#176 - LEGENDS: The Roofing Kingpin: How Paul Reed Went From Local Player to Multi-Million Dollar Roofer

Summary

Owned and Operated - A Plumbing, Electrical, and HVAC Business Growth Podcast

Episode #176: LEGENDS: The Roofing Kingpin: How Paul Reed Went From Local Player to Multi-Million Dollar Roofer
Release Date: March 11, 2025
Hosts: Tyson
Guest: Paul Reed, Founder of Northwest Roofing

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Introduction

In Episode #176 of Owned and Operated, host Tyson welcomes Paul Reed, the driving force behind Northwest Roofing, a powerhouse in the roofing industry that has evolved from a local Denver business to a multi-million dollar enterprise with multiple branches across the United States. This episode delves deep into Paul’s entrepreneurial journey, strategic business models, leadership philosophies, and his insights on navigating the ever-changing roofing market.

Paul Reed’s Background and Northwest Roofing’s Origin

Paul Reed begins by sharing his long-standing involvement in the roofing industry, celebrating his 33rd year in the field ([00:00]). Northwest Roofing was originally established in Denver in 1963. However, it wasn’t until 2004 that Paul partnered with a gentleman named Tom to revive the dormant company. Initially, Northwest Roofing started from scratch, with Paul emphasizing, “we were about 7 million” in revenue upon their partnership, highlighting a significant turnaround from its dormant state ([03:01]).

Storm Chasing: The Backbone of Northwest Roofing’s Growth

A core aspect of Northwest Roofing’s strategy has been storm chasing—rapidly deploying resources to areas hit by severe weather to capitalize on immediate roofing needs. Paul explains how the company swiftly establishes new branches in response to hailstorms, often setting up LLCs and local offices within days ([05:02]). This agile approach allowed Northwest Roofing to dominate regions affected by unpredictable weather patterns, particularly in Colorado. Paul notes, “most states with roofing in particular, you don't really have to have a state license” simplifying the expansion process ([05:27]).

Business Model Evolution: From Storm Chasing to Commercial Roofing

While storm chasing was instrumental in their early growth, Northwest Roofing has gradually shifted focus towards commercial roofing. Paul reflects on this pivot, stating, “I pivoted about seven years ago to almost fully commercial” ([22:06]). The transition was driven by several factors:

• Higher Revenue per Job: Commercial roofing projects average significantly higher tickets ($300,000+) compared to residential jobs.
• Reduced Dependence on Weather: Commercial contracts provide more stability compared to relying solely on hailstorms.
• Operational Efficiency: Managing fewer, larger projects is more sustainable and less taxing on resources than handling thousands of small residential jobs.

Leadership Philosophy and Team Building

Paul emphasizes the importance of mindset in leadership and sales, sharing a pivotal moment when he encouraged his sales team to aim for revenue targets far beyond the industry norm. At [17:50], Paul recounts telling his sales reps, “we could get some of you guys to 4 million to $6 million a year in revenue,” which challenged their existing perceptions and significantly boosted their performance. This shift was not just about increasing sales numbers but fostering a culture where high achievement was the standard.

Overcoming Industry Challenges and Market Changes

The roofing industry is evolving, with insurance companies exerting more control over restoration projects. Paul discusses how insurance-driven manage repair programs are changing the landscape, making traditional storm chasing less viable ([33:28]). He predicts that while storms will always occur, the reliance on rapid deployment models will decrease as insurance companies favor contracted, reliable service providers.

Commercial vs. Residential Roofing: Strategic Insights

Northwest Roofing’s strategic pivot to commercial roofing stems from several advantages:

• Higher Profit Margins: Commercial jobs offer greater revenue per project.
• Service Contracts: Establishing maintenance and service contracts provides steady income and long-term client relationships.
• Operational Focus: Focusing on fewer, larger projects allows for better resource allocation and efficiency.

Paul shares, “the average commercial roof is over 300,000” ([24:28]), underscoring the financial benefits of this focus. Additionally, he highlights the shift in client needs, such as working with major property management companies like Greystar, which drive the necessity for reliable commercial roofing services.

Advice for Aspiring Entrepreneurs in Roofing

Towards the end of the episode, Paul offers valuable advice for newcomers in the roofing industry:

1. Avoid Rapid Expansion Without Strategy: “Don’t drive fast business to get to business” ([36:17]).
2. Set Realistic Growth Goals: Not every company should aim for exponential growth; it’s essential to align business objectives with personal and financial well-being.
3. Focus on Quality Over Quantity: Instead of aiming for a high volume of sales reps, concentrate on nurturing top performers who can generate substantial revenue individually.
4. Emphasize Mindset and Culture: Encourage a mindset where high sales targets are achievable and supported through proper leadership and training.

Conclusion

Paul Reed’s journey with Northwest Roofing exemplifies strategic growth, adaptability, and leadership within the roofing industry. By transitioning from storm chasing to a focus on commercial roofing, fostering a high-performance sales culture, and navigating industry challenges, Paul has built a resilient and prosperous business. His insights provide a roadmap for other entrepreneurs aiming to scale their businesses thoughtfully and sustainably.

Notable Quotes:

• Paul Reed ([00:00]): “I believe in leading from the front. I think we could get some of you guys to 4 million to $6 million a year in revenue.”
• Paul Reed ([17:50]): “This was just really working on their mindset of like, this is possible.”
• Paul Reed ([36:17]): “Don’t drive fast business to get to business.”

Connect with Paul Reed:

• LinkedIn
• Facebook

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This episode offers a comprehensive look into the strategies and philosophies that have propelled Northwest Roofing to success, providing listeners with actionable insights and inspiration for their own business ventures.

Transcript

[Paul Reed]

I was actually driving past business to get to business. That's been my model, I believe in leading from the front. I think we could get some of you guys to 4 million to $6 million a year in revenue. And that was seriously a mindset.

[Tyson]

So the latest thing that we've been working on is, is maximizing our LSAs, which is local service ads, and also optimizing our Google my business profiles. So what that means is we're making sure that all of our LSAs are on when we need them and they're maximized to give us the best ROI. And then for GMBs, it's been partnering with service scalers to drive way more traffic through our GMBs. GMBs are almost like the new SEO. The more you put onto them, the better the performance. So our GMBs have been consistently getting better week after week after week. And it is our currently our single most impactful organic lead channel. So we'll sell hundreds of thousands of dollars a week through our GMBs. And I think last week we got 900 phone calls. So really impactful, awesome investment. And we've been able to partner with service killers on both of those things. If you want to hear a little bit more about service scalers, check out service scalers.com welcome back to Owned and operated. Today on the show, I have Paul Reed from Northwest Roofing. Welcome to the show.

[Paul Reed]

Thank you, man. Glad to be here.

[Tyson]

Yeah, this will be fun. I don't get to have a lot of roofing on. I think I had one guy and. Or no, sorry, he's coming on next week. But he's a small. He's startup roofing operator. So like, you know, four or five million dollars, I think. So this will be fun to talk about. Big roofing.

[Paul Reed]

Yeah, I'm excited, man. I'd love doing this.

[Tyson]

Before we get too into it, I've got a bunch of stuff to ask. I'd love to just get a background on Northwest Roofing. How'd it start and where's it at today?

[Paul Reed]

Yeah, great question. So we that Northwest Roofing actually was established in 1963 in Denver. I actually got into roofing in 1992. So I'm celebrating. Right. My what, 33rd year.

[Tyson]

Nice.

[Paul Reed]

I part I partnered with a gentleman shoot 15 years ago and he had actually acquired Northwest Roofing a couple years before me. It was kind of a dormant company for a few years and he, he acquired it and we partnered together and really kind of built it up to where we are today.

[Tyson]

How large was it when, when that happened? That initial partnership.

[Paul Reed]

So from the initial partnership from when he first acquired it, I mean, it was at zero. I mean, it was dormant and. Okay, Tom and I partnered. They were doing. Yeah, they were. They was dormant. Just had a name, had the, you know, licenses that were still active from 1963 register with the secretary of state. But when Tom and I partnered up, we were about 7 million.

[Tyson]

I've heard that that's a thing inside roofing. So someone will. That happened here a couple of years ago. A lot of hailstorms. So a lot of companies got started up or they bought like dormant brands basically, and then they just stop using them one day. So was that sort of what that was or was it a little bit different?

[Paul Reed]

No, it absolutely. It absolutely was. I mean, the company, again, when they had started it, I think it had. It probably been dormant when I said a couple years. Hell, it might even have been five years.

[Tyson]

Yeah.

[Paul Reed]

And he actually ran across the grandson of the original owner. And, you know, we pretty much just bought the name. Right. There wasn't, you know, any tools or trucks or anything like that. Pretty much bought the name. And the long longevity in business is really what we purch.

[Tyson]

And what year was that?

[Paul Reed]

Shoot, that would have been about 2004.

[Tyson]

When you first started off. I'm talking origin story stuff here. How much of this was like storm chasing? Were you guys traveling all over the place for work or was it like, hey, we're posted up in Denver and this is what we're doing?

[Paul Reed]

Well, for me personally, when I started, when I was 18, it was just. I was actually a guy on the roof. But when we started Northwest Roofing, we were pretty much based in Denver. About the first year, kind of started to move out a little bit, few different areas around Colorado and then, you know, got tempted to move to a few different states as well.

[Tyson]

When did you start moving to different states?

[Paul Reed]

Would have been about 2009, 2010. That's, you know, we kind of used to different volumes. You know, we would be doing a couple thousand roofs a year. And most of that, well, I'd say all of it was. Was pretty dependent on hailstorms. And you know, back then in Denver, it was. It was pretty easy to sell a lot of hell affected houses. And so, you know, you come up on a year and all of a sudden it gets to be July and you're like, man, maybe it's not going to hell in Denver. And maybe we need to go work in Albuquerque, New Mexico, because they just, you know, got a storm last week.

[Tyson]

And you would just launch a location there. Is that how that worked?

[Paul Reed]

Yeah, absolutely. So most states with, with roofing in particular, you don't really have to have a state license. You know, there's a handful of states that, that you do. The ones that do require it, it's not that hard to get. But you know, over, over the last 15, 20 years, you know, like a storm would hit in Kansas and Hutchinson, Kansas and on Tuesday and by Wednesday I had an LLC and office, you know, set up and business cards and signs made by Wednesday afternoon at 3:00. And, and we were a local company.

[Tyson]

What, what, what do you do? So in, in either of those two examples, what do you do once you're done? Do you just like leave it dormant or does that become a permanent location that you then just sell retail?

[Paul Reed]

We've done, we've done a mix of both. So we, we pulled out, got done. We always leave someone behind for, you know, six months to a year. And then I also have connections to make sure if there's an issue, a warranty deal. But you know, a lot of people, that's the misconception of storm chasing is that guys, storm chasers come in uptown, screw up the market, do a bunch of roofs and then leave. And I'm sure there are people out there like that. But we have used both models where we went in, sold a few hundred roofs left or sold a few hundred roofs and kind of stayed there for another few years.

[Tyson]

Just selling retail?

[Paul Reed]

Yeah, just selling retail. And then you can clean up the storms. There's always people that drag their feet, you know, so you could continue to do it. You know, my model, it's in roofing, it's not that difficult to go generate a million dollars or $2 million in revenue in a city. I mean we're talking a few hundred roofs and that's, it's not difficult to do. And we've been able over the years to keep over open different branches, you know, just based off of doing that.

[Tyson]

So how many active branches are there for Northwest today?

[Paul Reed]

Well, we were acquired by, by another company in September. So now it's really, really multiplied. But before then about 8.

[Tyson]

Okay, and is that the most that was that like the peak of branches or did you guys ever run more than that?

[Paul Reed]

That's probably about the peak. Yeah, that's probably about the peak. Yes sir.

[Tyson]

I'm trying to imagine just like plumbing H Vac electric. So I'm trying to imagine the organizational complexity of hey, I had a storm in Kansas. I need to Deposit a sales manager, quickly train up reps or ship sales reps over, have them live there for some amount of time. I mean that, that's a lot. There's a lot going on there, you know.

[Paul Reed]

Yes, yes and no. But the fact is, once you kind of figured out the model, I mean, and basically you see a storm hit, you know, on whatever Tuesday afternoon at 3:00, you start looking at it, we start making a few phone calls of like, hey, did it do damage or not? And literally kind of make that decision. I'm like, hey, we're going to go set up and you know, whatever, middle of Kansas, middle of Wyoming, Nebraska, wherever we were going to go. And, and once you kind of have your system of, you know, people that you're able to print signs fastly, you know, business cards at Kinkos, I mean, it doesn't take much to do that, change your phone number with, you know, all the apps that you have on your phone. I mean, different things like that. It's not that difficult. And you could send three, four, five guys in initially and then at that time, you know, training sales reps isn't difficult. I mean, our industry for the last 30 years on the storm restoration side, man, we've been blessed because it's, it's not that hard of a business. Like, it's not the organizational thing that you think of like on your side on the H Vac. Now, it has gotten a little bit difficult. You know, there's a lot more contractors, so we have a lot more competition. And you know, so those things have come into place but kind of in, back in the day and you would go back just five years ago, it was, it was simple, it wasn't a nightmare to open up a branch in Omaha, Nebraska tomorrow.

[Tyson]

What percentage of revenue today is like storm chasing versus retail roof? Even just in Denver, like, is Denver still the big banana and we're just doing a ton of retail now or have we really just sort of dispersed?

[Paul Reed]

So Denver is probably 80 to 90% storm, but across the country I believe the number is about 30% storm. The rest 70% retail, I believe are the numbers. I think I'm pretty close to that.

[Tyson]

So Denver's 80 to 90% storm. That's crazy. That's crazy.

[Paul Reed]

Yeah, yeah. No one in the right mind is going to replace the roof out of pocket.

[Tyson]

Like how many hail storms a month is that so?

[Paul Reed]

You know, like last year, I mean it came in and it was, it was, I think they said it was a billion dollar storm. The 1 in 20, 24, 23 was, was a little bit bigger than that, you know, And I mean that's, that's a lot of roofs, right?

[Tyson]

Yeah, that is. Okay, that's fascinating. All right, so if I'm pretend I just launched a roofing contractor. Walk me through this here. I, I'm in Cleveland. I hear there's a storm in Florida. I don't know. There always seems to be a storm in Florida. Maybe that hurricane from a couple months ago. All right, so that hurricane from a couple months ago, does that impact roofs? Not probably not like hail.

[Paul Reed]

Oh, it does, yeah. I mean the wind, it's, I mean, so we, we, we work up a windstorm.

[Tyson]

Tears up the shingles. Okay.

[Paul Reed]

Yeah.

[Tyson]

Okay.

[Paul Reed]

Yeah, yeah, yeah, it does.

[Tyson]

Do you think this is the best place? So I'm contrasting this with, I have a friend who has a roofing franchise and he's pretty locked in to, to an area because that's a, it's a franchise, Right. It's a geographically contained unit. Whereas. Doesn't sound like your business model would really work with that at all because you get like your whole thing is like, let's go find whatever just happened.

[Paul Reed]

Yeah. And that, that's been my business model. And listen, I'm 50 years old and again, I've been in this. 33. 30. This is my 33 or third year in this. If I had to do it all over again, I probably would have stayed a little bit more local because I also think that I kind of got it in my blood to where I was actually driving past business to get to business. Right. Because of the rush of running into a new city, a new state to open up an office and like, you know, your ego kind of comes into play and I don't hope that makes sense. But like there's this whole just rush of doing that and that was fun and we were successful. I know a lot of people that were successful, but I probably know more people that failed at doing that.

[Tyson]

Yeah.

[Paul Reed]

But again, if I had to do it all over again, I wouldn't drive past business to get to business. I don't know if I would have grew to be a 30 or 40 million dollar a year company. I might have stood around, you know, I don't know, 10, 15 million dollar a year and, and been happy and had a little more quality of life with work, life, balance.

[Tyson]

How often were you personally going to some of these or was it, was that always the game?

[Paul Reed]

That was always the game. I, I was usually the storm setter. I, I was out Leading the, leading the charge with the guys. That's been my model, I believe, from, leading from the front. And I've never asked him, my guys to move to a city to go work there for three, four months without me going as well.

[Tyson]

You partnered with, you partnered with Tom. You're in Denver, which apparently has a wild amount of hail. That's crazy. Yeah. You start seeing these storms and the first one was it actually Albuquerque. You use that as a reference.

[Paul Reed]

Yes, that we, that we actually moved to. So Albuquerque got hit in 2009 and we went down there and we bought a company again that, that was a small little company that had been open since 1986. I mean, literally paid, I think we paid $20,000 for the, for the name and the licensing and.

[Tyson]

Yeah.

[Paul Reed]

Now we've been in Albuquerque since 1986 and we've, you know, been here 25 years.

[Tyson]

Yeah, I, we had a, we had a major hailstorm. I want to say it was three years ago. And I had a friend who was a roofer and he described how people from out of town were asking to rent his name because he was a, he was an active business.

[Paul Reed]

Yes.

[Tyson]

But he was like, yeah, they wanted me to, they wanted to rent my name and maybe change the phone number, maybe not. And have you guys done that before?

[Paul Reed]

Yeah, that's a common model. The godfather of roofing, the guy that really kind of originated the storm restoration, storm chasing model, which is a gentleman named Marty Haight. That's what they used to do. They would go in and they would use your name and give you so much per roof, you know, or so much for square. So 30 square roof. They'd give you like $3 and so you'd get like 90 bucks. They would just sell it under your.

[Tyson]

Name in that scenario, what happens with the warranty?

[Paul Reed]

So you have. Because I'm going to take that back. I have done it one time. I did it in Omaha, Nebraska because I had to have a license there that I couldn't get for a few weeks. So I went to another brand and we just. There's contracts that I own the warranty for the first year.

[Tyson]

Okay.

[Paul Reed]

And then after that they have, they have the warranty. But I paid a percentage. I think I paid like 4% of the contract total and, and paid that for using their name. And they had the con, they had the warranty after the year.

[Tyson]

Do you guys still have the branch in Albuquerque?

[Paul Reed]

Yeah, still Rhino. Yeah, Another gentleman runs it for us. We had split it off, so it's still active. It's not, it's not currently involved with what we do.

[Tyson]

What did your team look like? You know, you, you obviously you good sized business. How did you build a leadership team to be able to deploy around launching into these new markets? Like, what did that look like?

[Paul Reed]

So I've always been a believer because one of the, one of the bad things that we have in our industry is we kind of have what's called the turn and burn model. So a lot of roofing contractors attract and promote and bring in a bunch of guys and, you know, kind of burn them out. You know, they go sell a few numbers and burn them out and it just always a revolving door. And I seen that model, you know, years and years ago and to be honest with you, we ran it ourselves where we would attract 30, 40 people because it was a, it was a numbers game. So we kind of look at the first of the year and we'd say, hey, do we want to do 20 million? You know, or whatever we're going to do this year, knowing that the average sales rep is going to sell about $300,000 a year. So, you know, depending on what our, what our target revenue was, that's how many reps I would need to attract. Knowing that by the end of the year only four or five of those guys would stick around. Right? And that's just, that's a horrible model. But that's still kind of the model in our industry. And I did run that for, for a period of time. After a while it kind of started wearing on me of seeing the people come in and out the doors and you know, and I started thinking, like, we got to do more with less. How can I not get my guys if the industry average was 300,000 and we're reward and like top salesman, we're doing a million 1.5. How can I get some guys? Because I was personally doing at that time over three and a half million myself, still running the company, still de facto sales manager, all those things. How can I get guys to that high quality guys that just come out and do 3, 4, 5, 6 million instead of having 70 guys, what if I just had five?

[Tyson]

What did that look like? The first couple you just, you took your best producers and like, how did that, how did you make it sustainable?

[Paul Reed]

So it was so it's a mindset. So every, every year for, for those of you guys that are watching that are in the roofing industry, we're all friends with people on Facebook that every December people are showing pictures of their Christmas party and Most roofing companies are rewarding this day a million dollar sales rep with a Rolex watch. Right. So if you look back 15 years ago in Denver, the average roof was about $9,000. Today, that same roof is worth $27,000. We were celebrating a million dollar a year guy in 2009. We're still celebrating him now. Even though back then I needed guys to go sell 100, 115 roofs. Now I expect a guy to get $1 million, he's going to go sell 25 or 30. Yeah, like the math. The math doesn't math with me. And so I looked at it and I started, I started looking at my guys going, I think we could get some of you guys to 4 million to $6 million a year in revenue. And that was seriously a mindset, Bill. It wasn't extra sales training or anything like that. It was just giving them permission to understand that a million dollars a year is not good as a sales rep. That was good 20 years ago when the roof was $9,000. Today, that same roof is 27. It's three times higher.

[Tyson]

Yeah. How did it go?

[Paul Reed]

So what I remember this like it was yesterday. The very first day I called in, I had 10 guys, I brought them into the conference room and I set them down and we were starting to do a lot more commercial roof and stuff as well. And I told them, if you want to be in this room next year, you have to be a $6 million a year producer.

[Tyson]

Okay?

[Paul Reed]

And there was not one of those guys that had ever sold over $1.8 million ever in their career. And that following year, I had three people hit six million. And I think like two of them hit like over four and a half and couple, you know, million and, you know, whatever, but they faded out. But it was shock. You could hear their jaws hit the table of. They were like, there's no way. This guy's crazy as hell. Because we're at what, Personally, I'm at 1.8. I worked my ass off last year, like, how am I going to get to six? This guy's crazy.

[Tyson]

Yeah.

[Paul Reed]

And so it was just really working on their mindset of like, this is possible, you know, me showing them, like, guys, I, you know, last year, whatever, I did 3.8, whatever the number was, and like, I literally only worked, you know, three or four hours a week selling roofs. Rest time. I was running the company and showing them there, there's a path and here's what we got to do and here's how our day looks. Here's what we got, you know, all of those things. Self managing, just a belief, just a mindset.

[Tyson]

Did the number of leads increase? Like, I guess I'm, I totally agree. That makes sense. We just converted more or we sold them at a higher ticket. Like, what was the variable that changed?

[Paul Reed]

We actually treated a sales job like a sales job because most independent sales reps, you know, like in roofing, are 10, 99. Most managers don't know where they're at during the day. They're waking up in the morning and they might get out at 10 o'clock, maybe run to the office. And at the end of the day, they were only actually trying to sell for an hour or two a day. Like that's the average sales rep is actually only selling an hour or two. And what if I could get you to sell five or six hours? What would that look like? What if you treated this like a real job? Like it was eight hours a day and you were actually out in the field doing what you're supposed to for eight hours a day? That's part of the mindset. And when we started doing that, it wasn't, it wasn't higher tickets, more leads, anything. It was just, we were out in the field and they sold more jobs and almost, honestly, like almost had just as much time as they did before.

[Tyson]

How much does a roofing? Is it like 10% or like how does the commission work?

[Paul Reed]

10 to 14 probably. I would say.

[Tyson]

Okay, like based on gross margin or 14 to 16.

[Paul Reed]

That's, that's like on total revenue of the job. So like you might get most of my guys. We've all transitioned mainly to commercial now. I'm probably some years I've been like 98 to 100% commercial.

[Tyson]

Yeah.

[Paul Reed]

The last couple of years we went and sold some residential just because it was there. Million dollar job, you know, they're going to make 150.

[Tyson]

Okay, yeah, that's average home.

[Paul Reed]

They're going to make about 3,500 to 4,000 a ticket. Yeah, but see, their mindset is a lot of guys, they're like, well, I can make $75,000. That's plenty.

[Tyson]

Yeah.

[Paul Reed]

You know, when they have the ability to go make two or 300 and they're just like, yeah, you know, I could get by. I pay my bills at 75. So that's. It's just. We've read a laziness.

[Unknown]

We're about eight months into using Evoca and Evoca has been an awesome partner for us in our call center. So what Evoca does For us is they do two different things. One, they have their Coach product, and Coach has been helping us do what it says. Coach our csrs every single day. It listens to every call call, and uses AI technology to basically pick apart that call and tell us where we can improve. And for the last eight months, we've been consistently improving our scores, which has been awesome. The other product they have is just conventional booking, and it's an AI tool that books over the phone, customer calls in, and it either handles overflow, as in our phones are full, or it does nights and weekends for us, and a customer will call in and actually deal with an AI agent all the way through booking. And the savings inside call center has allowed us to ramp up our marketing to continue to grow even more. Thank you, Evoca, and thank you, Tyson, for your partnership.

[Tyson]

How much of the business now is residential versus commercial?

[Paul Reed]

This last year, I did. If you do the simple math, 5 million, and we finished around 35, so whatever that math is.

[Tyson]

5 million was residential.

[Paul Reed]

Residential.

[Tyson]

Okay. Yes. You guys, like, fully. Fully rest. Was commercial pivoted?

[Paul Reed]

Basically, yes, I did. I pivoted about seven years ago to almost fully commercial. Kind of got out of the residential, but, like, in this last two years, I jumped back in because there was opportunity and, you know, why not go get 5 million if you can?

[Tyson]

Yeah. What. What's the benefit? Explain the. The larger ticket obviously makes sense. What else is the benefit of choosing commercial over residential in your industry?

[Paul Reed]

So for. For me, you know, we were doing. For. For our size, I was doing 2 to 3,000 residential jobs a year. Part of it has to do also, I think with, you know, where we're doing a lot of restoration work, you know, homeowners are their responsibilities. Pay the deductible. Right. So deductibles have gotten a lot bigger. You know, back in the day, their deductibles were a couple hundred bucks, 500 bucks. Now they're 5,000, 8,000, 10,000. So it's almost more of a retail model anyway. So you're having to actually learn sales. So, you know, having 2 or 3,000 positive versus, you know, 500 POS, that was a big draw for me.

[Tyson]

And.

[Paul Reed]

And listen, I. And part of it was, I think I. I kind of got burned out a little bit of. Of doing that many jobs and running over here, running over there, and, you know, not. Why not just be here and sell a job and, you know, it's a $1.5 million job instead of having to go sell 40 residentials I sold one commercial. Yeah, I actually roofed quicker than I did the 40.

[Tyson]

I don't even understand how client. So that's still storm chasing, right? Or like some variation of that. So big storm comes in and we're going to go. Do we go cold call, like commercial properties or management companies? Management companies, yeah, commercial properties.

[Paul Reed]

Management companies, Property community managers, things like that. Industrial parks, Bob's garage, you know, cotton dentistry, office things.

[Tyson]

Yeah, yeah, okay. Yeah, okay, that makes sense. That makes sense. And the average commercial roof is like 200,000 or a million or what's an average ticket here for commercial roofing?

[Paul Reed]

Ours last year was over 300,000.

[Tyson]

I have, I know buddy of mine's, Mills Snell. He is in North Carolina. And. Okay, I think he's almost all. I don't, I don't actually know the size of the business now. Last I heard it was like 22, 24 or somewhere in there. All commercial roofing, but like just one area. I don't think they travel. I'm gonna follow up now, but I don't think they travel a lot for it. But, yeah, average ticket is huge, you know, 250 or something is what he told me last time. Then that is monstrous. You know, you need a hundred jobs to do. $20 million. That's crazy. I, you know, we're 100 residential, so I'm, I'm. I feel this a little bit. I still, I still like residential, but, you know, we visited 42,000 homes last year. 42,000 homes. Isn't that just a lot of homes?

[Paul Reed]

It is, you know, but my biggest factor to get out of residential was I can't stand, like, Google reviews and Yelp and all that type of stuff. And it got to the point where homeowners started to kind of leverage. And it was such an important thing to have, you know, a 4.9 rating or whatever. And it was driving me freaking crazy because I had so many different homeowners. And when I say so many, like a handful, like eight homeowners leveraging of like, you know, I, yeah, I owe you 2300 bucks. But, like, you know, maybe I'll write a bad review if I, you know, have to pay this. And I was just like, I'm done with, with this. I kind of got cranky on service.

[Tyson]

No, I mean, that, that's definitely real. Like, homeowners weaponize reviews 100%. I mean, some do, obviously not everybody, but that's definitely a thing. They understand the value of it and they make a really big stink all about it. What I've liked about it is we, we just understand the customer acquisition and we understand the sales process. Whereas I'm, I just don't get it as much with. It just doesn't come naturally to me for commercial. Whereas the residential side kind of seems to come naturally, so it's just easier for us to lean into it. But we also don't have $300,000 average tickets for commercial. That might sway me.

[Paul Reed]

Yeah, and, and listen, it's almost turned into more service. Like that's what we do now. I mean, because all our stuff.

[Tyson]

Yeah.

[Paul Reed]

Our, our leads are all based off of our service and maintenance. So I mean we've had to master the service and maintenance side of it to be able to be in the running for these jobs.

[Tyson]

So what, what does that look like? Or do people just call you or do you have a concerted outbound effort to get those service contracts?

[Paul Reed]

Yeah, so we, you know, we have dedicated business development reps that, you know, literally their job is just to constantly be.

[Tyson]

Knock on doors, in touch with, with clients.

[Paul Reed]

Knock on doors. I'm a big believer in knocking on doors and asking for the opportunity. Yeah.

[Tyson]

Are there service contracts in commercial roofing or is it really just like, hey, we're here when you need us.

[Paul Reed]

So there are, there's service and maintenance contracts. So we have a, you know, pretty, pretty large repair department that we, that we serve with. But it's, there's any more. We've transitioned into a lot more service and maintenance tickets, twice a year, manual maintenance and things like that.

[Tyson]

This is like flat roof maintenance basically.

[Paul Reed]

Yeah, we do, we do a lot of low slope flat roofs and a lot of steep slope as well.

[Tyson]

I don't think any, I don't think we've ever been offered a maintenance contract, but we have a couple commercial buildings and yeah, it seems to be like a. Twice a year they gotta go patch something or do something or other for. Yeah, a couple grand every time they show up.

[Paul Reed]

Clean out gutters. Yeah, things like that. Absolutely.

[Tyson]

Yeah. Yeah. What's average ticket and service and like how many technicians are on the service side?

[Paul Reed]

So on our service side I think I have six technicians and then you know, whole kind of support staff behind. Behind them.

[Tyson]

Yeah.

[Paul Reed]

Average ticket on that is, is about nineteen hundred dollars.

[Tyson]

Is, is.

[Paul Reed]

Do you do that in my offices? I did like 2 million.

[Tyson]

Really? Like in. You said in all of them?

[Paul Reed]

One of them did a million.

[Tyson]

How are you doing this across multiple offices? Are guys like traveling to go service or is it like one service guy each spot or how does that work?

[Paul Reed]

No, so, and when. When I said the six that was based out of the Denver. So like, okay, my Phoenix office, I've got two service techs. A lot of the, you know, a lot of the admin stuff always will be based out of Denver. But you know, boots on the ground, guys in the field that are there on occasion, you know, we'll get a pick. Only got to send guys from, you.

[Tyson]

Know, wherever, Denver to whatever Kansas have locations been. Sorry. Now I'm just back to locations because it's just fascinating. It's just, you know, for. For our industry. Locations is completely based on kind of like Tommy Mellows a little bit. It's just like, okay, where's the next zip code that. That has opportunity, Right. And it's not really based on any external factors other than, hey, I'm an hour away from this place, I might as well go there. So when you're thinking about additional locations, what was the closest they ever got? Cause it sounds like you're. Each one's just in a different state.

[Paul Reed]

Yeah, there is. So I've had locations, you know, as close as an hour away. And that was, in my opinion, kind of a waste, you know, to me for the way that we look at locations instead of locations now is on my customer, my clients needs. So I have a lot of different clients, you know, that are. That are major property management companies that, you know, will have properties here, Utah, where. Wherever they have Matt. And so what we do is we start offering to serve them. And so for me now, like that's. That's where locations pop up for me now is, hey, greystar's got, you know, a bunch of properties they want me to serve in, you know, wherever in Utah. And so now we've. Now I've got to. I need to have a branch out there. And from there, you know, hey, we. We at least got our foot in the door. We've got a little bit of revenue coming in. We're serving greystar now. I could go out and find, you know, Cushman, Wakefields and all those of the world and, and start building it out.

[Tyson]

So that's kind of been the model that makes sense. And even despite all of that, because that sounds like a lot of retail, so I'm just trying to learn here. Still a huge majority of the work is insurance.

[Paul Reed]

So we, we transition though.

[Tyson]

Okay.

[Paul Reed]

We transitioned because again, I think the commercial and insurance restoration stuff and the residential as well has kind of changed over the years. Insurance companies, excuse me, are pushing back A lot more. And so we intentionally kind of transitioned to do a lot more retail over the years. And also that kind of tied in with private equity as well. But yeah, a lot of the different areas that we're called into, yeah, they could get a freak storm and, and that's why we originally got there. But we will stay there sometimes for retail stuff because, you know, not everywhere. It's like Denver or Dallas that gets hell every year. You know, there's sometimes like Phoenix got. Last time Phoenix got hell was 2011.

[Tyson]

So then what does your. So your branch in Phoenix primarily is just going to serve like retail customers then?

[Paul Reed]

All retail.

[Tyson]

Okay, okay. Okay.

[Paul Reed]

Yeah, our branches in California. All retail.

[Tyson]

Okay, that, that makes sense. And all the majority commercial.

[Paul Reed]

Yes, majority commercial. I'll probably do some residential in California though this year because those fires were crazy and. Oh yeah, there's a lot of damage all around, you know, not just in the fire zone, but from the wind and embers actually from the fire, you know, from hell, 10 miles away from where it all burned down when.

[Tyson]

What's an average size branch right now?

[Paul Reed]

Um, average size branch is probably 2 to 3 million.

[Tyson]

So the model changed a little bit. Obviously. We, we just, we just said that. So started off sort of storm chasing and now like Phoenix, not really storm chasing at all. So that's just a permanent location is what it sounds like. Right. Like we're just always going to be there.

[Paul Reed]

Yeah.

[Tyson]

Okay.

[Paul Reed]

I had some clients asked me if I could serve them in Phoenix. I said absolutely. So we set up there and then expanded it. You know, Phoenix this last year did. Yeah, a little over 3 million. You know, this year, hell, it'll probably hit 5 though.

[Tyson]

Yeah, there's the. What plant and expand or something. I met somebody that was doing that in plumbing for the third party administrators basically. So they would serve like Starbucks and they would do their grease traps and like water heaters and you know, whatever else. And I think they had, they had a few of those, but Starbucks was just my best example. And maybe five total clients that were big and then they would just go launch wherever there was enough density of service calls for that for Starbucks or whatever. And then they would use that as their into market model and it sounds like that is now the end to market model instead of storm chasing.

[Paul Reed]

Yeah, it is storm chasing in my opinion is going to go away, you know, after a while. There's going to be storms always, but I think the model is going to change and so I'm not going to rely on it.

[Tyson]

What makes you think it'll change, like, driven by insurance?

[Paul Reed]

Driven by insurance. You know, they're a profit driven. You know, their business isn't to just pay for your damages. Right. Like they.

[Tyson]

Right.

[Paul Reed]

They're a big business and it's got to be profitable. And the way that it's been the last few years for them, it's not that profitable. So they're starting to go to a lot more, what's called manage repair programs, where they have their own contractors, you know, that are selected, that are already agreed to do the work for a certain price.

[Tyson]

Yep.

[Paul Reed]

And so your typical roofing contractor is not going to go out and door, knock and get a job like we used to, is it.

[Tyson]

Is this all subcontracted labor?

[Paul Reed]

Depends on the state. So California is all W2 employee, Arizona's W2 employee.

[Tyson]

Yeah.

[Paul Reed]

And the rest of it pretty much is 1099. My subcruise.

[Tyson]

What is an average. This is kind of a nuanced question maybe, but what's an average roofing contractor size? Like, who are you competing against?

[Paul Reed]

Average size is probably 3 to 5 million.

[Tyson]

Okay.

[Paul Reed]

So, I mean, there's not that many. I mean, there are. I mean, there's. There's a few hundred guys that are doing 20, 30 million. You know, 20 people. They're doing, you know, 80 to 100. And yeah, you know, the two biggest ones are Cinemark and Tecton, and they're both doing like 1.5 and 1.3 billion.

[Tyson]

You said this earlier in the episode, how there's just seemingly less complexity. Maybe because there's less. Obviously you've launched service. But yeah, I was again, I was talking to my friend, and he launched this roofing company. He's four or five million dollars in his first year. And he. It's 1099 installers. So, you know, I'm sitting here, I'm like, this dude's gonna have a $20 million business in like four years or something crazy. Because all he has to think about is leads and sales and that is it. Like, he doesn't have to give a shit about anything else. And I'm like, what a superpower that is. Because, you know, plumbing, H vac, like, we got a lot more things I got to think about.

[Paul Reed]

No, it's, it's, it's. It's kind of Iraqi, man. And it's, it's been great. It's. It's been great because most roofing companies are actually sales organizations.

[Tyson]

Totally.

[Paul Reed]

That. That's all they are, that they're sales organizations. And you got, you Got. You have some more sophisticated companies, right, that have the big warehouse and all the tools and stuff and like that's, that's set up more like you like how you're doing that, right? The majority of storm restoration contractors are sales organizations. They need a laptop and a nice polo shirt. Like that's all they need.

[Tyson]

That's amazing. Like every time I talk to somebody in roofing, it just makes me want to get into roofing. Like this is, that's why. That's bullshit. This is freaking bullshit. I'm sure there's a lot that I'm missing. If I was a newer entrepreneur today, if I wanted to go start a roofing company, what would be a couple points of advice you'd give me, man?

[Paul Reed]

That first one, like I mentioned a little bit ago, is don't drive fast business to get to business. I think that's, that's a key thing. I would also kind of really look at what you have going on in life and I don't, I don't think everybody, I hate the word scaling because I don't think the word scaling is for everybody. I don't, I don't think all companies should scale. I believe that, you know, start now, I pick, pick your mark and where do you, where do you want to get to do? I want to get to be a, a ten million dollar a year company and I'm going to make, you know, I'm looking at my EBITDA. My EBIT is at, you know, 18%. Like that's, you know, it's, that's pretty, pretty good money. I mean, so for me, for a new guy starting out in this industry is to not buy into all the hype of necessarily growing to 30 or 40. Right. I know that's kind of counterproductive sometimes, you know, and you get a lot of people up on stage and you know, let's scale, grow and all this stuff.

[Tyson]

Yeah.

[Paul Reed]

Just not for everybody. Right. I think there's, I think there's an elite few that that's really for and I think you need to really figure that out, have honest conversation with yourself and you know, get a mentor in the, in this industry. Get a, get, get personal mentors, things like that, man. It's just, look, don't, don't buy into to, to all of the hype of trying to grow to 30, 40. Would you, would you have a hell of a life at 5? Would you have a hell of a life at 10? Like, what's that number? So to meet any new guys doing that, like Where. Where can you have, like, a really good life at?

[Tyson]

We had. We had Tommy on the show maybe two, three months ago. His message wasn't much different. Really focused on. Yeah. I mean, earnings. Really, like, hey, we're all focused on top line because it's the easiest thing to spout off. But, like, yeah, what's bottom. What do you. What are you taking? What are you reinvesting? And yeah, I agree. And I think the. The bigger the company you take.

[Paul Reed]

You take Tommy. You take a guy like Tommy, if you look at that, you're in the garage door industry.

[Tyson]

Yeah.

[Paul Reed]

There's never going to be another Tommy Mellow. Right. You could idolize him and use a lot of his systems, but, like, no one else is going to grow a damn garage door company to whatever it is. Million. Right. Like, that's not going to happen. Could you grow a garage door company to 10 or 20 and have a hell of a life as. I'm not mean, I'm not trying to, like, shatter people's dreams or say, like, shoot for the stars, but I'm just saying I think. I think sometimes there's also a reality that, like, that's the exception. And maybe this young person coming in is going to be the exception. Going to be able to do that. But the average person that we're talking to and that's maybe even listening to this man, where would you really be good at? 5 million, 10 million, 15? But bottom line, what's your bottom line?

[Tyson]

This was awesome. I feel like I got a real education on roofing. It did. I definitely don't want a storm chase at all. I didn't walk away with a desire to do that, but I do like that it is. Leads and sales, baby. Leads and sales. I like that a lot. That's cool. If people want to connect with you, Paul, how can they get a hold of you? What's the best way and the best way?

[Paul Reed]

Actually, LinkedIn and Facebook.

[Tyson]

This was awesome, dude. I appreciate you coming on and sharing your story. This was a lot of fun to learn about Northwest and to learn about the roofing industry. I feel like I learned a ton. So thanks for coming on.