How to Make Sure Your Roofing Business Is Profitable
May 16, 2023 - Sales - 13 minutes
Is a roofing business profitable? Or is it pretty much the same thing as working for a company but with more hassle? At the end of the day, this is not why most people start their own business. Financial independence is key, alongside making your own schedule and deciding who gets hired.
Whenever profits are down, many roofing business owners or managers can be tempted to point at the market or things outside their control and, fair enough, any company will have good times and bad times. But there are definitely steps you can take to minimize the latter and make the most out of the former.
These 6 steps are essential to maximizing your potential of running a profitable roofing business. What’s more, they’re all under your control and don’t depend on anything as fickle as the market, or as random as luck.
Let’s get started!
1. Clean Up Your Roofing Business Finance Department
Having a good bookkeeper is essential for running a profitable roofing business – or any other kind, for that matter! – and it’s hardly a department where you’d want to save money by doing it yourself. Unless you’re especially good at accounting, this is best left to the experts, not just because financials can quickly spiral out of control, but it’s even riskier when you’re also trying to do ten other things at the same time (which you probably are) and messing up can have expensive consequences.
Hire a roofing business bookkeeper
Even a part-time bookkeeper will be able to help out with the most important tasks, such as:
- managing taxes
- running an accounting software like Quickbooks or Xero
- managing payroll
- tracking business expenses
These tools will also empower you and your managers to always be in the know about the overall financial situation of the business, without having to trawl through Excel spreadsheets or waste time on compiling data.
At the same time, always be aware of exactly how much money is coming in and what’s going out, down to the last paperclip. Brushing expenses under the rug is a great way to leak money until the whole ship goes down!
Consider a roofing business consultant
Ruth King, a field service financial consultant, gave this advice to businesses looking to become more profitable:
The alternative is to keep going until one day you’re simply not able to pay vendors or payroll and by then, there’s little you can do to save the business without some truly drastic measures.
A consultant can help you identify your Key Performance Indicators, both financial and in terms of general business processes. This way, when you track your metrics, you can be certain that you’re looking at the relevant numbers and not just at vanity metrics. For example, your company could easily have a packed schedule and seem like its thriving based solely on that, but if your services aren’t priced correctly (more on that later!), you might actually be losing money. The video below will walk you through a few common KPIs:
Download the free spreadsheet here to work out your business KPIs!
2. Diversify Your Roofing Customer Base
In 2020, the restaurant and hospitality industry was severely hit, with many businesses having to drastically cut costs or even fold. While the roofing industry wasn’t directly affected as badly, with some states classifying roofing contractors as essential workers or placing fewer restrictions on their work, the companies that roofing businesses considered their prime customer base (restaurants, hotels, and such) meant they took a knock-on effect. After all, if your customers don’t have income, they can’t pay you to work, either.
Generally speaking, it’s a good business practice to never rely on a single customer or industry for more than 20% of your revenue. Simply put: don’t keep all your eggs in one basket.
What are some industries roofing contractors can collaborate with?
Many roofing businesses lost profits when they started relying too heavily on new construction because it was easier to win contracts where they knew exactly what they needed to do and work was more immediate. The same situation occurred with those who relied too much on certain sectors of the commercial roofing opportunities.
Working with both commercial and residential customers may take more management effort, but it ensures that whatever fluctuations come and go within any particular market, you’re insulated from them because when one slows down, there’ll be other work to pick up the slack.
Some industries or companies to consider collaborating with in slow times are:
- interior design companies
- facilities management companies
- service and maintenance businesses (electrical, HVAC, plumbing, etc.)
- commercial chains (restaurants, shops, stations, etc.)
3. How To Calculate a Fair Price For Your Roofing Services
Setting prices too low or too high is oftentimes how most businesses fail. Whether that’s because they’ve simply had a look at other companies operating in the same area and set their prices accordingly or because they’ve overestimated the customer base’s financial options, the end result is the same: not being able to break even, let alone make a decent profit.
So, let’s start by making sure you’ve got your prices set up the right way.
Roofing services price formula
This is an easy formula you can use to see if you’re charging the right price for your roofing services:
- Yearly Living Expenses = (L)
- Yearly Business Expenses = B
- Total billable days/year = H
- Total Taxes (%) = T
- Your Day Rate = L/[H * (1 – T)] + B/H
Example: Let’s say you’re a one-man-band for now and need to make $36,000 per year to meet your living expenses. You expect your business expenses to be about $14,000 per year, your taxes are estimated at around 30%, and you plan to work 261 billable days per year.
- Yearly living expenses = $36,000
- Business Expenses = $14,000
- Yearly Billable days = 261
- Total Tax Rate = 30% = 0.30
- Day Rate = $36,000/[261 *(1-0.3)] + $14,000/261
- Day rate = $251 so $30/h if you’re working 8h/day
Raising prices can be a necessity
This being said, that’s not pricing for profit, that’s pricing for survival. It’s the minimum you have to charge in order to cover your expenses or your net cost/hour.
If you want to run a profitable roofing business, you need to account for your net profit margin too, which comes down to your decision as a business owner or manager. Some people want to make $20/h in profit, others want to make $100 and both are equally right in their own context. Depending on the type of job, the number of hours required, and who the customer is.
From our experience dealing with hundreds of business owners, we’d hardly ever recommend setting prices according to the competition. You never know what kind of costs they have, whether they cut corners on quality or inspections, and, at the end of the day, you don’t want the sole reason for a customer hiring you to be the fact that you’re the cheapest around.
Keep in mind that even if you want to offer affordable services, that doesn’t have to mean cheap. After all, more often than not, the roof over a customer’s head isn’t something they’re looking to skimp on with work being done on the cheap: it nearly always means they’ll end up spending more in the long-run. A great price is reasonable, fair, and sets an expectation for quality that you’re far more likely to deliver on.
4. Be Your Own Top Salesman
Remind yourself that you’re not just selling a roof, you’re providing a safer, warmer home or business to your customers. At the same time, you’re also not selling a product, but a service, with all the responsibilities that come with it; that is: if you want to be worth top dollar.
Advertising your roofing contracting business
These are a few advertising options:
- Social media (Facebook, but also Instagram, Twitter and – why not? – TikTok)
- Local newspaper
- Local Facebook groups
- Collaborations with other companies in similar industries (e.g. a plumbing company can recommend your business to a client who’s looking to re-do their roof, too)
- Radio ads
- Local TV ads
These are pretty basic sales and marketing strategies but many roofing contractors don’t pay enough attention. This can mean they either spend too much on expensive traditional ads (a single local radio or television ad can cost more than some roofing businesses spend in a whole year on other marketing) or simply expect customers to pour in of their own accord (which very often isn’t the case).
Pros and cons of digital and traditional advertising
On one hand, digital advertising and social media in particular can be a lot cheaper and provide much better leads. For example, you can target homeowners in a certain area specifically, as opposed to paying for everyone who listens to the radio even if they might never be in a position to hire you. But if you’re looking for pure reach, then radio or local TV ads might be more suitable.
On the other hand, it’s also about the actual process of selling. Make sure to present the benefits of your service to the customer, rather than the actual how or individual products for which they probably have zero context or understanding. A homeowner will care a lot more about the ease of doing business with you (website booking portal, digital invoicing, etc.) and your online reviews than your rotating laser levels. This way, no one will go for the cheapest option and you’ll be able to run a profitable roofing business.
5. Join the Right Review Websites For Your Roofing Contractors
Like we mentioned above, the vast majority of customers (to the tune of 99%, according to Search Engine Journal) will check reviews before spending any money, while 49% will trust those reviews as much as they would trust a friend’s recommendation.
If that’s not enough to motivate you to create a profile on a few review websites, then think about the last time you went into a restaurant or watched a movie without reading anything about it. Exactly: it’s incredibly rare!
What are some roofing review websites?
Some examples of websites you might want to try listing your roofing business on are:
Claiming your Google My Business listing will automatically give people the possibility of leaving reviews there, which is great. But since anyone can leave a review on Google, many customers (especially if they’re looking at a bigger project like re-roofing) will check specialty websites too. Angie’s List, HomeAdvisor, or, depending on where you live, even a local registry could be a great idea.
Keep in mind that while having a listing on some of these websites is free of charge, some do come with a fee and what that fee generally pays for is a set amount of leads each month.
However, these are not guaranteed customers so spread out a little at first, try a couple of review websites, then see which one gets you the most customers before you commit long-term and damage your chances of running a profitable roofing business.
6. Hire Roofers with Soft Skills
Many roofing business owners complain about having a hard time finding good employees and it can certainly be challenging. Recruitment and retainment is a big topic amongst every branch of the field service industry and every manager and owner has seen the applicant pool dwindle with time.
Some service companies have started working from the ground up by sponsoring young people to study the trades and offering apprenticeships but not every roofing business can afford a program like that and, in the end, the return-on-investment isn’t guaranteed.
A few things to consider before hiring roofing technicians
Before drafting up a roofer recruitment ad or job description, here’s what you should consider:
- How advanced do their technical skills REALLY need to be? Sure, the more experience the better, but those people are few and far in between and skills can always be taught.
- How will test their soft skills? Things like work ethic and a desire to learn can’t be taught; you need to spot them from the get-go.
- What kind of compensation will you offer? Salaries and medical cover are important, but training, learning opportunities, and team activities can be big draws, too.
Hard skills can be taught, but work ethic is intrinsic
One strategy we’ve seen successfully implemented by a wide range of businesses has been to hire for soft skills, as opposed to simply for their experience.
You need skilled contractors, that’s true, and no one is saying you have to recruit someone who’s never seen a shingle before, but the idea is to find a balance. Keep in mind that you’ll be able to teach anything to someone who likes to learn, but love of knowledge, curiosity, team spirit – you can’t teach these, even to someone who knows everything about the roofing industry, if they’re not open to it.
When you’re working for a roofing business, you have to be at ease with a variety of challenges. There’s always a problem-solving aspect to jobs and a willingness to learn new things is vital. Otherwise, how are you going to get better?
This is why, when recruiting as a manager, you should pay close attention to how curious the candidate is, what questions they’re asking you, and if they have a track-record of self-improvement initiatives (e.g. they attended courses, personal projects, team sports, etc.).
How Much Do Roofing Companies Make?
So you’re probably wondering – how much do roofing companies make annually? Just like most jobs or companies, it will depend on the location and size of your business. According to Roofr, “In the US, a standard contractor makes an average of $84,856 per year. About 23 percent of roofing businesses earned a maximum of $50,000 annually; 40 percent of businesses earn $50k to $100k annually, and 24 percent can earn $100k to $200k. So long as you have the right tools, business mindset, and ambition – it’s possible to continuously grow your revenue each year. However, revenue can suffer due to climate (long winters) and hard economic times.”
The Takeaway On Running a Profitable Roofing Business
All in all, these are some of the steps you could take in order to run a more profitable roofing business. At the end of the day, it’s all about being in control of your processes and aware of the areas that need to be optimized.
The easiest way to do it is with a comprehensive job management software that helps you keep track of your customers, communications, schedule, inventory, and more. Click below to learn more about how Commusoft can help your roofing business grow!