want to think broadly about what the industry could look like in 10 - 15 years out. Not near term.
I'm gonna tell you exactly the way it's gonna go. All right, I love it. All right, love it. Yeah, it's gonna be no, and I'm going to be right and you're gonna say why that guy that idiot from Long Island. That was right.
So why don't we start by just you give me a little bit of your background, how you got into, you know, your position with King quality. I get to you're the owner of King quality. Yes. Okay. How you got into the business and your background and kind of what you do on a daily basis. What's your day like?
The way I actually started you know, I was a stockbroker, making phone calls telemarketing, and some friends of mine were in the home improvement industry and I thought like home improvements, who makes money in home provements? That's ridiculous. You know, how do you make money in that? And when the stock market dropped, and at a black first Black Monday, it was just terrific. And I was just starting out. I really didn't like the feeling.
I decided to work with them on the weekends and they were really a sales company, not a roofing company that was Siding and Windows was a lot different than what you think of as the traditional, you know, they weren't a contractor. They were really salesmen. Right? And my first weekend I went out with them, I sell a job, you know, and I just I'm telling you, it was the easiest thing I ever did knock on some doors like I actually canvas and close my own. Job. And they said, You just made 1500 bucks and it was a Saturday afternoon. And I said I'm not even trying this is easy. And within a few months, you know, I became the top sales guy they had and I met a few other people and to make a long story short, you know, we opened up three of us open up our own company, and eventually over time, it kept on growing.
Around 1992 or so we had bought out the other partners and it was just me and one other guy. And we built the company. We built the company really there was some lucky things that happened and what happened along the way is one thing. I went to a training with Dave Yoho, which was really helped me get a methodology to sell. So it's not just guessing how I'm going to sell this customer and going in blind but going on with the plan a game plan how we're going to sell a job and not sell just this one job. But every single job we go to is going to be sold the same exact way. Anybody we train we're going to train him this exact way. This is the way we do the pricing. This is the way we do the price drop.
This is really a crazy story and it changed the way I worked. One of the second jobs I went to I couldn't sell it and I dropped the price of the windows down to like nothing so I didn't believe what the price should have been. A few weeks later, I went to go back to try to sell the job again. And the job was being installed by another company and say I was at $4,000 for the job. I went up to the lady and I said I bet you they got it down for $3000 You're in my head. This is what I'm thinking because I told us all about the price. Right? I go there. It's not $4000 It's not $3000, it's $9900. And I'm dumbfounded and I say I don't understand I was giving you a great deal. And she says no, I got a much better deal than what you said. And I said can you explain it to me and she said yes I got a free door. I got the same windows, but I'm only paying $100 a month. And it changed everything for me and that's how I became the top guy there because every job I never quoted the price I quoted the monthly payment. Yes.
So when we went on our own of course we jumped on the financing. I always look for better and better financing. And finance was a big part of our company, you know, the siding windows. Then around 1996 A guy showed up in my office, and he'd been in the industry for a long time he worked for a company called Tylo which was the original door to door roofing sales company like back in the 70s. And the first big company kind of like power remodeling is today. And he's telling me all kinds of stories that great stories and I never know why he came to my office. And he said I have a private jet at the airport. Do you ever been on one? I said no. And he goes you want to go to Columbus, Ohio. I really want to show you this new siding. I call my wife up on like some crazy guys here. He's got a private jet. I think I'm gonna fly to Ohio. We fly to Ohio. He shows me an insulated siding that nobody else can get. And right away my head is spinning. I'm like wow, this is the secret. I'm sick of price. I'm sick of hearing the same thing. I'm sick of hearing everything else. If I sell something nobody else has. How do you price against me? You can't? Correct So for us it exploded. You know what I mean? It did really well and we killed it all the way through 2006 and we were really a siding and window company and the same thing. We had an exclusive window exclusive siding, and we absolutely killed the company grew tremendously everything was great. Eventually I started to buy my partner out.
In 2007 when the recession hit, I could not produce siding and window leads. Not at all couldn't produce them couldn't do anything. No matter what I spent no matter how I did I couldn't produce them. I started getting roofing leads and all my guys like I can't sell more often there's no money in it. I tried to go out then to prove them wrong and I couldn't sell it. I finally got in touch with GAF I said let me find out how you make it what you make what are the products and of course they had Deck Armor which nobody sold all these things nobody sold. And I said that's the stuff I gotta sell. And we made up a system. That was exclusive but it really wasn't exclusive because anybody can do it to this day. Anybody can do what I do, but they don't. Anyway, unbelievable. The competitors ours, they can get 1000 bucks a square but they they'd rather get 395 And make no money. So to me it's insane. It's like the exclusive siding without the exclusive siding.
And of course we linked it with financing programs with Wells Fargo. I begged them for something different every TV commercial I saw in 2008 they never had an interest rate for the cars. Everything was 0% 0% Five years. Remember that every commercial let me tell you how. Far was but every quarter 0% I begged Wells Fargo they did a pilot program for us. 0% Five years. I made it into their magazine because we killed it because our super roofing system came with zero interest for five years. No, we didn't advertise the price. We advertised zero interest five years and we rode it through the recession. Now we're going with long term financing because that's the new thing now because the jobs are much bigger. And that's where we are today. I got involved with GAF in 2007 2008 and we just it exploded roofing my salesman love that now we're we're doing really well with siding and windows also. But really the headliner for our company is exclusive products that nobody else has. Even though imagine I don't know how much you know about GAF but imagine I'm telling you a product anybody else can get. And I'm gonna be exclusive one. It's it's such a crazy thing. I one point had flown around the country to tell roofers how to do what I did. And I would make up the name of a system like the Motown roofing system Detroit or the Seattle the Emerald City and everyone Wow, it's such a great system I want I so well guess what? You can have it I just made it up. And it's so crazy because I use the seven part Millennium system. The amount of calls GAF gets because they want the system. It says I made it up. I trademarked the name. I made it all. Go make one up and go sell it but they don't.
Okay, yeah. So
That brings me to what I think is gonna happen 10 or 15 years from now. Yeah, the way that we're doing business today is done, I mean it's over. You know, it's already happening now with the consolidation. You're I mean, it's never before in the history of the industry. Has there been consolidation? Never, never three, the top 100 contractors do 3% of the business, right, that doesn't happen anywhere. No business you show me another industry doesn't happen. So that's going to totally change. It's gonna be the Amazon or GAF whoever it I don't know. We don't know. But they're gonna have some big conglomerate. It's gonna be all done through the internet. You'll have kids that go to the house just to take pictures go in the attic, but it's not going to be the same. It's going to be who all Europe offers a unique system, a unique warranty and unique product. If it's Amazon or with some big hedge fund that put something together, I don't know who it's going to be. But the way we do business today is done.
Yeah, I can believe in the consolidation. But King quality is a fairly large company. I mean, in the scheme of things and
We're a large company but eventually I'll either have to grow national, which I don't know if I have the energy, or sell.
So today's standards to me for we're dealing with now and I don't know if I feel like it or want to be like a company that goes nationwide. Do you I mean, if that's the story, you know what I mean? And if you know the the numbers that are flying around are insane. The you know, I'm not soliciting anybody and three hedge funds have already called about buying the company.
I was wondering about that private capital coming in to you know,
It is ridiculous to me. Because in the old days, there was no way out for an owner there was no way out. You sell to the employees. If you don't have a family member that wants to take over. You can't get the real value of the company. Do you mean what I put? You know, I spent $2 million $3 million in advertising. I think that's a lot but it's a lot. And how do I get that return back? You know, and it's very difficult in the old days. Now these guys are coming in and getting big money and it's it's crazy. You don't I mean a company A company that does nothing of what we do and the industry got bought for what I thought was a crazy amount of money and you know, knocked about 50 miles away from me. And they're not even really siding and/or roofing and the company wants to turn them into siding that hedge fund wants to turn them into siding and roofing they're really Kitchen and Bath like it's I went to dinner with the owner I said I don't even know why they put he goes it took me a long time to convince them that I had a big name, and it's nothing like King Quality's name and he got you know, big, big money, you know, and to me, that's what's going to happen. I don't know who the winner is going to be. Or how many winners but it's not going to flip once like this small hedge funds are going to flip it to a bigger place is going to flip it the bigger place and it's going to consolidate more and more and more and eventually, you'll have more buying power that have better financing. They'll have a better warranty. They have better everything. Did you know that I couldn't compete.
Right now because it's so fragmented. It's so easy if you could draw me in Iowa tomorrow and I'll open up a home inprovement company and I'll dominate the area because it's so easy, but it's so fragmented. And the current crop of people don't understand the industry. You know, GAF was paying me to go around and talk to contractors. And I finally told me you're wasting your money because the only ones that are getting it are the new young kids. The older ones Think you know, my way is a rip off or it's this or it's that are you charging too much or any kind of. When GAF makes a new underlayment to me the most important things and I know this is kind of boring, but the most important things are the underlayments because the shingles the shingle, like I told you earlier, I do an exclusive product. How can I make something exclusive if I have the same shingle? I can't. It's impossible, but I can take unique underlayments that my competitors refuse to sell because they think they're too expensive. And make those into an exclusive system, which anybody could do but they do not. They don't. So imagine I actually had the buying power to say to GAF, I want these underlayments only from me, and I want this particular warranty and I'll pay you more for it. I'm okay with that. You know, maybe when they dominate, they'll ask for better pricing. I don't know. But originally it won't matter because no one else has it.
And not only that I'm gonna tell you one more story. And this changed me dramatically. About seven or eight years ago my oldest wanted to get some shirt you don't even know what it was and I said yeah, we'll go to the mall to get the shirt I guess he didn't hear the last part. So it goes to the bathroom and I'm not gonna say let's get out here we got it. I want to get to the mall. And so when he comes out he was really talking about already bought it. Sight unseen, not try it on. And I know like in today's day and age of course that's the way it works, you know, but to me that was a revelation I haven't been to it's my wife buys the clothes. I try em on, I don't like them I'm gonna send it back. But if it's like that for young kid, when these guys are 35 and 42 they want to salesman comes to the house. Do they want somebody exactly. You got it. It's going to be done. Maybe not even talking to a live person. Maybe just whoever makes up. The best is going to be Amazon that makes up some great platform. You already have good measuring stuff. I still do think there'll be a young kid that comes around and maybe takes pictures goes in the attic. Or just checks around the property, how we're going to lay the job out what they need to maybe change for the estimate, but it's going to be as simple as this is the monthly payment. This is the thing. Yep, let's do it with
It'll be an automated drone that does not add another person
Not even a person automated drone and whoever has whoever lives lines with the best infrastructure whoever aligns with the best easiest way. You know we finance right now through Greensky. And the app for Greensky for the financing is ridiculous. It's so easy. It's so simple. It's so you know I'm I'm 57 years old. When I started. You were pretty much given away your your kids to get financing. It was like a 30-40 page sometimes longer with a mortgage pay stubs, W twos, we had to King Quality when we were rolling in that 1997 to 2006. We were using GE finance which was totally different but not not like a credit card like it is today. We had we had that availability but the majority of our loans were 25 year loans with a mortgage and we did some consolidation. We actually had a whole department set up for finance and we're not the sales guy but a whole separate guy would go for the closing go set up paperwork. That's done. we don't need that now. When we sell the job you pick the program, you pick the finance and the customers signs it you know on their phone. It's that easy in finished, it's worth a fee and it's worth money. So that's worth a fee and worth money is going to be some platform for a roof to sell in a roof especially it's so easy. And not only that the company that's known the best, you know, this consolidation thing going on. It's not to do $600 million company that's it's not what it's about. I'm not in my mind. I don't think it is. It's about to take over the industry because think of every other industry. There's no industry that's fragmented, and it's this fragmented. That means there's money, too much money spread around. It's got to be a couple of big places that then dominate the industry.
Do you let me just ask the question about your current business. Do you go through a distributor now and we buy direct from GAF
I wish we bought direct from GAF we don't we go through the show and that's the other thing. Why do we have distributors? What is the need? Let's start let's let's just go back to everything because this is something that to me, I don't understand this part of the industry. I don't understand when I first got involved with GAF I like you guys are idiots you know you guys don't understand. You think your customer is a ABC, Allied. That's not your customer. They could care less if I put it to every one of them. And you might if you get a chance go to any distributor and so you thinking about getting a roof done, what should you do? And they are going to push you to the whatever the cheapest product is 100% bar none. They're not going to tell you why you should use Deck Armor you should use a GAF thing or they're gonna say that's all a bunch of crap. You gotta go with the cheapest one. Because for some reason, that's what distribution is all about the money. People talk about what's the problem, GAF always criesthat you should get more money for I agree with everyone should get more money, but it starts because GAF sells to ABC, who then sells these little tiny contractors all over the place. And each one of them their biggest complaint is the money the money, the money. What happened and one thing I left out when I first started getting into roofing which I told you about back 2007 2008 The greatest thing that ever happened is in August 2008 the prices quadrupled. Hmm So why that was so good for me, is if I came to your house at 5000 for a roof and you get one for 3000 You say you know what? I'm gonna say the two grand What do I care? Yeah, I got a new roof in five years, man I want to color anymore. And if the cheap guys 10 or 12 and I'm 20, 12 is a lot of money. 20 is a lot too I agree but I can make it palatable with financing. Yeah, but if you're gonna pay 12 for cheap guy working out of his house, you're gonna go for the 20 so the greatest thing that happened was they raised the price on that was awesome 2008 Each time the pricing raises up it's better and better for me.
That was because the oil shock right the oil price of oil
The price of oil skyrocketed. And out of nowhere roofing my whole career and to make it more elaborate with you we would sell a siding job and throw a free roof and to match the siding. That's how like roofing was an afterthought. You know what I mean? When it was always around $9 a bundle for architecture always something around that. It went to 33 overnight. And it was awesome. Because then people wanted quality. And with quality. They wanted a warranty. They wanted to get a better underlayment and we only sold it one way you know it was either the best way or no way. You know we made up systems and each system, had a finance program. What I envision 15 years from now, you'll have good, better best and each one will have a finance program linked to it. The better the program, the better the finance program. Makes sense. So and that's all they have to do. So to get back to distribution. I don't understand how distribution is involved. I don't understand what the value is. I don't understand why they get so much money. I don't understand why they make so much money because they're not your partner. They're not they're more my partner than GAF partner put it that way. If I said tomorrow, I hate GAF and I don't want to use it anymore. They'll jump all over it was quite again. Not even they won't try to pitch me and say I think GAFs pretty good. They've been good to us. Yeah, not even just so they know where we're at. So that's not the customer. Why they give them so much money the back end I don't know.
So that's that's a part of the supply chain that could be disrupted. disintermediate if one of these big
It has to be unless they see it and they say they want to be the installation or the or the point of sale. Right? That would be the only way to save them is they would have to be the point of sale. Do you still use all the subs, all the subs, but they would have to become the point of sale? Because just to be the courier it makes no sense to especially now look around the country. You know an office space is for free. But warehouse space is everything. So the more and more warehouse space is available to Amazon to all these other places. They can be really the installer and the distribution. So the only thing that would save ABC and all these other places I believe, is to become the point of sale.
Do you see Amazon having designs on doing that? Or a Home Depot even or somebody like that? I mean, you know,
Home Depot, unless they'd have to change dramatically because they don't totally understand the industry because they're sitting on a goldmine right now. Yeah, Goldmine a coal mine. a goldmine which I don't understand how they don't hire someone that understands home improvement, you know, not how to sell the materials. They know how to do that. Yeah, like they could dominate easily, but they don't really understand it to me how to do it, how to get the right numbers, what profitability and home improvement means because they're used to moving a finished product. Do you know what I mean. Everything they sell is this selling and as is with home improvements, it's gotta get done and there's a lot of variables so you need a better profit margin. They don't get that part of it. Amazon, even though they're selling finished products, they're so smart. They could develop something to you and I'm just showing that I'm there in saying the guy owns the world.
Amazon roofing basics.
Could you imagine it, could you imagine could you imagine how fast they could put together they really wanted to and you get a system. GAF has a system a little guys that could do it, but the point of sale could be from GAF, do you already mean so they establish the point of sale, they set up the financing they do everything? And then the little group of contractors they have are actually GAF certified installers. Yeah, but they're not Joe's construction is just a guy that goes out installs or you know,
Talk to me about labor for all because you've heard from other people that labor is a real issue. And it's only going to get worse in the future that you know, just finding people who want to get into the business and actually get up on a roof and you know, nail shingles is problematic. I mean, what what's what's your view on labor and labor 10 years from now?
It's it's, you know, I mean, if you if you talk to a contractor that's not selling at the right price. What's the biggest issue he can't get it done because there's no labor. But if you realize the price is just a number. I don't have to I have as much labor as I need. Because I know if I want to dominate I gotta get the work done. So one thing I'm in control of is the price
is your labor. 1099 or W2s are a mixture of both.
They're no no W2s. No 1099. They all own their own corporations. Oh, they have their own corporations they send me a bill and their own comp and liability actually bill for the job and I pay them so they're like, smaller they do some work also for homeowners and stuff like that too. But we get them certified through GAF we train them you know they our TM comes in we show them how we want each job installed and we do each job the same way the same material, same everything. We we pay for all the material. They do the jobs, you know, we order the dumpster, we order the porta-potties like that. But my point about that is if roofings in a big flux, you know and the guy that's selling the job is not getting the right number. It's the wrong number. Right so they can't get it done because the guys are trying to hire want to make more money. Yeah, yeah, I realized I'm in control with price I charge my customer that with no and this is the weird thing. That I don't understand about roofing. They say their customer picks their price. How is that possible? I pick the price if I own the company, why should someone be in charge to what I earn? I need to earn a lot. I have expensive tastes you want I mean, I need to I need to make what I gotta make. So I make my prices and as things change, when material goes up, I changed my margin, not by the cost of material, but what my margin is. So I'm making a lot more now than I was when the price was lower. These guys didn't even change the price by what the material went up. If I'm at a 40% margin, and I'm selling a roof for 10 now I'm selling it for 20 I mean it's simple. I know this all seems simple. But if you talk to the majority guys, they don't get it. So now my roof I don't make 4000 I'm upselling for 20,000 Make an 8000 That's a better deal to me. I'd rather make eight than four these guys changed it by not even what the material went off. In fact, they try to cut it back more how am I going to make money how I'm going to do it. So because they're actually making less now, how do they pay labor?
Right? Well now how do your so you deal with this network? of other companies that actually do the installation? You know, how did they deal with labor? Can they can they pay enough from what you're paying them and
They have to pay the guys more to get more? Yeah, okay. Okay. So down to who's ever willing to pay is gonna get it done.
Gotcha. Gotcha. Yeah.
So it's good. Yeah. Willing to Oh, God, I gotta go. Yeah.
Yeah, there's a little bit of delay here. So it makes it but it is very interesting because, you know, one of the things that we're looking into is ways to automate the roofing process itself. You know, how can how can you do a roof in half the time with with half the crew? All right. That's kind of a question out there is it would that make a difference? Is that it? Was that something that you'd be interested in?
So listen to this. This is really funny. You said that. So recently, I did a job for one of my neighbors, you know, and he lives beautiful house on the water. You know, it's a nice view overlooking Connecticut. And he's a very unique guy. He actually built two of the bigger amusement places on one island, you know, one was Splish Splash, which was the biggest, you know, water park. He sold all that. And now he works for German company called, I think it's Mark and they build rides for Disney $26 million rides. So we were he was very interested in everything in my company and everything. I'm actually in the zoning board with his wife. So I went to the install and we were doing it and he went out he wanted to go up on the roof like it was. He was really into it would go up on the roof, and not as a not as a nitpicker. He just wanted to understand it. And the first thing he said is he goes, Man, this is such a waste of manpower. I've never seen such a waste of my life. And I just said what would you do different you know what you need a machine to clean up better? You know that? Why haven't three guys clean up? How come there's not something to come along and rip the roof? And just, you know, somehow shoot it right into the dumpster? And I was like, wow, you're right, you know, and he goes, I'm telling you right now, and he was actually saying to me, he sold he ended up he had sold to a hedge fund that kept him on and he wound up being in charge of like 15 amusement parks, and then they flipped and sold and he went to work as a consultant, you know, at the place in Germany. Prior to that, he said, you know, your industry you know, it's going to change I said it's already so the amount of phone calls I'm getting now. I can't believe it. And he goes, it can't stay like it is because it's too fragmented. It's too wasteful. It's too this. Somebody's got to come in with more money. You have to really change the way you do labor is one thing, change your labor way change the way it's sold. And just really make it streamlined. And I said, you know, it's so funny. You're saying this, and we had already talked about setting up this meeting, because I have a meeting coming up and it's kind of about that. And I believe because I was telling what I thought you know, I think the industry can't be what we talked about earlier. I think it's 3% of the contractors. I mean the top 100 to three that's yeah, insane. I mean, I don't think there's another industry like that. I don't think I don't know, you know what I mean?
Very, very unique in that respect. I've been finding out
the funeral industry used to be like that, right? Yeah, the funeral industry was like that now like there's three places that own you know, everything. But it's really weird that constructions like that, that it's so fragmented. And because it's so fragmented, technology wise, work wise, how you do the job. None of it changed because of somebody with big pockets doesn't come in why would it change?
Do you think these these big companies are going to just focus on roofing? Are they going to be all in one I mean, we'll do roofing windows, siding, interiors, whatever it is.
No interior. Okay, Siding Windows roofs, bathroom enclosures. It's gonna be all quick turnovers, nothing. Nothing. That's That's crazy. Do you know what I mean because you can't
Nothing that's custom crafted Are you okay? No cabinet makers or anything like that.
No way. I heard of a very unique thing from Europe though cabinet place that they're opening up. I forgot the name of it. But they have monster showrooms. They manufacture they have certified installers, so they don't handle the install, but they handle all the measuring all the manufacturing all the picking, but I don't that's a tough thing to do. I think these big hedge fund places. It's gonna be Windows, roofing, siding, bathroom enclosures. That's it
I want to explore two things with you now know the digital world and how that's changing. Okay, and what you're seeing out there in terms of new software functions, you know, they have these roof mapping systems. You now can go out and get a 3d digital model of your home made by a company called Matterport and can scan your own home and all of a sudden you have a very accurate representation of your entire home. You know, what can you do with that? They have all these data aggregators that give you information about your home What are you seeing in the digital world and the digital service kind of stuff?
I mean, we we use, you know, we use Quickmeasure to measure Yep. And you know, it's a GAF product which is just it's all a little bit about that. Why that was so huge for us is because my guys are salesmen, you know, they're not really contractors, you know, and it gave them more confidence to sell the job and know they were at the right price. So when you sell windows you sell 10 windows we don't really do pricing, it does cost me more per size of the window, but I don't do that with my salesmen. I just say hey, this is the number this is the closing price is your drop prices. All simple and easy. Quick measure allowed us to do the same thing. So that's quick measure out of the way. The first thing GAF had I forget what they called but you take a picture and change the roof colors on it was huge because it helped us upsell more than anything because now they could see different colors, different things, better styles. And it really allowed us to change the industry alot and I'll tell you one more story which just, you know, GAF and they're great company. I love them. Just so it's on the record.
I know. I know. I talked to Jamie Cito and he said you were you were their go to guy.
I love GAF but I fight about certain things. You know, one of them I fight about with is that distribution is not the customer. You know, I'm their customer. So they didn't totally believe me. And I said, tell me Well, I'll tell you, let's make a deal. Tell me your worst selling shingle, the worst selling shingle and they go American Harvest. It was a big mistake. And I said alright, I'm going to sell nothing but American Harvest. It's about how did they couldn't understand. They think the customer picks stuff. Yeah, customer picks nothing. I mean, we tell the salesman what we want them to sell just I mean it just but they don't understand that that's the way it actually works, you know, and we took on American Harvest. I mean ABC didn't want to sell ABC, was just shipping some back. And I said no, take it back. I need truckloads of it. We're going to sell it and we sold I think 150 jobs and six months of American Harvest. They were dumbfounded because they didn't get it and they still don't totally get it. Like even when they make a new product or a new thing. They do it all wrong. Like it's all totally wrong. They go to distribution, they punch it down their throat. They say stock this stuff like it's a grocery store, like at a grocery store. You need to get shelf space, right? I mean, that's the the biggest thing of grocery store, you need a shelf space and it's 100% accurate 100% If you see you do it, you tell me what homeowners walking down the aisle of distribution. You tell me what contractors walking down the aisle so they don't understand that it just sitting back there. The siding that changed my company, you know the insulated composite siding. That changed my company and changed my philosophy. It was sitting in warehouses all over the place.
I know when we got our move done, all I did was I get an electronic thing. It says, Here's, you know, here's the styles and colors you can pick from pick one, you know, it wasn't even Yeah, it wasn't finding this line and this line it was okay. What color do you want? Yeah, type of thing.
My salesmen have you know, we go through the sales process of the underlayments the patented way we sell it, you know, the trademark, the millennial system. It's better than anybody else that has a whole long process is two hours. But then you get the color. You know what I mean? You pick the color before you get the price, you know, and then you pick the color and we give you the price. And it's that simple, the easier it is for the homeowner to envision their house done. They can envision the dream. They can say yes. If they can't envision the dream, they can't say yes, it's very odd because I don't know how the clothing company did it so smoothly without and I guess it's that way they can return. I mean, where you buy something you don't like it, you send it back and that's okay. Obviously a roof inside and you can't send back and it's a major purchase. So that little that last part of the equation where they can 100% envision it online do you and be like without it without touching it feeling it but they can 100% 3D look at like the hover or you know, you can look at the whole move the roof around to really see what it looks like. Because once you envision what it looks like the homeowner, they can say yes, you can't close. My guys aren't allowed to give a price unless they pick a color. You know, and I know like that's an unusual thing, but it's I know, in order for me to get away from price it's got to be a dream, you know, so we're selling the dream. So in order to get the dream you have to envision envision the dream if you don't envision the dream you can't close so all that stuff you're talking about the better and better technology to see the job. See what it's going to look like on my house not on somebody else's is much better especially be able to make a decision online, you know what we're talking about.
So what other kind of digital services could you imagine, you know, in the next 5-10 years that would be useful for for your business. Just going out? Isn't it?
Um, not marketing, just selling you mean or what?
Well, here's, here's one thing we've been kicking around. Okay, so what if you had a roof to do? A drone came over and created a very, very precise 3d digital map of the roof with all of the penetrations and everything like that, and then produced a detailed plan. Here's, here's the order your tear off. Here's where the squares are placed on the roof. Here's where the people are supposed to go for minimum movement. You know, here's the order of laying the underlayment and laying that you know length. In other words, it was just totally optimized.
That's awesome. That's phenomenal and even. And until it's a plan given to the so not only for the homeowner, but how the contractor, the sub or whoever it is how they tackle the job. That's awesome. And then that's actually going to save labor. save time, save material without wasting as much because they'll know where to start which will be better. I love that. Okay, that's awesome.
Do you what? What are your customers say to you about Environmental greenness saving energy and recycling, you know, sustainability that all that stuff What do you see happening in that area.
Do you know um, it's comes up but it's not the biggest thing. But if we, if we made that the biggest thing, it would be the biggest thing. Like some of the things we get the most we have 11 million people watch. I gave a roof away to a nurse you know, during COVID and 11 million people saw that's huge. Yeah, so you know channel seven you know, ABC had its CBS had an interview we got everyone to cover it. Because it was a nurse during COVID. So now you're talking about the environment. You know, we have global warming and all this stuff, everything else. So if you put it out there, that would be gigantic. Right? We don't put it out there because we're not recycling. We're putting a dumpster. Dumpster cost is incredible on Long Island. To get stuff off. We sometimes spent $1,000 for a dumpster. It's insane. But if you can, we're stuck here and you can't get it off Long Island, you know, so it's very difficult. So that's a huge thing. But again, it's got to be you know, like a headliner, you know what I mean? And that's another thing too, that how awesome would that be to me? Because right now, you know, I started we started the company canvassing you're knocking on doors, and that's what Howard does now. It costs 22% to canvass now of the sale. That's insane. I mean, that's a that's a lot of money. I have mine down to six and a half percent and I spent 3 million in advertising. But we've been able to brand so well. I went to like an advertising company that handles like they do Mercedes Benz USA, they deploy the whole bunch of stuff like that. So when they got into this when I first went to them, the guy goes, this is gonna be so easy. You know, this is unbelievable, because it's so fragmented. That's when I first started talking about this seven years ago. And I said, really? And he goes, Oh, yeah, you have no competition. If we do this, you do that. It's gonna be like just he. It wasn't a sales pitch because he makes a lot more money than he does from other accounts in my account, right? You just said I will pay you back the money if I don't give you incredible growth. And it was just like he said, it was so easy. Yeah, so that being said stuff like, you know, environmental stuff. Like we could use keywords that people call up that would be huge, you know, so marketing wise, you know, to just use it as the point of sale is good, but to market with, you know, cleaning up the environment and we're gonna recycle material. That's huge. Okay, that's to me. That's gigantic, you know,
In your marketing, what do you do you lead with a 0% financing or the, you know, the, I'll call it the cost.
Monthly financing was ultimately everywhere. Like yeah, that's all we did you know, and we still lead with 0% Okay, but majority of our customers, we because of the sheer number of the jobs, you know, the the cost, you know, and now, you know, a regular real is $25,000 You know, and what are they deciding it's 50,75 $80,000 Right? So 0% that max term is five years or you can do like a no payment, no interest for 18 months. Payments are too high. So we recently switched to 2.99 for 12 years. Okay, well, we advertise it nowhere. You know what I mean? Like no place that we advertise it, because we don't want to scare people. Yeah, we want them to thing 0% Oh five year loan, I'll do that. And then when we get to the home, we say wow, you know what everyone's doing now? They're doing this new program. Right. And then we get
Lower monthly payment, all that stuff. Yeah. Okay.
Yeah. So it's been the 2.99 for 12 years has been amazing and it's gotten our ticket size, so much higher, you know, where they wanted just siding but wind up selling siding and a roof or siding, roof and Windows, you know, and to me when I see these contracts come in, I can't even we're doing roof. We're doing a roof on Monday. It's $96,000. And we do multiple roofs. I mean, think about that number 96,000. When I started $6000, $7000 for a roof you know, now $96,000 It just and it happens to be in Muttontown one of the richest zip codes in the country, you know, Muttontown, but the guy really and he wouldn't service in five years but it made it very simple for him to make a decision or not get other estimates, you know, because people don't realize that and this is one of the issues in the industry as well. Contractors think poor people want financing. Yeah, it's just the opposite. You know, our our approval rate with Greensky is almost 92% That's not poor people. We don't even you know, we don't work the borough's right it's the majority of people want financing gives them more power to buy. And that's what we go with, you know, and right now that 2.99 has been awesome,
I saw Jeff just arrive. Jeff, you know, we've been talking for a while here and very interesting and stuff. You'll have to read the conversation that we've had some very interesting Absolutely.
DId you record what I said about him, Larry, you know about being late.
Fortunately, it's all it's all.
Listen,I didn't even I didn't mean what I said, right. You still get the guy you know what I mean? Like you're like, let me redact that from the record. I mean, let me take that off there. You know,
I can I can edit the transcript to whatever. Okay, good. Now, while
I was saying that, because he agree with me, yeah.
Jeff, we haven't. We have a surfeit of Jeff's here. So when I say Jeff, you know, there it's two Jeff's but I'm talking to the king quality Jeff King Jeff, I'll call it there we go. Talk to me about insurance at all. Do you deal what is your relationship with insurance if any, and how do you view it?
Okay, just go my my because of the way we pay people, my biggest one is liability insurance, you know, and it's just it's last year, I think was 700,000. And it's just going to be you know, every year it's just going up and up and up. You know, when you're a general contractor. We're basically a general contractor. Your comp costs are relatively low. You know, because we don't have my employees are, you know, sales and office and stuff like that. So the rates very low. But my liability insurance and maybe around the country, this doesn't matter. And this always I always thought about this being in multiple states because in New York and some other states and this is an odd thing. If one of my subs guys get hurt, the comp goes through him. But the liability goes through me, which is really ridiculous. You know, and I hate the law. I don't know why it's like that. It's not like that in all states. So because of that reason. My liability rates are really high, which I hate it. So if somebody could come along and self insure and do whatever you get to do you don't I mean, like I even have it on my price. I'm really self insured for the first 100,000 You know, it was a whatever it is I you know, have my lawyer handle it report it I have my lawyer and we try to handle it in house and just pay the guy and be done with it, you know.
Okay. Another thing I wanted to talk to you about is the damaged roof, hail storms, that type of stuff how you deal with that, in terms of you know, roof inspections, and you know, these things come up. We've we've seen We've had one person say that if you could, you could accurately detect if the roof really was damaged to hail you'd have a billion dollar business because there's a lot of fraud and, you know, shady business in that and I just want to get your perspective on that.
You know, we don't really have you we had Sandy we had Irene we don't really get we don't really get Hail Okay, well, when I met other contractors through GAF the industry is it blows me away how it works, how it's set up? And yes, fraud is rampant, you know, they they wear special shoes put on you know, like dents in the roof that were the truth, the whole thing. It's really it's a crazy industry. And I don't totally understand it, but I know it's like, you know, they get a storm 50 Guys descend on the area. So it's very unusual. I don't know what's gonna happen. I don't have any shoe expertise with that.
Okay, okay, that's fair enough.
Just to maybe push a little on the insurance and not not sort of one back. Do you find that like homeowners or customers are asking for that type of stuff. Like I know we sell extended warranties, but like, do you find that you're getting requests to go further for you know, to kind of cover them in case they're, you know, avenues of damage or something like that.
You mean? While we're working this damage or damage to the roof later?
Damage to the roof later?
Yeah. insurance on the roof itself or warranties.
Okay, that is huge. That's gigantic, you know, if any kind of, you know, to me, and this is just something totally different, you know, to make something cool and win an award from some show. I don't give a crap ypou know what I mean. Why not, and this is something I said to Jeff all the time. Why not sell a better warranty? A better warranty is more peace of mind and more money to sell. You can change the underlying this is to me what they should really do if you want to get my really opinion about it. They should make a ridiculous underlayment like a glue down underlayment for the whole roof? It's breathable. I don't care what the price is. Can you imagine saying this the kind of I don't care what the price is. I care less. In fact, the higher I'm fine with it. Keep the shingle the same. I don't care and then a ridiculous warranty. Ridiculous warranty. And in order to get the warranty or to get the product, you have to commit to selling 500 roofs a year whatever the number is, I don't care and I don't care what it cost, but I can sell it. Every other large contractor out there can sell it because the homeowner wants peace of mind once the cost of a roof went above 10 grand. It doesn't matter if it's 10 or 50. And I'm telling you it doesn't. What does matter is they don't wanna do it again. The don't want to do it again. They want to do it right the first time, not the price. I didn't say they want the right price and things like that. I said they want the greatest roof they can get with the better warranty. That's everything. If they can have peace of mind for a lifetime. It's over and I mean workmanship and material. So not just the labor on material but the workmanship. Like why doesn't GAF like you said before about a system for the customer to buy. Why doesn't GAF like this to me blows me away? Why doesn't GAF make I want the roof installed this way? Every time. Like if I was gonna have a warranty me personally I'm gonna sign my name give you warranty. I would say I only want the roof done like this. This is the way to get this warranty. Not you can use this or this no when I put a bicycle together the first time for my niece and nephew 30 years ago, took me seven hours to do it. Then I learned I better follow the instructions. Where's the GAF instructions? There are 10 steps, Whatever it is, why not have you want this greatest? This greatest thing? And I'm making all these great underlayments in order to get this warranty. This is the way you got to do it. Does that make sense to you? Would you give two options to me?
I'm a finance guy you're speaking like risk mitigation here. And I like it. So normally the marketing guys don't say this kind of stuff. So
Listen, I went I had dinner once with everybody. Everybody, everybody. I'm not gonna do that everybody was there. And I said, Isn't it great GAF I love GAF because they warantee Owens Corning underlayment. They warrantied it. I said you guys are so generous, I would never do that. You guys are the best. So they said what are you talking about? There was a guy that from distribution, and I said show him invoices. So there's a roofing invoice, just shingle. And they said I don't care where to get the underlayment and I said I don't know what do you think he got it from but your're warantee it now with a Golden Pledge? Could you imagine this? They don't know what's going on the the roof. Let's go back. And they said, well, they don't know how they can do it. So I'm going to take you back to 1994. I meet Ron Ross, the owner of SRS. I talk him into open up a finance company. And he says well, how do I know you're going to use my products? I'm not going to finance somebody else's products. And I said fair enough. We're going to fax the material over to the list and you fund the job. So the finance company gets the material list. That's 1994. 1994 they figure out a way to do it. We're in 2020 GAF can't figure out a way to make sure their materials are being used on their warranties. Okay.
I can't wait till Alex and the other Jeff read this transcript that will be good.
Make it even better. I'm gonna solve the whole problem for you. Watch this. My sales guy goes out and sells the job. Sells the roof, sell the golden pledge warranty. So the customer is happy. Everything's good. We pre register the warranty. It's not it. We didn't register we pre registered. We get the number. Now we call to order the material, all the material, all the GAF underlayments. Everything goes the PO number becomes the golden pledge number. Isn't that simple that to me? I could do that program and I suck at it. Yeah, how can they would all the geniuses not do it? So now everything goes under so it's not well, I don't know what kind of underlayment they use. I don't know what this I don't know what that and you know what their solution is? If someone doesn't do this, it will tell the territory manager he'll go be a policeman. And I said so. Is he a salesman, or a policeman? He's not a policeman. Make sure the other guys are using all your best material and just so you know one other thing. The highest profit margins are on the underlayments the good underlayments so if you want to make more money, what would you want to do some more underlayments why don't they do that one little thing. It's so simple. Make a crazy warranty which they have a good one out and make it even better. But say you have to do this. Now I make a new product I want to release you know what they do? They go to distribution, convince them to buy it and it doesn't sell because of whatever reasons too expensive. Why not say hey, we just made this new product. You have to use it in the system. Or else you can't get the warranty.
When don't they sell it directly to you instead of ABC?
It just does certain things like the warranty the risk management, like the minimal thing to do is make sure you're insuring your own material.
Yeah. I'm Jeff we're reaching the end of an hour here. I don't know if you have to add time to go a little bit over but I appreciate your time. I have a couple other things to ask you. Okay. We're hearing about the roof becoming much more than just weather protection. I mean, you got solar going on. We hear about water collection we hear about heating and cooling, you know, the roof participate in, you know, heating and cooling make it more environmentally, you know, energy efficient. There's all sorts of speculative things that people are talking about that the roof can do. I mean, one of them is it can it can you can embed antennas. In the roof and it can be a node on the 5g network. Okay, that type of thing. Awesome. I just wanted to get your perspective on these other functionalities besides just you know, protection, water protection on the roof, weather protection,
As long as and this is the whole thing the price doesn't matter. Do you you know what I mean and that's the one thing cool and better, is good. Price doesn't matter. So if you can put Wi Fi into the roof and it's the most unbelievable thing and it's gonna cost the guy an extra 100 bucks a month. People are gonna buy it for sure like not even a guess at it. As long as it's easy to get. It's easy to install. We can sell a big company can sell anything. So it's not about the price here. I mean, that's what I have to. I always tell you it's not about your price. It's about how cool something and how new it is and if we can install it easily and put it into the financing. It's nothing.
What do you think of the solar shingles GAF energy just kind of
I love the solar shingle. I just want to make sure that you know we sold two jobs already with it. And I love the way it looks we haven't installed yet but I'm looking forward to it. And that could be I mean, there's no there's no protrusions through the roof, which is huge. It's easy for us to do like it's easy for a sales company to install. And it looks it doesn't look as nice as the Tesla one but it's also not a science project to install it. Right. But it looks 100 times better than the mounting system. You know, the the rack system, it's not even close, you know? So I think that that way it's I think it's gonna be huge, you know,
You're just gonna roll it into your financing scheme. and promote it as well. Okay, good. Before I let Jeff ask any more questions. I just want to roll back to a previous conversation and like Jeff, to notices to take note of this. Talking to when we started out as you what's the industry going to look like in 10 years and you said I'll tell you exactly what it's gonna look like a 10 year consolidation. So just go through go through that scenario again for Jeff's benefit and we'll have some no
There's no way that the industry is remaining like it is there's no way and I don't have a magic ball to tell you who's going to take it over but for sure you know, right now on a smaller level. Hedge funds are coming in strong which you know, which they're buying up. I get emails I've talked to two of them pretty extensively. But they're given crazy numbers you know, that they want to buy your company for and with them buying them it's going to consolidate into huge you know, big companies and I think even bigger and I think whoever emerges you know, it's either going to be Amazon it could be GAF, and it could be like you said earlier distribution I don't know you know, but some point of sale is going to take it over and really set up a smooth internet sale or an online sale and have a network of contractors. They're all going to be most likely subcontractors, but a whole network of subcontractors all around the country. But the whole point of sale will be online the pricing will be what it should be. Could you remember, we spend more money on a rug than you do for a roof, you know, per square footage. So I feel the pricing is going to skyrocket. You know like really, really, you know, for everything, all the siding, windows, roofs, that kind of stuff. The margins will be much better to handle you know, the bigger companies, and it's definitely going to be so much more consolidated than we're looking at today. It's you know, we talked earlier, the top 100 contractors are 3% of the volume that's crazy. It's impossible. And not only that, the culprits that I feel keeping, keeping the industry rough is like small, small little contractors keep it tough. And once they become subs they're actually make more money. They have less headaches, they have a regular life, because they really don't know how to run a business, you know, and also it does keep the pricing down a little bit. When that's eliminated through consolidation. It's going to be totally different thing but there won't be 10,000 players like there are now there's only going to be a few players for and it's not even. It is 100% inevitable. I believe. Yeah, like not even a question about it's going to go and you said King Quality we're big because it's a fragmented industry. This should be 10 companies doing billions of dollars. I how I don't understand how there's not you know, and one of the reasons why there's not one of the GAF guys in GAF solar. Really nice guy. I met him a couple of weeks ago. He came and he graduated Yale, you know, the whole you know, most of the standard guys are all you know, Yale, Harvard or whatever, you know, now, him growing up there's no way he dreamed of being in the roofing industry and it just wouldn't even in fact, he said when he first went to work at GAF he was embarrassed - he was I work at Standard, you know, it's the way it is, you know, because nobody, I have sales people making 400 grand a year now nobody envisions that that that's actually out there. But in reality is even more money available, but there's not enough smart guys in the industry. Do you want me for me to start? When I started in the early 90s and dominate Long Island? I think you could dump me in Iowa you can dump and I'm not that smart and anywhere and just dominate the industry. What about when all the people from Amazon or from Apple, or they actually get involved and they really think about this. It's it's going to change completely. It's just the roofing is not sexy, but it's not going to be about the roofing. It's going to be about the money and that's what it's bound to happen because it's impossible that I could open up a company and dominate. I couldn't open up a cell phone company, there's no way it just wouldn't even happen. But why am I able to open up a roofing company because it's not dominated by by major brands, you know, and it's going to happen. Okay, good. Good. What do you see? Do you think that's gonna happen?
I mean, me personally, and I know some of this was for my benefit. So so I'll answer I think you're 100%. Right. I think I think I could see some folks with deep pockets trying to set up a network, utilize some sort of online platform, right, that would make transacting easier for the homeowner, homeowner homeowner but then also maybe like things like written contracts and whatnot for the contractors right? Standardize that. I think there's there's probably some money in there and you'll get efficiencies on on all different sides of the supply chain. To me that's that's that's kind of the future I envision, but it's always dangerous to let a finance guy in his office think about what the future of roofing looks like because I'm not close enough to the customers
A roofing guy in a financial guy agreeing with each other
We're agreeing with you, because honestly, in this has really been the issue. For for 100 years. There hasn't been anybody like you even talking about the roofing industry, even remotely in it. It's been all you know, blue collar guys joining me in this change is going to come from the outside when I went around the country and spoke to contractors on how to finance you know, for GAF, the guys that did the best were the young guys and the guys from the window industry. One young couple from St. Louis, they still send me emails. They were from the mortgage industry. They're killing it, you know, because they can see it's not about you know, what contractors don't understand. The price we charge is more important to us than the homeowner. And they don't get that when people from outside the industry, like a banker or like you're saying a finance guy. They're gonna look at the money they need to make. Not what the homeowner thinks they're going to look at the money they want to make, and they're gonna be very surprised that they can charge whatever they choose, whatever the number they pick, to make the company profitable and worthwhile is the price that can charge it's really unusual. And as long as they make it easy, you know, easy to circumvent, easy to finance and easy to do. I look at Greensky and I already talked about this earlier, but the ease in which we finance jobs through Greensky. It blows me away to because I've been in this so long I saw the hard way of bringing in sometimes 50 sheets of paper sign initial, this thing's literally 30 seconds. And they're approved for $75,000 I mean, think about that. That's and you can do the husband and wife get them each a loan. And you know that this is not if the husband 75 Get the wife 75 And it's 30 seconds. Now imagine we take the guy out of coming to the house, and like you said before a 3d model and now we go wow, you're approved. You're not approved for the 50 for the roof, you're approved for 150 Why not get the siding, why not get the windows here's what your house can look like? This is how easy it is press this button. Here's your monthly payment this is the color you want. Here's your install date. I think that's that's the future. I mean, it's not even, it's not even up for the questions. I think people that thought roofing was, you know, like an embarrassment you know what I mean, you know, and I did too, like I didn't think I didn't think I'd be roofer you know, it's like I didn't I was like wow, this is this is so easy. And there's gonna be smarter
You got a private jet right as your first experience. So there you go
First experience was unbelievable. And I think there's gonna be more people like that who are really smart and really unbelievable and look at it from a different way and a different way to monetize it and I think it's just going to be so ideal. You know, if you talk to somebody that grew up before there was cars, and they came back and saw cars oh my god, that was amazing. I feel we're in that in home improvements, because it's so the technology, the way we go to market. It's changed but not like the rest of the world did. It's going to be from a beeper to a cell phone, and that's going to happen. It's gonna happen fast.
So given that future, and again, we appreciate we'll wrap up real quickly realize your time is valuable. But given that future you've just depicted what would be your advice to GAF for the top priority thing that they should do in the next five to 10 years.
They have to think of what position they want to be in they want to be the manufacturer or they want to be the point of sale you know, I feel the point of sale eventually is going to dictate how much money GAF makes because if you make a you know, Amazon dictates what they're going to pay. You know, they their girl, you know what I mean? So whoever comes across that, and the beginning they will be friends and partners, but eventually the point of sale is everything and they can dictate what they want to do. So GAF has decide Do they want to stick to being a manufacturer you know, they're already kind of kowtow to distribution, but they, they kind of got out, you know, they're able to battle a little bit, but the next one won't be kowtow to distribution. That's going to be tied to the point of sale. I think they have to decide if they're going to be the point of sale or not. And I think that's the big thing. You know, because I don't I don't see why. I personally don't see why GAF can't be the point of sale, make the warranty make everything make the material and then have a group of guys differently than they do now. Because they'll say oh, we already do that. They don't do not the way I'm saying the way I'm saying is they make the price, they sell the job, they do the financing, they tell them the material, they tell what kind of materials will be on the job, then they ship it to the site or they have distribution center, and then they have a group of contractors that do the labor that they pay well. do you know what I mean and how can I pay well, because they're going to be negotiating the price and these guys will do the work, you know, and I think if they don't do it like that, they're still going to be successful. I mean, there's certainly a manufacturer but they'll never be the monster profit margin. You know what I mean, if they could get you know, because there's going to be somebody that emerges that they still have to treat them just in they're going to set the standard, like with distribution. You know, they'll say, Oh, we're not good at setting a price or whatever, whatever that whatever the behind the scenes stuff is they still have to work things out. Why doesn't GAF just become the point of sale? And especially with their branding, because everyone knows GAF?
Yes, yes. They do have the brand. So that would be good. So hey, Jeff, we really appreciate you taking the time. I know we've gone a little bit over again, I'm going to distribute this we extract it we transcribe it and show it to people if we have any more questions can I just shoot you an email or an email? Okay.
The biggest question you asked me really honestly, was the last one because it's that's that's GAF decision and they have to decide and I honestly think they're best positioned to be the point of sale. You know what I mean to take it over because they have a they have a contract network 90% of their so called Master Elite guys are really subs they're not, yeah, they're not big companies. They're really subs that would have them available, and they can have them do the work at prices. Those guys will be happy with because they don't realize the money right can be made. And I think that's actually that was a good that was a I didn't really thought about that. But that's actually they should be the point of sale and with the technology they're working on. They could be and it would just be come to the GAF website, you know, just like your people already do. But instead this pricing, this is your price. Do you want to wait for six months and here's the price today
Here's your cost per month and we can put solar on and you know, give you a whole bunch of options. I don't know why do we siding and windows as well. You know, yeah. Okay.
That's the answer. They should be doing that.
Yeah. All right. I appreciate it. Hey, it's been a pleasure talking to you.
