How to Start a Roofing Company

1. 1

   Form the entity and get an EIN

   Almost everyone forms an LLC or a corporation rather than operating as a sole proprietor, because roofing is a trade where a bad day produces a serious claim. Which structure and which tax election makes sense depends on your income, your state and your payroll plans — a conversation with a CPA, not a decision to copy from a forum. The federal employer identification number is free directly from the IRS.

2. 2

   Find out what your state actually requires

   Some states license roofing specifically, some cover it under a general contractor classification, some regulate only above a dollar threshold, and a few leave it to counties. Several require a licence before you may advertise, not just before you may build. Start with the state-by-state licensing reference, then confirm with the board, because these rules change.

3. 3

   Get insured before you get busy

   General liability at minimum, workers’ compensation as soon as anyone works for you, commercial auto the day the truck starts hauling. Underwriting takes time and many carriers approach roofing cautiously — start weeks before you need the certificate.

4. 4

   Open a business bank account and a bookkeeping system on day one

   Not month six. Commingled money is the most common reason a new contractor cannot tell whether a job made money or substantiate a deduction, and it weakens the liability protection the entity was formed to provide.

5. 5

   Get a contract reviewed by a lawyer in your state

   Before the first job, not after the first dispute. Residential construction contract requirements are heavily state-specific and downloaded templates are often non-compliant. The clause-by-clause guide explains what each provision does, so the review is a shorter conversation.

The templated document a bank asks for is a formality. The useful version is short and answers five questions honestly. If you cannot answer them, the plan is not finished however many pages it has.

• ●What work, for whom, in what radius? Retail replacement, insurance restoration, repair and service, and commercial low-slope are four different businesses with different cash cycles, marketing and crews. Pick one to start.
• ●Where does the first year of work come from? Named sources, not “marketing.” If the honest answer is “people I know,” say so and count how many.
• ●What does a job cost you to produce? Burdened labor per square, material, disposal, mobilization — the estimating work, without which the rest of the plan is fiction.
• ●What is your annual overhead, in dollars? Insurance, truck, phone, software, fuel, accounting, licensing, your own draw. Divide by target revenue for the percentage every job must carry before profit exists — and overhead divided by gross margin per square is your break-even in squares.
• ●How do you survive February? Roofing revenue is seasonal in most of the country and lumpy everywhere. The plan has to say what pays the fixed costs.

Most new roofing companies start with the owner working and either a helper or a subcontracted crew. Both routes carry a decision you should not make alone.

Subcontracted crews

Lower fixed cost, faster to scale up and down, no payroll administration. In exchange: less control over schedule and quality, reliance on their insurance, and exposure if the relationship is later characterised differently than you intended. Verify insurance directly with the agent, get a written subcontract, and keep certificates current — your workers’ compensation auditor will ask.

Employees

Higher fixed cost and real administration — payroll, withholding, workers’ compensation, unemployment insurance — in exchange for control, consistency and the ability to train to your standard. Most companies that build a durable reputation end up here for their core crew.

A roofing job is cash-negative before it is cash-positive. Material is delivered before the work is done, labor is paid weekly, the customer pays on completion or later — and every additional job in progress consumes cash you have not yet collected. This is why profitable roofing companies fail.

• ●Supplier terms are your cheapest financing. A distributor credit account with net terms closes most of the gap on a residential job. It takes time and references to set up — start before you need it, and protect it by paying on time even in a bad month.
• ●Structure the payment schedule deliberately. A deposit, a payment at material delivery or substantial completion, and a final balance is a common residential shape. Several states cap or regulate the deposit a residential contractor may collect — check yours before setting a policy.
• ●Insurance jobs pay in stages and slowly. Carriers commonly pay actual cash value first and release recoverable depreciation after work is completed and documented. Where there is a mortgage, the payment is frequently co-payable to the servicer, which releases funds in draws after its own inspections. Plan the float or do not take the work.
• ●Get a credit line before you look like you need one, and invoice the day the job closes out — better still, collect in the field at completion.