Risk Management

Jump to section

• Overview & contents
• i. Important Notice
• 1. Executive Summary
• 2. Why Most Roofing Companies Fail to Make Money
• 3. Insurance Is the Defining Cost
• 4. The Economics of One Roof
• 5. SWOT and Competitive Position
• 6. Customer Acquisition
• 7. Service Mix and the Commercial Question
• 8. Crews, Subcontractors and the Certificate Trap
• 9. Funding: SBA and What Beats It
• 10. Working Capital
• 11. The Five-Year Build and Its Gates
• 12. Licensing, Bonding and Compliance
• 13. People and Production
• 14. Financial Projections
• 15. Break-Even
• 16. Sensitivity and Scenarios
• 17. Risk Management
• 18. Implementation Timeline
• 19. Returns
• 20. Key Performance Indicators
• 21. Key Assumptions
• 22. Conclusion
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Capital Schedules
• C. Appendix C: Funding and Debt Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

17.1 The risks that matter

Gross margin erosion is the risk that ends roofing companies, and it is dangerous precisely because it is quiet. Four percentage points removes $257,000 of Year 5 EBITDA — nearly half of it — and produces no event that forces attention. It is managed by costing every job before it is sold from aerial takeoff rather than estimation, by weekly job costing on completed work against the estimate, and by the published finding that shops without per-job costing run four to seven points lower on net margin.

Volume shortfall is the largest single sensitivity at $455,000 for a 20 per cent movement, because overhead does not shrink with the work. It is managed by the booking-depth gate on every crew addition, by never adding capacity ahead of demand, and by a marketing function measured on cost per sold job so that the pipeline can be rebuilt deliberately rather than hopefully.

A workers’ compensation claim is small in probability and severe in consequence. Class code 5551 carries among the highest base rates in construction because of fall claim severity, and a single serious claim resets the experience modification rate for three years — reversing the 18.5 to 16.0 per cent improvement that is worth $43,000 a year. It is managed by fall protection on every roof without exception, documented training, prompt incident closure, and subcontractor certificate discipline.

Supplier credit withdrawal removes $346,000 of free working capital overnight and cannot be replaced at any price. It is extended on payment behaviour rather than financial statements, so a single stretched month in a seasonal trough can cost it. It is managed by treating distributor terms as the most senior obligation after payroll, and by drawing the line of credit rather than stretching the distributor when the off-season bites.

Material price volatility is outside management control. Asphalt shingle pricing swung nearly one fifth during 2024 and 2025 as oil and refinery outages disrupted supply, and lead times extended to eight to twelve weeks. It is managed by pricing from current cost rather than from last month’s, by quoting with a validity period, and by holding the ability to shift mix toward repairs where material intensity is lower.

17.2 Risks sized against the plan

17.3 Controls

• Every job costed before it is sold, from aerial measurement rather than visual estimation.
• Weekly job costing on completed work against the estimate, by crew — not monthly, and not only on the jobs that went well.
• No crew added until existing crews are booked four weeks ahead for three consecutive months.
• Marketing measured on cost per sold job by channel; no channel funded on cost per lead alone.
• Current subcontractor certificate on file before any payment is released, enforced by the payment system rather than by a folder.
• Fall protection deployed on every roof without exception, with documented training and attendance records.
• Distributor payments made exactly to terms in every month, including the seasonal trough.
• Consumer finance offered on every estimate, not only where the homeowner raises price.
• No crew or capacity step funded where the preceding gate on margin, cost per sold job or booking depth has been missed.
• No owner distribution beyond budgeted compensation until debt service cover has exceeded 1.50 times for two consecutive years.