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Roofing Insurance claims Overhead and Profit explained: Greed Or Must? - YouTube
Channel: Dmitry Lipinskiy
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in today's video I'm gonna explain
overhead and profit everything you need
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to know for your business this video is
for both homeowners and contractors I
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want to explain what overhead and profit
is why insurance companies paying
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overhead and profit why they don't pay
who is greedy behind the scenes who is
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trying to pocket money they should not
be pocketing all of that in today's
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video what is overhead and profit
overhead and profit is the line item in
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insurance estimate in home improvement
industry it's very simple you file a
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claim in the case something happened to
your house hailstorm hurricane whatever
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it is are you property has a damaged you
call the insurance they got out they
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pretty much agreed to do the work they
say yeah you're gonna find a contract or
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we're gonna pay for the work they're
gonna issue one of this estimates this
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was a regional this actual my company
right here we did the job so this job
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started with a four thousand four
hundred and fifty three dollars there
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was a regional estimate and final
estimate ended up being twenty seven
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thousand one hundred and fifty five
dollars big big change but a lot of
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times scope of work increases
dramatically insurance adjuster comes
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out she is just very few things maybe
one slope we come out would talk to them
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they're like oh yeah it's way bigger
just like fixing your car or fixing your
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body you get to the hospital you start
with something and then they diagnose
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and they find more things so some claims
can be really complicated depends of
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kind of house you have but all of them
will have something called overhead and
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profit and overhead and profit usually
is not included in the original estimate
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and overhead and profit also have been
really big debate between contractors
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and insurance companies because some
homeowners don't understand it and
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accusing contractors sort of being
greedy some insurance companies think
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contractors have been greedy so pretty
much everybody's pointing fingers at a
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contractor like hey you don't need that
we'll pay you enough already
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homeowners look at a number like this
it's like a beach it's twenty seven
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thousand dollars sort of contractor you
know just be thankful for what you get
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well let me explain to
you and show you why overhead and profit
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and while it sounds really big it's not
actually that big so here's the deal
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overhead and profit usually comes in the
formula of ten and ten as a matter of
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fact on the state farm on the very first
page of their estimate they give you
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like an example of what you're gonna get
prior you know when they pretty much
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open the claim funny enough State Farm
is one of the worst companies out there
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they'll never pay over and the profit I
believe last year they shortened my
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business over a hundred thousand dollars
and overhead and profit alone huge loss
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I mean options are go after them hire
lawyer probably spend a hundred K just
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chasing hundred K not always win-win for
me so we drop those case I mean it's
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cost of business almost but it's a ten
percent for overhead and ten percent for
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profit to understand overhead and profit
you need to understand how weak
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contractors beat on our jobs usually we
calculate materials in the roofing
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business and a lot of other trades out
there it's about thirty percent of the
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job materials about thirty percent of
job labor is gonna be about thirty
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percent of the job so you're probably
thinking well if labor and materials is
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your major cost is thirty percent each
it's a forty percent gross profit margin
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you're right it is so I would say this
number up to this point is pretty
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accurate it's about 40 percent and from
that point it breaks something like this
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sales guy sales representative for the
company gets about ten percent a lot of
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sales reps in the roofing industry are
independent just like doctors and
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hospitals are 1099 employees so
technically the work for the hospital
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but they're not employee of the hospital
they're independent so they get paid you
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know on different pay structure so in
the roofing business and the
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construction business a lot of times
it's a commission based only so sales
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guys don't earn anything unless he sell
something just like real estate agents
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it goes into many many industries now
ten percent ghosts tourists overhead and
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ten percent goes towards profit clear
profit Cu net profit should be about ten
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percent in a
there is I covered in the last video
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that good profitable company will net
profit of up to 15% but it can be
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actually as low as 7 we're not losing
lost 10% it just fluctuates like for
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example your overhead can be slightly
bigger your profit can be 12% your
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commission some people pay their
commissions a little bit higher it can
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be 12:30 and 15% it doesn't really
matter where a 10% goes the rough
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numbers are there your material can be a
little bit more your labor can be a
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little bit more job per job your your
gross profit can be more I mean
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everything is fluctuates the 10%
it's just margin of error you never know
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what's gonna go wrong in its
construction and something always don't
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go as planned so now let's talk about
overhead of any company with it let's
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say 2 3 million plus again a half which
is not it's only two three hundred to
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roofing jobs per year so you're gonna
have marketing expenses you're gonna
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have warehouse expenses this is my
warehouse right here where I'm spending
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about $3,200 per month about four
thousand square feet here you know you
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have gas and fuel we provide vehicles to
our guys will pay fuel or my gas and
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fuel bill right now it's you know
anywhere between two and three thousand
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dollars a month you have insurance
expenses insurance can be very very high
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I mean I've paid insurance sometimes you
know they do audit I mean it can be 50
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hundred thousand a year bill then you
have administrative expense a few
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different subscriptions stuff like
QuickBooks stuff like your CRM it adds
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up really really quick then you have
office supplies I mean I always joke
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that I'm like it's a 2018 I'm a
paperless company I don't print anything
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but sometimes I come to my office and my
employees printing books here and it
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drives me crazy every single time but I
cannot even tell how much money I spend
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on printing expenses like I literally
can start printing books here then you
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have to train your sales guys your
employees you see you buy different
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online subscriptions to train them or
maybe you travel with them on different
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training you you know you have days
where nobody's paying you and you do
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have expense to Train
you guys you know whether their hourly
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employee or celery or it doesn't really
matter did I have insurance twice I have
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insurance twice because actually have
different insurances here actually you
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will have probably three four inches you
have car insurance you have general
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liability insurance work I'm insurance I
mean stuff like insurance for your tools
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all of that so insurance twice not gonna
take it out because we do have a lot of
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insurance expenses overall guys this is
your overhead and overhead
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it's what skills a lot of businesses
because sometimes we don't see trees
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through the forest we were busy we think
here like for example if you have ten
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thousand dollar job here and material
cost three and labor cost three you
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think you know I just made four thousand
dollars but what if you only do two of
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those jobs you know per week what if it
rains for two weeks I mean your bills
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don't stop coming
you always get those charges your
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overhead is always there you already
have agreement with your receptionist
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how much she is getting paid per hour
that's you know your green tea here 40
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hours a week maybe she's a seller employ
all of that stuff so now we go back to
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insurance company and we're trying to
negotiate with them on the jobs because
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you as a homeowner not paying us
insurance is paying us but insurance
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always have excuse not to pay here's a
few excuses what insurance companies use
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and not to pay overhead and profit one
they say well you only have one trade we
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don't know you overhead and profit we
only pay overhead and profit when you
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have two or three trades listen if your
insurance company I have a message for
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you does any of this goes away if I do
200 roofing jobs per year and it's just
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one trade no it stays how many trades
per job has nothing to do with my
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overhead am i bill for my warehouse
gonna go away just because I don't do
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painting on a certain job no in my
reception is going to charge me less
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because we're only schedule one crew
instead of two kurz no and my production
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manager gonna get paid less because he's
scheduled want three per job versus two
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no all of my overhead and staying there
in also why should I not make money on a
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job why should I not like the profit on
the job
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if it's only one trade I mean this is my
business model I don't want to have five
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chase per job I mean if I do if
homeowners has siding and gutters and
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all of that sure but it has nothing to
do with profitability of the business or
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overhead absolutely nothing it's
irrelevant but insurance company use it
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all the time I don't think it's legal I
don't think it's more about they do they
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pretty much say you have to have it
depends by insurance company some of
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them say couple trades or whatever I'm
telling you this even if you have one
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trade you have legal argument to argue
with the insurance company that they owe
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overhead and profit because it doesn't
change this does not change if it's one
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or three trades now some insurance
companies say well this job was not
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complex enough you pretty much just made
two phone calls and you know I mean they
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use every argument in the book every
excuse in the book again my complexity
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of the job has nothing to do with my
overhead nothing to do with my bills
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nothing to do with what I do day to day
I mean my overhead is there and I am I'm
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on business I need to make profit
otherwise I'm gonna be closing doors and
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who's gonna be serving those customers
anyway who's gonna be taking care of
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insurance and then because it's a
roofing business and it's a roofing
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channel I want to talk about this excuse
they say the roofing doesn't really
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count they say that well it's already
included it's only one trade you're only
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doing roofing and and it's also a lot of
BS guys Xactimate does not include
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overhead and profit and a little friend
trade if your insurance company you have
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a proof that it is included please
comment below send me email and I would
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like to review it but I'm telling you
right now that roofing trade in the
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insurance paperwork an exacta my
paperwork does not include overhead and
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profit now who is greedy here is a
contractor still greedy you think
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because we only have three parties
involved we have insurance company we
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have homeowner and we have a contract
again everybody's pointing finger at the
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contractor as a matter of fact insurance
company often goes to the homeowner and
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say well if your contractor is not gonna
do it without overhead and profit we
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have contractors who will and I'm pretty
sure they do there is a lot of
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contractors who don't want to be making
money who don't care if they're in
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business next year or not who will eat
deductible who will do the job for the
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bare minimum there's guys out there I
would have been business five years from
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now I owe it to my clients I don't want
to put my business in jeopardy last year
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guys my business eight hundred and
seventy thousand dollars in overhead and
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profit we collected some we collected
over half but one hundred and seventy
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thousand dollars it's my loss for one
year and that's with me collecting you
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like this job right here we collected on
that one but it was a fight and it's not
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a easy fight so my answer and what I see
in the industry the greedy is out of all
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its insurance number one the greediest
bastards out there they just don't care
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about industry they don't want to take
care of the homeowner so contractors
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because when you screw in the contractor
you're actually doing big disservice to
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the homeowner as well because when
contractors not profitable when his
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overhead is not met he's gonna be out of
business you're just contributing to the
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failure in the industry because in seven
years ninety percent of the contractors
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are out of business this is one of the
reasons why this is the reason because
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one contractor is profitable he can pay
his employees well he can pay his bills
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on time he's not suffering financially
he moves on he takes care of the
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customers now when the customers taken
care of
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you know they give contractor more
business everybody prosper it's all good
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now what's happening when you take you
know twenty percent and you just
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shorting them of course you greedy
you know you pocket all those money and
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now homeowner is getting screwed
actually as well so now with all
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fairness homeowners can be greedy too I
see it happening all the time and not
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many people talking about it especially
not on YouTube or Facebook but homeowner
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also a lot of times look at
paperwork and they just judge you they
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look at it give me $10,000 sometimes it
can be $30,000 and we have bills not
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paid here I mean in five years I have
two customers they did not pay me for my
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aunt we took them to court settled you
know we got paid but homeowner will look
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at $30,000
mmm materials were only ten labor was
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only ten I already paid you enough I'm
just gonna pocket you know like 20
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percent and they literally tell in
contractors like you got enough just be
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happy for what you got I don't believe I
owe you
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well legally they have to pay but
morally when people see those checks in
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their names because insurance actually
pay homeowner something triggers they
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all of a sudden have little amnesia that
they have to actually write a check to
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the contractor and they decided to keep
money I personally had the clients who
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told me like Misha I'm sorry I spent the
money like what do you mean you spend
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the mine he's like the media I spent the
money you know it was a lot of money
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written to my name expended I don't have
it I'm like well we're gonna do a
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payment plan but I'm not walking away
from $6,000 final thing we're looking to
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meet you but you get like $35,000 and my
own guys don't matter okay
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I get you like I got it so you think
$35,000 is a lot of money do you want to
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help me do you want me to send your bill
for my insurance work on when I get
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fifty thousand dollar bill and I don't
have it in my bank because of customers
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like that if you want to look how much
you pay me I'm gonna start showing you
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some bills that I paid and you will be
blown away you'll be like I don't want
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to be in that business because
everybody's looking here and nobody's
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looking here and this is the hard part
this is the reason overhead and profit
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exists right it was not borne by our
greed it was born out of necessity and
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somebody's definitely taking advantage
of it so now Kent contractor has become
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greedy absolutely I'm not going to
defend contractors in this channel
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because contractors also contribute to
it right so contractors a lot of times
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they supplement for items they didn't do
it's not more else
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right but they don't do it and my
message to contractor if you're sending
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one of this to insurance company or show
that the homeowner make sure you can
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back up every item every single time if
you're not gonna do it it's not for the
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homeowner to find out or insurance
company hey you didn't do it it's your
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job and it's your responsibility to
triple-check you estimate that hey I did
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everything and I'm charging for every
item if you didn't do guess what
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call the freakin insurance company and
say hey I didn't do that part take it
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away it can be 500 bucks it can be 5,000
you know who you are you know what you
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do I've see I met way too many guys who
is screwing insurance companies and
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homeowners and charging for the stuff
they didn't do don't make us look bad so
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contractors can be greedy also if you do
don't have overhead if you're working
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out of your garage I mean it's up to you
how you do it like for me the only
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contractors who should not be charging
and I'm not saying that in the way that
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you know you don't have legal right you
probably have legal right but I wouldn't
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fight over it because if you truly don't
have overhead if your paper contractor
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working out of your house you don't have
sales guys you you keep your commissions
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you keep your overhead you are making
twenty thirty percent of profit margins
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I mean maybe don't be greedy
don't try to pursue get too much
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attention to you because for me it's
just hard to justify but if you really
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did business good work in contractor who
takes care of his employees who takes
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care of his business who in his seated
to stay and want to keep marketing and
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keep branding and keep you know growing
his warehouses and stuff then for sure
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you do need overhead and profit just to
stay in business so I want to end this
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video with a huge huge credit to guy
named Steve Patrick he's one of the
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veterans in on this topic he actually
wrote a book about overhead and profit
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so check out the group on Facebook it
called level the playing field pretty
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much the whole group is best resource
for the contractor who's trying to get
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overhead and profit who is fighting that
wall or hit that wall and by
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insurance companies and don't know how
to get overhead and profit
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Steve Patrick is one of the best guys in
the industry who knows how to make
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insurance companies pay and I want to
finish with a message to the homeowners
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if you look at the paperwork and you
think it's a lot of money
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don't let the numbers block you with a
good experience with your contractor if
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you happy with the work if company did
everything they said they supposed to do
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like be on your contractor side not a
new insurance company side insurance
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company won't save money for them not
for you
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your contractor you deserve to get paid
it's not your money either it's
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insurance company money you've been
paying premiums let your contractor be
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profitable be successful and he will
take care of all your future needs for
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years to come you don't want to a
contractor to be in jeopardy to be out
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of business so that's my message for you
guys I would like to hear from you what
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do you guys think about this topic
what do you don't agree maybe this is
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social media world
you're not gonna offend me with a
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negative comment comment below I would
like to start conversation I like
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negative comments I read all my comments
give me one of those or one of those
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whether you agree or disagree and I'll
see you guys in the next video
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