SOUTHSTAR DISTRIBUTION SERVICES L.L.C.
Location: Orlando, FL
Number of full-time employees: 3
What it does: Distributor of roofing products with an emphasis on environmentally friendly, solar, and vegetative [plants, grass, water effects] components
Revenue Model: Resale of products and materials supplied; on-going maintenance, inspections on the materials following installation
2010 Revenues: $980,000
2011 Projections: $4 million
How they made it: Recent jobs include a $720,000 contract with Nemours Children’s Hospital and the opportunity to provide the roofing for an addition to Walt Disney World’s Fantasyland. New services being rolled out include roof maintenance for commercial clients.
When Rodney D. Hughes and Tony McGee decided to go into business together, they were already at the top of their respective games. Hughes had served as assistant commissioner of Economic Development for the state of Tennessee and McGee just finished an 11-year professional football career, having played with the Cincinnati Bengals, the Dallas Cowboys, and the New York Giants. Weighing several ventures, “it would have been easy to go into something cool, fun, and sexy, but those markets are usually saturated,” says the 40-year-old McGee. Instead they went for the practical, selling commercial roofing materials through SouthStar Distribution (www.southstardistribution.com; 407-299-1200). “After all, every building needs a roof,” insists McGee.
After the two pooled their savings to come up with $60,000 to lease a warehouse and pay for marketing materials and office supplies, they looked to capitalize on the move to solar power. They figured they’d sell energy-efficient roofing solutions to developers, building owners, and contractors, giving customers the convenience of dealing with a single provider. They’d purchase the materials from partner manufacturers. While the plan sounded good on paper, it proved problematic in practice since many manufacturers and potential clients already had existing relationships with other roofing material distributors. “We were hung up on, and people didn’t want to talk to us,” says Hughes, 44.
“It’s a very tight market with a lot of deep relationships, and we had to break through those relationships to show that we had the business acumen, the capital, and the vision to make this business work.”
To get around this barrier, they first registered as a minority-owned business with the Small Business Administration (www.sba.gov) and the Florida Minority Supplier Development Council (www.fmsdc.org) so they could take advantage of set-asides. Then they took their sales pitch outside of the office. Says Hughes, “You’ve got to get in front of people and you’ve got to be able to impress them enough for them to give you the opportunity.” They spent the first 12 months combing through their personal networks and relying on past successes to build relationships that might culminate into sales. “We’ve done an excellent job of maximizing my background in professional sports, letting it be a point of discussion,” says McGee.
With his political background, Hughes focused his energies on cultivating contacts through associations such as Metro Orlando’s Economic Development Commission. Only after the relationships were cemented—whether on the golf course, at a political function, or behind the scenes of a sporting event—did Hughes and McGee then steer the conversation to business and what SouthStar could bring to the table.
The soft sales strategy worked and SouthStar found itself invited to bid for projects. Going up against billion-dollar companies became the newest challenge. Since they had low overhead, they sought to undercut the competition. “You’ve got to be resourceful in finding people who will provide you with competitors’ pricing information,” says Hughes. One way SouthStar did this was by forming relationships with industry professionals in other cities. “We’re in Orlando but we can reach out to Jacksonville or Tampa to people who aren’t really competing against us and better understand their pricing,” says Hughes. “It might not be exactly what the percentages or the pricing is in our market but at least we have an idea.”
Though solar roofing products were their initial focus, “the transition to those markets has been slower than we thought,” says Hughes. So they made adjustments seeking out less expensive energy-efficient products to sell, such as cool roofing systems, which would give potential customers a faster return on investment. “We sought to be more nimble and to take advantage of our competitor’s weaknesses. They are large companies that are slow to bring change, innovation, and diversity to market,” says Hughes.
The adjustments paid off: 70% of their business is from the sales of energy-efficient, cost-saving materials. Also, the push resulted in a number of federal building contracts, as well as the Orange County Public School System. The company is poised for even more dramatic growth this year, winning a $720,000 contract with Orlando’s Nemours Children’s Hospital and an opportunity to provide the roofing for an addition to Walt Disney World’s Fantasyland. They will also start projects with two additional hospitals and a courthouse later in the spring that will add up to $1 million in business. Finally, the duo have added new services such as roof maintenance to the company’s arsenal and are finishing up a number of Web- and phone-based applications that will speed processes and lower costs. Hughes adds, “Our objective is to create innovations that will drive us to being a billion-dollar business.”