January 30, 2012 | last updated June 4, 2012 11:38 am
BUSINESS STRATEGY

Construction start-up seeks niche - honesty

PHOTO/PABLO ROBLES
PHOTO/PABLO ROBLES
ProSource founders Russell Houle, left, and Dylan Magee met at an energy efficiency conference. Even in a down economy, they share a belief that honesty can be the basis for a thriving construction business.

Last year, a Farmington duo with little professional construction experience decided to launch a home improvement business during the worst era for the industry in 20 years.

They say they jumped in because they saw a void in what other contractors offered.

That void was honesty.

"There is so much trepidation when you walk into a house because people usually have had a bad experience with other contractors," said Dylan Magee, co-managing partner of ProSource LLC. "We know we can win now in a down economy by putting the customer first."

Magee founded ProSource in Farmington with partner Russell Houle in February, 2011. The two quickly recovered the $1,000 of personal money they each put into the business, and the company has been profitable ever since, hiring two employees in the process and never carrying any debt.

The duo believe they found a niche in the tough construction industry by eliminating headaches for homeowners by working as a general contractor controlling subcontractors in home improvement projects.

"I will only call these people for anything I need," said Middletown resident Nilda Perichi, who used ProSource twice in 2011 for home renovations. "I've had lots of other people work on my house who — pardon my language — can go to hell as far as I am concerned."

In the 20 years Perichi has lived at her Middletown residence, she put in a new kitchen, TV room, a two-car garage and a heated driveway. She called on ProSource in October to install insulation in her home and called them back in November to renovate her bathroom.

Perichi said ProSource is different from other contractors because they keep their promises: showing up on time, returning when they say they will return, finishing projects on or ahead of schedule, and calling if there is ever a problem.

"I'm done with contractors. These people are beyond responsible," Perichi said. "They were true to their word."

The construction industry is full of contractors — often unlicensed — who charge homeowners outrageous prices, perform shoddy work or both, especially in the new wave of green construction, Magee said. Window installers charge a $1,000 markup on energy efficiency windows that could be purchased from the manufacturer for $250.

"Could we sell our jobs for more? Absolutely, because people buy us and trust what we say," Houle said. "But when you do things the right way, it'll come back to you."

Problems with home improvement contractors are the most frequent complaints received by the Connecticut Department of Consumer Protection, said DCP spokeswoman Claudette Carveth. The agency receives 1,200 written complaints annually and thousands of calls.

The most frequent complaints revolve around unfinished work, unregistered contractors, not returning deposits and poor workmanship, Carveth said. DCP can address all these complaint directly, except for the shoddy work. When homeowners seek a renovation contractor, DCP recommends they check out their home improvement database.

"While our home improvement registration is not a measure of competence, and sometimes there's little we can do directly on workmanship issues, having a registered contractor is certainly a benefit," Carveth said.

Magee, a native of Connecticut, ran an investment banking firm in Dallas for 10 years before starting a talent recruiting firm for construction companies in Texas. He eventually sold his shares and returned to Connecticut. Magee wanted to get into construction work, but wanted to start his own businesses. He linked with Houle, a long-time insurance salesman, who he met at a seminar about energy efficiencies for homes.

When they launched ProSource, their families and friends warned them of the devastation in the state construction industry. The number of jobs for construction workers dipped 28 percent since 2008, and over the last five years, the entire industry shrunk 20 percent, according to the U.S. Bureau of Economic Analysis.

The loss of jobs and industry in the construction sector is the worst since the 1989-1992 recession.

But Magee and Houle felt they had a solid business plan by being upfront with their customers, offering a lifetime guarantee on all their contracted work. For energy efficiency improvements, ProSource offers a five-year return on investment and a 25 percent guaranteed reduction in heating and electric bills.

"We know the best subs out there that will do the best work," Magee said. "The buck stops with us, with our license."

The Connecticut home improvement industry isn't as rife with devious contractors as ProSource claims, said Bob Hanbury, co-owner of Newington-based House of Hanbury Builders Inc.

Traditionally, home improvements are full of miscommunication between the homeowner and the contractor, leading to disputes regardless of whose fault it is, Hanbury said. In that sense, there is a need for a company like ProSource to act as a general contractor go-between to smooth out the issues.

But fraudulent contracting isn't a problem in Connecticut, Hanbury said, especially since the economic downturn weeded out the weaker companies.

"The contractors that survived must be pretty good because the home building and home remodeling industries have been very difficult," Hanbury said. "If you are gouging people or being dishonest, the work spreads pretty quickly."

The down economy has created problems with professionalism and workmanship competency, Hanbury said. Subcontractors are expanding out of their comfort zone to take more jobs to pay the bills, and the result is lower quality work.

Houle said customers like dealing with ProSource because they are interacting directly with the owners of the company. ProSource's two employees — both project managers — are giving a slice of the profits from each job, so they are more invested in producing quality work.

John Sullivan, owner of Sullivan's Jewelers in Middlebury, said he had ProSource install insulation that is saving him 40 percent off his energy bills, which is above the 25 percent ProSource promised.

"I liked them so much that they started work on my business, and then they went and did work on my home," said Sullivan, who hired ProSource six months ago. "I'm always skeptical when it comes to this stuff, and they turned out pretty good."

Of ProSource's business in the first 10 months, 50 percent of the revenue came on referral jobs from former customers. The success in repeat business comes from the company's three-part philosophy: don't overcharge, don't overpromise, and do exactly what they promised.

For 2012, Magee and Houle want to reach $250,000 in monthly revenues for the company and add 25 employees.

"I'm really proud of what we did over the last year," Magee said.

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