Several factors affect roofing profit margins, such as the size and location of the business, the type of roofing work undertaken, and the general level of experience and expertise.
How much profit do roofing companies make? Roofing company owners make an average salary of $75,360 per year for each crew they employ.
Here’s the process I’ll follow to demonstrate how I came to that number:
1. Find the sales price of the average residential roofing job
According to Forbes, the average residential roofing replacement is between $5,500 to $11,000. But that only refers to a full roof refit.
Considering that many roofing jobs are smaller repair jobs, the average comes out to about $4,000.
Remember: These are rough figures, and each contractor will be different. Over time you will be able to get an average of your overall job values and take your work from there. But you can now use these figures to get a rough estimate.
2. Find the average expenses of a single residential roofing job
A few key expenses go into acquiring and fulfilling a roofing job. These include:
Cost of Materials: 25%
Material costs like tiles and roofing felt will make up a large chunk of the total job cost.
If you’re using high-end materials, you can charge more, and if you’re using lower-cost materials, you’ll charge less, so these figures usually stay the same in terms of the percentage cut of the overall job.
Material costs per job will average around 25% of the value of the job.
Cost of Labor: 30%
Labor costs per job will average between 25-35% of the value of the overall job. This will be the most significant expense for almost all roofing projects.
The above is just for labor workers doing the hands-on work. You then need to consider other workers, such as project managers, estimators, and office staff.
Project Managers: 6.25%
Roofing project managers are typically paid a monthly salary of about $5,000.
Assuming each project manager can manage around 5 jobs per week would mean they can manage about 20 jobs per month.
20 jobs at $4,000 will give you monthly revenue of $80,000. Therefore, the project manager’s cost ($5,000 per month) comes to about 6.25% of your revenue.
Of course, like other aspects of the business, if you can do this job yourself as the business owner, you will save this cost, but you also need to remember you can’t do everything.
Estimators give potential customers a quote for the job. They will also be paid a monthly salary of about $5000, much like the project manager.
An estimator can quote 5 roofing jobs per day, or 100 per month.
Assuming 20% of estimates are awarded, the estimator will bring in 20 jobs per month, totaling $80,000 in revenue.
Of that revenue, the estimator cost ($5,000) comes out to be about 6.25%, which is the same as the project manager’s cost.
Office Staff: Under 1%
These days, you don’t need a physical office for your staff.
You can hire people remotely to answer the phones and manage your job schedule. You can also pay a part-time virtual assistant for bookkeeping.
Paying for office staff activities will generally cost you less than 1% of your revenue as long as you have revenues greater than $200,000 per year.
Marketing is the cost that varies the most from company to company.
Smaller companies only need a little marketing to keep their crews busy. They can take advantage of low-cost marketing channels such as social media.
Larger companies need to go down the quality trail in terms of marketing channels to keep the required amount of leads flowing. They need to get into Pay-Per-Click, Search Engine Optimization, and other more advanced digital and offline marketing strategies.
Companies also vary in how effectively they can advertise. Those that have put in the foundational work of creating a relatable brand will get a better return on their advertising investment.
With that considered, marketing for a medium-sized roofing contractor in an averagely competitive location will be around 8% of revenue.
Company vehicles have the following costs:
- Maintenance & repairs
- Commercial vehicle insurance
- State taxes
- Financing (optional)
- Extended warranties (optional)
When you add up these costs and convert the total into a per-mile cost (by dividing the total cost in a given period by the miles driven in the same period), you’ll probably end up with a per-mile cost of about 65 cents.
Let’s say the distance between your shop and a job site averages 30 miles. If two vehicles make a round trip for two days to complete the job, that comes out to 240 miles. Let’s round up to 260 miles, to include stops to grab materials and lunch.
The estimator would have also used up about 40 miles. But he has to estimate 5 potential jobs to land a single job. So that comes out to 160 miles driven per awarded job for estimating.
Add the 260 miles for the crew and project manager to the 160 miles for estimating and we get a total of 420 miles driven per job.
420 miles at 65 cents gives us a transportation cost of $273 per job. Our average job has a $4,000 sales price, which puts the transportation cost at about 6.8%.
Other costs: 1%
Some smaller costs include the following:
- Software costs
- Payroll services
- Legal fees
- Financial services
These shouldn’t total more than 1% of your total revenue.
3. Subtract costs from the sales price to determine average job profit.
So from the above, we assume that the average job value of a roofing contractor is $4000. Using the above data, we can break this $4000 into the following proportions on a per-job basis.
84.3% of our revenue going into expenses means we have 15.7% left over as our roofing company’s profit margin.
An average sales price of $4,000 results in $628 in profit per job.
4. Find out how many jobs a roofing contractor can do per year
Roofing jobs can take a few hours to up to two weeks. It all depends on the roof’s size and the job’s complexity.
For our purposes, we’ll assume that each roofing job takes an average of 2 days to complete.
That means a single roofing crew can complete 10 jobs per month or 120 jobs per year. This assumes an average of 20 days of work per month.
5. Multiply the number of jobs per year by the profit per job
120 jobs per year with an average sales price of $4,000 per job results in $480,000 in yearly revenue.
In step 3, we found that the expenses add up to 84.3%, and the profit margin per job comes out to 15.7%.
The abovementioned $480,000 in yearly revenue with a 15.7% profit margin results in $75,360 in net yearly profit.
$75,360 per year may not seem a lot for someone running a business but remember, this is looking on a linear scale.
We have only taken into account running jobs from a single crew. If you deployed two crews, this figure could increase by a factor of 2.
And every additional crew you deployed would bring in an additional $75,360 yearly profit.
That’s the beauty of running your own business. The potential for earnings is nearly limitless. And roofing is a good trade because it will always be in mind.
There are other expenses you need to factor in when you grow past a certain level, such as higher marketing costs, office space, and storage space. However, as you can see, roofing contractors have the potential to earn a significant amount.
Frequently asked questions
What is the average profit margin for roofing contractors?
The average profit margin for roofing contractors is 15%. This margin can increase with experience, a solid customer base, and a reputation for quality services.
What are the key skills needed to be successful as a roofing contractor?
To be successful as a roofing contractor, it is essential to have technical knowledge of building materials and construction techniques. You must also possess excellent customer service skills, good business management abilities, and problem-solving skills.