Every roofing contractor wants to know how much to charge per square.
This is a common question, but the answer is not so simple.
Still, it is imperative that roofing contractors (especially new owners) determine their price quickly, otherwise they could be in serious trouble.
Says Roofing Insights CEO Dmitry Lipinskiy:
“If you can’t figure out your price during your first year in business, you might soon be out of business because you’re not charging enough, or maybe you’re charging too much.”
Lipinskiy also says determining a price point depends on which part of the country a company operates in.
For example, companies in Alabama won’t be able to charge as much as companies in New York.
To learn how much contractors in your area charge, ask around, then find a number that works for your business within that same ballpark of prices.
It should be noted that in all his years as a business owner, Lipinskiy has seen some people charge as little as $250/square, and others as high as $650/square.
Yet on average, many companies range between $350-500/square.
The question now is, how do companies come up with their price?
According to Lipinskiy, there are 5 factors that affect the price of roofing jobs.
1. Overhead and direct cost
No surprises here.
As a business owner, you obviously need to charge more money for your time and materials than you paid.
“Direct cost is easy. It’s how much your materials and labor cost,”
says Lipinskiy.
But that’s not where you should stop calculating price. It’s also key to add in things like overhead to your price because secretaries, office supplies, and anything else administration-related costs money.
Consequently, that price should be passed on to the consumer.
“It’s everything you do and pay for in business,”
Lipinskiy says in regards to what can be considered overhead.
2. Value
“Value is your perception in the market, and how much consumers are willing to pay for your services,”
notes Lipinskiy.
If you’re a first-year roofing company, your value isn’t very high.
But five years from now, your value will increase exponentially.
To determine your value, you will have to be bold. Charge consumers what you think you’re worth, and don’t be afraid to stand by your number, even when customers question your price.
Also, don’t charge too little for your services. If you’re the cheapest contractor on the market, many people might automatically assume you’re the cheapest option because your service isn’t up to the quality of your competition.
3. Ability to sell
If you or one of your salespeople can sell high-ticket items like premium products or upgrades, this will increase your earning potential.
It’s not abnormal for a salesperson to show up at a house for a gutter inspection, and then an hour later the homeowner is signing a contract for a new roof.
Yet, to do this, it takes well-trained salespeople who are motivated and incentivized to perform well, and not all companies have this ability.
“I see a lot of guys who just don’t have it. Maybe they don’t have sales experience or maybe they can’t read people. There is also a lack of presentation with some guys,”
says Lipinskiy.
“For example, if you’re emailing your quotes, that’s a big mistake because you’re leaving money on the table. If you’re emailing your quote, then people are only looking at your prices.”
This then puts contractors in the unenviable position of having to explain their prices and what makes them different from competitors who charge similar prices.
To stand out, don’t modify your price.
Instead, find a way to present your estimates more professionally.
One app that can help with this is SumoQuote.
Their sleek and user-friendly interface allows contractors to present to homeowners in a much more efficient and professional manner.
Check them out today and learn how you can start presenting better quotes for the low price of just $59/month.
4. Breaking point
This is the number contractors must surpass in order to make money, and it will vary for each company depending on where they live and how much overhead they have.
“For example, in my business, if we sell $400,000 per month, we’re profitable,”
says Lipinskiy.
“But if we only sell $350,000, we are not making money. This means that each job I do is profitable, as long as I meet my breaking point.”
Also, please be aware that charging more money doesn’t necessarily mean you will get to your breaking point faster.
In actuality, you may be moving even further away from turning a profit.
Think of it like this:
Say you sell one client $10,000 in upgrades. That’s great, but it doesn’t mean that $10,000 is all yours.
Sure, you sold an upgrade, but to install that upgrade, you may need to hire more people, which directly cuts into your bottom line.
And ironically enough, at a certain point, that $10,000 upgrade is no longer profitable.
Remember:
It’s better to close 50% of your leads at $350/square than to close only 20% of your leads at $500/square.
As a business owner, take the time to learn what’s best for your company.
5. Profit
How much money do you want to make?
Sounds silly, right?
Of course, you want to make as much money as humanly possible.
But how much are you willing to sacrifice in order to achieve that outcome?
Consider industry stalwarts like Eric Reno of Paramount Roofing and Jim Klingbiel of Advantex Roofing in Chicago.
Those guys do most of their admin work themselves, meaning they don’t have secretaries and they take all their calls.
This eliminates some of their overhead, but it also means they have to constantly be fielding calls, thus taking them away from other opportunities within their business.
Conversely, Dmitry Lipinskiy takes none of his phone calls and only intervenes during emergencies because he has developed a system that can run even when he isn’t around.
Both management styles work, but they’re not going to work for every type of personality.
“We’re all different and we all have different personalities. You have to figure out your personality and where you want to be within your business,”
mentions Lipinskiy.
What did you think of these 5 factors that affect how much contractors should charge per square?
Do you agree/disagree with any of them?
Drop a comment below, and don’t forget to subscribe to Roofing Insights on all of their social media channels!
