Position your company

Diversify or specialize? It’s a question building contractors face, particularly during tough times when the pace of construction slows down.

“But in the gutter industry,” observes co-owner Frank Heneghan of Connecticut Gutter LLC, “most installers put all their eggs in one basket.”

Though home builders, for example, might ponder entry into the nonresidential construction market, Heneghan relates most installers appear to feel no equivalent urge to explore different gutter markets. “And that’s why I have struggling installers today,” he says, “who are calling me up to ask if I’ll buy their machines or if I’ll hire them.”

These gutter installers have discovered an exclusive focus on linear feet per day, a business strategy that might work during boom times, can leave them high and dry when that market recedes. Thus, installers who sell only to homeowners or only to tract-home builders, may suffer as housing prices decline and residential construction permits are down.

At Connecticut Gutter, Heneghan and his partner Chris Bailey are facing their first real downturn since founding the Milford-based company in December 2003. And yet the firm is well positioned to ride out the economic storm — and even grow as competitors exit the business and Connecticut Gutter picks up the slack.

“With 10 employees, three crews and three machines,” Heneghan reports, “we’re at the threshold of doing $1 million a year. We’re even going to start running TV ads. When other installers are retrenching, that’s the time for us to increase our presence. We have a clear field to build relationships with new customers, which means we’ll have a leg up when the economy starts to improve.”

Connecticut Gutter is well positioned because its revenues are diversified. Heneghan estimates 60 percent of business comes from installing seamless aluminum gutters, including a healthy portion of commercial projects. “But because the industry never stays the same,” he adds, “we’re always on the lookout to develop new products and services.” About 15 percent of Connecticut Gutter’s revenue is generated by copper gutter installations, 10 percent by zinc and the remainder by steel gutters and other products.

“We install anything and everything, from new construction to historic restoration and from a one-story ranch home to a four-story commercial building,” Heneghan continues. “We cover 90 percent of Connecticut, as well as Westchester County, N.Y. Our bread-and-butter, however, is doing installations for contractors.”

Heneghan and Bailey’s diversified strategy has been a hallmark of Connecticut Gutter since its founding some five years ago. The duo, both residents of Milford, had both worked in family construction businesses before going off to college. Then they graduated and entered different careers. For his part, Heneghan was making good money at an information technology firm. “But I was also helping to make somebody else rich,” he laughs.

The two men decided to launch a business of their own. With their backgrounds in construction, they searched for an underserved niche. “We could see right away,” Heneghan recalls, “that the gutter industry was highly fragmented. There were only mom-and-pop local companies. Nobody was pursuing a coordinated, statewide marketing strategy.” When a visit to the secretary of state’s office confirmed that the name “Connecticut Gutter” was available — and when talks with potential gutter product suppliers were encouraging — Heneghan and Bailey knew they had found their niche.

Everything about the company is geared, says Heneghan, so “when people in Connecticut think of gutters, they’ll think of Connecticut Gutters as the ëgo-to’ company.” The firm sports a professionally designed logo and website, is a licensed home improvement contractor in Connecticut and New York’s Westchester County, is active in local and national homebuilder associations and carries $2 million in general liability insurance.

The company’s desire to never stand pat is seen in its willingness to try new products in response to a changing market. “For example,” Heneghan relates, “copper gutter installations are down from their peak of a couple years ago. But even before that, when copper was going great, we were approached by RHEINZINK about offering their gutters. We saw that nobody else in our market was really doing zinc and this was a niche we could develop.”

Today, with copper gutter installations having declined to about 15 percent of its business, Connecticut Gutters has more than taken up the slack as RHEINZINK products now add 10 percent to the Heneghan’s bottom line. “With all the environmental concerns about runoff from lead-coated copper,” he points out, “zinc is being chosen by more architects, builders, and homeowners. The color goes great with slate roofs. And RHEINZINK panel products give us opportunities to do cladding, as well as gutters, and generate more revenue.”

Another example of Connecticut Gutters’ penchant for innovation is its foray into Kynar 500-coated steel gutters. Though the high-end coating may price the gutters beyond the residential market, commercial building owners see the wisdom of investing in gutters that will retain their color and performance for the life of the roofing system and even the building itself.

In its five years of business, Connecticut Gutters sold various gutter protection products until settling on Leaf Relief from Alcoa.
“We’ve been very cautious with gutter protection,” Heneghan states. “There are a million products out there. With the products we tried before, they might be OK 70 percent of the time. But then 30 percent of the time we’d get call-backs. But now we’re very happy with Leaf Relief.”

Gutter repair and gutter cleaning are also among Heneghan and Bailey’s services. And more recently, their company has begun to offer roofing, siding, exterior work, window replacement and metal flashing, though these endeavors remain limited for the time being.

Diversification is important from a financial management standpoint. “Commercial jobs can be big-dollar projects and provide good margins,” Heneghan explains. “But we must often wait for payment, particularly if we do the work as a subcontractor. We can have a lot of capital outlay tied up in materials before we ever get paid. Yet because our work is diverse — with three crews, we can average two to three projects a day — that means we can keep our cash flow going until payments for commercial jobs come in.”

While Connecticut Gutters is active in advertising, Heneghan calls this “passive” marketing. The best results, he believes, “come from ‘active’ marketing — and that means picking up the phone. Cold-calling is probably the biggest challenge we have. But contractors will listen when I explain that, when it comes to gutters, we can offer them better products and probably save them money versus their other alternatives.”

For gutters, Connecticut builders in the past relied on local mom-and-pop installers. “But a contractor’s biggest concern is scheduling,” Heneghan notes. “The gutter is the last thing that goes on a building. So the contractor wants the installer to be available so that the gutters can go up right away, the project is finished and the contractor gets paid.”

Heneghan discovered by leveraging technology — namely his cell phone and PDA — he can visit sites and often scope out commercial gutter jobs the same day he talks to the contractor. Mom and pop, on the other hand, might take a couple of days before visiting the site. And because Connecticut Gutters is a statewide operation, contractors can enjoy a single source for all their projects rather than lining up local gutter installers for each job.

Quick response has been built into Connecticut Gutter’s business model from the start. Bailey handles personnel, logistics, purchasing and field operations. Heneghan is in charge of sales, marketing, customer relations and business development. “That’s the way to make a partnership work to your advantage,” Heneghan counsels, “by splitting things up so that partners have separate spheres of responsibility. You can’t really get your company organized if everyone tries to be responsible for everything.”

Connecticut Gutters’ marketing approach has won the company some high-profile projects such as the Old Lyme Town Hall and the Katherine Hepburn Cultural Arts Center in Old Saybrook. Other commercial work has included schools and college campuses, country clubs, condominiums, retirement communities, government buildings and hospitals. When completed, these landmark jobs provide ongoing advertisements for Connecticut Gutters’ capacity to serve commercial clients of all types.

Asked about the future, Heneghan is unfazed by the current economic downturn. “Our goal is to be the main gutter installer in Connecticut,” he declares. “There’s lots of room for growth. So far, we’re not even half the size we plan to be!”

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