Owner's Salary and Net Profit


Looking for a little feedback out there.

I own a residential/commercial roofing business/corp in Central Ca.

My current annual revenue is around 2 million.

My salary is 200k gross.

Business net profit is usually around 3-5% ($60,000 - $100,000) at years’s end (on top of my salary).

Just wondering if this is in the ballpark as per what other roofing companies are making? Seems like should be making more for amount of revenue and work I put into my business.

Just wanted to get some thoughts. Any help is appreciated.

Thank you

I can’t speak for commercial but in residential roofing, you should be able to average 30 to 35% gross profit (profit defined as the difference between job total dollar amount minus labor and materials) pretty readily. A well run company that has decent quality control and control of their costs should do 35 to 40%. A top company should do 40 to 45% gross profit. There are some that even manage to do a little better.

2 million is a tough spot to be in to a certain degree. You’re big enough to need a reasonable level of sophistication but you don’t have the critical mass to amortize a number of overhead costs. So either you’re working your butt off wearing dozens of hats or you’re taking less profit because you’re hiring out that overhead. It’s hard to hire half an estimator, half an accountant, etc…

IMHO, you should either be a little pickier on jobs and only take those at higher profit margins. You may make more money by being smaller. Or you need to grow your business to where you can more easily absorb and amortize your overhead.

As long as your company is financially sound and you’re taking that money out, I’d say you’re doing fairly decent. Good luck.

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Thank you for your reply/help. So right now, below is how I have it lined up.
If I removed the equipment rental, other construction costs (permits, dump fees, etc), subcontractors and tools and small
equipment, my GP would be at 34%. Is this how you would figure it? Also my salary ($82500) is included in the wages below.
Would you pull that out to compute GP? The below represents 5 mos. Really appreciate your help with this.
Construction Income 908,947.80 100.00 %
Total Income $908,947.80 100.00 %
Construction Materials Costs 230,511.04 25.36 %
Equipment Rental for Jobs 1,477.90 0.16 %
Other Construction Costs 39,792.96 4.38 %
Salary and Wages 370,013.55 40.71 %
Subcontractors 116,627.00 12.83 %
Tools and Small Equipment 1,074.71 0.12 %
Total Cost of Goods Sold $759,497.16 83.56 %
GROSS PROFIT $149,450.64 16.44 %
GROSS PROFIT $149,450.64 16.44 %
General and Administrative 908.00 0.10 %
Advertising and Promotion 3,834.37 0.42 %
Bank Service Charges 805.76 0.09 %
Charitable Contributions 1,500.00 0.17 %
Computer and Internet Expenses 1,444.30 0.16 %
Equipment Rental 853.77 0.09 %
Interest Expense 1,638.58 0.18 %
Meals and Entertainment 480.85 0.05 %
Merchant Account Fees 580.45 0.06 %
Office Supplies 1,976.69 0.22 %
Postage 666.20 0.07 %
Professional Fees 2,591.38 0.29 %
Subscriptions & Memberships 39.85 0.00 %
Telephone Expense 2,570.67 0.28 %
Utilities 833.74 0.09 %
Total General and Administrative 20,724.61 2.28 %
Indirect Expense
Auto and Truck 9,905.76 1.09 %
Auto Insurance 3,166.28 0.35 %
Fuel 10,717.65 1.18 %
Total Auto and Truck 23,789.69 2.62 %
Business Licenses and Permits 2,403.31 0.26 %
Finance Expense 15.68 0.00 %
Freight 1,984.34 0.22 %
Insurance Expense 7,040.00 0.77 %
Repairs and Maintenance 1,034.87 0.11 %
Shop Supplies 4,650.76 0.51 %
Total Indirect Expense 40,918.65 4.50 %
Mileage 3,450.65 0.38 %
Office/General Administrative Expenses 65.00 0.01 %
QuickBooks Payments Fees 5,617.68 0.62 %
Rental Expenses
Rent 13,463.77 1.48 %
Rent-PropTaxes 2,657.03 0.29 %
Total Rental Expenses 16,120.80 1.77 %
Taxes-Unsecured Property (Business) 207.18 0.02 %
Total Expenses $87,104.57 9.58 %
NET OPERATING INCOME $62,346.07 6.86 %

QB P&L Jan-July:
Cost of goods sold 49.2%
Gross Profit 50.8%
Expense 28.2%
Net Income 22.5%

Last year
Net Income 18.3%

Not sure how you mean “200k salary” but if its a S or C corp, keep your salary realistic like $60k. Pay yourself distributions for any of the remainder. You may do this already but just throwing it out there.

so you think 200,000/year owner salary is too much for a biz my size (2mil). How big is your biz? OSalary is included in the salary and wages of my p and l. where do you put subs? thanks

He’s saying there may be more advantageous ways to take money out of the company. When you take a salary, you are paying the 15% FICA tax. If you take money out as a shareholder distribution, you can save 7.5% of that. There has to be some balance which is a topic best discussed with your accountant.

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Authentic_Dad is correct.

$200k doesn’t seem bad at all to me but our business are prob. completely different. We are 95% residential ; roofing & gutters with no subs.

Off your topic again but I highly recommend seeking out a financial adviser in addition to a CPA.

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Thanks capitalroofer.
I do have a CPA and plan on asking him about some of these things.
Just wanted to see a side by side comparison with another roofing company.
Question on your:
Cost of goods sold 49.2%
Gross Profit 50.8%
Expense 28.2%
Net Income 22.5%
Is you salary included in your 22.5% net income?
If not, what is your total profit percentage when you add your salary?

No sweat. I was hoping a couple of others would post percentages as well. Where does your Net Income percentage fall?

Owner salary (and all other supporting/office staff) is included in my expenses class.
Distributions come from the remaining 22.5%.

Another question:
What percentage of your gross revenue is your salary?

Gross profit is (traditionally) your gross sales less "direct costs. I.e… material and labor attributable directly to those sales. So roofers (subs or otherwise) that roofer rose jobs. Virtually every other cost is part of your “overhead” in other words an expense.
As for the 200 grand you’re taking, that’s 10% of your total sales! Seams like a lot to me, but if your company can pay you that while still planing for growth, and not leveraged to a bank… it’s good to be the king!