John Kenney, CPRC, CEO, Cotney Consulting Group - August 2026
One of the biggest misconceptions in the roofing industry is that a larger company is automatically a stronger company. I’ve learned over the years that the two don’t always go together. Some of the healthiest contractors I’ve worked with weren’t necessarily the biggest and some of the fastest-growing companies were quietly creating problems they didn’t realize existed.
Growth has a way of changing the way we look at a business. When the backlog is full, the phones keep ringing and crews are booked weeks or months in advance, it’s easy to assume the company is heading in the right direction. Revenue becomes the scoreboard. If sales are increasing, most owners naturally believe the business is becoming more successful.
Revenue certainly matters. Without work, there isn’t a business to manage. But after spending more than four decades estimating projects, running operations and consulting with roofing contractors across North America, I’ve come to appreciate that revenue tells only part of the story.
The more important question is whether the business is becoming more profitable as it grows. Unfortunately, that isn’t always the case. Some of the most financially stressed companies I’ve encountered were also experiencing some of their strongest sales years, which seems, at first glance, difficult to understand. How can a company be busier than ever while struggling to maintain profitability or cash flow?
The answer is almost always found beneath the revenue. As companies grow, overhead begins to grow with them. That isn’t necessarily a problem. Expansion requires investment. More projects require additional supervision. More customers create more administrative work. Larger operations often require better technology, additional warehouse space, stronger safety programs and expanded accounting support. These investments are often necessary. The danger comes when overhead begins to grow faster than the systems needed to support it.
One of the patterns I’ve seen repeatedly is that contractors rarely make one large decision that suddenly creates an overhead problem. Instead, they make dozens of smaller decisions over several years. Each one seems reasonable on its own.
The company hires another project manager because everyone is overloaded. A second estimator comes aboard to help keep proposals moving. Office staff increases to support purchasing, billing and customer service. New trucks are added to the fleet. Software subscriptions multiply. Before long, the company has built an
entirely different organization than the one that existed only a few years earlier. Every one of these decisions may have been justified. Collectively, however, they create a business that now requires substantially more revenue just to maintain the same level of profitability, catching many contractors by surprise.
One issue I frequently discuss with clients is something I call organizational creep. It rarely happens intentionally. In fact, it usually develops during periods of success. The company becomes busier, so additional people are hired. As more people come on board, communication becomes more complicated. More meetings are scheduled. More approvals become necessary. Layers of management begin forming that never existed before. Eventually, owners start spending more time managing the organization than managing the business.
I’ve seen companies where project managers spend half their day searching for information that should have been available from the beginning. Estimators answer questions that should have been resolved during project turnover. Accounting personnel spend valuable time correcting paperwork instead of processing it. None of those activities generate revenue but they all increase overhead. Adding people to inefficient processes rarely creates efficiency. More often, it simply creates larger inefficient processes.
The same principle applies to technology. Today’s roofing contractors have access to remarkable software platforms that improve estimating, project management, accounting, customer communication and field reporting. Used correctly, these tools can significantly improve operational efficiency. Used incorrectly, they simply become another monthly expense.
I’ve walked into companies using multiple software platforms that performed nearly identical functions because no one had stopped to evaluate the entire workflow. Employees entered the same information
into different systems. Reports were generated but rarely reviewed. Technology should simplify operations, not complicate them.
Growth also changes the way overhead is recovered, although many contractors don’t recognize it. Every estimate your company produces carries more than labor, material and equipment costs. It also carries a portion of the company’s overhead. Office salaries, insurance, vehicles, software, facilities and every other indirect expense must ultimately be recovered through the work you sell.
As overhead increases, every estimate must recover a larger share of those costs before the project contributes a dollar of profit. That is one reason accurate estimating becomes even more critical as companies grow. If estimating fails to recover overhead properly, increased sales simply create more work without producing the financial return necessary to support the larger organization.
Estimating, operations and accounting are far more connected than many contractors realize. They should never operate as independent departments. Every estimate establishes expectations. Field production determines whether those expectations are achieved. Job costing measures the outcome. Accounting records the financial impact. Leadership then uses that information to improve the next estimate.
When any part of that process breaks down, profitability becomes more difficult to maintain. That is one of the reasons I encourage contractors to view job costing as much more than an accounting function. It is one of the most valuable management tools available. Every completed project tells a story. It reveals whether labor assumptions were realistic, whether production rates matched expectations and whether overhead recovery was sufficient. Companies that consistently review these lessons become stronger estimators and stronger operators. Too many contractors review financial statements only after the month has closed. By then,
opportunities to correct course have often passed.
One of the questions I ask during nearly every consulting engagement is surprisingly simple. “How do you know your overhead is being recovered?” The answer usually starts with confidence but after a few more questions the conversation changes. Contractors know what their annual overhead is. They know what they spend on insurance, salaries, rent and vehicles. What many don’t know is whether every project is carrying its fair share of those costs. That distinction matters.
I’ve reviewed estimates where labor and material costs were calculated with impressive accuracy, yet the company still struggled financially because overhead recovery was based on assumptions that were no longer valid. As organizations grow, overhead rarely stays proportional. Additional management, expanded office staff, larger facilities and higher operating costs all change the equation. If estimating isn’t adjusted to reflect those changes, every successful project may still be leaving money behind.
This is where job costing becomes one of the most valuable management tools in the company. Too often it is viewed as an accounting exercise completed after the project is over. In reality, job costing is one of the most effective ways to improve future performance. It connects the estimate to field production and then ties both back to the financial results.
Think about what happens when that information is actually used. An estimator develops production rates based on experience and historical data. The project manager executes the work. The field records labor hours and production quantities. Accounting closes the job and measures the financial outcome. Leadership reviews the results and identifies where assumptions were correct and where they were not. This process creates something far more valuable than a financial report. It creates knowledge.
Companies that consistently learn from completed projects gradually improve every part of the organization. Their estimates become more accurate. Their project managers understand where labor is being gained or lost. Field leaders develop better appreciation for production expectations. Owners make decisions based on facts instead of assumptions.
I’ve often said that estimating doesn’t end when the proposal is submitted. It ends when the job is complete and the results have been analyzed. Everything in between becomes part of the company’s cost history and ultimately influences the next estimate.
The opposite is equally true. When departments operate independently, overhead quietly becomes more difficult to control. Estimating focuses on winning work. Operations focus on completing projects. Accounting focuses on closing the books. Everyone works hard but few people step back to evaluate how the entire system is performing. That separation creates blind spots.
One department may solve a problem while unintentionally creating additional work for another. Project managers develop spreadsheets because information isn’t readily available. Accounting spends hours correcting coding errors that originated in the field. Estimators answer questions that should have been resolved during the turnover meeting. None of those activities appear on an estimate, yet every one of them increases overhead.
I’ve seen this pattern enough times to know that growth never fixes operational problems. It magnifies them.
Poor communication doesn’t improve because a company becomes larger. Weak project handoffs don’t suddenly become stronger. Inconsistent documentation doesn’t become more organized. Every weakness simply affects more projects, people and customers.
That is why I encourage contractors to strengthen their systems before they accelerate their growth. A well-designed process can support additional volume. A weak process simply creates additional frustration.
Owners should periodically step back and look at their business from a different perspective. If you were starting your company today with the knowledge you have now, would you build it the same way? Would every position still exist? Would every software platform still be in place? Would every report still be generated?
More importantly, does every overhead expense contribute measurable value to the organization?
These aren’t accounting questions, they’re leadership questions.
After more than forty-five years in this industry, I’ve come to believe that overhead isn’t something to be feared. It is simply the cost of building an organization capable of serving customers well. The objective isn’t to operate with the lowest overhead possible. The objective is to ensure every dollar invested strengthens
the company and supports profitable growth.
The contractors who consistently perform well over the long term aren’t necessarily the ones generating the highest annual revenue. More often, they are the ones who understand exactly how their business operates. They know where money is being made, where it is being spent and whether their systems are keeping pace with their growth.
Every owner wants to build a larger company. There is nothing wrong with that goal; just remember that revenue and profitability rarely grow at the same pace. One can increase rapidly while the other quietly stands still. I’ve watched that happen many times over the course of my career.
Companies that avoid the overhead trap don’t do anything extraordinary. They ask better questions. They review their numbers more carefully. They challenge assumptions before they become habits. Most importantly, they never allow growth to get ahead of the organization they’ve worked so hard to build. Revenue creates opportunity. Disciplined leadership determines whether that opportunity becomes lasting success.
John Kenney, CPRC is CEO of Cotney Consulting Group, Plant City. He has decades of experience on commercial roofing projects, providing a unique understanding of what it takes to succeed in roofing – on the roof, in the office and at scale. John saw the need to provide contractors with strategic guidance built on real-world field knowledge. Cotney Consulting offers COO on Demand, online training, technology solutions, business advisory consulting, collections, contracts, Castagra estimating training, safety and OSHA training. John partners with FRSA to provide educational seminars. For more information, contact John at jkenney@cotneyconsulting.com or 813-851-4173.