Ronin01

New guy signing in. I work primarily as an insurance adjuster, but occasionally do sales work for a stormer. Probably not the most popular occupation here, but I signed on because I want to try and keep myself informed. Some stormers really do want to do a good job and I want to have happy customers.
I have about 11years experience adjusting and 6 years roofing. I split it up so I don't get to burned out on one job, I never intertwine the jobs, working both sides of a storm. I do one or the other, so there are no questions ethically. Who knows, maybe some of my experience can be helpful on here.
Anyway, look forward to picking your brains.

Grumpy

Ronin, welcome to the forum. I personally have nothing against storm chasers EXCEPT the ones that cut corners and make the customer suffer so that they can profit. I see no way that I can do a quality roofing system to my standards using decent materials for what the insurance companies are willing to pay.

I have the utmost respect for the marketing machines that most storm chasers are. But that's often where the respect ends.

Maybe you can enlighten us why insurance companies don't pay enough for a properly licensed and insured roofing company to install roofs, as if we don't already know. And maybe you can tell us the oxymoron that insurance companies are paying "wages" only the uninsurd or under insured can operate on, when in the end is it not the very same insurance companies that suffer? I don't see HOW a stormer can afford to do a good job, that's another thing maybe you can enlighten us on.

__________________
-Grumpy
Chicago Gutters Chicago Roofing

Ronin01

Well, glad to see you start with an easy question.
I am sure nobody here is under any delusion about why insurance companies pay as little as they can. It always a constant battle to try and get more money from them. I also doubt that anybody wonders where stormers cut their cost. We are all paying the same amount for materials, so the stormers are using inexpensive labor. Our labor subs get paid about $75/sq so we have to be around $220/sq to cover cost.
It's a fact of life that the insurance companies are pretty much forcing roofers to use "lower waged labor". I suppose if you could get all the roofers together and say they weren't going to work for that, you may be able to force them to increase their payments, but I just don't see it happening. We have tough enough time working a storm when Allstate comes out and says "Joe's Roofing" will do it for $175/sq, so that's what we are paying everybody. Doesn't matter that last week Joe was unemployeed, then the hail storm came, so he got his ladder and his hammer and his cousin and went into the roofing business.
Most of the professional stormers make their money in volume. It's not uncommon for them to put on 1000 roofs in 6 months. Do some of them do a crappy job? Sure. There are only 2 companies that I found that I will work for, because they do a really good job and they stand behind their product. I also go out on every one of my jobs to make sure the crew is working up to standard.

Hope that's a good start for an answer.

Grumpy

I disagree that stormers are paying the same ammount for materials. I see stormers using the cheapest possible materials on the market, even using seconds. In addition I see stormers typically install the "minimum code" roofing system, and cut corners that way. What is a minimum code roofing system, well ice shield for example is required at the gutter line to extend past the warm wall 24". It is not "required" in the valleys or at pre-flashing areas like pipes, chimneys and skylights. However IMO it should be, and I won't do a roof without the ice shield pre-flashing at these areas. So stormers using cheaper materials that I wouldn't stake my reputation on, and slapping up minimum code roofs do pay less for materials because they use less materials. Further more I typically see stormers won't replace flashings, specificaly wall and chimney flashings. If the customer wants a warranty from me I will need to do the whole roof, not just the shingles, which means I need to replace the flashings.

I also disagree that most professional companies make money in volume. Doing one job for a loss or doing one job for very little profit is bad. Doing alot of jobs for a loss is real bad and doing alot of jobs for very little profit isn't good. Further more the majority of the companies that do volume typically have very low levels of quality control, be they stormers, retail or new construction. It's hard to find quality guys, so if you need warm bodies you lower your standards. That's typically what I see. Although I can think of a select few companies that have volume and adequate reputations.

But let's be real, you said $220 is your cost, I am assuming you mean "sale price", not your cost. I think that's low, but realistic to what I see others charging for a minimum code roof. I can do a good roof on a basic very ez walker 1 layer rip for $250 with a 3-tab shingle (not with an architectural) and no wall flashings. I see insurance companies, like you said, offering $175 or sometimes even less. Heck one time I saw a price the insurance company was offering before depreciation which didn't even cover the cost of materials. WTF?!

Ok but back to my $250. Labor Plus material Plus disposal is about $185. My office and overhead is another $1000 per day so let's say on an average 25 square job that another $40 a square, now we are up to $225. The salesman gets anywhere from 7-15% depending on company, I pay 11%, thats about $25, so now we are up to $250.

If I do a job for what insurance companies are willing to pay, I will be LOSING approximately $75 on each and every square I install. Not good for my bottom line, wouldn't you agree?


I toyed around with the idea, if I cut my overhead variable by half, making it $500 instead of $1,000 would that double my work volume? Well first off that's just stupid, why take on twice as much risk and liability for the same profit, but the short answer was No. Saving the home owner or insurance company $500 would certainly not double my profit, not when unemployed Joe is doing the work at $1,875 below my actual current sale price. I'd still be $1,375 higher. Furthermore, I would need that $500 savings on each job to actually triple my volume to make it worth my while to take ont he added liability. I think we already know my volume won't triple if it won't double.

So correct me if I am wrong. You are saying the answer to storm work is: cheap labor and minimum code roofing systems with commodity roofing materials?

__________________
-Grumpy
Chicago Gutters Chicago Roofing

Grumpy

I hope that you know that I am not picking on you directly. Just the whole "storm chasing" industry in general.

I wish consumers would wake up and see they are often asking for trouble by dancing with the devil and getting that "free roof."

__________________
-Grumpy
Chicago Gutters Chicago Roofing

Ronin01

Not a problem, I have a pretty thick skin. Just to clarify a few points:
The $220/sq was what I figure cost at. $75+/sq labor and about $130+ for materials, so I round it to $220. That's going through ABC Supply, who we use at most storms. We were paying $81/sq for 30 yr GAF and Owens Corning last year.

I am certainly not going to defend all stormers as I don't know them all and I do know there are some bad ones. I do know the guys that I am working with here, and they are very strict on their installs. 2 rows of I&W shield on the gutter edge, in the valley and they are removing siding to run roof to wall I&W. Also around pipe jacks, skylights, chimmneys etc. They also use new flashing. My last job took 2 days to flash a 2'6"x5' stone chimney because my guy had to cut through 6" stone to box it in. I was really impressed by them. I also know that a lot of the companies don't do that, that's why I am working with these guys. We always upgrade the homeowner to a dimensional shingle and I usually toss in ridge vent for $5 a foot just to cover material and labor.
Part of my job doing the sales is to hold fire to the feet of the insurance company. Some of them pay enough on the front, some I have to go back after to get the price up there. A lot of the guys settle for 25% profit, I am shooting for 40%. I find that I have to supplement about 3 out of 4 claims. I always try to get O&P.
Last year I was in New York and the companies paid well, about $325/sq average, even Allstate was ok. I had one that the insurance company paid $515 for 3 tab on a 2 story steep. I am ok going after the insurance company, but I personally won't try a charge the homeowner more unless they want an upgrade and the insurance allowance won't cover it. The company I work for won't do the job if there isn't at least 12% profit, averaged out over 3-400 jobs they are doing ok.

Just for a base example on how my deal works out. My company takes 10% off of the top to cover office cost (which includes our housing and advertising). Then we do a 50-50 split on profit. Say I get a 30 sq house bought for $10k ($333/sq). Company gets $1k office, then figure $220/sq labor and material ($6600). I split $2400 with the company.

Working on the insurance company is the key. Don't always accept their first number, ask for O&P. Doesn't hurt to ask for the extra $5-600 and its all profit.

Grumpy

I'm not quite sure I agree with your math. Here's mine...

12% is a pittance. 40% is about what any legitimate company should be asking. As you can see my bare bones minimum is 35%, anything less and it's not worth it to leave the office.

At your $220 cost if we figure the average job is 25 squares and we figure you're making 15% on average we can figure an average gross profit of about $825. Across the board of 300 jobs thats $247,500 gross profit for the year. Split that 40% for the sales rep (which I know some stormers pay) that's $99,000 for the salesman. Not bad if it's one sales rep, but what's left for the company? $148,500.

So the boss is making $148,500? No. How much does the office cost? Mine is $12k a year, so that's $136,500. Phones? Mines $3,600 a year so that's $132,900. Secretary? $30,000 a year so now $102,900. Truck payment? $6,000 a year so now $96,900. There is more overhead, I have only scratchd the surface but the boss is already making less than the sales rep. That doesn't sound like a formula for success.

Furthermore let's examine that $825 average gross profit per job number. So I suppose you are using sub contractors, I bet they are decent too if you are paying $75. But we both know that their warranty is only as good for as long as you are giving them jobs. So lets say in a year or two jobs start to leak, and that sub won't come back and fix them. An average leak repair with travel is a 3 hour job. Figure you'll be paying another subcontractor $45 an hour to fix the first guy's mistakes, now figure you'll need anout $50 to make the repair, each repair on average will cost the company about $185. Throw that cork screw into the mix and it messes up all the numbers.

I simply couldn't operate for the long term on 12%. I could soak up some quick cash after 3 or 4 storms work them and then go out of business to get out of my warrantys, and start another company doing the same thing under a different corporation. That seems to be the business model for most stormers. LOL heck for most contractors in general. Work 3-5 years and then change names. I am proud to say we are on our 6th year, we are over the 5 year hump and looking to get past the 10 year hump.


It's alot of work working for the insurance company, it definetly takes a specialist. I personally prefer to work direct for the customer, I have dabbled in the storm work once or thrice and did not like it one bit. As I progressed my career and learned more about the numbers I just didn't see how it was possible, as described above.

__________________
-Grumpy
Chicago Gutters Chicago Roofing

ROOFMAX

insurnnce co here pay 130-150 sq and that labor and all materials. and crackhead joe will work for that. last mo. a nursing home got paid 100 per sq on 240 sq. job. a co drove 250 miles to do the job for 100 dollars a sq. labor and all materials. this is in northeast arkansas. o bye the way shingles are blowning off like a deck of cards,but here insurance co will tell there comsters 200 per sq is just out ragis price to pay and i do mean labor and materals dump cost' , turn key job,

Ronin01

Grumpy, the 12% is the lowest I have ever seen them take a job for, they definitely weren't happy about it. I would say on average they are around 30%. I always shoot for 40%.

To be honest with you, I have really never gotten into how the company does business wise. The guys running it are a bit younger then I am, and I think they are still learning a lot about how to run the operation business wise. They know the roofing part of it, but as you know that is only a small part of running an operation successfully.

As far as I know the storming business is relatively new, the first time I remember seeing stormers was about 10 years ago in a Chicago hail storm. I know a bunch of guys did really well for a while and made a bunch of money. A lot of them got to big, to quick and overextended themselves. A bunch of them got their asses handed to them trying to work in Florida after the hurricanes. No materials, fighting with insurance companies, all the inspections and regulations. Put a few of them out of business. Storming is still a fairly new industry and whether or not it will be sustained is hard to tell.

Grumpy

LOL that Chicago storm is the same "dabbling" I refrenced above.

If I ever decide to stop going against the grain and choose the path of least resistance, I'll look you up. You can head up my storm recovery division. If you can get $330 a square we can both make alot of money all day every day.

I know alot of guys that lost 2-3 years worth of profit in FL about 8 years ago or whatever hurricane hit around then.


I think storming will be around for a very long while unless the insurance companies do something abou it. What I mean is, look at auto mechanics for example. Look at the health care industry, you simply CAN'T afford to go to a doctor if you don't have insurance. Look at ambulance chasing lawyers. LOL I think roofers are behind the curve when it comes to "chasing".

__________________
-Grumpy
Chicago Gutters Chicago Roofing