5 Easy Ways to Boost Roofing Profits (Especially in Today’s Cutthroat Market)

Here are 5 easy ways to boost profit in your roofing company without changing a whole lot else, because profit is the lifeblood of a company. I know some people get weird about profit, but the sole purpose of a business is to make a profit. If you challenge that fundamental fact, I don't agree, because without profit you can't support your team, you can't take care of customers, you can't create an amazing culture, you can't create an amazing experience. And you can't stand behind your installations because things go wrong. It's not if, it's when. Profit is the lifeblood. This video is going to help you maximize it. And we discovered this after auditing P&Ls. Many of these came from inside the Roofing and Solar Reform Alliance community where we ran an owner's roundtable where owners shared their P&Ls. We deleted all the private information so we can get together as a group. And so getting like an inside view into each other's companies because we have a confidentiality agreement in place. What happens in RSRA stays there. And that's the power of an application-only value-aligned community. So let's get right into it. Now, the first one on the list might sound a little crazy, especially because today's— well, let's just face it, price-pressured economy. I know homeowners are feeling a lot of price pressure. I'm seeing a lot of conversations in RSRA around low bidders. So again, disclaimer here, I'm about to tell you to raise your prices. I'm not telling you to raise your prices in a crazy amount, but I just wanted to share some simple math. Now, this one lever could be used in conjunction with others, but if a company is operating at 10% net profit and you raise your prices by 2%, that results in a 20% lift to your profit, 20% increase to your net profit. Yeah, 2% price increase on a 10% net. Now, I recognize that there may be some variable expenses in there like commission, But the reason I'm sharing this is so many people are feeling price pressure, price pressure, that if you have that lift, you can actually serve less customers and have the same net. So even in this price-pressured economy and you have a strong sales process in place and are offering financing, a 2% price increase is barely noticeable and oftentimes isn't going to be the deciding factor on whether or not you get the business. So number one, Increase your prices even a little bit. Number 2, audit your marketing expenses. Now, I'm not saying cut it down, but audit what's being successful and what's not. Many roofing companies in RSRA have gone through an audit checklist that we've walked them through to discover where they're hemorrhaging cash or allocating resources that just simply aren't producing. And if you look at your marketing spend like an investment portfolio, You'll have different asset allocations. Maybe you've got pay-per-click here, Meta here, third-party lead aggregators here. You've got your SEO budget, a branding budget, and maybe you're doing some local charity things or billboards at the local schools and maybe a little bit for radio ads. Well, as you look at that proportion, you say, okay, well, I'm spending 25% of my budget here, but it's really only producing 2% of my leads. Well, maybe we could reallocate that to the thing that's working even better. So an asset review— excuse me, an asset allocation review of your marketing budget will allow you to, one, cut wasted spend. Many members in RSRA have cut over six figures of wasted spend by going through this audit. And then you can either, one, add that to the bottom line or to reallocate those into better investment strategies for your marketing. Number 3, Getting a hold of your gross margin. A lot of companies that we took a look at weren't aware of where and how they were bidding projects, where their pricing structure was. So their gross margins were all over the place. You know, the old way of doing things and just saying like a rough per square count isn't an accurate way to scale a roofing company. Now, some of those gross margin leaks can come in, well, obviously material, labor, and then commissions. You know, the typical cost of your COGS or cost of goods sold. Now, one of the pieces in this equation, which of course has to do with your pricing, hence number 1, raising your prices. But many companies have discovered that their commission pay scales just simply aren't sustainable. And I know that if there's sales reps watching this, I'm probably going to get chewed out and say it's greedy and you got to take care of your salespeople. And yes, I agree with all of that 100%, but I've also watched what happens as companies grow and especially the, the, when I'll say younger companies, is they just say, hey, I just wanna get really competitive by offering more commission. And that's how I'm gonna attract salespeople. And that's gonna be the thing. Like they're gonna come to me 'cause they'll earn more. But then as they grow and they start becoming a bit more of a sophisticated business owner, or maybe they're even thinking about an exit at one point and they're like, wait a minute, this is creating incredible margin erosion and it's simply not sustainable. For me to scale, I need to hire more production staff. In-house staff, runners, etc., but there's just no meat on the bone to do that. And then you have to change commission plans and that is not fun for anybody. So I want to encourage you to take a hard look at your margin, your gross margin, and take a look at your commission scales because there's a few people that I've talked with inside RSRA that ran a certain way for years, got much clearer about how to look at their financials and ended up having to let a lot of people— well, I shouldn't say let it go. They adjusted the comp plan, which resulted in them leaving. but it was the only way to protect the financial integrity of the company. And both can be true. You can pay fairly and create an amazing environment for salespeople to have a culture they love and a path to earning really good money and a way that supports the company so the company can support everybody else. 4 on the list is reevaluating your overhead. One of the most common places of overhead creep is overstaffing. We see this a lot, and I know that when you're growing, it's almost like a seesaw, right? You scale, you, you staff up to scale. So your overhead and staffing is way heavier than your production needs until the teeter-totter flips the other direction. But the problem is a lot of folks, and I've seen this time and time again, it's almost like there's 5 different managers, but 1 salesperson's like, you don't need 5 managers for 1 salesperson. You know, this one's a manager and that one's a manager and this one's a manager, you know, or way too heavy. Office staff. So office staff is one of the most common leaks for overhead. The other things to look at, of course, are your software expenses. I know that it's really tough. We usually balloon and then we cut. We balloon because it just goes up and then we're adding this and then we're adding that and then that website widget and then this software expense and this one per user. So all of that does increase. But what I do want to share is that one, you want to look in the places that you can save the most money. And not step over— what do they say? It's step over gold coins to get to bronze, bronze coins, something to that effect. So again, people is a very big expense. And if you're overstaffed, that's going to be a really big problem. Now, the next thing to look at is your, your, your variable expenses, which I know on the recurring overhead, there shouldn't be much variable. It's mostly fixed. But take a look at the, the licensing leaks, as I like to put them, where it's like, all right, now I got to put 75 people on this CRM or whatever it is, and this fee starts stacking up. So take a look at those key areas on your overhead, starting with your personnel and asking yourself the honest question if you are overstaffed. Now, I know that there's two camps, people, folks that have an exit intent in their business and those that don't. And it doesn't matter. I'm not pushing one agenda or the other, but I do want to share that shouldn't a path to exit be something of consideration and you're going to get a 5 to 7x multiple just for this conversation. For every dollar you save in overhead that adds to your profitability, that's worth $7 on an exit. Likewise, as you increase your margin and/or you increase your profit and your EBITDA numbers, every dollar you make is worth $7. So when you start thinking through this and you're like, okay, I save $1,000, but it's worth $7,000. And then, okay, now I saved $100,000. That's worth $700,000. All of this starts to add up and it will change how you think about the financials of your company. Number 5 on the list is one of my favorites, and that is increasing revenue per customer. It is amazing how many folks aren't offering a best, better, good option or aren't offering upsells. It's you call me for a roof, here's the price for the one roof instead of offering extended warranties, upgrades, and/or higher-tiered roof packages. Now, one of the trends in RSRA, because there's a lot of folks who are making the transition from being storm dependent to retail driven, are including, especially being run by great sessions like Cody Landels is running, who built Reimagine Roofing to multimillion per month using over-the-phone sales and incredible retail selling skills because they're almost all retail and they're following what Cody's been teaching on using a best, better, good approach and finding that people end up spending even more money. Now you pair that with offering incredible financing options and you'll watch your average ticket price continue to increase. So if we put all this together and you increase your prices, you really take a look at your gross margins, you reevaluate the commission that you're paying to make sure it's healthy, not to take away from anyone. In my opinion, people should be paid incredibly fairly, but it should be fair for everybody. If you audit your marketing expenses and you add in an upsell, you end up earning more per customer. You have to serve less people with less liability, have a more profitable business and an even better life and a better future. So I want to find out from you what else did I miss in this video? Drop a comment below. And if you want to have rich conversations just like this with value-aligned roofing company leaders, then click the link in the description to learn more about becoming a member of RSRA or go to rsra.org/join.