Private equity (PE) is reshaping the roofing industry. Investors are capitalizing on roofing’s steady demand, growth potential, and strong margins. This influx of Roofing Private Equity activity is creating opportunities for roofing entrepreneurs—but it’s also introducing new challenges.
For roofing business owners, navigating private equity can feel overwhelming. How do these firms operate? What are the risks and rewards? And how can you position your company for success, whether you’re ready to sell now or planning for the future?
This comprehensive guide explores the nuances of private equity in the roofing industry. Drawing on insights from industry leaders like Ty Meredith, Kris Werner, Gregg Schonhorn, Josh Sparks, and Jake Brydon, it breaks down:
- The five types of private equity firms in roofing.
- Challenges of working with PE firms.
- Step-by-step strategies for selling your business effectively.
- How to maximize your company’s value before a sale.
We have 2-3 Roofing Private Equity Firms we highly recommend, and a highly reputable M&A Advisor to chat with too – so if you’re thinking of selling (or getting into the roofing industry,) please reach out to me personally at tim@hookagency.com
Why Roofing Catches Private Equity’s Eye
Private equity thrives on businesses with predictable cash flow, scalability, and strong ROI. Roofing aligns with these priorities. Here’s why:
- Essential service: Roofs are indispensable. Homeowners and businesses rely on roofing services for maintenance, repairs, and replacements.
- Steady revenue: Roofing’s consistent demand ensures reliable income, even during economic downturns.
- High margins: Roofing can deliver robust profit margins, especially for businesses with efficient operations.
- Opportunities for consolidation: The roofing industry is fragmented, with many small businesses. This creates an opportunity for PE firms to combine multiple companies into larger, more efficient entities.
- Insurance-driven growth: Natural disasters drive spikes in roofing demand. From hurricanes to hailstorms, PE firms see opportunities to scale quickly by leveraging insurance-backed projects.
Ty Meredith noted:
“Private equity is drawn to roofing because it’s not just a trade—it’s a long-term investment. The demand is always there, and with the right systems, the growth potential is massive.”
Understanding why private equity is interested is key. But the type of PE firm you work with will heavily influence your experience and outcomes.
The Five Types of Private Equity Firms in Roofing
Private equity firms aren’t one-size-fits-all. They have different strategies, goals, and methods. Here’s a closer look at the five main types of PE firms involved in roofing:
1. Platform Builders
Platform builders are foundational investors. They look for roofing companies with proven systems and scalable operations. The company they acquire serves as the base for a larger portfolio.
What They’re Looking For:
- Annual revenue of $10M+.
- Strong leadership teams and management systems.
- Scalable operations that can replicate across markets.
How They Operate:
Platform builders use their initial acquisition as a model. They purchase smaller companies (add-ons) to expand market share, using the platform company’s systems to ensure consistency.
Kris Werner explained:
“Platform builders don’t just invest in a business—they invest in its processes. If your company can operate seamlessly without you, you’re a prime target for a platform builder.”
Benefits:
- Access to resources like marketing expertise and bulk purchasing.
- Clear pathways to scale and expand into new territories.
Risks:
- Intense pressure to meet aggressive growth goals.
- Loss of some control over decision-making.
2. Roll-Up Firms
Roll-up firms focus on consolidation. They buy multiple roofing companies in the same region to create economies of scale.
What They’re Looking For:
- Businesses with $2M–$5M in revenue.
- Local companies with loyal customer bases.
- Opportunities for cost savings through integration.
How They Operate:
Roll-up firms reduce overhead by merging back-office operations like HR, accounting, and marketing. They aim to increase profitability by streamlining processes.
Jake Brydon shared:
“Roll-up firms are efficiency machines. They’re not as concerned about the brand or the culture—they’re focused on how to make every dollar go further.”
Benefits:
- Greater efficiency and cost savings.
- Access to shared resources like training and software.
Risks:
- Cultural clashes during integration.
- Reduced autonomy for local management.
3. Growth Equity Investors
Growth equity firms are looking for roofing companies that are already thriving but need capital to scale further.
What They’re Looking For:
- Strong growth rates and profitability.
- Owners who are willing to stay involved post-investment.
- Opportunities to expand into new markets or service lines.
How They Operate:
These firms provide funding in exchange for partial ownership. They aim to supercharge growth by investing in marketing, technology, and infrastructure.
Kris Werner described:
“Growth equity firms are ideal for owners who want to stay in the game but need help scaling. They bring the resources you need without taking over completely.”
Benefits:
- Increased financial backing for expansion.
- Retain significant control over day-to-day operations.
Risks:
- Shared ownership means shared decision-making.
- Pressure to hit ambitious growth targets.
4. Turnaround Specialists
Turnaround specialists invest in struggling roofing companies, aiming to improve profitability and sell at a profit.
What They’re Looking For:
- Companies with potential but poor financial performance.
- Owners willing to relinquish control.
How They Operate:
These firms focus on cutting costs, restructuring operations, and stabilizing cash flow. Once the company is profitable, they sell it.
Josh Sparks noted:
“Turnaround specialists are fixers. If your business is in trouble, they’ll come in and make hard changes to get it back on track.”
Benefits:
- A lifeline for struggling businesses.
- Expertise in turning around failing operations.
Risks:
- Drastic changes to staff, systems, and culture.
- Little to no say in the company’s direction.
5. Real Estate-Focused PE Firms
These firms view roofing as a stepping stone to bigger real estate investments. They’re often interested in ancillary services like gutters, siding, and solar.
What They’re Looking For:
- Roofing companies with complementary services.
- Opportunities to cross-sell to real estate clients.
How They Operate:
These firms use roofing businesses as part of a larger strategy. For example, they may bundle roofing with property management or construction services.
Jake Brydon observed:
“Real estate-focused PE firms are thinking bigger than roofing. For them, it’s part of a larger portfolio strategy.”
Benefits:
- Cross-industry opportunities for growth.
- Diversified revenue streams.
Risks:
- Roofing may take a backseat to other priorities.
- Less emphasis on long-term growth within the roofing sector.
Challenges of Working with Private Equity
Private equity offers opportunities, but it also comes with challenges. Roofing business owners should be aware of the following:
1. Loss of Control
PE firms often require a significant say in business decisions. You may lose autonomy over hiring, branding, and day-to-day operations.
2. Pressure to Perform
PE firms expect high returns. This can create intense pressure to meet aggressive growth or profitability targets.
3. Cultural Misalignment
Integrating with a PE firm’s systems can lead to cultural clashes, especially if their approach conflicts with your company values.
4. Exit Timing
PE firms typically hold investments for 3–7 years before exiting. If their timeline doesn’t align with your goals, conflicts can arise.
Kris Werner emphasized:
“You have to know what you’re getting into. Private equity is not for everyone, and the wrong partner can do more harm than good.”
When is the right time to sell your roofing business?
This is one of the most critical questions for any business owner considering private equity. Exit timing isn’t just about financials—it’s also about operational readiness, market conditions, and personal factors. Based on insights from experts like Gregg Schonhorn, Jake Brydon, and Kris Werner, this section explores key considerations that influence your decision and highlights how to maximize your outcome.
1. Understanding Your Numbers: The Foundation of Timing
A business owner who truly understands their financial and operational metrics can make data-driven decisions about when to sell. For example, Gregg Schonhorn points out a common barrier:
“Many roofing business owners come to me saying they’re stuck at $3 million in revenue. My first question is, ‘What are your unsold estimates?’ Often, these businesses have $800,000 to $1 million in unsold estimates. That’s your next $4 million business right there—if you can address the bottleneck.”
Knowing your key performance indicators (KPIs), such as:
- Unsold estimates: A reflection of missed opportunities.
- Gross profit margins: Typically, roofing businesses should aim for 40%-50%.
- Cost of goods sold (COGS): If this exceeds 60%, there’s room for improvement.
- Operational efficiency: Are you scaling trucks, staff, or services at the right pace?
By tracking and analyzing these metrics, you can identify whether your business is truly ready to hit its peak valuation or if operational changes could boost profitability before selling.
2. From $1 Million to $5 Million: The Growth Mindset
Growing from $1 million to $5 million in revenue is a journey of discipline and focus. According to Gregg Schonhorn:
“The journey to $5 million requires you to dive into the details. Know your leads, conversion rates, and ticket averages. From there, create systems that scale predictably.”
Here are steps to grow into that next stage:
- Audit your unsold estimates: Address follow-ups and improve close rates to unlock hidden revenue.
- Add trucks strategically: Expanding capacity at the right pace is crucial. Use your metrics to ensure new trucks will be profitable.
- Refine your sales process: Ensure consistent ticket averages and track salesperson performance.
- Leverage technology: Tools like ServiceTitan or Acculynx can streamline operations and provide insights for smarter growth.
3. From $5 Million to $10 Million: Building a Management Structure
Once a roofing business hits $5 million, the next challenge is building the leadership team that can support further growth. Gregg Schonhorn explains:
“The journey from $5 million to $10 million is about stepping back as an owner and empowering your team. This means layering in management roles and holding them accountable to KPIs.”
To prepare for this stage:
- Invest in management: Bring in or develop a general manager, operations manager, or sales manager.
- Create employee scorecards: Define roles, responsibilities, and KPIs for success.
- Standardize processes: SOPs (Standard Operating Procedures) ensure consistency and scalability.
- Prepare for CFO-level oversight: As financial complexity grows, a CFO or controller becomes essential to manage budgets, forecasts, and profitability.
4. The $10 Million+ Range: Fine-Tuning for Sale
At $10 million and beyond, it’s time to think critically about how private equity will perceive your business. Key steps include:
- Separate business lines: If you have multiple divisions (e.g., residential and commercial), consider creating clean financials for each.
- Focus on high-value segments: Avoid areas like new construction that don’t generate recurring revenue or strong multiples.
- Polish your trailing 12 months: Private equity looks closely at your recent financial performance. Eliminate bad months from your valuation window by waiting for strong quarters to show consistent growth.
Gregg Schonhorn emphasizes:
“If you’re targeting a high multiple, every decision in your business—from adding trucks to marketing spend—should be evaluated through the lens of how it impacts EBITDA and long-term growth.”
5. Market Trends and Timing: Avoiding Common Pitfalls
Market conditions can heavily influence when to sell. According to Schonhorn, the private equity appetite for roofing businesses remains high, but timing your exit is still crucial.
Considerations for Exit Timing:
- Election cycles: Economic uncertainty during election years can impact valuations.
- Interest rates: Rising rates may reduce deal flow or valuations temporarily.
- Competitive landscape: Entering a competitive bidding process ensures you’re not underselling.
Schonhorn advises avoiding unsolicited offers or cold email pitches without first understanding your business’s true value:
“I often see owners settle for 6X multiples when their business could command 9X or more in a competitive environment. Running a well-structured process is critical to getting the best deal.”
How to Prepare Your Roofing Business for Private Equity
If you’re considering working with private equity, preparation is key. Here’s a step-by-step guide:
- Optimize Your Operations
- Streamline processes to ensure efficiency.
- Invest in technology for better project management and customer service.
- Build a Strong Leadership Team
- Train managers to handle day-to-day operations.
- Show that your business can thrive without your constant involvement.
- Focus on Financial Metrics
- Track key performance indicators (KPIs) like profit margins, customer acquisition cost, and lifetime value.
- Ensure clean, accurate financial records.
- Create a Scalable Model
- Demonstrate how your business can grow in new markets.
- Develop replicable systems for sales, production, and marketing.
- Document Everything
- Create manuals, SOPs, and playbooks.
- Make it easy for PE firms to understand your processes.
Maximizing Value: Tips for Roofing Entrepreneurs
Even if you’re not ready to sell, it’s smart to position your business for future success. Here’s how:
- Invest in Branding: A strong brand increases valuation. Focus on building trust with customers through consistent messaging.
- Expand Your Services: Consider adding complementary services like solar installation or gutter maintenance.
- Build Recurring Revenue: Service contracts and maintenance plans create predictable income streams.
Josh Sparks shared:
“The key is to think like an investor. What would make your business more attractive? Build for that today, even if you don’t plan to sell for years.”
Conclusion: Is Private Equity Right for You?
Private equity can unlock growth for roofing companies—but it’s not a fit for everyone. By understanding the types of PE firms, preparing your business, and being selective about your partners, you can navigate this space successfully.
If you’re considering private equity, consult industry veterans like Ty Meredith, Kris Werner, and Jake Brydon. Their experiences show that with the right preparation and mindset, you can make the most of this opportunity.
Looking for more insights? Contact Hook Agency to learn
