Why Do So Many Roofing Companies Go Out of Business?

Every year, roofing companies open their doors full of energy and big plans. And yet every year, a handful of those roofers shut down quietly—sometimes within just a few years of getting started.

It happens more often than most homeowners realize. So what goes wrong? What does it mean for you when you are hiring someone to work on your home?

The answers come down to a few core problems that show up again and again in the roofing industry. At Equity Roofing, we’ve helped homeowners across Central Pennsylvania navigate their roof repairs after their old roofer went out of business.

We believe understanding what causes the high turnover rate in roofing can help homeowners make the best decision for their home.

Is it Easy to Start a Roofing Company?

One of the reasons roofing sees so much turnover is that it does not take much to get started. In Pennsylvania, there is very little regulation preventing someone from launching a roofing business. You do not need formal training, a license, or a large amount of startup money.

That low barrier to entry means the market fills up quickly, including with people who have the technical skill but have never run a business before. A talent in roofing doesn’t automatically translate into knowing how to manage cash flow, hire employees, or keep customers happy.

This is sometimes called an "entrepreneurial seizure"—when a skilled technician decides to go out on their own without fully understanding what running a company actually requires.

What Kinds of Roofing Companies Fail?

Most struggling roofing companies tend to fall into one of two categories. Understanding the difference can help you recognize which kind you might be dealing with.

The production-focused company is run by someone who truly knows how to install a roof. But they tend to underprice their work and struggle to manage the business side of things. Over time, they either run out of money or burn out from the stress of doing everything themselves.

The sales-focused company grows fast and looks impressive on the outside. But without a strong production department, the quality of their work suffers. Customers call with complaints, after-project to-do lists pile up, and jobs go unfinished (and unpaid). The wake of problems eventually catches up with them.

What Does Cash Flow Have to Do With Roofing?

Roofing is a cash-heavy business, and the mishandling of cash flow can be both a red flag and a sign that the company won’t last long.

Labor and materials make up 60 to 70% of the cost of any roofing job. That money has to come from somewhere before the work is done and the final payment is collected. If a company is not carefully tracking what it owes versus what it has actually earned, it can end up deeply in the hole before it even realizes the problem.

Two specific cash flow traps are especially common:

• Collecting deposits for new jobs and using that money to pay bills from old jobs—essentially robbing Peter to pay Paul
• Waiting on insurance companies or homeowners to release the final payment, sometimes for 60 to 90 days, while the company's own bills keep coming due

Companies that grow very fast are especially vulnerable to this. They are spending money on equipment, hiring, and marketing while relying on deposits to fund it all. If sales slow down for even a short time, there is no cushion to fall back on.

Is a Cheap Roofer Bad?

Roofing companies will sometimes underbid jobs, especially during slow seasons, and this isn’t always a reflection of their talent or quality. But when a bid comes in significantly lower than others, it could signal a short lifespan for the company.

When a company prices a job far below market rate, something is getting squeezed. It might be material quality. It might be what they are paying their crew. Most likely, it is both. And a company that cannot cover its true costs on a job today is a company that may not be around tomorrow.

Some things to consider when it comes to low roofing quotes:

• A company that is $12,000 cheaper than a comparable quote is almost certainly cutting corners somewhere
• Labor and materials already account for most of the job cost—the math simply does not work at extremely low prices
• If something goes wrong after the job, you need the company to still be in business to stand behind their work

A fair price is not just about the shingles on your roof. It includes the sales process, the installation oversight, warranty registration, and the ability to send a service crew if something comes up down the road. Those things cost money. A responsible company builds that into its pricing.

For a guide on how to compare roof quotes, we recommend reviewing this article.