Mike Gilkey got into commercial window installation for the simplest of all possible reasons: to keep his crews busy during the cold months. A few years ago, Gilkey, whose company has four locations in three states and produces its own windows out of a 50,000-square-foot plant in Cincinnati, began putting the vinyl windows he manufactures, as well as other windows, in office buildings and condominiums of anywhere from 3 to 20 or more stories. Today, his company operates a separate division, Gilkey Commercial, which accounts for approximately 15% of Gilkey's $22 million in sales.
His goal? Rapid growth for the commercial division. Long-term, he wants to see it producing 40% of Gilkey Window's revenue.
Companies that replace windows, siding, and other exterior components in the home normally shy away from doing business with other businesses. (The exception is roofing, where many large firms divide their energies between commercial and residential work. See “The Best of Both Worlds”.)
Commercial, says Jim Lett, owner of A.B.E. Doors & Windows in Allentown, Pa., is “a whole different culture. When you're doing commercial jobs, it's bid work, as opposed to negotiating with a homeowner.” Not just that, but the scope of work is often far larger and you're dealing with a number of decision makers, who may include a builder, a building manager, a general contractor, and an architect. And then there's the question of how to find such jobs and how to sell them.
Clearly, not every home improvement company is cut out to do commercial work.
On the other hand, some nowhere near as large as Gilkey Window have developed substantial profit centers in commercial by finding a way in, then methodically pursuing the business. Take A.B.E. Doors & Windows, for instance. Five years ago, Lett had an opportunity to buy out a competitor who specialized in servicing and replacing doors at industrial and other business establishments. He started with a handful of accounts. Installing and servicing industrial doors — such as rolling metal doors — now generates about a half million a year in revenue for A.B.E., and the commercial division is currently bidding a $300,000 job. “I used to tinker with commercial,” says Lett, whose major business consists of selling and installing residential windows, patio doors, entry doors, and garage doors. “But when we purchased that company, we focused on commercial clients.”
Bill Frazier, owner of Austin Gutterman, a company whose primary business is installing the Gutter Helmet gutter protection system on homes in Austin, Texas, now does a substantial volume — about 40% of his company's $3 million in annual sales — in commercial work. Much of that consists of installing gutters for new home builders and replacing them on commercial buildings, including multi-family. Why pursue commercial work? “Why not?” Frazier says. “It's there.”
Hunters and Gatherers Home improvement companies typically expand in one of three ways: They hire more salespeople, open a branch location, or take on a new product line. Pursuing commercial business is not like any of these. In Gilkey's formulation, residential home improvement companies sow the leads and reap the sales harvest. Companies seeking commercial work, according to him, are more like hunters stalking big game. His company's average commercial window job is $60,000, and the largest it has done to date is $2 million, on a local retirement home.
Commercial jobs are often much larger than residential, but not always. David Moore, president of Garden State Brickface, a New Jersey company specializing in residential exteriors that operates a separate commercial division, says a typical Garden State siding or residential window replacement job averages about $10,000. A job at the company's commercial services division averages somewhere between $13,000 and $15,000. Garden State Commercial Services takes on a lot of maintenance projects — waterproofing, power washing, cleaning, brick pointing and repair — as a way to foster relationships with building owners that lead to full-scale restoration jobs. For instance, the company recently bid on and won a $1 million contract for such an undertaking.
For some contractors, the scope of work is the attraction as well as the challenge. When Tim Murphy, owner of Tim Murphy Carpentry, in Chicago, started his company, he would take “anything that came along,” though most jobs somehow involved replacing windows. Six years ago, through his supplier, Murphy heard about a project that involved changing out 2,000 double-hung wood windows in a pair of older condominium buildings. It was the chance the contractor says he'd been waiting for. “You need something to hang your hat on,” he says. It took a year to sell the condo association and months to complete the work. But that job changed his business.
“It gave us the opportunity to create a niche, to standardize our methods, focus more on what we did, and plan better,” Murphy says. Today the company specializes in wood window replacement in jobs of 25 or more openings. Murphy himself sells the jobs, which are often in the six figures.