If you’re looking to start a roofing business, it’s the perfect time to flip the switch. Industry research notes that the US roofing industry consists of more than 80,000 businesses employing 250,000 people — and annual industry revenues exceed $50 billion. It’s an excellent time to consider starting a roofing company, as both the residential and commercial sectors are experiencing a wave of new construction, and that means opportunities for the roofing industry, which is expected to grow revenues by around 1% annually for the next five years.
Moving from working as a roofing contractor to starting your own business may feel a bit dizzying, but it doesn’t have to be. Establishing a business legally is a straightforward process, and creating a plan for growth is exciting. As you get deeper into the process, you’ll get to tackle challenges with cash flow, marketing, hiring, and more.
We worked together with Kyle Shirley, founder and owner of Sol Vista Roofing in Denver, to create a guide to start and grow a roofing business from the ground up.
1. Lay the sheathing: Registration, licensing, and insurance
Handling the fundamentals is like putting down the deck at the start of a roofing project: It sets you up for success later. Starting a business starts with the legal and logistical nuts and bolts that get you ready for growth later on.
Here are a few key steps to make sure you cover:
- Register your business with your state’s Secretary of State. You’ll need a name for your business entity and a business structure — often a sole proprietorship or limited liability company (LLC).
- Get the proper license and insurance according to your state’s requirements. We have a contractor licensing guide for every state you can refer to — as many states do require specific licensing for roofing businesses.
- Obtain a business bank account and any software or staff you’ll need for accounting and bookkeeping. It’s important to keep your business’ finances separate from your personal accounts.
Once you’re registered, licensed, insured, and financially prepared, you’re ready to start thinking about how to grow your roofing business from the ground up.
2. Make a clear business plan aimed at growth
The first step in growing your roofing business is to create a plan to grow. Start with your business plan – if you didn’t have a business plan when you started your roofing business, now would be a good time to write it down.
“A strong business plan consists of thorough market research,” says Kyle Shirley. “You should look into the top players in your city or market, then perform a SWOT analysis to evaluate your strengths, weaknesses, opportunities, and threats. New businesses can leverage technology, automation, and lower overhead costs to compete with existing businesses. Your business plan lays out your strategy for breaking into the market and financial projections for the first five years, giving you a sense of how many jobs you need to take on to grow and scale.”
Below, we’ve listed some items your business plan should definitely include.
Set goals for your business
Goals may include the revenue you want to generate over the next five years, the number of new jobs you will take on, or targets for hiring employees. The clearer you can be with your growth objectives, the easier it is to determine what resources you need in order to accomplish them.
Get clear on your customers
Are you going to specialize in a specific niche, or diversify your client base? Will your business focus on residential customers or commercial roofing projects? The audience you are trying to reach — and the types of roofing jobs you want to take on — will determine your marketing strategy and hiring requirements, as well as other business decisions.
Analyze your competition
Once you’re clear on your goals and the types of roofing projects you’re going after, look at what your competition is doing. What kinds of jobs are they bidding on? How can you differentiate your company from existing businesses?
Action item: Create a growth plan for your roofing company.
Why it matters: Avoid the most dangerous business error of all: “Failing to plan is planning to fail.”
3. Keep the cash flowing like water down a valley
Here’s a little-known fact about growing a roofing business: It can be incredibly cash-hungry. If you start growing without proper financial management, you will quickly find your company out of cash and in bankruptcy court. That’s not an overstatement: Cash flow is the number one reason why roofing contractors fail.
“The construction business has a long cash conversion cycle,” notes Kyle Shirley, “so you need to go in with eyes wide open, understanding the average days sales outstanding (DSO) for your market — which you can find by reaching out to local or state roofing organizations. From there, you can track your accounts receivable, accounts payable, and overhead expenses to see your current cash flow. Even better, you can project your sales, labor costs, and materials costs further out to make sure that the revenue coming in is going to cover your costs.”
In order to grow, a roofing company must proactively manage cash flow — or you’ll end up doing about as well as a roof without flashing. Since you’re a seasoned roofer, you know that payments can lag behind job completion — sometimes way behind. But your costs keep adding up, and you need cash on hand to continue hiring skilled roofers, buying materials and equipment, and taking on more or bigger roofing jobs.
To grow your roofing business sustainably, it’s not enough to be a skilled roofer. You need to be a master of your cash flow.
Becoming a successful business owner means knowing when to delegate and when to stay involved. When it comes to cash flow, it’s important to always have your finger on the pulse.
Review your cash flow regularly
If you have an accountant, work with them to create a real-time view of your cash flow that you can check any time. Even without a dedicated accountant, you can use a cash flow forecast to predict your cash needs for the upcoming week, month, or year. Revise your projections to include actual expenses and revenue to make sure your model is accurate.
Modern construction accounting software can take into account expenses, accounts payable, and accounts receivable to help you spot cash flow problems before they sink your business.
Use cash flow to inform your business decisions
When making financial decisions for your roofing business, operate with certainty rather than assumptions. Cash flow predictions and analytics are useful, but you’ll also want to lean on cash flow statements from past months and years that give a true picture of how your roofing business is doing.
Beyond staying on top of cash flow as an owner, you’ll also want to make sure that you develop operational excellence among your team as your business grows: prompt invoicing, strong payment terms, and efforts to drive down costs where possible.
Action item: Evaluate a recent cash flow statement and develop a real-time cash flow dashboard. Make it a priority to check in on your business cash flow at least weekly.
Why it matters: If your business is cash flow negative, it doesn’t matter if you have significant revenue coming in down the line. Growing and maintaining your roofing business means having positive cash flow to expand your workforce and take on new jobs.
4. Set your prices as carefully as you assemble a roof
While cash flow is critical for survival, profit is essential for growing a roofing business. Your profit is the money you will use to reinvest in the business for continued growth. Too many roofers fail to price their services correctly, either aiming too high to attract customers or too low to maintain profitability.
Read more: The profit roadmap for contractors
For many business owners, nailing down the right pricing structure feels like a mystery, and some resort to simply copying competitors in hopes of success. But here’s the truth: Roofing businesses charge wildly different rates (from $3.50 to $10 per square foot in commercial roofing or $4.35 to $11 per square foot in residential roofing), and you need to figure out the price that will work for your business.
“Most contractors are not charging enough,” says Kyle Shirley. “Businesses tend to focus on their labor and material cost, but most people are not factoring in overhead. Some contractors I speak to think they don’t have any overhead, but even a solo contractor has to cover gas and insurance costs. Other overhead costs include marketing, technology (software, a website, etc.), and rent — though there are many more. And of course, your pricing also has to include a profit margin, because that profit is what you can re-invest in your business to grow.”
Your prices are going to depend on your region, whether you’re doing commercial or residential roofing work, and your specialization. Fortunately, getting the price right isn’t difficult, and you only have to follow one simple rule: The customer has to cover every cost.
When you’re just doing individual roofing jobs, it’s easy to forget about the cost of doing business — but when you’re running a business, you need to remember that every job you take on needs to cover overhead as well. In addition to materials and labor for roofing jobs, you need to cover the cost of staff, offices, benefits, and more.
Oh, and you do want to make a profit, right? Your pricing needs to take all of this into account. The average profit margin across the roofing industry is 7.2%, but you may adjust that number higher or lower depending on your business needs.
Keep reading: Contractor’s guide to profit and overhead
Action item: Take a look at your current hourly rate and billable hours, then determine whether they are actually covering your costs and working toward making a profit.
Why it matters: Too many businesses fail because they undercharge or overprice their services. Make sure you know the real cost of running your roofing business and price accordingly.
5. Hire & retain employees that form a great underlayment
Your employees are the face of your roofing business, which means that whoever you hire will represent your company in front of your customers. Successful business owners put their people first because a thriving team leads to a growing company. Roofers know that an underlayment helps protect the finished roof, so get team members who will help hold your company together.
“As a new business owner, you need employees who will build your reputation and earn a good review,” Kyle Shirley emphasizes. “When we started out, we did a lot of interviews and vetting. We tested our roofers out on different projects and jobs to make sure they would represent Sol Vista Roofing as professionals. We want customers to feel fantastic about the service they get so they’ll spread the word. That’s crucial when you’re just starting out.”
Update your benefits package to remain competitive
The more you can offer potential employees, the better employees you will attract. Strong health benefits, retirement plans, and leave policies may seem like high costs, but the value of productive employees can quickly outweigh the initial investment. Hiring, training, and developing an excellent team is the best investment you can make in growing your roofing business.
When your employees consistently treat your customers with respect and demonstrate professional knowledge, growth comes naturally. Also, when you invest in your employees, they’re more likely to stick around, helping you to keep turnover low and engagement high.
Provide training opportunities
Create onboarding procedures for every position that orients new employees to skills as well as company culture. While standardizing training for roofers is important, don’t forget about your back-office employees. Make sure your office staff have access to tools and courses that help them do their jobs more efficiently.
Training doesn’t have to be expensive. Levelset’s Payment Academy offers free courses on collections and credit, construction financial management, and more.
Make it clear how employees can grow from the start. Rather than providing a job, open up a career path for everyone who works in your roofing business. Strong employees are attracted to growth opportunities, so provide incentives and promotions for performance to everyone who works for you.
Action item: Look at your processes for hiring, training, and development to identify areas for improvement.
Why it matters: Employees are the single greatest asset of any roofing business. Treat them accordingly.
6. Create clear policies and procedures for every aspect of your business
As your business grows, you’ll have less direct involvement in the day-to-day operations of the company. Too many business owners try to fight fires or manage every aspect of operations, but this is a recipe for burnout and stagnation.
“As you open your doors and take on new customers, document your policies and standard operating procedures,” says Kyle Shirley. “It doesn’t have to be pretty, but you need to write it down. Then, over time you can refine your procedures as you learn more about your business. How would you have handled that sale differently? Update the procedure. We have procedures for everything our company does, and those documents are visible to every one of our employees. If someone on my team asks how to get a measurement report for a roof, I point them to the procedure. As your business grows, you won’t have your hands in every aspect of operations, but good policies and procedures will make sure your team is consistent.”
Instead, you need to optimize your operations by building great processes, writing them down, and trusting your employees. Take all that you’ve learned about roofing, sales, and more—and add in knowledge from your employees. Use this accumulated experience to standardize how your team handles calls, evaluates customer creditworthiness, and manages repairs and installations.
You need to have clear, written instructions for every company process. A policy serves three purposes:
- Keeps everyone on the same page
- Saves supervisors from having to repeat information
- Ensures that wisdom isn’t lost when you have employee turnover
Trust your employees
Once you have standard procedures, let your employees follow them. Too many business owners try to micromanage, but this approach is rarely successful. Instead, refine your procedures over time and use ongoing training to empower your employees to handle every situation.
In the end, your business is a collection of many different processes — from simple phone greetings to deciding whether to file a mechanics lien for non-payment. Having clear, unified processes for every aspect of your roofing business improves productivity and prevents knowledge from disappearing when employees leave your company.
Action item: Identify processes that need standardization, write out clear instructions for those processes, and keep going until you have documentation to handle (nearly) every aspect of your roofing business.
Why it matters: As you grow, you’ll have less direct control over your business. By crafting great processes, your wisdom stays in every aspect of the company even as your attention moves toward strategy rather than day-to-day operations.
7. Execute a focused marketing and sales strategy
You can have the best roofers, office manager, and accountant on the planet, but if you don’t win jobs, your roofing business will not grow. Build a sales and marketing team that understands your target audience — and what gets them to say “yes” to the sale.
“A sales procedure is one of the most important things you can have,” says Kyle Shirley. “And you want it to include everything. Our sales team parks on the street so they don’t block a homeowner’s driveway. We get to know the customer first. We walk around the property with the homeowner, and we gradually get a sense of what they need from us. After we do an inspection, we present our quote on site — and we explain the value that we bring, like our warranty. We don’t want to email that quote later, because we want a chance to discuss what we’re offering to the homeowner.”
On residential jobs, the homeowner is dealing with a potentially large outlay of funds and may be in a stressful situation—like a failing roof or the impending sale of their home. You want your sales staff to act with empathy and understanding.
If your goal is to get more commercial or public jobs, you’ll need someone experienced in writing winning bids. Bidding a private commercial project can be different from bidding a government job — your team should understand the difference.
“Commercial roofing sales is much more about building relationships over time,” notes Kyle Shirley. “You do good work with a developer and they begin to understand what you offer. You show them that you get their problem and you present solutions that will work for them. We’ll often send a video with our bids to explain our reasoning, which helps replicate that personal touch you usually get working on the residential side with homeowners.”
Both residential and commercial roofing companies need to be able to demonstrate their value to potential customers by addressing their needs and maintaining professionalism.
Growing a roofing business requires that customers know who you are and how to find you. Having a recognizable brand, strong online presence, and an easy-to-use website are vital for growth.
“In terms of marketing, we do one-to-one outreach on the commercial side and lots of mass digital work on the residential side,” says Kyle Shirley. “We love Google pay-per-click (PPC) ads, and we’re active on social media platforms so that we can be visible in front of homeowners. You need to pay for a search engine optimization (SEO) person as well as some type of new media ads. But don’t discount legacy marketing: postcards, yard signs, door hangers. In some markets, going door to door after a storm is a viable tactic.”
According to Findstack, 72% of people use Google reviews to find businesses, and those with at least 200 reviews generate twice as much revenue on average. As a residential roofing business owner, you need to recognize that the majority of your marketing efforts must go toward optimizing for Google searches, which is where the majority of your potential customers are likely to find you when they’re looking for help with small service jobs or large remodeling projects.
Optimize your website
Either hire an outside agency or an internal specialist who can help you rank in Google for relevant search terms, like “roofer in X city.” You’ll want a strong domain name (www.yourdomain.com), well-written marketing copy, and perhaps even a regularly updated blog with information that supports potential customers.
You can have your business show up in Google Reviews and on Google Maps by signing up for a business profile.
Your website needs to work well on both computers and mobile devices, have your contact information readily available, and include a contact form that is easily accessible. When your potential customers find your website from a Google search, make it easy for them to get information about your business and reach out to you.
Feature recent roofing projects that highlight the types of projects you want to work on. Write up the project details, like problems you solved, your standards of cleanliness during construction, and the communication process with the project owner.
Create a recognizable brand
Beyond optimizing your website and working toward better rankings in Google, you’ll want to make sure that you have a strong brand. Considering your business’ colors, logo, slogan, name, uniforms, trucks, and more can make marketing easier — and make it easier for your business to spread by word of mouth.
If people know about your business, you’ll get more business. Once you’re an established name in your area, marketing becomes easier, but it never loses importance. Staying ahead of the competition means continually reaching out to potential customers and positioning your roofing business as the best solution to their needs.
4 techniques for closing sales
Here are four ways that strong roofing businesses get the sale for both repair work and new installations:
- Participate in a sales training program that includes role playing over the phone and in person.
- Encourage your salespeople to spend more time listening than speaking, and to take notes on what the customer is looking for.
- Ensure your sales staff do a thorough inspection, provide options, and use the echo customer’s language to share that they’ve understood.
- Provide a detailed proposal on site, including transparent pricing and line item costs that give the customer a clear sense of your value.
- Evaluate your sales performance and audit your processes to see if there are areas for improvement.
- Review your sales and marketing materials regularly to make sure they speak to the audience you’re trying to attract.
- Take a close look at your current branding and your online marketing efforts to find areas for improvement.
Why it matters: Without a strong sales and marketing machine, there are no jobs to bring in revenue for your business. Making sure that your sales staff is well trained is a crucial part of running a successful roofing business.
The majority of your customers are looking for you online, so making sure you stand out there is critical for business success. And it’s not just important for residential jobs — even developers and general contractors will look up your website as part of their prequalification process to determine your ability to complete a commercial roofing job.
8. Know the laws that pertain to roofing businesses
Construction law is complex, and roofers have a lot of rules to follow. Failure to comply with building codes and other regulations can result in project delays, steep financial penalties, or a loss of your contractor license.
In addition to property rules, roofer’s licensing requirements, and other laws, you also need to be able to read and understand your construction contract thoroughly. If you’re not careful, you may end up agreeing to contract terms that delay payments or hurt your business financially. Someone at your company should review every contract — or even better, hire a legal team to do it for you.
9. Be the leader your company needs
Becoming a strong leader for your business is an important step if you want to grow. Business leaders with a clear vision, strong communication, and deft organization are able to overcome challenges and make wise decisions as they grow.
Many roofing business owners started out as roofers or supervisors. The upside of that path is that you have excellent background knowledge about the industry that can inform decisions about materials, techniques, or sales. On the other hand, very few people are natural born leaders, and working as an individual roofer doesn’t always offer the opportunity to develop leadership skills.
So start working on becoming a better leader right now.
Always keep communicating
As the business owner, it’s easy to get stuck in your silo — but it’s a mistake. Your roofers, salespeople, customer service representatives, accountants, and more are at the front of your business and have information you need. Take time to ask three simple questions: What’s going well? What isn’t? How can I help you?
Stay open to feedback
It’s easy to get caught in a rut doing business the way you’ve always done it. Be open to new insights by meeting with other business owners, attending classes, joining professional groups, and getting feedback from members of your team.
Never stop learning
Leadership skills develop over time and by incorporating insights from many sources. Listen to leadership podcasts, read leadership books, and take leadership classes with the intent to never stop growing as a leader.
The success of your roofing business starts with your own success as a leader. Build from your strengths and work on your weaknesses to develop into a business owner capable of growing and expanding where you want to be.
Action item: Make a plan to become a better business leader this year.
Why it matters: Your roofing business’ success starts with you. Leadership skills take time to develop, and these skills will help you gain the insights you need for continuous growth.