Not long ago, after college and time working outside the family business, Robert Hilty came back to Competition Roofing and took over the president's role. Soon after, the company did its first transition of ownership — his sisters and he acquired non-voting stock in the company with the plan to eventually buy his dad, the company’s founder, out of his voting stock, become the sole owners of the company and continue running it as a family asset that, hopefully, the next generation will take over.
Though not active in the business, he has two of his sisters are currently also shareholders, and so was his brother. At the Houston Smart Business Dealmakers Conference, he reveald that about eight months after getting into it, his brother decided he didn't want to be in anymore.
“We have a business consultant and one of the things that he said was, ‘The best thing you can do with family is give them options,’” Hilty says. “We didn't really want to allow him to be bought out because we thought he would regret it later on. Often, especially later on, if someone has regrets, and they're out of the family business, they’re disconnected from the family, they can hold grudges. But at the time, it was what he wanted. And so, we were able to purchase him out of the company and he’s now able to have his independence. It was his choice. I think in the long term, for the family, that was better to have him have that option versus forcing him to stay in the company, even if we thought it would be a benefit for him long term. And I think, overall, for the family relationship, it was better.”
A little while back, the company transitioned its business model. It was doing a mixture of repairs, maintenance and re-roofs. They learned that the repairs and maintenance work was more profitable than re-roof work — while it was a lower volume, it was a higher margin. There was a way, then, that they could continue doing annual maintenance that was more predictable, cash-flow wise.
“We primarily work in retail centers, some industrial. For a lot of retail centers, they want to know what their cash flow is. So, setting long-term maintenance goals that offset having to do roof replacements, and/or push roof replacements years down the road where they can easily predict what their cash flow is going to be, was the start of that,” he says. “That grew into, if we can do that, we can never replace a roof. That's where we're at now is transitioning customers to never replacing the roofs, doing annual maintenance, having it part of the budget, but making sure that it's done in such a way where if you look at the annual cost of ownership of a roof for replacing it versus doing maintenance that the cost of ownership that we're providing to them is less than if they were to go and replace the roof on a 20- to 30-year basis.”
Since that transition, he says they’ve found that it is a lower volume, but their margins and gross profit are much higher. And with the same size field crew, they can do a lot more work than they were doing before. That’s led to steady growth and better utilization of resources.
Having never run a company before, he says there's just a lot he didn’t know — about finance, insurance, employment law and many other things that go on behind the scenes of running a company. And because the company also has a sheet metal business and a little bit of real estate, it's a little bit more complex than just a singular company.
He says he’s also realizing that the business can no longer pull every decision out of his dad's head. So, they’re figuring out what processes need to be in place, what the bonus structure should be, and more.
“As an entrepreneur/owner, being one person in charge, having all the knowledge, that's not very valuable to other people,” Hilty says. “And even if we don't want to sell at this point, basically making sure the company doesn't solely rely on me and my decision making is going to be a big challenge going forward. And how do we do that? How do we structure that? How do we bring other people into the decision-making process to where the company doesn't solely run on me and my decisions?”
