Seven years ago, several employees of Specialty Associates Inc., a West Allis roofing contractor, made a major decision that would dramatically change their careers.
That decision led to the creation of Waterford-based SRS Roofing & Sheet Metal, a growing contractor that had $8.25 million in revenue last year and started 2012 with its best first quarter ever. The company’s noteworthy projects include the roofing work for The Moderne, a 30-story residential building currently under construction in downtown Milwaukee, and a hockey and swimming facility expansion project for the Kohl Center at the University of Wisconsin-Madison.
Specialty Associates Inc. (SAI) was one of the largest roofing contractors in the state and had been through several turbulent years of ownership changes and a Chapter 11 bankruptcy filing. But in early 2005, an even bigger change was coming. Tecta America Corp. acquired General Roofing Services, the parent company of SAI. Tecta is the parent company of FJA Christiansen Roofing Co. Inc., one of Milwaukee’s oldest and most prominent roofing companies.
SAI employees knew that Tecta would not maintain two roofing companies in Milwaukee.
“We knew when they were done, the lead entity in Milwaukee would be FJA,” said Michael Hurst, who was then the president of SAI. “They were going to merge (SAI and FJA), cherrypick (SAI). Take the best people, the best pieces of equipment and just drop everything they weren’t interested in.”
Hurst joined SAI in 1996 as an architectural sheet metal mechanic and crew foreman. Seeking a new career path, and with an interest in computers, he moved into an information technology position at the company in 2000. The company was acquired in 1999 by Pompano Beach, Fla.-based General Roofing, then a huge international roofing company, and Hurst traveled around the nation installing, and doing training for, accounting software and developing process improvements and controls.
But Hurst had a lot to learn about the roofing business.
“Before 2004, I couldn’t have told you much more than a roof goes on the top of a building,” he said.
In 2004, General Roofing was acquired by Aurora, Colo.-based investment firm Republic Financial Corp., and Ron Werowinski, who founded SAI in 1975, left the company. Hurst became president of SAI after Werowinski left.
“When Ron left, because of my relationship with all of the other (General Roofing) operators in the country, I really got a good understanding of the roofing business from the business side,” Hurst said.
Hurst led SAI through turbulent times. Right after it acquired the company, Republic had General Roofing file to reorganize the company under Chapter 11 of the bankruptcy code. As a result, some SAI vendors did not get paid, damaging their relationship with the company, Hurst said. Some vendors who did not get paid demanded payments from homeowners who had already paid SAI.
“Trying to run the company with those kinds of things going on, it’s a nightmare,” Hurst said. “The construction trade is really a relationship business. You’ve got to do what you say and say what you do.”
The bankruptcy was difficult, but a valuable learning experience, Hurst said.
“Having to run (what was once a $25 million to $30 million) roofing company and get it through Chapter 11, you learn a lot of lessons,” he said. “Bankruptcy was awful. Those tough times in business, if you survive them, you learn a lot more from them.”
After a few months in Chapter 11, SAI returned to profitability, Hurst said. But about a year after it was acquired by Republic, General Roofing was sold to Tecta.
Turning point
Then Hurst and other managers at SAI had to decide if they wanted to stay with SAI, which would be merged with FJA. Tecta demanded that they sign non-compete clauses.
Hurst talked with several of the SAI managers and encouraged them to leave the company to start their own roofing business.
The group had become very close during the company’s ownership changes and trying times.
“The dynamic that developed was incredible,” Hurst said. “You really got to know people in that time, what made them tick.”
“I said (to some of the SAI managers), ‘We just went through something a lot harder than starting a new business. With a new business, you don’t have all of the negative baggage,'” Hurst said. “I said, ‘Guys if we go try this thing, my hunch is it isn’t going to be any more difficult. It will probably be easier than running this through bankruptcy.”
Hurst first focused his attention on SAI executives Michael Heinzen and Tom Bechtel. Heinzen had more than 20 years of experience in the roofing industry. Bechtel helped form SAI in 1975 and became superintendent of the roofing operations and general manager.
“Between Tommy and Mike, they knew everybody in the roofing world,” Hurst said.
Eventually a group of 13 owners, all from SAI, was assembled for the new business.
“(We asked them) do you want to forgo comforts for a few years so you get to reap the rewards?’ Hurst said. “Do you want to put your money where your mouth is? It started making sense. We weren’t afraid. (We figured) if it doesn’t work well, then we’ll have to go out and get a job.”
The fledgling company, SRS Roofing & Sheet Metal started in mid-June of 2005 operating at a hobby farm that Hurst’s father owned in Waterford. They opened an office in the farmhouse and scrounged together some computer equipment. They kept the roofing equipment in a barn or outside.
“We told the bank that this isn’t a normal startup business,” Hurst said. “This is kind of a ready-made company. These people have worked together for years. This isn’t two guys in a bar with a pickup truck trying to start a roofing company.”
The company had $825,000 in revenue in 2005, after operating for about four to five months.
In 2006, the company had $2.6 million in revenue and was profitable, Hurst said. The company had revenue of about $6.9 million in 2007 and $7 million in 2008.
“The growth curb was pretty steep,” Hurst said.
More dark days
But then the Great Recession took hold, devastating the construction industry. Hurst refuses to use the recession as an excuse, but the company had a rough year in 2009 with only $5.6 million in revenue and the firm lost money ($475,000) for the first time since 2005.
“It just seemed like the world was closing in on us,” Hurst said.
The company’s operating efficiency suffered in 2009. In 2007 the company had $6.9 million in revenue from 51,000 man hours of work. But in 2009 the company had $5.6 million in revenue with 50,700 man hours. How did the company make less money with employees doing roughly the same amount of work? Workers likely slowed down their pace to match the decline in workload, Hurst said.
“Even really good people have a tendency to make the work fit the hours,” he said.
The company had become complacent and cocky from its strong growth years and needed to get back to its core values, Hurst said. Two of the company’s owners were fired.
“It’s not rocket science,” Hurst said. “It’s running a roofing business.”
The company suffered another major blow when Heinzen was diagnosed with liver cancer. Hurst compares Heinzen to Walt Kowalski, Clint Eastwood’s character in the movie “Gran Torino.”
“(Heinzen) was tough, stone cold,” Hurst said. “But he was also a big Teddy bear and one of the most compassionate guys I’ve ever known.”
As the company’s vice president of operations and production manager Heinzen handled all of the material acquisition and set up the jobs.
“He knew exactly what a job needed and how to get it done,” Hurst said.
Heinzen’s health deteriorated rapidly in 2010. Heinzen worked when he could and said he was doing so to help build the company for the benefit of the younger co-owners.
“He went downhill rapidly,” Hurst said. “He wasn’t in the office much in 2010. In January and February he looked like a holocaust survivor. It was horrible. But he handled it so well.”
Heinzen died in September of 2010.
Attitude adjustment
“In kind of a strange way, it made everybody take a step back and re-evaluate things,” Hurst said. “Here we were hanging our heads (since 2009), nervous and worried about the business. (Heinzen’s death) kind of reminded us, it could be a lot worse. It kind of got us out of our defeatist attitude of 2009.”
Business has improved for SRS since then. The company was profitable again in 2010, with revenue of $6.7 million. In 2011, the company’s revenue reached a new high of $8.25 million.
SRS has established a solid presence in the region’s commercial roofing marketplace.
“For the first few years we had to explain who we were and where we came from,” Hurst said. “We used to have to offer lower prices. We felt the only way to get the work was to be cheaper because we were the new kid on the block. We don’t have to do those things anymore.”
Some of the most noteworthy projects that SRS has or is working on include The Moderne, the Capitol West condominium building in Madison, the expansion and remodeling of Union South at UW-Madison, the swimming and hockey facility addition at the UW Kohl Center, the Wisconsin Energy Institute in Madison, the Macy’s store at Southridge Mall in Greendale, Woodman’s stores in Janesville and Oak Creek, the Waukesha Electric expansion and the Crowne Plaza Hotel in Wauwatosa.
SRS has done several projects for J.H. Findorff & Son Inc., which is building The Moderne.
“They have a great culture that extends to their field team,” Zak Koga, Findorff project manager, said of SRS. “Mike Hurst at SRS is one of my most trusted subcontractors. I never have to wonder if his team will do the right thing whether I’m watching or not.”
SRS has nine owners, all of whom work in the business. That ownership involvement increases the attention to quality work, Hurst said. One of the founding principles of the company was pride in ownership leading to pride in the quality of work that the company does, he said. That is a major shift from a corporate philosophy focused more on profits and shareholder return, Hurst said.
As SRS grows, the company’s owners want to maintain a viable business but they want to avoid getting too big. The company wants to operate with a high level of integrity and maintain strong relationships with its vendors and customers, Hurst said.
“We don’t want to grow this into another SAI again,” he said. “We learned there’s more important things than being huge. When you get really big, everyone becomes a number. That may work in other (business) models, but in construction, I just don’t believe in it.”
