Performance Exteriors of Crystal Lake, Ill. is averaging three to four siding, windows and/or insulation jobs each week. This is a modest, yet respectable, level of activity considering the firm was launched from scratch in July 2005 and has done minimal advertising. Last year, during its first full year in business, the company billed just over $700,000, but with a staff of eight, it is clear that plans are in place for a bigger volume of activity in 2007.
Michael Lotesto, a known expert in the emerging field of building science who has served as a consultant to the Department of Energy, the Department of Housing and Urban Development as well as for a number of well-known industry suppliers, started the firm — in part — to prove a personal theory. Yes, he aims to build a profitable business. It is the way he wants to build that business. Lotesto believes that by providing health, safety and energy-efficiency diagnostics for a fee, his firm will have a leg up on his more traditional lead-churning counterparts in winning exterior contracting jobs.
“Through our business model, and the way we generate leads, we get respect,” says Lotesto. “People welcome us into their home. They are grateful for our time. They pay us for our leads. They pay us to come in. They respect our knowledge. They are not buying windows or siding. They want solutions to their problems. They want their house prettier. They want their daughter’s bedroom more comfortable. That is all they really care about.”
In 2007 Lotesto plans to hit $1.5 million in sales. That number will double in 2008 to $3 million. And in ’09, Lotesto expects the firm to hit $5 million in sales on the way to an eventual plateau of $8 million in revenue per year.
“Believe it or not, of the people that call us, 60 percent or better are engineers, or they are building inspectors, or they are architects, or they are builders,” says Lotesto. “They call us because they are curious about our approach. And every single time — and I am not talking 98 percent, I am talking 100 percent — when we leave they are thanking us up and down.”
Though Performance Exteriors does not advertise, they do manage to get their name and brand into the public eye. The key has been Lotesto’s willingness to work with local and national media. To this end, he has retained the services of a freelance publicist. Articles about Lotesto and Performance Exteriors have appeared in The Chicago Tribune, The Chicago Sun Times, and has been picked up by the wire services and appeared in papers around the country like the Los Angeles Times. All of it is clipped and put into a sales book. And all builds instant credibility with potential clients. After meeting with customers, they typically generate referrals and inquiries for service.
The Performance Exteriors Process
Lotesto and other Performance Exterior technicians are thanked so profusely when they leave because they have performed a battery of tests on a home. But they have not done those tests for free. The company charges a professional fee for a diagnostic session.
Charging for initial visits is a key point of differentiation with most contractors, says Lotesto. When they know they are paying for a service, they have already bought into the process. The client receives you as a professional, “just like they would their doctor, their lawyer or their accountant.”
“We charge anywhere from $475 to $550 for an initial visit. It takes two hours in the home. Then it takes another two hours to develop the report. And then you need to send it out to the homeowner and go through it,” Lotesto explains. “If we are actually hired to go out and help with remediation and construction, we deduct the entire cost from the contract. They get it free.”
The first step in the process is to sit down with the customer and to go through a series of questions about the house. The goal of this initial client interview is to uncover nagging issues and to understand their underlying reasons for having an expert come out to the house; i.e., there is a draft, energy bills are high, there are occasional odors, etc.
“I explain the methods of building science and how houses work and how systems work together,” says Lotesto. “Then I actually document and prove my results. What else is a homeowner paying for? They are not paying for windows or siding. They want results. They want more comfort. They want better air quality. They want lower energy bills.”
From there a battery of tests stipulated by the Building Performance Institute is performed. In order to be an accredited company by BPI, all of the tests must be completed at each site. (For more information about BPI, see sidebar below, Building Science Resources.) The tests include: a blower door test; a thermal imaging test in all rooms of the home; a manometer test of all appliances for proper air exchange; a CO monitor test of all combustion appliances like water heaters, stoves, ovens and dryers.
A blower-door measures the hourly rate of air exchange from inside to out. A good blower-door test result is to exchange a third of a home’s air each hour. On the opposite end of the spectrum, Lotesto has conducted blower-door tests on homes where the rate of air exchange is 1.5 times a home’s volume every hour. This is extremely inefficient and in most cases, high energy bills are the source of the call. According to Lotesto, inefficient or poorly performing homes cannot be categorized. There are expensive new homes performing as inefficiently as the typical, older fixer-upper home.
“I was just out with a major manufacturer and we tested two of their executives’ homes. Both failed miserably,” notes Lotesto. “These people were very surprised. They used good products. They had decent installers. But nobody took the time, like a doctor or a professional would, and asked how these things really work. Nobody checked for holes they missed. Nobody asked what could have been done differently to make the homes truly perform.”
In a go-go, growth-oriented industry like professional home improvement, Lotesto’s vision might be worth watching.