The reality is that most painting contractors are neither rich nor able to take much time off? What keeps them busy and hustling is the reality that there are lots of unlicensed, uninsured painters in the market place that don’t even carry workers compensation for their workers. This means that it is easier for some to bid a job for a much lower price and still have the same profit margin as the conscientious, legal contractor. An unlicensed contractor may even employ illegal workers, pay those cash and then avoid all federal and state taxes. When someone asks to be paid in cash, we all know what that means.
A typical project breaks down to about 50% labor costs, 25% material costs and then 25% is gross profit. Now out of that gross profit every painting contractor also has to spend money on gas, telephone and auto insurance.
A typical project breaks down to about 50% labor costs, 25% material costs and then 25% is gross profit. Now out of that gross profit every painting contractor also has to spend money on gas, telephone and auto insurance. Only a licensed contractor will spend an additional 10% or more on a license, general liability insurance and workman’s compensation for his men. And then there is the 7.65% that legal contractors are bound to pay to social security and matching state taxes as well.
While most homeowners don’t understand the liability they are open to when they operate outside the constraints of the law, the fact is an unlicensed contractor can always bid a job 20% to 25% less and still maintain the same profit margin as a legitimate one. But if someone is injured the property owner has little recourse. He may get a call to inquire about the limits of his homeowner’s insurance. When the unlicensed contractor walks off the job, the client has no leverage because there is no official channel to deal with this problem. And who is going to “honestly” guarantee a job when their whole approach to your project is dishonest and illegal?
The reason everyone should ask for a painting contractor’s license and his general liability insurance is for their own protection and peace of mind. Only a licensed painting contractor is able to guarantee his work and be there when you need him again.