Roofing Success
The Roofing Success Podcast is a show created to inspire roofing contractors to achieve optimal success in their roofing businesses. The host, Jim Ahlin, is the co-author of the book, "Internet Marketing For Roofing Contractors, How to TRIPLE Your Sales and Turn Your Roofing Website Into an Online Lead Generation Machine", and Co-Founder of Roofer Marketers, the Digital Marketing Agency for the roofing industry. On each episode, Jim will be sitting down with industry leaders to talk about their processes, the lessons they learned, and how to find success in roofing.
Roofing Success
Why Your Roofing Company Isn’t Making Enough Money with Zach Exposito
Your roofing company isn’t making enough money—here’s why. In this powerful conversation with second-generation roofing pro Zach Exposito, we dig into the hidden pitfalls that could be costing your company thousands (or more) every year. Zach opens up about the challenges he faced, including hiring missteps, poor role definitions, and inefficient processes, and shares how he turned things around to create a thriving, scalable roofing business.
You’ll learn:
- Why hiring the wrong people can cost you more than you think.
- How to structure your team for growth and efficiency.
- The #1 financial mistake most roofing companies make—and how to fix it.
- What you need to know about running lean while still reinvesting for growth.
Zach’s insights into team building, department structure, and financial strategy are invaluable for owners looking to scale and stay profitable. Don’t let your roofing company fall victim to these common mistakes!
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Are you unknowingly building a business destined to fail? Zach Exposito exposes the critical flaws that almost broke him and how you can fix them before it's too late. This episode takes you behind the scenes of a roofing revolution. Zach shares his secrets to overcoming early setbacks, restructuring for success and creating a business where every role has purpose for success, and creating a business where every role has purpose.
Speaker 1:Zach Exposito is a second generation roofing pro with a sharp eye for finance and an even sharper focus on building teams From sales to operations. Zach's approach is a blueprint for anyone ready to level up their business. What makes Zach stand out? His ability to turn hiring challenges into opportunities and his refusal to settle for mediocrity. You'll hear how he redefined project management and found the perfect balance between growth and efficiency. Grab a notebook. This episode is packed with insights that could transform your business. Whether you're just starting out or ready to scale, zach's story will inspire you to think bigger and execute better. Welcome to the Roofing Success Podcast. I'm Jim Alleyne and I'm here to bring you insights from top leaders in the roofing industry to help you grow and scale your roofing business. Welcome back, zach Exposito. How are you man?
Speaker 2:I'm good, Jim. Thank you very much for having me again. It's a pleasure. Yeah, man.
Speaker 1:It's always fun, man. We had a great conversation last time and you added a lot of value and I love your story and where you came from and how you got things going and left the left roofing and tried to get away and brought it back in right. Yep, left roofing and tried to get away and brought back in Right, and and and and and and. How much opportunity you saw in the roofing business, even though you went that route down the finance route and things like that. I think that's a testament to the business itself, right, like there's a to the industry itself, that the, the amount of opportunity, that the amount of opportunity that's in this business.
Speaker 1:I wanted to just kind of start off by talking about, you know, some things. We were chatting a little bit off camera and you know there's always this constant evolution in business, right, and there's things that you that you're always working on long term and then there's things that you're kind of they're more new things that you're working on. How do you balance that? Like, let's start talking about what are the long term, kind of long term things that you're always working on in your roofing business?
Speaker 2:Well, I mean, it's quite challenging and it's kind of a hard question to answer. Long-term, I think you know our goal is continuous growth and continuing to service our clients to the best that we possibly can, and that's always a challenge in itself, right? So that in itself is is something that we're working towards every day how to better each simple process. Uh, from the simplest things, we try to avoid all the redundancies and, uh, service our clients better and also expand the business at the same time and increase our revenue, but do it, you know, effectively and efficiently. So, um, you know, adding new departments is always, always a slower process than anybody would like.
Speaker 2:So you have the roadmap, and we have that roadmap as to what departments we may be missing in our company. But it's just a process to get the right person to fill that department. But it's just a process to get the right person to fill that department. You know the roles for the department, the procedures for the department. All that kind of stuff takes time, takes work, and always adding a new department to any business is quite challenging in itself. So that's something that we're always constantly working on long-term is adding departments, and then, once you add those departments, you also want to build that department out and add team members to it. So definitely a long-term thing that we've always been working on is, you know, recruitment and adding team members to our business that are going to.
Speaker 1:Let's talk about how that's evolved over time, right? So when you started off, what was the structure of the departments of your company, and then which ones have's evolved over time, right? So when you started off, what? What was the structure of the departments of your company, and then which ones have you added over time?
Speaker 2:I mean I'd say maybe majority of them. We've added more time. Um, from the beginning, uh, so when I started we basically had one person that was, uh, you know, office manager, accounts payable, accounts receivable, permitting, and I would say she was more or less also the administrative assistant in the office answering phone calls, so on and so forth, also handling payroll, doing HR. So we were also a smaller business and we had, you know, less moving parts and less revenue as well. We also had an office administrator and then we had sales and I kind of started when I started into the business. I started in the new construction department doing sales there and trying to grow that business and then trying to grow the commercial side of the business as well.
Speaker 2:So eight years later more or less, we have a permitting department that has two staff members that work there. We have accounts receivable, accounts payable, bookkeeping, we have secretary and then we have our operations department and sales. So our sales department obviously deals with sales. We have a new construction estimator that just does plan takeoffs on new construction. Our operations department consists of operations manager, project administrator, which kind of assists and facilitates all of the ongoing projects and helps keep the clients informed of the process and handles any upcoming deliveries, things of that nature. And then we also have the field side of the operations, which is our crews. And well, another one that was added was project managers, which we never had.
Speaker 1:Nice. How was that change to have project managers? Was that a very positive change for you? Was it a struggle at any point?
Speaker 2:You know I wouldn't say a struggle, I'd say it always has its challenges. We had at one point, you know, we we got four or five project managers at the beginning phase of this and then we ended up having none shortly after or sometime after, because we came to the conclusion that we weren't hiring properly for the role. Uh, they weren't necessarily project managers and they were, you know, the the, the job they were supposed to overtake wasn't really being overtaken. It was still falling on that same person, um, to handle it, which was either sales myself or the operations department. So we ended up kind of restructuring the roles and objectives for the project manager and since we've done that, obviously it's worked out great because it alleviates a lot of the office staff and the salesperson as well, because usually that phone call would have gone to the salesperson prior to us having project managers and you know it makes their job more difficult to sell and focus on new clients moving forward.
Speaker 1:Yeah, definitely. I love that story, and I don't know if you even realize it or not, but what the story is to me it's because business is such a constant iteration that sometimes you do something and it doesn't work out the way that you hoped, right, like, and so you created this project manager role, you hired for it, you executed on it and then you went oh man, oh no, maybe it's not the right. We didn't structure this right. We didn't. It's not the right. Maybe it's not the right person for the role, like, there's always stuff that can happen along the way, and I you know when you were, when you, how did you originally structure it? And then, what were your thoughts? When you restructured the role Like, what were some of the things that you were like, man, we, we should have done it this way, or that's what we did the second time around. This is how we did it the second time around.
Speaker 2:Well, prior to bringing our project managers originally, we remember we never had that role on our company, so that would fall on you know whoever was offering um, handling the operation side of the of the projects or usually it was the salesperson, and you know they would get a call, so on and so forth. Oh, another thing that we also added to that side kind of that goes hand in hand is runners. So material deliveries. That would also at one point fall on the sales guys. So we were running very thin. It was very operational, successful, but I sat back and took a bigger picture of it and said, okay, we want growth and this is our long-term goal. We can't achieve it by continuing the way that we're right now. So initially we kind of converted what would be a runner to kind of a project manager role, which was kind of where we failed at originally and we also didn't really define. We didn't define the proper procedures and the obligations for that department and what was expected of that department and those individuals.
Speaker 2:Another thing we failed at was, out of fear of losing a customer, getting a bad reputation and, more than anything, losing money, we would pick up a lot of the slack that was customer, gaining a better reputation and, more than anything, losing money.
Speaker 2:We would pick up a lot of the slack that was left off by these individuals at the beginning because they weren't project managers per se, they weren't really trained properly. So to a certain extent it was our fault internally for not doing it properly as it should have been done. So that slack fell on us, which we would take over it or we would micromanage to ensure that nothing would go wrong. So you know, it was kind of a disaster, to say the least, on both sides and it caused a lot of frustration, obviously within, because micromanaging and then you're taking power away from somebody who you expect or you told was supposed to be a project manager on that project. So it created a lot of conflict and it was. It wasn't the proper structure, I don't believe, and things weren't getting done as they should have been done without the reinforcement from other people that were doing other departments, from other people that were doing other departments.
Speaker 1:So what was it that where you said, like, what was the point in time or the thing that happened when you were like all right, this is it. We have to like we've reached the end of the road here. We have to find a new road to go down.
Speaker 2:I mean, I realized it pretty early on. But, you know, another thing that we obviously failed at is that I understood the demand that we had at the time and the services that we needed to service uh. So you know, we kept them on board just to, you know, facilitate those things because they were doing a good job, you know, to the capacity that they could um like. Again, I say it's a, it's a failure on our end, I believe, um, but it's part of the process and you know, everybody learns throughout these processes. Uh, but I kind of realized that early on, when a lot of things would fall on myself or other people, uh to take it over, because it just wasn't done, being properly done, done properly, or uh, the source wasn't really reliable. So, um, over time, it started to uh fix itself in the sense of, you know, uh parting ways. Uh, either they would part ways with the company because they figured that it wasn't going as well for them, or the way that they realized, and or we parted ways with them because we came to the conclusion that it wasn't the right fit for a company. And then, you know, we had a, a lapse there where we had no project managers. We figured out a very sustainable way to operate by using our operations department, kind of as a project manager from the office, um, which was great. But uh, obviously we still need somebody on the field.
Speaker 2:So it took some time to to make those hires and to find the right people and then obviously train them. So it's a it's a slow process because you want to make sure you dedicate time to each individual that you hire, regardless if they come from another company. We do things up very differently than everybody else, so you want to make sure that you spend time with them, that they know the information they need to know. Everybody always comes um as a new candidate that used to work for another company, that's been X amount of years in the industry and they know everything, and then you quickly find out you know that's not necessarily the case, but it's not a bad thing either, right? So what we do is obviously we like to be transparent and we expect them to be transparent with us as well and address where the weaknesses are at and whatever they're not familiar with or trained on. We try to train them on those things yeah, that it it's.
Speaker 1:What would you do different if you had to start over in that, in that process?
Speaker 2:I mean, I'd probably do what we're doing now currently, which is, you know, hire slowly, um and, and spend time to train that person properly, so that when you bring the next person on, you know, hopefully that person that's already trained can take over that role.
Speaker 1:Yeah, I think that that's a big struggle that a lot of us have as business owners is we either create a role or hire for a role but it's not fully fleshed out. It's just that we need help, right, like you know, like we need help, we're busy, we like let's try to solve this problem with a person, right, like, let's just put a person in that role instead of really well defining the role. Defining the role well, you know, having a thorough training process that you're going to bring them through, you know, taking time. There's the old um, the a lot of great old hiring analogies around that high, what's the higher? Slow fire, fast, right, all that type of stuff. And then but I think that's a big thing and maybe get your thoughts on this of how, how things have changed over the years for you guys is that training of people? You know, I think everyone starts out with man. We just need people, right? Have you decided, no, we're going to make sure that we have a, or we're going to try to.
Speaker 1:I'm sure you don't have every role in your company. It's hard to but like, no, in these specific roles that we know that we're going to be hiring more often, do you? Have you said, okay, we're going to have a 90 day formal training process or a 60 day formal training process or anything like that, or have you, is it just a work in progress? Okay, we can make this better. Make that better. The next person we hire will go. It'll be better for them. How have you guys done that?
Speaker 2:Yeah, it's just a work in progress. I mean, we don't go into it thinking the next person you know it's going to be where we work we don't go into using that person as kind of a guideline for the next person. But you know, we obviously train the essentials. I wouldn't necessarily say it's 90 days, but through the whole 90 day period, more or less. It is training for the most part, not, you know, direct, uh, hands-on, full training, but throughout the workday, uh, there'd be a training involved in there. Um, so you know it's, it's just it's also hiring the right people, especially in new departments that you're building, hiring the person that's going to help innovate that department and be proactive in addressing issues and helping you find solutions to those issues.
Speaker 2:It's frustrating when sometimes you hire more people and you come to the conclusion that all you're doing is creating more work for yourself. You, sometimes you hire more people and you come to the conclusion that all you're doing is creating more work for yourself. So that's, you know. Another thing that we focus on is, you know, trying to create the right, the right team and bring on the right individuals on board to join our team. That can effectively, you know, enhance things, change things for the better in the company and and realize where things are maybe wrong or done wrong and find a solution for those things not things for the better in the company. And realize where things are maybe wrong or done wrong and find a solution for those things, not just the problems.
Speaker 1:That's a big thing. As you grow and you have the ability to hire great people, you guys have what's a little bit. I would say. You have a unique service mix and a little bit more unique from a lot of the contractors that I speak to, in terms of so you do new construction, you do commercial and you do residential, and so I think having a lot of the contractors I talk to are you know that were residential or were commercial, you know, and then you have in-house crews and you do subcontracting, also have subcontract crews that you subcontract with. Let's talk through some of this in a little bit. I think one of the things that I'm always curious about and I've always heard as a challenging path is new construction. Do you guys, are you still very active in new construction? Is that one of your kind of more active service offerings?
Speaker 2:I wouldn't necessarily say active, but you know we so. When it comes to new construction, when it comes to the industry in general, it's just it's very hard to find a good contractor, subcontractor, like a roofing contractor, contractor specifically, more so for general contractors. And you know builders and developers and people building new construction projects, um, so, believe it or not, we've kind of found our good niche there and our place where you know people are contractors, are willing to pay a little bit better just to make sure that those guys are going to show up when they say they're going to show up, otherwise it delays the whole project. Um, but, with that being said, we do have a very select few and you know we work for new contractors as well, but we're kind of selective and we just don't bid for everybody, because that kind of world of new construction is a little bit different.
Speaker 2:Uh, you know you can find yourself just bidding projects, just to bid projects, and never get awarded anything and you, just for the sake of that contract, you're using your numbers to negotiate with other guys, and you know. And then there's the other side of it where you know contractors try lowering you to the point where there's no profit to be made on that project. So we've found our select group of contractors and we're grateful for them because they're a big part of our business and big part of our success and you know, we specifically typically only work with them, we prioritize their projects because, you know, majority of the time those projects will be awarded to us based on our performance in the past and and the fact that we show up at the end of the day, you know, and we make things right.
Speaker 1:So, would you say, the key to success there is finding builders and contractors that you can work with that have the expectation of more of a higher quality of work versus just the lowest price. Absolutely yes. And then the magic question, zach, is how do you find those guys? How do you identify someone who is willing to? Actually because that's always the struggle in new construction right, it's like the race to the bottom a lot of times, right, like was it just going through and bidding a lot of projects and developing relationships, like what created this group of contractors and builders that you work with? How did you get to that client base?
Speaker 2:I'd say majority of it would be relationship-based builds referrals from other contractors that we've worked with in the past long term, and when they get this referral they're looking for somebody who's going to be a team player on their project, get whatever done that needs to be done and show up when they need to show up and get the job done properly. So majority of it is that there's still the case, obviously, where to build relationships you still got to give each other opportunities. So we still bid out jobs for new contractors from time to time and there's been great relationships that have flourished from a situation like that where we never knew the contractor. We gave them one price and you know, moving forward we start bidding on other projects, getting awarded them and having a great long-term relationship with that contractor. But more so it's more relationship-based. Where you find those long term contractor relationships. It's not to say that they don't happen the other way, but usually it happens by relationships and referrals.
Speaker 1:Yeah, when you're in the bidding process, how do you differentiate your value to that contractor, Because you know you don't want to. I mean, the value isn't in having the lowest bid Right. There's never a value there, so from a business perspective. So is there a way that you found, or or it's just you bid these projects. You start to kind of feel the relationship out, see what kind of, what kind of you know contractors they're looking to hire. You know, how is that? How does that fall into place for you?
Speaker 2:I mean, we're very transparent. We don't like to waste a lot of time. It's as simple as just. You know, and nowadays it's such a such a rare thing to find. You know, and nowadays it's such a such a rare thing to find, but it's as simple as picking up the phone and calling them and getting a feel for them and just talking to them openly and finding out. You know, what are you guys looking for? What is the goal here? Is there a budget? Are you guys looking for the cheapest contractor or are you guys looking for quality? You know, do you care if they have insurance or not? Is that part of the value that you're adding to what they have to offer? Those are just conversations that just need to be had.
Speaker 2:I think it's a conversation that saves everybody a whole lot of hardship and time. You'd be surprised how many answers you get quickly to identify if it's a good contract that they're continuing their relationship with or not. Based on that one phone call, you could also just find out how many other bids they're getting. Sometimes they'll just voluntarily tell you you know they're getting 20, 30, you know something outrageous even six, seven bids. It's like okay, well, you guys seem like you're. You know, and I'll tell them. You know, it seems like you guys are price driven.
Speaker 2:Considering the fact that you have seven bids, I mean, what is that you're looking for? Um, you know? So it's just a conversation, you know? And uh, sometimes it works out for the better because they could see that you know you're no nonsense and that you know you don't want to waste your time and mean business and you want to get to the bottom of it and you want to perform and you want to work and you want to get awarded the job. I'm not just here to bid on your job, I want to know how can I get awarded the job. So that's a big part of it, for sure.
Speaker 1:That's a big aha moment. I love pick up the phone, because people don't pick up the phone nowadays. It's like the path of least resistance. Great, we'll just get our bid in Right Like, we'll just submit this bid and hope for the best, and pick up that phone, have those conversations, ask questions. People will answer questions, they'll. They'll tell you more than you that, than you think that they'll ever tell you right like it's. It's amazing how much they will tell you, um, yeah, because they want their project done right too. Right Like they.
Speaker 1:And of course, there are some that are just price shopping and they just want the lowest price and they're very, but understanding their budgets, understanding their timelines, understanding what they're looking for is an easy thing. Now we have the in-house crews and we subcontract on stuff. You said that with your in-house crews, you focus those that team more on residential and that on a lot of your commercial projects you'll do subcontracted crews. What got you there? What? What determined? Okay, our crews were. We feel our crews are better suited for our residential work than our commercial work, or or you know what was the process that got you to how you structured how you're doing that?
Speaker 2:It was just learning by experience, honestly, as we grew. Originally we never really had that kind of problem. Everything was always in-house. Because of the workload that we had and the backlog we had, we were able to manage and handle it with our in-house crews. But as we continued, as the growth continued, we found ourselves having a bigger issue and a bigger backlog issue when it came to residential, when we got our crews tied up and stuck on you know, a huge commercial project, uh, roof replacement, you know, and then you got everybody else calling saying, hey, when's my roof gonna get started on the residential side, when the residential side is a lot, uh, it's a lot more volume, um, part of the business, um, you know, guys tear off, yeah, 30 squares, 40 squares, um, or more. But you know, for the most part they could get a quick turnaround, at least get dried in within a couple days, not one, two, three days, as commercial takes much longer than that and it's a bigger process, um. So you know that that's where we found ourselves.
Speaker 2:And then we gave it a shot, just to, you know, and we've done it the other way around too. So we ended up working out with getting our commercial crews subcontracted for the most part not always per se we could still we still do put our in-house crews on commercial jobs, and sometimes clients require that, which we also have the unique ability to offer, um and provide. But you know, when we figured out that when you put the subcontractors on those projects, they could provide a bigger workforce, um, to get several more commercial jobs started at one point, and then we could focus our in-house crews over here on the residential side, we've done it. What I was trying to explain is that we've done it the other way around too, where we've had such a back, big backlog on residential where we've stuck a subcontractor in there and it was a disaster compared to putting a subcontractor on a commercial job, um, and it's just, there's a lot of things that that that you know, that that play a part in that.
Speaker 2:Uh, you know the way they're dressed, uh, your housekeeping manners. Uh, you know the way they're dressed, uh, your housekeeping manners, um, you know the cleaning up, protecting the property, uh, understanding those things. And you know, our in-house crews understand it because they go through the process with us over time. They've gone through the process with us and they usually go back. They're the ones that go back when the client is like hey, by the way, you guys left the stain on my driveway or this or that, and you know, they've been through the process with us and they understand those things.
Speaker 2:The subcontractor, you know, unfortunately, they usually don't go back and clean those things up and they usually don't carry them um, so our guys, also uniformed, you know they know where they need to park, uh, on the property, don't park on the grass. So it's, it's different and and it's unique, um, it just takes, um, you know, takes building and experiences over time. And I, I think we've found that, I mean not to say you don't have the same thing on the commercial side, but it's a little bit different when you're doing a, you know, uh, um, a thousand square warehouse, you know, and nobody even knows you guys on the roof.
Speaker 1:That's right. Yeah, there, there's just a couple extra trucks in the parking lot, right, like it's not. You know, when you're at someone's house, it's it. I could that that. That to me, is a an aha moment is when, when people are at, when you're at someone's house, it's much more. There's a much more personal relationship involved in that. Um, if that's a good way to put it, like there's to that customer experience has to be different, and not that you can't buy good subcontracted crews that that will park where you want them and do all that. But it's, it's, it's uh, you know, uh, you know, it's just, that's how it's worked out for you.
Speaker 1:But a lot of this business, a lot of roofing contractors, are sales and marketing companies that sell roofing and everything is subcontracted. I feel there is a very large advantage to having in-house crews people on your team W2, to be able to go out and do repair work on top of the replacements and to have the flexibility that you have. If you need help on a commercial project, you can move your crews over. You have a lot more control in the process. But I think that a lot of contractors struggle or are worried about hiring and training and managing crews. What advice can you give them on building out in-house crews for their roofing?
Speaker 2:company. It's definitely challenging. We've been very grateful and fortunate to have long-term, long-lasting in-house crews and I'd like to say that to other contractors. That's a good benefit. You treat the field workers, the field workers, good and you understand their value, that you know they're loyal guys and they'll stick around and and that helps your business flourish and they're a big, huge part of any business and obviously continuous growth. But growth, but they're they're field supporting, they're the ones getting these jobs actually done and they're the ones that are going out there in the rain to put a tarp or to to do an emergency prepare for a high value customer. You know these kinds of things. So it's it's difficult but it's not impossible. And you know, like anything else you'd have to do, you know you have to work little by little and try it out. And you know we still find ourselves hiring new field workers where they don't necessarily work out and they end up costing the business money due to, uh, improper workmanships or improper installs. Um, you know you have, once you start getting field, uh, the fleet vehicles as well. That comes hand in hand with the crews. Now you, you know you're increasing your overhead with commercial insurance policies. Um, you got to make sure that that driver's driver's license is valid. You know that. You know their records clean, because then you know that opens the door for more liability for the company and more losses. So it's definitely challenging, but but I think it's something that's that a lot of businesses in the roofing industry lack today and it's definitely needed. I think that's what kind of stands out when it comes to your service to your customers. You're not able to service a customer the same just having subcontractors Almost impossible.
Speaker 2:I was fortunate enough that when I came to the business, for the most part we already had in-house crews. We just expanded, developed. You know we increased our fleet, added new fleet, got rid of the old fleet. You know GPS trackers is another thing. It was at a point where you know you got to pick up the phone and call seven different people to find out where they're at.
Speaker 2:So you know now from a screen. You know our operations department. Anybody for the most part in their company can see. You know where these guys are at all times, if they're on their way to the job, if they left the job, so on and so forth. You know so little things like that. Also with Field Cruise, adding softwares was also very challenging for them to manage and to report back to the office effectively and efficiently. Company Cam Job Nimbus. You know there's a lot of different softwares and the more softwares you add, the more challenging it is for your field crews. But it's something that needs to be trained and had and it definitely is beneficial for in-house crew management, for sure.
Speaker 1:Yeah, definitely, and that's that it's. It's just the additional training and management you have to take that on. But I mean to what? Like it does seem invaluable to me. To me it's, you know, like it just seems like that's the way to go, especially into the future where you know W-2 is a big thing in the industry now, going from 1099 to W-2. If you have subcontractors that don't work for anyone else which happens in this industry at times, there's a, you know they may not be subcontractors to the IRS, just so you know.
Speaker 2:Yes, that's true. I mean you, you hear stories and you see the way that people operate and it's it's pretty bizarre, it complicates things more than anything in my opinion, and it doesn't really show a a determination to your own company and and the value that that you know you hold yourself up to and you hold your company up to.
Speaker 2:Yeah, I just I don't understand it. I you know you hold yourself up to and you hold your company up to. Yeah, I just I don't understand it. I you know we'd like to do things the right way and I mean we're here to you know, to grow the business, to create employment for others and to make money.
Speaker 1:Yeah, you have a. You came from a finance background, no-transcript in running the roofing business. Some of the things that you took from your experience in the finance industry I mean, for the most part, everything.
Speaker 2:I mean finance is embedded into every kind of business, regardless of what industry or sector you're in. So having that foundation and having that vision and understanding the importance of finance within a business was very beneficial to our growth. Um, I've, you know, looking at the way other companies are run and the way, uh, the industry is currently with other contractors, you come to a sense to understand that you know a lot of these guys are the roofing guys, right, so, and usually that's how you end up in the industry. Otherwise, you know, no sane person ends up here. But you know the roofing guys. I think there's a.
Speaker 2:You notice that there's a big loss in the financial aspect of it and how to run a company. Lean, how to run a company effectively and efficiently and how to, more importantly, invest, reinvest in your business, which I see not too much of um anymore. Also, uh, and you know, not necessarily invest in your equipment, invest in your people, invest in softwares, invest in your company as a whole. Um, that's what's going to make it very successful, but you know it's it's a big contributing factor.
Speaker 2:Knowing and understanding financials um, knowing and understanding financials, knowing and understanding you know job profit, looking at a P&L for a job, understanding you know where your cost is going, how you could cut costs moving forward and increase your profits. You know there's money lost. You got to understand where that money ended up going to make sure you guys don't. You know the company doesn't make the same mistakes moving forward. The financial side of it is a big, complex side of it and I think it's one of the most important sides to it Because without that you know you really can't. You could have the best installers on the field, the best everything, but if you know if your financials aren't properly aligned, then you have a bigger problem.
Speaker 1:If your financials aren't properly aligned, then you have a bigger problem. So for someone that doesn't man, that maybe never read a P&L or a balance sheet or a cash flow statement or anything like that, what are some of the key things that you would look at to determine the health of a business? Let's maybe on a P&L, right On the overall P&L of a roofing company. If you, if I gave you a P&L from a roofing company, what would be the first couple of things that you would just kind of glance over to see what was in line or not in line?
Speaker 2:Um, I mean, I, I I looked through the whole financial, through the whole P&L. It's hard, you know, to just look at one thing and and not the other. So you got to kind of look at for me at least, and well for most but you got to look at the everything. So you got to look at the P&L. You got to look at balance sheet, um, income statements, uh, you have to look at it all as a whole, make sure those balance out. You know the income statement. Your P&L for the most part should match. But I I want to look at everything. So I want to know, you know, what we're spending and you go, just go down the P&L.
Speaker 2:It's not very that complicated. You know P&Ls, balance sheets, income statements, Um, those are the basic fundamentals of finance and it's very, it's not really that difficult to understand and interpret. What's more difficult, I feel, for most people is how to realize you know what could better within that P&L. So just going down and understanding you know what your cost of goods sold is and then continuing down the list. If you see a vehicle on there under your fleet that may have costed you $30,000 in repairs that year, it might be a good idea to get rid of that vehicle and replace it with a new vehicle that's going to cost you less to maintain it less headaches on the road. You know it's going to cost you less to maintain it less headaches on the road. You're spending the same that you're going to spend on it and, um, you also get a tax credit on that because obviously you're buying a fleet vehicle. So these are just things that you have to look at and understand, and if you're not looking at it.
Speaker 2:Anybody could think, okay, well, I've had this truck, you know, you know, for five years, you know, and or for 10 years, and it's the best truck I have. And yeah, of course I've, you know, replaced the engine on it twice. But replacing an engine only costs a thousand, two thousand dollars and but when you do these costs and you add them up over the 10 years, you could have had two brand new vehicles. Your guys would be happier, you'd have less worries, less headaches, liability, and you're paying less taxes.
Speaker 2:So it's a win-win, but you got to just look at it and understand it. So that's really what I look for and what I look at in P&Ls it's really just making sure that the cost is there, making sure we're still being profitable. You know the cost is there, making sure we're still being profitable, seeing where we can cut costs, finding out why expenses went up this year versus last year. Also, doing a comparable, a P&L comparable this year versus last year and see where you're at and see how lean the company's running. You know if you're making less profit this year but your expenses are more. You know you got to find out what's going on and you know where is it happening, where is it occurring.
Speaker 2:Um, it may be something that you can't control and then you'd have a better idea as to. You know, now we got to look at increasing our um, increasing the price that we're selling the projects at, because we're not cutting it here. Um, if something that it could be controlled, finding out where that you know that cost is increasing, and finding out what you know, what could be cut there and what could be controlled within that cost. So those are just a few things that you know, I look at, and I think that everybody should be looking at. You know on how to run the jobs you then you want to. You know, go down to your to job costing and look at each individual job and see what went wrong, where materials were overordered, underordered. What happened to the materials when they were overordered? You know little. Things like that make a big difference in the company's financial health, for sure.
Speaker 1:In that job costing? It's just something that came to my mind. If materials were under ordered now that runner has to go out, pick up materials, drive it to the job site, do things like that, are you making sure that that time is added into that job costing?
Speaker 2:How much detail are you making sure is in that job costing? No, I mean, I would love for that to be the case, uh, and in a perfect world it would be. But yeah, it's. You know there's a lot there's. There's certain things in finance that you have to realize that it just has to be allocated to kind of like an overall operating expense for the business, otherwise you're going to drive yourself crazy, um, and drive your team crazy as well. It's something that's very hard to record, but so that would be just kind of an overhead expense, if you will, for that specific job and the material would also be allocated based on the software that we had. If you're using QuickBooks, you know you're making a purchase order from inventory or from the supplier and that's, you know, getting recorded and hitting that job account. But yeah, the runner's time and the runner's cost and fuel for the vehicle and so on and so forth is not really being specifically associated with that project.
Speaker 1:Yeah, what are you looking for? What is a healthy range to you in gross profit, net profit on a job or just in general across the whole company?
Speaker 2:It depends. Residential and commercial are different profit margins. Commercial is a much higher profit margin. New construction is a little bit lower than commercial roof replacement, and then residential or profit margin is is a little bit lower than you know, commercial roof replacement and then, like residential, our profit margin is probably a little bit lower. But you have higher volume there, right?
Speaker 2:So it's a better cash flow sector of the business where you have that. You know, for those that don't understand financials, it's just, you know, you have that kind of revolving door of clients making payments to the company, creating that cash flow. Commercial side. It's a little bit less of cash flow wise, but the profit margins are a little bit bigger. So it's a little bit complex. It takes understanding that Residential, nothing less than 20% is where we aim. Um, you know, even though that's, uh, that may be a little bit on the lower end, we always aim higher than that, but the threshold would be the minimum bottom baseline would be a 20% and 20% would be a net. So you're looking at a little bit more than that. When I say 20%, we'll run our numbers hard and then, uh, we'll do the profit margin based off net, net, yeah, so so it's not terrible. Um, sometimes we got to compete, but we know where we need to be. On res, on commercial, um, you're, you're upwards 30, 34, 40, at times, net as well.
Speaker 1:Um, it's just because yeah, you have more, more outlay, more for more time, right, usually you're it's kind of you're there's some risk in the the length of time that you have your. You know you have to pay your subs or your payroll and your materials and you know you have there's things that you have to pay along the way. I think that, and I feel like that's a consideration that some people don't make, in that, like that, yes, it may have this, but you have it's like your money's invested for a longer period of time right, yeah, you're fine.
Speaker 2:In other words, you're basically financing it for that zero interest. Yeah. So you definitely have to account for that. You have to account for the exposure and the liability. And then you know everything else the equipment. There's usually more equipment involved. There's more logistics, there's more managing involved. There's everything's more involved.
Speaker 1:You know insurance requirements, things of that nature, so you got to associate that to those projects. What are some of the lessons you've learned about running lean, like? What are some of the some of the things that you've been able to change along the through the years?
Speaker 2:like to to help to run lean through the years to help to run lean. That's tough. I got to think hard on that one because we're always I can't really remember, and I'll think about it a specific big item, but for the most part it's just continuous budgeting and looking at your books and looking what did we spend last year, what we expected to spend this year, where can we cut on that?
Speaker 1:we don't necessarily see as a necessary expense, so the constant eyes on it is what helps you to do that. It's not a specific thing like oh, we cut this out of the budget and that helped increase profitability. It's just this. It's the intent, intentionality that you have with your, with your, with your finance on an ongoing basis. You're very you're keeping your eye on the ball the whole time Correct.
Speaker 2:Correct A hundred percent. And that goes with. You know that goes with everything because when you cut costs here you could, you could increase costs over here, you know. So let's cut costs necessarily where we don't need it and put it towards a new salary for an employee, that where we could add value to the business. That goes from anything as simple as you know. The office cleaning, is it necessary? You know, can we get somebody else to do the office cleaning? Do we need it? Equipment for the office paper, toilet paper, you know every little thing kind of needs to be taken into account because you add those things up and you know obviously pennies add to dollars. So you know software is everything.
Speaker 2:Vehicle maintenance, vehicle cost is a big uh, because a lot of money goes, goes there. Uh, equipment costs, you know if you're spending. You know x amount here. You know this year, if you know you're you increase on on nail guns and equipment, you know 30, 40 percent. You know you got to figure out what's going on there. Maybe you got to get a different mechanic for your tools. Maybe you know they're going missing somewhere somehow. Maybe you got to track them better. Something needs to be done. So it's not necessarily cutting costs all the time, um, but you know, identifying where the you know issues may be occurring related to cost, that could be addressed. Something similar to that, ladders, is another one. You know, ladders are expensive and they get lost way too frequently and way too often. Um, yeah, so, yeah, exactly so. Learning how to track those things and and keep accountability for them and keep others accountable for them obviously helped you save in the long term you had mentioned reinvestment and I think this is a big thing for people to think about.
Speaker 1:I think a lot of people take money out of their businesses too soon. I think that they don't really project what type of reinvestment they'll need to get to their new goals. I think there's a lot of times there's a gap there. It's just like they just set a new goal and don't think about what it's going to take to get there from an investment. You know, like there's an investment, there's an investment in marketing, there's an investment in team, there's an investment in equipment. Like I think that a lot of it's not focused on again and it's probably just your focus on it. But not focused on again and it's probably just your focus on it. But how can, how should someone think about the reinvestment in their business to continue to grow and build and become a more stable and successful company?
Speaker 2:Um, I mean, you obviously have to identify a roadmap for the business and understand that and uh, and put into the fundamentals as to how that's going to enhance the business, because it's not necessarily a case where, you know, adding the vision or adding the apartment is not really going to contribute to the long-term success or growth of that business. Maybe not at that given time or maybe not at all. So just because you know and I advise a lot of people not to look at other businesses and the way other businesses are running things, because if you do it your way and you do it through trial and error, and you figure out the right way and the correct way and you do it the financial way as well, that a lot of people aren't doing it You'll come to the realization that you might be doing things completely different but much better than companies that have been around for much longer. So just focus on yourself and reinvest in things that you need that become issues or create more expenses and increase costs for you. At the time, I gave the example of a fleet vehicle. I think that's definitely a great investment.
Speaker 2:Um, you know, uh, ladders is another one. Uh, damaged ladders, get rid of them. Buy new ladders because one of your guys falling on that ladder is going to cost you a lot more money than a brand new ladder is. So you know realizing what your exposures and liabilities are, because that is, you know, a big part of it. And again it goes to trial and error. You know when nobody ever thinks of those things until you get that guy that unfortunately falls from the ladder and then you you understand what a cost is associated to that. You know and you also want to make sure that you give your guys a safe working environment. You know and you also want to make sure that you give your guys a safe working environment. So those kinds of things contribute to the success of the business and it's definitely very important to reinvest in them. Pay yourself a salary. Focus on the business. Your salary will increase over time, don't you know? Take the net profits as your salary but?
Speaker 1:but, zach, there's a nice, there's a nice boat, slip down and down there, not too far from you. You got to fill it with something.
Speaker 1:You got to get that you got to get well, yeah, I mean there's other things, that you spend the money you could get a nice high rise down there and brickle or something like you know. Like thinking of Miami and the Florida market. The Florida market is, you know, is very challenging with all the all of the insurance law changes, all of the lot, you know, legislative changes that have been happening through the years. How are you looking at navigating all of the challenges, not only from the Florida state laws, but just the changes and challenges facing the roofing industry? How are you thinking about that and what are you doing to make sure that Z roofing and waterproofing is around long term?
Speaker 2:to make sure that Z roofing and waterproofing is around long term. Just adjusting, man, and you know it obviously has to do with you know it ties back into financials. Certain laws don't have anything to do with financials, but we adjust to them and we do whatever we need to do. If it's anything to do with legality, we have our legal team that handles that and puts in whatever we need to be. If it's anything to do with legality, we have um, we have our legal um you know team that that handles that and puts in whatever we need to be put into the contract.
Speaker 2:Um, staying on top of those, those new laws and those new changes, so you could adjust in time and it's not late, too late, um. And then, uh, one of the things that kind of continuously changes in our market and just changed again, is the building code, the Florida building code, and it's just understanding and adapting to that change and finding out, okay, there's a new building code change. It requires different stringent methods of installation, some for the better, some for the worse. But you got to see now what, what is approved, what can we install and what is the cost associated to it, because you know this is what we're what our job costing was running at over here with this um, with this roofing system. Now, what is this going to cost us? And now you know there's seven, several different options available, different manufacturers, different products, different methods of installation.
Speaker 2:So we sat down and we kind of ran the numbers hard. So you know what is this system going to cost us compared to this system, compared to this system, compared to this system, compared to this system, and what are the requirements for all of the installations. So this system requires, you know, three rows of nails and cap, six inches on center. This one requires two rows, 12 inches on center. So we do the math with the, you know, and then this row might cover 10 squares, this one might cover two squares, right, so it's all cost based and it's just running those numbers and figuring out the hard numbers and coming down to the penny with the system itself and where, where our target point is going to be. Where am I going to direct my sales guys? How are they going to sell the product, what are we going to pitch to clients and what number is it going to be sold at?
Speaker 1:Yeah.
Speaker 2:So a lot of people, you know, with quick changes like this in the market don't adjust in time and they just continue doing the same thing they were doing Same price and different system, different prices, different product itself. So they might not necessarily be making as much profit as they think they're making and especially if they're not looking at their job costing, it's going to be too late for them to figure that out, unfortunately.
Speaker 1:Don't make it too late for you Know your numbers. It's the most important part of business. Don't make it too late for you. Focus on your know. Your numbers is you know. It's it's an the most important part of business. Zach, I appreciate your time today, man. This has been another episode of the Roofing Success Podcast. Thank you for tuning into the Roofing Success Podcast. For more valuable content, visit roofingsuccesspodcastcom While there, check out our sponsors for exclusive offers, shop for merchandise and sign up for our newsletter for industry updates and tips. Also join the Roofing Success Facebook group to connect with other professionals and stay updated on the latest trends. If you enjoyed this episode, please subscribe, like, share and leave a comment. Your support helps us continue to bring you top industry insights. The website link is in the description. Thanks for listening you.
