33 Carpenters is a successful roofing company based out of the Quad Cities in Iowa, but according to the company’s vice president, Austin Nelson, becoming a profitable roofing business was not an easy process.
That’s because while some people assume that roofing business owners are paper pushers who collect forty percent profit on all their jobs without much effort, the reality is much different.
“You are lucky if your net profit is twelve percent. It’s not the forty percent that people think it is,”
To get to where he is now, Nelson spent many years simply trying to figure out how the roofing industry worked. This included spending time as a roof installer and also another stint as a subcontractor who operated like a traditional roofing company.
Says Nelson of his time as a subcontractor:
“It was a roofing endeavor to support and parallel some other things we had going on. You have to remember that not too long ago I didn’t have a great reputation in the roofing industry. I was selling roofs for the labor plus the material. We valued our labor at $65 an hour. I was the cheapest guy around.”
“We had a bunch of CertainTeed organic shingles in this neighborhood and we had figured out the warranty situation so we would help the customer get $900-$1,000 from CertainTeed that we would put toward the material purchase.”
By using this business model, Nelson was able to vastly undercut his competition on price and secure new clients in the neighborhoods he worked in, which meant he never had to look too far to find more roofing projects.
“It’s really easy to organically grow your opportunities when that’s how you are getting the work,”
“We also didn’t have profit, but it was more money than we had ever made. I had never been paid $65 an hour. I was Chuck-in-a-truck and contractors hated us.”
Fortunately for both him and his competitors, Nelson eventually evolved his company and began operating like a traditional roofing business because he soon realized that his old model would lead to more serious problems in the future.
“You don’t have to do too many roofs before you figure out that it’s super hard work and your career isn’t going to last very long if you are the guy putting on all these roofs. Additionally, there soon was a contractor in town that was subcontracting work at a price that was even lower than ours,”
On top of the toll from the physical labor and the rigorous local competition, the American economy was also in dire straits due to the housing bubble collapsing, which left many businesses and individuals scrambling for work.
“Things were in really bad shape and this was the first example of me doubting the faith that I had,”
“I had to figure out a better way to do business because there was nowhere for me to go on my price to compete with another guy that was knocking the bottom out of the market. We were still getting a bunch of jobs and we were still making a good amount of money, but I knew I had to do more if we were going to actually have a business and make more money.”
Nelson insists that his business never was operating on the basis of greed, and that altering their business model was done simply so they could expand their brand and become more sustainable over time.
In addition to the restructuring of the business, Nelson’s personal life was also undergoing change as he and his wife were preparing to start a family.
“I was concerned about what the future looked like,”
Nelson emphasizes once again.
“It wasn’t just the other guy and it wasn’t just the state of the world. I had a new family and I needed to be able to support them. Like all fathers do, I wanted to provide them with more than I had.”
Nelson then pivoted out of subcontracting in the Quad Cities and went down to Clarksville, Tennessee to work with an old friend who owned a storm restoration company in the area.
This was uncharted territory for Nelson because his friend’s roofing company did a lot of insurance work, something that Nelson had never done during in his career.
Despite being initially reticent to the prospect of selling homeowners contracts that were predicated on insurance proceeds, Nelson swallowed his pride and trusted his friend, who assured him that this was how traditional roofing companies were conducting business.
“I thought that the consumers were not going to sign something that didn’t have a price on it, but the contract was written up the right way, the homework had been done by my friend’s attorneys, and I didn’t have anything to lose,”
“I also had the benefit of having already run my own roofing company, so I wasn’t afraid to talk to people about the whole roofing process because I knew how long the jobs were going to take.”
Nelson says he can remember the first customer who agreed to do business with him based off the amount of the insurance proceeds, and how shocked he was at how easily he could convince that homeowner that this was standard practice in the roofing industry.
He adds that this sale was critical in helping him build a foundation, not only for the remainder of his time in Clarksville, but also when he eventually returned to the Quad Cities and founded 33 Carpenters.
And for those who are curious how much discrepancy there is between a roofing job funded by insurance proceeds versus the price Nelson charged when he was cornering the market all those years ago, the difference is incredible.
“We were selling roofs for $185 per square in 2008, and when I went to Clarkesville the insurance company was paying over $300 a square,”
Those numbers alone should make any roofer currently cornering his market pause and reflect on how they can improve their process.
To learn more about Austin Nelson and 33 Carpenters, check out his first video with Roofing Insights, and don’t forget to subscribe to all of Roofing Insights’ social media channels so you never miss any of their upcoming content!