Valuing a Roofing Company
The roofing industry is growing and adapting to a variety of socioeconomic factors. It was not affected by COVID-19 as severely as other industries. In fact, revenue is expected to increase this year thanks to the increase in value of residential construction. Whether you plan on selling a roofing company or plan to buy one, it is important to understand the fair market value of a roofing company.
Many components impact the value of a roofing company. As a business appraiser, Peak Business Valuation works with dozens of roofing contractors who are looking to buy or sell a roofing business. The first step in doing so is obtaining a business valuation. As part of a valuation engagement, a valuation expert uses key factors to value a roofing company. While there are many factors to consider when valuing a roofing business, this article will not cover them all. For more specific information about valuing a roofing company you are looking to buy or sell, schedule a free consultation with Peak Business Valuation.
Market Multiples for a Roofing Company
- REV Multiple Average: 0.33x – 0.51x
- SDE Multiple Average: 1.88x – 2.73x
- EBITDA Multiple Average: 2.47x – 3.55x
**Disclaimer: These multiples are for educational purposes only. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation or its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.
How to Value a Roofing Company
A valuation expert will determine what market multiples are most applicable to your roofing company. For additional information see Valuation Multiples for a Roofing Company. By increasing your understanding of what your roofing company is worth, you can begin to take steps to increase the value of your business. This is helpful whether you are expanding, acquiring an existing company, or maximizing the value of your business before selling. Here are a few ideas to help increase your roofing business’s value. If you are searching for a more extensive valuation, schedule a free consultation with Peak Business Valuation.
Key Success Factors
Peak Business Valuation, business appraiser, values roofing companies regularly. Below are several success factors that can help distinguish your roofing business and increase its value. See Value Drivers for a Roofing Company, Valuation Multiples for a Roofing Company, and How to Value a Roofing Company for more ideas.
Online Reputation
Potential clients look to the internet for answers now more than ever. That means when they are building a new home, looking to make roof repairs, or roofing the office of their business, the first place they go to look for a roofer is Google. Not only is it important to have an online presence, but it is also crucial to have a good reputation to go with it. There are a few key elements that are essential to developing a good reputation online.
- Great website – You don’t need to spend thousands of dollars to build a perfect website for your roofing company. However, a website that is simple and easy to navigate will bring in more leads for your business. For example, pictures of previous jobs are a great way to illustrate roofing expertise.
- Reviews – Clients want to have the best idea possible of what they are getting before they pay for it. Asking for Google reviews is a great way to boost your online presence and credibility.
- Contact – If it is difficult for a potential client to find how to contact you on Google or your website, they will continue their search elsewhere. Make sure your contact information is easy to find online.
The online reputation of a roofing company will directly correlate with the company’s local reputation as well. Maintaining good standing in both is vital to the value of the business.
Commercial vs. Residential
Something else a valuation expert considers is whether the roofing company typically works with commercial or residential clients. Residential roofing companies have seen an increase in demand due to the housing market. While commercial companies have been expected to decrease due to “declining corporate profit” in the aftermath of COVID-19. A valuation could have entirely different results in value depending on the client sector a roofing company focuses on.
Management
A successful roofing company is organized and completes jobs in an orderly and timely manner. This requires good communication and organization which begins with management. Managers set expectations for employee performance. If the leadership in a roofing company does not set a standard for how quickly and well a job is completed then it will ultimately be reflected on the bottom line. Management’s ability to maximize profit through its workforce is an indirect value driver in a business valuation. For additional questions schedule a free consultation with Peak Business Valuation, we are happy to help!
Roofing Software
Technology has made many industries more efficient through industry-specific software. There are several roofing software companies (Acculynx, JobNimbus, etc.) that provide a streamlined way for roofing contractors and their employees to keep track of jobs. Many contractors don’t necessarily consider roofing as a repeat customer industry. However, if a windstorm, hurricane, or another type of natural disaster hits, the roofing company can access their database of clients and reach out to see which of them need roofing services again. This type of stored information can be a valuable asset to the business.
Economic Health
It is important to know what post-pandemic revenue and profit margins look like. Half of the roofing companies expected an increase in their revenue from 2019 to 2020. These industry trends help determine the financial health of the business being evaluated. It is also valuable to know other ways in which the industry and the respective roofing company were affected by the pandemic.
Going Green
There is increasing demand to offer products and services that are environmentally friendly. The roofing industry is no different. The ability of a roofing company to offer solar panels sets them apart from competitors who do not. The business could benefit from adding solar panels to its list of products/services. Or, they can partner with an existing solar company to meet their client’s needs.
Summary
There are many important things to consider when valuing a roofing company. Understanding the value of a roofing business is important whether you are looking to buy, sell, or grow your roofing business. Obtaining a business valuation can help you understand the fair market value. A business appraisal also identifies opportunities to maximize the value of your company.
Peak Business Valuation, business appraiser, values roofing companies across the country. We are happy to answer any questions you may have about understanding the value of a roofing company. You can reach out by scheduling your free consultation below.
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