I live in Seattle. My girlfriendís brother has a lot of expertise in the roofing industry and wants to start a business with me. Heres the catch – he doesnít have citizenship so he would need me to form the business, get insurance, run the administrative side of things, and set it all up. I have a full time job so Iím looking to do this on the side. He wants to get 80% of the profits since he is doing the work and give me 20% for doing the setup.
Oh man this is Juicy. I love the roofing business.
Lets start with my concerns:
A couple things you should know – roofing has the highest workers compensation rate of any industry in America. Its the only one higher than moving and storage. Its an extremely dangerous job. People die on the job. Youíll pay upwards of 40% on top of payroll in the form of workers compensation. So if you pay guys $20/hr to do the work youíll pay an additional $8 per hour in workers compensation.
Donít do a single job without liability and workers compensation insurance. Make sure to form an LLC for liability purposes.
You need to talk to a lawyer about the concerns sharing profits and ownership with someone who doesnít have a social security number. I donít know if its possible for them to be a part owner. Iím assuming they arenít here legally or they would have a work visa and a temporary social? This is all research you need to do.
A hands off role with 20% of profits doesnít sound worth the risk to me. You need to either be involved and own the business outright and set up a profit sharing plan with him or you need to not do it.
You are basically partnering so sit down and have the hard talks with him. You can set up performance hurdles to make it fair. If no profit he doesnít get paid. If the business starts to get profitable he is paid a fair salary for his work (based on revenue and commission). Everything above and beyond that salary you get until your initial investment is recouped. After that you split the profit based on value added.
There is only so much value in doing the roofing. You could get the best roofer in the world for $75k a year. The real value is in building the processes and bringing in the business. If he is a competent business manager and can build out training systems thats a lot of value. If you are doing that and he is just on the roof sweating and thats his glass ceiling then that should be considered when sharing profits.
If I were you I would want to be very involved on the quoting and selling side of things and take more of the profit. An 80/20 split is in no way worth your time, effort or risk. Sit down and have the hard conversations with him and how you see it happening.
Lets talk about what I would do if you did decide to move forward:
You arenít going to compete on price. Your competitive advantage is going to be a quick turnaround, ultra responsive customer service, eager professionalism and quality work. If you are looking for the cheapest, we are not your company. If you are looking for great value and a quick timeline, we are your company.
You do not want to be a subcontractor. General Contractors only care about one thing – money. They will beat you up on price. Plus, acting as a sub does not put to use any of your competitive advantages. Your great website, your accessibility, your responsiveness, your professionalism, your customer service. Youíre competing with the guys who donít do any of that and its a race to the bottom. Donít get involved there. Work directly with home and business owners who need a new roof.
Find your target customer. Homeowners? Business owners? Storm victims? Go and get in front of them with marketing. Find the homes in the high end neighborhood that are 20 years old and you know need a new roof.
Go and do some networking. Anybody who could potentially recommend your business you need to stop and see. Realtors. Home lenders. Insurance agents. These three could be huge. Go into their business and talk to them and drop off a card. Make friends with them. Try to refer them some business from your network and let them know you plan to do that. Get their cards and send them follow up emails. If you had great conversation with them send them a box of chocolates and a thank you card for referring business.
Consider working a niche. Maybe get really really good at working with insurance companies after storms. You can get customers a free roof if they sustain damage. That’s a good play and a skill most roofers arenít interested in learning because it takes work.
Start a lean business and buy your equipment used so you can sell later if necessary without eating a ton of depreciation. Keep your expenses variable.
Do a market analysis and study competitors. Look for the best roofing company in the USA and model your business after them. Call them and play a customer. Learn how they charge and how everything works.
Get serious about content marketing and SEO. Nurture your google my business location. Build a great website full of amazing content. All the questions someone would ask when they are putting on their own roof, dealing with insurance, or whatever. Answer all those questions!
Make sure the employees are professionally dressed and have good manners when on the job. No smoking on the job. No using customers bathrooms. No untrimmed beards or showing tattoos. A collared shirt.
Quote high. Be okay losing most of the jobs you quote. Convert fewer jobs but make more profit on each. Make sure to do a phenomenal job and youíll do great.