You finish in month two and get paid in month eighteen
You dry the building in so every other trade can start, then wait on 10% until the whole job closes and a manufacturer's inspector you don't employ signs off.
Trades that finish late get their retention released not long after they demobilize. Roofing finishes first and waits longest, which makes it the widest distance on the whole site between work performed and cash received. Then a third party inspection falls between you and the release, and his punch list is written months after your crew went somewhere else.
The size of it
Ten percent held on a job you completed in month two of an eighteen month build means the entire net margin on that job stays out for 12 to 16 months, plus a remobilization to clear punch and unlock it. Levelset's data shows over 25% of retained money was never paid at all.
Roofing production is short and it happens early. A 40,000 square foot roof is three to six weeks of work, and nothing inside the building starts until it's dry, so you bill most of the contract in month two of an eighteen month build. Your retention then rides the general contractor's entire schedule. On top of that, most GCs won't release roofing retention until the manufacturer issues the NDL warranty certificate, and that certificate only issues after the manufacturer's own field inspector walks the roof, the punch items on his report are corrected at your cost, and the per square warranty fee is paid. The party holding the last lever has no contract with you or with the GC. Subcontractors already wait an average of about 167 days for retention, and roofing stacks a warranty inspection on top of that.
Three moves, in order
Step 01: Job cost structure
Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words.
What else costs roofing contractors money
The same mechanism in other trades
What roofing owners ask
When does a roofing subcontractor get retainage released on a commercial job?
You dry the building in so every other trade can start, then wait on 10% until the whole job closes and a manufacturer's inspector you don't employ signs off.
What does it cost?
Ten percent held on a job you completed in month two of an eighteen month build means the entire net margin on that job stays out for 12 to 16 months, plus a remobilization to clear punch and unlock it. Levelset's data shows over 25% of retained money was never paid at all.
What do I do first?
Build one list of every open retention balance with the date your scope was complete and the status of the warranty certificate on each job.
What are roofing contractors supposed to be making?
Roofing runs 22% gross margin, 15% overhead and 7% net profit before taxes at $1M–$5M. The all-trade average is 7%, so this trade is right on it. The CFOS target is 10.5%.
Which part of the system fixes it?
The step is number 01, job cost structure. Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words. It comes from chapter 1 of CONTROL: The Construction Financial Operating System.
Everything on this page is something you can install yourself, andCONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for roofing contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.
Wrote CONTROL, the 8 step system behind these figures. More about the author.