Maintaining Margins: How Roofing Contractors Can Renovate Their Bottom Lines
Our topics this month include repair, restoration and renovation. Inside the pages of this issue and online at www.RoofingContractor.com we have a look at materials, equipment and methods used in the maintenance of low-slope roofing systems.
Never one to stay entirely on topic, I choose to use this space to discuss renovation of something else: your bottom line.
Forward-thinking roofing contractors are always seeking ways to enhance the bottom line, and I think an expanding economy, such as we find ourselves in today, is the right time to consider changes to your margin structure. Aside from the fact that the nation’s economy is expanding and construction opportunities are growing, there are a host of reasons to review and perhaps renovate your pricing strategies.
I realize this is not for the faint of heart. Determining when and how to raise prices is a real art. Going for a higher price point will tell you real fast how well you and your sales team have done communicating the value of your services to your clients.
Tougher still, you have not given it all you’ve got until you take it to the point where you risk losing some work.
As for some of the reasons you should consider bumping up your margin, here are a few to consider. No pun intended, but every roofing company must maintain a rainy-day fund. It should be sufficient to cover all the fixed costs of your enterprise over potentially long periods of time (months).
In addition to the rainy-day fund for operations, you should set aside dollars earmarked for marketing when you find yourself short on work (and the inflow of cash from work). We saw many examples of firms pulling back on marketing efforts when the Great Recession started. Perfect timing, right? The phone stops ringing so you stop asking people to call you. Roofing contractors who kept looking (and asking) for work found out that there was work to be had. It often appeared in places they never looked before, but they found business and prevailed.
Cash to fund increases in labor and material costs may not be there later if you do not bake some into your pricing now. And there will be increases. As the economy has improved there are already spot shortages in many labor markets, and the more skilled the labor the greater the demand. We could be on the verge of a serious labor shortage in the construction industry, and labor rates may change very quickly for some specialties in some markets.
In a business such as roof contracting where cash is a rare and valuable commodity, setting large quantities aside with “hands off except in case of emergency” takes a lot of guts and self-discipline. It also takes a plan, so I recommend you work on this with your accounting professional to determine how much you should work toward setting aside for future business needs.
For many roofing contractors, now is prime time to re-think how to price your work. You have devoted your life to this risky work, and you as well as the members of your team should be fairly compensated for it. Your hard work should not just be rewarded monetarily, but with a well-financed, stable enterprise that can sustain the economic ups and downs of the region in which you work.