Your next question will probably be, “Well, how much is the average roofing contract?” The answer to that question isn’t so simple because it is based on averages. Those averages will depend on several variables that can change from region to region, neighborhood to neighborhood and house to house.
Here’s a few variables that contribute to the overall cost of replacing a roof:
Regional Labor & Material Costs
The fact of the matter is that it is less expensive to replace a roof in Dallas, TX than it is in Minneapolis, MN. Material is more expensive in the North. Labor is paid at a higher rate in Minnesota. Insurance companies pay the replacement cost value based on these regional values.
As an example, a basic 1,800 square foot home that takes 24 squares with waste in Dallas may have a replacement cost value of $4,500 – $5,000. That same home in Minneapolis could run as much as $7,000 – $7,500 for a new roof. If you’re counting on making 10% of the contract, you would make as much as $250-$300 more on the Minnesota home based on this example.
Obviously, there’s cost of living factors that have to be considered when comparing one region to another. Labor & Material costs are just one of the variables that determine how much a new roof will cost.
You may not be willing to travel to a different part of the country in order to make more money. That’s understandable. This is just a variable to consider when you hear about other sales people making more or less on average. Maybe it has to do with part of the country they are working.
Steep & 2nd Story Charges
Some neighborhoods will all be single story dwellings that are easily walked on while the neighborhood across the street will all be 2nd story steep roofs.
The insurance companies pay extra for 2nd story and steep roofs because it takes longer to complete the work and requires additional precautions be taken by the roofers and the roofing company.
Using our same 24 square roof as an example, these additional charges could add as much as $1,000 to the contract. At 10% you would make $100 more because of the increased costs associated with steep and 2nd story roofs.
One of many mistakes I made as a rookie roofing salesman was to start working in a relatively new neighborhood that primarily consisted of single story walkable roofs. If you’re going to choose between two neighborhoods, it is almost always better to pick the neighborhood with 2nd story and steep roofs. If not both, at least try to get one of the two.
2nd Layers and more
Roofs will sometimes have more than (1) one layer to tear off and dump. This usually happens when the previous owner tried to save money on their last roofing job. Rather than tear off and dump the old roof, they just had a new roof nailed over the top.
Obviously, tearing off a 2nd layer is more work on the crew. The insurance company will normally pay for these 2nd layer tear offs and that will increase the value of the contract. Sometimes there will be more than 2 layers.
In my personal experience, I’ve torn off as many as 6 layers on an old farm house in West Texas. By the time you get to the 3rd layer, you’re just loosening things up and sweeping the debris off the roof. It gets real nasty, real fast after you get past that 2nd or 3rd layer.
Bottom line is that more layers = more money
You generally aren’t going to find 2nd or 3rd layers of roofing in brand new neighborhoods. Think about it, they’ve probably never had their roofs replaced before. They haven’t had an opportunity to put on a 2nd layer.
You’ll find 2nd layers in older, more established neighborhoods. They can be difficult to spot, especially if the last roofing crew cut back and put down new drip edge.
Sometimes you won’t even know you have a 2nd layer until the crew starts tearing off the old roof. When that happens, take pictures of the 2nd layer and contact the insurance company as soon as possible. The roofing crew will get paid for the 2nd layer regardless of whether or not the insurance company pays for it.
You need to do your due diligence of taking pictures and making contact with the insurance company to be sure you get paid for the extra work. If you don’t take care of this immediately, this could be one of those jobs where you make much less than 10% because of the extra costs associated with paying the 2nd layer labor expenses.
There’s only two basic commission structures. Every roofing company has a slightly different commission formula, but they’re almost always based on these two basic structures:
1). Flat Rate Commission
Personally, I don’t like flat rate commissions because it robs the sales person of the opportunity to make significantly more money, but I’ll explain it here so you can understand.
The roofing company will generally give their sales people a price list for all the different types of roofing services they provide. The sales person has to sell the job for no less than what is on the price list. If they do, they earn a flat rate commission. These rates vary from company to company, but are generally based on a rate of anywhere from 8% to 10% of the total contract.
On the good side, it is very easy for a rookies sales person to know exactly how much to charge. The prices are set in stone and there’s no negotiation.
On the bad side, the prices are set in stone and there’s no negotiation. If you as a roofing salesperson are held to a certain price and your prospect is price shopping, you may as well keep walking down the street. You’re going to lose that sale.
Because of the way replacement cost value is paid these days, there’s virtually no advantage to a homeowner paying less for the same job as their neighbor across the street. If they pay less, the insurance company will only reduce the amount of the homeowner’s 2nd check.
Wouldn’t you rather have the option to charge less when you need to in order to get a job and be able to charge a higher price that would give you a bigger commission check whenever possible too?
2). Profit Split with Overhead Costs
This is the commission structure I learned under and it is the one I recommend today. In my opinion, a profit split with a percentage for overhead cost gives the roofing salesperson the ability to make the most money.
Some people will say it is more difficult to learn the business under this commission structure, but I would argue that you can learn pretty fast when it means you have the opportunity to make several hundred dollars more a week or thousands more in a month. Wouldn’t you agree?
Basically, you earn a split of the profits after all costs have been paid. In some roofing companies this is 30% to 40% of the profit. Most of the reputable roofing companies pay their sales people at least 40% to 50% of the profits. If you’re going to take a job paying 30% of the profit, you’re probably making less than you could.
The second part of this commission structure is the “overhead expense” or sometimes called “office expense”. In the company I learned under, the overhead was 10% of the contract. You can find roofing companies where the overhead is lower because they don’t have as many expenses. I personally believe that a 5% overhead expense is more reasonable.
If the company you’re working for, isn’t also working for you, you need to ask yourself why are you paying 10% overhead? Are they doing anything to help you make money? Do they provide training and on-going support? Do they generate leads to help you get into new neighborhoods? If you’re not getting that kind of support, you may want to look for lower overhead and greater support.
Every roofing company runs sales contests and offers bonuses. These incentives can add to your bottom line. If you’re working for somebody that doesn’t have a bonus structure, walk into the office or call your boss on the phone and ask for one. They’ll be glad to set something up, a goal for you to reach for in order to get you some extra bonus money.
If you’re not getting the occasional bonus, you may want to find another roofing company to work for. Roofing sales can be a tough job when the rent is due and your gas tank is empty. Bonuses and sales contests can help give you the extra push to make more money and fun doing it.
Finally, you have to be comfortable with the company you are going to sell roofs for. You’ll find that if you’re not very comfortable, you aren’t going to sell much. Find a company you can trust so you can go out and make as much money as possible.