Toward the end of last year, a former customer who was one of the residents of a condo association located about a quarter mile from his business approached Chris Zorzy about re-siding the 30-year old building as well as adding windows and replacing the roof. Zorzy, owner of A&A Services in Salem, Mass., normally steers clear of big commercial jobs, including multi-family. The condo resident, a former flooring contractor, “called me up and said: would you want to bid on this project? I’m a trustee and I have a lot of pull.”
Zorzy initially expressed no interest but the caller persevered and, because “we were going into the end-of-year slow season,” and because it seemed like a sure thing with minimum hassles, Zorzy and his project manager came out to the site to measure the 16-unit building. “We got up on the roof. We measured the windows. We called our suppliers and we had all our subs come and measure it out,” Zorzy says. He put a lot of time into preparing a proposal with a spec sheet, including fiber-cement siding, plus the roofing and windows. The bid and ancillary documents measured four inches thick and the projected cost was in excess of half a million dollars. “Another guy gave them a quote, just on the siding.”
It’s inevitable: Sooner or later owners of exterior companies with a solid reputation in the market will be approached to do something other than a single-family residence. After all, they have the expertise and, when it comes to subcontractors, know all the players. Most commercial buildings have a manager and a budget for updating the exterior based on a schedule. Multi-family buildings, such as apartment houses and condominium or co-op properties, are managed essentially the same way—by a property management company—only it’s a homeowners association (HOA) that makes the final decision to approve use of a particular contractor when work on the building has to be done. For that reason, choosing the contractor is often a decision in which price is a bigger factor than quality.
“You’re always pitching to a community or a committee,” says Michael Damora, vice president of sales and marketing for K&B Home Remodeling in New Jersey. “And there’s always one guy on the board who has a friend in the business.” For that reason, he points out, another hazard in multi-family is that, if something goes wrong, “you’re not dealing with one homeowner, you’re dealing with many. ‘They almost killed my cat.’ ‘Who stepped on my prize daisies?’”
Since proposals are either emailed back to a property manager or presented to a board, there’s little actual selling, which frustrates home improvement company owners, and for some automatically removes that type of job from consideration. How do you make the case for being the best possible contractor to do this job if the buying criteria is largely restricted to price?
“If I can’t present myself and show why someone should hire me,” says Jason Kersch, sales manager at Major Homes, a Queens, N.Y. home improvement company heavily involved in siding, “then it’s a price game.” And if you win the game, Kersch points out, suddenly you’re “married to the job” and the client wants to “know all the costs and take control of the scheduling.”
Scale, Control, Equipment
Though the size of the job would swell the year’s top-line number, big jobs typically do not yield retail margins. Zorzy figured if he got the job he would have to configure the accounting separately to keep his books straight at the end of the year. But there were also control issues. The property manager hired a consultant who, along with a board member who was a retired architect, wanted to dictate “what we were going to use and why and how.” Finally Zorzy said, “I am bowing out on this,” figuring he’d already wasted enough time. “It’s not our cup of tea,” he says.
But the bigger reason experienced residential contractors often balk is scale. Most companies do not have the on-staff crews to take on a $1 million or $2 million siding job, let alone combination roofing/siding/windows job and would have to sub out at least portions of the work. In addition, “buildings that go higher than three stories require scaffolding,” notes Damora. “You’re definitely a little more exposed from a safety standpoint and a potential OSHA visit.”
One exterior contractor who has pursued larger jobs is Mark Franzoso, owner of Franzoso Contracting in Croton-on-Hudson, N.Y. Franzoso, who installs using his own trained crews—18 in all, of which 7 specialize in siding—has both won and lost in bidding on a several big siding jobs. His company has now completed two fiber cement siding jobs for condo developments. He’s made aware of such opportunities when property managers put out RFPs or when board members he knows alert him. He is personally involved in selling the job, and sees an opportunity for his company when going up against the often less-than-stellar work that results when a low-ball bidder secures the contract.
Leveraging Size and Quality
Franzoso Contracting’s size—$13.1 million in 2016 sales—means it has the resources to undertake a big job without having to drain personnel from bread-and-butter roofing, siding, and window jobs on single family homes. Executing the work isn’t the difficulty; getting the job is. “A low bid is the biggest challenge to overcome,” Franzoso notes.
For instance, Franzoso tells of a $2 million exterior renovation in nearby Ossining for which the bidding came down to Franzoso Contracting vs. another contractor whose proposal was $380,000 less—a seemingly open-and-shut case for the condo association making the decision. But Franzoso invited the president of the condominium board out to look at different projects by the two companies, and explained the difference in terms of his company’s use of employee crews and an attention to workmanship bordering on the fastidious, as indicated by reviews. “He [the president] showed the rest of the board [his pictures] and they decided to go with the us and the additional $380,000,” Franzoso says.
At the moment, he’s booked through February for siding jobs, since “I refuse to subcontract work out.” Franzoso says he’s happy to bid on big commercial or multi-family jobs since “I get top dollar and I get great cash flow.”
Others are more ambivalent, tempted by the big money but more than aware of the risks, especially the risk that the job could swallow the company’s time, energy, and resources. In addition, there’s the awareness that if something goes wrong on the job, the cost of making good on that is proportionate to the cost of the job itself. “I’d rather have $5 million in volume stretched out across hundreds of homes, than in two or three huge jobs,” Damora points out, “because if something goes wrong with any of those big jobs, your year is shot.”
That said, K&B has taken several non-homeowner jobs (mostly firehouses) where “they just want someone competent to do the work,” but the company prices the work the same way it would any residence and builds to the same standards. Jason Kersch of Major Homes takes a similar approach. “We take it on a case-by-case basis,” Kersch says. “It’s not a question of how big it is. It’s more the issues that might be involved.”