How Does Storm Work Affect the Value of My Roofing Company

How Does Storm Work Affect the Value of My Roofing Company?

How much of your revenue comes from storm and insurance claims versus retail or commercial work is one of the most important questions a buyer will ask when evaluating a roofing company.

How Buyers Think About Storm Revenue

Storm revenue is not bad revenue. In a strong hail or wind year it can produce exceptional top-line numbers and strong EBITDA. The challenge from a buyer's perspective is that it is very unpredictable. A business that does $4 million in revenue after a significant weather event in its market might do $2 million in a quiet year. The unpredictable revenue from storms can be difficult for a buyer to underwrite with their investors or lenders.

What buyers will typically do when evaluating a storm-heavy roofing company is look through the best storm years and try to establish what the business looks like in a normalized year without a major weather catalyst. The more normalized revenue over a 3 year period, is what they’ll base their EBITDA calculation on. If the trailing 12 months reflects an active storm season, expect buyers to ask hard questions about what the business produces in a year without that tailwind.

Customer concentration is the other concern buyers have. Storm-driven revenue often flows through public adjusters, insurance adjusters, and a network of referral relationships that can be highly concentrated and highly personal to the owner. When those relationships are personal to the individual rather than held by the company, buyers see risk that flows directly into the value.

Retail & Commercial Replacement: What Buyers Pay a Premium For

Retail replacement work is the gold standard in roofing valuation. A homeowner replacing an aging roof on their own timeline, driven by the condition of the roof rather than a weather event, represents need-driven demand that exists in every market every year regardless of what the weather does. That consistency is what buyers pay for.

Commercial roofing is equally sought after and in some cases commands strong buyer interest from a specific pool of institutional acquirers who understand and actively target commercial roofing operations. Long-term service and maintenance agreements with commercial property owners, property management companies, and institutional clients represent contracted recurring revenue that looks very attractive to buyers building platforms. NorthBase has direct relationships with the buyers who are specifically looking for commercial roofing businesses right now, and that buyer pool is quietly more active than most commercial roofing owners realize.

The Balanced Roofing Business

The most attractive roofing acquisition in the eyes of most buyers is a business with a strong foundation in either retail replacement or commercial work, or ideally both, with storm revenue as an additional layer that performs well in active years without being the engine the whole operation depends on. A business with consistent retail or commercial revenue that also captures storm work when events occur in its market is positioned to benefit from weather activity without being exposed to its absence. That combination tells buyers a clear and compelling story: this business generates real revenue in any year and exceptional revenue in a strong storm year. That is a profile buyers will compete for.

What to Do If Your Business Is Storm Dependent

If storm and insurance work represents the majority of your revenue and you want to sell, It means the buyer pool is more selective, and the positioning of the business requires more care. There are buyers who specifically understand storm-driven roofing businesses, who have acquired them, and who know how to evaluate and operate through the natural variance of weather cycles. Reaching those buyers and capitalizing on the right valuation requires an advisor who knows who they are and how to present your specific business to them in the most credible way.

If you are thinking about selling your roofing company and want an honest picture of how your revenue mix affects what buyers will pay, talk to NorthBase. We know the roofing buyers, we understand how storm revenue, retail, and commercial work gets evaluated, and we have the relationships to bring the right buyers to the table for your specific business.

Jason Hoff, Founder of NorthBase, is a Mergers & Acquisition advisor specializing in HVAC, Plumbing, and home services& Contractor businesses including roofing companies.

Jason.Hoff@NorthBase.com | 970-581-9698 | www.NorthBase.com