DANNY WILLIAMS ‘COLD CALLING’

Each month our special correspondent Danny Williams* replies to a reader’s letter...

“We have been in business for almost 10 years manufacturing PVC-U and now aluminium windows and doors for the trade and with our own retail installation arm. After a great couple of years we want to expand into other areas and are looking at new build. What are your thoughts?”

AT (Location withheld by request)

The first question for you is: What do you mean by New Build, apart from the obvious. If it’s half a dozen houses for an independent developer, then the chances are it will bring few problems any more significant than your regular home improvements. If it’s larger estates, which are inevitably for the big national brands or larger regionals, with numbers upwards of maybe fifty properties, then it is a whole new game. And one in which the rules – as well as the rewards and penalties - will be quite different.

The first, crucial point I will make is that large scale new build is unsuitable for 90% of all window and door fabricators, simply because of the volumes involved. During my 35 years or more in this industry I have been involved with dozens of new build projects. Even recently I was approached to get involved with a new build project but these days I simply walk away.

Let’s talk about scale first: you indicated to me that you have capacity to produce in excess of 1000 frames a week AT, and that you intend to scale up further, which of course is decent. For new build you will of course have to manufacture AND install, so this will impact on your whole operation. The frames you make for larger estates will depend of course on the specification of the homes being built. But generally, you will be looking at basic spec, and for lower budget properties, there will be a lot of repeats. Increasingly however, developers are breaking up estates using a number of different styled properties, which do call for variations in window dessigns and sizes. All of which adds to costs. Either way, you will make these for a fraction of the margin that you will be getting for your trade frames and even less than for your own retail sales.

The key to new build is of course lower margins but higher volumes…pile ‘em high and sell ‘em cheap, as the old expression goes. And a great many fortunes have been made according to that principle, in many industries including new build windows. But the people that have been most successful in our industry at this sector, are few and far between and have generally focused on new build, because it requires disciplines and operations that are quite different to those broadly applicable to home improvement.

First, the volumes. There are fabricators out there that swamp even your impressive operation, which specialise in the sector, although some of the better known fabricators in the industry have new build operations through which they are encouraging their installers to get involved. This adds to the competition of course. The larger operations, particularly those that specialise, will make a couple of quid on each frame but over hundreds of thousands of plastic squares every year. And their price list will form the basis of the housebuilders’ procurement managers’ starting point.

Next, you will be expected to install them… and at a fraction of what you might get for home improvement. Finding even half decent fitters has long been a problem and for new build, they will be expected, again, to work on volumes: considerably lower rates per frame, but over larger numbers. Fitters can make more money of course, but they have to work hard for it, though many are happier with this work because they don’t have to faff around covering up carpets and being polite to the homeowner. But so far I am not scaring you…you’re ready to make lots of white plastic frames and you’ve got the gangs to fit them. But have you taken into account Murphy’s Laws? The three… anything that can go wrong will go wrong; nothing is as easy as it looks; and everything takes longer than you think it will. They must have been written by a builder…

Despite what you were told on Thursday when the builder’s procurement people called off the next tranche, the properties will not all be ready: the lintels didn’t turn up/couple of brickies didn’t show/rain stopped play for a couple of days…there is always a problem even with the best run site. I have lost count of the number of reasons – not excuses – that throw a spanner in the works.

As you can probably tell, I am not enamoured with new build AT. It is not for me. But as I have acknowledged, many have and continue to make decent money at it. But don’t go into it wearing rose tinted specs. It needs to be a separate operation, run by people that know what they are doing, particularly on site. Contracts for new build can be full of holes and are often designed to make money from penalties and add-ons as there was zero margin in the pitch to get the job in the first place.

However well run your factory is, it will need to be slick and flexible and with new build production probably set apart from your regular manufacturing. And at the top of the chain, your accounting needs to be absolutely bang on. Oh, and you should be prepared to wait for your money…

I wish you well with your project AT, which I know that you are well down the road with; but you did ask. Good luck! I shall keep tabs and, if you make a decent fist of it, I might just ask you how and have another go at it.