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
STOP Letting Sales Reps Destroy Your Profit Margins with Austin Watterson
Sales reps are making you broke…
They sell cheap just to get the deal. Skip steps. Miss supplements. Then say, “It’s not a big deal… I’ll make it up on the next one.” Meanwhile, your profit margin is getting crushed.
That’s what Austin Watterson (Royal Roofing) realized after building a sales team that was blowing up jobs left and right.
In this video, you’ll hear:
- How their “red light, yellow light, green light” system flags low-profit jobs
- Why W2 reps and structured compensation are better than the 1099 mess
- What happens when sales reps don’t give the “Surgeon General’s Warning” to homeowners
- And how one small change made Royal Roofing more profitable, while keeping reps happy
Austin went from $0 to $20M+ in sales… while protecting his margins and keeping his sanity.
Now he’s helping others do the same.
Listen to the episode on Spotify & Apple Podcasts (282) 👇
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Links:
https://roofedbyroyal.com/
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One of the biggest problems is that most companies don't know they get started. Especially when you're big sales driven. Just because that guy tells you he can put a roof on does not mean he can put a roof on properly. If I was to start all over again at zero, don't do it by yourself. Find alignment. And when you're in your 20s and 30s, it's harder because you're more aggressive a lot of times. You're you're a little bit hardcore. It's harder. We have to educate people and have set those expectations. I'm signing a contract with you. You're not gonna remember everything either. So we have our production team actually call when we call and remind you hey, make sure the driveway's cleared out. Delivery shingles comes from at a different time from the installs. We're gonna be there Thursday afternoon to deliver shingles does not mean that we're putting your roof, we're installing your roof.
SPEAKER_01:So you just have to walk people through that. Welcome to the Roofing Success Podcast. I'm Jim Aline and I'm here to bring you insights from top leaders in the roofing industry to help you grow and scale your roofing business.
SPEAKER_02:Austin Waterson, how are you, man? I'm doing great. I'm doing great. How about yourself, Jim? I'm doing good, man. Glad to have you on. We've been, you know, we've we we've known each other for many years now, and um, you know, saw you through, you know, man, ups and downs with your, you know, with the business, with your health, with all kinds of things. It's uh it's great to finally have you on. So yeah, yeah.
SPEAKER_00:I'm glad to yeah, glad you had to have me on here. Yeah, I think several years ago we met, actually, we met through John Bruce.
SPEAKER_02:He was yeah, yeah.
SPEAKER_00:Yeah, you know, Brucey, he he connected us.
SPEAKER_02:The the golden doodle of roofing is what he's calling himself now. Uh self-proclaimed, yeah. Self-proclaimed, that's right. He's a he's a good guy. Um, well, Austin, uh, you know, you have Royal Roofing and Solar Um over in the Kansas City area and uh and have have merged with Abernathy roofing. And, you know, let's start back with uh with this journey for you, man. How did how did you get into roofing and and how did how did I how did it get to here for you?
SPEAKER_00:Yeah, it used to be in the restaurant business before roofing. So you gotta try to keep, you know, I was director of operations over several uh restaurants, and when you're when your average ticket is, you know, six, seven dollars in the fast food side, you got a lot of people to satisfy. So very customer service driven and and you know I I got it I became a partner there when I was 19 years old. And so once I it was time for me to move on and I sold ownership I had and uh searched around for what I want to do next and I figured out that roofing looked looked appeasing, but I forgot I had a fear of heights. And and so yeah, I found out quickly I had a I didn't know cra crap about roofing. I didn't know differences from a three-tap shingle to an architectural shingle. And I'd actually went to work for a company and and uh they were a storm chaser at the time and I learned a few things from them, actually left and went over to another company and and became really good friends with a couple of guys and learned quite a bit. But I was very customer service driven and relationship driven and and so I ended up starting my starting my own company.
SPEAKER_05:Nice. What year was that?
SPEAKER_00:Uh the end of 2014.
SPEAKER_02:All right. So got out of the restaurant industry, so that was that was just after the crash and everything, and um started in say on the sales side?
SPEAKER_00:Yep, so yeah, I left the restaurant well into 2010 is when I left.
SPEAKER_04:Yep.
SPEAKER_00:And then uh yeah, so yeah, got on, yeah, just doing sales and and you know, I you know it as most people try to get into roofing, a lot of people are getting out in the fall. That's when I started.
SPEAKER_02:So by you know Again, you know, you know, winter in winter in Kansas in Kansas City, you know, might be a great time to sell roofs. Yeah, it was for me because nobody else was everybody else was taking time off.
SPEAKER_00:Yeah, so I was laying down a hundred, two hundred thousand dollar January, February, March. So I remember the end of the year doing well and and so you know, done that for a few years and you know, and ended up starting my own company. And uh yeah, here I am now.
SPEAKER_02:So Yeah. What were some of those early lessons you said, you know, from the rest being in the restaurant industry, serving hundreds of you know, lots of small ticket customers, having that customer service. What were some of those early lessons that you brought into your roofing sales and then into your roofing business?
SPEAKER_00:Well, uh, so night I think the statistic is like 93% of mom and pop restaurants fail. And the reason why they fail is systems and processes. And how do you and when you get into a restaurant chain, everything's a process and how you do everything, it's gotta be done. You expect the same bite of a hamburger every single time you pull up. You want your drink made the same exact way or your ice cream made the same exact way every single time. And so there's a lot of teaching everybody to to do the same thing over and over, you know, watch rent repeat. And and so that's that's what I you know really brought over, especially as you're growing teams and and doing that, and and you get you get lost sometimes when you're not using that stuff. You're just going and going and shooting from the hip. And and and so you gotta everything's gotta have a have a SOP on it. Everything's gotta, there's gotta be a process. Sometimes you feel like, man, we're just we're just selling roofs. We're trying to make this, you know, bring some easier. So you got to my and that's my challenge to myself a lot of times is I gotta stand back like, wait a minute, we got too many, too much in this. Let's step back, let's just go sell a roof.
SPEAKER_02:Yeah. That's uh that that that that consistency in customer experience is is important. You know, I I think that it gets lost a lot in an industry like roofing because people don't use a roofing contractor for many, many years, right? They only use, they might only replace a roof or two in their whole, you know, in their whole life. So they're not as used to the experience. You're used to that same bite of a hamburger, right? You expect it. It's just it's is you're a little, you're used to if, you know, from a maybe if you go to a chain fine dining, you know, I could go to a Ruth Chris here or Ruth Chris there, and it I'm gonna, I want that same bite of the of that steak. It's you know, I'm expecting it a little bit more. Um, what are some of those things? Like how how have you built that into your business? What are some of the like when you first started operationally, started Royal, you're like, I need to have a consistent process. What were some of the first consistencies that you built in?
SPEAKER_00:So a lot of consistencies was just is or is your just your internal operations? From you know, I I actually had uh brooke who still works for us, she challenged me one time, she goes, our service sucks. And like compared to whom? The rest of the industry? No, our service is pretty good, but she was right, our service did suck. We gotta the timelines and and all that. So the customer experience from the time they I realized quickly that I can't take all the phone calls. I can't, you know, I I help, but I need to get out of the way sometimes. And when you're trying to set appointments or the consistency at the very beginning is the most important because that is exactly the same. You know, when you go and knock someone's door or you walk into a real estate agent or insurance agent, you know, creating a relationship, you know, that first impressions do mean a lot. And so when you call a company and and you want and most of the time, I worked off referrals. So it was just like how you and I connected. It wasn't I just cold called roofer marketers one day because I just felt like you were the company to call. It was talking to bros, and so the introduction is already there. It's up to Jim to to mess it up. That's right. And so that's where those relationships, so those people don't always have to talk to me. They can talk to someone in the office that that's gonna have that's somebody in the know. Somebody has to provide experience. If you don't know what you're talking about or doing, well, we're in that relationship.
SPEAKER_02:That that's in that's interesting. Let's dig into that a little bit more because it is that first conversation, right? That the trust gets built or the or or you drop the ball because it's it's you either know it or you don't. Your team either knows it or they don't. There's um, you know, if if a if a customer calls your company, a homeowner calls your company, and they're like, man, these people don't really know what they're talking about, or the person that I spoke with doesn't know what they're talking about, that that creates that uh not the best first impression, right? It it does not add to the trust of your company in that scenario. How are you how are you solving for that? What are you how are you how are you maintaining that consistency in in having someone who's educated on roofing having that first impression and and having those first conversations?
SPEAKER_00:Well, and and and for us, you you have to have it they'll be somebody take a phone call 24 hours a day. So we have after hours, we have you know nights and weekends, and unfortunately, you're never gonna be able to train those people.
SPEAKER_02:True.
SPEAKER_00:But it's more or less, hey, do you have emergency? Some can someone call you but you need somebody call you back immediately. And that's our answering service. You have to have that because if that way is consistency as you're trying to grow. And for me, I could take, you know, I always took those phone calls and handled it. But but also for your sales team, sometimes they they need to be spending time with their families and all that stuff, and so their call overflow can go go to the same spot. And and so you have to you have to have onboarding. Yeah, you don't just take you if you call 10 companies right now, pick any city in the country, you call 10 roofing companies, how many are gonna answer?
SPEAKER_02:Maybe three.
SPEAKER_00:Correct. And they're still gonna there's and you're gonna at least get one answering machine.
SPEAKER_05:Yes.
SPEAKER_00:You will get an answering machine, uh, you'll get some voicemails, personal cell phone voicemails, yeah, and how long does it take to call back? How long does it take if they ever call you back?
SPEAKER_05:If they ever.
SPEAKER_00:Yeah. And so I want an appointment set. So for Jim, if he calls our company, it's more about easing your mind that you have an appointment set. Because you have if you have a leave, I need somebody dispatch immediately. If I need my roof looked at, no hurry. I'm I j whether it's jumping on Google, I pulled up Abernathy roofing, I called these guys, I got appointments scheduled for Friday at two o'clock. Great. They can they have our our we do onboarding, we know what we're looking at, we know all those things. We we care about there the person calling in. And can we always do better? Absolutely. That's where we but we record all the phone calls, we go through them, we we we try to improve on that weekly.
SPEAKER_02:But we have you have you developed like specific questions? Because when you're using those call answering services, there's a lot of inconsistency in that, right? And which which there has to be. They're gonna have employee turnover, there's gonna be things like that, right? Um, have you developed any questions that you want answered, or are you just like, hey, make it the the first priority is just give the give the make sure that the call is answered and that person is having is having a conversation. They don't have that that person doesn't have to have all of the answers for that customer. They know, they just need to say, hey, how how to properly set expectations of an appointment, right? Or a home visit, right? Like, so are there any questions that you're having them ask that that help with help help tee up your your sales team or whoever's going out? Before we carry on with the episode, let's give a shout out to one of our sponsors. Roofers, let's get real.
SPEAKER_01:You're great at building roofs, but are you great at building a steady stream of leads? That's where Job Nimbus Marketing comes in. They know the roofing industry inside and out, and they'll help you dominate Google, Facebook, reputation management, and everything in between.
SPEAKER_02:If you want more quality leads, more book jobs, and more growth, visit the link in the description or the sponsors page on the Roofing Success Podcast website. Are there any questions that you're having them ask that that help with help help tee up your sales team or whoever's going out?
SPEAKER_00:Yeah, we have a series of of uh we call a playbook of questions they have to ask. And, you know, whether it's, you know, whether they have animals, whether, you know, hard to find on GPS sometimes. You know, we try to confirm the house, like, okay, Jim, you got the house. You know, you have a White House, uh, you know, things like that. So there's different things just to confirm that we got got the right, got the right address, all that. So that's there's there's a series. I mean, I guess I've never calculated the time, but you're you're usually most of the phone calls are three to five minutes long, which seems like, man, that's a long time to call. And well, yeah, it that that person's important to us.
SPEAKER_05:That's right.
SPEAKER_00:What would you rather have that or okay? You said your name was Jim. Jim, uh, let's get let's get this home homeowner. Uh, we're gonna call you in the next two hours because that's what you're trying to, you're trying to think on your feet. Like, yeah, uh, who do I give this lead to? There's nobody here to take this call. And that's what you get. Like, said, Hey, Jim, we're gonna get you scheduled. Is there a time on Friday? We have openings Thursday and Friday for one of our sales reps to come out. What do you have any preferred times? And then so that way we schedule around your schedule instead of telling you when we're gonna be there.
SPEAKER_05:Yeah.
SPEAKER_00:Or handing a sales rep your phone number to call, and it does not happen immediately, it can happen days later or not at all. And those leads are those leads are expensive.
SPEAKER_03:They're expensive.
SPEAKER_00:So, you know, that's why some you love or hate Angie, Angie's list, but I mean it works for some people, it don't work for others. Uh, but it's a speed delete.
SPEAKER_02:You know what the most expensive lead is, Austin? The one you don't respond to.
SPEAKER_00:The ones that don't get it. Yeah. And they shouldn't get a call back. They should get answered in because your time is valuable. If you call and you take you like the service that you got on the phone, talk to someone, you have an appointment set for tomorrow at two o'clock, you're probably not calling three other roofing companies to come out yet.
SPEAKER_05:That's right.
SPEAKER_00:You're gonna allow us to come out, you're gonna let us take a look, and then if you don't like what we have to say or don't like our price, then you may call for comparable. But you're not going to most people don't have three roofing companies scheduled to come out.
SPEAKER_02:No. No. So then you you you made sure that that experience was was in place, right? That that was the first part of that customer service. You got to take care of people, right? I mean, if you're working in the restaurant and no one's no one's there to seat people or no one's there to take an order, uh that's not gonna go over well. So, you know, it's kind of the same, the same thing here. Hey, someone has to, someone has to be attentive to this this potential customer, right? So um now you're attentive to them. Now, what what what was the next thing that from a customer service standpoint that you you brought over from that from that restaurant experience that was like, hey, this is this is another thing that we implemented that that came from there, but it works really well from a customer experience standpoint.
SPEAKER_00:Well, so do you read the labels on different things, the Surgeon General's warning on cigarettes or any of that stuff that that warns you this could be harmful if swallowed and all that? There's a reason why those labor labels are on there, is because they got sued for that. Yes. And so it's like, hey, if you smoke these, you could this could cause cancer. So here, how many how many can I put my mouth today? It doesn't stop anyone from smoking, but it stops lawsuits from happening. But for us, it's not about lawsuits, it's about having communication. And so we had one that, you know, several years ago had one of the big uh$100 million companies coming to Kansas City and community next to us and and knocked a lot of doors, sold a lot of jobs, and they got into where you know part of Kansas City is the Woodrock capital of the world, is they use that old Masonite siding and lots of damaged siding. And so what happens is the siding's damaged when you tear the roof off, try and replace step flashing. It's been, you know, some of the best siding. Well, what happens is it's always your fault. Always. Well, you guys damaged my siding. Well, these guys are going back to the roofing crews trying to charge a roofing crew back for damaging siding. It's not the roofing crew, that's it was a homeowner's problem to begin with. You but you never had that conversation with the homeowner. You have to set expectations. You have to, you have to the customer experiences when you're in front of them. And that's where I I love the idea that like the phone sales and all that, but when you're out there with someone, you're walking them through their property. That's right. They don't want to hear you talking bad about their house or the ones that painted last. Like, oh man, this is terrible paint job. No, it's here's what we have. Your garage doors are damaged. When's the last time you walked around your house and saw everything wrong with your house? So when we do an inspection, we we're very thorough with our inspections. How many people get in addicts? Every one of our sales guys has to get an attic. That's part of part of making sure ventilation's proper. And and so that's where that's huge. Giving them the process, because you get you get caught up in sign here, sign here. Well, three years later, you got problems because you never talked to them about it. Or and it could be three hours after the roof's on when they get home and they're calling you because they're upset because their siding's damaged, or this was wrong, or that's wrong. You go from an open valley to a closed valley, or vice versa. If you didn't just do if you just automatically do stuff, you know, you go from a three-tap to architectural shingle, or you go from shingles to metal, and there's you know, you everything, a new roof, everybody shows up looking at their house. So they see all these problems that they think are there. And if it may not be your fault, but it's your problem. And so if you address it up front and walk people through it, here's the expectations. Crew shows up at 6 30 in the morning, start why the hell is these guys showing up at 6 30 in the morning? You didn't know you had to move your cars out of the driveway? Come on, duh, we're doing your roof. People don't know. They don't know, people don't know, they've never been through it. You do it every day.
SPEAKER_05:Yeah.
SPEAKER_00:And and so I love that. So we have to we have to educate people and and have set those expectations. And what I talked to you about today, Jim, I'm signing a contract with you, you're not gonna remember everything either. So we have our production team actually call when we call and remind you hey, make sure the driveway's cleared out. We're gonna do delivery of shingles comes from a different time from the install. So we're gonna be there Thursday afternoon to deliver shingles does not mean that we're putting your we're installing a roof. So you just have to walk people through that because they don't know what they don't know.
SPEAKER_02:I love that. It it's it put puts your surgeon general's warnings on everything, right?
SPEAKER_00:Yeah, and that's what it is. It's it's and it's not to to keep from getting sued, it's to protect relationships and provide better customer experience. But I use that as examples because that I'm warning you right now, this is what's gonna happen.
SPEAKER_02:The the the thing that I that I the way that I always frame that is if your customers are wondering, you're losing.
SPEAKER_00:Correct. Absolutely. I like that.
SPEAKER_02:So so if they're wondering when are, you know, when or why or how, right? Like, man, I wonder how they're gonna do this. You're losing right there. Yeah. What I wonder when materials are gonna be delivered. I wonder when the crew's gonna start. I wonder when the job's gonna start. I wonder when my when my salesperson's gonna be here. I wonder what is going to happen when my you said you guys do a really thorough inspection. Like, how do you frame, you know, framing that up front that this is the expectation? Hey, when our sales rep or when our project manager or project, whatever you call your, your pre, when they get there, this is what to expect. Right? Like this is how we, this is what we're gonna do. These are all the things we're gonna do. We're gonna look at all these different things. We're gonna show you these things, we're gonna walk you around your house. We're gonna, you're gonna, when we, when our when our when our uh estimator, when our salesperson walks you around your house, guess what you're gonna find? Things that you'd have you've never even seen before. Right? If you set that expectation and then they're walking around the house and and you're like, hey, yeah, see that up there, and they're like, I've never seen that. The person on the phone who set the appointment told me I'd see things that I had never seen before. Right. If you could carry that conversation throughout the power in something like that, not that you're gonna get it perfect every time, but the you know, to can to to continuously try to have that intention. Um what are some of the things that you have found over the years, some of the biggest gaps in expectations from a homeowner with the roofing company? I know you're enjoying the episode, but let's give a shout out to another one of our sponsors. I talk to contractors every day that feels stuck.
SPEAKER_01:Not because they're not working hard, but because they're missing the structure to grow without chaos. Or their culture's falling apart because their team's unclear, unaligned, or just burned out. And when change hits, they're reacting instead of leading because time and priorities aren't under their control. Day 41 Thrive helps to fix that with proven strategies for growth, culture, and leadership that actually work. Ready to thrive beyond the storm?
SPEAKER_02:Visit the link in the description or visit the Roofing Success Podcast website on the sponsors page to start your journey today. What are some of the things that you have found over the years, some of the biggest gaps in expectations from a homeowner with the roofing company?
SPEAKER_00:Uh messes, you know, cleanup, they don't realize it's gonna be as be as cumbersome as it is. Uh the timeline on whether it's dealing with insurance, getting back from mortgage, and supplementing, supplements are a huge thing, especially nowadays. Is it can take 30, 60, 90 days trying to get supplements approved. So keeping them in the loop and like, well, I thought this would get done a lot quicker. I mean, you just told me, well, it's not I used to just get on the phone, shoot one email or text message and was taken care of. Not anymore. Yeah. Because they've they've uh tied the hands on a lot of adjusters and they've handcuffed them to what they can and can't approve anymore.
SPEAKER_05:Yeah.
SPEAKER_00:So there's there's a lot of red tape with insurance. Good, bad, otherwise, it is what it is, and we have to adapt.
SPEAKER_02:Yeah, and and yeah, and it and we're always adapting, right? But like, so how do you continue to get that message? I don't know how many salespeople you have now, but you've I mean you've had some big teams over the years, and you know, between between all of the companies now in the portfolio, like, I mean, you guys probably have a pretty big team. How do you keep those? How do you keep that messaging? How do you keep uh how do you keep your sales reps now setting those same expectations pro setting the expectations properly?
SPEAKER_00:Continued training, daily trainings, daily accountability meetings with your team. Uh you know, we're extremely guilty of, you know, and I say we, it's uh myself, the you know, a lot of roofing companies. Oh, we have sales meeting once a once a week. Well, we cancel them every once in a while because we're too busy. Uh we so now we meet once a week if we do, and then we talk about a few things over a phone call or in person for the next seven days, and then we have a meeting again. There it has to be daily, it has to be daily focus. And and that's where you have to have things automated. You you know, as much as we hate hate processes and sales guys want to just go sell and you gotta have some you gotta have some automations and some accountability with them because and at the same time, your best sales guys, they need some, they need assistance. And so you have an operations team. Our sales guys, they don't do a single work order one, they put their stuff together and somebody else builds their work order, somebody else all they just have to make sure they translate the the playbook properly and do a good handoff. And you're don't ask sales guys to be construction guys, but teach them construction construction to understand it, to talk about it, but they don't have to be a construction expert go go stay focused on sales.
SPEAKER_02:Yeah. What what were some of the lessons over the years that have gotten you to this point? Like, did you ever try to make them like construction experts, or did you ever like, or were you always around this mindset, like let's just build a sales team and hit and hit and and go go hit the ground and and and sell?
SPEAKER_00:So one of the biggest problems is that most companies don't know that get started, especially when you're big sales driven, just because that guy tells you he can put a roof on does not mean he can put a roof on properly.
SPEAKER_05:Yeah.
SPEAKER_00:And so then you get a sales guy that now you're gonna be a project manager and go out and run your own job. And well, I don't get paid to oversee the crew roofing, I get paid by selling jobs. So I'm not even overseeing this. Well, that lifespan of a sales rep at a company doesn't last more than two or three years a lot of times. So, and a lot of these companies don't last three years. Well, those warranties I mean, I see a company right now that's been in business for for less than two years, they're advertising 10-year workmanship warranties, 15-year workmanship warranties. How? Because that I mean they can't. I mean they can, but the warranty stuff happens. It's gonna all companies have warranties, but a lot of guys are avoid taking care of warranties. And so that's your you have to have people in charge of your warranties, and those are more important than anything else. Somebody calls you three years later, five years later, you better get out there and take care of it.
SPEAKER_02:Yeah. That's the the and and those are those are opportunity calls. Correct. Like to me, those are like that's an opportunity to shine, right? Like that's an opportunity to to make a raving fan. Um, you know, that's an opportunity to get referred. That's an opportunity. There's a lot of opportunity there. What's the what do how do you guys re how like are you constantly recruiting sales reps? Do you have you know what you've done a lot of cool stuff, and this is this is one of the one things that I wanted to talk about with you. Maybe we'll just shift gears gears there now. But over the years, you know, you you know, you see all the industry compensation models and and and you've really kind of tried to change the way you thought about that. I I think you've been very unique in the way that you're thinking about your your compensation for sales reps. Um you know, let's talk about traditional, like what you what you saw when you entered the industry and what you paid over the years, and then the change that you made, and and and you know, we'll get into some of the whys and and what how that's working. So let's start off with when you got in the industry, what how were you getting paid when you were a sales rep?
SPEAKER_00:When I was a sales rep, I came in like, hey, we're gonna get you set up on 1099 and fill out this, all these forms, sign this contract. You just like, okay, sign it, move on.
SPEAKER_05:Yeah.
SPEAKER_00:And you know, as a business owner for, you know, with a partner in the restaurant business, I was I was used to doing taking care of my own taxes and doing all that, which also got myself in trouble a couple years too, when I'm 19, 20 years old. And so when the state of the state send you letters telling you that yeah, penalties and all this just surpass four or five thousand dollars just on penalties and interest, and like, oh man, what? No way. Hey, there is no negotiating that, you're paying that crap. So that's what so that, but that's the same thing for all guys, you know, guys or girls, when they come into a company, you're supposed to wear your badge, supposed to show up to these meetings, supposed to do all that, but you're paying me as a$10.99 to avoid paying workers' comp insurance, to avoid paying payroll taxes. And I know a lot of people do it, but who's responsible if you fall off that roof? We are the homeowners. And so we've we've had, I mean, subcontractors that actually I had it happen a couple years ago that they had fraudulent insurance. The insurance agent. There's a bunch of fraud with with insurance agents, had one with subcontractors, been insured for years. He switched over to a different guy because he's gonna save him a bunch of money, guy he met, and that guy was deducting money out of his account every month for his agency, not for the insurance company. But it's giving out certificates. So we we messed up there, and but you know, they ended up costing$100 and some odd thousand dollars, but we have workers' comp coverage. And and so we have we carry workers' comp on every one of our employees, and and that's gonna flow uphill. So if I don't have workers comp and that guy got hurt through my subcontractor, guess who's paying for it out of pocket? I just saw a prominent company yet two days ago, over the weekend the sales rep was driving drunk. Got tea booked, yes, turned around on the highway, done a U-turn in the middle of the highway, and got in a wreck with a semi. And this is heartbreaking to see that happen to anyone and another company, and we've we've had that happen too, is that that's why we have GPS and cameras in all of our vehicles to protect us. We we have to protect the brand.
SPEAKER_02:Yeah. So in in the so you you went from, did you start off at a W-2 model with Royal when you first started, or was that something that you transitioned to?
SPEAKER_00:Yeah, so all of our yeah, all of our sales teams always been W-2. They're you know, I try to serve, but I realized quick like that's not a good model. Uh, but the 1050-50, I mean, I paid off the don't matter if you pay 1050-50 or a or or part of the contract amount, when you when you have whether they're new sales guys that don't know what they're selling, or you have experienced sales guys that, hey,$300 is better than nothing. I want to sign this contract and get to the$400 and and and move on. And so when you do a$1050-50, 50% of nothing's still nothing. And a 50-50 split when there's a thousand dollars left over,$500, you just bought yourself a headache.
SPEAKER_05:Yeah.
SPEAKER_00:And so now magnitude that a you know,$18,$20 million got all these sales guys building their own jobs. They're they're all getting, oh well, I won't collect on that one, I'll just move on. I won't collect on that one because we didn't talk, we didn't give them the Surgeon General's warning on what's going on. So that customer is mad. We're just gonna take a$1,500 off and collect the money and go on. I just won't get paid. That's how a lot of sales guys think. And I'll make it up in the next one. I didn't get paid on this one. I'll go, so you leave hundreds of thousands of dollars in collections out there. And we have a little, I mean, we've had a little bit over the years, but not not like a lot of people have, and you hate to see that for anyone. And and so when you do a 50-50 model, I don't want, I we don't need practice. We have pro so like on the construction side, I mean, we want to make sure our jobs are built properly. We have really good crews, we spend time working with them as well. We don't just bring in any crew that says they can. I mean, our main crew in Kansas City, he's been roofing for me, I mean, since 2011. So he's been on my job. So that's that's relationships. And now one of the guys on that crew, his son is doing roasts for us now. So his son was nine years old at the time, you know. So that's that's good to that we're able to to continue quality of work and mistakes happen. I mean, weather happens, and you're always gonna have some type of warranty calls.
SPEAKER_05:But yeah.
SPEAKER_00:But on the and so the 1050-50 split, how are we protecting ourselves? Who's approving that job? A sales manager that's trying to get job, he's busy trying to get guys, he's got five jobs. No, I have one person that approves every single job in our company, and they got they get red light, yellow light, green lighted, and I get a copy every time it goes. If it's not green light, I actually get a copy. I have other people handle it, but we get maybe one yellow light a week. And margins aren't where quite where they need to be. And usually it's because we get one red light every two weeks.
SPEAKER_05:Yeah.
SPEAKER_00:And so that's a training, it's either one they got should have been in supplementing, or the yellow lights are usually it's something that guys miss a couple things on. Uh, ice and water shield, something like that. They can miss on the scope. So we just have we have people that go through every scope that go through help all the sales guys. So let them go sell. But we we're very big on believing we have the company to protect the brand, the company has to be paid first on every job.
SPEAKER_02:This is where I want to go. The how are you structuring it? Because you the 1050-50, like you said, there's 50% of nothing is nothing, right? A percentage of the job doesn't like that doesn't work out a lot of time. Like, so how are you structuring that in in in a in a way that it the and and then let's get into like your red, yellow, green, like what constitutes red and yellow, right?
SPEAKER_00:Yeah, so so what is our profit percentages we need on those to so if it's a red light, it's it's below our bottom profit percentage. So, and then you got and then your medium, which your yellow light, you'll sell those jobs all the day long, but you also see if management approved a job that that hey, go ahead and get this one sold, I'll let you sell that price.
SPEAKER_02:You know, so they have to get approval on a yellow light. They can't sell a red light. Is that how is that how you're working it? Yep. Yep. And and we're not saying this is what I want people to understand. When it hits red light, it's not um, this isn't this job went negative. This is we're based on the scope, we we're not at the profit percentage that we that we need to achieve to be a to to be a healthy company, right? Like that's what you're basing that on, right? Like we're not saying, oh no, red light is we're losing money on this job. Oh no, we're losing money. No, no, no, we're not even getting there. We're not getting to the losing money. And and not that you know, you might have some surprises down the road or something that happens on that job that that that, but this is sales rep turns in the job. It that that that scope gets ran through by that that individual and they read, yellow, and green. And am I getting it right? I know you're enjoying the episode, but let's give a shout out to another one of our sponsors.
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SPEAKER_02:Sales rep turns in the job. It that that that scope gets ran through by that that individual and they read, yellow, and green. Am I getting it right? Yep, I have a guy in Bolivia that does all that for us.
SPEAKER_00:So builds every builds every order. And that, yeah, that no, you're exactly right. Is it's red lighted because it hits a profit percentage that is not acceptable. But also, it may hit a profit percentage. It's not acceptable for us, but it's I don't want a sales guy not to make money either. They're out there busting their butt. Yes. So you take a new guy that, well, I didn't know. I thought, I thought I could do this. No, wait a minute. You gotta you gotta charge him for additional layers. You have to charge for a re-deck. You have you can't give away this pro, you can't give this stuff away. And and so it was like, oh man, it was my first, you know, and then you talk to Manager, man, it was his first sale. It was I was there, I helped him close it and I let it go, but we don't just to just to get a win isn't it's not always a win. And on that 10, so that red light for us is that 1050-50 split when it goes out, when now when you collect and try doing a P ⁇ L and realize like, wait a minute, there's only$800 here to split. We don't want that job.
SPEAKER_05:Yes.
SPEAKER_00:Don't if there's$800 here to split, you're not, we're taking the$800, you get zero. Yeah. And so you have to, if you want to be a good, if you have to give jobs away, you're not a good salesman.
SPEAKER_05:Yes.
SPEAKER_00:And so do we make concessions at times? Absolutely, whether it's multifamily, weather, what whatever it is to help somebody, uh, elderly person, person on, you know, low income, things like that. We we do that all the time. But you cannot just walk out and and and give everybody a huge discount and think you gotta win just because you signed something. So that just because you sign contract.
SPEAKER_05:Yeah. Yeah.
SPEAKER_00:So so we it gives us an it's a learning opportunity for a sales guy to go back and like, oh, wait a minute, I didn't see this in the entrance go. Like, we had one the other day, it's like you're off four square with waste and and entrance though. Why didn't you catch us? Oh man, I just completely overlooked it. Well, you got in a hurry trying to sign a deal, which I get it, I understand, but I don't want you. Hey, we'll we can supplement this. This isn't a big deal, but it is a big deal because if we just run it through as is and it doesn't get invoiced out the back end or a supplement to insurance, that stuff. This is you're gonna you're gonna make about$200 on that job. You work too hard to get$200. I don't want my guys working for free. They work too hard.
SPEAKER_02:I love that that it creates the it's their metrics that create feedback opportunities for training, right? Correct. Yes, they're also it's also to me, the let me think it it also can create feedback on, you know, I mean, from a larger perspective, is is this person the right person for the job, right? Because if somebody keeps turning in jobs that are yellow and red and they're all yellow and red, to your point, they're either missing stuff or they're underselling. They're not, you know, they're the so if they're not it, I I love metrics that lead to better outcomes, right? So now it's like, okay, now we could train this person up. We train them up, we train them up. Oh, they're not getting it. Well, they're still not getting it. They're still not getting it. Okay, now we know they might not be the right person. You know what I mean? But you're giving them real opportunity in that training process to get, oh no, this is this is what it is, this is why you missed it. You know, we'll supplement for that. Or next time make sure you catch that. And, you know, so I I love that it's giving you a good feedback loop also on your team members.
SPEAKER_00:Yep. So yeah, what we've done is converted, we call a red line model. This is one thing you took from the solar industry. We took from them and said, this works great in solar because all these uh the EPCs, the EPCs is the install companies, you usually sign their contract. So you had the sales organizations that went on just sold. They could sell at$6 a watt,$4 a watt,$3 a watt. They knew, but their red line was$2.50 a watt,$2 a watt.
SPEAKER_05:Got it.
SPEAKER_00:Some got down to$1.15, and that's when you knew you were going to get a really crappy install. Uh so there was a lot, and that's why we started installing our own solar, and we figured all that out through there, but you gotta know your you gotta know your numbers. And and so I mean, I asked a guy the other day, and he's like, I go, how do you do your bids? He goes, our sales, I go, do you do bid? Well, we're mainly insurance, we work off the insurance scope. I go, what about somebody ask for a bid? Well, they gotta come back here and then we'll pull an Eagle View, and and then when I get time, I'll write the bid for them. And I'm just like, holy smokes, get out of the way. Get out of the way. And this is me talking to my younger self, get out of the way, Austin. And so we have a per square price that they have to is their red line. So so whatever you and it just it's a lot like entrance. You have adders for steep charges, two-story charges, decking, but here's your basic one-story, 512 roof. I don't care if there's 17 sticks of drip edge or 27 sticks of drip edge or six turtle vents or 10 turtle vents. It's a law of averages. Yeah, the law of averages. If you cannot give somebody a price on site when you when we have met we pull measurements up for every single home we go to, I pay somebody full time to pull measurements. So I don't have to use EagleView, I don't have to use Hover, I don't have to use all that stuff because that does get expensive. We have somebody full time that pulls a measurement, it's worth the money. Go put the measurement, have it ready. When our sales guy shows up, they can put a price together. They have the power, they know what their commissions are when they're presenting the job. Long as long as you train them right to do it, to we we call it quick bid. And so you have to know what how to do a quick bid. You got you gotta know be able to calculate how many squares are. You gotta know how much waste, hip ridge starter, you got steep charges, you have chimney flashing. It's just it's a lot similar, like entrance scope, but it's everything's a charge. And if you want to give that job away, that's on you. It's coming, you're paying for it, not us. And so uh we have it set up, it's a 60-40 split. You get 60 if you generate the lead. If we hand you the lead, you get 40. So go out and knock doors, knock more doors, go generate how much other you make the money than paying it to Google or Facebook. That's right. And it's a but it's a higher quality lead. So go get in front of that person and you're gonna make an extra you know six hundred to a thousand dollars a job typically. Or sometimes maybe more than that. Some of these jobs are three or four thousand dollar difference. So go and the way it's if you sell properly, if you want to take a percentage of the contract, just to kind of reverse it for a lot to understand, is you're between 12 and 18 percent of the contract a lot of times, right in there. So if you sell gin, you're pushing you know 15 to 18 percent. If you take the lead from the company, you're looking at you know 10 to 14. So, and I've had some that come in four and five percent. But guess what? We didn't know. You did, you chose to sell that cheap. That's cool that you got the job, but we have to maintain the warranty. We still over have overhead, we still have a business to run. So if we don't do it that way and trying to scale, there's a lot of, and I know you and I shared privately what our commissions or what our profit margins are, but I include our commissions go above the line with labor and materials. And our gross, so our gross profit, materials labor, and commissions are higher than most companies that just after material labor.
SPEAKER_02:That's right. And that and I think that's a great testament to the way that you've structured this, and that's why I wanted to get into it. Like, I think uh, first of all, I think a lot of contractors, and you could tell me if you think this too, they just don't even they don't even know their numbers from a job costing perspective. Like they really don't know. And then a lot of times, especially uh some if if you're newer or or need the work, you you undervalue. I'm gonna I'm gonna say you undervalue yourself, right?
SPEAKER_03:Like correct.
SPEAKER_02:And and and and so, you know, or if you go into a market and you're like, well, everyone's selling at this per square. I have to sell at this per square. But that's not the truth, right? Like the truth is you have to sell at what you need to be at, not what someone down the road needs to be at.
SPEAKER_00:So we and we have to give those guys the tools, and that's what our sales leadership. We have some really good salespeople that are really good at what they do. They work with homeowners, they're you know, a lot more consultative sales, but you know, you can't be super pushy or anything like that, but we're there to sell it. I mean, you're there to mean you got it, you're getting a new roof. We're not selling somebody roof that don't need one. Yeah. And, you know, and that that was the deal with solar. So many people were sold solar, they shouldn't have bought it. And so there's different, yeah, you're you can be sold a roof and don't need one, but you know, we got a five-star review yesterday because the guy thought he needed a new roof was actually wasn't a roof issue, it was a gutter issue. And so we went out there, addressed it for him, and didn't charge him anything, gave us a five-star review. Because he he was prepared to write a check to put a new roof on his house.
SPEAKER_02:Yeah, that was a good day for him.
SPEAKER_00:Oh, yeah. Oh, yeah, I guarantee you he he had heartburn all day on that deal. But that's right. We'll solve his problem and and and and and that's good. It's a win if you if you can do that.
SPEAKER_02:Yeah, definitely. I also like the fact, when did you did did you always do the the self-gen versus company gen splits differently, or did was that something that changed over the years?
SPEAKER_00:Uh yeah, because you know, I've tried a couple different ways of like, you know, percentage, like, okay, get two more percent for a self-gen, you know, we're paying 8%, 10%. And, you know, if it's a company lead, I know some some companies pay 4% for a company lead and 7% for a self gen. And and you're like, man, I can't, man, that's a lot. Go make your money. Go make your money. But we're still getting our money. So so we have that red line. You gotta, I mean, we're making our margins that we need to make to keep a business right.
SPEAKER_05:That's right.
SPEAKER_00:And so, man, you guys, that seems no, it's because if you do a 1050-50 split, I know one company out there right now that gets 18 between 12 and 18% rebates from the supplier and manufacture. Well, guess what? That they're putting that on the you're paying that for shingles. Let's not, let's not get into what are we paying for shingles, what are we paying for drip edge. And even back on the bidding side, is if you got to calculate every single piece of drip edge, every piece or every every foot of starter, every turtle vent, if you're trying to get that precise, you're going, it's a law of averages, speed delete, empower your guys, because it's gonna wash out really quickly if you have a process of what they're selling for. But yeah, if you're trying to do a 1050-50 split and letting them sell, they're trying to calculate, you're you're leaving too many margins, too much margin of error there.
SPEAKER_02:Margin of error. Yep. Yeah. So don't matter if there's six turtle vents or there's 16. Another thing I wanted to talk to you about was mergers and acquisitions, right? You Royal and Abernathy merged together. Um, how did that come about?
SPEAKER_00:Yeah, so yeah, we built our companies on relationships. And I we have a storm and I'd have, you know, whether insurance agents, I mean, I'd get I'd get 30 leads an hour some days. I mean, that's where, I mean, we and we'd look up two days later and be four or five hundred leads deep. And and so, you know, and I say a couple of days, it usually, you know, within within four or five days, we'd have that many leads a lot of those times. And and now those homeowners are not calling their insurance agent, they're getting door knocked before that even happens, or they're they're just getting on on social media and getting a referral to a roofer. They're not they're not going to their insurance agent. The insurance agent is is kind of gets left alone now. A lot of people don't rely on their insurance agents like they used to. But insurance relationships are still important, those insurance agents.
SPEAKER_05:Oh, yeah.
SPEAKER_00:So, John and I like, okay, how do we we get a storm in Kansas City? Well, I can send my team up there, I can send my team to southern Missouri and help you out, but how does that work? How would that look, what would that look like? That's a lot of chaos. Trying to help each other and like this or that is going to be very confusing. Yeah. And so then we're like, I'm like, John, why don't we? I know this kind of from left field here, but why don't we just merge and create one company? Now let's look at the bigger picture of look at what our value is, because we're merging, we're not hurting the value of either company. We're going to increase the value of the company. Yeah. So we're actually helping each other. And we're going to cut our costs down, our operating cost. We're going to be able to share some of the expenses and do all that. So we really sit down, spent a weekend going through because it was just kind of a left field. Why don't we merge? Like, because John and I are both really good at coming up with bad ideas out loud. So it's one's like, hey, wait a minute, that may be a decent idea. Let's talk about it. And let's so we spent a weekend really going through it, got our wives involved. And they're like, where the hell did this come from? Another one of you guys' crazy ideas. And and that's what they both kind of looked at first, like, well, let's let's meet. So we actually spent a weekend together and really hashed things out and talked about things and like, wait a minute, this actually makes sense. And and so that's when we started the process of of putting a merger together.
SPEAKER_02:What were uh so so let's just talk about the the lessons of of merging, right? Like what are what are some of the things that came together well? What were some of the challenges that you guys have faced in that? Um, you know, what what advice would you give to someone else?
SPEAKER_00:Uh, you know what? The biggest thing is alignment from leadership. You have to be aligned, you have to have the same values and it won't work.
unknown:Yeah.
SPEAKER_00:And you and and it's like a marriage too. You gotta be have, you gotta humble yourself at times and and uh and respect the others' opinions and input. And when you when you're running a three, four million dollar company by yourself or running a$10 million company by yourself, you're never running it by yourself. You have other people, but you are your hand for the first$5 million, your hands in every piece of it. You're making two all the decisions, and and you get used to making all the decisions, you're like, oh, wait a minute. I have partners, I have to respect them, and you have to do what's best for the company. There's things that marketing things or different things you've sponsored or done over the years that it may not make sense anymore. Like it never really made financial sense to do that, but we've always done it. And so you you have to you have to humble yourself, I guess, is you know, business-wise and and make sure you're still getting others' opinions and input and and talk about it as a team. Is like, okay, I have real, and I've always been good about you know, within the royal leadership, to give them input and be a part of the decision making. Because I tell them not making decision at all is worse than making it the wrong decision. And and so that's what you got to empower your people there. But for us, it that was a it was never a challenge. I could definitely because the attorneys make a lot of money on a merger, but they're there to protect us because you I'm like, guys, it's just some damn paperwork. John and I are good friends, Sarah and Buffy are great friends. Let's just get the paperwork and let's get it done. And they are laughing at me. I'm like, it's not hard. Why are we going through this? Like, be prepared to spend to spend a lot of money. That's so if you're not prepared to spend, but they pre I can only imagine if a merger would not work. It's just like a marriage isn't gonna work if you don't have mutual values and mutual ideas and mutual goals. Yeah. And and so the attorneys, yes, they made great money, but they protected us. They protected both parties. And you know, and actually there are two attorneys, the attorney I used, I've always used the attorney John's always used, they actually had already done some things, several business dealings together. So it wasn't it, they'd already, they were already friends. So I can imagine people that know each other trying to make something happen. But alignment is the big is the key, having good business alignment.
SPEAKER_02:Yeah. Where do you see the future of of roofing going and where do you see the future of Royal and Abernathy in that?
SPEAKER_00:You know, you see the guys that are PE, it's you're gonna you're gonna drown out, you're gonna get drowned out if you don't join PE. But what other companies that's out there that's owned by PE that's not roofing in any market in the in the home services category that there's still not local, other local companies. Plumbing, there's plenty of local plumbing companies. There's plenty of local HVAC companies. Now you want to get in dental, PE's big in dental. And veterinaries. There's plenty of veterinarians out there still that do make a great money that are that didn't sell private equity. Same as there's a lot of PE dental companies out there that bought up a lot of dentists, but there's still plenty of local dentists out there. So I mean it's whether it's a home service or any type of, you know, you're still doing uh what, you know, you need everybody needs a dentist, everybody needs a doctor, but it's not all PE. So do they push, they push everyone to get better. If you don't get better, I mean, yes, uh there's no more Ben Franklin stores, Walmart. So we can use Walmart. Walmart done that. There's a reason why there's a dollar store on every corner now. It's called Amazon. Amazon's push dollar stores become become more convenient. Because the dollar store, people aren't driving three miles through town to go to a dollar store. If it's not convenient, they're ordering on Amazon. So Amazon's made made us lazy as a consumer. Instacart, Uber Eats, it's it's convenience. So when you talk roofing, you know, what's the old meme that says you cheap, fast, good? Yeah. Pick two of three. How long has that meme been around?
SPEAKER_02:A long time.
SPEAKER_00:Why has it got to evolve too? I want cheap, fast, and good. Why can't I get it? Because I get it with Amazon.
SPEAKER_02:Yeah.
SPEAKER_00:I want it now. Well, outside of Yeti coolers and you know, different things, you you want stuff now, you won't be rewarded now. You want it at a fair price, and you expect good quality. So you're telling me if I get it right now for a fair price, you're gonna put a crappy roof on my house? No, you're gonna get the same roof.
SPEAKER_05:Yeah.
SPEAKER_00:So that's cheap, fast, good. They want to give me all the above.
SPEAKER_02:What advice would you have for uh for for somebody that's uh that you know that or the advice you would give yourself when you started if from from where you are now?
SPEAKER_00:You know, probably if I was to start all over again at zero, don't do it by yourself. Find alignment. And when you're in your 20s and 30s, it's harder because you're more aggressive a lot of times. You're you're a little bit hardcore, you don't it's it's harder. Just like it's just like back on marriages. A lot of marriages don't last in their twelve people get married at a young age. It's the same as a business relationship, it don't always last, and that's not good. You hate to burn bridges, you hate to burn relationships. Those relationships matter. But if I wouldn't want to go start a riffing company from ground zero again, I want a team. I've always wanted a team, and that's where I can probably go make more money going out and doing sales and having three office people and and two project managers running jobs. I can probably go make, but I don't want to do that. And and so yeah, to the younger me would be don't do it by yourself. It's 10 years ago, I think, is different for a lot of people, but this day and age with PE, there's too many, there's too many uphill challenges. I mean, from I mean, marketing was easier 10 years ago. And now you got 14 marketing companies, you got everybody hitting you up there, you gotta run a business. Yeah and if you are trying to worry about that roof going on the house today, too, because it's hard to scale. And and some people just want to go and sell two roofs at three roofs a month and they're happy, and there's nothing wrong with that at all. I'm friends with those guys and I support them and and I take their phone calls and help them any way I can. And and so I'm not I'm not anti-anyone and I'm not anti-private equity. I get the business model, but I don't think if you don't evolve in business in general, you're gonna be gone. If you don't have systems and processes, you're gonna be gone. And just like keeping bad sales guys around or bad roofing crews, it you have to you have to get better every day.
SPEAKER_02:Awesome, man. Get better every day. This has been another episode of the Roofing Success Podcast. Thank you for tuning in to the Roofing Success Podcast. For more valuable content, visit Roofing SuccessPodcast.com. 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.
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