How to Raise Your Roofing Profit Margins

Are your profit margins where they could be? Here are tips for taking your roofing company’s profitability to new heights.

There’s no nobler purpose than protecting others. Yet when your head finally hits the pillow at the end of another grueling day, are you thinking about the customers you’ve helped keep safe and dry… or are you spinning about supply chain issues, weather conditions and cash flow crunches?

Roofing contractors face a unique mix of challenges and one of the best ways to manage them is with careful oversight of their business’ financial health. Profit margins are powerful metrics to do exactly that.

This article will show you what makes a good roofing profit margin and what steps you can take to improve yours. 

With the comfort of knowing your numbers are as reliable as your roofs, you’ll be sleeping soundly in no time.

What are average profit margins for roofing companies?

Breakthrough Academy has analyzed thousands of roofing businesses over the years and used the data to create profit margin benchmarks.

The chart below breaks out these margin benchmarks for roofing companies as “Awesome,” “Average” and “Ahhh… could be better...”

We’ve split the margins between retail / insurance and commercial roofing services, though you’ll notice the numbers are pretty similar between the two. 

If your business provides various services, we recommend tracking your margins separately for each type of roofing project so you can readily see how each is impacting your business.

Gross versus net roofing company profit margins

Profit margins are the most important indicators of the financial health of your roofing business, specifically for your gross and net profitability.

The two metrics differ slightly. Here’s what each measures:

💲Gross profit margin – This is your revenue AFTER paying the project labor costs (roofing crew) and material costs (shingles, underlay, etc.), but BEFORE you pay any overhead.

A solid gross profit margin helps your roofing company withstand downturns, which gives you a competitive edge.

💲Net profit margin – This is basically your “bottom line.” It’s what’s left after you’ve paid ALL your expenses, including project costs, overhead and salaries (including yours!). 

Your net profits can be reinvested into your roofing business to spur growth. 

If you need to nail down your profit margins, this article shows you how to calculate them.

4 ways to increase your roofing business profit margins

If your profit margins aren’t where you’d like them to be, here are some tips on how to ramp up your roofing profitability.

#1: Use a budget

Jon Drew always upheld the highest standards for his business, Refined Exteriors, but when quality began to suffer after expanding the team, he realized something had to be done. Together with Breakthrough Academy, he implemented systems that created so much operational efficiency it allowed him to reduce his staff, while still doubling his profits.

The moral of the story? It’s how you use the dollars you have. 

The only way to achieve that is with a clear budget that accurately reflects how you actually plan to run your business. Think of it like the financial overlay protecting your cashflow. Without it, your roofing business is vulnerable to all sorts of spending leaks, such as out of control overhead, or business decisions made without a strategy for long-term success.

Get a grip on your numbers with this Budget Tool.

#2: Turn job costing into a habit

At the start of every roofing project, whether it’s residential or commercial, ideally you have an idea of the gross profit margin the job will deliver, beyond just whatever money happens to be left at the end.

There is a proven method to arrive at accurate gross profit margin projections that doesn’t involve crossing your fingers and hoping for the best: job costing.

Job costing is the process of tracking the expenses associated with each project. Basically, it works like this:

1. Assign each job a code. 
2. Record that code with every expense related to the roofing project.
3. At the close of each project, calculate how the final project cost compares to the estimate.

This approach improves the accuracy of your estimates and, by extension, will increase your profitability because you can be more intentional about your markup.

If you’d like to implement a job costing system in your roofing business, here’s a video to get you started.

#3: Invest in your people

Early on in running his business, Coast Mountain Roof, Brad Gordon was drowning in debt to suppliers and overwhelmed with the minutiae of managing EVERYTHING. 

The situation was unsustainable, so he hooked up with Breakthrough Academy and systemized his hiring systems. Through the use of Ideal Candidate Profiles and Employment Agreements, he was able to DOUBLE his net profit margin.

Brad’s efforts leveraged one of the best methods for increasing profitability: hiring and retaining great staff. Turnover can be incredibly expensive, but fortunately there are things you can do to build a work environment that inspires commitment from your team:

• Consistent training – Standard operating procedures ensure your staff learn the same processes the same way and have ready-made references when they need them. This limits mistakes and keeps you from explaining things again and again...
• Goal accountability – Goal Setting & Review (GSR) sessions clearly lay out the expectations and responsibilities of your staff on a weekly basis, which provides focus and efficiency. Everyone knows what they need to get done.
• Performance incentives – People stay where they’re appreciated and rewarded for doing good work. Whether it’s a bonus or a cut of the surplus for finishing a project under budget, this is one investment that’s well worth making.

Learn more about how these game-changing initiatives can support healthy profit margins.