Formidable fence

Formidable fence

manufacturing by Mark Gordon | Managing Editor

A $36 million statewide fence company, already one of the largest of its kind in the Southeast, hopes to expand even more. Its catalyst for growth is through bonds traditionally used by government agencies.

A casual conversation about dogs and race cars between a retired Massachusetts cop and a gas station attendant sounds like an unlikely place to launch one of the largest fence companies in the southeastern U.S.

But that's exactly how the Elite Group, a Bradenton-based umbrella company for a trio of fence installation and manufacturing businesses, got its start in 1994. That's when Gordon Douglass, a new Floridian and recent retiree of the Andover, Mass., police force, struck up a conversation with Sean Murphy, the son and nephew of two longtime fence company owners.

Murphy, 24 years old at the time, had been working at a Bradenton Shell station when he ran into Douglass. In addition to NASCAR, the pair talked fences. Murphy had literally grown up in the fence business, working for his dad's Tropical Fence in his native Daytona after school and on weekends, and then post-high school, working for his uncle at another Tropical Fence outlet in Fort Myers.

Murphy wanted to get back in the business, this time on his own. Well, almost his own. With a $30,000 loan from Douglass, the duo opened their own fence company.

At first, the partners put in 16-hour days building the fences by hand in the backyard of Murphy's small Bradenton duplex - at least, Murphy says, until code enforcement officers came by. That put in an end to the home-based operations and in turn, forced Murphy to think about how he wanted to grow the business. The next stop was an 800-square-foot office, the first of several expansions.

More than 13 years later, the Elite Group is has grown rather significantly: The company, just Murphy and Douglass in that grinding first year, made $89,000 in 1994 and about $200,000 the next year. It passed $1 million in 1997 and $2 million in 2000.

Puny results when put up against the $36 million in revenues the Elite Group made in 2006, to go with its 150 in-house employees and 100-plus subcontractors.

The company, which is now made up of Arrow Fence Systems, Elite Vinyl Products and Nations Fence Products, has also grown to 12 offices, including nine in Florida and one each in Atlanta, Charlotte and suburban Nashville, Tenn. Arrow Fence is the most well-known in the Gulf Coast, with products including wood, aluminum and chain fences, which the company sells retail direct to customers and installs; Elite Vinyl, which Murphy founded in 2000, manufactures and installs vinyl fencing and related products for other dealers and fence companies; and Nations Fence is a six-office Tampa based business, which Murphy bought last year.

And with a new Bradenton building and manufacturing plant it just moved into as its backbone, the Elite Group is projecting $41 million in 2007 revenues and hopes to come close to, if not pass, $50 million by the end of 2008. It also hopes to hire at least 50 more people over the next two years.

"I never though it would grow like this," says Murphy, now 38. "All I did was work and work."

Economic development

The building is the centerpiece of the company's expansion. It's an eye-popping 111,000 square feet, more than 550% bigger then the company's most recent 17,000-square-foot location. And the building, on 30th Street West in Bradenton, less than half-a-mile from Cortez Road, is big enough to house all of the company's divisions and manufacturing needs.

Previously, the company's offices and facilities were scattered across three Manatee County locations. "With this building," says Murphy, "we are capable of doing everything we have set out to do."

The building is even a story onto itself. Spread over eight acres, it sat vacant for two years after the departure of its last tenant, windows manufacturer Owens Corning. Murphy began to look into buying the building earlier this year, although the key selling points weren't the merits of the building, which were good.

Instead, the biggest selling point was when Murphy and the Elite Group executives discovered they could buy the property by using Industrial Development Bonds, a federal tax-free source of funds open to a few specific types of industries, including manufacturing. These are the same types of bonds traditionally associated with government agencies when funding anything from roads to schools to new buildings.

Murphy hired Charlie Sands, an Ormond Beach-based bonds consultant who helps businesses, mostly in Florida, figure out how to navigate the financial and governmental process of actually getting the money from the Industrial Development Bonds.

In addition to manufacturing, industries that can use the bonds are limited to the nonprofit and low-income housing sectors. Manufacturers have to prove to a myriad of government agencies that the funds will go toward buying or constructing a new building or buying new equipment, as well as lead to new jobs.

"The whole idea of [these bonds] is to spur economic development," says Sands. "It's supposed to allow small and medium-sized businesses access to low interest rates that big businesses normally get."

Sands assisted the Elite Group in both getting the bond application approved by the state and then in actually selling the bonds. On the first front, Sands says state bureaucrats in Tallahassee were unusually backed up earlier this year, a delayed byproduct of a new gubernatorial administration.

But Murphy and Roger Grenier, the Elite Group's recently hired chief financial officer, enlisted state Rep. Bill Galvano, R-Bradenton, to uncork the bottleneck, a crucial step in the process. "Everyday we didn't close," Grenier says, "it cost us a ton of money."

Sands then facilitated the process of selling the $3.4 million worth of bonds, which were bought by the Bradenton-branch of BB&T. The bank guaranteed the bonds, Sands says, which then sold the majority of them to mutual funds.

The Elite Group's savings were substantial: After fees and costs, its interest rate on the building purchase was 4.75%, says Sands, almost four points lower than the standard going rate of 8.25%. In actual dollars, the bonds will save the company about $100,000 a year in interest charges.

'A fun ride'

Murphy doesn't scoff at savings like that, even as he closes in on $40 million in annual revenues. In many ways, Murphy still sees himself, and his company, as the scrappy underdog, the ones willing to do any job, from condo rooftops to a backyard backstop to a cougar cage.

A cougar cage? Murphy wistfully recalls the time about 10 years ago when he walked into a perspective clients' house and a 250-pound cougar sat on a pool table, a slab of red meat in its mouth, blood all over its face. Murphy built the cage, but not before gingerly walking around the pool table to meet with customer.

Most jobs the company takes on today are bigger then animal cages. They vary from standard white picket jobs to temporary chain link-fences for construction sites to custom-made vinyl gazebos, planter boxes, and park benches.

The vinyl fence products are the newest to both Elite and the industry. In general, vinyl fences, while more expensive than traditional wood, require less maintenance and upkeep. They don't need to be painted or stained, either. The base ingredient in vinyl fences is PVC, a compound that combines strength with ultraviolet light resistance, similar to what's used in vinyl siding and vinyl windows.

Elite opened its vinyl unit in 2000 after Murphy bought a used vinyl fabricator machine from a friend in the business, mostly to just see if he could use it for a few jobs. It turns out it was good a for a lot more than that.

It's not a coincidence the company's revenues have grown from the $2 million range to more than $35 million since it began a vinyl division. "Elite Vinyl has been a really big hit for us," Murphy says, with a hint of 'aw-shucks.'

The new building, Grenier says, is integral for the custom jobs, a smaller but growing part of company revenues. About 10% of the new building is devoted to a welding area, where Elite employees put together the panels and pieces of various fences.

The remainder of the building is essentially a storage warehouse - an asset and a challenge. It's a logistical asset, because it allows the company to ship products from one location.

The challenge, both within the company because of its new building and the industry itself, Murphy says, is in inventory management. Some of the building is set aside for storage, simply because the company works with extra-large pieces of wood, metal and vinyl.

Still, Murphy says the trick is making sure that finished products, such as fences that are shipped to Home Depots in Georgia and Florida, don't create a backlog. The company currently turns over its inventory about seven to 10 times a year, which Grenier says is a little better than the industry average.

David vs. Goliath

All of this activity and growth has presented the Elite Group with a litany of other challenges that can be considered 'good problems.' It has become so big in revenues, products and locations, there are few other examples of big companies that just do fences to match up against.

Indeed, the industry has somewhat of a David vs. Goliath makeup, as there are several mom and pop players competing for business with the big boys: Home Depot and Lowe's. Elite plays both sides of the fence, so to speak, as it sells products both directly to consumers and dealers, as well as to Home Depot. Elite is the largest fence products supplier to Home Depot in Georgia and Florida, Murphy says, adding that he hopes to put North Carolina and South Carolina on that list soon.

Locally, Elite's competitors include Tampa-based Putnam Fencing. Putnam, while not covering as wide a geographical area as Elite, follows the same model of installing any type of steel, wood and vinyl fencing. Putnam, founded in 1999, serves mostly Greater Tampa-area locations.

Murphy spends the majority of his time these days checking in on the non-Bradenton operations, as well as navigating an entrepreneur's tired and true challenge that is joined at the hip with getting bigger: How to mange growth without missing opportunities.

Some of the challenge is taking care of itself, as over the past few months, Murphy says business has slowed somewhat, enough to be noticeable but not alarming. No surprise, he attributes the drop to the slumping housing market. New construction is down and people are spending less on fence repairs, company executives say.

Still, in addition to the new building, Murphy's had some good news, too.

In July, for example, the Nations Fence division hit $2 million in revenues, the best month of any unit in the company, ever. What's more, Murphy hopes the new building will be the catalyst for some new revenue lines, including an aluminum and ornamental division.

"It has been a fun ride," says Murphy. "There's never been a day, in 14 years, when I came to work and didn't have something to do."

REVIEW SUMMARY

Industry. Manufacturing

Business. The Elite Group, Bradenton

Key. The fence manufacturing and installation company is utilizing bonds normally associated with governments to grow.