Roofing companies are prone to failing early in the business’s life, and there appear to be several main reasons for this situation. Some estimates suggest that more than 85% of roofing companies fail in the first two years, and 95% fail within five years of opening the business. Common reasons suggest roofing companies fail due to cash flow problems, undercharging clients, workers’ compensation, and other insurance expenses.
However, those are surface reasons and do not explain why they run into cash flow and other problems.
One perspective blames the high failure rates on insurance companies, including fraudulence among workers’ compensation providers. That perspective says insurance firms audit roofers and make sizable claims against them. Roofers often lack the resources and sophistication to challenge the insurance companies, so they go out of business rather than pay the claim and start a new corporation to continue operating. This cycle repeats with the roofers going in and out of business to avoid paying the claims.
Roofing companies that pay the audit claims make little money, so they appear to undercharge relative to cover their expenses. Insurance companies will likely have a different perspective on their audits, but some roofing company owners consider some unfair. Hopefully, the sides can reach a better understanding of the requirements.
