New Year, New Margins: How Roofing Contractors Should Evaluate Their Break-Even Point

Most roofing companies look at revenue to decide whether they had a good year—but revenue is only half the story. The real performance indicator is margin, and the number that drives margin more than anything else is your break-even point. If you haven’t recalculated it for the new year, you’re already operating with blind spots.

Break-even analysis isn’t just a spreadsheet exercise. It’s the foundation of how contractors set prices, manage labor, allocate overhead, and make hiring decisions. When your break-even point is outdated, every estimate you produce can quietly erode your profit.

Why Break-Even Analysis Matters More Than You Think

Roofing is one of the most volatile construction trades:

• Labor costs fluctuate

• Insurance premiums rise

• Production efficiency varies

• Material pricing shifts

• Overhead grows as you scale

If you’re still using last year’s numbers, your pricing is already incorrect.

The danger signs appear quickly:

• Jobs appear profitable on paper, but cash isn’t increasing.

• Crews stay busy while margins shrink.

• Overhead expands without pricing adjustments.

• You bid more work but make less money

Busy does not mean profitable. Break-even is reality.

The Three Numbers Every Roofing Contractor Must Know

1. Total Annual Overhead

This includes:

• Office and admin salaries

• Vehicle and equipment costs

• Software and technology

• Insurance premiums

• Marketing and sales expenses

• Office rent and utilities

Underestimating overhead is the #1 reason roofers misprice jobs.

2. Your True Labor Burden

Do NOT calculate labor on wages alone.

Include:

• Payroll taxes

• Workers’ comp

• Health benefits

• Paid leave

• Lost productivity

• Hiring and onboarding

• Supervision costs

Your “real” labor cost is almost always much higher than your wage rate.

3. Required Gross Profit Margin

Most roofing contractors need a 30–40% gross margin to operate safely.

Anything less puts your business at risk.

How to Recalculate Your Break-Even for the New Year

A simple, operational method:

Step 1 — Add Up Your Total Overhead

Use last year’s actuals plus increases for the year ahead.

Step 2 — Determine Productive Crew Hours

Crews are not 100% billable. Factor in weather, training, and material delays.

Step 3 — Allocate Overhead Per Labor Hour

Divide your total overhead by your annual billable hours.

Step 4 — Add Fully Burdened Labor Costs

This gives you your minimum labor rate before profit.

Step 5 — Add Material & Equipment Costs

Forecast price changes.

Step 6 — Add Your Required Gross Profit

This is your minimum pricing threshold.

This calculation should be updated every year—not every few years.

Why Contractors Get This Wrong

Break-even calculations fail when:

• Leadership relies on outdated numbers.

• Estimators price emotionally instead of mathematically.

• Supervisors don’t understand production economics.

• Overhead grows quietly

• Seasonal or economic shifts aren’t accounted for

Every job becomes a margin gamble.

A Real Example: How Contractors Lose Margin Without Knowing It

A contractor calculates labor at $28/hr. And charges $65/hr. But the actual burdened cost is:

• Labor burden: $52/hr.

• Overhead allocation: $18/hr.

• Required margin: $35/hr.

Your minimum rate should be:

$105/hr. or more

If you’re charging less, you’re losing money—even if the job “looked profitable.”

How to Apply Your Updated Break-Even

Once recalculated, apply it immediately to:

✔ Re-roof bids

✔ Service call pricing

✔ Time-and-materials work

✔ Crew sizing decisions

✔ Annual operating budgets

✔ Estimating standards across your team

Your break-even number should always lead to updated pricing.

Quick Checklist: Break-Even Reset for Roofing Contractors

• Update overhead and labor burden numbers.

• Recalculate production efficiency

• Set new gross margin targets.

• Align your estimating team with the new pricing.

• Communicate the change to sales and field teams

Skipping any of these steps creates inaccurate pricing.

Closing Thought: You Can’t Manage What You Don’t Measure

Contractors who update their break-even annually make smarter decisions, win better work, and maintain more substantial margins. Those who don’t?They work harder while making less.

Know your numbers. Protect your margin. Build a healthier roofing business.

Ready to strengthen your estimating system and protect your margins? Cotney Consulting Group offers Estimating Mastery, Operations Performance Training, and Estimator Coaching to help roofing companies build profitable, scalable systems.👉 View Our Training Options