Pricing Your Work
A big question, usually coming from a roofing contractor just starting a new roofing business, or who wants to offer a new service is: “What should I charge?”
The answer to that question will depend on a number of factors. A few major factors when trying to decide how to set prices for your roof work are: Regional economy, the type of roofing service you are offering, your competition, material costs, and profit margin.
I have heard it said that if you sign up every job you give an estimate for, your prices are too low, if you are not signing up any jobs, your prices are too high. That little bit of advice has helped me personally in setting my own prices.
Regional Economy
The economy in your region can affect how you price your work. Just because you read online that roofers are charging $400.00/square to replace an asphalt shingle roof doesn’t mean you’ll be able charge that in your area. You may be able to charge more or less depending on the current economic climate and the average income in your area.
Different Types of Roofing
I realize this may be obvious to most, but it needs to be said anyway. Not all roofing applications are the same. Therefore, you can’t price them equally. Shingle installation costs will be different than slate or metal per square. This doesn’t only go for materials costs, but also labor costs. Some types of roofing, such as slate, is considered a specialty. Besides the cost of slate per square being more than shingles, installation costs will also be more because of the time and expertise involved to install a slate roof properly. Commercial roofing often has additional challenges and requirements, so the prices charged for a commercial job may be more than a residential job.
Competition
An important factor to investigate when deciding your pricing is what other contractors in your area are charging. Don’t cherry-pick other roofing company prices you randomly find off the internet and try to use them as your own. There is not a standard roofing price that will fit every job in every area. If you are going to compare prices, make sure they are specific to your area. You may be surprised to other local roofing companies are charging much more than what you were planning to charge. Finding out what an established roofer is charging will give you a good starting point when setting your own prices. I realize there are a lot of part-time, moonlighting roofers who will severely undercut their competitors. I don’t have a problem with charging a little less in order to get a job, but you should at least be in the ballpark with other contractors, whether your price is slightly higher or lower. Pricing too high may catch up with you eventually. If homeowners have you do work, thinking they are getting a fair price, only to find out later they could have got the same job completed, with the same quality, at a much lower price, you may reap some negative word-of-mouth reviews. If you are going to charge more than your competitors, make sure your materials, workmanship, and guarantees are superior to your competitors, so you can justify the higher price.
Materials Costs
The cost of materials can greatly affect your pricing structure. If you choose to use high quality, high cost roofing materials, or materials that require technical expertise or additional time to install, make sure you increase your pricing to reflect that. You MUST make sure your marketing and sales presentations highlight the reasons for your pricing. When a potential customer is comparing your estimate to another contractor’s, they may be comparing apples to oranges. You need to educate your customer as to the benefits of the products and techniques you are using, while contrasting that to methods often used by other roofers. This will help soften the “sticker shock” affect when they find your pricing quite a bit higher than another estimate they received. This advice goes for new installation as well as small roof repairs.
Make sure you shop around at various roofing supply houses to get the most competitive pricing. It is often foolish to use big box home improvement stores to purchase all your roofing materials. In my region, almost all roofing supply warehouses offer lower, sometimes much lower, pricing than the major home improvement chains. They often also offer better quality materials. I realize this is not always the case, so take some time to compare.
Keep in mind that materials costs can vary from region to region and even town to town. In my area, the prices for asphalt shingles are $25/square cheaper in the city-based roofing supply companies than in the suburbs. A local roofing supply chain even has a huge price difference between its own stores which are only 10 miles apart! One is in the city, close to other roofing supply companies, while its suburban store, which is the only one in that area, charges much higher prices. Competition is the factor in driving the prices down. It pays to shop around.
Profit Margin
Another factor to consider is profit margin. Sometimes, competition may be so tight, that you will wonder how you will make a profit. This is where you may need to make some tough decisions about how to price your work. Use some of the ideas mentioned above in the Materials Costs section to help justify charging higher prices than your competitors. Remember that materials are not the only costs you have. Vehicle maintenance and fuel costs, liability insurance costs, health care, employees, equipment costs, and much more all influence the total costs of your job. The materials costs are obvious, but these other costs are “unseen” in a way, as they are spread out over time, rather than job specific. If I have a customer balk at a price, or the time it took to do a job, especially for a smaller repair, I will sometimes gently remind them of all the additional costs that are factored in besides the materials or the time it took to complete the job.
Pricing Models
There are two basic pricing models- A set price, and time and materials. I use a set price (either per/square, per/piece, or per/job) for almost every job I do. I like to give the homeowner an estimated total job cost, and I do my best to complete the job at the quoted price. There are some types of jobs that cannot be priced that way, such as possible roof deck repair, or other potential additional work. I may price that type of work as a $/per sheet of plywood, or similar type pricing. I generally do not like to charge an hourly rate for a few reasons.
One, is that the rate per hour sometimes will look ridiculously high to the customer. A $150 repair with minimal materials that takes a half hour appears to be $300/hour profit to some customers. Of course, they don’t factor in all other miscellaneous costs to running a roofing business. There is no way I am going to tell a customer my rate is $300/hour. I would never get hired. I evaluate a job and give the customer my price for completing the work. I have hardly had any customer balk at a $150 roof repair charge, no matter how long it took.
Secondly, I don’t like to be tied to a clock. I don’t want to be accused of taking a nap on the roof in order to ramp up my per hour payout. On the flip side, I don’t want to be penalized for being able to do a job quickly and efficiently. I have seen some painfully slow roofers, who will spend a whole day on a job that would take me just a few hours. A per/hour rate may work out great for them, but not for me. I would rather charge based on my expertise, than on the time it would take me to complete a job.
Lastly, I like being able to give the customer a reliable estimate. With an hourly rate, the customer is at my mercy. I could make up any reason to prolong the job in order to up the profits. With a fixed price, I try to be confident that the estimate I give the homeowner is the price they will pay at the end of the job. I realize there are exceptions to this, but for the most part I am able to hold to the price.
I understand many other tradesman do charge by an hourly rate for a number of good reasons. For me, at least, I have had good success at avoiding the hourly rate model.
How I Price My Work
For slate and tile repair, I have a $ per/slate price that I charge. I will adjust the price slightly higher or lower depending on the difficulty of the job. For shingle installation, I use a $ per/square charge, that is adjusted based on the type of shingles used and other potential add-ons the customer may request. For shingle and flat roof repairs, I don’t have a fixed rate, I basically evaluate the necessary repairs and set my pricing based on job difficulty, needed materials, and estimated time to complete the job. The customer will get a set price, not a time and materials cost.
I don’t list prices on my website, and I try not to quote over the phone without seeing the job first. There are many factors that will influence pricing, so be careful not to commit to a price before seeing the job in person. I will give a ballpark figure over the phone, but I try to be careful not put a price in the potential customer’s mind only to have to change it when I get on site to see the job in person.
In the long run, you need to price your work according to what works best for your business, in your particular region, with the specific services you offer.