I received the following email from a lady who runs a double glazing company:
I’m a regular reader of your blogs etc, they keep me amused as I open my mail to endless bills and bad debts.
I’m the owner of a small double glazing company. I don’t fabricate windows anymore just sealed units.
This year has been a struggle to say the least and I’m finding it more and more difficult to survive. I kind of took the company over from a friend of mine to start with and sometimes (well most of the times) wished I was a bored housewife again, no, I jest, daytime tv is appauling. Lol
I have gone round in circles for the last year, downsized premises, staff etc and to no avail.
When would you say it’s time to throw the towel in? I figure that if I get the same answer from enough people it might help me make a decision. It’s either that or toss a coin. Lol
I often get people contacting for general advice, but obviously this one is far more important than many of the request I receive. I’d be interested to hear what readers of this website feel, but below are my thoughts:
General Economy
This is clearly the toughest time of the year for our industry, which has been made far worse with the weather we’ve experienced over the past four weeks. I would expect far more companies in our industry to be suffering poor cash flow, and directors up and down the country thinking ‘I’ve had enough!’.
In many respects, it is good for the industry if a few of these companies do pack in, as we’re in an industry with massive over capacity and falling margins. However, in this instance, I have to assume the lady is made of sterner stuff, otherwise she would not have made contact.
The positive news on the economy is that things are picking up, and the coldest weather the UK has experienced for a generation will have a positive effect on double glazing sales as a result. So, I would suggest not panicking at this stage, and try ride it out.
Pricing
I would recommend trying to get out of the price led marketing, and try selling on quality and service.
It is very unusual to see any company in our industry surviving in the long run when they compete at the bottom end of the market. This means looking at the marketing and advertising to ensure the image is right, and the overall company ethos may need to change.
Sealed Units
I don’t know too much about the company, but I would look at the viability of producing sealed units. There’s dozens of manufacturers out there with economies of scale that could supply sealed units at highly competitive rates.
I’d be looking at the overhead currently going into making sealed units, and the material costs. Then I’d be looking at how much it would cost to buy in the equivalent production, and I’m pretty confident that manufacturing low volumes of sealed units would not pay.
Overheads
Even though the lady has mentioned that she has already downsized the business, I’d still be looking at the overhead of the business in detail.
Every company should understand what the break even position is, and ideally scrutinise their monthly management accounts. I’d be recommending trying to create a more flexible sales force and installation department, so as sales increase people can be drafted in, but when things are tough they can be let go. It sounds really tough, but carrying too high an overhead figure through lean months is one of the reasons many companies fail.
I must stress that every company MUST understand their financial situation, and I don’t just mean how much money is in the bank (or otherwise). Financial forecasts should be in place, with sales targets, targets for Gross Profit, Overhead targets, cash flow forecasts and crucially net profit targets. Every job should be costed out prior to installation, and after installation, so lessons can be learned for future trading. For example, is the company selling porches consistently too cheap, and is the profit per day good enough from roofline jobs. It is vital that companies look at the profit per day / overhead recovery per fitting team.
Adminbase software from Ab Initio has an excellent job costing facility. In fact, without looking like I’m promoting another company, I would highly recommend Adminbase to anyone who wants a well run window company.
Sales
It goes without saying that the company has to bring the sales in. I don’t know what marketing / advertising is in place, but I would guess this will need looking at if the situation has got to considering closing down.
Personally, I wouldn’t waste money in traditional media where you are competing with all the price led, low margin installation companies. I’d be tempted to work hard on service levels so more recommendations are generated. Mailshot your existing customers with some special offers. Look at your website. Internet Marketing is the modern day ‘garlic bread’.
Conversion Rates
Are the sales staff converting at the right levels? It might be that they haven’t been supplied with the right tools and knowledge to compete against more proactive competitors, or it might be that they’re just not good enough. Are you getting support from your suppliers on the marketing front? Maybe you need to look at buying frames from a company who help you convert business, and even helps generate you leads?
If your sales team is not converting at more than 50% and selling products at a good margin, then there is lots of room for improvement. You might need to make some tough decisions here.
Conclusion
It might be that things have got to a point where you cannot continue any further. You might need to speak with your suppliers and discuss your situation. They would probably be far happier accepting stage payments for the debt, in the knowledge that you have a plan to turn things around, rather than you leaving them with a bad debt.
I also do not know what the alternatives you have if you were to close the business. What else would you do?
All I would say is that there have been times in the past where I have questioned whether it’s worth continuing. I have always rolled my sleeves up and got stuck in. And, I’m glad I did, because there was light at the end of the tunnel.
Should you throw the towel in?
Well, I wouldn’t, I’d put the hours in, get some good advice and try turn things around.
Tags: ab initio, adminbase, double glazing west midlands, manufacturing sealed units, running a double glazing company
It depends if you are a competitor of mine!
But in all seriousness, it would be too easy to just throw the towel in.
I’m sad to say through all the ups and downs I love windows. Sure cash flow is a nightmare at the moment but for most companies in the industry at the moment it will be. Even the biggies will be having issues and in some ways their head aches will be even bigger.
Who’d of known we’d of had nearly a month of no fit and problems building conservatory bases … but at the end of each day it’s great seeing a beautiful conservatory going up or looking at how much a window can change the look of a property and if at the end of the day you can make a living and pay your suppliers on time most of the time . Would you really want to work for anyone else.
We’re very lucky to be our own bosses and alot of us can’t remember what it was like working for anyone else. So stick in there and when the tide turns as it always does you’ll be glad you did. And if you become a National you can buy me out!!
i own a small doubleglazing company to ive given up the government and the banks have desroyed the small buisness .
i would close it down it will only be a constant burden get out while you can
hi, i run a small window company in the midlands , upto feb 2009 i employed a service engineer/surveyer £600 plus pweek when the credit crunch came about i had a choice either carry on and make little money and pay someone for very little work or step up and do the job myself. i now do everything myself except the fitting and it if i am honest it has been a decent year for me by being a chamaeleon . i deal with 2 suppliers 1 for frames/glass the other for roofline + trims etc so no headaches on that side (well very little) . point is i had no choice but to diversify and carryon . Now rewinding 4 years as to when i started i had these illusions of only doing the selling (which is all i knew then ) and a little of the business side and i would have not beleived if anyone told me that now i would be doing what i am doing even though in a sense i was forced into . the thing what keeps me positive is that brown card and clock machine that is somewhere i wont go again whilst there are people buying windows. my advice is look after number1 cos when the sh@@ hits the fan everyone will walk away with no regard for you but whilst u are paying people instead of yourself they will be your best friend sad but true…..good luck keep going drop any klingons think of yourself and u will be ok because if u got the wages you will get the staff you need……..
Hang on in, the worst seems to have passed and providing you work hard enough, making money will be a bit easier and business will be more profitable. Think of the rewards in the long term! You seem to have made all the cutbacks you can which was the right thing to do, and it may seem that it has had no effect now, but if business becomes better again, you will see it.
There’s my blog too you know!
Working for a reasonably large sealed unit manufacturer, i can make some comments regarding the decision to buy in sealed units or manufacture in house.
Volume is a key factor and as mentioned above, economies of scale play a large part in sealed unit costs. Not only do the materials required need to be costed properly, but the processing equipment and numbers produced per operative must be correctly accounted for.
Also as mentioned above, there are many sealed unit companies around the UK who can offer competitive options. Some are on the way out and selling at what seem fantastic prices – grab them while you can as they wont last long. (Only grab them if you dont intend being around long yourself as the units will have no warranty and you will have no where to go to get them replaced)
My experienced view of how many sealed units per day would be economically viable has not really changed over the years. Unless there is a strong start up capital fund, then the numbers tell a realistic story. Manufacturing less than 100 average area (0.6m2) low e units with a mix of 30% toughened, will probably not pay for itself at todays prices. If you are a fabricator making this number of units for your own use, STOP.
There are exceptions. If you have a good niche e.g. you operate in a rural area with little or no other suppliers around, you have a good long established customer base, you own all your equipment and are able to gas fill accredited to EN1279 part 3, then maybe you have a chance at around 100 per day.
Many sealed unit companies are going to have a massive shock this next 12-18 months. Currently viable businesses manufacturing say 200 – 500 units per day will find that they have to massively invest in gas filling equipment to maintain volume production and be able to supply WER windows at competitive rates. Off line gas filling is far too slow. e.g. making 300 units per day all gas filled would add around 2 minutes per unit to production time – 10 hours. Gas filling 2 units at once cuts this to 5 hours. Having multiple machines adds say 10 – 15k to the machinery bill. Additional time adds to the wage bill. Extra components add to the unit cost.
On line gas filling is the only real answer for reasonable volume production in terms of speeding up production and maintaining EN1279 part 3 requirements. The maximum leakage rate per annum of 1% is difficult to achieve with consistency. Any one using single sealed hotmelt units that claim to be gas filled need to check the units. Over the years we have randomly tested various units and non have had any where near the volume of gas that is required. We are looking for 90% (WER calculated volumes) +10/-5% (EN1279 part 3 rules) Less than 85%, forget it.
There are many claims by various sealant and warm edge manufacturers about the gas retention of their products. This is all pointless if the sealed unit manufacturer doesnt know how to use them or put them together properly or even worse, hasnt been shown by the supplier.
I recently saw a component manufacturer offering a 20-year sealed unit warranty. This is fantastic but also completely unreal. I dont know of any component supplier of any type that would give a 20-year sealed unit warranty that covers world wide sealant production from any manufacturer. On closer inspection, the warranty only covers the material they supply offering a free replacement of THE MATERIAL or a refund to the VALUE OF THE MATERIAL. This adds up to around £2.00 per m2. It specifically excludes edge sealant. Most people should know that the only reason a properly manufactured sealed unit fails is if the sealant fails due to faulty production, poor application, poor glazing or contamination from an external contaminant such as Silicone, often used when glazing the units. (or, of course, if someone lobs a brick through it) The sealant breaks down, water vapour enters the cavity, the desicant fills up, the unit mists up. If the seal doesnt fail then it really doesnt matter what state the desicant is in or what the glass is or what the spacer tube is. A quality permanent seal will keep out moisture, end of story.
Choosing to gas fill online requires investment of around 300K minimum. Realistically 500k+ with robotic sealing. Not many 200 – 500 sealed unit manufacturers have the funds, space or skills to manufacture this way.
As WERs become standard, or lower window u-values become specified, gas filling will become the norm. It is possible to achieve a C without Argon, but in reality this unit will be up to £5.00 per m2 more than a window that can achieve a C using Argon as the only enhancement to a soft coat unit with aluminium spacer tube. They will be priced out of the market. This also assumes that C rating will be the standard. It looks like A ratings will very quickly take the mantle.
Thus, for many sealed unit manufacturers, the future looks difficult. However, with the right investment, the correct production techniques and putting together choice components, the future can be very exciting and profitable.
Steevie
Hi Matthew
Obviously this post caught my eye, and not only because of the unsolicited testimonial (thanks by the way the tenner will be in the post). But because after some 11 or 12 years of helping home improvement companies through the use of Adminbase it still astounds me and the other staff at Ab Initio how many owners don’t understand the basic principals you outlined in your reply.
Because of what I do for a living I get a fairly unique view of the industry. Over the years I have spent time learning the business processes of some of the best and most successful companies in the sector, so I can advise them how best to apply Adminbase in their particular business. I can tell you it has on occasion been a real eye opener, so many of the companies I have seen have succeeded in spite of their efforts not because of them.
One part of your reply really leapt off the screen when I read it.
“Every job should be costed out prior to installation, and after installation, so lessons can be learned for future trading.”
You would think that you were stating the obvious when you wrote that, but I can tell you well in excess of half the companies I have visited over my time with Ab Initio don’t job cost at all. Simply relying on monthly, or even quarterly management accounts to tell them if they are getting it right or not. As you rightly state costing teaches you important lessons and always saves you money. Sure if you have to do it manually, it’s tedious and time consuming but is worth every penny and every minute spent on it as it will prevent your company making the same loss twice.
You also mention the other biggest potential drain on a companies finances, marketing. The problem with advertising is if it does not bring in enough sales and you are not aware, it still continues to cost you money.
I once spent a morning with one of our customers helping him entering advertising costs into Adminbase so he could get a marketing analysis from the system, imagine his utter shock when we ran the report for the preceding 12 months to find that the local paper he had advertised in for over a decade had in the last year cost him over £2000 per sale !! Worse still the average order value was lower than the cost of generating the sale in the first place. He rang and cancelled the advert there and then; but if he knew 12 months earlier cancelling it would have saved him over £30,000 on his bottom line profit.
Now for the lady writing to you for advice, that alone could be the difference between survival and failure. So I would add to your advice.
“I wouldn’t, I’d put the hours in, get some good advice and try turn things around.
by saying, get smart learn from your past, do some analysis and find the holes the money is disappearing into, once you know where to look finding them is easy. Then plugging them becomes possible.
Hi Roy
As you know I’m a big fan of your software, but it only works if the owners embrace it, and their staff use it.
I would be really keen for you to supply a guest post where you further develop the points you have raised.
RCG
Should I close down my double glazing company?
If you have not been successful to date, are you capable of, or willing to, make massive changes in the way you run the business and sustain those changes?
Adminbase is only of any use if the people using it are willing use it to effect, input the correct data and use the results to drive their business, it is a fantastic tool for those who have the drive to act upon inefficiencies and organise and optimise their business.
I will guarantee that there are many hundreds of businesses out there which have invested in software in order to stream line their business only to revert to type.
If a company is started when trading conditions are good the chances are that even a poor business manager will get away with it but when times get tough they will get found out.
During the good times they could absorb unnecessary losses i.e. poor marketing, low sales conversion rates, fitters wasting trims, fitters using company vans, diesel, silicones etc to do home jobs, etc…
When times get tough however that is when the quality managers come into their own, some people are just not cut out to be business leaders or managers and no matter how they try it is not in their nature.
Some people can have a desire to change and even a commitment and determination to change, they can even actually change for a short period of time but can they sustain what does not come naturally to them?
Good managers will command respect, they will get the best out of people, they will manage by motivation, they will create an environment where everyone knows exactly what is expected of them, they will create a an environment of trust, fairness and clarity of thought.
No back biting, giving credit where it is due, not suffering fools gladly, recognising when their people are trying to contribute and not just turning up and taking their wages because they put in the hours.
Good managers will delegate, give people the chance to shine, put their arm around them when they get it wrong or feel down and genuinely praise them when they do something above and beyond.
Do you close your double glazing company down? I suppose their are some other questions you have to ask yourself apart from the man management side i.e.
How much business and at what margins do you need to generate each day/week/month to break even and then to make enough profit to make all the effort worth while?
Can you generate enough enquiries at the right cost?
Do you have or can you recruit enough (that may only be one) quality sales people to convert the leads?
Can you manage and retain quality sales people?
Can you accept that, especially in the early stages, that a quality sales person might be taking more out of the business than you?
Are you capable of managing fitters with their ‘ I get all the worst job attitudes’ and I need more for that job because it cost me £xx in deisel.
It is all about management, to give a footballing analogy.
Colchester united beat Norwich City 7-1 (or 7-0) at the start of this season, Norwich sacked their manager and recruited the manager from Colchester, the two teams played last week with ostensibly the same players and Norwich beat Colchester 5-0
The common denominator has to be the manager, I will shut up now….Andy