bear that. We have to charge an minimum of $70/hr just to stay in operations and here is why.
As an S Corp IRS election, we are required via the IRS to pay statutory employees (of which my husband is the only one), a "reasonable" salary for his experience level. My husband stopped being a journeyman painter about 20 years ago. 25 years since,he could now be considered an expert in the field. 27% of our gross receipts generated from that hourly rate was a federal requirement our business has to meet period. (The federal government seems to insist on collecting their fair share of funding for a soon to be insolvent SS and MC program.) If we were filing a Schedule C instead of an 1120s that percentage would be higher due to the federal self employment tax that sole proprietors have to pay on their Entire net income of in 2010 15.3%. That 15.3% is higher than most single painters effective federal tax rate at years end). In addition, 31% of our gross receipts go to cost of operating a business. This includes bonding, insurance, licensing fees, ecology environmental fees, disposal fees, vehicle gas and maintenance fees, office supplies,tools,repair and maintenance of tools, storage,subcontractors or others we hire to help in busy times, 1300/year in tax prep fees for our election filing,postage,and promotion and development(or advertising costs). If you aren't fortunate to have your spouse do all bookkeeping aspects of your business including 1099,s payroll w-2,w-3's 940 and 941 and all state excise return filings, than you would have to pay someone to do this task for your business which would again take an even higher percentage of your gross receipts. It is costly to maintain books for any construction trade that maintains good standing with both state federal requirements. Furthermore an additional 18% is state excise taxes owed on labor and materials as well as the materials themselves. This is considered "cost of goods sold". For a business that grossed with one person, 110K last year ( a bad year for us due to economic uncertainty and late extensions by congress of the Bush tax cuts for our clients income range), we lived on pass through income of 23K plus my husbands payroll of 30K, 5000 of which went toward catastrophic medical insurance premiums. That is at best a modest lifestyle in comparison to the lifestyles of the people we work for. Your pricing on any job needs to reflect these real costs of doing business with an inflation factor figured in or you won't be in business for very long. For those of you newbies to business (and painting IS a business it is not just a trade), if you don't factor this in to your pricing, you will not maintain adequate cash flow and reserves to meet the cost of operation and certainly not to maintain a living. Novice painters wear out physically spinning wheels for a year or two until they figure this one out. All clients like low bids so you can count on being very busy not making much if any profit to live on.
Everyone's a painter, but not everyone's a businessman. If you low ball jobs because your in dire need of personal income, you will establish a reputation of always being the low guy. Low guy gets low paying clients ONLY. Clients won't understand a reasonable figure when you give it to them in the future because they are simply too used to getting something for nothing and yes they tell others what they paid you for their job. It's bad precedent to set when eventually you have to increase your fees to meet increasing costs,taxation and inflationary factors. It is simply not a matter of IF this happens, its only a matter of WHEN.
A warning: Bidding your jobs higher will result in losing jobs to people like Linda Stacey from Fort Collins above. Linda doesn't understand business finance well and doesn't understand the important opportunity and role she has in helping our country MAINTAIN real LASTING employment especially now. Linda can go find her low guy and live with the results which are inevitably going to be that he can no longer be found? Linda discovered oil overspray on her Lexus and all over her new roof. It appears low guy's business had been operating under the table for some time and that a state tax warrant has been slapped on him. Furthermore his assets are now frozen and his ability to get a license to operate any business has become a condition of meeting a court ordered monetary judgment. Sorry Linda, he wasn't insured or bonded either…….
Note: I drive a Lexus, a nice little GS 300, but mine is actually paid for. A word of advice…watch out for folks that visibly live in the high end but whine about reasonable costs of the projects they want to do. This is sign of "living above one's means" and high debt to income ratios. Overbid those jobs in hopes that you don't get them. You likely won't get paid if they select you. Hope this gives some new citizens entering this trade a broader vision of the paint contracting business and what to consider in your bids!!!!!Happy painting…..