436: Markup vs. Margin: How to Price Roofing Jobs for Profit (with Michael Stone)

⏱️ 1:05:37 🎤 Dave Sullivan, Michael Stone

AUDIO EPISODE

436: Markup vs. Margin: How to Price Roofing Jobs for Profit (with Michael Stone)

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Chapters

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0:00

Introduction & Sponsor

Dave Sullivan introduces the episode and its focus on profitability, then highlights Ruby virtual receptionists as a sponsor.
7:02

Why Contractors Fail

Michael Stone, with 64 years in construction, explains that most contractors fail because they don't charge enough and don't treat their business like a business.
27:27

Key to Success: Numbers

Michael outlines reasons for failure including poor marketing and not meticulously tracking bookkeeping, job costs, and overhead to ensure an 8% net profit.
45:54

Overhead vs. Job Costs

Dave and Michael clarify the distinction between overhead (fixed costs) and job costs (direct costs) and how miscategorization impacts pricing and profitability.
1:05:07

Accurate Bookkeeping Importance

Michael emphasizes that correct P&L setup and understanding financial statements are crucial for making money, and warns against common accounting pitfalls.
1:17:13

Embezzlement & Management

The hosts discuss the prevalent issue of embezzlement in construction and the need for owners to understand financial statements to prevent such losses.
1:27:30

Markup & Gross Profit

Michael explains the history behind his book 'Markup and Profit' and clarifies the difference between gross profit and net profit, emphasizing gross margin's importance.
1:42:01

Pricing for Profit

The discussion focuses on why contractors must determine their own pricing based on their unique cost structure, rather than following competitors, to ensure profitability.
1:50:50

Managing Overhead & Efficiency

Michael and Dave discuss common overhead issues, such as excessive staffing and poor planning, which lead to increased job costs and reduced profitability.
2:05:20

Sales Goals & Coaching

The episode concludes with advice on setting clear sales goals, understanding the math behind profitability, and the value of coaching for business success.

Speakers

Dave Sullivan

Host — The Roofer Coach; The Roofer CFO

Michael Stone

Author of Markup and Profit, a Contractor's Guide

Key Takeaways

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Treat your roofing business like a business by meticulously tracking financial numbers, rather than relying on competitiveness or personality alone.

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Understand the critical difference between overhead costs (fixed, regardless of work) and job costs (direct, per job) to accurately price your services.

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Aim for a minimum of 8% net profit; if your business isn't achieving this, adjustments are necessary in estimating or operational efficiency.

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Do not let your bookkeeper or CPA tell you that your salary is your net profit; your salary is an overhead expense that must be accounted for in your pricing.

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Develop a personalized pricing strategy based on your unique cost structure, rather than blindly matching competitor prices, as their numbers will differ from yours.

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Continuously monitor your gross profit margin on every job through detailed job costing to identify and address "slippage" or profit leaks.

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Invest in proper financial education by reading foundational texts like 'Markup and Profit' and consider professional coaching to gain external perspective and accountability.

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