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Best of Success

Remember the 8 Percent Rule

greg hayne

Best of Success Seminar - Greg Hayne

December 5, 2012
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“You can’t afford not to be selling preventive maintenance through your service departments,” said Greg Hayne, who maintains that service and repair work can be the most profitable slice of the roofing market.

Hayne is the owner of Roof Management, a roof consulting company headquartered in Fairfield, Iowa. In 2008, he became intrigued by the exceptional service some roofing contractor service departments were providing to his building owner clients. He decided to find out exactly why these particular companies were so good at performing service work compared to their competitors. After conducting his research, Hayne developed a training program for service departments, and he now he teaches contractors what the best of the best are doing. He also helps roofers grow their service departments in both size and profitability. He shared some insights with the audience at Best of Success in a session titled “How to Sell Preventive Maintenance (and Why You Need To).”

The worst way to sell maintenance is to come up with proposals that cover unnecessary items, said Hayne. Inflated estimates damage your credibility. “The key to preventive maintenance is to sell as little as possible,” he said. “Only do what’s absolutely necessary.”

When approaching building owners, the key is to remember the 8 Percent Rule. According to Hayne, the capitalization rate on commercial real estate is traditionally about 8 percent. “That is their desired rate of return,” said Hayne. “Therefore, once the roof begins to reach the end of its life, if we can go up there and spend not to exceed 8 percent of the cost of a new roof on preventive repairs and by making those repairs keep the roof reasonably watertight, then we should do that forever and never replace the roof. It is only when we can’t do it that we should replace the roof, and then we should do it immediately.”

The 8 Percent Rule basically defines the budget, noted Hayne, who ran through specific case studies and detialed the cost savings for the owner. He explained that there might be times when owners must spend more than 8 percent in a given year — such as in years with a re-roofing project — but they should be good for several years after that.

 Hayne recommends reminding building owners that roof maintenance expenses can be written off the year they occur, while re-roofing is considered a capital expense and the investment made in a new roof must be depreciated over time. “Therefore, strictly from a tax/financial perspective, roof maintenance is more desirable than re-roofing,” he said.  

 

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