Herman: John L. Herman Jr., Author

The Value of your Labor

A recent email asked me to discuss something about his paint contracting business. This gets to two things, the value of your labor and the need for marketing constantly.

You can only charge so much per hour and get away with it. The value of one person working even at a fee per day limits the amount of money you can make. Let’s take lawyers. Some charge $ 150.00 per hour, others get $ 250.00 per hour and there is the occasional $ 1,000 per hour attorney. But whatever they charge they are limited because you can only work, and therefore charge, for so many hours. Hence, some smart lawyer who saw this decided to start charging a percentage of what they collected instead of an hourly fee and whammo, their income shot up. In my best year I took in two million dollars in fees which translated into one thousand dollars per hour and no banker or owner would have hired me at that rate, but on a percentage rate basis of collected money returned to them from my deals, that is exactly what they paid me.

In a service related business like plumbing, contracting, building, or painting customers expect to pay a reasonable hourly fee for wages. Now, do you rush to get a job done as fast as you can when you get less pay? What’s the incentive to finish and get out of the customers house or commercial building when you are only cutting your own paycheck? One of my first jobs was as a painter in my father and uncles paint business. We painted every Exxon (ESSO back then) gas station in the greater Baltimore area. I got one dollar per hour. They charged three dollars an hour for my labor. They owned the business and got twice what I did for my hour of work. They knew they couldn’t make enough money just based on what they could paint. They made more money having others do as much painting as possible and they made money on every hour everyone else worked.

Even as a young boy at the time I realized something important. My fathers side business was paint contracting. But he wasn’t a painter. He was an employment agency who provided jobs for painters. And as an agency he made a fee for every hour his employees worked. So the way for him to make a lot of money, and all service businesses fit this need, is to get a lot of jobs, more than just he and my uncle could paint. And hire a lot of workers to do the work. See, painting is the field they chose, but the principle business was findings jobs and hiring employees to do the work. They were responsible for the final product, so pricing the jobs well, hiring the staff well, and training the staff well became their main jobs. They were no longer what they started out to be…gas station painters.

• Posted: 22 December 2007
• Comments: 1
• Category: Running a business

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