Starting a roofing business presents an opportunity to enter a high-demand industry with a path to financial success. As the owner, you get to be your boss, set your schedule, and work with clients to make their homes or businesses more reliable.
Whether you’re a seasoned roofer ready to branch out on your own or someone with an interest in the trade, understanding the steps to establish a successful roofing business is important. From initial planning and securing funding to managing operations and hiring skilled labor, each step is a building block toward creating a thriving business. In this guide, we’ll explore the key aspects of starting a roofing business.
Roofing businesses provide roof replacement or repair roofs on residential homes and commercial buildings. Services also include installing skylights as well as treating roofs for waterproofing, heatproofing, or soundproofing. As solar-powered shingles increase in popularity, roofing businesses are profiting from this trend by installing solar roofs with solar-powered tiles. The size of a roofing company can vary depending on whether or not the company works with general contractors to complete large commercial projects. A small roofing company will typically focus on residential home projects, whereas larger companies build and replace roofs on large commercial buildings.
Running a roofing business requires strategic and financial planning to account for variations in weather and working conditions. In areas that experience extremely cold temperatures, roofing businesses have a much shorter season to complete jobs. Severe storms such as hurricanes or tornadoes can create opportunities for roofers as these weather events often cause damage to roofs.
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The roofing contractors industry generated $56.7 billion in revenue during 2023.1 Demand in this industry is driven by new construction, weather events, and factors that impact homeownership, such as mortgage rates. While the industry caters to both residential and commercial sectors, the dynamics of these markets differ significantly.
As the roofing industry evolves, keeping up with the latest industry trends is essential to stay ahead of the competition. Consumers are increasingly looking for sustainable and energy-efficient roofing options that reduce their monthly energy bills. There has also been a significant shift towards technology in the industry, such as using drones for roof inspections and adopting innovative roofing materials. Other industry trends include rubber roofing, solar roofing, green roofs, and 3D printing technology.
Steps To Start A Roofing Business
Step 1: Research Licensing Requirements
Before doing anything else, the first step should be to research which licenses and permits you need to work as a roofer. This is key, as each city or state has its own rules, and this process can take some time, so it’s better to start now. In California, for example, the Contractors State License Board requires that individuals must have at least four years of working experience before being able to get a roofing license.2
Also, many states mandate the minimum amount of liability insurance and workers’ compensation that roofing contractors need to carry. Texas requires all roofers to have insurance coverage.3
Step 2: Write a Business Plan
Writing a business plan may seem like an extra step when you’re eager to get started, but it’s a step that shouldn’t be skipped. A business plan is not just a document; it’s a tool that helps you understand your business better and outlines the path to success. It’s like laying the foundation of a house before building the walls and roof.
One part of your business plan will be defining the business strategy. This isn’t just about knowing what services you’ll offer or who your target customers are. It’s about understanding how all the pieces fit together – your services, your customers, your operations, your marketing, and your finances. By mapping out these details, you’re not just dreaming about your business; you’re planning for its success.
A business plan also works through the day-to-day operations. It helps you understand the scheduling of work, management of crews, and sourcing of materials. In the roofing industry, where profit margins can be thin, having efficient operations can be the difference between success and failure.
Finally, a business plan helps with financial planning. A roofing business requires a significant investment in equipment, materials, licensing, insurance, and possibly hiring staff. A business plan helps you estimate these startup costs accurately, ensuring you better understand the financial commitment required. Also, by projecting future revenues and expenses, a business plan allows you to evaluate the potential profitability of your roofing business.
Related: How to write a business plan
Step 3: Source Funding
While the roofing industry has low entry barriers regarding the amount of capital needed to start, it’s important to ensure you have enough to get started. Finding the funds to start your business can feel like a big hurdle, but with some planning and research, you can find the right funding source. Here are some options to consider:
Personal savings is one of the most common ways to fund a new roofing business. It’s a straightforward option – you’re simply using your own money to get your business off the ground. This way, you don’t have to worry about paying interest or giving up a piece of your business. However, it’s important to keep enough money aside for personal emergencies and unexpected expenses. If your personal savings aren’t quite enough to cover all your startup costs, don’t worry. There are other options you can combine with your savings.
Banks and credit unions are the most common sources of outside funding. To qualify for a loan, you’ll typically need a good credit score, collateral, and a business plan to show that you’re a reliable borrower. If they view the loan as too risky, the institution may choose to back it up with an SBA (Small Business Administration) loan guarantee. These are government-backed loans specifically designed to assist startups and small businesses.
Friends and family can be another option for funding when you’re starting a business. They might offer more flexible repayment terms compared to traditional lenders, but mixing business with personal relationships can be tricky. To protect your relationships, make sure you document all transactions and set clear expectations about repayment.
Home equity loans allow you to borrow against the value of your home. This can be a good option if you have a significant amount of equity in your home and are confident in your ability to repay the loan. The interest rates are typically lower than on business loans.
Microloans are another option to consider, especially if you need a smaller amount of money or can’t qualify for a traditional loan. These small loans are often provided by local economic development organizations. Some even offer business training alongside the loan, helping you build both your business and your entrepreneurial skills.
Step 4: Register the Business
The next step in this journey is properly registering your business and making it legal. Every state has different requirements, but here is a general overview:
Choose a business structure: There are four primary types of business structures: Sole Proprietorship, General Partnership, Corporation, and Limited Liability Company (LLC).
- Sole proprietorship: Easiest and least expensive to set up, but the owner is personally responsible for all business debts and obligations.
- General partnership: Two or more people share ownership. Like a sole proprietorship, each partner is personally responsible for business debts and obligations.
- Corporation: This is a separate entity from its owners, so it provides liability protection. It’s more difficult and expensive to set up than a sole proprietorship or a partnership.
- Limited Liability Company (LLC): This offers liability protection like a corporation but with less formality. It can be more cost-effective than a corporation but is still more complex and costlier than a sole proprietorship.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Obtain a contractor’s license: You’ll need this license in many states, even if it isn’t specifically for roofing. In some places, like Illinois, California, and Arizona, there are specific requirements for roofing contractors. The process often involves having work experience, passing an exam, and occasionally providing a bond. Even if your state doesn’t ask for a roofing license, your city or county might.
Get To know safety regulations and OSHA standards: It’s important that you know the Occupational Safety and Health Administration (OSHA) standards4 for the construction industry, as roofing can be a riskier job. Ensuring safety is not only a legal requirement but also essential for your team’s well-being.
Obtain business licenses and permits: Depending on your location, there will likely be a variety of general business registrations needed before opening. This could include a business license, seller’s permit, and Employer Identification Number (EIN).
Step 5: Purchase Tools & Equipment
Starting your own roofing service involves a lot of planning, but it’s now time to put those ideas into action. Before you head out to your first job site, make sure you have all the necessary tools, equipment, and resources to get the job done right.
A variety of tools are needed for roofing jobs, such as ladders, impact guns, saws, pry bars, roofing nail guns, and safety equipment like harnesses and helmets. Take inventory of what you already have on hand and buy the rest. You’ll also need a vehicle that can transport your tools and equipment from one job site to another. Be sure it is able to withstand the weight of the materials you will be transporting.
Step 6: Hire Labor
Labor costs can really add up in roofing, sometimes making up half or even more of what you make on a job. So accurate bidding and getting your team right is super important because they’re such a big part of your costs.
When you’re looking to hire, you’ve got two main choices: you can bring in independent contractors or hire your own employees. Both options have their advantages and drawbacks:
Independent contractors take care of their own taxes and tools, which can save you some headaches with expenses, paperwork, and keeping up with rules. Although this can seem appealing, it may lead to challenges regarding quality and supervision because you have less influence over their work hours and methods.
On the other hand, hiring employees gives you increased control, making it easier to guide their work. However, employing staff members requires you to handle payroll, taxes, and insurance.
Regardless of whether you hire independent contractors or employees, verify that everyone on your team is legally eligible to work. Some roofing businesses attempt to cut costs by employing undocumented workers at lower pay rates. This approach not only hurts local job opportunities but also puts your business at risk of substantial fines and legal troubles.
Step 7: Prepare to Launch!
We’ve walked through some important steps, but there are still some things left to do before you can officially open your doors. Everyone’s needs will be different, but here’s some of the common items you may need to consider:
Get roofing insurance: Roofing is a high-risk industry, and accidents can happen, so make sure your business is protected with general liability insurance. If you have employees, you’ll also need workers’ compensation insurance to cover any injuries they might sustain while on the job.
Setting up bookkeeping: Keeping track of your finances is key to running a successful business. You’ll need to set up an accounting system to handle daily transactions, taxes, and financial statements. You can either hire a bookkeeper or use accounting software like Wave Accounting (FREE) or Quickbooks to help you with this.
Opening a business bank account: Keeping your business finances separate from your personal ones is a good practice. Open a business bank account to keep track of your income and expenses.
Accepting credit cards: Making it easy for customers to pay you is important. Look into setting up a credit card processing system like Square or Stripe so customers can pay for services with their credit cards.
Join industry associations: Groups like the National Roofing Contractors Association provide valuable networking and training opportunities.
Creating a marketing strategy: Develop a marketing strategy to spread the word about your new roofing business. Essential elements include a memorable logo, an easy-to-navigate website, active social media presence, and a Google My Business directory listing. Consider traditional marketing methods like flyers and local ads, as well as digital marketing like SEO and Google Ads.
Common Questions When Starting A Roofing Business
How much does it cost to start a roofing business?
Roofers have one of the lowest startup costs of all contractor trades, making the field accessible for most. On average, the total cost to get a roofing business up and running can range from $10,000 to $25,000, but you may already have most of the items, which will bring this estimate down significantly.
Vehicle: If you don’t already have a truck or van to transport equipment and materials, the most significant expense is often a reliable vehicle. Costs can range from $5,000 to $40,000.
Tools and equipment: Essential tools such as ladders, safety gear, nail guns, and other roofing equipment can cost between $1,000 and $5,000, depending on the quality and quantity of the tools purchased.
Insurance: Initial insurance costs, including liability and workers’ compensation, can range from $2,000 to $4,000.
Business registration: Registering your business, which may include fees for a DBA, LLC, or corporation setup, can range from $50 to $800, depending on your state and chosen structure.
Marketing: Initial marketing efforts, including creating a website, printing business cards, and other promotional materials, can cost around $500 to $1,500. This will help establish your presence in the market.
How profitable is a roofing business?
Estimating the potential profitability of a roofing business involves considering various factors, including average revenue per job, number of jobs per year, and operating expenses. Let’s break this down with some industry assumptions:
The average roof installation job costs a homeowner $9,227.5 If a roofing business completes around 40 roofs in a year at that billing rate, it would generate $369,080 in total annual revenue.
Factoring in the main expense categories – materials at 25% ($92,270), direct labor at 30% (this assumes the owner is heavily involved) ($110,724), insurance/facilities/equipment at 10% ($36,908), and admin/sales costs at 5% ($18,454) – produces total annual operating expenses of $258,356.
By subtracting these costs from estimated revenues, a roofing contractor could achieve around $110,724 in annual pre-tax profits.
What is the NAICS code for a roofing business?
The NAICS code for a roofing business is 238160.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.