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Metal Roofing Cost of Doing Business Survey

Posted 06/1/2017

A survey that looks inside the operations of metal roofing contractors

This Spring, Metal Construction News surveyed contractors providing metal roofing installation services. We had a few goals. First, we wanted to better understand the types of contractors who were doing metal roofing, and we wanted to get a clearer look at the types of projects they took on. But most importantly, we wanted to break the crust on these companies and look inside their operations so we could. By doing so, we hoped to be able to identify differences in operations between metal roofers and all other roofers, as well as lay down benchmarks for operations that other metal roofing contractors could measure themselves against.

We will report the results of the Metal Roofing Cost of Doing Business Survey in this article and, in much more depth, in a white paper to be published this summer. We'll also present a webinar with industry experts who will talk about the results and give even more context to the survey.

 

The Study

MCN compiled the survey sample from four sources. About half of the list came from our subscription list, which is a qualified list of contractors who work in the metal construction industry and is audited by a publishing industry group called BPA Worldwide. The other three lists came from partners who saw the benefit of the survey and contributed. They include the Metal Roofing Alliance, the National Roofing Contractors Association and the Metal Building Contractors & Erectors Association.

We used an independent survey company, Readex Research, which worked with us to create the 19-question survey, and conducted the survey by email. The survey ran between Feb. 15, and March 9. We had a 5 percent response rate, but since we only wanted contractors who did metal roofing, the number of qualified respondents was lower at 266. 

By any measure, the survey was very intrusive, asking contractors to divulge profit margins and other closely held information. Of course, no individual response will be released, but the aggregated responses tell an inside story of the metal roofing industry that is revelatory.

 

Sponsors and Participants

The Metal Roofing Cost of Doing Business Survey was made possible by the generous support of MBCI. The Houston-based metal component company sponsored the survey, and has been a long-time backer of education for contractors.

Three industry partners also contributed names to the survey. They were the Metal Roofing Alliance, the National Roofing Contractors Association and the Metal Building Contractors & Erectors Association.

Thank you to all of these organizations. 

 

The Respondents

Figure 1. 

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So, who are these people?

About 40 percent of our respondents say they are general contractors. (See Figure 1.) Another 35 percent say they are roofing contractors with those about evenly split between those who call themselves metal roofers and those who identify just as roofing contractors. The other largest tranche of respondents was metal building erectors, who comprised about 15 percent of the group, which is slightly fewer than either roofing contractor piece of the pie.

 

 

 

 

Figure 2.

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For the most part, we received an even representation of respondents across the country. (See Figure 2.) The Midwest featured a slightly higher rate, while the East came in slightly lower. For reference, here are the states in each region:

 

East: N.Y., N.J., Del., Conn., Mass., R.I., Vt., Pa., W.Va., Maine, Md., Washington, D.C.
South: Va., Ky., Tenn., Ark., La., Miss., Ala., Ga., N.C., S.C., Fla., Okla., Texas
Midwest: Minn., Iowa, Mo., Ill., Wis., Mich., Ind., Ohio, Neb., S.D., N.D., Kan.
West: Idaho, Mont., Utah, N.M., Ariz., Colo., Wyo., Calif., Nev., Ore., Wash., Hawaii, Alaska

 

 

Figure 3.

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Respondents' company structures were evenly divided between regular corporation (C Corp), limited liability corporation (LLC) and S corporation, all measure about 30 percent of the respondents. (See Figure 3.) Sole proprietorships, which generally are much smaller companies, represented about 13 percent of the group.

 

 

 

 

 

 

Figure 4.

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Unsurprisingly, union shops represent a very small proportion of our respondents at 3.4 percent, and if you included dual shops (4.9 percent) that would only increase to 8.5 percent of the total. (See Figure 4.) The vast majority of companies are unaffiliated with unions. This gibes closely with general union representation with just under seven percent of the private industry labor force represented by unions, according to the U.S. Bureau of Labor Statistics.

 

 

 

 

Figure 5. 

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In the survey, we asked respondents to report number for 2016, since we would then have a year-end numbers for the financial reporting. (See Figure 5.) Compared to 2015, nearly 60 percent of the respondents increased revenue. About a quarter stayed the same, and only 16.5 percent saw declines in revenues. The gross profit numbers tracked similarly, as one would expect, but there was a one glaring point we discovered. Companies that grew experience slower growth for their gross profits. Respondents who said their revenues remained flat or declined, reported improved gross profit performance.

 

 Characteristics of Metal Roofers

When the Harvard Joint Center for Housing Studies began its Remodeling Futures program in the mid-1990s, it faced a difficult question. "What was a remodeler?" We face a similar difficulty with identifying metal roofing contractors. Obviously, the 16 percent of our respondents who called themselves "Metal Roofing Contractor" are simple to identify. But can we call a roofing contractor who installs a substantial amount of metal roofing a metal roofing contractor?

This is a slippery, sliding scale. Consider a self-identified roofing contractor that does $15 million in annual revenue, of which $2 million is in metal roofing. Compare that contractor to a self-identified metal roofing contractor who does less than $1 million in revenue. If we don't include the general roofer in our calculations about the industry, we're leaving-in poker parlance-a lot of money on the table.

Our starting point for our survey was that only companies that had earned revenue on a metal roofing project in 2016 qualified. From that, we wanted to compare and contrast.

  

Figure 6.

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By looking at the types of projects contractors who do metal roofing complete, we can get a better picture of the breakdown of the industry and where the activity is. In figure 6, we have charted contractors who did at least one project by each market segment. Of our respondents, 85 percent did at least one metal roofing project in the commercial segment, but only about 50 percent did a non-metal roof.

That indicates there is substantial overlap of metal and non-metal roofs among contractors doing commercial roofing projects.

The overlap is even greater among contractors in the residential market, with nearly 60 percent of respondents reporting doing residential metal roof projects compared to 42 percent installing non-metal roofs.

At its core, this isn't surprising. Residential roofers tend to be less specialized and will often include other services such as siding and window installation, especially in the retrofit market. The survey results bear that out.

 

Figure 7.

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When you break down the activity by the mean number of projects completed each segment, you see even more overlap. (See Figure 7.) In fact, on the new commercial side of the industry, our respondents report doing about five non-metal roofing projects in 2016 compared to only 3.5 metal roofing projects. For new commercial roofs, the story is that our respondents may do at least one metal roof in 2016, but they were doing a lot more non-metal roofs.

In commercial retrofit activity, the response is just the opposite, with our respondents doing more metal roofing than non-metal roofing.

Most of the roofing activity in the residential market is in the retrofit segment, and that is true of metal roofing as well. The proportion of metal roofing to non-metal roofing is essentially the same among our respondents. According to the recent data from the Metal Roofing Alliance, about 11 percent of the residential retrofit market is now metal roofing. Among contractors who offer metal roofing services, the mean number of metal roofing projects completed is about the same as the mean number of non-metal projects, meaning about half of the roofs are metal.

 

Figure 8.

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We also looked at the characteristics of the companies doing the roofing activity. (See Figure 8.) The table tilts heavily toward metal roofing contractors, especially in the residential retrofit market. Metal roofing contractors completed about 20 residential retrofit projects in 2016. They also complete more new residential metal roofing projects than any other type of contractor. 

One of the surprises is that the number of general roofing contractors finished nearly as many new residential roofing projects as metal roofers in 2016. In the new commercial metal roofing market, it was the metal building contractor that completed the most projects.

 

 

 

Figure 9.

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When you look at contractors who did metal roofing projects in 2016, and ask them how many non-metal roofs they installed, you are not surprised to see that companies that identify as roofing contractors did a lot of non-metal roofs. (See Figure 9.) But we were surprised to see how many non-metal residential retrofit projects companies who identified as metal roofers completed.

 

 

 

 

 

Revenue from Metal Roofing 

How does this activity breakdown into revenue for companies?

 

 

Figure 10.

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About 50 percent of the revenue derived by our respondents for roofing projects comes from the commercial market. (See Figure 10.) Slightly more than a third comes from residential and the remained comes from other projects, such as industrial. To be honest, we were a little surprised by the size of the other segment, and future surveys will have to break that down further.

 

 

 

 

 

 

 

Figure 11.

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Looking at the contractor level for this revenue, a couple of notable results stick out. (See Figure 11.) Metal roofing contractors derived nearly 70 percent of their revenue from the residential market. It seems clear that those companies who identify as metal roofers are more likely to work on residential projects.

Roofing contractors, on the other hand, split their revenue relatively evenly between residential and commercial.

 

 

 

Project Size

 

Figure 12.

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Looking at project sizes across the country (See Figure 12), we saw considerable variation among metal roofing projects in the commercial market. The national mean for a metal roofing project is 18,900 square feet, but in the West that figure is considerably lower at 12,700 square feet. The largest projects occur in the Midwest, with a mean of 24,300 square feet.

 

 

 

 

 

 

 

Figure 13.

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On the residential side (See Figure 13), the variation is for less noticeable. One reason for the difference is that the average size home is relatively constant across the country.

 

 

 

 

 

 

 

 

Company Size

We asked respondents to report their revenue for all roofing projects for 2016 and for metal roofing projects for 2016. The metal roofing revenue is a subset of the all roofing revenue, although these numbers can give us an idea of the amount of metal roofing activity among all roofers.

 

 

Figure 14.

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The mean revenue for all roofing projects among our respondents was $2.9 million in 2016. Of that total, $832,000 was for metal roofing projects. (See Figure 14.) The percentage of metal roofing was 28.6 percent.

 

 

 

 

 

 

 

 

Figure 15.

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By region, that revenue showed considerable variance, especially for all the roofing projects. (See Figure 15.) Companies in the Midwest had a mean revenue of $3.47 million for all roofing projects with $667,000 coming from metal roofing. Compared to the national average, that shows a much lower percentage (19.2 percent) of roofing revenue coming from metal roofing.

 

The South also reported a large mean revenue for all roofing, and the percentage of metal roofing (30.3 percent) was slightly higher than the national average. In the West the percentage was similar to the South (32.3 percent, although all roofing revenue was below the national average. In the East, though, the percentage of metal roofing (48.3 percent) was much higher than the national average, although all roofing revenue was far below the national average and the other regions.

 

 

Figure 16.

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For the most part, roofing contractors tend to specialize in commercial or residential roofing, although many will take on projects in the other market segment. We looked at companies that reported getting more than 50 percent of their revenues from one segment or the other and called them "primarily commercial" and "primarily residential" contractors.

When you analyze the size of those companies (See Figure 16), you can see that the mean revenue for commercial roofing projects for companies doing primarily commercial was much higher than residential projects for companies doing primarily residential. Although, companies doing primarily residential had a much greater proportion of metal roofing work than primarily commercial (27.9 percent for primarily commercial and 37.8 percent for primarily residential).

 

Figure 17.

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The final element of company size we investigated was comparing by contractor type. (See Figure 17.) To no one's surprise, the mean revenue from roofing projects tended was higher for roofing contractors, whether metal or general, than it was for either general contractors or metal building contractors. 

For metal roofing projects, the mean revenue was highest for metal roofing contractors, and it was a much larger percentage (74.4 percent) of all roofing than any other contractor type.

 

 

Number of Employees 

Another measurement of the size of a company is the number of employees it has, whether full time or part time. It's not a completely accurate gauge, since some types of contractors, such as roofing contractors, may employ more employs per the revenue they generate than others. This is an area of study we are looking to dig into in future surveys. However, it's still illustrative to compare numbers.

 

 

Figure 18.

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Our first comparison is field, office and sales staff for both full time and part time. (See Figure 18.) Among our respondents, the mean number of full-time field employees came in just over 14.1, 5.5 for office staff and 2.8 for sales. That's a total of nearly 22 full-time employees.

 

Part-time employees across all categories totaled a mean of 3.2 employees. Looking at the percentage of part-time to full-time, you can see that for field 16.3 percent of employees were part time, for office it was 10.9 percent, and for sales it was 13 percent.

 

 

 

 

Figure 19.

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In our survey, roofing contractors employed the most full-time employees (28.2) with general contractors (25.9) employing second most followed at some distance by metal roofing (13.9) and metal building contractors (13.3). (See Figure 19.)

 

As a percentage of employees, general contractors employed far more office staff (27.8 percent) than the other contractor types. All four were essentially the same in the percentage of field employees hired as compared to total employees.

 

 

Company Financials

Of particular interest in our survey was identifying some financial information that we could then start benchmarking performance against. Respondents were generous in sharing this information, but it should be taken with a bit of caution. The more detailed our request, the lower the response rate, but our topline results still fit within our parameters.

Of our responses, the most complete and confident information falls within the area of direct construction costs. Even with direct costs, there are considerable variances in how contractors measure that, especially from one type of contractor, such a general contractor doing primarily commercial work, to a residential metal roofing company. The biggest variances can come in how the labor is burdened. Some companies place items such as medical insurance in overhead, while others put is a part of the labor cost and therefore a direct cost.

Even with those caveats, though, we can identify some benchmarks and comparisons within the direct costs of metal construction.

 

 

Figure 20.

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Comparing mean direct construction costs for materials, labor and other direct costs between all roofing and metal roofing (See Figure 20), a couple of noticeable items jump out. As a percentage of overall revenue, material and labor costs eat a larger portion of the pie than all roofing.

Extrapolating, that means that on a $10,000 metal roofing job, material costs will be approximately a third of the cost, and labor costs will come in at just under 30 percent. For the same project that is all roofing, the material costs will be comparable to the labor costs of a metal roofing project at 28.2 percent, while the labor costs drop significantly to 18 percent.

 

 

 

 

Figure 21.

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When we look specifically at metal roofing costs by contractor type (See Figure 21), you'll notice that material costs for metal roofing for general contractors is nearly 50 percent, while the labor costs are also higher than for metal roofing contractors or roofing contractors. Consequently, one can assume that general contractors aren't finding much profit in metal roofing installation.

 

Comparing metal roofing contractors with roofing contractors, you see considerable similarity on material costs as a percentage of overall revenue, but labor costs are much lower.

 

 

 

 

 

 

Figure 22.

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We were surprised by the lack of variance of direct costs by project type. (See Figure 22.) Material costs were substantially similar, or at least close enough that one wouldn't want to draw too large of a conclusion from the differences. There is a slightly larger variance in labor costs, where residential projects-both new and retrofit-see a lower labor cost. But even those number are not wildly notable.

 

 

 

 

 

 

 

 

Sales

There isn't a contracting firm in the world that can sustain its business without a good sales program, and often those programs depend on the person making the point-of-contact pitch. Who is doing that sales program can be considerably different depending on the type of business. A general contractor doing primarily commercial work is likely to have a sales person who is highly technical and has deep construction knowledge. A residential roofing contractor focusing on the retrofit market may have a team of sales people who have little technical knowledge but are highly trained and adept sales people.

 

 

Figure 23.

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How sales people are compensated can help identify what kind of sales people we have in the industry. Our initial thought was that for the most part, sales people in the construction industry, especially that part serving the roofing market, would most likely be all commission or a significant part.

Our survey suggests says that 44 percent of our respondents compensate sales people by salary only. (See Figure 23.) Only 14.1 percent of sales people are commission only. For that nearly 42 percent that are a combination of salary and commission, we don't have enough information to determine what part of their compensation comes from commission. Future surveys should be able to dig into that more.

 

 

Figure 24.

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Looking at the survey responses when sorted by contractor type, the results fall more in line with expectations. Metal roofing contractors and roofing contractors are much more commission oriented that general contractors or metal building contractors. Seventy-seven percent of roofing contractors are solely commission or partly commission. For metal roofing contractors, that total is 65 percent. On the flip side, though, only 46 percent of general contractors have commissions as part of the sales process.

Metal building contractors are the least likely to have commission-only sales people, indicating there is a highly technical aspect to the sales process.

 

 

Figure 25.

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We have indicated throughout our discussion that there may be relative differences in sales approaches between commercial and residential construction. This is borne out by looking at sales commissions for companies with more than 50 percent of their revenue from commercial. Fifty-five percent of those companies are salary only and only 6 percent are commission only. Those are large contrasts from companies that are primarily residential, where 32 percent are salary only and 30 percent are commission only.

 

 

 

Conclusion

There is a lot to be learned about the metal roofing market, and the Metal Roofing Cost of Doing Business Survey is only scratching the surface of the information. As we have mentioned several times in this article, there is more research to be done. As we get greater depth of knowledge, we should be able to get better information and improved benchmarking.

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