2014 State of the Industry Survey
Contractors Are Preparing for Growth Opportunities
For the sixth year in a row, Roofing Contractor and BNP Media Market Research conducted its exclusive State of the Industry survey, which was sponsored by GAF and EagleView Technologies.
From the onset, the goal of the survey was to capture the contractor’s perspective on the residential and commercial roofing markets. The survey included questions designed to gauge changes in contractors’ annual sales volumes and identify trends among the various products they install.
The survey also contained questions about other topics, including their plans for capital expenditures and the use of aerial measurements. This year we added several questions about marketing methods, including the most common sources of sales leads cited by customers. The survey also asked contractors to rate the important challenges facing the industry in 2014.
It’s understandable that business owners might worry about the strength of the economic recovery, but most contractors in the survey expect their own businesses to improve over the next three years. When the dust settles, a majority of respondents (56 percent) expect to see an increase in annual sales for 2013 when compared to 2012. They are more optimistic about the future. Overall, 67 percent of respondents expect year-over-year increases in sales this year, and 79 percent expect sales to increase over the next three years. (See Figure 1.)
BNP Market Research conducted the Web-based survey of U.S.-based roofing contractors from Nov. 11-25, 2013. Respondents included Roofing Contractor subscribers and contractor partners of ABC Supply Co., Inc. and Allied Building Products Corp. As was the case with past surveys, respondents to the study were typically high-ranking members of their companies; 59 percent of respondents listed their title as owner, president, CEO or vice president, while another 22 percent were managers or supervisors.
The respondents worked for companies in a wide variety of sizes. Overall, the average number of full-time employees for companies in the study was 46, and the mean gross annual sales figure for 2013 was $7.9 million.
Respondents were asked to break down the type of work their companies performed. (See Figure 2.) The companies surveyed perform a variety of residential and commercial work, both retrofit and new construction. The largest share of their revenue is derived from some sort of remedial work, either roof replacement or repair. Overall, 36 percent of the revenue from contractors surveyed came from residential roof replacement and 29 percent from commercial roof replacement. Residential repairs accounted for 8 percent of revenue, while commercial repairs accounted for 10 percent. Residential new construction accounted for 5 percent of contractors’ revenue, and commercial new construction accounted for 12 percent. In all, 83 percent of total revenue in 2013 came from re-roofing and repairs.
For many questions, the survey data was broken down to focus more directly on the commercial and residential markets. The sample was divided as follows: respondents with at least 50 percent of their business revenue coming from residential sources were included in the residential group. Respondents with at least 50 percent of revenue from commercial sources were included in the commercial group. The majority of contractors in the survey did both types of work, so it’s important to note that contractors in the residential group could do a substantial amount of commercial work, while contractors in the commercial group could do a substantial amount of residential work.
Residential Group: Companies in the residential group had an average of 15 full-time employees and four part-time employees. They averaged $2.5 million in sales in 2013.
Commercial Group: Companies in the commercial group had an average of 77 full-time employees and five part-time employees. They averaged $12.5 million in sales.
Annual Sales Outlook
The sales outlook for the entire survey sample is shown in Figure 1. Overall, 56 percent of contractors surveyed had year-over-year sales increases in 2013, while 22 percent saw sales decline. Twenty-two percent had sales remain the same. In 2014, only 10 percent expect sales to decrease, and only 8 percent expect sales to decrease over the next three years.
Residential Group: In the residential group, 52 percent of contractors saw an increase in sales in 2013 compared to 2012. (See Figure 3.) Comparing 2014 to 2013, 67 percent expect sales to increase this year, while 11 percent expect sales to decline. Twenty-two percent expect sales to remain the same. Over the next three years, 79 percent of residential contractors expect to see sales growth, and only 9 percent expect sales to decline.
Commercial Group: In the commercial group, 58 percent experienced a sales increase in 2013, while 19 percent saw a decrease when compared to 2012. (See Figure 4.) In 2014, 67 percent of contractors in the commercial group expect sales to go up compared to 2013, and 76 percent expect them to rise over the next three years. Only 7 percent of commercial contractors expect sales to decrease over the next three years.
Contractors responding to the survey were asked which types of products they offered and the percentage of revenue that resulted from each product category.
Residential Group: It’s probably no surprise that contractors in the residential group indicated steep-slope asphalt products accounted for the largest share of business in 2013 at 44 percent. (See Figure 5.) Low-slope asphaltic products accounted for 16 percent of revenue, and single-ply roofing accounted for 13 percent. Metal roofing was the fourth-largest segment, accounting for 12 percent of revenue.
Within those top four categories, the types of products they installed broke down this way. In the steep-slope asphalt category, laminate shingles grabbed the lion’s share of business, accounting for 72 percent of revenue. Lower-end strip or three-tab shingles accounted for 16 percent of revenue in the category, and super-heavyweight shingles made up 12 percent.
In the low-slope asphalt category, modified bitumen products (APP and SBS) combined to account for 75 percent of revenue for contractors in the residential group, while built-up roofs (BUR) accounted for 25 percent.
Single-ply product sales in the residential group for 2013 broke out this way: EPDM accounted for 42 percent of single-ply revenue while TPO accounted for 41 percent. PVC products accounted for 17 percent of single-ply sales.
Metal roofing accounted for 12 percent of revenue overall, about half of which (48 percent) involved architectural standing seam projects.
Commercial Group: Single-ply products accounted for half of commercial contractors’ sales. (See Figure 6.) Low-slope asphalt products accounted for 17 percent of annual revenue. Metal roofing accounted for 10 percent of revenue for contractors in this group, and coatings represented 8 percent. Steep-slope asphalt accounted for 6 percent of revenue.
TPO accounted for 46 percent of the revenue within the single-ply category. Thirty-one percent of revenue was derived from EPDM and 24 percent from PVC.
Within the low-slope asphalt category, modified bitumen products combined to account for 69 percent of the total (43 percent for SBS and 26 percent for APP). BUR projects accounted for 30 percent of the total.
In the metal roofing category, 74 percent of revenue came from architectural standing seam projects.
Product Sales Trends
The survey asked respondents if sales for the types of products they installed increased or decreased in 2013. Respondents were also asked about their expectations for sales increases or decreases in the year ahead.
Residential Group: More than half of the contractors in the residential group saw steep-slope asphalt sales increase last year. Fifty-six percent of residential contractors saw steep-slope asphalt sales rise, while 19 percent saw sales decline. (See Figure 7). Other product categories showed solid growth as well. Metal roofing sales were up for 48 percent of respondents, and single-ply revenue was up for 45 percent. Sales of coatings increased for 36 percent of contractors in this group, and low-slope asphalt revenue was up for 33 percent.
When asked to predict how revenue from these products would change in 2014, contractors in the residential group had the highest expectations for steep-slope asphalt products, with 59 percent expecting a sales increase. Single-ply sales were also expected to be strong, with more than half (55 percent) expecting an increase in revenue. Within the single-ply category, 74 percent expect to see an increase in TPO sales, while 50 percent expect EPDM sales to rise. Forty-four percent predict more PVC revenue in 2014.
The outlook was also good for metal roofing sales, with 51 percent expecting an increase this year. Forty-three percent of residential contractors expect to do more work with coatings, and 40 percent expect to sell more low-slope asphalt products.
Commercial Group: Single ply was the best growth category for contractors in the commercial group. About two-thirds of contractors in the commercial group saw an increase in single-ply sales in 2013. (See Figure 8.)
Other categories that had the greatest percentage of commercial contractors reporting growth included metal roofing (39 percent), low-slope asphalt (32 percent) and coatings (29 percent). Spray polyurethane foam (SPF) was up for 28 percent of commercial contractors, and steep-slope asphalt sales rose for 27 percent.
Looking ahead to 2014, commercial contractors have high expectations for products in the single-ply category, with 72 percent of respondents expecting an increase in single-ply sales this year. Within the single-ply segment, some 68 percent expect sales to increase for TPO, while 56 percent expect sales to be up for PVC, and 37 percent for EPDM.
Forty-six percent of respondents expect metal roofing sales to increase in 2014, and 44 percent expect more revenue from coatings. Thirty-six percent of respondents expect low-slope asphalt sales to increase, and 33 percent expect steep-slope asphalt sales to increase.
The survey also asked if contractors kept track of how their customers found out about their companies. Those that did track the source of referrals were also asked which sources customers mentioned, as well as the source they cited most frequently.
Residential Group: In the residential group, 89 percent of respondents kept track of how consumers found out about their businesses. When asked which source of referrals customers cited most frequently, the top answer was friends (34 percent), followed by neighbor recommendations (14 percent), search engines such as Google or Bing (11 percent), and truck signs (7 percent). Phone directories such as the Yellow Pages were cited by 6 percent of residential contractors as their most frequent source of leads, while other mentions included the Better Business Bureau (5 percent), Lawn signs (5 percent), online consumer review boards such as Angie’s List (5 percent) and direct mail (4 percent). Consumer social media platforms such as Craigslist were cited by 2 percent, and consumer social media platforms like Facebook and Twitter accounted for 1 percent.
Commercial Group: Three in five commercial contractors kept track of how customers found out about them. For those that did, search engines were the most frequently cited source of information, with 23 percent stating that customers found them most often that way. Other sources cited as the most frequent source of leads included friends (10 percent), manufacturers’ websites (10 percent), phone directory (10 percent), truck signs (8 percent), direct mail (5 percent) and neighbor recommendations (5 percent). Professional social media sites such as LinkedIn accounted for 3 percent of referrals and consumer social media sites for 1 percent.
Capital Expenditure Plans
Contractors were asked if their companies planned to make various types of capital investments in 2014. Options included adding new passenger vehicles and trucks for their fleets, purchasing new roofing production equipment, and moving to new offices or adding on to existing buildings.
Residential Group: The majority of respondents in the residential group (60 percent) indicated they would invest in roofing production equipment and tools. Forty-six percent expected to add new passenger vehicles for company fleets, and 19 percent planned to invest in production vehicles such as boom trucks. Nineteen percent planned to add on to their existing buildings or move to a new one.
Commercial Group: Seventy-eight percent of commercial contractors plan to purchase new roofing production equipment and tools this year. More than half (55 percent) expect to add new passenger vehicles to their fleets, and 35 percent plan to add production vehicles. Equipment for the metal shop, including machines such as roll formers and benders, is planned for by 20 percent of commercial contractors. Sixteen percent plan to upgrade their buildings or move to new offices.
Use of Aerial Measurements
The survey also asked if contractors currently use aerial measurements.
Residential Group: About two-thirds of residential contractors (64 percent) currently use aerial measurements, and another 8 percent plan to begin using them in 2014. Of those who currently use aerial measurements, almost all of them (96 percent) use aerial measurements for estimating, 37 percent use them for ordering material and 37 percent as a sales and marketing tool. Four percent use them for warranty validation. Two-thirds of respondents in the residential group ordered aerial measurements on roofs of all sizes.
Commercial Group: In the commercial group, 59 percent indicated they currently use aerial measurements. Another 4 percent plan to add the service this year. Respondents in the commercial group who ordered aerial measurements made use of the reports this way: 95 percent use them for estimating; 53 percent use them as a sales and marketing tool; 20 percent use them to order material; and 10 percent use them for warranty validation. Eighty-five percent of respondents in the commercial group use them on any and all size roofs.
Asked to rate a number of issues on a five-point scale to determine which ones they thought would have the most impact in 2014, contractors singled out some key areas of concern in the year ahead.
Residential Group: The top six answers for the residential group are shown below, ranked in descending order by the percentage of respondents who checked the top two responses (“impactful” and “very impactful”). For each of the following issues, more than half of all residential contractors in the survey felt they would have a great impact on their businesses in 2014.
- Lowball pricing/bidding wars (63 percent)
- Insurance/health care costs (62 percent)
- Finding qualified workers (59 percent)
- The weak economy (59 percent)
- Government intervention/regulation (58 percent)
- Increased material costs (57 percent)
Commercial Group: Contractors in the commercial group rated the top six most impactful issues this way:
- Insurance/health care costs (77 percent)
- Finding qualified workers (71 percent)
- Government intervention/regulation (63 percent)
- The weak economy (57 percent)
- Lowball pricing/bidding wars (53 percent)
- Increased material costs (46 percent)
For more on the challenges facing the industry in 2014 and advice from industry experts on how to prepare for the busy season ahead, check out the State of the Industry Reports here on Roofing Contractor.
State of the Industry Reports