The Window Replacement Company of Virginia didn't look like a great buy when Joe Henley purchased it in September 2006.
Henley says that by the time he took possession, production had grown inefficient and management had become somewhat lax. In spite of its name, 85% of The Window Replacement Co.'s volume came from sun-rooms, and it could take the company as long as six months to complete a sunroom job. Sales had slipped and were slipping further.
“If I was to value the company based on what the books actually showed, it wasn't worth what I paid for it,” Henley says.
Despite the numbers, Henley, with a background in home building and a four-year stint as a senior business development manager for Four Seasons Sunrooms, saw The Window Replacement Co. as an opportunity to use all he'd learned to rebuild the 23-year-old operation and take full advantage of the potential of a dynamic marketplace, namely the affluent Virginia suburbs outside Washington, D.C.
He reasoned that in a market where home prices started at $400,000 to $500,000, the price of a $40,000 to $50,000 sunroom would fall well within the range of what he calls the “magic number.”
“The magic number to me is when the home improvement or addition is less than 10% of the value of the home,” Henley says. “In my experience, when I was able to get to that number, I realized it was much easier to sell the product to the customer because they could justify it more easily,” he explains. His feeling, he says, was that even if sales and profitability were far from satisfactory at the time he bought the company, the business model he intended to apply, or create, meant that if The Window Replacement Co. could get the sales, profitability would follow.
PRODUCTION HOLES As Henley started planning to change the company, he realized that production was a glaring problem. Inefficiencies bred delay, and delay had a way of extending itself so that as many as 170 to 180 days could elapse between contract signing and actual installation of a sunroom job.
Using a project management technique called “critical path,” the new owner analyzed each step in the production process and virtually every piece of paper and form used, from sale to final collection, paying particular attention, he says, to “the time required to complete each activity, and which activities have to be completed before other, dependent, activities can be done.”
This process revealed “huge holes” that devoured time at every step. Using these findings, Henley charted that optimum critical path through production, slashing days at a time from the schedule.
For example, the company was losing time downstream because employees were “chasing paper,” such as the plat plan required to pull a building permit. So Henley created a checklist of the paperwork that salespeople are responsible for submitting.
“It's just a simple checklist, but the sales guy knows that if he doesn't turn this paperwork in completely, there is no commission being paid on the job,” Henley says. That change cut two weeks off the typical production cycle.
Similarly, the technicians who take final measurements for a job are now required to get to the home within seven days of the sale and turn in all the paperwork on their new checklist — a scope of work, complete sketches, a bill of materials, etc. — within 24 hours of doing the tech measure, while details are still fresh in their minds.
These changes cut job time 30 days from sale to engineer, Henley says. Having technicians write up a bill of materials right away often saves more days in the actual construction phase of a job, too.
“On a project that takes three weeks to build, guys might make 10 trips to Lowe's to pick up something. I would lose 2 hours every time, so on a three-week job I lost 20 hours,” Henley says.