Roofing company margins and overhead

Gross margin, net margin and where roofers get confused

Roofing has a reputation for large tickets and thin profits, and both parts are true for many companies. A replacement can bring in a five-figure invoice, but most of that money passes straight through to the supplier, the crew and the sales rep. What matters is how much of each job is left to carry the office, insurance, trucks, marketing and the owner, and whether that amount covers twelve months of overhead when the work comes in only eight or nine.

Keep two numbers apart. Job gross margin is revenue minus the direct costs of that roof. Company net margin is gross profit across all jobs minus overhead. Owners who look only at the job sheet often feel profitable in July and borrow in February.

Example: one replacement job, line by line

Example: a fictional company sells an asphalt shingle replacement for $18,000. The figures below show the method, not typical prices in your market.

Example, continued: notice how much of the margin sits in two lines the customer never sees, the commission and the overhead allocation. A small change in either moves net profit more than a better shingle price does.

Materials: protecting the biggest line

On most replacements, materials are the largest single cost, and they leak margin in ways the estimate rarely shows. The fix is discipline at three points: when you measure, when you order and when the job closes.

• Measure from a consistent source. Whether you use aerial reports or tape and pitch gauge, use the same method for every job and record the waste factor you applied, so you can compare it with what was actually used.
• Order to the measurement, not to a round number. Extra bundles left on site are rarely returned and often end up on the next job unbilled.
• Return unused material within the supplier's window and get the credit applied to that job, not to the general account.
• Put a materials escalation clause in contracts signed weeks before the install date, so a supplier price increase between signing and delivery is not yours alone.
• Check every supplier invoice against the order. Short deliveries, wrong colors and freight charges add up across a season.
• Price accessories as their own lines: ridge vents, pipe boots, drip edge and ice and water barrier are where estimates most often come in light.

At job close, compare estimated with actual materials. If the gap is consistently in one direction for one estimator or one roof type, change the estimating template rather than arguing about individual jobs. That single habit usually recovers more margin than any supplier negotiation.

Labor: crews, subcontractors and the real hourly cost

The median roofer earned $26.65 an hour in May 2025^[2]. That is the wage, not the cost. Employer payroll taxes, workers' compensation (expensive in roofing), paid time off, training and safety equipment all sit on top. Roofing contractor establishments paid an average of $70,552 per employee in 2023 payroll^[1], a figure that includes office staff and supervisors as well as crews.

Fall protection is part of labor cost, not optional overhead. OSHA reports that falls to a lower level caused 389 of 1,034 construction deaths in 2024^[3]. Harnesses, anchors, guardrails, training time and a competent person on site belong in your loaded rate. A bid that leaves them out is not cheaper; it is underpriced.

• Employee crews: you control quality and scheduling, but carry payroll through rain days and slow weeks.
• Subcontract crews: cost per square is fixed, which protects margin on slow jobs, but you still answer for workmanship, safety and permits.
• Mixed: many companies keep a core crew for repairs and warranty work and use subs for peak replacement volume. Track margin separately for each.

Sales commission that protects margin

Example: in the job above, a rep paid 8% of revenue earns $1,440. A rep paid 25% of gross profit earns $1,730. Now suppose the rep cuts $1,500 off the price to close. On revenue commission, the discount costs the rep about $120. On gross-profit commission, it costs about $370. The second plan makes the rep think twice before discounting, because the rep shares the loss.

1. 01

   Define gross profit in writing

   List exactly which costs come off before commission: materials at actual invoice, labor at a standard rate, disposal, permits and the warranty reserve.

2. 02

   Pay on collected jobs

   Release commission when the customer pays, with a clawback if the job is refunded or written off.

3. 03

   Charge change orders correctly

   Decking replacement and other add-ons found on the roof should carry their own margin, so reps do not promise them free to close.

4. 04

   Review margin by rep monthly

   A rep with high revenue and low margin is buying sales with your profit. Coach on pricing before raising targets.

Warranty reserves: money set aside for callbacks

A workmanship warranty is a promise to spend money later. Treat it that way: move a fixed share of every job's revenue into a warranty reserve account in your books, record every callback against it, and review the balance each quarter. If callbacks regularly exceed the reserve, the problem is installation quality or your warranty terms, and the fix is training or an inspection step, not a bigger reserve.

• Log each callback with the original job, the crew, the cause (flashing, nails, ventilation, material defect) and the hours and materials used.
• Separate manufacturer material claims from workmanship claims; the first may be recoverable.
• Take before and after photos on every job so warranty disputes can be settled with evidence.

Seasonality and overhead absorption

Roofing payroll is lopsided across the year. US roofing contractors paid 20.8% of their 2023 payroll in the first quarter, compared with 25.9% across all industries^[1], and roofing contractor employment rose from 240,100 in January 2025 to 263,100 in October 2025^[4]. BLS notes that work in northern states may be limited in winter^[2].

Overhead does not take the winter off. Rent, office salaries, insurance, truck payments and software continue. Divide annual overhead by the months you actually install, and you get the overhead each busy month must cover. Then check your pipeline: if booked jobs in the slow months cannot cover their share, you need repair and maintenance work, a winter inspection offer, or a cash reserve built in the peak.

Storm work and insurance jobs

Wind and hail caused the largest share of homeowners insurance claims from 2018 to 2022, at 2.8% of insured homes per year^[5], and NOAA recorded 5,432 hail events in 2025^[6]. Storm seasons can fill a schedule, but insurance work has its own margin risks: payment depends on the adjuster's scope and the homeowner's deductible, supplements take time, and cash arrives later than on retail jobs. Track storm jobs as their own category, with days from completion to final payment as a key number.

• Record the claim number, adjuster contact and approved scope on the job before work starts.
• Photograph decking and hidden damage when the old roof comes off, so supplements are supported with evidence.
• Collect the deductible on the schedule your contract states, and never offer to waive it.
• Report storm-job margin separately: if supplements routinely take months, the cash cost belongs in your overhead plan.

A monthly margin review

1. Close every finished job with actual materials invoices, labor hours and disposal, not the estimate.
2. Compare estimated and actual gross margin per job; list any job that missed by more than you can explain.
3. Review margin by rep, by crew and by job type (repair, replacement, insurance).
4. Check the warranty reserve balance against callbacks logged this month.
5. Update the overhead per busy month figure and compare it with booked gross profit for the next 90 days.
6. Feed what you learn back into your estimating sheet. The markup vs. margin guide shows how to set prices from a target margin.