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Host Scott Lollar is a 35-year veteran of the painting industry and founder of Consulting4Contractors. The 'Success Beyond The Brush' Podcast serves as a touchpoint to painting contractors who have hustled, sacrificed, and worked hard to get their business to where it is today. Now, you need the guidance, expertise, experience, and team to make it into the multi-million-dollar company of your dreams. You'll hear stories and interviews from "Brothers of the Brush" and "Sisters of the Sprayer" who have been where you are and are charting a new course for their company's success. Listen in and go beyond $1,000,000!
SBTB Ep 9 | Risk Management Without Killing Momentum
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[00:00:00]
Introduction: Everyday Risks in Paint Contracting
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Mark: There's risk in the everyday stuff.
Just last week, we painted a whole church. Long hallways, tons of doors. I think there's 50 or 60 doors. Painted four coats to get to this dark color. At the end of the project, Scott, one of my guys starts using his thumbnail and finding out he can scratch through all of the paint on every single door.
Good paint applied correctly, no issues. Come to find out it was oil-based paint used on the doors 10 years ago. We never checked. We didn't do a denatured alcohol test. We did not know we were painting over oil primarily because our emerald urethane from Sherwin Williams didn't separate. It gave us no indication. We were painting over oil until we had a major adhesion problem.
So I've got this huge risk problem. Now, we've got this enormous cleanup, sand through, have to go back and prime, simply because we didn't test the doors to see if they were painted in oil. And that's the type of risk management I'm talking about. This is everyday painting. We do this every day. How do we as owners play [00:01:00] that defense and say, guys, our protocol, when we approach a new substrate and we don't know what the last coat was, we get out a rag and we do a test.
Scott: Somebody skipped a step, right? And now you've got a big issue.
Everyone just went to work and just didn't think about that there was going to be a big problem. And now it's a big problem, isn't it?
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Introduction: Success Beyond the Brush
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Welcome back to the Success Beyond the Brush Podcast, where we help painting contractors build real companies and not just stay busy. Today's conversation comes from a place that we are sure every business owner knows all too well. It's that season where it feels like everything's breaking. You have safety issues, there's missteps, insurance gaps, maybe a little bit of financial exposure, and not because you're reckless, but because growth just naturally increases risk.
So in this episode, Scott and Mark are going to unpack what real risk management looks like for contractors, not fear-based decision making, not shutting down your momentum, but putting in place the systems, [00:02:00] the protocols, even some protections in so no one mistake turns into a business ending event.
So if you've ever felt like you're playing defense after getting hit from every single angle, then this episode is for you. Let's dive in.
Understanding Risk Management
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Mark: So there's seasons in business, right? And I'm in this season right now where I feel beat up from just thing after thing that has gone wrong in my business. And if I'm being honest, it probably is over a nine to 10 month period, but inside it feels like it all happened last week and I feel like this enormous weight that we have just been bombarded.
We'll get into some of those conversations, but I wanted to talk a little bit today and get your thoughts on this idea of risk management, right? How do we as owners play defense and be protective in our companies without being this scared [00:03:00] mom who's always not letting her kids play outside? And we don't stray too far.
We have to have momentum and most of us are entrepreneurs by nature, pushing and trying new things. That's kind of what got us to where we are. But the bigger you get, the more at risk you are. Your thoughts?
Scott: Yeah. You're so right and, because I know your story, I know it's been a couple of unfortunate coincidences that has, you know, brought you to this place. But, I think that can happen, Mark. If we're not careful, we do things that are probably not wise and we haven't really measured the cost and this tension that we have of Ah, how bad could it be?
Or, Well, you know, go big or go home, or whatever it is, right? I love that. I'm like you, let's go. We'll figure it out later. No, No. You need to temper that with some sensibility and, I think that in the simplest terms in painting, and especially when you're thinking about house painters or [00:04:00] repaint, you don't think about somebody could die here or you know, what's the worst that's going to happen?
You sand something and you do it over. You don't think about a catastrophic failure or a catastrophic event. And I'm not saying that's the way you should walk out the door every day, but I think that you should always take a moment, or at least have someone on your team that has the sensibility to manage as we're calling the risk of everything we're doing, and that can often come in the form of the risk of expansion.
Mark: Yeah. Yeah. And I want to be careful because this topic could go several different ways. We're not exactly talking today about diversification or whether you should get into this entire new avenue of business or something that you're not familiar with. But to your point, there's risk in the everyday stuff of what we do.
Just last week, we painted a whole church long hallways, tons of doors. I think there's [00:05:00] 50 or 60 doors. Painted four coats to get to this dark color. At the end of the project, Scott, one of my guys starts using his thumbnail and finding out he can scratch through all of the paint on every single door.
Good paint applied correctly, no issues. Come to find out it was oil-based paint used on the doors 10 years ago. We never checked, we didn't do a denatured alcohol test. We did not know we were painting over oil primarily because our, our emerald urethane from Sherwin Williams didn't separate. It gave us no indication we were painting over oil until we had a major adhesion problem.
So I've got this huge risk problem. Now we've got this enormous cleanup, sand through, have to go back and prime simply because we didn't test the doors to see if they were painted in oil. And that's the type of risk management I'm talking about. This is everyday painting. We do this every day. How do we as owners [00:06:00] play that defense and say, guys, our protocol, when we approach a new substrate and we don't know what the last coat was, we get out of a rag and we do a test.
Scott: Yeah. You and I are old enough to know better, but that's a pretty straightforward protocol that we would've thought thoroughly about 10 or 15 years ago, not so much today. And somebody skipped a step, right? And now you've got a big issue.
And at the beginning of this day, everyone just went to work and just didn't think about that there was going to be a big problem. And now it's a big problem, isn't it?
Mark: It sure is. I guess I'm just, because I'm in this season right now of feeling like I'm being pelted by all these things, I'm in such a defensive state of mind. How do I teach those safety protocols? That's the ladder we climb every single day. The guy knows how to do it. He's done it a thousand times, but in some ways that actually makes him the most dangerous person to climb that ladder because he's not thinking about safety.
Scott: Well, I do think there's a few things that people should [00:07:00] think about and at least investigate to stack some of this in their favor.
Insurance and Financial Risk
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Scott: The first thing I'll just kind of hit on is a good insurance agent and understand your risk in that manner. I think it's all too often that people are using their local state farm or whatever, and that's a person that traditionally is really doing personal lines or doing auto and home and life or whatever.
And of course they can write contractor insurance, without question they can. And I'm not saying that the insurance agents aren't qualified to do so. But they're not typically doing day in, day out contractor or business insurance. So when you have a claim or an issue, I have heard so many times people say, I was improperly insured. I was underinsured, I was not insured for that.
And so the first thing I would say is go find a proper business insurance. One, preferably, that actually specializes in [00:08:00] contractors. Federated Insurance is one that I think a lot of. They write only businesses. They don't do any consumer lines, but you know, I can't speak to their rates will be good for you or not in your area, but they are focused on businesses like you and they can give you advice.
So are you insured for all of the things that you do? Are you underinsured, over-insured or properly insured? And one of the things that we've seen several times recently, which is a little bit interesting is pollution insurance. Um, We've had some people that we know have some claims because of contamination.
One of lead which is not uncommon in our industry. The contamination was not covered because there was no insurance for it. And then another one that we are aware of that had some asbestos issues, of course, unforeseen and it was known that it might be an issue, and it was handled very carefully, but the wrong person got involved, then [00:09:00] it became an issue.
And again, no pollution insurance. So if you are going to do certain work, your insurance agent needs to advise you as to your options, and then you can make some decisions as to if it's cost prohibitive, then you need to understand that and just turn some of that work away. But you can't just go about your business hoping for the best every day because that's what happens. It's not for, It's not for the best case scenario. It's for the worst case scenario. And are you covered for it?
Mark: But that's how I would approach those conversations with my insurance carriers. I always looked at them as salespeople. They're going to come in and ask a bunch of questions about my business so they can sell me more stuff. And I played those conversations defensively, and the truth is, I wish I would've listened.
I was trying to sugar coat and whitewash, you know, oh, we don't do much carpentry. We're hardly ever on a ladder. You know, you want to downplay it because I don't want to pay more than I have to, when the truth is that guy could have helped me a ton had I been honest with [00:10:00] him. And he says, oh, you do epoxy floors, you get into major grinding.
We might want to look at some additional lines to make sure you're covered. Because boy, it costs me big time.
Scott: The other thing is getting more information depending on your state. We have clients that have businesses in states where the exterior work comp is different than the interior work comp. And they didn't separate out their payroll that way because they didn't know. And so they get to their audit and they're like, well, your payroll's not broken out, so we're going to allocate all your payroll to the higher rate, right? So it, again, it's a person that didn't think to ask or educate the contractor, here's what you need to do.
I'm telling you now, here's how to successfully set this up. So managing that risk and asking the right questions and having the right people can be very important because the costs can easily be, I don't know, it could be a hundred thousand dollars, no questions asked.
If something happens to someone or something that you don't have coverage for.
​[00:11:00] Well if this episode is hitting close to home, you are not alone and you don't have to figure this stuff out on your own. At Consulting4Contractors, we are here to help painting contractors identify risk before it becomes a crisis, from your insurance and safety systems to financial exposure and operational structure.
If you want clarity, protection, and confidence as your business grows, head to Consulting4Contractors.com to learn more. We offer all of these things and more. And now for the rest of the episode with Mark and Scott.
Safety Protocols and OSHA Compliance
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Mark: We would do a disservice if we didn't at least touch on the subject of safety, which is huge when you think about from an OSHA perspective, from an EPA perspective, especially being in the coatings industry. But the conversations that I have with other contractors, again and again, reveal, they're pretty much doing what we are, which is minimal at best.
And I think we as a industry as a whole could do a lot better [00:12:00] at making this constant. Making it repeatable, and making sure we're documenting it very well.
Scott: I do agree that there's quite often an under focus on safety, even the basics. So, having a basic understanding of PPE and ensuring people use it. I think eyes and lungs are pretty important, and I don't say that in jest. I say that as if you're the business owner, I would like you to think it's your responsibility to make sure people behave safely, not so that you don't get in trouble with OSHA.
It's so that they are safe and go home without an injury. Now, of course it will save you money if you stay out of the hospital or out of urgent care or out of the industrial clinic. It's going to to help. And if you don't have an OSHA fine, it's going to help. But how about the fact that you care about people?
So, you know, I see so many social media posts, pictures of their people in very unsafe setups. Now we've all done that one extra step or, oh [00:13:00] shoot, I'm just going to have to step on the top of this ladder for a second, but I don't put it in on the internet. But you know, really having a good safety plan and enforcing it.
Now for those listening that are Sub model and say, well, that's not my problem, I think you would be a valued contractor to them if you would care and help them understand safety and hold them accountable to be safe when they're working on your job. Again, not because of the image or whatever.
Because sometimes things flow downhill and so even sometimes you think all your T's are crossed and I's are dotted. If someone gets hurt, something happens, you still are going to be drug into it, very likely. But how about just adding value to those people and say, Hey, I'd like to help you be safe in this work, both today when you're working for me, and tomorrow when you're working for someone else.
I think that would really endear you. But it shows that you care about people and I think your subs should be held to that account. When you're [00:14:00] working on commercial sites, you're held to that level and that's a general contractor employing you as a subcontractor. You walk on that site, you have to have your PPE, you have to have your safety glasses, your vested or whatever it is, right?
And so I think really holding everybody that works for your company to that standard is really important. And it helps, as we're talking about today, manage the risk of being in business.
Mark: Yeah, I couldn't agree more. when we not only have access to that PPE or that standoff or whatever it is that you're providing it like it is here. We are encouraging you to use it. I can't put the glove on, but the pair of gloves are right there. It's obviously important to us and I think an easy way to know is, you know, your next staff meeting or crew leader meeting, you have your team together.
You know, if I were to walk into your team and just say, what does the company actually care more about? Getting that job done as quickly as possible and beating hours, or you going home safe, the team [00:15:00] knows, I mean, there's kind of those laughs and giggles around the room as like, yeah I did some sketchy stuff today.
We know the companies that. That incorporate this and have it as a serious big part of their business and the ones that, eh, whatever, just get the job done. Don't really care.
Scott: Well, I've been around long enough as you have that. I've been involved with an OSHA inspection,
Mark: Whew.
Scott: and I have clients that are being part of them and they can be quite unnerving. And I think everybody should be aware of the basics of a safe work environment including competent persons, basic ladder training.
One of the things that OSHA is going to ask is if you were trained. It's not just that you know how to use the ladder or a respirator. It's, you know you're wearing it. Okay. Why are you wearing it? I don't know. Do you know how to clean it? I don't know. No, I don't. Do you know how to store it?
Yeah. I throw it in my trunk. Those are [00:16:00] all violations. he, They could have shown up to the site and you could have been wearing it perfectly. But if you don't know why you're wearing it, how to use it, how to store it, those are all training issues. And that's as much of a issue as the fact that you weren't wearing one or you were.
So I think that it wouldn't take much for a company to stay compliant to the six or eight or 10 basic safety tenants that we use day in, day out. I don't think most of us are not doing crazy stuff like confined space or trenching or anything weird like that. It's basic stuff.
And the OSHA process, if someone stops by your site and or someone calls someone on you or whatever, it can be traumatic and the same can be said for the EPA if they show up. If you're in a situation where someone's complained because you're you know, scraping lead chips all over the neighborhood and in their yard and they get irritated and they call the health department on you or EPA, it's a big deal.
And that's risk that you've taken on unnecessarily and just your basic knowledge and [00:17:00] some basic movement towards identifying these risks can really be helpful. Including we don't do any houses built after 1978. A lot of people have made those statements and said, I'm just not going to do it.
That's a management of your risk right there.
Mark: So in addition to our insurance risk assessment maybe our just general safety risk assessment, what might be some other opportunities that business owners should be assessing in their business as to their risk?
Financial Risks and Contracts
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Scott: I actually think that a lot of people have financial risk by writing bad contracts. By not being clear about scopes of work, about having things vague and open-ended, and especially you know, that I work with a lot of people as they're moving into the commercial world, it's a much different animal than residential.
And there can be some people in that market, GC's specifically, that can be kind of sharky. I think that there's some of them that are looking for people like you that don't know what they're doing. Because they're going to bleed you out [00:18:00] and you are going to be helpless because you're going to get broke and you'll start doing whatever it takes to get paid or you'll discount or whatever it is.
And so I think understanding a market or a service very clearly before you enter into it or taking passes on projects that in our younger days we'd say, this is going to make me rich. And now we know it actually just shy of bankrupt you. But to be clear about your capacities and your abilities and only pursue things that are within your ability to weather a catastrophe, right? So if you didn't get paid at all from this job or whatever, would it crush you? No. I think we could survive. It wouldn't be great, but we could. And so understanding your financial risk, and when you're signing a contract or when you're submitting a contract, you know how many people, ah, I do work on a handshake, you know.
Or you submit the proposal in, you know, the proper Estimate Rocket or PaintScout or [00:19:00] whatever. We don't make them sign them or eh, it's okay, you know. How many times have we heard, this time we didn't have it signed and this is the time where the client's a problem and they're not going to pay us, right? You know, I also think that we sometimes can let people manipulate us. And so I think there's a lot of financial risk that you have to be clear about and understand that proper tension between customer service versus being patient for payment and when to know when to go hard. I know that for instance, a lot of people let their lien rights expire or don't execute their lien rights because they're just hopeful it's going to work out and it doesn't because gets so far past that they have no recourse except to sue someone. And if you know you're a corporation, then you're going to have to hire an attorney. And it's not a small claims thing, right? You're going to have to do the whole thing and there's this, most attorneys are going to say, there's not enough money here for you to pay me and pay yourself if we win, even if [00:20:00] we win.
So your financial risk is really something to continue to be thinking about. Now, again, I don't think you should be scared of it. I think you should be sensible about it.
Mark: And I think anything that we're talking about today could be taken to an extreme. To where the owner is simply sitting in his office in the fetal position, scared to make a move about anything. And certainly that's not what we're talking about, but my experience when talking to fellow business owners is we tend to be entrepreneurs. We tend to be momentum gatherers and pushers and doers. And the risk of that is that sometimes we are not often weighing properly the risk either financially or safety or insurance coverage or manpower coverage. There's all kinds of risk that we tend to downplay in order to keep that momentum.
And it needs to be, I maybe there's always going to be a rub. The point of today's conversation is [00:21:00] simply to bring back that there is a lot of risk, and especially at scale, the more people we have working, the larger the contract, the bigger the numbers get, our risk significantly goes up. Which by the way, is why our reward should be greater as well, because our risk has increased. and, and And how well we manage that risk and take it seriously and think through those will determine our success, I believe.
Scott: I agree with you wholeheartedly, and I think the right thing to do would be just take a quick census, make sure that all of the things that we've talked about are covered in your business. If any of these helped you, you know, then we'd say it was a good use of our time. Appreciate the conversation, Mark, as always.
Mark: Of course. Good talking to you.
Conclusion: Managing Risk for Sustainable Growth
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Scott: Talk to you next time.​Well, that does it for our episode today. Risk is part of entrepreneurship, but unmanaged risk is optional. The bigger your company gets, the more intentional you ought to be about safety, insurance, contracts, systems, all those things [00:22:00] that introduce risk into your company. Not to slow that growth, but to sustain it in a way that is gonna benefit you in the long run.
So thanks for listening to Success Beyond The Brush. If today's conversation helped you at all, or it helped you rethink how you're going to protect your business, share this episode with another contractor who might need to hear it or even better yet, go to Consulting4Contractors.com. That's Consulting4Contractors.com.
Check out our resources on there. Or even schedule a free discovery call with Scott to maybe get a little bit of better picture of what your risk looks like in your business. Thanks again and we'll see you in the next one.