State of the Industry Report: Sidebars
Increasingly Aggressive Pursuit of Undocumented Workers by Richard Alaniz
The year 2011 saw the Department of Homeland Security and the Social Security Administration taking an increasingly aggressive stance in using all available information to curb the hiring of unauthorized workers and to penalize employers who do.
On Feb. 14 alone, the Department of Homeland Security (DHS) issued more than 1,000 new Notices of Inspection, requesting I-9 forms and supporting documentation. And on April 6, continuing its own aggressive pursuit of undocumented workers and those who employ them, the Social Security Administration resumed its practice of sending out “No-Match Letters,” which can be used by DHS in combination with other evidence in any future prosecution or Notice of Inspection of the employer’s I-9 records.
What impact will this have on roofing contractors? Well, it depends on whether or not the company hires undocumented workers, either knowingly or unknowingly. Companies that do are now much more likely to be caught and should be warned that getting caught can be very expensive, with civil penalties for a first offense of up to $3,200 for each unauthorized alien and possible criminal penalties of up to an additional $3,000, plus up to 6 months in jail. With these penalties on the table, it more important than ever for employer’s to have their house in order. While hiring fully documented workers may negatively impact the bottom line, the impact is not nearly as great as large fines and jail time.
It is important to note that the impact of the new, aggressive enforcement protocols is not limited to companies that actually hire undocumented workers. While the focus of these efforts is to locate employers who hire undocumented workers, regulators are also targeting and fining employers for “paperwork violations” and failure to “properly complete, retain, and/or make available for inspection Forms I-9 as required by law.” These types of violations can quickly add up, and may result civil penalties of up to $1,100 for each violation.
If regulators do come calling, which is increasingly likely, do not panic, but do take their inquiries seriously. But a better strategy is to keep vigilant hiring and documentation practices. In addition to complying with all regulations and carefully completing and maintaining all necessary paperwork, employers should conduct regular in-house I-9 audits to determine if changes in policies and procedures are required as well as whether any “paperwork violations” are present in their I-9s.
Richard D. Alaniz is a partner at Alaniz and Schraeder, a national labor and employment firm based in Houston. He can be reached at firstname.lastname@example.org.
Get Leads from QR Codes by Greg Hoffman
Marketing trends in roofing continue to focus on Internet-related strategies. The foundation of all the Internet marketing is your company website — and next in line is how to get prospects to your site.
SEO, or Search Engine Optimization, is super hot right now — this is the process of getting top ranking on Google. If you are not one of the first companies listed, you are at a big disadvantage. It’s page one or none when it comes to search engine leads.
Social media continues to evolve with Facebook as the dominant force. Google is attempting to break into this space with Google+ (Google Plus). 2012 will undoubtedly produce new wrinkles in social media opportunities for roofing marketing.
Here’s a new lead generator to consider: QR Codes. QR codes have been a fixture in Japan for a number of years. The United States is seeing a significant increase in the use of QR codes to market products and services. Is this something you should be looking at to increase leads for your roofing business?
To answer that question, let’s start with a brief explanation of QR codes. These are two-dimensional digital Quick Response codes that have uses ranging from automotive production tracking to garbage trucks in New York City. They are relatively easy to create and can contain information about product promotions, production data, links to video testimonials or links to corporate website information. The information can be captured by a smartphone with an app for reading QR codes or regular cell phone that comes with a QR reader. Customers are using their phones to access information from QR codes and the usage is increasing steadily.
You should seriously consider adding QR codes to your marketing to drive potential customers to your company website. The obvious place for you to have a QR code is on your trucks and yard signs. When a potential client sees your truck parked in front of a neighbors’ home, they can use their phone to capture your QR code off the truck. Your website URL would be linked via the QR code. The customer could then immediately be connected to your website and gather all the information they need to contact you and hopefully request a bid.
Naturally, before you start sending people to your website with your QR Code, you better look good! Make sure you have a well designed website so that when your clients arrive at the site you are prepared with a professional and compelling presentation of your roofing company. In addition, your site needs to make it easy for the customer to find your contact information. You should aggressively encourage contact from the visitor on every page with a phone call or by filling out a contact form so that you can capture every possible lead.
Greg Hoffman is president of Roofing Contractor Marketing.
Watch Out for the Age Wave by Kevin Kennedy
We are in an “Age Wave” created by the baby boomers who are now retiring. The trend will begin having more sellers than buyers of private businesses as we move forward. Exiting owners should now begin creating a plan for an exit that will require three to four years to meet their financial goals: aligning their management for the next window of opportunity, and to deciding on an internal or external transfer.
The recession has not been friendly to most companies. Owners need a plan for an exit during the next window of opportunity. Most owners in their late fifties and early sixties are not looking forward to struggling through another recession.
There is a window of opportunity closing for wealthy owners that may close in 2013. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 significantly increased the estate tax exemption to $5 million per individual. It also created a portability option where any unused portion of the exemption could be transferred and utilized by the surviving spouse. This equates to a $10 million estate and gift tax exemption per couple. Although this is a very generous exemption compared to the previous legislation, the provision is set to expire Dec. 31, 2012, and the exemption will revert to $1 million.
Owners who want to exit their business this decade need to create a plan and business model to:
• Build back the business value lost in the recession.
• Deal with the different taxes from different transfers.
• Create business deductible savings plans to supplement your retirement plans.
• Consider the different valuations of your business depending on the transfer.
• Project the cash flow that will be needed to meet your financial goals.
• Determine the insurances required to protect you wealth and estate.
• Ensure proper estate tax planning protection.
• Perform financial planning and calculate reinvestment of the exit proceeds.
• Prepare the company to operate successfully without your presence.
The first step in exit planning might be to admit you need help. You intuitively understand your business but have never exited a business before. Exiting is not easy and you probably only have one chance to get it right. Studies show that less than 30 percent of first-generation owners and less than 10 percent of second-generation owners succeed in transferring their business to the next generation. It is very disappointing to see so many businesses prosper only to watch the aging owners fumble the ball in the “red zone” and fail to monetize their business and protect their wealth and legacy.
Kevin Kennedy is CEO of Beacon Exit Planning, LLC.
Brace Yourself for Uncertainty by Robert Reale
Unlike new construction, which is planned out months (and sometimes years) in advance, a market dominated by re-roofing creates an environment that’simpossible to forecast and difficult to schedule. Building owners usually don’t know they have a problem unless their building is infiltrated by substantial moisture, and they typically want the issue resolved immediately. 2011 saw a perfect storm of market challenges for roofing contractors. We experienced several extreme weather events across the entire country, which caused peaks and valleys in demand. All manufacturers were challenged to respond and ramp up supply with limited notice. When materials were available, trucks were hard to find. The 2009 recession forced a large portion of the trucking workforce into other industries, and even as the market rebounds, we are not seeing these former truckers return. Additionally, more stringent DOT compliance regulations have forced some truckers out of commission and prevented new workers from entering the field. All of these complications just make it tougher for manufacturers to ship materials on short notice.
Roofing contractors can prepare themselves the following three ways: (1) stocking a reserve of materials, (2) bolstering repair crews, and (3) selling maintenance plans.
When severe weather events occur, the contractor who can get the roof repaired the fastest is often the winner of the bid, whether or not they were the low price. Having materials on-hand will allow contractors the ability to respond immediately.
An experienced repair crew can often buy the contractor and building owner valuable time in cases when a complete reroof may be prescribed. A knowledgeable crew will have the right tools and technologies to quickly detect and isolate leaks and get the building watertight, preventing further damage to the building owner’s assets.
Maintenance programs are the ultimate win-win for contractors and building owners. A bi-annual roof maintenance plan allows contractors to maintain a relationship with building owners and repair minor issues before they become major issues. Since building owners typically do not frequent their roofs, consider using a proposal writing software that generates roof condition reports with the aid of photography. Nothing is more powerful than the visual. Show the building owner photos of the roof while outlining areas of concern and the potential consequences of inaction. An owner or facility manager will rarely ignore an obvious trouble spot on their roof when visual evidence is presented.
Robert Reale is manager of Marketing Communications at Carlisle SynTec.
Training Can Bridge the Cultural Divide by Dale Tyler
In my opinion, the biggest problem facing roofing contractors today is the diversity within their workforce. When I say “diversity,” it is important to note that I am speaking of a primarily “Hispanic” workforce within the roofing industry. This diversification creates barriers including but not limited to communication and cultural leadership. A situation in which top-level management, or even direct supervisors, cannot effectively communicate with their labor force outside of interpreters can be damaging to your company. Many or most supervisors and foremen are not trained in professional leadership skills and are pulled between their loyalty to their employers and also to the labor force (fellow countrymen or family members). On the other hand, as noted previously, many non-Latino leaders do not know how to properly lead the Hispanic workforce due to lack of cultural understanding. Therefore, there is an absolute need within the company to open these channels of communication by providing training in professional leadership skills to Latino leaders and cultural leadership training, and in some cases language training, to non-Latino leaders. This is critical to the health and success of your company.
Unfortunately, this problem is not one that can be prepared for but more than likely already exists or is deeply rooted in most companies and needs to be addressed. My recommendation and one that my company has taken part in is language and cultural training.
If we are going to effectively work with the Hispanic workforce, we must both understand them and learn best business practices. And vice versa, developing Latino leaders who can make a significant positive impact on both our companies and communities is a growing necessity in the roofing industry.
Dale Tyler is president of National Roofing Partners (NRP).
Keys to Success in 2012 by Bob Tafaro
2011 was another year in which the roofing industry got little help from a sluggish economy. We made our own success by being nimble and meeting spikes in demand caused by storm activity, and by continuing to offer value to all of our customer constituents.
As we all know, the economy alone has generated little momentum for the industry in recent months. At the end of 2011, public construction spending was even lower than in 2010. Still, the outlook today isn’t nearly as troubling as it was a couple of years ago. So — as has been the case for the past several months — the roofing industry cannot rely on a growing economy this year but rather has to generate growth itself by being innovative and ready to respond. Similar to our 2011 strategy, we must be able to respond to storm demand and to customer demand for “green” and longer-lasting roofing products. Likewise, financing is becoming an emerging factor in the roofing industry, given its increasing prominence in the solar industry, and with many consumers seeking finance offerings. Again, continued innovation, value, and quality are the keys to our success.
In general, any increases in volume last year may have been offset by raw materials costs, which continue to rise and are expected to continue to rise next year. Sales growth last year was realized primarily in residential and TPO markets. In fact, the TPO sector performed relatively well in 2011 and continued to gain share from other single-ply alternatives. Non-residential construction has started to stabilize, albeit at a low level.
Economic uncertainty is forcing us — and many other market sectors — to act smarter about earning customers’ business when times are tough. Again, innovation is key, but it’s more than simply putting new products in the marketplace. It’s also about focusing on long-term issues such as sustainability and solar products that perform well but are lightweight, easy to install, and cost competitive. Many of the best opportunities require even greater engagement and education of our end customers, such as designer shingles, solar, and a continued focus on systems. A challenge that many of us faced and met successfully in 2011 was an unusually high volume of severe storm damage in the South and Midwest. At GAF, for example, we were ready to respond thanks to a logistics team that precisely directed capacity toward storm markets without disrupting service to other customers. Manufacturing was able to run at near-capacity levels. By being prepared and responsive at critical times, we were able to improve customer satisfaction in the long term and earn future business.
Looking ahead, our outlook for 2012 is guarded, at best. While some economic indicators give us reason to be hopeful, others reflect an even worsening economy. For example, one economic forecast in November for the U.S. commercial and industrial construction industry indicated that 2012 will be a year in which advances in private construction will be partially offset by ongoing declines in publicly financed construction. Another report shows housing starts up slightly in 2012 but consumer and capital spending down — indicators of an economy far from recovery. Raw materials costs are expected to increase, which could mean higher prices. So, once again, we find ourselves faced with an unstable market environment full of volatility and uncertainty.
However, our industry is growing better every year at learning to survive in this economic downturn through new innovations, products with improved performance and quality, and great customer service. Ours is an industry where, if you can add value and help the customer save on future costs such as energy or replacement expenses, you can earn both their business and their trust. Ours is an industry that still has room to grow even in the toughest times.
Bob Tafaro is president and chief executive officer of GAF.
Stay Ahead of the Curve on Codes by Mike Ennis
There are several trends roofing contractors need to be aware in the low-slope roofing market. First, the requirements for low VOC adhesives and sealants will become even stricter. This will lead to the greater use of water-based systems.
SPRI, the association representing sheet membrane and component suppliers to the commercial roofing industry, would also like to increase the industry’s awareness of ANSI/SPRI ES-1. The revised version of this standard combines ES-1 and FM 4435, so roofing professionals may want to start designing to the revised standard.
At the same time, there will be a greater push for full systems and single-source warranties.
SPRI is currently working to get several standards — including WD-1, RP-14, VF-1 and GD-1 — into the 2015 version of the International Building Code. If these efforts are successful, then roofing professionals will want to stay ahead of the curve and start designing to these standards. However, the success of SPRI’s efforts in this area will not be known until this time next year. In the interim, SPRI members will continue to identify areas within the industry that will benefit from the collective efforts of the association. Whether it is the development of standards, performing technical research, providing input to industry codes or developing industry education programs, SPRI’s focus is to provide unbiased information that will enhance the community of knowledge and to help advance the industry as a whole.
Mike Ennis is the technical director of SPRI, the association representing sheet membrane and component suppliers to the commercial roofing industry. For more information, visit www.spri.org.
Sell on Value by David Harrison
The roofing business continues to be challenging. Buyers are postponing decisions when possible due to concerns about the economy. Even quality competitors are often returning to trying to convert business based on price rather than differentiating with their value. What’s a contractor to do?
My general advice — stay the course! The very minute you compete based on being an equivalent or lower price than your competitor, you are on a slippery slope. When you become known for price, your reputation for price sticks with you. When you have a reputation for value, you’ll get through the difficult times and strengthen your business.
So what is selling on value? In the roofing industry, we are in the business of preventing problems. All contractors claim to do the same things: (A) evaluate your needs; (B) specify a solution; (C) install the product; and (D) provide a warranty. The reality is, unless the customer believes that there is a potential risk in their decision and also believes that you can help reduce that risk, then you have not provided a value. The potential risk areas through the client’s eyes include the contractor they choose, the manufacturer used and the warranty for protection — why would they pay one penny more for you!
The key therefore in selling value is not just sharing what you are going to do, but be very clear about what makes you different. If you don’t explain the differences, other contractors that the customer trusts will essentially get credit for knowing and likely doing what you shared is the right approach even if they never mentioned it.
When do you focus on differentiating? Ideally, first on the incoming call to establish the appointment. Second, when you meet with the customer to identify their needs and evaluate the roof situation. Third, by making your proposal a true selling document rather than an itemized estimate. Fourth, in the follow up.
People who utilized you because of your price as opposed to value are not as likely to recommend you to their friends and family. That’s because if they bought on price — and recommend you — and the friend gets a price higher than other contractors, they’ll look stupid. But when they buy on value, there is a reason that they know you provide that will make them look good — and not put them at risk of looking bad. Frankly, the approach to referrals is one of the biggest differences between contractors that I see making money and those that just get by. As a rule of thumb, if at least 50 percent of your business is not from referrals, there may be a problem.
David Harrison is president of Harrison Management Consultants.
Keep a Watchful Eye on Washington by Craig Brightup
The debate over renewing the payroll tax cut will pick up in February where it left off at the end of 2011, and the budget debate between the White House and congressional Republicans will be further exacerbated by a presidential election that focuses on Bush-era tax rates scheduled to expire Jan. 1, 2013.
President Obama will continue to demand that those earning more than $200,000 annually pay higher rates, which would hit millions of small businesses including roofing contractors. These wage earners also will get hit in 2013 by “ObamaCare’s” 0.9-percent surtax on top of the 2.9 percent Medicare tax and a 3.8 percent surcharge on investment income. With issues of this magnitude, the fight over taxes will last through 2012 and not be resolved until after the election.
The regulatory fight will go on, too, with layers of new regulations continuing to hinder business. One example is the Dec. 10, 2010, decision by OSHA to rescind its fall protection enforcement directive for steep slope roofing that allowed for the use of slide guards on residential roofs. Since 1995, the old directive provided needed flexibility for maximum worker safety. However, OSHA replaced it with a new directive that is more rigid and less safe, and has in the wings a silica rule and proposals on recordkeeping and safety programs.
Actions from other agencies such as the EPA and National Labor Relations Board (NLRB) also are not helping roofing contractors and, as shown by the president’s recess appointments to the NLRB, regulatory relief will not be possible until after the election. However, despite no movement on immigration legislation, Congress was able to stop DOL wage regulations for the H-2B visa program that included a $10-an-hour increase for construction. This was done through bipartisan language to defund the regulations in a spending bill to keep the government running through Sept. 31, 2012.
Hopefully, a bipartisan consensus will emerge regarding energy-efficiency tax incentives, too. The homeowner energy-efficiency tax credit (IRC Sec. 25C) is one of some 60 tax credits that expired Dec. 31, 2011, and Congress typically considers all of them in a “tax-extenders” bill. The Residential Energy Efficient Tax Credit Industry Coalition is advocating a formula with a $1,000 cap and that all roofing products that meet Energy Star requirements be eligible for the credit. Bipartisan legislation to that effect is expected to be introduced by spring if not sooner.
It is crucial that roofing contractors make their voices heard in Washington, D.C. Equally important is getting involved in the election process to see that on Nov. 6, 2012, enough pro-business candidates are put in office that growth policies can be enacted to jump-start the economy and construction.
Craig Brightup is CEO of The Brightup Group LLC.
Don’t Let Economy Get the Best of You by Duane Cummings
As we face 2012, many roofing contractors would say the biggest problem they must address is the continued slowing of the economy. Compounding their concern is the fact this is a presidential election year. Typically, spending and investment come to a slow drizzle as everyone waits to see what will happen with the political landscape. So, the idea of back-to-back years dealing with a sluggish economy has contractors fearful, defensive, and looking for ideas and suggestions.
In 2011, many companies faced layoffs, cutbacks, and in some cases closure. The blame initially went to a reduced number of opportunities and a larger and hungrier number of competitors in the marketplace. But, after additional analysis, the struggling economy uncovered the fact that many contractors had lost focus and control of their overhead and day-to-day operational spending. Unfortunately, they also took on jobs that had no chance of being profitable to keep the cash flowing and “feed the monster.” Although it took a while to discover, there is a silver lining.
Regardless of the current outlook, there are reasons to be optimistic. First, we need only look back at our history and realize economies are cyclical and things will change. Second, thankfully many companies have already made drastic cuts due to the challenging economy and are now running “lean.” With lower overhead and a watchful eye on their operating costs, they can once again begin to look for profit instead of focusing on spiraling losses. The third bright spot that should be celebrated is the number of highly experienced professionals looking for employment opportunities. Now is a fantastic time to put together an “A” team for the upcoming year. And finally, if you have additional time on your hands while things are slow, that time can be used to get out and build solid relationships with customers and vendors. Although initially the glass looked half empty, I think you can now agree that it may be half full.
Yes, the economy is shaky and there is reason to be concerned. But, rather than letting it get the best of you, I recommend you simply keep looking forward, be thankful for the wakeup call, continue to keep overhead down, maintain a sharp eye on operating expenses, acquire and train the very best team possible, give proper attention to the bidding and buying process, pick and choose projects appropriately, and above all else, spend this time getting to know your customers and vendors. By doing these things, companies tip the scales of success and profitability in their favor, even in a scary economy.
Duane Cummings is founder of the The Sensational Group.
Legal Issues to Watch by Trenton H. Cotney
Given the financial state of the economy, one of the biggest issues that roofing contractors face and will continue to face is properly estimating projects. With the increase in government oversight from the EPA, OSHA, the Department of Labor and other government agencies, contractors often fail to account for increased safety measures or payroll requirements that may dramatically increase the overhead cost of a project.
From a legal standpoint, it is important for any roofing contractor to not only adequately estimate a project, but also have provisions in its contract to allow it to pass on increased regulation costs either to its customer or downstream to subcontractors and suppliers. For example, any roofing contractor working on a Davis-Bacon Project should have multiple provisions contained in its contract to require subtiers to provide certified payrolls and conform to Davis-Bacon requirements. Roofing contractors should also make sure to include flow down provisions so that subtiers are required to comply with the same provisions that roofing contractors follow upstream. Finally, roofing contractors should be aware, especially when doing subcontracting work, of payment provisions which may ultimately affect the ability of the roofing contractor to get paid.
Over the last 3 years, OSHA has increased its inspection and citation efforts throughout the United States. While the new residential fall protection standards may increase the safety on residential jobs, OSHA has failed to adequately identify the economic impact that the fall protection requirements may have on residential roofing contractors. In addition, on both commercial and residential jobs, OSHA is reluctant to define greater hazards caused by many of the safety standards. For example, on smaller roofs and residential jobs where materials are roof stacked, the enhanced fall protection standards may create greater dangers than their non-use.
Trenton H. Cotney is a shareholder, Glenn Rasmussen Fogarty & Hooker, P.A. He specializes in construction law.