Listen to manufacturers of gutter protection systems expound on their product, and it sounds like a dream come true for replacement contractors. Talk to the contractors who sell these systems, and most say gutter protection is a perfect addition to their business. The only factor that might temper the enthusiasm of either group is the rate at which the market for this product category is growing, something that has new competitors springing up like, well, weeds in an uncleaned gutter.
For replacement contractors, what's not to like when it comes to gutter protection systems? The product satisfies a real consumer need. Its emergence has created a booming market, still largely untapped. The product itself is an uncomplicated device that dovetails nicely with existing exterior product lines. And don't forget the profit margins, which are healthy — to say the least.
CLOCK IS TICKING For those in the business and for contractors considering the addition of a gutter protection line, there's still time to hit the sweet spot in the market. But the clock is ticking.
“Gutter protection is what windows and siding were in the 1970s and '80s,” says Steve Tenute, president of Gutter Cap. “I tell dealers we are ready to ride the roller coaster for the next 10 years.”
Although no one appears to have hard numbers on the size of the overall market, everyone agrees on its strong potential and that it's far from played out.
“Gutter protection products are one of the hottest in the home improvement industry right now,” says longtime Gutter Helmet dealer Dale Brenke, president and co-owner of Schmidt Siding and Window, Mankato, Minn. Sales have grown for the 15 years Brenke's carried the product and by about 15% last year, he says. He expects the same this year.
Another veteran dealer, Dave Francisco, president of Frisco Enterprises, Fortville, Ind., reports that sales growth in his market has accelerated over the years to some 25% to 30% today.
Tri-State Home Improvement, Branford, Conn., has been selling Gutter Cap for only one year. “We're buried,” says Brad Pompilli, company president. “Last fall was unbelievable, and I can't think about what is going to happen this fall.” Demand is so hot, Pompilli says he gets two to three calls a day just from the signage on his vans. “If I could do that with windows, I'd be on a beach somewhere instead of here talking to you.”
STEADY GROWTH Both long-established and new manufacturers report similar growth patterns. Englert LeafGuard currently goes up on some 70,000 homes a year to the tune of $100 million, according to Joe Turovac, vice president, specialty products, and sales are growing by 20% to 25% annually.
In its first full year in the market last year, Gutter Pro USA sold just under one million feet of product, says Chandler White, company president. This year, White says, they're on track to double that.
Gutter Helmet wholesale sales — product sold to dealers — has climbed from $3 million to more than $26 million in eight years, says David Skelton, director of sales and marketing. The company has experienced 40% annual growth for the past three years running and was up 32% vs. 2003 in the first five months of 2004.
Several factors propel the gutter protection market. Need is one. Anywhere there are houses and trees, the gutters on those homes will get clogged with leaves, twigs, dirt, bark, and pine needles. Cleaning them is a messy, risky job to begin with. But factor in the aging baby boomers, who grow more averse to climbing ladders with each passing year, and you've got a steadily growing demographic feeding market demand.
At Atlanta-based Dixie HomeCrafters, where the gutter protection product GutterGuard “just took off,” John Stevens, director of marketing, says the company's average gutter protection customer is older than 50. Gutters and gutter protection will make up 65% of the company's projected $128 million in sales in 2004, he adds.
Skelton says he “can pull 50,000 warranty cards that show the target demographic is 50-plus.” He adds that “the female makes the buying decision almost 100% of the time.”
The market fuels its own growth, too. With more manufacturers and contractors entering seemingly every day, the volume of advertising climbs and, with it, consumer knowledge of the product, which in turn further feeds demand.
“Massive advertising by the major players has greatly increased consumer awareness,” says John Olthoff, president of GutterFilter, a relatively new manufacturer in the market. “It's everywhere you look — TV, newspapers — which makes it easier to sell,” he says.
A Natural Replacement contractors embrace the product line for several reasons. With an average retail cost — depending on the system —of anywhere from less than $1,000 to $3,000 and more, gutter protection provides sales opportunities at a lower price point than many other home improvement installations. Margins are better than average too, ranging up to 60%, dealers report. Solid training from most manufacturers tends to make installation uncomplicated. And gutter protection is a good fit with many contractors' existing lines and so can be cross-marketed.
“It dovetails rather nicely because our sales training for the gutter protection product also works for windows and siding,” Stevens says. “Our lead generation mechanisms are all the same; our production management is similar. It's a natural.”
Contractors also like it because it comes with good prospecting potential. You can sell it to homeowners for whom you've already done other jobs and use it as a low-cost entrée to new customers who are more likely to return to you for higher-ticket home improvements, dealers say.
Yet with all this going for it, the market remains in its infancy, offering what manufacturers and contractors report as enormous growth potential for years to come. Manufacturers variously rate penetration from “minuscule” to perhaps 3%.
“I tell dealers, go look at any subdivision in any market, anywhere,” Tenute says. “Look at 100 houses and I guarantee you won't see two with gutter protection that works. The market is untapped at this point.”
Of course, the downside is that the gutter protection bandwagon is getting more crowded every day, which, in time, could drive down margins. “Everybody and their mother has something,” says David Bobby, co-owner of Atlas Gutter Helmet, Whitmore Lake, Mich. “The roofer has something, the gutter guy has something, the siding guy, the guy who cleans your chimney, the guy who power-washes your house,” he says. Everybody's selling gutter protection.
Model Sales Contractors who now enjoy success with a gutter protection product report that even though consumers are embracing the product, it still has to be sold professionally, just like more-established lines.
When Todd Schulz, vice president and co-owner of Weather Tight Corp., Franklin, Wis., started selling gutter protection, he mistakenly thought it was a “no-brainer.”
“I thought, who in the world isn't going to buy this; it's only $2,000,” Schulz says. But a consumer's mind works the same with a gutter protection system as it does with other, larger-ticket jobs. “They think: ‘This is the first person I've seen. I don't want to make a decision tonight; I need to shop around.' So even though it's a low-ticket item, we base our product demonstration on an education process so they know what the better product is and can make a wise decision,” Schulz says.
The same integrated mix of lead generators that you use for other products is likely to be just as effective in creating gutter protection sales. And there's this plus: Gutter protection stands out as a “show and tell” product.
“We've found that the best way is through home improvement shows and any medium that will allow a dealer to have a working model in front of consumers,” says Larry Loefflad, national sales manager of Waterloov, a gutter protection system manufacturer based in Red Bank, N.J. “These generate the quickest and best volume of leads.”
Brad Pompilli finds that “when we put a kiosk in the mall, people say, ‘Oh, I like that.' We get about 10 times the response on a display for Gutter Cap than we would for windows and siding.”
Dedicated Effort Contractor dealers point out that to be profitable with gutter protection, and avoid simply swapping out dollars from other lines, you've got to make a serious commitment.
Schulz says at first he used siding crews to install, which hurt that part of his business. “You have to look at the big picture and determine if you're going to sell enough to keep another crew busy, or reduce your installation dollars in other products,” he says. Gutter protection has a higher gross margin, but “it's still lower profit dollars because of the size of the sale.” Schulz says he found that “you have to have dedicated installation crews for this particular product to work well.”
There are enough particulars to organizing a profitable gutter protection business that one contractor, Bill Frazier, president of Austin Gutterman, now has a second business running seminars on the subject (see “Go to Camp,” below). “Because of the nature of the gutter business, it's easy to get into,” Frazier says. “It's not so easy to stay in. Four out of five of these businesses fail every five years. But you can make it viable if you run it like a business.”
This evolving market seems likely to continue adding potential. A steady stream of new patents continues to improve product performance and add new products to the category. A gutter heating system was introduced recently (see “New Products, New Emphasis Are Broadening the Market,” page 64), for example, and new products such as the GutterFilter urethane foam “insert” and LeafGuard's GutterTunnel “dual-filtration” system have helped broaden the market by offering lower-ticket alternatives.
With category advertising and promotion swelling, the U.S. population and housing inventory aging, and record-level new-home construction adding prospects every day, gutter protection looks like a good candidate for strong growth through the remainder of the decade. —Jay Holtzman is a freelance writer based in Jamestown, R.I.
New Products, New Emphasis are Broadening the Market “Even if you have gutter protection, you can still get snow and ice on top of that,” says Steve Tenute, president of Gutter Cap. “So we came up with a heated gutter system that works whether or not you have gutter protection.”
The product, Heater Cap, is just one example of how gutter protection products are evolving, and with them the market potential for contractors. Heater Cap is designed to prevent the formation of icicles and ice dams that can block gutters and cause damage to fascia boards and roofing, as well as the gutters themselves. Special self-regulating heating cable is installed on the first row of shingles in the gutters and downspouts, then hardwired into the home's electrical panel or breaker box. The product needs to be installed by a qualified electrician.
Although the product is sold with Gutter Cap gutter protection, Tenute says he is making it available to installers of other gutter protection systems, as well. It's not only a question of sales but one of safety, he says, because overhanging icicles are a potential hazard to people as well as to roofs and gutters.
Another example of the market's evolution is the emerging potential of moisture-control products. David Skelton, director of sales and marketing for Gutter Helmet, talks about gutters as one part of a total moisture-management system. Moisture can damage fascias and rafter tips, he says, and with mold and mildew issues getting more attention these days, “gutter protection isn't just to keep leaves out of your gutter.” Gutter Helmet salespeople are now being trained to present the product in this broader context.
Go to Camp Bill Frazier has learned a thing or two in more than 30 years in the home improvement industry, 20 as the “Austin Gutterman.” Not the least of his lessons is how to survive profitably in a business in which, according to Frazier, 80% of companies don't make it to the five-year mark.
Three years ago, Frazier began passing his hard-won knowledge to others in the business through his “Organizing the Organization” gutter business boot camps.
“I give my son credit for coming up with the idea,” Frazier says. Bobby, who is a vice president of the company, realized that Austin Gutterman had evolved a number of techniques and operating procedures specific to gutter and gutter protection companies that others in the business “either didn't do or didn't know how to do,” Frazier says. “He said, ‘Wouldn't it be great if we could teach them how to do it and bring an air of professionalism to the gutter business?'”
The boot camps consist of three days of training in how to organize a gutter business, put systems in place, train employees, and “stop working 90 hours a week,” Frazier says. Attendees take home three large manuals covering all course materials, business forms, and ways to incorporate what they've learned into their own company cultures.
Some 12 to 15 companies attend each boot camp. Since the program got started, about 150 companies have completed the course, at a cost of $2,000 per company. “We get a lot of great feedback from people who say they wish they could have done this five or 10 years ago, because business is better and they are making money now,” Frazier says.
According to Frazier, the three areas where gutter companies generally need the most help are: