State of the Industry Survey
Maybe we’ve hit bottom and things are on the upswing after all. Time will tell, but it’s hard to look at the data from Roofing Contractor’s most recent State of the Industry survey without concluding that a majority of contractors feel business will improve in the year ahead. Sixty percent of survey respondents believe their sales revenue will increase in 2012. They are even more optimistic about the next few years, and most results from this year’s survey show improvement over last year’s numbers.
This is the fourth year in a row Roofing Contractorand BNP Media Market Research have joined forces to conduct the State of the Industry survey, which is sponsored by GAF. The survey was designed to find out how contractors view the roofing market, see how their businesses were doing, identify product trends, and assess key challenges facing the industry.
The survey also asked contractors about other topics including the number of manufacturers they work with and whether or not they are in a manufacturer-sponsored certification program. It contained questions about the forthcoming International Green Construction Code (IgCC) and changes in OSHA’s residential fall protection enforcement policy.
The survey was conducted from Oct. 28 through Nov. 17, 2011. BNP Market Research reached out to more than 50,000 roofing contractors for the Web-based study, and 358 qualified respondents completed surveys for a response rate of 1 percent. Upon completion of fieldwork, the data was weighted to match the 2010 U.S. Census regional distribution for national representation.
Consistent with the previous three surveys, respondents to the study were typically high-ranking members of their companies. Sixty-nine percent listed their title as owner, president, CEO or vice president, while another 26 percent were managers or supervisors. Companies reflected a wide variety of sizes both in terms of the number of employees and their annual sales volume.
The companies perform a mix of residential and commercial work (Figure 1). Taken as a whole, 46 percent of their revenue came from residential replacement and 19 percent from commercial replacement. Residential repair accounted for 12 percent of revenue, while commercial repair accounted for 8 percent. New construction accounted for 15 percent of revenue, with commercial new construction at 8 percent and residential new construction at 7 percent. Thus 85 percent of total revenue in 2011 came from some sort of remedial work, either re-roofing or repairs.
How did the companies surveyed do last year? More than two-thirds of them saw sales increase or stay the same in 2011, while 32 percent saw sales decline.
Information on total annual sales volume for the entire survey sample is shown in Figure 2, which includes data on sales in 2011, expected sales volume for this year and the sales outlook for the next three years.
• Last year: As the top line in the chart shows, 48 percent of respondents reported an increase in sales in 2011, while 32 percent reported a sales decrease. About 19 percent had sales stay about the same. These results compare favorably to those in the last two surveys, with the sales outlook consistently improving each year.
• This year:A majority of contractors are optimistic that their sales volume will be even better this year. As the second line in Figure 2 shows, 60 percent of survey respondents expect sales to increase in 2012, while only 16 percent expect them to decrease and 24 percent expect them to remain the same.
• The next three years: The long-term outlook is even better, with 76 percent of contractors surveyed expecting sales volumes to increase over the next three years.
The survey also broke down the data for the commercial and residential markets separately, dividing the sample as follows: respondents with at least 50 percent of their business revenue coming from residential sources were analyzed in the residential group. Respondents with at least 50 percent of revenue from commercial sources were classified in the commercial group. Companies in the residential group averaged $3.1 million in sales in 2011, while companies in the commercial group averaged $8 million.
The Residential Market
When asked to focus solely on the residential side of their business, contractors offered their residential sales outlook, which is shown in Figure 3.
• Last year:42 percent reported an increase in residential sales, while 28 percent reported a decrease. Residential sales remained about the same for 30 percent.
• This year: Half of the respondents expect sales to increase in 2012. Sixteen percent expect sales to decrease, and 35 percent expect sales to remain the same.
• Over the next three years: About two-thirds of contactors predict residential revenue will increase over the next three years; 11 percent predict it will decrease; and 23 percent expect it will stay about the same.
Products installed:For contractors in the residential group, it’s no surprise that steep-slope asphalt accounted for the largest chunk of business at 45 percent (Figure 5). Single ply (16 percent) and low-slope asphalt (16 percent) accounted for the next largest pieces of the pie, followed by metal roofing (11 percent) and concrete tile (5 percent).
We also asked how sales in each product category fared last year. In the residential group, steep-slope asphalt was the category with the greatest number of contractors seeing an increase — 38 percent (Figure 7). However, there were other solid performers. More than 30 percent of contractors in the residential group saw increases in the following categories in addition to steep-slope asphalt: metal, cool roof coatings and single-ply roofing.
When asked to predict how products in these same categories would fare in 2012, the categories that performed best last year had the best expectations for this year, but they finished in a slightly different order. Of those in the residential group, 52 percent expect increased revenue from metal roofing; 51 percent foresee increased sales for steep-slope asphalt products; 50 percent predict coating sales will increase; and 47 percent expect to do more single ply.
Business conditions:The survey included several questions about the business climate, including overall business conditions, changes in the cost of doing business, and changes in the number of employees working for the company. In the residential group, 26 percent thought business conditions in the roofing industry were better, 45 percent thought they were worse, and 29 percent thought they stayed about the same. They are more optimistic about this year, as 38 percent think conditions will improve and only 21 percent feel they will deteriorate; 41 percent believe they will remain unchanged. The vast majority of residential contractors — 90 percent — saw prices increase last year, and 85 percent expect them to continue to rise this year.
Number of employees: Companies in the residential group had an average of 13 employees in 2011. Twenty-nine percent of the companies in the residential group added workers last year, while 32 percent shed workers.
Relationships with manufacturers: The survey data seems to reflect stable relationships between contractors and the manufacturers they purchase products from. Most residential contractors purchased products from an average of three companies in each product category, and few changed the number of suppliers in any category (the greatest number was in steep-slope asphalt, where 17 percent increased the number of manufacturers they use). The vast majority of contractors surveyed did not plan to make changes in 2012, as at least 75 percent of them did not plan to increase or decrease the number of manufacturers they dealt with.
Certification programs:The survey asked if contractors were members of any manufacturer-sponsored programs certifying their expertise in installing their products. In the residential group, 60 percent said yes. Of those that did participate, 48 percent were certified with one or two manufacturers, while the average for the group was three manufacturers.
A majority of contractors who participated in manufacturer-sponsored programs found them helpful. More than 80 percent found them at least somewhat helpful when it comes to training their employees, and 77 percent said they were at least somewhat important in promoting their businesses.
Key challenges in 2012: Contractors were asked to rate a number of issues from 1 to 5 to determine which ones they thought would have the most impact in the year ahead. The answers for the residential group are shown below, along with the percentage of respondents who checked the top two responses (“impactful” and “very impactful”). In the residential group, the problems contractors thought would have the most impact this year included:
1. Increased material costs (80 percent)
2. The weak economy (76 percent)
3. Insurance and health care costs (76 percent)
4. Lowball pricing/bidding wars (74 percent)
5. Government intervention/regulation (64 percent)
6. Cash flow/financing (59 percent)
7. Finding qualified workers (52 percent)
The Commercial Market
Contractors were asked to focus on their commercial roofing sales, and they offered the following data regarding the sales outlook for the commercial market, which is shown in Figure 4.
• Last year: Sales for those in the commercial group were slightly better than those in the residential group for last year. In 2011, sales were up for 44 percent of companies in the commercial group. Sales were down for 21 percent and about the same for 36 percent.
• This year:Just over half (51 percent) of the respondents expect sales to increase in 2012. Fifteen percent expect sales to decrease this year, and 34 percent expect sales to remain the same.
• Over the next three years:Fifty-nine percent of contactors surveyed believe their revenue from commercial jobs will increase in the next few years.
Revenue from products installed:For contractors in the commercial group, single ply accounted for 45 percent of all revenue, by far the largest amount (Figure 6). Low-slope asphalt (19 percent) and metal (17 percent) were the next largest categories, and all other products accounted for less than 10 percent of the total.
Breaking down 2011 sales by product category, we see that there were several categories that saw a large number of respondents in the commercial group reporting increases in sales over the previous year (Figure 8). More than half (54 percent) of all contractors in the commercial group reported an increase in single-ply roofing revenue. Other products seeing the greatest increases included cool roof coatings (38 percent), metal (32 percent) and garden roofs (28 percent).
Sixty-two percent of contractors in the commercial group predicted revenue from single ply would continue to increase this year. Other categories with strong outlooks for growth include cool roof coatings (50 percent), garden roofing (45 percent), low-slope asphalt (40 percent), metal (39 percent) and solar (37 percent).
Business conditions:Those in the commercial group had a slightly more positive take on overall business conditions than did those in the residential group. Twenty-nine percent of respondents from the commercial business conditions improved in 2011, and 48 believe conditions will improve this year. Forty-one percent indicated conditions worsened last year and 25 percent expect them to worsen this year.
Number of employees:Companies in the commercial group averaged 220 employees. Thirty-seven percent of them hired more workers last year, while 24 percent employed fewer workers in 2011. More than half of the companies in this group expect to hire more workers next year.
Relationships with manufacturers: Like their counterparts in the residential group, those in the commercial group purchased products from an average of three companies in each product category. Relatively few changed the number of suppliers in any given category last year; the greatest change was in the single-ply category, which saw 25 percent of companies in the group reported an increase in the number of single-ply manufacturers. At least 80 percent of them don’t foresee changes in the number of manufacturers they purchase products from in any category in 2012.
Certification programs:Those companies in the commercial group were more likely to be part of a manufacturer-sponsored certification program than those in the residential group. Eighty-five percent of those in the commercial group belonged to at least one such program (compared to 60 percent in the residential group), and they were members of groups from an average of seven manufacturers (as opposed to an average of three in the residential group). A majority of contractors who participated in manufacturer-sponsored programs found them helpful: 88 percent reported that certification programs were at least somewhat helpful with employee training, and 83 percent said they were at least somewhat important in promoting their businesses.
Key challenges in 2012:Contractors in the commercial group rated the issues they thought would have the most impact this way:
1. Insurance and health care costs (83 percent)
2. The weak economy (76 percent)
3. Government intervention/regulation (72 percent)
4. Increased material costs (71 percent)
5. Lowball pricing/bidding wars (70 percent)
6. Finding qualified workers (61 percent)
7. Cash flow/financing (56 percent)
Green Codes and
The survey also included some questions on specific items, including the International Green Construction Code (IgCC) and OSHA enforcement procedures.
The International Code Council (ICC) will soon publish the IgCC, and many expect it to be incorporated by various local codes. It contains stipulations that could be very important to the roofing world, including requirements regarding recycled content and energy efficiency, but the survey indicates contractors are not very familiar with the code (Figure 9). Only 7 percent of contractors in the residential group and 10 percent in the commercial group indicated they were familiar or very familiar with it, while those “not very familiar’ or ‘not at all familiar” with it totaled 73 percent in the residential group and 65 percent in the commercial group. This appears to be an area where more education is needed.
OSHA issued a revision in its residential fall protection directive in 2011, and the survey asked contractors if they had changed the way they handle safety on residential roofing projects as a result. Fifty-six percent said yes, while 44 percent answered no.
Of those who did change their residential safety procedures, 86 percent increased the use of harnesses and personal fall arrest systems, 78 percent increased training of personnel, 21 percent increased the use of guardrails, and 16 percent eliminated the use of slide guards.
For those who indicated they had not made changes due to the directive, 51 percent said they were already in compliance with the standards in the new directive, 32 percent saw no need to alter existing methods, and 15 percent did not know about the changes.
Besides being asked about the problems facing the industry, contractors were also asked if they had any advice for other roofing contractors looking to have a profitable and successful future in the industry. A very high percentage of survey respondents — 95 percent — took advantage of the opportunity to include some comments, and we’ll give them the last word on the subject.
While a few urged people to find another line of work, most offered detailed responses that stuck to the basics of sound business practices. The most common themes included:
• Exercise careful financial management: know your costs, cut overhead and price jobs correctly.
• Make ethics a priority: Integrity and honesty are essential.
• Perform top-quality work: There is no substitute. Do not cut corners.
• Take care of your customers: Make sure the customer is satisfied.
• Take care of your employees: Surround yourself with good people, make sure they are well trained and follow proper safety procedures.
One respondent summed up the keys to success this way: “Maintain profitability, minimize debt, promote integrity and honesty, and make a long-term commitment to the roofing industry.”
“Stay educated about the industry,” advised another. “Join a roofing association — either national, regional or state — to help you through the maze of regulations and product information.”
One contractor summed it up this way: “Be honest and trustworthy and hire the same type of people. Don’t promise what you can’t deliver, deliver what you promise and actively ask for referrals.”
Click here, to register for the State of the Industry webinar.