Profitability is one of the most significant variables to measure the performance of the business you own – in this case, your roofing business. Profitability is different from the profits earned by the business so we have to first understand the differences between the two.
Profits, in this case, look at when the value of your output exceeds the cost of the input. Profitability looks at the ability of your business to earn a return on an investment – a contracted roofing job.
Profitability is the main goal of any business since a business cannot survive if it’s not profitable in the long run. On average, roofing companies tend to take somewhere between 20-40% gross profit in the roofing industry. Remember, gross and net profit are very different so don’t get excited by the number right away – there’s more to it that needs to be accounted for!
There are a few key elements that PAS Claims will cover to help you determine the profitability of your future roofing jobs. If you need a great partner for your roofing business, contact PAS Claims and let us help you grow your business to higher levels!
Whatever roofing job you need to do, you need to first pass through an approval process. During the approval process, the profitability of the job is going to be the main thing you should look at. Net profit margin should be the only element that you need to look at. Net profit is a number that helps you determine profitability. It’s quite easy to check it. Net profit is measured by subtracting revenue from expenses. The number you get is your profit on the roofing job. A positive number, of course, means your business is doing well and you’re turning a profit. Negative means you’re not doing well and you’re actually losing money. Getting a zero as your outcome means you’re going to break even. During the approval process, you have to take into consideration the materials you need and their cost, the cost of labor, and your overhead costs. Things may go south and you might need more materials than accounted for but that’s a part of owning a business. Whatever you do, always look to get out on top with even the smallest contracted jobs. You’re not in this business, or any business for that matter, that’s not going to make you money and secure you a healthier financial future.
Part of the accounting process is understanding the gross profit margin of your roofing company. We’ve already learned about net profit margin but what is a gross profit margin?
Gross profit margin is the amount left over after your roofing business subtracts the cost of products/services sold from the net sales revenue for products/services sold. Simply put, the gross profit margin of the business has to be greater than the operating expenses – in which case you will achieve the ultimate goal – profit. Estimating gross profit even before the job is accepted and started is a key to a healthy business. It’s going to guide you in the right direction seeing as it will show you how profitable the job might actually be. If it’s not profitable even before it’s started, it’s best to stay away from it.
If your revenue is increasing but the profit is decreasing – check the expenses. It’s certainly going to show you where your money is actually going. Staying on top of all of this is a sign of an organized company that knows its business. So what causes the revenue to increase but decrease in profits?
The expenses are probably increasing faster than the revenue. It may be a multitude of things that are the root cause of the issue. You might be reinvesting every dime back into your roofing company to grow it more but you haven’t actually checked if your expenses have outpaced the revenue. Buying new equipment for the company is a great thing to do if you’re trying to grow the business but look out for the growing expenses because they can run your business to the ground if not properly corrected and reduced.
This is a common issue with many companies on the market. To stay competitive, companies take jobs for much less money than they should take and then end up doing a job for as little profit as they can. Never undervalue the services you provide. Consider all of the costs before taking a job. This one goes hand in hand with the first two tips. You have a crew of experienced guys that need to get paid accordingly and will not settle for less. So, why even take a job that’s not going to cover all of the costs and still land you a nice profit at the end of it. If your sales representative comes back with a new deal done that’s not up to the standards – tell him to go back and negotiate it the right way. You don’t sell a roof, you sell an experience and the newly added value your roofing company is going to provide to their home. Your work is worth more than you’re selling it for. Learn how to make good proposals that are going to benefit you and your company in the end. Make the changes and improve your business immediately!
In the construction industry, there is a lot of wasted material during and after the job is finished. This is due to the material being sold in large quantities and most of the time, you don’t even use all of the materials. Calculating the materials and saving that waste can be really profitable and instrumental to your roofing business. If you do this correctly, you may end up with more profit over time just for the fact that your guys haven’t wasted those large quantities of materials. Rather than buying a bunch after discarding the perfectly good material, use it on your next job and you’ll start to notice the difference immediately.
We’re in this business to help you with this exact thing. Supplemental claims are a necessity in the roofing industry and if you’re not using them – you’re losing out on the money. Most of our clients improved their profitability just from this simple tip. You can at least assess how much materials you may need for a certain job but you are not going to be certain until you’re at the job site. Sometimes, it takes time to see just how much material or equipment you need for a job. Insurance companies are not going to account for these things when doing the appraisal since they are here to pay as little as they can. You know the business and you understand how things can go south. Don’t let the insurance companies get away with not paying for the added materials you needed to complete the job. Remember, if you don’t do the job correctly, you might not get paid for it. Do what’s in the best interest of your company. Supplemental claims will greatly improve the profitability of the job and make you a happy owner!
PAS Claims offers insurance restoration solutions for roofing contractors all over the US. We offer Xactimate roof estimates, roof insurance claim management, aerial roof view measuring, and a lot more. Our experienced and knowledgeable crew will handle the process from start to finish. If you’re in need of a reliable company to help you grow your roofing business, PAS Claims is the right place for you! Call us now (866) 266-7713 or schedule a call directly. Your roofing business is in the right hands when you trust the professionals at PAS Claims!