Roof estimate math: working out what financing is worth to you

Step 1: Gather five numbers from last season

You need:

1. Replacement estimates written. Count full replacements only, not repairs.
2. Replacements signed. From those estimates.
3. Average signed ticket. Total signed replacement revenue divided by the number of jobs.
4. Gross margin on replacements. Revenue minus materials, labour, disposal and direct costs, as a percentage.
5. Financing costs per financed job. Any dealer fee, merchant discount or program cost your lender charges, as a percentage or dollar amount.

Our example company, "Example Roofing" in a mid-sized Canadian city, has:

Example Roofing therefore did 55 × $17,000 = $935,000 in replacement work, with about $299,200 in gross margin.

Step 2: Size the lost-estimate pool

The opportunity sits in the estimates you didn't sign. Example Roofing lost 165 estimates. Not all of them were lost on price. Some homeowners chose a competitor, some sold the house, some patched the roof instead.

Ask your estimators, or check your notes, to sort last season's losses roughly into reasons:

• Price or "not this year": the ones financing might help
• Chose a competitor: financing helps only if the competitor won on payment terms
• Never responded: unknown, often a follow-up problem rather than a price problem
• Other: sold the house, insurance issue, changed plans

Say Example Roofing's notes suggest 60 of the 165 losses were about price or timing. That's the realistic pool for financing. The other 105 need different fixes, such as faster estimates, better reviews or the follow-up rhythm that catches people who went quiet.

Step 3: Estimate a conservative conversion

Now the uncomfortable question: how many of those 60 could a clear, well-explained financing option turn into signed jobs? Nobody knows in advance. So calculate three cases:

Plan on the cautious case. If the cautious case doesn't justify the effort, financing marketing probably isn't your best move this season.

Step 4: Subtract the cost of financing

Financed jobs usually cost you something. In our example, the dealer cost is 6% of job value. That cost applies to every financed job, including those that would have paid cash anyway.

Assume that in the middle case, 14 homeowners finance: the 6 new jobs plus 8 who would have signed regardless but chose to finance once it was offered.

• Dealer cost on 14 jobs: 14 × $17,000 × 6% = $14,280
• Extra gross margin from 6 new jobs: 6 × $17,000 × 32% = $32,640
• Net gain before marketing costs: $18,360

In the cautious case with 3 new jobs and 8 switchers, the dealer cost is 11 × $1,020 = $11,220 and the extra margin is $16,320, leaving $5,100. That's thin. If even more existing cash buyers switch to financing, it can go negative.

This is the step most owners skip, and it's the one that matters most. Financing that mostly converts cash buyers into financed buyers costs you money.

Step 5: Add the upgrade effect

There's a second way financing can add margin: homeowners choosing a better option. If a homeowner picks an upgraded system, say better underlayment and an upgraded shingle line, or a metal roof, the ticket and often the margin rise.

Suppose that among Example Roofing's financed jobs, 4 homeowners upgrade, each adding $3,000 in revenue at the same 32% margin. That's another $3,840 in gross margin. It's worth measuring separately, because an upgrade effect can make financing worthwhile even when the conversion effect is small. The estimator scripts service covers how to present options so homeowners can weigh them fairly.

Step 6: Compare with the marketing cost

Now set the marketing cost against the gain. If you spend on pages, scripts, follow-up and tracking, put the whole season's cost against the net gain from steps 4 and 5.

For a company like Example Roofing, the middle case gives roughly $18,360 + $3,840 = $22,200 in net gross margin. If the marketing around financing costs more than that, the program doesn't pay this season, even though it "added six jobs". If some of the same work, such as follow-up, also revives estimates that didn't finance, count that benefit too, but separately.

The honest conclusion for many companies is that financing marketing pays best when it's part of a broader effort, such as better follow-up and better estimates, rather than a standalone campaign. See pricing for what plans cost.

Step 7: Measure what really happened

Your calculation is a hypothesis. After a season, check it against reality:

1. Did total signed replacements rise compared with last season, after allowing for changes in lead volume?
2. How many signed jobs were financed?
3. Of the financed jobs, how many came from homeowners who'd said "not this year" earlier?
4. What did financing cost you in total?
5. Did average ticket size change on financed jobs?

The financing tracking service records exactly these numbers each month, so the end-of-season review is a short meeting rather than an archaeology project.

Common mistakes in the arithmetic

• Counting every financed job as new business. Some would have signed anyway.
• Ignoring dealer costs. They apply to every financed job.
• Using revenue instead of margin. A $17,000 job is not $17,000 of profit.
• Comparing a strong lead season with a weak one. If you got twice as many leads, more signed jobs prove nothing about financing.
• Assuming conversion from outside benchmarks. Your market, lender and team are specific; your own numbers are the only reliable ones.

A one-page worksheet

Copy this onto a sheet and fill it in:

1. Estimates written last season: ____
2. Signed: ____ (signing rate ____%)
3. Average ticket: $____
4. Gross margin: ____%
5. Estimates lost on price or timing: ____
6. Cautious conversion (5%) of line 5: ____ jobs
7. Extra gross margin: line 6 × line 3 × line 4 = $____
8. Expected number of financed jobs, including switchers: ____
9. Financing cost: line 8 × line 3 × dealer cost % = $____
10. Net gain before marketing: line 7 − line 9 = $____

If line 10 is small or negative, fix follow-up and estimate quality first. If it's comfortably positive, financing marketing deserves a proper test. Either way, the guides overview has more on timing and advertising rules.