Every day, Roofing Insights is faced with this same question from business owners:
How much should I be charging customers for my contracting services?
The answer to this question is complex, considering that different price points affect businesses of various sizes in a multitude of ways. You need to find your roofing cost per square to get started.
Roofing insights is committed to exploring this question in order to allow contractors of all different sizes find their break-even point.
The following six slides all contain important information that will help you decide which price point your business needs to meet in order to be profitable.
Here’s the thing:
A lot of determining what your price point should be comes down to what kind of business you are running.
For example, if you are a high-volume business but you sell shingles at a low price, your numbers will be different from a company who stays small but charges a higher price for their services.
In the above graphic, there are five factors that go into building your price, but the most important is the break-even point.
As a contractor, you have to find the equilibrium between landing jobs and charging customers enough money to stay in business.
According to Roofing insights, the break-even point is defined as the minimum amount of jobs that you need to sell in order to remain profitable.
Please note:
The break-even point has nothing to do with individual job costs.
Instead, it has everything to do with how you run your business, and there are five factors that dictate your break-even point.
Look at the graphic above to see which five factors affect your bottom line, and then leave Roofing insights a comment below with which factor you believe is the most important for running a successful business.
Let’s take a look at businesses that have a high price but sell at a low volume.
These types of companies are typically specializing in specific types of contracting, and while there are some companies who will profit immensely doing this type of work, as a business owner, you should not be comfortable with turning down small jobs.
That’s because even small ticket items have their value in contributing to your profit margins.
As you’ll see in the graphic above, charging a large amount for your services will not automatically ensure that your company is profitable, especially if you do not manage enough volume to justify your prices.
Now let’s take a look at companies who have market average prices and consistently produce a decent amount of volume.
For these companies, if they do 60 jobs in a given month and charge enough money to earn a net profit of 12%, their profits for the month are $68,000.
Consider that this profit margin has been calculated under the assumption that the average ticket price is only $9,500.
What size is your business? How many jobs per month does your company have to do in order to be profitable?
Tell us in the comments section below!
This brings us to our last slide. This slide covers companies who have a low price but do a lot of jobs every month.
A great example of a company who succeeds at this size is American Home Contractors of Virginia.
Last year, Roofing Insights paid a visit to Tyler Griffin and his company American Home Contractors to learn what made their company so profitable.
What Roofing Insights learned was that Griffin had become a master at taking all kinds of jobs, no matter the ticket price, and turning a profit.
As you’ll see in the graphic above, your ticket prices do not have to be exorbitantly high in order to generate a profit.
In the case of American Home Contractors and other companies of this size, a net profit of only 10% has the ability to yield as much as $80,000 per month.
Final Comparison
In conclusion, the three different types of roofing companies outlined in this article all have the ability to generate profit.
Yet, in order for each type of business to make money, they have to meet a certain threshold.
Check out the table above to see where your business model falls!
Before you go…
Roofing Insights wants your feedback.
