Generac looks ahead to hurricane season
After a wind-damaged 2017, Hurricane Preparedness week is upon us.
With the 2018 hurricane season knocking on the door — and the extremely active 2017 season still fresh in mind — Generac Power Systems is urging homeowners to use Hurricane Preparedness week, May 6 to 12, to begin preparing before facing the specter of a tropical storm or hurricane.
“Preparation before storms arrive is absolutely critical,” said Russ Minick, chief marketing officer for Generac. “Once a storm is en route, the last thing you should have to worry about is how you will deal with a long-term power outage. Hurricane Preparedness Week is a good time to begin exploring your emergency power options, so you can invest in the system that best suits your needs in time to be ready for a storm.”
The 2017 hurricane season was the costliest on record, eclipsing more than $200 billion in damage. This isn’t surprising, because for the first time, three Category 4 hurricanes made landfall in United States territories. Hurricanes Harvey, Irma and Maria caused massive flooding, power outages and infrastructure damage. For 2018, the Department of Atmospheric Science at Colorado State University currently projects a slightly above-average season, with 14 named storms, seven hurricanes and three major (Category 3 or above) hurricanes.
In its most recent quarter, Generac posted a net sales gain of 20.3% to $397.6 million. Domestic segment sales increased 21.5% to $300.2 million.
“The fundamental demand environment for home standby and portable generators continues to be robust, benefitting from increased power outage activity in recent quarters contributing to excellent growth in both in-home consultations and end-user activations,” president and CEO Aaron Jagdfeld said.
In praise of the small business
A financial advisor examines the rewards of business ownership.
Each year, when I think about the national recognition of small business owners (this year, National Small Business Week was April 29 to May 5), I stop and think not only about our firm’s hundreds of clients in all 50 states, but also about the huge economic engine made up of the 28 million closely held family businesses across the nation.
These thoughts lead me to consider two important facts: Every time 10 people are hired in this country, six of them go to work for small businesses; and, together, those 28 million small businesses generate more than 50% of our nation’s GDP.
Speaking at several national conventions each year allows me to meet thousands of these business owners, and I often like to take that opportunity to ask them three questions: Why should someone want to be a small business owner? Why should an owner’s children or employees consider buying this business? Do the financial benefits of small-business ownership offset the hard work and sacrifices?
Let’s look at the last two questions first. At Castle Wealth Advisors, LLC, our Castle Valuation Group has prepared more than 400 business valuations in the last 18 years. Out of those valuations, we picked a cross section of 186 companies and averaged their results. We discovered some interesting facts:
- The average business valuation is $1,109,000;
- The average gross margin is 40.5%;
- The weighted average adjusted EBITDA is $273,000;
- The average stockholder’s equity is $917,000; and
- The adjusted EBITDA to appraised value is 24.14%.
Those numbers offer perspective on my questions. After all, being able to earn 24% per year on appraised value is an excellent reason to own your own company rather than work for a large corporation where they keep the profits. It’s also a good incentive for the next generation in the owner’s family — or perhaps one or two key employees — to purchase the business when the owner is ready to retire.
Sure, the next generation could go to work for a large company and hope for salary increases and job promotions that match the earning potential of small-business ownership. However, for someone with an entrepreneurial spirit, acquiring an existing business and growing that business is an excellent challenge.
It’s also a venture that pays benefits beyond the cash register. It has been proven many times that when a customer shops at a locally owned store rather than a national chain, approximately 30% of the cash being spent will remain in the local community.
So, is it a good idea for that next-gen entrepreneur to consider buying the business? Well, he or she will get the chance to take control of a business with an established customer base, excellent cash flow, well-trained employees and an important role in the local community, all with a chance to earn 24% a year on the business’s value. Seems like a good idea to me.
It’s also an idea that is becoming increasingly important for baby-boomer business owners between the ages of 60 and 70 who have children interested in buying the business. Of course, for such a transition to succeed, an owner needs to be a good coach and the next-gen entrepreneurs need to be good listeners, and the business needs a sound succession plan to address the many legal, financial and operational matters required for the transition. However, if the transition is designed well, the next generation will have a great chance of being successful.
That brings me back to the first question I like to ask those owners: Why should someone want to be a small business owner?
Certainly for the financial rewards, but also simply for the pleasure of entrepreneurial endeavors. And, yes, for the gratification that comes from knowing you’ve contributed to your community and the lives of the people who work for you. But also for the knowledge that you have created something that will continue to contribute to the community and to people’s lives for years to come. Who needs a better reason than that?
Sales rise, profits fall for Foundation Building Materials
Foundation posts a net loss of $1.1 million for Q1.
Foundation Building Materials, Inc., reported consolidated net sales of $536.3 million for the first quarter 2018 — an 11.9% increase compared to sales of $479.5 million for the same three months of 2017.
The company also reported a consolidated gross profit of $154.4 million for the period, a 10.4% increase compared to $139.9 million during the same period a year ago.
But Foundation posted a net loss of $1.1 million during the quarter, compared to net income of $3.9 million for the first quarter of 2017.
Specialty Building Products net sales increased nearly 11% for the quarter to $463.7 million, with sales from acquired branches and existing branches, strategically combined with acquired branches, contributing $32 million of the increase.
Mechanical Insulation sales were $72.6 million, rising 19.1% for the quarter. Base business net sales contributed $9.3 million of the increase, primarily due to higher net sales to industrial end markets, the company said.
During the first quarter, the company completed two acquisitions totaling seven branches. For 2018, these two acquisitions are expected to contribute $27.0 million to $29.0 million to net sales, Foundation said.
The Tustin, Calif.-based specialty building product distributor of wallboard, suspended ceiling systems and mechanical insulation operates more than 220 branches across the United States and Canada.