economic summit (phase 1)

““The 2009 The 2009 Home Home

Improvement Improvement Economic Economic Summit”Summit”

Presented by Presented by

Dave Yoho AssociatesDave Yoho Associates

““The 2009 The 2009 Home Home

Improvement Improvement Economic Economic Summit”Summit”

Presented by Presented by

Dave Yoho AssociatesDave Yoho AssociatesThe entire contents of this handout material is copyrighted by and is the intellectual property of Dave Yoho Associates.

No reproduction is permitted without the express written permission of Dave Yoho Associates.

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Market$harp

Oakhill Press

The Industry in The Industry in TransitionTransition

Rick Strachan, Executive DirectorRick Strachan, Executive DirectorHanley-Wood Hanley-Wood [email protected]@hanleywood.com

Rick Strachan serves as Executive Director of Hanley Wood’s Residential Remodeling Group consisting of 12 publications, including Remodeling Magazine and The Replacement Contractor. Since 1992, he has served Hanley Wood, who is one of the top 10 business media firms in the United States. Rick is on the board of Joint Center for Housings Studies Harvard University Remodeling Futures Committee. He is an active participant in the affairs of this industry and has received the President’s award from NARI - The National Association of Remodeling Industries.

Resurgent RemodelingA brighter outlook through 2015

Hanley Wood’s Remodeling Network Cover the Market

What the experts are saying…

The Market

Kermit BakerDirector of the Remodeling Futures Program

Joint Center for Housing Studies at Harvard UniversityCambridge, MA

A market with a strong story:

— Strong growth

— Greater stability during downturns

— Short term market projections

— Long term market projections

The Market

43.6

115

149161

180210

229

280297

327

279300

1980 1990 1995 1997 1999 2001 2003 2005 2006 2007 2008* 2009*

The Market

Stability and long term growth

Source: Joint Center for Housing Studies Harvard University, U.S. Census Bureau*Denotes preliminary Joint Center for Housing Studies / Hanley Wood Estimates

Billions of $’s

The Market

Greater stability during downturns:

— But midsize & smaller projects and replacements are less vulnerable than larger A&A

— Peak to trough for Replacement and Remodeling market during current cycle is estimated at -15% to -20%, which is far less than the current Residential New Construction projection

2008 / 2009: a dip, not a crash for remodeling

The Market

Source: Harvard Joint Center for Housing Studies tabulations of Commerce Departments numbers,based on $353.4B for new residential and $294.9B for remodeling

Replacement and Remodeling increasing share of residential spending

17%

24% 22%

29%32%

40%

48%

1995 1997 1999 2001 2003 2005 2007

0

10

20

30

40

50

2005 2006 2007 2008 2009 2010 2011

New Res

R&R

The Market

Window unit sales (Millions of units)

Source: 2008 WDMA/AAMA Study of U.S. Market for Windows, Doors, Skylights



$8.5 $9.5$11.7 $12.7 $13.5

$10.9 $10.1

2002 2003 2004 2005 2006 2007 2008 (Est.)

$ Billions

The Market

Source: Kitchen & Bath Business, KCMA

RemodelingNew Construction

200720062005

24.3%24.3%

75.7%75.7%

19.6%19.6%

80.4%80.4%

15.1%15.1%

84.9%84.9%

Cabinets

Source: Kermit Baker, Chief Economist, Harvard Joint Center for Housing Studies


— Improvements decrease 9% in 2009

— Overall remodeling expenditures down 5% to 9%

— 3.5% to 4.5% annual real growth (adjusted for inflation) over next decade

The Market: 2009

Harvard Joint Center for Housing Studies Projections

Growth Drivers

Growth Drivers

— Total households

— Total existing housing stock

— Average age of housing stock

— Age by region

— Homeowner spending forecast

Growth Drivers

Total households are still growing

Sources: Census Bureau, Housing Vacancy Survey; George Masnick and Eric Belsky, “Revised Interim Joint Center Household Projections Based Upon 1.2 Million Annual Net Immigrants”, JCHS Research * Denotes Projection

Growth Drivers

37.446.1

58.368.7

88.4

120.8130.4

139.3

102.3

Millions of units

1940 1950 1960 1970 1980 1990 2003 2013*

Greater total housing stock = opportunity

Sources: U.S. Census Bureau (October 2008), Homeownership Alliance, Brookings Institute

2007

Growth Drivers

Average Age of U.S. Housing Stock

2005 34 years (oldest in U.S. history)

2013 37 years (projected)

An aging housing stock = even bigger opportunity

Growth Drivers

Source: Joint Center for Housing Studies, Harvard University

Average age of interior building products

Source: NAHB, Facts and Figures

Dishwasher, disposal, compactor: 10 years

Cabinets:15 - 20 years

Exhaust fan: 20 years

Granite:20+ years

Laminate:10 - 15 years

Growth Drivers

Sealer, silicone, waxes:1 - 5 yrs

Screen:25 - 50 yrs

Cement:50 yrs

Exposed exterior:25 - 30 yrs

Poured footing and foundation: 200 yrs

Average age of exterior building products

Growth Drivers

Source: NAHB, Facts and Figures

Consumers still want more

Source: U.S. Bureau of the Census, Construction Reports, Series C-22, Housing Completions. Prepared by Economics Department, NAHB

Growth Drivers

New Home Characteristics1989 2006

Growth Drivers

Average size in sq. ft. 1,9051,905 2,4692,469

New homes with 4+ bedrooms 28%28% 39%39%

New homes with 2.5+ bathrooms 44%44% 59%59%

New homes with central air 77%77% 89%89%

Improvement spending increases with age of home

Source: Joint Center tabulations of the American Housing Survey

0-4 5-9 14-10 15-19 20-24 25-29 30-39 40-49 Over 50

Age of Home

Average annual spending

Growth Drivers

Median year of homes built by region

Northeast: Northeast:

19551955

Source: Harvard Joint Center Tabulations of American Housing Surveys

Midwest: Midwest:

19651965

South: South:

19761976

West: West:

19741974

Growth Drivers

The bright side…

Sal AlfanoEditorial Director, Remodeling Group

Hanley Wood Business Media

Washington, DC

Growth Drivers

Remodeling trends:Remodeling trends:

— Green remodelingGreen remodeling

— Demographic changesDemographic changes

— Growing minority segmentGrowing minority segment

— Aging in placeAging in place

— Outdoor livingOutdoor living

— Reinvestment in rental housingReinvestment in rental housing


Kermit BakerDirector of the Remodeling Futures Program

Joint Center for Housing Studies at Harvard University

Cambridge, MA

Remodeling Trends

Green remodeling is coming on strong

84%84%

No

Yes

Don’t Know10%10%6%6%

Remodeling Trends

Source: REMODELING; Green Remodeling Study, November 2006

Do you believe that over the next five years client interest in and required use of sustainable / green products will grow?

What Remodelers are installing:

73% Energy-efficient windows

65% Insulation replacement, sprayed foam or fiber

56% High-efficiency HVAC systems

47% High-efficiency kitchen appliances

46% Water-saving faucets and fixtures

Source: NAHB: First Quarter 2008 Remodeling Market Index

Home owners demand energy-efficient upgrades

Remodeling Trends: Green

Boomers want to age in place

— 84% of 50+ homeowners want to stay in their homes

— Only 16% have modified their homes to do so safely and comfortably

Source: AARP polling

Remodeling Trends: Demographics

1995 31.3%31.3% 22.5%22.5% 3.7%3.7%

2005 24.5%24.5% 31.3%31.3% 20.4%20.4%

2015 21.3%21.3% 23.6%23.6% 27.0%27.0%

Source: JCHS Projections

Boomers are big, but don’t ignore Gen-Xers


Share of Total Homeowner Spending

Lead Baby Boom(Born 1945 – 1954)

Trail Baby Boom(Born 1955 – 1964)

Gen X(Born 1965 – 1974)

23.3%

20.6%

18.4%

14.4%

12.3%1995

2000

2005

2010

2015

Minorities increase spending, too

Source: Joint Center for Housing Studies, Harvard University

Share of total home improvement expenditure


Remodeling Trends: Projects

D-I-Y enthusiasm dims

— 81% Americans planned home improvements in 2008

— Only 44% wanted to do a DIY (down from 56% in 2006)

— 32% of females between 25 and 34 said they would DIY (compared to 59% in 2006)

Source: Vertis Communications Study, July, 2008

What the industry is saying…


Tom KellyPresident, CEO and Owner

Neil Kelly Design, Build, Remodeling

Bend, OR

Professional vs. D-I-Y: Kitchen and bath projects

Source: Joint Center tabulations of American Housing Surveys


DO-IT-YOURSELFHomeowners

ReportingProjects

(000s)Average

($)

TotalExpenditures

($M)

PROFESSIONALHomeowners

ReportingProjects

(000s)Average

($)

TotalExpenditures

($M)

Minor kitchen remodel 758758 4,0014,001 3,0323,032 629629 1,4701,470 924924

Major kitchen remodel 572572 29,79029,790 17,03417,034 461461 12,77812,778 5,8965,896

Minor bath remodel 749749 2,0002,000 1,4991,499 837837 750750 628628

Major bath remodel 622622 15,84215,842 9,8589,858 583583 5,8245,824 3,3973,397

Professional vs. D-I-Y: Exterior replacement projects

Source: Joint Center tabulations of American Housing Surveys


DO-IT-YOURSELFHomeowners

ReportingProjects

(000s)Average

($)

TotalExpenditures

($M)

PROFESSIONALHomeowners

ReportingProjects

(000s)Average

($)

TotalExpenditures

($M)

Roofing 2,7072,707 5,8105,810 15,72815,728 677677 2,6852,685 1,8191,819

Siding 776776 6,6736,673 5,1775,177 428428 2,9342,934 1,2561,256

Window / door 2,7332,733 3,8013,801 10,38710,387 1,8811,881 1,3231,323 2,4882,488

Add / replacedeck / porch 416416 8,5338,533 3,5463,546 443443 2,0482,048 907907

Contractor universeContractor universe

— Diverse segmentationDiverse segmentation

— Totals by type of workTotals by type of work

— Types of work Types of work by specialtyby specialty

— Consolidation? Consolidation? Not yetNot yet

Source: 2002 Census Tabulations by Joint Center for Housing Studies of Harvard University (2007)

Firms with Revenues of $25,000 or More

Universe

Over a MILLION firms prove vibrant diversity

– 530,200 individual remodeling businesses

– 320,100 specialty trade firms

– 210,100 general contractor remodeling firms

82,90082,900

117,200117,200

General Contracting Firms

Specialty Firms

Universe

The core 200,000+ remodeling firms: 41% general contractors, 59% specialty contractors

200,100 firms with a payroll and with 50% or more of their business in residential remodeling

Source: Harvard Joint Center Tabulations of the 2002 Census Construction Industries (2007). Excludes firms with less than $25,000 in annual revenues

1.1%

2.4%

Share of Establishments

Share of Remodeling Receipts

Universe

The largest 12.1% of GC firms account for 57.2% of all GC firm revenues

($ thousands)

Of the core 82,900 general contracting firms, the top 12.1% take in 57.2% of the revenues

Note: Excludes single-trade contractorsSource: Harvard Joint Center Tabulations of the 2002 Census Construction Industries. Completed January 2007

Independent Independent Contractor StatusContractor Status

D.S. Berenson, EsquireD.S. Berenson, EsquireJohanson Berenson LLP Johanson Berenson LLP [email protected]@johansonberenson.com

Mr. Berenson serves as general and special counsel to contractors, remodeling industry manufacturers, trade associations, banks and consumer lenders. His experience includes the Office of Chief Counsel of the Internal Revenue Service and the Securities and Exchange Commission. A frequent lecturer and author, Mr. Berenson was one of nine attorneys honored in the 2005 Forbes Magazine “Special Tribute to America's Best Lawyers”. He is the author of Pratt’s State Law and Regulation of Closed-End Credit, a six-volume treatise of installment sale practices.

Amends the Fair Labor Standards Act of 1938

Requires every employer to:

• Keep records of non-employees (contractors) who perform labor or services for remuneration

• Provide certain notice to each employee and non- employee including their classification as employee or

non-employee and information concerning their rights under the law

H.R. 6111 Employee H.R. 6111 Employee Misclassification Prevention ActMisclassification Prevention Act

• Makes it unlawful for any person to fail to accurately classify as an employee or non-employee

• Doubles the amount of liquidated damages for maximum hours, minimum wage and notice of classification violations by an employer

• Subjects a person who repeatedly or willfully violates such notice requirements to a civil penalty not to exceed $10,000 for each violation


• Directs the Secretary of Labor to establish a web page on the Department of Labor’s website that summarizes the rights of employees under the Fair Labor Standards Act and other federal laws

• Requires a federal grant for the administration of state unemployment compensation


Requires the state’s unemployment compensation law to include a provision for:

1) Auditing programs that identify employers that have not registered under the state law or that are paying

unreported compensation where the effect is to exclude employees from unemployment compensation coverage

2) Establishing administrative penalties for misclassifying employees or paying unreported unemployment

compensation to employees


Requires any office, administration or division of the Department of Labor to report any misclassification of an employee by an employer that it discovers to the Department’s Employment Standards Administration (ESA).


Authorizes the ESA to report such information to the Internal Revenue Service (IRS).


To Acquire Review of the Act - - Click onto:

http://www.govtrack.us/congress/bill.xpd?bill=h110-6111&tab=summary





General Tax General Tax Issues - - 2009Issues - - 2009

Thomas Cox, Managing PrincipleThomas Cox, Managing PrincipleThompson Greenspon - CPA Thompson Greenspon - CPA [email protected]@tgccpa.com

Thomas E. Cox, CPA, is the managing principle of Thompson Greenspon, Fairfax, VA. He acts as the firm’s liaison with the IRS on ruling requests, audits and other compliance areas. Prior to joining Thompson Greenspon in 1978, Tom was an appeals officer with the appellate division of the IRS and was an instructor for their advanced corporate and partnership tax courses. His experience includes tax planning for corporate reorganizations, workouts, liquidations, partnerships, compensation planning and individual and business tax planning.

* This section also features D.S. Berenson, Esquire

Energy Tax Credits Energy Tax Credits and Marketing Themand Marketing Them

Nils Peterman Nils Peterman National Fenestration Rating Council National Fenestration Rating Council [email protected]@ase.org

Nils Petermann is a member of the National Fenestration Rating Council. He leads the Alliance to Save Energy’s efforts to promote energy-efficient fenestration as project manager for the Efficient Windows Collaborative, a collective project between the Alliance, the University of Minnesota, Lawrence Berkeley National Laboratory and AZS Consulting. Nils performs analysis and promotion of strategies to advance energy efficiency in the fenestration market, including utility and tax incentives, sustainable building standards and end-user education.

* This section also features D.S. Berenson, Esquire and Tom Cox, CPA

$1500 Energy Tax Credit

Homeowner’s primary residence (30% of purchase price)

Does not include installation

Homeowners must file IRS form 5695 with 2009 and/or 2010 tax return

Homeowners should keep manufacturer certification for their records

Energy Tax CreditsHow to maximize them and explain to homeowners

A Tax Credit. You don’t receive the tax credit when you buy the Home Improvement project. You claim the credit on your federal income tax form at the end of the year – 2009 or 2010. The credit then increases the tax refund you receive or decreases the amount you owe.

Tax Credits vs. Tax Deductions. In general, a tax credit is more valuable than a tax deduction. A tax credit reduces the tax you pay, dollar-for-dollar. Tax deductions – (home mortgages or charitable giving) – lower your taxable income. If you are in the 35-percent tax bracket, the income tax you pay is reduced by 35 percent of the amount of the tax credit.

Tax Credit for Efficient Windows, Doors & Skylights

Installed in 2009 or 2010

30% of purchase price (exclude installation)

Maximum credit: $1,500 for qualified energy efficiency improvements (including windows, doors and skylights)

NFCR-certified energy ratings:

– U-factor of 0.30 or less

– Solar Heat Gain Coefficient (SHGC) of 0.30 or less

To visit the Alliance to Save Energy site click here: www.ase.org/content/article/detail/2654

To visit the ENERGY STAR site click here: www.energystar.gov/index.cfm?c=products.pr_tax_credits

http://www.ase.org/content/article/detail/2654

http://www.energystar.gov/index.cfm?c=products.pr_tax_credits

http://www.energystar.gov/index.cfm?c=products.pr_tax_credits

Lead PaintLead PaintIssuesIssues

Paul Toub, V.P. of MarketingPaul Toub, V.P. of MarketingKachina Lead Paint Solutions LLC Kachina Lead Paint Solutions LLC [email protected] [email protected]

Paul will review the amended Toxic Substances Control Act (TSCA) and its impact on the remodeling industry. As Marketing Director of Anthony Home Improvements, Inc. and Housecrafters (installers for 58 of The Home Depot stores), he understands TSCA and Lead Safe Work Practices as an industry insider. Paul’s extensive marketing and professional announcing experience make him an easy-to-understand and enjoyable presenter.


APRIL 2008 - The Toxic Substances Control Act (TSCA) was amended

Significantly increased the burden and impact on our industry

First change happened 12/22/2008

Give to the owners of any pre-1978 home prior to beginning work

Get signed acknowledgment

Save for 6 years

NON-COMPLIANCE?

Criminal fines & imprisonment for up to one year/violation

Civil Penalties Up to $32,500 per violation / per day

Overseen by EPA & State Agencies

WHAT KIND OF WORK?

Removal of painted surfaces or painted components

“Renovation” = Any work that disturbs a painted surface

Surface preparation on painted surfaces Sanding and scrapingOther activities that may generate paint dust

WHAT KIND OF WORK? Removal of large structures that may have paint on them

Walls and ceilings Large surface re-plasteringMajor re-plumbing

Weatherization projects Cutting holes in painted surfaces to blow-in insulation or gain access to attics

WHAT KIND OF WORK?

Window replacementWindow repair (if painted)

NOT SURE ABOUT AGE OF THE HOME OR TYPE OF WORK?

When in doubt…Better safe than sorry!

EXCLUSIONS1978 or newer housing

Minor work disrupts 6 square feet or less of painted surfaces per room (interior)

20 square feet or less (exterior)

BE CAREFUL ABOUT THIS EXCLUSION

Do not rely on these exclusions if a child, age 6 or younger, lives or regularly visits the dwelling

When in doubt…Better safe than sorry!

All you need to do thru 4/21/2010

BOTTOM LINE:

APRIL 22, 2010

Pamphlet + test for lead paint (pre ’78 rule still applies)

If positive – lead safe work practices (LSWP)

EXCEPTIONS

Newer construction

Lead-free certified job sitesTest shows no lead paint or other surface

coatings that contain lead

Not in excess of 1.0 mg / sq. cm (or 0.5% by weight)

EXCEPTIONS

If owner lives there and opts out

• No pregnant women

• No child under age 6

• Must certify these conditions and agree LSWP will not be used

Why owner would opt-out?$$$$$$

Can you opt-out?Yes. Refuse the work!

IF YOU DO PROCEED

• Attest that it will assign a certified renovator

• Use only certified or properly trained workers

• Follow LSWP

• Adhere to all recordkeeping requirements

COMPANY NEEDS TO BE EPA- CERTIFIED

• Supervised or directed by the certified renovator

• Must have received relevant OJT in LSWP from a certified renovator

IF YOU DO PROCEED

INSTALLERS ON JOB

•Complete 8 hour course (includes 2 hours hands-on training) by an EPA certified training provider

•Accredited refresher course every 5 years

BECOMING A CERTIFIED RENOVATOR

The Opportunity to The Opportunity to Acquire Other Acquire Other

CompaniesCompanies

David Moore, Chairman & CEODavid Moore, Chairman & CEOMoore HoldingsMoore [email protected]@mooreholdings.com

David Moore is Chairman/CEO of Moore Holdings and Chairman of Sonostar Ventures which invest in and manage a variety of private companies. He has held the following positions: CEO, Register.com (NASDAQ); Board Member, Network Solutions; and CBS Marketwatch.com (NASDAQ); Vice Chairman, Marquis Jet; Chairman, U.S. Home Systems; Chairman, Garden State Brickface and Renewal by Andersen of NY and NJ. He has served on the Boards of ten different companies, six of them public (two NYSE, four NASDAQ). David graduated magna cum laude from Amherst College in 1978 and has an MBA from Harvard University.


W. Hobson Hogan, Senior AssociateW. Hobson Hogan, Senior [email protected]@fminet.com

Hobson Hogan is a member of FMI’s investment banking practice. He specializes in building products manufacturers and distributors, as well as other construction industry firms, focusing on mergers and acquisitions, ownership transfer issues and strategy development. He has an extensive background in finance, strategic planning, consulting and engineering. His experience provides him with an understanding of difficult organizational, operational and strategic issues facing the building and construction industry.

Investment Banking

Drivers of Salability and Value

© FMI Corporation 2009

DisclaimersForward Looking Statements

This presentation contains forecasts, certain statements, projections and estimates from the U.S. Department of Commerce Construction Put in Place data, building permits, and other trade sources considered reliable, as compiled and estimated by FMI's Research Services Group and other third parties. FMI nor its employees make no representation as to the completeness or accuracy of the data. Such statements, estimates, and projections reflect various assumptions concerning anticipated results, which may or may not prove to be correct. Such projections and estimates are not necessarily indicative of current value or future performance, which may be significantly more or less favorable than as reflected therein. Accordingly, no representations are made as to the accuracy or completeness of such statements, estimates, or projections, and such statements, estimates, or projections should not be relied upon as indicative of future value or as a guarantee of value or future results.


Legal and Financial Advice

This presentation contains commentary and strategies that may have significant legal, tax, and other financial implications. FMI does not provide legal, accounting, or tax services. Any related strategies and suggestions in this presentation should be carefully reviewed by appropriate legal, tax, and financial advisors to determine their specific suitability.

Disclaimers


Value Drivers

*Personnel Process

Product

Profit Projections

Pricing of Debt/Equity

“6P Framework”

Company Side

Numbers Side


The Company Side

Personnel

Drivers of Value

Presence of professional management team

Highly skilled staff and/or workforce

Customer relationships spread throughout organization

Detractors of Value

Owner manages everything

Owner responsible for high proportion of customer

relationships


The Company Side

ProcessDrivers of Value

Internal controls in place

Accounting, IT and CRM systems in place

Presence of HR procedures (Employee handbook, Safety procedures)

Detractors of Value Loose controls

Company “run out of shoebox”

Poor health and safety record and/or procedures

Environmental issues


ProductDrivers of Value

Growing market share Strong brand Barriers to entry Intellectual property Leading edge

Detractors of Value Declining market share Commodity product Low barriers to entry “Bleeding edge” product

The Company Side


ProfitsDrivers of Value

Consistent results Performance in tough times Audited statements High margins relative to industry Easily verified adjusted earnings

Detractors of Value Volatile earnings Low margins relative to industry Difficult to quantify owners’ expenses and

perquisites Capital intensive business

The Numbers Side


ProjectionsDrivers of Value

Well thought out business plan Expected revenue growth Expected profitability growth

Detractors of Value No support to business plan

Vastly different than historic results

Vastly different than industry projections

Declining revenue or profitability High Capital Expenditures (CAPEX) expected

The Numbers Side


Pricing of Debt & Equity

Drivers of Value

Hard assets to borrow against

High quality current assets

Consistency of results

Detractors of Value

Lack of hard assets and/or assets in poor shape

Obsolete inventory and/or poor receivables

Risky industry and/or product

The Company Side


Valuation BasicsMethodologies

Asset-based approach Fair market value of assets

Market-based approach Public comparables Public transactions

Income approach Earnings based method Discounted cash flow (“DCF”) method Leveraged buy out (“LBO”) method

* Not every methodology will be used in every case* No one methodology is superior


Market Factors Affecting Value

Continued weakness in residential markets

Equity out refinancing and home equity loans greatly curtailed

Bank lending significantly tightened

Debt pricing greatly increased

Rich Nelson, President & Co-FounderRich Nelson, President & Co-FounderPCM ConstructionPCM [email protected]@pcmgc.com

Rich Nelson is President and co-founder of PCM Construction. Established in 1992 PCM Construction, Inc and its Subsidiaries (PCM) provide facilities maintenance services to commercial properties in the Washington/Baltimore area. The services that PCM provides are commercial asphalt, concrete, line-striping, painting, flooring, electrical, mechanical/HVAC, plumbing, powerwashing, and waterproofing/ restoration services. PCM also has two separate general contracting divisions.

The Basis of Good OptimizationThe Basis of Good Optimization

• Additional services can be offered that expand your Additional services can be offered that expand your current service portfoliocurrent service portfolio

• Both the acquired and the acquiring business would Both the acquired and the acquiring business would immediately benefit from client base and business immediately benefit from client base and business processes of each organizationprocesses of each organization

• The businesses have management style/talent that The businesses have management style/talent that fit into your corporate values and culturefit into your corporate values and culture

The Integration ProcessThe Integration Process

• Nothing except paycheck changes the first 30 daysNothing except paycheck changes the first 30 days

• Schedule a strategic planning session with a Schedule a strategic planning session with a professional facilitator 30 days after closing. Session professional facilitator 30 days after closing. Session will include specific tasks to improve and who is will include specific tasks to improve and who is responsible and how it is being measured.responsible and how it is being measured.

• Let leaders leadLet leaders lead

Review and Update MethodsReview and Update Methods

• Continually check in with the management team of the Continually check in with the management team of the acquired company. Feelings of “seller remorse” and acquired company. Feelings of “seller remorse” and regret are natural.regret are natural.

• Continue to engage a professional facilitator to meet Continue to engage a professional facilitator to meet quarterly and fine tune and/or adjust your strategic plan quarterly and fine tune and/or adjust your strategic plan and most importantly, make sure progress is being made and most importantly, make sure progress is being made toward identified goals.toward identified goals.

• Be flexible. Both companies bring value to the Be flexible. Both companies bring value to the acquisition.acquisition.

Mark Watts, CPA, CVAMark Watts, CPA, CVACocke, Szpanka & TaylorCocke, Szpanka & [email protected]@cst-cpa.com

Mark Watts has over 25 years experience with an emphasis on taxation; planning, preparation, and compliance. He is a partner, advising closely-held businesses and owners, along with high net worth individuals. He is a member of the National Association of Certified Valuation Analysts and has actively participated in, or advised clients on matters of mergers and acquisitions.

Tax Treatment of Assets Included in Sale of a Business

AssetAsset Seller’s Tax TreatmentSeller’s Tax Treatment Buildings and Buildings and

building building componentscomponents

Long-term gain attributed to depreciation is unrecaptured Section 1250 gain. Long-term gain attributed to depreciation is unrecaptured Section 1250 gain. Maximum individual capital gain rate on unrecaptured Section 1250 property is Maximum individual capital gain rate on unrecaptured Section 1250 property is 25%.25%.

LandLand Long-term gain is Section 1231 gain. Maximum individual capital gain rate on Long-term gain is Section 1231 gain. Maximum individual capital gain rate on Section 1231 property is 15%.Section 1231 property is 15%.

Equipment and Equipment and other tangible other tangible personal propertypersonal property

Gain attributed to depreciation is ordinary income under Section 1245. Gain attributed to depreciation is ordinary income under Section 1245. Maximum individual ordinary income tax rate is 35%.Maximum individual ordinary income tax rate is 35%.

Long-term gain in excess of depreciation is a capital gain under Section 1231. Long-term gain in excess of depreciation is a capital gain under Section 1231. Maximum individual capital gain rate on Section 1231 property is 15%.Maximum individual capital gain rate on Section 1231 property is 15%.

InventoryInventory Gain is ordinary income. Maximum individual ordinary income tax rate is 35%.Gain is ordinary income. Maximum individual ordinary income tax rate is 35%.

Intangible assets Intangible assets such as goodwill, such as goodwill, covenant not to covenant not to compete, copyright, compete, copyright, patent, customer patent, customer list, employee list, employee contract, franchise, contract, franchise, trademark or trade trademark or trade namename

Long-term gains on self-created intangibles are generally considered capital Long-term gains on self-created intangibles are generally considered capital gains. Top individual capital gain rate is 15%. gains. Top individual capital gain rate is 15%.

Exception:Exception: Income from a covenant not to compete is ordinary income, not Income from a covenant not to compete is ordinary income, not subject to SE tax, maximum rate of 35%subject to SE tax, maximum rate of 35%

Gain on acquired intangibles attributed to amortization is ordinary income Gain on acquired intangibles attributed to amortization is ordinary income under Section 1245. Maximum individual ordinary income tax rate is 35%.under Section 1245. Maximum individual ordinary income tax rate is 35%.

Long-term gain on acquired intangibles in excess of amortization is a capital Long-term gain on acquired intangibles in excess of amortization is a capital gain under Section 1231. Maximum capital gain rate on Section 1231 property gain under Section 1231. Maximum capital gain rate on Section 1231 property is 15% in excess of unrecaptured Section 1231 losses.is 15% in excess of unrecaptured Section 1231 losses.

AssetAsset Buyer’s Tax TreatmentBuyer’s Tax Treatment Buildings and Buildings and

building building componentscomponents

Depreciable over 39 yearsDepreciable over 39 years

LandLand Nondeductible—cost is capitalized and recovered when soldNondeductible—cost is capitalized and recovered when sold

Equipment and Equipment and other tangible other tangible personal propertypersonal property

Depreciable—generally over five or seven years unless other class life Depreciable—generally over five or seven years unless other class life applies. For 2009, up to $250,000 may qualify for current expense applies. For 2009, up to $250,000 may qualify for current expense deduction under Section 179.deduction under Section 179.

InventoryInventory Added to cost of goods—deductible when sold to customers.Added to cost of goods—deductible when sold to customers.

Intangible assets Intangible assets such as goodwill, such as goodwill, covenant not to covenant not to compete, compete, copyright, patent, copyright, patent, customer list, customer list, employee contract, employee contract, franchise, franchise, trademark or trade trademark or trade namename

Amortizable over 15 years as Section 197 intangibles.Amortizable over 15 years as Section 197 intangibles.

Tax Treatment of Assets Included in Sale of a Business

S.F.I. Programs – The S.F.I. Programs – The Promise and the Promise and the

ProblemsProblems

Jim Hall, PresidentJim Hall, PresidentTEMO, Inc.TEMO, [email protected]@temosunrooms.com

Jim Hall is the president of TEMO, Inc. For 22 years he has lent his expertise and management skills to the growth of this dynamic company. He is an integral part of TEMO’s management team and has helped guide the growth and success of America’s thermal sunroom manufacturer leader. Jim has served TEMO as its CPA, company controller and general manager of operations. He also contributes his leadership to TEMO’s national dealer network in assisting their business development.

•Excellent lead source

Why SFI?Why SFI?Why SFI?Why SFI?

•Other sources may not be available

•Other sources may be too costly

•Other sources may provide limited results

•Face-to-face (SFI) is proven to work

The Keys to SFI SuccessThe Keys to SFI SuccessThe Keys to SFI SuccessThe Keys to SFI Success•2 Key roles: corporate & independent contractor

•Corporate: must work within their structure

•Independent contractors: Don’t use SFI as sole marketing strategy

Understanding Corporate Understanding Corporate SFI Cultures SFI Cultures

Understanding Corporate Understanding Corporate SFI Cultures SFI Cultures

•Customer service and satisfaction is a MUST

•Cultivate relationships & build trust with store management teams

Ray Melani, Co-OwnerRay Melani, Co-OwnerMelani Brothers Melani Brothers [email protected]@melanibros.com

Ray and his brother Ron are the founders, co-owners and managers of a legendary company that started with two guys and a truck (one canvassed and sold; one installed and collected). They grew into the largest marketers of sunrooms in the US, installing as many as 600 per year. They have a branch office in Richmond, VA. Melani Brothers was an early pioneer in the use of S.F.I. relationships and used this method as a leverage to build their business and establish their brand.

Case Study: Sears S.F.I. ProgramCase Study: Sears S.F.I. ProgramSubject: AMRE ($250 Million S.F.I.)Subject: AMRE ($250 Million S.F.I.)

Presented by David Moore, Chairman & CEO Presented by David Moore, Chairman & CEO Moore Holdings Moore Holdings


The PromiseThe PromiseCreate leads from the brand (Sears) which will increase Create leads from the brand (Sears) which will increase the return on advertising in all forms, including direct the return on advertising in all forms, including direct mail and tele-marketing the license for which included mail and tele-marketing the license for which included a remittance to Sears of about 15% (this varied with a remittance to Sears of about 15% (this varied with the product).the product). The ProblemThe ProblemThe cost of developing the marketing (advertising) The cost of developing the marketing (advertising) tools, i.e., print, TV production, had to be added to the tools, i.e., print, TV production, had to be added to the 15%. The same held true for outbound tele-marketing, 15%. The same held true for outbound tele-marketing, the creation of inbound call centers and similar.the creation of inbound call centers and similar.


The PromiseThe PromiseUsing the Sears brand enabled salespeople to appear Using the Sears brand enabled salespeople to appear more user-friendly. While contracts had to meet a more user-friendly. While contracts had to meet a standard provided by Sears, this nonetheless standard provided by Sears, this nonetheless presented a workable strategic partnership.presented a workable strategic partnership. The ProblemThe ProblemAs AMRE grew and took on more markets, the cost of As AMRE grew and took on more markets, the cost of expanding the creation of advertising, TV production expanding the creation of advertising, TV production and direct mail circulation increased and direct mail circulation increased disproportionately. Outbound tele-marketing and call disproportionately. Outbound tele-marketing and call center costs also increased.center costs also increased.


The PromiseThe PromiseThe sales methodology, when coupled with the brand The sales methodology, when coupled with the brand name, enabled salespeople to be less aggressive, thus name, enabled salespeople to be less aggressive, thus engendering better customer satisfaction. This also engendering better customer satisfaction. This also made possible a sales-hiring plan which included little made possible a sales-hiring plan which included little or non-experienced in-home salespeople. or non-experienced in-home salespeople. The ProblemThe ProblemWhen adding the license fee of 15% to marketing When adding the license fee of 15% to marketing costs ranging from 5-10%, the total cost of marketing costs ranging from 5-10%, the total cost of marketing represented 20-25% creating an inflated retail selling represented 20-25% creating an inflated retail selling price. Ultimately marketing costs hit 28%.price. Ultimately marketing costs hit 28%.


The PromiseThe Promise

We are strategic partners.We are strategic partners.

The ProblemThe Problem

AMRE grew to a $250 million plus AMRE grew to a $250 million plus company while operating on a 1 year company while operating on a 1 year contract renewable at the option of contract renewable at the option of Sears.Sears.


ObservationsObservations

SFI helped build AMRE, Facelifters and SFI helped build AMRE, Facelifters and Melani Brothers to their positions. Melani Brothers to their positions. Once attained, it is up to management Once attained, it is up to management to modify and augment arrangements to modify and augment arrangements to better suit their needs.to better suit their needs.

FinancingFinancingIssuesIssues

Jim Borschow, PresidentJim Borschow, PresidentFirst Consumer Credit, Inc.First Consumer Credit, [email protected]@firstconsumercredit.com

Mr. Borschow has been involved in home improvement consumer finance for most of his adult life with over 30 years of experience. As president of FCC Finance, Mr. Borschow utilizes his extensive expertise in home improvement lending to create opportunities for bringing financial transactions to completion. He could be described as a traditionalist, dedicated to understanding the business of his customers and committed to pursuing profitable business opportunities.

Home Improvement Financing - - 2009Home Improvement Financing - - 2009

• Current economic environmentsCurrent economic environments• Lender issuesLender issues• Creating optimum contractor opportunityCreating optimum contractor opportunity

Current Economic EnvironmentCurrent Economic Environment

• Tremendous uncertaintyTremendous uncertainty

• UnemploymentUnemployment

• Liquidity / Most effective use of capitalLiquidity / Most effective use of capital

Lender IssuesLender Issues• PricingPricing• CostCost• LossesLosses• Cash flowCash flow

Creating Optimum Contractor OpportunityCreating Optimum Contractor Opportunity

• Understanding the lenders issues and needsUnderstanding the lenders issues and needs

• Maximizing approvals / FundingsMaximizing approvals / Fundings

The Economic and The Economic and Financial OutlookFinancial Outlook

Robert Genetski, Ph.D.Robert Genetski, Ph.D.Classic Principles Classic Principles [email protected] [email protected]

Dr. Robert Genetski is one of the nation’s premier interest rate forecasters and investment advisors, providing insights to economic, financial and investment matters. In the early 1980s, he correctly forecast that tax cuts would end the nation’s economic malaise by boosting productivity, reducing inflation and interest rates. Dr. Genetski has served as Senior Vice President and Chief Economist for a major Midwest bank and headed asset management, investment research and investment banking operations. He has taught economics at several major university and served on numerous boards of directors.

Modern Economic Principles

WSJ January 6, 2009 As layoffs and store closures grip the U.S., families hope frugality will see them through. But thriftiness is a major reason the downturn may not soon end.

Frugal Families Aggravate Nation’s Economic Woes

Classical PrinciplesClassical Principles

Low tax ratesLow tax rates

Free marketsFree markets

Protect individual property rightsProtect individual property rights

Stable pricesStable prices

GDP--Major Countries-(Based on Purchasing Power Parity)

0

5

10

15

20

25

1980 1985 1990 1995 2000 2005 2010 2015 2020

Japan

China

United States

India

France

UKGermany

Brazil

Source: World Bank; IMF; classicalprinciples.com

Government “Stimulus”(billions of dollars)

• Beginning deficit $250• Early stimulus 170• Bailout Fannie & Freddie

200+• Fallout from Fannie & Freddie bailout

700• Citi, AIG bailouts

500+• Help auto companies retool 25• Bailout Detroit so it can retool

25• Obama proposed “stimulus” 790

• Total over $2,500

Factors Affecting Credit MarketsFactors Affecting Credit Markets

Fed’s monetary policy - further downturnFed’s monetary policy - further downturn

Cascading recession - borrowers squeezedCascading recession - borrowers squeezed

Government borrowing - scarcity of creditGovernment borrowing - scarcity of credit

Banking crisis - banks attempting to Banking crisis - banks attempting to recapitalizerecapitalize

FDIC insurance hike - $13.5 billion tax on FDIC insurance hike - $13.5 billion tax on banks banks

Business StrategiesBusiness Strategies

Survival mode - focus on cash flow Survival mode - focus on cash flow

Conserve capital, allocate funds cautiouslyConserve capital, allocate funds cautiously

Monitor and adjust budgets monthlyMonitor and adjust budgets monthly

Credit sources will remain Credit sources will remain scarce/expensivescarce/expensive

Prepare for major swings in spending, Prepare for major swings in spending, inflation and interest ratesinflation and interest rates

Avoid fixed price contractsAvoid fixed price contracts

Implications: Personal StrategiesImplications: Personal Strategies

StocksStocks

BondsBonds

Real AssetsReal Assets

Growing Your Business Growing Your Business in a Changing in a Changing

EconomyEconomy

Brian Smith, Senior Account ExecutiveBrian Smith, Senior Account ExecutiveDave Yoho Associates Dave Yoho Associates [email protected]@briansmith.com

Joined Dave Yoho Associates as part of a “turn-around team” after almost 20 years experience in Sales Management with some of the largest and most successful home improvement retailers in the US. He now practices as a Senior Account Executive working on a broad range of consulting assignments throughout the home improvement/remodeling industry. He has developed programs for large and mid-size home improvement companies covering almost all products which are sold directly to home owners.

ISSUES & CONCERNSISSUES & CONCERNS Traditional advertising sources are producing less leads

per dollar invested

The ability to contact prospects or re-contact customers by phone is impaired by DNC legislation

Changes in lead sources require modification of the sales model

Effective marketers reduce cost by implementing more

creative lead distribution and instituting revised sales models

Increased marketing costs are a major contribution to lower profitability

A key ingredient in a successful home improvement marketing/sales plan is: The quality and quantity of leads generated is measured against the quality and quantity of the salespeople who are issued the leads which were generated

The cost of a lead is increased (or reduced) by the efficiency and sales ability of the person to whom it is issued

ISSUES & CONCERNSISSUES & CONCERNS

A “90 DAY CASE STUDY”A “90 DAY CASE STUDY”CASE STUDY WDT-41CASE STUDY WDT-41

SALES ISSUESSALES ISSUES PriorPrior @90 @90 DaysDays IncreaseIncrease

Demo rate - vs. leads issued Demo rate - vs. leads issued 68%68% 75%75% 11.5%11.5%

1st call close rate - vs. leads issued1st call close rate - vs. leads issued 10%10% 19%19% 90%90%

1st call close rate - vs. demos1st call close rate - vs. demos 17%17% 30%30% 76%76%

Close rate (2nd call, etc.) - to leads issuedClose rate (2nd call, etc.) - to leads issued 10%10% 11%11% 10%10%

Close rate (2nd call, etc.) to demosClose rate (2nd call, etc.) to demos 17%17% 18%18% .06%.06%

Average net sales per monthAverage net sales per month $812,040$812,040 $1,026,437$1,026,437 $214,393$214,393

Projected annual volume (based on annual average by month) as of June 1st - $9,283,817

Projected annual volume as of September 1st - $11,245,262

MARKETING MARKETING ISSUESISSUES

PriorPrior @90 DAYS@90 DAYS INCREASEINCREASE DECREASEDECREASE

Marketing CostsMarketing Costs 17.01%17.01% 12.96%12.96% 4.05%*4.05%*

Efficiency Efficiency RatingRating $2,351$2,351 $2,673$2,673 $322$322

Average Leads Average Leads Issued Per Mo.Issued Per Mo. 408408 386386 2424

* Increased earnings (4.05% decreased marketing costs) - - $123,172.44

A “90 DAY CASE STUDY”A “90 DAY CASE STUDY”CASE STUDY WDT-41CASE STUDY WDT-41

Joe Talmon, PresidentJoe Talmon, PresidentLarmco Windows – Home Solutions Larmco Windows – Home Solutions [email protected]@larmco.com

Joe Talmon is President of Larmco Windows – Home Solutions an Ohio based company, he is a 22 year veteran of the window and home improvement industry. He transformed a small regional wholesale window manufacturer into a respected retailer of high end replacement windows, siding and other products. His passion is quickly uncovered when you hear him speak about one call selling, sales training, and working shows and events.

We will continually be faced with many great opportunities that will be brilliantly disguised as problems or challenges.

When we move the dirt away and dig past what we think we see we will discover those great opportunities and the profits they provide.

We will continually be faced with many great opportunities that will be brilliantly disguised as problems or challenges.

When we move the dirt away and dig past what we think we see we will discover those great opportunities and the profits they provide.

In 2007 we recognized that the landscape in our market looked confusing, different, more challenging and not at all like what we wanted to see.

The foreclosure crisis had hit Ohio in a big way and it seemed the one thing everyone wanted to talk about was foreclosure.

A competitor who had not existed 5 years earlier was now spending over $100,000 per month in radio and TV advertising according to a competitive media research study.

We suddenly realized we were no longer the Big Dog in town that we had thought we were.

In 2007 we recognized that the landscape in our market looked confusing, different, more challenging and not at all like what we wanted to see.

The foreclosure crisis had hit Ohio in a big way and it seemed the one thing everyone wanted to talk about was foreclosure.

A competitor who had not existed 5 years earlier was now spending over $100,000 per month in radio and TV advertising according to a competitive media research study.

We suddenly realized we were no longer the Big Dog in town that we had thought we were.

By mid 2007 I made a discovery

The need to change and the want to change had little to do with changing the organization.

It didn't matter how much we talked about change or agreed to change, something was missing.

In the end the single key ingredient turned out to be discipline the discipline to change.

By mid 2007 I made a discovery

The need to change and the want to change had little to do with changing the organization.

It didn't matter how much we talked about change or agreed to change, something was missing.

In the end the single key ingredient turned out to be discipline the discipline to change.

I decided we had to do 6 things

1.We had to stop toying with canvassing and learn to do it well

2. Show and event marketing had to be taken to a new dimension 3. Create a serious contact program for our existing customer base

4. Increase sales training to work with new lead sources

5. Tighten up lead management systems

6. Introduce new products

I decided we had to do 6 things

1.We had to stop toying with canvassing and learn to do it well

2. Show and event marketing had to be taken to a new dimension 3. Create a serious contact program for our existing customer base

4. Increase sales training to work with new lead sources

5. Tighten up lead management systems

6. Introduce new products

The new and improved canvassing program produced leads and allowed us to expand in to more effective show and event marketing evolving into a fun experience for our guests and show staff.

We adopted a new philosophy for training canvassers and show crew, "Sesame Street Training 101" Greed - Need – Lead.

We added a few new rules for shows and events:

• We will now go anywhere there are people• No chairs allowed, no one is allowed in the booth unless they are with a prospect• No-one is allowed to pass our booth that we don't stop and engage

The new and improved canvassing program produced leads and allowed us to expand in to more effective show and event marketing evolving into a fun experience for our guests and show staff.

We adopted a new philosophy for training canvassers and show crew, "Sesame Street Training 101" Greed - Need – Lead.

We added a few new rules for shows and events:

• We will now go anywhere there are people• No chairs allowed, no one is allowed in the booth unless they are with a prospect• No-one is allowed to pass our booth that we don't stop and engage

It started in a small town an hour north of our primary market at the Marion County Popcorn Festival.

We took our concept on the road where no one really knew us and decided to be over the top, be ridiculously aggressive and see what happens.

In a few long days, well off the beaten path, down the street nearly two blocks, then down another street nearly to the end of that section of the street we found our booth.

If location is everything we had nothing.

We set 57 appointments in 4 not so busy days.

From that event on everything changed for us.

It started in a small town an hour north of our primary market at the Marion County Popcorn Festival.

We took our concept on the road where no one really knew us and decided to be over the top, be ridiculously aggressive and see what happens.

In a few long days, well off the beaten path, down the street nearly two blocks, then down another street nearly to the end of that section of the street we found our booth.

If location is everything we had nothing.

We set 57 appointments in 4 not so busy days.

From that event on everything changed for us.

Today we have slot machines in our show and event booths and we just set a new company record by using our new and improved approach setting 203 appointments in 4 1/2 days at our home and garden show.

We have added some new products – and – with the help of Terry Ferraro, E-Shield attic insulation is booming for us.

We have zero service, easy installation, and great profit. We have even started to take a “window no demo” and turn it into an “insulation sales”.

Today we have slot machines in our show and event booths and we just set a new company record by using our new and improved approach setting 203 appointments in 4 1/2 days at our home and garden show.

We have added some new products – and – with the help of Terry Ferraro, E-Shield attic insulation is booming for us.

We have zero service, easy installation, and great profit. We have even started to take a “window no demo” and turn it into an “insulation sales”.

The past customer contact program was a home run.

We discovered far less service than we thought we would.

We found that nearly everyone loves us (nearly everyone)

And while we believed it to be true, we rediscovered that selling to our previous customers was 10 times easier than selling to anyone else.

We now make QC calls to every completed installation and every completed service. We end every call with a scripted line.

"Before I let you go I'm excited to tell you about a new product."

The past customer contact program was a home run.

We discovered far less service than we thought we would.

We found that nearly everyone loves us (nearly everyone)

And while we believed it to be true, we rediscovered that selling to our previous customers was 10 times easier than selling to anyone else.

We now make QC calls to every completed installation and every completed service. We end every call with a scripted line.

"Before I let you go I'm excited to tell you about a new product."

We are now selling new work for the first time to people within one week of a completed service or completed installation.

As a result of the decision to add discipline change began to happen.

By the end of 2008 our central Ohio region had overtaken our numbers from 2007 - - More importantly our profits grew.

I see 2009 being an up year in both sales and profits over 2008.

I believe that the future will offer us amazing opportunities that will be brilliantly disguised as problems or challenges.

We are now selling new work for the first time to people within one week of a completed service or completed installation.

As a result of the decision to add discipline change began to happen.

By the end of 2008 our central Ohio region had overtaken our numbers from 2007 - - More importantly our profits grew.

I see 2009 being an up year in both sales and profits over 2008.

I believe that the future will offer us amazing opportunities that will be brilliantly disguised as problems or challenges.

Rick Wuest, Owner & PresidentRick Wuest, Owner & PresidentThompson Creek Window Company Thompson Creek Window Company [email protected]@thompsoncreek.com

Rick Wuest is the Owner and President of Thompson Creek Window Company. Thompson Creek’s headquarters is in Landover MD, and services customers in Maryland, DC, and Northern Virginia. The company is a specialty remodeler marketing and installing widows, siding, entry doors, and gutter systems. The company manufactures their own replacement windows and Gutter Systems.

Sal Ferro, President & CEOSal Ferro, President & CEOAlure Home ImprovementAlure Home [email protected]@alure.com

Salvatore (Sal) Ferro is President and CEO of Alure Home Improvement of East Meadow, NY, a full service home improvement company with revenues of over $45 million annually. Starting as a Production Manager a scant 20 years ago, he enabled his company to grow from a small painting contractor to the successful multi-product giant of today. He has received numerous rewards from both industry and consumer groups. His company has participated six times on the ABC Extreme Home Makeover show and most notably, his company acquires over 40% of their business from referral leads.

Tim Musch, Business Development Dir.Tim Musch, Business Development Dir.MarketSharp Software MarketSharp Software [email protected]@marketsharp.com

Tim Musch is Director of Business Development for MarketSharp Software located in Lacrosse, WI. Prior to that, he spent 15 years gaining experience in a family owned remodeling company in Central Wisconsin. MarketSharp has supplied computerized marketing solutions to over 2000 of the country’s most successful remodelers. Tim has spent the last 18 years developing and refining computerized database marketing systems for the remodeling industry.

Efficiency!

Grow Your Business

This Year By 34%

While...

Only Getting 6%

Better At What You

Do!

A Quick Lesson In Knowing Your Numbers...

UPS trucks drove 2.5 billion miles last year, but the company says it’s research found by doing ONE THING saved driving 28,541,472 million miles, and three million gallons of fuel.

Any Idea What It Is?

What AreYOUR Company’s

Left Turns?

The Lead(inquiry)

The Call(inbound/outbound)

Pre-ApproachActivities

Presentation

SystematicLead Follow-up

(asset recovery)

Repeat/Referral Strategies

(customer replication)

Leverage Your Business’ FLEX Points!

Great Brainstorming Tool!

It All Starts Here!

Planning Worksheet…

Brainstorm Meeting…

Let’s Trade…

=XYZ Windows1300 Main StreetYour Town, USA800-555-1212

Michelle NowlanGeneral Manager

To Sum Up…

•Know your numbers

•Continuously strive to improve

“…the best way to put distance between you and the crowd, is to do an outstanding job with information. How you gather, manage, and use information will determine whether you win or lose.“

- Bill Gates

Report Example…

MarketingMarketingSavvySavvy

ADVERTISING CASE HISTORY (NEWSPAPER) #170NP

SUBJECT: Large window replacement retailer, $20MM annual revenue – major eastern city.

GOAL: Contain/reduce marketing costs (13% in 2007). MAY 2007 meeting with competing major newspapers (reps) (together in conference room).Each given purchase order for $20M advertising (1 mo).Each given instructions to use $20M to produce as much advertising as possible for one month.

Each informed: publication producing most inquiries (leads) would receive a contract for balance of the year.

RESULTS AT END OF MAY

• Newspaper (A) stuck to rate card produce results less than fair

• Newspaper (B) use company’s ads as fillers, special projects, inserts

• Newspaper (B) advertising produced 171 leads, 86 appointments. Cost per lead issued $232Net revenue $182,333Net advertising cost 11%


OVERVIEWNewspaper (B) utilized special projects. Probably equal to $90M – $100M based on lineage.

FOLLOW THROUGHNewspaper (B) was asked to agree to a contract for $20,000 a month not to exceed 12%.

2008 PROJECT• Newspaper (B) continued project for $20M per month for entire year• Conditioned by “not to exceed” 12%• Incoming calls monitored by “Call Cap” (or similar) shared with newspaper rep• Reviewed at the end of each month with rep

2009 PROJECTSame as above


ADVERTISING CASE HISTORY (MAGAZINE) #183MP

SUBJECT: Suburban company – near a major city – windows/siding

(A) Community magazines (city, county) contracts volume based.

STRUCTURED AGREEMENT• Rates are paid by actual gross volume sold• Window volume at 10%, siding volume at 6%• Use 800 number with monitor check in publication and/or Call Cap• At net volume cost not to exceed 12% total

(B) Monthly news insert (mail delivered)• Arrangement similar to above• All rates are at 12% net volume

STRUCTURED AGREEMENT • Not to exceed total of 12% of volume

ADVERTISING CASE HISTORY (RADIO) #191R

SUBJECT: Established company suburb – windows, sunrooms, siding, volume $12MM

GOAL: Promote brand in-market while producing cost-effective leads

RESEARCH METHOD:• Listen to different radio show daily• Determine – the number of (“self-promoting”) charity and/or public interest ads indicating “non-revenue” advertising

• Visit station personally• Trial program 60 days

$50 per lead – and 12% of net sales Utilize first station results as benchmark for additional programs

ADVERTISING CASE HISTORY (TELEVISION) #194TV

SUBJECT: Suburban company, third level market – siding, windows, roofing, heating, annual volume $13MM

GOAL: Television advertising in a market supported by 6 channels – per inquiry

MARKET DEFINITION: 4MM population extending 75 to 90 miles from company base. Four stations affiliated with major networks, 2 independent

METHOD: All contracts based on per inquiry, space available and run of schedule

COST: Per inquiry – $50-$80 each

CONTROL: Shared 800 numbers with control check, reviewed monthly

THE PLUS: During January/February (normally slow for stations) may get 10-20 runs per day

THE MINUS: During elections, where majority of the time is booked, fewer runs

Discussion on

Ron Sherman, PresidentRon Sherman, PresidentRon Sherman Advertising Ron Sherman Advertising [email protected]@ronshermanadv.com

Ron Sherman is the President of a multi-million dollar ad agency headquartered in Little Rock, Arkansas. He specializes in producing programs for the home improvement industry. He acts as producer and spokesperson for many of those in the room today. In any given time, throughout the US, you can count on running into a Ron Sherman production television program. He has dedicated his business and his modern production studio to the art of – producing leads.

A form of direct response in which the advertiser

receives free commercials while paying only for

results.

Also known as:• “Cost Per Lead” or CPL• “Pay Per Lead” or PPL• Cost Per Action

1. Establish a favorable arrangement for both parties

2. Create a unique, dynamic, performance-based relationship with your media partner

3. Mutual respect is needed for the model to thrive

Advantages:

1. Expanded awareness of your company

2. Risk-free leads

3. Gives many home improvement companies the opportunity to use TV for the first time

Disadvantages:

1. Many stations only offer P.I. in the 1st and 3rd quarter

2. Many stations will pull a P.I. program without notice

3. High percentage of stations offering P.I. programs have smaller audience which results in a dramatic drop in leads after initial campaign

1. Create two very different commercials with the shared goal of getting the phone to ring

2. Request a complete list of all commercial times to ensure you are not getting a high percentage of weekend and over-night placement

“Advertising revenue will drop 13% this year,

but improve to a decline of just 1.5% in 2010” (According to tvnewsday.com)

TV spot revenue down 4.9% in ‘08• Biggest loser for TV spots is markets 101-210• The only area to show growth was Hispanic cable

and cable TV

1. Top 50 markets rates in 1st quarter are down 10-20%

2. Markets 51-100 are very erratic

3. Markets 101-210 show rate reductions up to 50%

The total TV market revenue will be a determining factor, whether the TV stations will aggressively

work on a P.I. basis or sizable rate reductions.

Market Market Size RevenueAbilene 162 $12MGainesville 163 $19MFlint-Saginaw 63 $45MTulsa 60 $80MMinneapolis-St. Paul 14 $295MHouston 11 $450M

(According to National Association of Broadcasters)

Internet Internet MarketingMarketing

Jim Cory, EditorJim Cory, EditorReplacement Contractor Magazine Replacement Contractor Magazine [email protected]@hanleywood.com

Jim Cory is the editor of Replacement Contractor, a HanleyWood publication for roofing, siding and window contractors. Prior to the launch of Replacement Contractor, in the fall of 2002, he was Senior Editor at Remodeling, another HanleyWood publication. He currently contributes to both Remodeling and Replacement Contractor as well as the respective Web sites. He organizes the Replacement Contractor Executive Conference, an annual event focusing on sales and marketing in the home improvement industry.

Tom Audette, Business Development Dir.Tom Audette, Business Development Dir.Three Deep Marketing Three Deep Marketing [email protected]@threedeepmarketing.com

Tom Audette is the Business Development Director for Three Deep Marketing; a digital marketing agency that does search engine optimization, paid search management and email marketing. He has over 17 years of direct industry experience as a sales rep, sales manager, marketing manager, and business executive and as VP of Marketing for a large home improvement company where he generated over 30% of revenues via the Internet with marketing costs under 10%.

Yellow Page advertising in 2008 dipped below their 1998 levels. In the next 4 years, ad spending will drop an additional 39%. (Media Futurist)

The Death Of Old The Death Of Old MediaMedia

Newspapers have lost 23% of their revenues since 2005 and circulation is now at its lowest point in 62 years. (WSJ)


Average DVR user sees only 46% of the commercials in the programs they watch.

70% of advertisers now feel the DVR will “reduce or destroy” the 30 second commercial.


Online Industry Online Industry StatisticsStatistics

85% of product / service inquiries now start on the 85% of product / service inquiries now start on the Internet Internet (B2B Magazine)(B2B Magazine)

US Internet ad spending will grow by 8.9% in 2009 to US Internet ad spending will grow by 8.9% in 2009 to $25.7 billion. $25.7 billion.

Paid search spending will grow by 14.9% in 2009, to $12.3 Paid search spending will grow by 14.9% in 2009, to $12.3 billion billion (Emarketer)(Emarketer)

Why?Why?– It’s where homeowners are searchingIt’s where homeowners are searching– It’s cost effectiveIt’s cost effective– It’s highly measurableIt’s highly measurable

Contractor Advertising DollarsContractor Advertising DollarsTraditional Focus vs. New FocusTraditional Focus vs. New Focus

Traditional Traditional FocusFocus

Yellow PagesYellow Pages NewspaperNewspaper TelevisionTelevision Direct MailDirect Mail RadioRadio Home ShowsHome Shows CanvassingCanvassing

New FocusNew Focus Paid SearchPaid Search

SEOSEO Local SearchLocal Search

EmailEmail RadioRadio

Home ShowsHome Shows CanvassingCanvassing

Search Engine OptimizationSearch Engine Optimization

““Studies show that web users Studies show that web users predominantly click on the predominantly click on the top four top four resultsresults for any particular search, and then for any particular search, and then move on.” move on.” (Forrester Research)(Forrester Research)

Paid Search – Pay Per ClickPaid Search – Pay Per Click

The The fastestfastest way to get listed in those way to get listed in those

precious top four results.precious top four results.

You only pay if a prospect “clicks” the ad

The higher the bid “per click” the higher your ad appears.

Geographic targeted ads

Extremely measurable if implemented correctly

The Growth Of Local The Growth Of Local SearchSearch

FACT: Google has over 75% market share in online search

If your customers can’t find you there…you aren’t even in the game!

Continuous ImprovementContinuous Improvement Fix Every Sell Cycle InefficiencyFix Every Sell Cycle Inefficiency

SpecificLandingPage &

Lead Capture

Internet Lead

SalesAppointment

DealClosed

50% Appointment

Set Rates

30% Sales Close Rates 15%

ReferralRates

In a down economy, you must fix every revenue gap in your selling cycle!

AB

C

Jesse Cory, CEOJesse Cory, CEOOHM Creative Group OHM Creative Group [email protected] [email protected]

Jesse Cory is the CEO of Ohm Creative Group, a Marketing and Public Relations Firm. With a lifetime of achievements in Motion Pictures, New York’s Fashion Industry and Digital Marketing, Jesse has become an expert at bringing all his talents together to manage a diverse client base, including CBS Radio & Detroit Public Television. Utilizing his vast professional experience to turn results and profits for numerous clients.

Todd Bairstow, Founding PartnerTodd Bairstow, Founding PartnerKeyword Advisors Keyword Advisors [email protected] [email protected]

Todd Bairstow is a Founding Partner at Keyword Advisors, a lead generation company specializing in home improvement leads and appointments. They currently work with large home improvement brands in the gutter protection and one day bath categories, their programs have generated tens of thousands of high quality home improvement leads and appointments via the Internet in the last 3 years. Todd has a background as a copywriter and associate creative director at Arnold Worldwide, one of the largest and most successful ad agencies in the US.

Elements of Today’s Internet Lead Generation

Search Engine

Optimization

Paid Search Advertising

Third Party Online Lead Companies

Anatomy of A Search Results Page

natural search resultspaid search results

Search Engine Optimization“Leveraging ‘Free’ Media”

Make your site ‘friendly’ to search engines

Pick 2 keywords per page to optimize forThink about how your prospects search for you

Manage expectations - optimize for local & default terms(i.e. “replacement windows boston”, “ABC Window Company”)

Look to distributor and/or brand to optimize for national and generic terms(i.e. “replacement windows”)

Coordinate with dealers & your national brand“In unity there is strength”

Paid Search Marketing (Pay-Per-Click)“Buy Your Way To The Top”

Buy hundreds/thousands keywords, place dozens of ads

Drive traffic to response-oriented landing pagesNot necessarily your website

Critical: Actively track & evaluate your results constantly

Manage by the numbers! Your campaigns are only as good as your results in terms of volume and cost per lead

Buying Leads From Online Lead Companies“You Get What You Pay For”

All Internet leads are not created equal

- - Caveat emptor - -

Determine lead types that fit with your business:

Exclusive vs. Non-Exclusive

Branded vs. Un-branded

Telephone leads vs. Web leads

Travis Jenkins, PresidentTravis Jenkins, PresidentAll-Tex ExteriorsAll-Tex [email protected]@alltexexteriors.com

Travis Jenkins is President of All-Tex Exteriors, Houston, TX. They specialize in siding, windows, sunrooms and roofing. By redirecting the marketing efforts of his company, he made a transition from the largest showroom in Houston to an Internet marketing lead generation company which now provides 10 salespeople with leads from this source. Only 30% are “pay-per-click”, 70% are from organic search and his web optimization.

THE NEBULOUS (INDEFINITE) THE NEBULOUS (INDEFINITE) LEADLEAD

• Uncovers “remote” prospectsUncovers “remote” prospects

• A supplemental - - low cost leadA supplemental - - low cost lead

• Creates “now” and “future” leadsCreates “now” and “future” leads

• Requires training (re-training)Requires training (re-training)– Scripts for lead taking/confirmingScripts for lead taking/confirming

– Sales training (finessing)Sales training (finessing)

THE BOOK “PLAN”THE BOOK “PLAN”

• Published bookPublished book

• Available in book stores & Available in book stores & AmazonAmazon

• Registered in the Library of Registered in the Library of CongressCongress

www.WindowHelpBook.com

http://www.windowhelpbook.com/

• Door hangers, postcards Door hangers, postcards and handouts available to and handouts available to retailerretailer

• Bound books available Bound books available for retailer/salespeoplefor retailer/salespeople

• Script for phone follow Script for phone follow up available for up available for retailer/salespeopleretailer/salespeople

THE BOOK “PLAN”THE BOOK “PLAN”

www.WindowHelpBook.com

http://www.windowhelpbook.com/

CONSERVATIVE CONSERVATIVE PROJECTIONPROJECTION

• Inquiries per Inquiries per week.................................................................week.................................................................66

• Projected for 12 months..................................................Projected for 12 months..................................................300300

• Estimated 40% fall-off inquiry to leads issued.............Estimated 40% fall-off inquiry to leads issued.............180180

• Estimated 70% “sit rate” (presentations)...................Estimated 70% “sit rate” (presentations)...................126126

• Estimated 20% close rate (1 out of 5) sales made.......Estimated 20% close rate (1 out of 5) sales made.......25+25+

CONSERVATIVE CONSERVATIVE PROJECTIONPROJECTION

Assuming an average contract of $8,000Assuming an average contract of $8,000

Gross sales: Gross sales: $200,000$200,000





DiversityDiversity

Sal Alfano, Editorial DirectorSal Alfano, Editorial DirectorHanley Wood Business Media Hanley Wood Business Media [email protected]@hanleywood.com

Sal Alfano is Editorial Director of a group of Hanley Wood Business Media magazines that includes JLC, Remodeling, Upscale Remodeling, Coastal Contractor, Professional Deck Builder, and Replacement Contractor. He brings “hands-on” experience to his editorial role. For 20 years he managed his own design/build remodeling company in Vermont. He has been active in the residential/construction industry for more than 35 years.

Todd Miller, PresidentTodd Miller, PresidentClassic Metal Roofing Systems Classic Metal Roofing Systems [email protected]@classicroof.com

Todd Miller is President of Classic Metal Roofing Systems, Piqua, OH, a leading manufacturer of residential metal roofing products, using pre-painted steel, aluminum, copper and zinc. The company stays on the leading edge of coatings, metal forming, and environmental technology. Classic Metal Roofing Systems is active in educating the public as to the benefits of metal roofing. Todd is a Board Member of the Metal Roofing Alliance (MRA) and Metal Construction Association (MCA) and chairs the Governmental Relations Committee.

Diversity

• Capitalize on your good nameBring additional products to past customers

• Stretch your leadsOffer something else to old leads

• Get more from your advertisingStretch those dollars

• Increase your company valueAdd a profit center

• Increase your franchiseSpecialty products - - - Exclusive territories

• Stay on the cutting edgeRespond to trends

• Sell upscale but non-discretionary itemsRoofing is not a luxury

• Maximize your referralsSell high profile “stand out” products

Diversity

Chris Ripley, OwnerChris Ripley, OwnerSmarter CoatingSmarter [email protected]@SmarterCoating.com

Chris has been involved in the Home Improvement Industry for eleven years, eight as a manufacturer, with dealers from coast to coast covering 26 states, Chris has a birds eye view of consumer trends. As a member of the Society of Industry Leaders, private equity firms and Hedge Fund managers have relied on Chris's insight to plan multi-million dollar trading strategies in the remodeling field. Chris owns Smarter Coating a Boston based coatings distributer.

During times of constricted consumer spending:

Consumers will often abandon the need for references and competitive bids when they perceive the items as a need and the outlay for the product is perceived as low.

A product’s terms of purchase will often be more important than price.

Items of need always out pace luxury goods.Given items of the same perceived need, the lower cost of the two will be purchased.

Diversity in HIP: Diversity in HIP: The opportunity to use your CURRENT and PAST customers to increase your bottom

line.

Each Dollar earned in a trough of a recession and Each Dollar earned in a trough of a recession and invested is worth two to three times more at the invested is worth two to three times more at the

end of the recession end of the recession

Offer your current customers lower cost items of need

Only add product lines that are turnkey

Every Dollar counts now more than ever!

Leverage your PC list with lower cost need based items first

Partner with firms that offer need based products

Offering a cost effective menu of "need" products Offering a cost effective menu of "need" products to PC's and currents will often net a better return to PC's and currents will often net a better return

in today’s economyin today’s economy

Large multi-product firm with several branches

Mid-Size single product firm

Use in place staff to call on current customers

First 8 days of the program saw ~$111,000 in net sales Close rates above 55%, average jobs size of $6,600

Developed a program with a turn-key product

Program has current net sales of $175,000

Close rates above 45%, average jobs size of $5,700

Terry Ferraro, President & CEOTerry Ferraro, President & CEOPro Materials Direct Pro Materials Direct [email protected]@aol.com

Terry Ferraro is President and CEO of Pro Materials Direct a distributor of specialty products to home improvement companies. They currently serve over 40% of Replacement Contractors’ (magazine) top 100. Since 1975, when he first joined Alside, he has dedicated his career to the industry. His distribution company, American Wholesale Supply, has branches in 7 southeastern states. He is a founder and director of EBank, a founder of Magnolia Windows and Gutter Protection products of America.

The Energy Lead

Starts a new conversation with your customer

Puts you back in your customer’s living room

In recent surveys energy efficiency has become the consumer’s top priority when choosing products for their home

Every where we turn energy

efficiency is right in front of us

Even this month’s National Geographic Magazine features saving energy on

it’s cover.

Today entire magazines are dedicated to Energy Smart

Homes!

How are Americans

spending their home

improvement budgets?

Americans are spending 42% of their home-improvement dollars on Green Products and Energy

Efficiency.

A growing trend across the country

is that homes must under go an

energy performance audit before they can be placed on

the market.

Marketing Case Studies

Presented by Brian Smith

Senior Account Executive

Dave Yoho Associates

Case Study 3871CCanvassing Program Instituted

Location: West Coast

Products Sold: Roofing, Windows, Textured Coating

Annual Revenue (Volume): $9.8 million

Average Contract Price: $14,353

Number of Sales People: 10

Major Lead Sources (’07): Radio (1), direct mail and print (2), Events (3)

Canvassing Program Instituted: Nov 2007

Number of Canvassers (currently): 6

Daily Schedule: 11AM – 5:30PM including (2) 15 min breaks & 30 minute lunch

Canvasser Compensation: $20 per hour, 1% of net business

Number of leads: 1.36 per person per hour, 41 per day

Issue rate: 54%

Presentation (Demo) Rate: 60%

Close rate to issue: 16%

Net Close: 14%

Retention: 90+%

Cost of Canvas Program: (fully loaded) 9% (current)

Cost per Issued Lead: $76


Details: Leads are called into call center from customers’ homes – canvassers (average age) over 40. Most have some sales background – canvassers work with a presentation book to sell the appointment (not the job). Canvassers carry mini presentation books, they are scripted and prepared to overcome objections to sell time and attention based on visual observations of problems. They operate in predetermined (upscale) neighborhoods, i.e. previous completed jobs and demographics. Each lead is called into the call center (and scheduled) from the customer’s home.

Concerns: Issue rate (54%) – presentation (demo) rate 60%.The program has become their number one lead source. It created a backlog of leads, which were often set too far out. The latter reduced both the (set) and (presentation) rate.


Case Study EC 77(90 day turn around)

Location: Mid Atlantic

Products: Windows, Siding, Sunrooms, Gutter Protection, One day bath remodeling

Company Volume: 12 million

Marketing Efficiencies: .25 lead per hour written; .11 appointment per hour and 19% issue rate to the sales department

Fully Loaded Marketing Cost: 35%


Evaluation: Company was a one source lead generator. They relied on sweepstakes at shows, on tv, internet etc… to generate all inquiries causing an enormous amount of leads and an enormous amount people to process those leads. It took 2 data entry people, 2 managers, 39 call center operators and 5 confirmers to issue 40 appointments per day. Company was severely understaffed in the sales department based on number of new inquiries.


Solution: Redirect efforts to face to face appointment setting from the event or door called into a confirmer on the spot and eliminate the sweepstakes approach from all other sources. Reduce call center staff to 9, 1 manager, 1 supervisor, 1 data entry and 2 confirmers.

Results: 14.9% reduced marketing cost .39 set appointment per hour; 32% issue rate, net savings $910,000 annually.

Current Concerns: Sales department is still severely understaffed which is preventing a higher issue rate.

VISIT OUR WEBSITES VISIT OUR WEBSITES FOR FREE BUSINESS FOR FREE BUSINESS

INFORMATIONINFORMATIONwww.DaveYoho.comwww.DaveYoho.com

www.SuperSalesTraining.netwww.SuperSalesTraining.netwww.HIPseminars.comwww.HIPseminars.com

economic summit (phase 1)

Documents

remodeling market

market source

years growth drivers

yrs growth drivers source

harvard joint center

housing studies projections

projection growth drivers

housing completions