Benchmarks and the “Going Rate”

It can be very useful to compare numbers with other painting contractors. Doing so provides us with “benchmarks”—targets that we can aim for. For example, if you see that a large number of contractors are spending 5% of their revenues on marketing and you are spending 10%, you have a clue that improvements can be made.

However, these benchmarks are only that. They are not numbers that are absolute or sacrosanct. They provide a comparison by which we can evaluate our own business. But in the end, we must look at our numbers and the causes for them.

Treating benchmarks as an absolute is no different from asking about the “going rate”. The “going rate” syndrome holds that there is some magic number that you must charge, and nothing can be done to alter it. It treats our pricing as if some power dictates what we can charge, and our own actions are irrelevant.

Just as we should not use the prices of other contractors in calculating our own selling price, we should not use their benchmarks. To do so is to ignore the myriad factors and variables that are involved in each of these numbers.

Let us return to the marketing example. Suppose you have been in business for a year (or are trying to market in a new area). Comparing your numbers to those of contractors who have been in business for 20 years and have established themselves in a particular community is a recipe for disaster. Their context is completely different from yours. Their established market presence likely means that they have more name recognition, and therefore do not need to spend as much on marketing.

This is not to dismiss benchmarks. In the above example, the benchmarks show us what is possible—they show us what numbers can be reasonable. And we can then plan accordingly. We can develop a plan to reduce our marketing over a period of years, and identify the specific steps that will allow us to do so while building name recognition.

The “going rate” syndrome can take many forms, but each has the same ultimate cause—the failure to know one’s own numbers. Each tries to use the numbers of other contractors as a guide to one’s own business. In the end, this is not only foolish, it is the road to failure.