When talking with customers about paint gross profits, I often bring up waste, but, in most cases, it is dismissed because the impact is not understood. They know they have waste, they just don’t understand the value or the cost it represents.
Waste reduction can add as much as 10 percent to your current gross profit.
I remember walking into a shop that had gross profit concerns with a gallon mixing tub — I poured all the leftover paint I found in the mixing room into it — and I almost filled it. I collected around 120 ounces of wasted paint. The average cost per ounce is $2-$3 depending on the product, for this example I will use $2.50. Multiplying the 120 ounces by $2.50 totals $300 of waste. Using paint purchases of $12,000 and average sales of $23,000, a shop would have 47 percent gross profit. Subtracting the $300 of waste I found from the $12,000 in cost would increase the gross profit by two percentage points to 49 percent, pretty significant by eliminating just $300 in waste.
Moving from that example to what I generally see in mixing rooms will illustrate how much waste is probably accumulating in your shop. Most often I see three to four ounces of leftover paint in mixing cups, which is twice the benchmark. If you think about two extra ounces of primer, sealer, basecoat and clear being mixed than is needed, it adds up very quickly.
Calculating out the example above using our $2.50 average shows $20 of waste per repair. If you multiply $20 by the average of 100 repairs per month, you now have accumulated $2,000 in paint waste. Now let’s subtract $2,000 from the paint purchase example above to see the increase in gross profits. Using the same sales of $23,000, our purchases are now $10,000 — calculating out to 57 percent gross profit — a 10 percent increase from the original amount.
Now that you have seen the effect waste has on gross profit, let’s look at ways to reduce waste. As the two examples above show, the best way to reduce waste is to mix less paint. There are many tools available to help painters determine the amount of paint they need to complete a repair. Most mixing systems have panel calculators that can be used to help determine paint quantities. However, the painter is the most effective tool to reduce waste. If the painter consistently has three to four ounces of paint leftover after a repair, they should adjust the quantities themselves. Most painters mix for comfort, not for need, so coaching them to mix less is a major step towards reducing waste.
Paint processes also influence paint waste. Are you cutting in parts or painting the part all at once? When you cut parts in, you add another paint-mix step, creating another opportunity for waste. Changing your paint processes to eliminate cutting in parts can help reduce waste by eliminating that additional two to three ounces of base used.
Developing a process to use leftover base as a ground coat rather than mixing a value-shade sealer can reduce the impact of waste by eliminating another mix step. This will not work in all instances, but it can be very beneficial.
The elephant in the room concerning waste is rework. While some cannot be avoided, best practices in operations can reduce rework significantly. Regardless of the cause or solution, rework must be calculated as paint waste or billed as a shop charge. Just mixing the paint and letting the cost work itself out is like putting your hands over you face to keep people from seeing you. It will not work out! This cost is an average of $250 per episode. I’ll let you do the math based on the rework in your shop.
If you don’t know the amount of rework in your shop you should start tracking it today, along with anything else that consumes materials that is not on an invoice. A mirror or handle that a friend wanted you to blow some paint on or the blend panel you did not bill for is all considered waste and adds to cost, detracting from gross profits.
Every shop is different and not all shops will be able to reduce all waste or achieve a 10 percent increase in gross profit like my example shows, however, I am willing to challenge you to strive for a 5 percent increase. I feel any shop, regardless of current paint processes, can achieve that increase. Involve your painters — you will not fix this on your own. Challenge them, even reward them when they reach the goals you establish. It will bring dividends to not only your gross profits, but to their habits as well.
