What Is ROA and Why It Matters for Your Restoration Business
In the fast-moving world of restoration, where projects can swing wildly in scope and speed, it’s easy to stay focused on revenue growth or monthly net income. But what if you’re growing inefficiently? What if your trucks, drying equipment, and office systems are costing you more than they’re returning?
This is where Return on Assets (ROA) becomes one of your most valuable—but underutilized—financial tools.
What Is ROA?
ROA stands for Return on Assets, a financial metric that tells you how much net income your business generates for every dollar of assets it owns. It’s a measure of efficiency—not just profitability.
Formula:
ROA = Net Income ÷ Total Assets
Say your restoration company earned $500,000 in net income last year, and your total assets (vehicles, equipment, AR, inventory, and cash) add up to $2,000,000. Your ROA would be:
$500,000 ÷ $2,000,000 = 25%
That means you’re generating $0.25 in net profit for every dollar you have invested in assets.
Why ROA Matters for Restoration Companies
Restoration businesses are asset-intensive. Whether you own a fleet of box trucks and air movers or you’ve invested heavily in contents cleaning systems or in-house rebuild crews, those resources are only valuable if they’re working.
Here’s why ROA deserves your attention:
1. It tells you if your gear is earning its keep.
Idle vehicles, underutilized trailers, or expensive Esporta systems collecting dust? ROA can expose this. You’re tying up capital in assets that aren’t producing income.
2. It helps you prioritize lean operations.
If two branches generate the same profit, but one requires $1M in assets and the other only $600K, which one is more efficient? ROA gives you a clear answer.
3. It provides a common language for owners and investors.
Unlike EBITDA or gross margin, ROA is balance-sheet aware. It factors in not just what you’re earning, but how much you had to invest to earn it.
What Affects ROA in a Restoration Business?
There are two parts to the ROA formula, and both matter:
🧾 Net Income:
Unprofitable jobs, scope creep, or insurance pushback can drag this down fast.
So can bloated SG&A (office payroll, software subscriptions, fleet insurance).
Watch for excessive labor during slow seasons or low-margin rebuild work.
🏗 Total Assets:
AR that's aging out past 90 days still counts as an asset—but it’s not helping your cash flow.
Unused equipment, extra trucks, or stagnant inventory inflates your asset base without boosting income.
Construction materials and WIP that linger on the balance sheet after delays can reduce your efficiency ratio.
How to Improve Your ROA
Improving ROA doesn’t mean slashing and burning—it means becoming more intentional. Here’s how:
1. Tighten Your AR and Job Closeouts
Reduce days to collect. The faster you turn receivables into cash, the better.
Speed up job closeouts to reduce WIP backlog and move revenue onto the P&L.
2. Get Lean with Equipment and Inventory
Track asset utilization: how often is each piece used monthly?
Rent or subcontract during peak season instead of over-buying in Q1.
Sell or lease idle gear that hasn't paid for itself in the past 12 months.
3. Evaluate ROI by Service Line
Is rebuild work dragging down your margins?
Are pack-out services profitable enough to justify the contents team and storage space?
ROA by department can help you decide what to scale—and what to rethink.
4. Benchmark Against Industry Peers
Are you sitting at a 5% ROA while others in your revenue range are closer to 15%?
Restoration companies that track performance by region, division, and asset base can outgrow the competition without outspending them.
What’s a Good ROA in the Restoration Industry?
There’s no one-size-fits-all number, but here are some ballpark benchmarks:
5% or less: Indicates underutilized assets or tight margins.
10–15%: Fair range for a well-run operation with some inefficiencies.
20% or more: Strong asset efficiency, especially in companies leveraging subcontracted labor or leased equipment during surges.
Note: Companies that operate lean—using subcontractors or renting equipment only when needed—often show higher ROA, even if their total revenue is lower.
Final Thought: ROA Drives Smart Growth
Restoration owners often ask, “Should I hire more?” “Should I buy more trucks?” “Should I expand?”
ROA helps answer those questions.
Before you make your next big purchase or open another location, look at whether your current assets are pulling their weight. If they are, you’re in a good place to scale. If they aren’t, pouring more capital into the business may just bury you further under inefficiency.
Want help tracking metrics like ROA and using them to make smarter decisions?
We specialize in financial reporting and analysis for restoration companies—and we’ll show you which KPIs actually move the needle.
👉 Schedule a CFO insight call today: https://calendly.com/kiwicashflow