Loading
Crowther control
construction by Jean Gruss | Editor/Lee-Collier
The construction downturn has given financially strong companies an opportunity to take market share and acquire competitors. Crowther Roofing is one of those planning to take advantage of the situation.
Lee Crowther likes to be in control.
He's seen competitors in the roofing business grow revenues astronomically during the boom yet they didn't generate much more profit than his commercial roofing company, Fort Myers-based Crowther Roofing & Sheet Metal of Florida.
"Every year in the last 10 our profit margins have gone up," says Crowther, chairman of the company. But Crowther hasn't been immune from the boom and bust, however. The company's sales rose 36% to $95 million in 2006 compared with 2005, but fell 26% in 2007 to $70 million.
How do you manage revenue swings of that magnitude and still maintain profit margins? The 70-year-old Crowther attributes that to the way he's managed his company conservatively. It was shaped in part by the fact that he almost filed for bankruptcy in the 1970s during the oil crisis, when the prices for roofing products rose and his contracts didn't have escalation clauses.
The result today is the company has no debt, virtually unlimited bonding capacity and, Crowther says, "Our cash reserves are big." That's an enviable position to be in to enter a construction downturn that Crowther doesn't think will return until 2010. "Right now we haven't seen the bottom," he says.
There's general agreement among the Crowther family that now's the time to strike at the competition in the state and expand out of Southwest Florida. Lee Crowther has since passed the baton of the company's leadership to his two sons, David and Lee Scott Crowther, and Chief Financial Officer Thomas Callans.
"I want to sell in good times and buy in bad times," Lee Crowther says.
But the four are debating whether to expand by taking on new debt to fund acquisitions or grow internally without relying on borrowed money. The elder Crowther shuns debt while David says borrowing now may be advantageous because rates are low. "Proper leverage is not a bad thing," says David Crowther, 45. "I'm probably the most aggressive son."
One thing is certain, though. The family-owned company plans to boost its presence in Sarasota and other areas of the Gulf Coast, the east coast and in southeastern states from Alabama to Georgia, the Carolinas and Virginia. It is even exploring a massive undisclosed project in the Bahamas.
Financial advantages
Crowther Roofing has financial advantages that give it a clear leg up over most competitors. Especially in larger projects, special insurance called "bonding" is required to make sure a company completes the job. Obtaining this insurance can be expensive for companies with a short history or weak finances.
But Crowther has no problem obtaining bonding insurance cheaply because it has been in business for decades, has cash reserves and is debt-free. In most cases, its financial strength is such that it can self-insure its projects. The elder Crowther says the bonding advantage can be as much as $25,000 on a $500,000 job.
"It gives us a good advantage," says Callans, the firm's CFO. "When we go in to negotiate a project, that's one of the things we'll talk about."
Cheap bonding is especially important when Crowther pursues big roofing projects because few other roofing contractors can compete for those. Recent projects included roofing the 1.3-million-square-foot Coconut Point mall in Estero and 350,000 square feet of roofing for 30 buildings at the new town of Ave Maria in eastern Collier County.
To land more jobs, Crowther does more than roofing. It has added services such as building trusses, repairing and replacing roof-based air conditioning units and installing materials under the roof. Previously, a general contractor on a big job had to subcontract all those separate jobs. Now, they can subcontract with Crowther instead of half a dozen others, relieving it of scheduling and other hassles.
Crowther has other advantages too, including an enviable safety record that keeps workers' compensation costs low. It can also use its size to negotiate big discounts from suppliers.
Because nearly half of Crowther's work is re-roofing existing structures, it has developed a roof-maintenance program for existing customers called Roof Check. It bridges the time gap between a new-roof job and a re-roofing, providing regular communication between Crowther and its customer. A roof can last 15 to 20 years, so it's important to keep that connection.
Incentives work
Over the years, Crowther has developed an elaborate system of incentives for its workers. When they're hired, roofers are given a color-coded nameplate that managers affix onto boards showing each job. Each color represents a pay grade and roofers move to the next color and pay grade when they acquire new skills, an important tool when most of the workforce is Spanish-speaking.
The company has its own training program, Crowther University, on which it spends $250,000 annually. On-the-job training is critical because there are no trade schools or apprenticeship programs in Florida that teach the often-complex roofing skills.
Workers are graded on safety, quality control and meeting budget. Points are assigned to each of these three criteria and awarded at the end of a job to every worker that meets the goals.
"At the end of the year, they can make 10% to 50% of their paycheck," says Lee Scott Crowther, 47.
The elder Crowther says that kind of incentive is more rewarding and less risky than giving employees a stake in the company. "What if the business fails?" Crowther asks. "I saw that happen and it doesn't seem fair."
Bahamas breeze
The Crowthers say the construction downturn is an opportunity to gain market share in existing markets and gain a foothold in new areas. For example, it is beefing up its Sarasota operation where executives say there's little homegrown competition except for Sarasota-based Sutter Roofing (Sutter officials couldn't be reached.)
It is particularly enthused about the East Coast of Florida, where it says the larger population has insulated it from the worst of the downturn that has hit Southwest Florida particularly hard. To do that it may acquire a competitor in Southeast Florida or open an office.
Orlando is another market that is faring well, in part because of the relatively strong tourism and high-technology industries that are predominant there. Because it's a new market for them, David Crowther says the company is likely to acquire another company there.
The elder Crowther has a simple formula for acquisition targets: "If they're making money, they've got to have good people."
The Crowthers are looking even further than Florida, including Virginia, the Carolinas, Alabama and Georgia. They're bidding on one project in the Bahamas that will be a huge resort on the scale of Atlantis, the hugely popular Kerzner resort there.
Debt may be another option to fuel the expansion. "That's certainly an avenue," Callans says. "I've got the bankers coming in tomorrow."
The Crowthers agree on one thing: Expansion plans wouldn't have hatched if it weren't for the construction downturn in Southwest Florida. "It's an extremely healthy correction," says David Crowther.
REVIEW SUMMARY
Company. Crowther Roofing & Sheet Metal of Florida
Industry. Roofing contractor
Key. Downturns offer opportunities to expand market share and acquire rivals for those who are financially strong.
Your free article limit has been reached this month.
Subscribe now for unlimited digital access to our award-winning business news.
Join thousands of executives who rely on us for insights spanning Tampa Bay to Naples.
