You may think we’re just gonna give you a straight answer:
- Ok – we’ll give you a straight answer (25-30%) but please read this whole thing for different perspectives.
- Markup and Profit: A contractor’s guide says 20-46%
- One roofer below believes most are between 10-15%, another says 15-25%.
The percentage of revenue that should be allocated to overhead costs can vary significantly based on several factors. These include the size of your business, location, the volume of work you handle, and the efficiency of your operations.
However, as a benchmark, the conventional wisdom often suggests that your overhead should be between 25% to 30% of your revenue. This is the range that many successful roofing companies aim for. However, adhering strictly to industry norms can sometimes limit innovative thinking and novel approaches to business operation.
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Markup & Profit: A Contractor’s Guide Says 20-46%
Let’s explore some unique and out-of-the-box considerations:
- Dynamic Overhead Modeling: Instead of adhering to a fixed overhead percentage, consider adopting a dynamic model that adjusts based on the volume and complexity of work. When you have more complex projects or when business is booming, your overhead might naturally increase. Conversely, during slower periods, you might be able to trim down. This approach requires a robust forecasting model but can provide better financial flexibility.
- Invest in Tech: Prioritize investing in technology that can streamline your operations and decrease your overhead costs in the long run. For example, drone technology can significantly cut down the time and labor required for roof inspections. Similarly, project management software can improve efficiency in job scheduling and resource allocation, reducing administrative overhead.
- Go Green: Consider investing in green energy solutions, like solar panels, for your offices and warehouses. This is an upfront cost but can significantly reduce your utility bills, a common overhead expense, in the long run. It also positions your business as environmentally responsible, which could attract more clients.
- Outsourcing and Remote Work: Consider if certain aspects of your business, such as customer service, accounting, or even some aspects of sales, could be outsourced or done remotely. This can significantly reduce your overhead costs related to office space.
- Co-Working Spaces: If your business isn’t client-facing (clients don’t come to your office), consider operating from a co-working space to reduce rent and utility costs.
- Preventive Maintenance: Invest in regular maintenance of your equipment to prevent costly repairs and interruptions to your workflow.
The key takeaway here is that while the 25-30% range can be a helpful guideline, don’t be afraid to think outside the box and challenge the status quo. Every business is unique, and the “right” overhead percentage should be tailored to your company’s specific needs and circumstances.
How to Get Your Overhead percentage
Take your monthly overhead divide it by your monthly sales… that gives you overhead percentage. From that number you determine how profitable you want to be. So if your at 15% overhead and you want to profit 15-20% you just add those two and that’s your sales percentage rate over cost. Good luck.
Between 15-25% of Revenue
Depending on the amount of marketing you are doing, and how you are compensating yourself, overhead for a company using subs will run between 15-25% of revenue.
Sorry for being vague, but most everyone in a forum like this will have their expenses in different areas that will not be consistent. This will cause wide swings in their % of overhead and GP. There is not a one size fits all.
Most are Typically Between 10-15%
“Most are typically between 10-15%. Some years we are a tad under our set OH some years we are over. In the end is essentially spot on. One strong piece of advice, if you have employees, DONT ADJUST IT!! Find something that works and run…you’ll lose employee’s trust.”
Good Knight Roofing
Real Mileage May Vary When it Comes to Roofing Overhead %
Based on these comments, it seems that the normal overhead percentage for a roofing company can vary significantly, depending on a variety of factors. Here’s an extrapolation of the advice given:
- Overhead Calculation: Overhead percentage can be calculated by dividing monthly overhead by monthly sales. This gives a rough estimate of the overhead costs as a proportion of total revenue.
- Profit Targeting: After determining the overhead percentage, a profit margin can be chosen. If overhead is 15% and the desired profit margin is 15-20%, then the total sales percentage rate over cost should be between 30% to 35%. This means that the sale price of services should be 30-35% higher than the cost to provide the services.
- Variability: There is a range of typical overhead percentages. Depending on factors like the level of marketing and how the owner pays themselves, overhead can range between 15-25% of revenue. However, these values may vary due to different business practices and strategies.
- Stability: Stability in overhead percentage is advised, especially if a business has employees. Constantly changing the overhead percentage can lead to a loss of trust among employees. A range of 10-15% overhead is suggested by one of the commenters, with the understanding that some years the actual overhead might be slightly higher or lower.
- Individuality: Every business is unique, with different expenses and financial structures. This means that there isn’t a “one size fits all” percentage that will work for all roofing companies. Therefore, it’s important for each business to understand its own financial situation and make decisions accordingly.
In summary, while there are guidelines and experiences shared by others in the industry, the “normal” overhead percentage for a roofing company should be determined by the individual company’s situation and financial goals. It’s crucial to consider factors such as the desired profit margin, current expenses, revenue, and the potential impact of changes on employee morale.