search
cart
facebook twitter linkedin youtube instagram Spotify Podcasts Apple Podcasts Spotify Podcasts Apple Podcasts
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • TOPICS
    • Cool Roofing
    • Event News
    • Latinos in Roofing
    • Low Slope
    • Legal
    • Metal
    • Project Profiles
    • Roofing Supply Pro
    • Roofing Safety
    • Steep Slope
    • Sustainable Roofing
    • Technology
  • EXCLUSIVES
    • Best of Success
    • Contractor Profile
    • IRE Show
    • Roofing Contractor of the Year
    • Top 100
    • Young Guns
    • State of the Industry
    • Century Club
  • MULTIMEDIA
    • Videos
    • Podcasts
    • Interactive Spotlights
    • Roofing Quizzes
    • IRE Videos
    • Webinars
    • Photo Galleries
  • PRODUCTS
    • New Products
    • Featured Products
  • COLUMNS
    • Editor's Note
    • Exit Planning
    • Legally Speaking
    • Safety Advice
    • Technical Details
    • Guest Column
  • EVENTS
    • International Roofing Expo
    • Webinars
    • Best of Success Conference
    • Industry Events
  • DIRECTORY
    • Associations
    • Distributors
    • Manufacturer/Supplier
    • Business Services
    • Get Listed
  • MORE
    • Roofing Contractor eNews
    • RC Store
    • Roofing Supply Pro
    • Custom Content & Marketing Services
    • Market Research
    • Sponsor Insights
    • Company Spotlights
    • Classifieds
      • Auctions
      • Business For Sale
      • Business Opportunities
      • Equipment For Sale
      • Positions Available
      • Products
      • Safety
      • Software
      • Services
      • Training
    • Contact Us
  • EMAGAZINE
    • eMagazine
    • Advertise
      • Media Kit
      • Editorial Calendar
      • Contact
    • Archive Issues
  • SIGN UP!
IRE Educational Sessions

The Power of Numbers

By Monroe Porter
porter1
porter2
porter1
porter2
March 15, 2012

There is an old joke about someone asking a lawyer, an accountant and a contractor what is the sum of two plus two. The accountant’s answer is four, the contractor answers three, as he will make up the difference in production or volume, and the lawyer asks what you would like it to be. No matter how hard you try, unless you are the government, two plus two is four. The U.S. debt is so large that if you stacked $100 bills, the stack would be higher than the diameter of the earth. Unfortunately, unlike the government, contractors cannot simply turn to the printing press and make more money.

Every day we receive phone calls from contractors looking for help that are in such a deep, dark hole there is no way to save them. When confronted, they tend to blame the economy or a key employee causing issues but not one of the culprits has good, sound financial records. In fact, in every case their numbers are a mess. Having good financial records and knowing your numbers may not keep you from going broke, but it won’t be a surprise when it happens.

Start by simplifying your accounting process. Set up your income statement to resemble how you estimate. There are two kinds of cost: overhead and direct. Separate direct from fixed overhead so your profit and loss statement shows an accurate gross profit.

Next, have a monthly financial meeting and review both your P & L, a balance sheet, all recently completed job costs, accounts payable, accounts receivable, sales and estimating closing rates and any other pertinent financial data. Your numbers become more accurate by using them and questioning the answers.

Try to make a budget. As hard as one might try, most people either will or will not make a budget. I have found that if your nature is not to make one, you probably won’t. If that doesn’t work for you, then take a profit and loss statement and compare last year to this year. See what costs have or are increasing. Look at your backlog to help you project sales. See where you can cut costs and do so.

Forget old sales to overhead and other ratios. Material costs have dramatically increased in the last few years. What used to be a $10,000 job now might be a $15,000 job. Margins have also dropped. You must take a few minutes and project your current percentage and not merely rely on what they used to be.

If you are losing money, stop the bleeding. Understand that selling yourself out of a loss is unlikely. While trying to sell your way out of the situation might appear to be the least painful option, it rarely works. If you save one dollar, it is yours to keep and, while painful, it is the most realistic option.

There are many ways to relate overhead costs but the most accurate realistic approach is to relate overhead to a function of time, not sales. Most overhead costs are a function of time. Rent, office salaries, truck payments and many other costs are paid weekly and monthly, not as a percentage of sales. Know how much overhead it costs to run your business each month, week and day. This sets an easy and memorable target to hit. If you are a seasonable business and lose money in the winter, try to minimize those loses by cutting costs as much as possible.

 The number one reason most contractors fail is they do not understand their overhead costs. While this might seem trite, I always worry when a contractor states his or her overhead in some type of round percentage such as 10 or 20 percent rather than saying something like our overhead is 16 percent or 22.5 percent. Remember, that as silly as it seems, two plus two is four, not three. Make sure your numbers add up. 

KEYWORDS: building materials business management

Share This Story

Looking for a reprint of this article?
From high-res PDFs to custom plaques, order your copy today!

Monroeporter
Monroe Porter is the president of PROOF Management Consultants. He can be reached at 804-267-1688.

Recommended Content

JOIN TODAY
to unlock your recommendations.

Already have an account? Sign In

  • Roofing Contractor Group Publisher Jill Bloom

    Physics, the Power of Authenticity and You

    In February's Publisher's Note, Jill Bloom describes a...
    Columns
    By: Jill Bloom
  • The Family Food Fare supermarket in Midland, Mich.

    ‘Rooftop Ninja’ Discovered Living on Roof, Inside Grocery Sign

    A bizarre tale out of Midland, Mich.: a woman dubbed the...
    Roofing News
    By: Bryan Gottlieb
  • A before and after heat measurement comparison

    How Hot is Too Hot in the Attic?

    If the ventilation is working, how hot should the attic...
    Sustainable Roofing
    By: Paul Scelsi
You must login or register in order to post a comment.

Report Abusive Comment

Manage My Account
  • eMagazine Subscription
  • Sign Up for the eNewsletter
  • Online Registration
  • Manage My Preferences
  • Subscription Customer Service

More Videos

Sponsored Content

Sponsored Content is a special paid section where industry companies provide high quality, objective, non-commercial content around topics of interest to the Roofing Contractor audience. All Sponsored Content is supplied by the advertising company and any opinions expressed in this article are those of the author and not necessarily reflect the views of Roofing Contractor or its parent company, BNP Media. Interested in participating in our Sponsored Content section? Contact your local rep!

close
  • An overhead view of a residential block
    Sponsored byCBIZ CompuData

    From Spreadsheets to Strategy: How Roofing Companies Can Transform Financial Operations

  • Snow Guard Solutions for Metal Roofs by S-5!
    Sponsored byS-5!

    Safeguard Your Building: How Snow Guards Prevent Costly Roof & Property Damage

  • A hand holding a wooden block that reads 'EVOLVE'
    Sponsored byWatercress Financial

    Embracing Change: A New Era for the Roofing Industry

Popular Stories

Agentes de ICE arrestaron a casi una docena de empleados de una empresa de techos en Lowell, Massachusetts. Los arrestos son parte de una redada federal más amplia contra la contratación no autorizada y las violaciones migratorias en Boston.

ICE Redondea a Equipo de Techos Afuera de Boston

Florida has become the focal point for construction-site raids, attracting national attention and altering labor dynamics throughout the industry.

Florida Emerges as the Epicenter of ICE Raids

QXO CEO Brad Jacobs will share the company’s strategic vision today at the Wolfe Research Global Transportation & Industrials Conference in New York following its acquisition of Beacon Roofing Supply..

QXO’s Brad Jacobs Charts Growth at Wolfe Research Conference

Roofing Contractor Webinar

Events

December 3, 2025

The Premier Roofing Conference: Best of Success

Join roofing professionals from across the nation at the 2025 Best of Success conference, the ultimate destination for roofing professionals seeking the latest industry insights and networking opportunities. Pick up strategies for critical challenges like workforce shortage with innovative solutions, explore the latest advancements in roofing technology and sustainable practices, and gain valuable insights from industry leaders on navigating the evolving roofing landscape.

View All Submit An Event

Related Articles

  • Measuring Up: The Power of One

    See More
  • By the Numbers: Salaries are Only Part of the Equation

    See More
  • Best of Success Seminar: Business Success by the Numbers

    See More

Related Products

See More Products
  • vrb_1.jpg

    The Art of Roofing Cutting Series DVD Library - Super Advanced DVD

  • vrb_1 (1).jpg

    The Art of Roof Cutting Series DVD Library - Basic DVD

  • Green_roof_Systems.gif

    Green Roof Systems: A Guide to the Planning, Design and Construction of Building Over Structure

See More Products
×

Be in the forefront of the roofing industry!

Join thousands of professionals today. Shouldn’t you know what they know?

JOIN NOW!
  • RESOURCES
    • Advertise
    • Contact Us
    • Directories
    • Store
    • Want More
  • SIGN UP TODAY
    • Create Account
    • eMagazine
    • eNewsletter
    • Customer Service
    • Manage Preferences
  • SERVICES
    • Marketing Services
    • Reprints
    • Market Research
    • List Rental
    • Survey/Respondent Access
  • STAY CONNECTED
    • LinkedIn
    • Facebook
    • Instagram
    • YouTube
    • X
  • PRIVACY
    • PRIVACY POLICY
    • TERMS & CONDITIONS
    • DO NOT SELL MY PERSONAL INFORMATION
    • PRIVACY REQUEST
    • ACCESSIBILITY

Copyright ©2025. All Rights Reserved BNP Media.

Design, CMS, Hosting & Web Development :: ePublishing