When it comes to the economy no one has a crystal ball, so just like everyone else contractors are bracing for the worst even as they hope for the best. Roofing contractors and entrepreneurs in general are often optimistic by nature, and regional differences and the fragmented nature of the marketplace mean some contractors are faring quite differently than others in different parts of the country - or even right across town. But national trends in housing and construction are hard to ignore, and those who serve the residential and commercial roofing sectors have had to adapt to a new economic reality. Many have diversified their product lines, become more efficient, and explored new ways of helping their customers.
As part of its State of the Industry Report, Roofing Contractor talked to representatives of some of the industry’s leading manufacturers, distributors and associations, as well as contractors, to get their insights on the commercial and residential roofing markets. They also shared some advice designed to help contractors meet the challenges of the year ahead.
Help Building Owners Maximize Value
Robert Delaney, General Manager of Firestone Building Products, said building owners have made it clear that budgets are going to be tight again in 2010.
“If they are going to invest in a re-roof project, they want to make sure that the initial cost is competitive; it will last and help them save money,” Delaney said. “Our long-time roofing contractor partners continue to tout the advantages of EPDM and TPO roofing systems for new and re-roof applications: low installed cost, durability, installation ease, design flexibility and recyclability. These combined traits help demonstrate the excellent lifetime economic value of EPDM and TPO.”
Delaney said the rise in green building practices and increase in state and federal tax credits and grants for energy-efficient roof systems has sparked interest in solar photovoltaic (PV) and intensive garden roof systems.
“Unfortunately, there is a lot of misinformation out there, so it is important that roofing contractors take a lead role to ensure all components work well together,” Delaney said. “Solar PV and garden systems need a durable, reliable roof foundation. Fully adhered single-ply systems over a properly insulated deck perform best as the roofing platform for these types of assemblies.”
Delaney said roofing contractors can help their customers make good decisions by selecting reliable, proven products and systems that are backed by a healthy company.
“A quality roof should include energy saving options,” he said. “By showing the value of increased levels of insulation, optimizing the amount of surface reflectivity for the local climate, and offering daylighting solutions, they can demonstrate the important role that the roof plays when considering cost-saving, energy-efficient solutions. As their roofing expert, contractors can show their customers how to minimize the cost and maximize the value and service life of their roof to get the most out of their investment.”
Sheree Bargabos, Owens Corning President of Roofing and Asphalt and President of the Asphalt Roofing Manufacturers Association, said homeowners are more educated and discerning about the products they purchase for their home, largely because of the availability of information online.
“Knowing how valuable information and resources are to homeowners, contractors can differentiate themselves in 2010 and capitalize on this trend,” Bargabos said. “Be the resource - educate prospective customers on the role the roof plays in the overall performance and look of their home. Look at the entire roofing system including a properly ventilated and insulated attic to provide optimal energy efficiency and enable homeowners to take advantage of tax credits.”
Contractors should promote design, asserted Bargabos. “Because a roof can make up half of a home’s façade, take the time to review choices in both shingle design and color,” she suggested. “Offer options and resources to help homeowners find the best roof that will make their home stand out.”
Bargabos also noted that contractors should showcase sustainability. “Durability, a key tenet of green products, is an important factor when recommending asphalt shingle options,” she said. “In addition to offering greater value, durable roofs are long-lasting and help reduce material usage. However, when a product is at the end of its lifespan, also consider ways to minimize impact on the environment, such as recycling. There are shingle recycling options at no added cost for contractors and will even help you promote your services to homeowners.”
Technology Can Help
Richard Spanton Jr., CEO of Acculynx, said in these trying economic times contractors need to think differently. “Use the available technology to leverage their business into the 21st Century,” he advised. “Now is the time to harness technology to clean up business practices of the past. The contractors that use available technologies to increase transparency of their organization will gain market share now and in the future.”
Spanton said roofers will be able to work faster and more efficiently by using the power of Eagleview, Acculynx, Hailswath, Quickbooks, Google Maps, Google Earth, GPS, and mobile workstations in trucks “and ultimately have access to their entire business on the fly.”
“In my opinion, the quicker that contractors realize this, the better off they will be,” noted Spanton, who advised contractors to acquire a laptop with wireless broadband Internet and put a printer in their sales vehicles.
“Get software to help manage their entire business - times have changed,” Spanton said. “Those that are going out to measure and then heading back to the office and mailing bids out three days later will be left behind. This is an ‘on-demand’ world and even contractors need to succumb to technology advancements.”
In a downturn, the cream will rise to the top, Spanton said, so contractors should focus on the core of their business and how they can be more efficient, organized, and profitable. “Every call and customer counts now,” he said. “Their bids must be professional and on time. Customer service should increase. Make the customer happy that they chose you.”
Geoff Stone of Metalforming said a surging trend for the metal roofing industry is Computer Integrated Roof Manufacturing (CIRM). “In this system roof design, estimation, verification, and roof panel manufacturing are all seamlessly integrated under the control of one software,” Stone said. “This eliminates many of the manual steps encountered in the roof project cycle which greatly increases productivity at every employee level in the cycle, eliminating errors and cost.”
Stone said 2010 should mean one thing: Don’t stop investing for the future.
“The time when business is slower is the perfect time for the organization to give time to research and development of new ways to become more competitive,” Stone said. “This will pay off many-fold as the market normalizes.”
Ray Smith, Managing Director for AppliCad, said metal roofing is garnering increased attention due to issues such as lifetime cost, durability, appearance and recyclability. “The problem for most roofers is that metal roofing needs far greater precision at every step of the process than they have previously had to be concerned with - estimating, manufacture and installation,” Smith said. “Roofers must learn to be more precise; you cannot stretch metal and waste is expensive.”
Smith said contractors in 2010 must understand costs, and software can help. “Drop customers or jobs where you cannot get a reasonable margin,” he said. “Working for breakeven is a waste of time and creates other problems for the whole industry. You might as well stay in the shed and read the paper and drink coffee. What is better though, instead of working for breakeven, is to work on making your business more efficient. Learn how to get the most from the business management software and advanced estimating software. Both these systems can help improve profitability.”
“Embrace technology tools that improve accuracy and efficiency,” Smith continued. “For example, a waste optimization utility in the AppliCad software for estimating metal can save anything up to about 10 percent to 15 percent. Imagine this being transferred directly to the bottom line of your annual accounts.”
Advice for Contractors
Ronnie McGlothlin, President of Empire Roofing Inc. and President of the Midwest Roofing Contractors Association, believes that service and maintenance work will become an even greater part of the typical roofing contractor’s business as owners look to stretch every dollar.
“Owners will be holding capital in the first quarter and may be further into the year,” he said. “I believe selling maintenance will go over a lot easier because owners can typically pass this expense to the tenants. Expand services in maintenance and leak repair. New construction and roof replacement may be slow until next year. Streamline your labor costs and overhead to weather the storm.”
Jeff Carpenter, Owens Corning Contractor Development Leader, believes contractors must continue to find ways to differentiate themselves from their competition in 2010.
“Homeowners are pursuing multiple quotes to find the best value, not necessarily the lowest price,” he said. “Contractors must take the time to inform homeowners that a roof is not just a roof.”
Carpenter said anyone can put a roof on for a low price. “Contractors can combat this by focusing on the value of a roof over time as well as how a new roof can enhance the curb appeal and value of a home,” he said. “There is opportunity to differentiate a contractor’s business and a homeowner’s buying experience by helping them understand the best roof color and design options to make their home pop.”
Jay Butch, Director of Contractor Programs for CertainTeed Corp. said several trends that contractors should be mindful of include consumers’ interest in green products that qualify for tax credits, methods of financing their home improvement projects, and the comparative value proposition offered by competing contractors.
“The federal tax credits have stimulated demand for products such as solar reflective roofing and attic insulation,” Butch said. “Due to the banking industry’s tightening of credit, many homeowners now look to the contractor to offer financing options to fund their project. Perhaps more than ever before, consumers are shopping for value by comparing the proposals and qualifications of the multiple contractors they contacted.”
Butch said contractors should scrutinize all aspects of business operations and financials very closely to ensure maximum efficiency and profitability. “Review your company’s results from 2009 and use them as a basis to project realistic and attainable goals for 2010,” he said. “Determine which segments of your business performed well and if any were unprofitable, then decide what actions to take in each segment.
“Monitor your sales, production and overhead figures, plus your personnel, relentlessly,” Butch advised. “Make any necessary adjustments to keep your company going in the right direction and operating in the black.”
Butch urged contractors to make sure they keep a close eye on profit margins. “Those contractors who are going strong through this economic downturn are already focused and need little advice,” he said. “For others who may be struggling, the temptation to slash their margins in order to keep the doors open should be avoided. Better to scale operations back and live to fight another day than go bankrupt with plenty of unprofitable business on the books.”
John DeRosa Jr., Manager of Sales and Contractor Development for IKO, called it “mission critical” that contractors evaluate their performance and seek to improve in three critical areas: leads, closing percentages, and pricing for profit.
“Get back to the basics and identify some of the things you did to generate leads when you first started your business,” DeRosa said. “Are you doing any of those things today? How might you benefit from revisiting some of those activities?”
“Get comfortable asking for a commitment and be prepared to respond to the objections you will hear,” DeRosa said about closing percentages. “I’m not talking about pushing for the ‘one-call close.’ I’m suggesting you list all of the reasons your prospects give you for not signing a contract and prepare yourself to better address those reasons. Remember, the longer it takes for you to answer these objections, the more credibility the objections are given.”
Proper pricing is essential. “Maximize your profitability by tightening your operations and eliminating the unnecessary,” he said. “This should give you the ability to shave a few dollars off of your estimates without lowering your profit margin.”
DeRosa advised contractors to “fight the urge to slash prices for the benefit of winning more business.”
“While this may yield short-term sales, it will most likely result in a long-term profit disaster,” he said. “I would instead suggest you identify your pricing ‘sweet spot’ by calculating two prices that incorporate your ‘optimum’ and ‘minimum’ profit margin expectations. This will give you a better understanding of your profit comfort zone in the likely event that a homeowner wants to negotiate a better deal.
“I would also suggest you identify cost-reduction opportunities and discuss these with the homeowner prior to simply dropping down to your ‘minimum’ price level. What things will you change or remove from your proposal to get the homeowner to the price they need to be at?”
Many Shades of Green
Reed Hitchcock, Executive Vice President, Asphalt Roofing Manufacturers Association, calls the push for green and sustainable buildings remarkable. “Organizations are eager to develop and promote their own standards and establish them as the pre-eminent ones for energy efficiency, renewable energy, sustainability and green (or vegetative) roofing,” he said. “The latter developing technologies and trends are just a few of the bigger issues affecting the commercial roofing industry as a whole, and roofing contractors in particular. The roof is no longer considered off limits but is now viewed as a platform, or site, upon which these new activities can occur and new technologies can be built.”
Roofing contractors need to be knowledgeable about these changing regulations and industry trends, noted Hitchcock. “Strategic business relationships with non-roofing tradespersons such as electricians, gardeners and energy-efficiency experts will help expand the roofing contractors’ scope of knowledge and provide their customers with resources to make informed decisions. The contractor must become an educator, and educated contractors will be successful in 2010.”
Dan Piché, President of Mule-Hide Products Co. Inc., agrees that green will continue to be a significant trend in the commercial market, fueled in particular by energy efficiency upgrades to both federal and military buildings.
“The growth of the U.S. Green Building Council’s LEED program will continue,” he said. “Roofing contractors should be well versed in the sustainability attributes of the products and systems they offer, because they will frequently be challenged to supply materials that meet this requirement.”
Piché believes a large amount of commercial debt is coming due in 2010 and that will weaken new development - with the exception of school and municipality work. “With new construction activity off, most of the low-slope business in 2010 will come from existing buildings,” he said. “There will be continued emphasis on the maintenance and repair of these existing roofs. Contractors who lack maintenance and repair solutions should look to educate themselves in how to expand in this segment.
“With the current economic situation, some building owners are requiring manufacturer warranties for their roofing systems and are not accepting contractor-backed warranties. Building owners also have higher expectations and will look to hire certified, warranty-eligible contractors for all types of projects. They are also using roof consultants for interim inspections and a pre-job walk-through to ensure they get a quality warranty system. Stricter enforcement by FM (Factory Mutual) Global on FM-insured buildings is one factor that will drive this.”
“When it comes to green, it is important for contractors to understand and speak the language,” Piché concluded. “Green roofing doesn’t just mean vegetative; it also includes white single-ply membranes, white cap sheets, elastomeric acrylic coatings, insulation and products with recycled content.”
Help Is Available
Todd Homa, Director of Sales for Polyglass USA, Inc., said in a highly competitive environment contractors need to utilize all resources available to them to edge out their competition.
“One resource that I have rarely seen utilized in 2009 by contractors is the sales and technical expertise of the roofing manufacturer,” Homa said. “As a manufacturer of low and steep slope roofing solutions, Polyglass recognizes our primary mission is to support our distribution and assist our contractor base.”
With the advent of the Internet, building owners and home owners have become more sophisticated consumers, Homa noted.
“The days of dropping off an estimate sheet and a sample selector is gone,” he said. “Contractor sales proposals need to be well thought out, professionally presented as well as provide a clear, concise and compelling value proposition for the consumer to act upon.
“This is where a manufacturing partner can help. Our sales force is well versed in presentation preparation and public speaking techniques. We can assist the contractor in creating a unique presentation as well as help them define a value proposition. Both our sales and technical staff members can accompany contractors to sales presentation meetings, assist in adding credibility to the contractor and answer product/warranty specific questions.”
Bob Tafaro, President and Chief Executive Officer of GAF Materials Corporation, said companies must demonstrate that they not only care about the environment but actively do something about it. “At GAF, for example, our green initiative includes green products, such as Everguard TPO and TOPCOAT coatings - and it includes making products more responsibly by producing less solid waste and air emissions during manufacturing, warehousing, and transportation,” he said. “For example, by focusing on performance instead of weight, not only do we have a better performing shingle but we also use fewer non-renewable resources in making and transporting the product.”
Tafaro said the environment is an important issue for everyone, and he urged the industry to work together to ensure a greener future. “To that end, GAF already supports roofing contractor efforts by working with local recyclers to help contractors recycle used shingles,” he said. “Currently, we do not know how the government’s program to support homeowner energy efficiency will evolve, but it’s something we should all watch closely and that could further add impetus to this growing trend.”
Educating your salespeople and estimators so they can respond to consumer demand for green products is essential, according to Tafaro. “Being knowledgeable in the emerging area of sustainability can be a competitive advantage,” he said.
Chris Salazar, Vice President Sales and Marketing for Karnak Corporation, pointed out there are opportunities to capitalize on energy savings incentives, rebates and job stimulus money related to roofing, including regulations requiring or encouraging the use of highly reflective roof surfaces. “Expect a stronger review of building code requirement compliance as a result of energy code and building code revisions,” Salazar said.
Old dogs can still learn new tricks, according to Salazar. “Give your business a broader dimension,” he urged contractors. “Add divisions or services that can generate steady income, help pay the bills, and most importantly keep your name in front of the customer.”
Finding a niche that uniquely showcases your strengths and letting people know about it are essential. “Market it and market it,” Salazar said. “Take advantage of the business slowdown and implement those time-consuming business growth plans you had when business was booming.”
Salazar said contractors should become knowledgeable on “what’s new.”
“Knowing how new roofing technology fits in with regulations, building maintenance, budgets, tax considerations, can make yours the ‘go-to’ business,” he said. “Think like your customer. Your business has slowed down; you have to cut costs and figure out ways to make your equipment and resources last longer. Your customers have the same problems, so offer those options that help them address those issues and you will surely grow your business.”
For example, Salazar suggested that contractors offer coatings as a way to extend the life of the roof. “This is self-serving advice, I know,” he said. “But tell the truth - have you done it yet?”
Contractors have to be resourceful in 2010, Salazar noted. “Take advantage of the knowledge that is out there in the form of reps, distributors, manufacturers, contractor associations, government agencies, utilities,” he said. “There are a lot of folks that want you to help you improve your business, and can help you generate leads. Use the phone and the Web.
“And remember, the definition of stupidity is doing the same thing over and over and expecting different results.”