In April, Keisha Monroe sent me a couple in Genoa Township who were getting ready to list their house. I put the drone up, and before it was back on the ground the husband asked, "So what's the Keisha discount?"
There isn't one. I've run my dad's roofing company since 2016, and the fastest way I know to lose money is to discount the work that was easiest to win. They signed at full price anyway. Here's the math behind that answer, and what I offer instead.
Referral discounts are backwards
A referred job is the cheapest job I win. When I buy leads from a home-services site, I pay about $90 a lead and close about one in eight. Add eight drone flights and eight kitchen-table conversations, and each signed roof costs me around $1,500 before anyone touches a shingle. A referral from someone like Keisha closes about two times in three and costs me maybe $150 in estimating time.
So referrals save money on selling. Building costs the same. The shingles don't know who sent you, and neither does my crew's payroll.
A 10 percent discount on a typical roof is about $1,700. Add that to the $150, and the referred job now costs more to win than a stranger off the internet.
Know your number per job
Most roofers can tell you their price per square. Fewer can tell you what's left when the job is done. Here's a typical job: a 28-square tear-off in Powell, one layer, architectural shingles.
| Line | Amount |
|---|---|
| Materials: shingles, synthetic underlayment, ice and water shield, drip edge, starter, ridge cap, vents, pipe boots, nails | $5,900 |
| Dumpster and disposal | $600 |
| Crew wages, payroll taxes, workers' comp | $4,550 |
| Direct cost | $11,050 |
| Overhead: office, insurance, trucks, estimating, warranty calls (20% of price) | $3,400 |
| Profit (15% of price) | $2,550 |
| Price | $17,000 |
The formula is price = direct cost ÷ (1 − overhead % − profit %). Here that's $11,050 ÷ 0.65. To find your overhead percentage, add up last year's costs that weren't materials, crew labor or disposal, and divide by last year's revenue.
Fifteen percent sounds generous until you remember my four crews only do replacements from April through November. That profit carries us through winter.
Now give the friend 10 percent off. The price drops $1,700. The shingles, the crew and the overhead don't move, so every dollar comes out of the $2,550. Profit falls to $850. A 10 percent discount cuts my profit by two-thirds.
Build the thank-you into the price
Referrals save me about $1,300 in selling costs, so I spend part of that on purpose. Every referred job carries two extra lines on my internal worksheet, not the customer's:
- $150 to thank the person who sent them. Usually a gift card to whatever restaurant they keep bringing up at breakfast.
- Up to $500, at my cost, on something extra for the customer.
The rest stays in the job.
Ask before you hand anyone cash or a gift card for a referral. Realtors have licensing rules about what they can accept, so Keisha gets the free kind of thank-you. I mark the referral won in Surge the day the contract is signed, so her 50 points hit the screen at the next breakfast, and I say her name out loud when I stand up.
Add value instead of cutting price
A discount becomes the price. The neighbor hears you knocked off $1,700 and expects the same, and everybody wonders what the first number was padded with. A value-add at cost gives the customer more than it costs me, and the price stays the price.
What I offer referred customers:
- Gutter guards on the whole house. On a typical two-story my cost is about $480, and retail is $1,150.
- A baffled ridge vent instead of the standard one, about $180 more in material.
- Lead pipe boots instead of rubber ones, which crack in the sun years before the shingles wear out.
- A drone check the spring after we finish, with photos. It costs me an hour.
The Genoa Township couple were moving, so gutter guards were no use to them. They got a drone report of the finished roof and a transferable workmanship warranty letter, and Keisha put both in the listing packet.
Scope it so the quick job stays quick
The other way referred work loses money is scope creep. People are more comfortable asking a favor of someone their friend vouched for. "While you're up there, can you look at the chimney?" is how a $17,000 roof turns into a free afternoon. Rotten decking is the classic surprise. You can't see it from a drone, and every sheet costs money.
Write the scope before the price, and put a unit price on every surprise. My contracts include two sheets of decking, and each one after that is $95. My scope block:
SCOPE: [address]
Tear-off: [1] layer. Each extra layer: $[__] per square
Decking: [2] sheets included. Each extra sheet: $[__]
Underlayment: synthetic; ice and water shield at eaves and valleys
Flashing: new step and counterflashing at [chimney / walls]
Chimney: masonry, crown and tuckpointing NOT included
Skylights: reflash [ ] replace [ ] not included [ ]
Gutters: detach and reset [ ] replace [ ] not included [ ]
Satellite dish: removed; owner calls provider to reset
Cleanup: magnet sweep of yard and driveway
Anything else: written change order with a price, before we start
How to say no to the discount
I coach 12U softball. Nobody bats leadoff because her mom brings the good snacks, and nobody gets a cheaper roof because they know somebody. Here's what I say:
"I'm glad Keisha sent you. My price is the same for everybody, because the shingles and my crew cost the same no matter who calls. What you get as her referral is me on your roof personally, [value-add] at my cost, and a straight answer about what the roof actually needs. If the number is more than you planned, let's look at the scope together and see what can wait."
If the number is the problem, change the scope, never the price. The gutters can wait a year. The shingles can't be 10 percent cheaper.
Some of the pressure comes from us, not the customer. We worry that charging full price makes the member who sent the job look bad. I asked Keisha about that once. She said the only thing that would embarrass her was a roof that leaked.
Insurance jobs are priced differently
On a retail job the homeowner pays, and I price it with the table above. On an insurance job, the price mostly isn't mine to set. The adjuster writes the estimate in claims software, usually Xactimate, with line items priced for our area. My job is making the scope match the actual roof. My drone photos go to the adjuster, and if the estimate missed code-required drip edge, ice and water shield or a second layer of shingles, I send a supplement with photos.
Insurance jobs also cost me more to run: adjuster meetings, supplements, and waiting on the depreciation check most carriers hold until the work is done. None of that gets cheaper for a referral.
The homeowner owes the deductible, and on an insurance job a friend discount is almost always a request to eat it. I won't. If the insurer was told the roof cost $17,000 and the homeowner really paid $16,000, somebody misled the insurance company, and my name is on the invoice.
And if there's no damage, I say so. Last fall Anil Venkataraman sent me a Powell homeowner who expected insurance to cover a whole new roof. There was no hail damage, just bad flashing around a skylight. I fixed it for a few hundred dollars. That kind of straight answer is free, whoever sent you.
Before your next estimate, pull last year's overhead and revenue and work out your percentage. Then figure your profit on a typical job at full price and at 10 percent off. Know both numbers before the drone comes down.
