Getting Bigger is a Bigger Challenge than Getting Big

Ken Silverman of Silver Line Windows talks about serving Home Depot and continued expansion, and how the company has changed as it faces the future as “one of the big boys”
While Silver Line Windows makes no claims to be “the” largest, it is certainly one of the largest vinyl window manufacturers in the country, with plants in New Jersey, Georgia, Ohio, Illinois, and Texas. With plans for several more, there’s no doubt Silver Line is one of the most aggressive companies in the industry right now. Leading the North Brunswick, NJ, based company is Kenneth Silverman, who as Silver Line’schairman and CEO, made the original decision to start selling its windows and doors through the Home Depot. Walking through a window plant faster than perhaps any other industry executive, he clearly provides much of the energy behind Silver Line. And while he may say his people aren’t “boisterous,” he certainly is, and the company, to a great extent, reflects his personality. In this interview, Silverman talks about some of the reasons for its success to date, including the growth it has seen in the big box market. But, it’s clear today, he’s also thinking “outside the big box,” looking to expand Silver Line’s business in its other existing channels, as well as exploring new options in the marketplace.

Current Position

Window & Door: Many people say Silver Line is the largest vinyl window manufacturer in the country. There’s even been speculation that Silver Line might produce more windows, no matter what the material, than anybody else. Could you comment on your current position in the market?
Ken Silverman:
We make a lot of windows. We don’t like to publicly say how many, but we make a lot. If we can be the sleeping giant of the industry, that’s where we want to be. It’s a challenge. It’s easy to get caught up in all of the talk about what X is doing, what he’s doing, what we’re doing, but we stay focused. We try very hard to stay focused and to grow our business and not to worry about anybody else.

WD: How did Silver Line get started?
KS:
My dad started the business in 1947. He was a mechanical engineer and a tool maker. Somebody hired my dad to designed a storm door. He finished the design, bought the aluminum, and the gentleman couldn’t pay him. So he had all this aluminum and a designed storm door and nothing to do with it so he actually went out and sold them. I came to the company about 29 years ago. We had about 70 people. It was a nice successful small aluminum jalousie/single-hung new construction window company. What basically transpired is that my dad and I didn’t agree on much. What he liked, I didn’t, and vice versa, but we’ve formed a great partnership. I managed the business and he worked on the factories and the engineering. That’s how I got started.

W&D: Was Silver Line a pioneer in vinyl?
KS:
We were in vinyl in the early in the ’80s, so were we pioneers? I think we were one of the companies that really believed in vinyl in the early stages. At that time, we had a pretty good aluminum business. It was really booming. I said, “We have got to get into vinyl.” About that time my ex-VP of sales told me, “You’re crazy. Why do you want to get into vinyl when our aluminum business is so strong.” I said, “Vinyl’s the future.” And he said, “You’re crazy. What do you need vinyl for.” Thank God he’s no longer with us.

First, we made a mechanical replacement window, and then a new construction single-hung window. Although vinyl windows were not always well received, we stayed with it. We kept our aluminum products until vinyl became widely accepted. We also, almost immediately, went into making our own vinyl.

Back then, the extruders had exclusive deals with competitors for the products we wanted, and they wouldn’t sell it to us, so we said, “The heck with it.” That's why we decided to make our own vinyl. In the beginning, everyone would say, “You’re not an extruder, and you don’t know how to make vinyl.” Today, as opposed to years ago, every guy who’s making extrusions and has extrusion tooling wants to know what we’re doing, where we buy our tooling, how we make our tooling. We’ve now come to the forefront in the vinyl extrusion marketplace.

W&D:Were you pioneers in vertical integration?
KS:
Yes. We were vertical, as some others were, but we were more aggressive.

W&D: How big a market were you serving when you first started into vinyl?
KS:
The Eastern seaboard, that was it. We had one large plant that we had just moved into in the early 80’s. The increase in our vinyl business forced us to buy a second plant in New Jersey. We saw an opportunity in vinyl and we just pushed on with it. And now, as we’ve evolved, we’ve gotten into better products. We’ve constantly strived to get better and better, to be on the forefront in design and engineering. This is especially important when you consider our large volume. You can’t afford to have a blip so to speak.

W&D: Silver Line, fairly or unfairly, has a reputation for being at the low-end of the market. What’s your response to that?
KS:
You know it depends. It depends on who you talk to. Some people think that we make the same aluminum windows we made 25 years ago in this local market. This is no longer true. Our current products have positioned at the higher end of the market. I can take you to distributor after distributor—they buy Silver Line for it’s quality, workmanship and competitive price. Our vision is to give a good quality product at a reasonable price to the consumer. That’s what we’re about and that’s what we’re always going to be about. That’s one of our fortes.

If you look at our new 2900 single-hung window, it’s probably the most successful single-hung vinyl window on the market now. Because of it’s performance numbers, because of the j-channel, because of the appearance—it’s taken a great deal of market share.

In some ways, we’re perceived at the low-end because of our relationship with the Home Depot. Some stigmatize big boxes as only supplying a commodity product. But one of the strongest parts of our company today is that the Home Depot has made us so quality conscious. It pushes stringent requirements on us, which we embrace as part of our vendor partnership. We have a test lab here, we test windows every day. How many window companies in this country have a test lab where they test windows manufactured in their plant every day? Not just when AAMA comes in, but every day. Because of our volume, we are concerned about having one bad day. We just don’t want to take that chance.

Home Depot

W&D: Well now that we’re talking about Home Depot, can you tell me how that relationship got started?
KS:
About 14 years ago, I saw Home Depot was opening up in New Jersey and the surrounding area. At the time, we were with a company called Pergament. I saw the opportunity and I said to a couple of our head guys, “Do me a favor, let’s get a hold of a buyer at Depot.” We basically got a hold of them, and we laid out a plan together, and we started with one store.

I think in this world, there is hard work, timing, and luck, and to be honest and straightforward, the timing was perfect, we worked real hard at it, and a strong business relationship was formed. They liked what they saw. They saw the benefits of our vertical integration and the opportunities it created when going to market with them. One of their head guys said to me, “Look Kenny, I’ll make you a deal. You keep us exclusive with the big box, and we’ll just give you more stores. Provide us with good quality, a fair price and work hard for us and we’ll grow the category together.” That’s what happened over the past 12 years.

W&D: Did you foresee the success that was going to come?
KS:
Home Depot and Silver Line share the same entrepreneurial spirit and the same kind of work ethics. In these regards we paralleled each other, and we still do today. One thing that people realize about us is that we’re really good learners. We make mistakes as we go along, but we soak up tons of knowledge and we learn as we go. I learned with Pergament. We didn’t know the retail business, but we had a couple years with Pergament, and we learned from it. We learned a great deal about retail merchandising. Then, one day, Pergament said, “It’s us or Depot.” Here’s where I really took a chance. We were in 33 Pergament stores, and I said, “You know guys, I really appreciate the opportunity, but if you really feel like that, then I have to leave.” And I chose Depot. And I evidently chose the right horse.

W&D: People have a lot of questions about the big box market. What product lines to you sell in Home Depot?
KS:
Replacement windows are a big part of our business with the Home Depot. We also sell some new construction. We’re different from others in the way we treat the Depot business. We treat each store as its own separate entity. You can go into a Depot that’s five miles or 10 miles from another Depot and find a different set of sizes stocked in each store. We do our market research. For instance, in the town I live in there was one builder who built half the town, so a lot of the window sizes used in these homes are the same. But 10 miles down the road, it might have been another builder who used different sizes, so your product mix has to match the community.

W&D: Who are their customers?
KS:
Home Depot has regular retail customers (DIYers), they have home improvement contractors, and they have what I would call the weekend contractor. That might be the policeman or fireman who is working part time to make some extra money.

W&D: People generally don’t think of replacement windows as a DIY project? Do you think that’s a large segment of your business? Is it growing?
KS:
I’d say Depot is the largest retailer of DIY products. We’ve had a great deal of success, but it’s all a matter of conveying the message. We’ve just gone through a re-design of our P-O-P program just to reinforce the message. Although some people would say the DIY business is dwindling, I think when you look at the economy, there’s still plenty of people who will be taking on this type of project themselves.

W&D: Home Depot clearly scared Pergament. How about your other dealers and distributors? Does your relationship with Home Depot ever make them nervous?
KS:
I think they’ve scared a lot of people in the business, but I think at the same time, our distributors realize it’s two different markets. A new construction lumber yard doesn’t compete head-to-head with Depot. We sell to a tremendous amount of new construction lumber yards, which end up supplying builders and contractors. As our company has grown, we’ve channeled the business through different brands. We’ve got the big box as one venue, which is our American Craftsman brand. We have our Silver Line brand which sells through distributors, dealers and lumber yards . We’ve just launched our newest brand, Stanley Pro-Fit Window.

W&D: I have one more question regarding Home Depot. I understand they put some pretty big demands on vendors. What’s the biggest challenge in serving that market?
KS:
I think the biggest challenge for anybody is service. I think the big box helped us get better. We realize the name of the game in our business today is service. In this business you’re going to have the guys my size and the smaller fabricator. Unfortunately, you’re not going to have many people in the middle, because the middle guy is neither fish nor fowl. You either have to be able to compete or find a niche and serve it well. Energy Star, AAMA, tougher building codes, they are making the business tougher. While it is good for our industry, it’s separating the men from the boys.

As the codes get more stringent, we feel it helps us. Our distributor doesn’t have to worry about whether or not our windows meet code. Most of our products are developed to comply with these codes. We don’t skimp. I can’t afford to have that kind of liability today.

To grow our business, I think service is the key. The guy who makes windows the fastest and provides the best quality at the best possible price window will win the ballgame. And price isn’t always everything. Some people think, “Silver Line is always the lowest price.” In some cases, where we have to be competitive, we are aggressive. But, at the same time, we present quality to the marketplace.

For example, we helped 3M develop the application of their Accentrim V-groove product on windows and doors. That is an expensive process. It presents a quality solution to the often high price of traditional V-groove glass. We’ve recently introduced a oak laminate patio door that we’re selling the heck out of. Because of the flexibility that being vertical provides, we’re able to give it to the consumer at a better cost.

W&D: Getting back to service, delivery times have been shrinking considerably in recent years. People even talk about five to seven days as standard. Where do you see that going?
KS:
That’s where the industry is going. There are peaks and valleys that complicate this, but that is the goal. I can tell you that, year after year, as we’ve grown our business we’re getting better and better.

Fortunately, we stock tens of thousands of windows to provide fast delivery of our most popular windows. Service is where it’s at, and customers are willing to pay more for that.

Once the delivery challenge is conquered, we’ll move on to the next challenge. I think that’s window performance and that’s where we have some advantages. You look at the performance of our product and stack it up in terms of DP ratings and U-values and we’re very strong. I’ve had customers ask, “Can you take something out of this window? I don’t need it that good.” I say, “No. This is what we make, I won’t deviate.” We want to be known as a high-quality company, not a commodity. Will we always have cost effective products? The answer is yes. Will we have high-end lines? The answer is most definitely. You have to right now. We want to cover both ends of the marketplace.

Our goal is to cover as much of the market as possible. We offer a “good, better, best” scenario in almost all product categories.

W&D: You’ve talked about the different channels you serve. What are some of the different needs you see in each, and where are Silver Line’s strengths?
KS:
I think we have different strengths in each area, and each area requires a separate expertise. The big box business has a team designed specifically to serve that channel. And the pro side has a totally separate team. We’re developing a team specifically for the new Stanley brand. Each team is very focused on their particular function. Years ago, we tried to implement one corporate philosophy and use it in all channels. It doesn’t work that way. Each channel has its own separate needs and we find this to be the only way to grow each market.

W&D:What do you see as the major differences in the products targeted at various channels?
KS:
The products are similar. They may have variations in the frame, the glass type, or maybe a component. In order to keep high standards, we don’t want to diminish the product for any one of our brands. Each product has to meet certain company and industry criteria in order for us to go to market with the product. And those criteria are pretty stringent right now.

On several products, low-E glass is standard. We use what is thought to be the best low-E on the market, irregardless or price. We could have gone to a lower price low-E, but it would of compromised our commitment to quality and performance. We strive to maintain high standards. If we weren’t a tremendous outfit and didn’t have high standards, Stanley wouldn’t have made the deal with us to make Stanley windows. They wouldn’t just make a deal with anybody. They had a quality criteria and a testing criteria—we met both.

There’s just a stigma. High-volume is always associated with commodity, and it’s not necessarily the case. If you visit any of my factories, you’re going to find highly-automated facilities that produce a lot of windows—high quality windows. Our big push right now is automation. We’re building a tremendous amount of our own automatic equipment today. There’s a race for manufacturers to automate. Automation results in a better window in a faster time frame therefore, I think the guy that automates, who can automate the best, will win the ballgame.

W&D: When consolidation was the big trend, Silver Line didn’t make any acquisitions. Weren’t you interested?
KS:
I kicked tires for all these companies. I’d look at the EBITDA number and I’d ask “How can normal people pay this kind of money?” You can’t grow your business by overpaying for things. We feel that we can open our own factories cheaper. It’s a little tougher to get started than it is to go and buy companies. But you don’t get the Silver Line culture or the Silver Line philosophy and that is our strength.

You also overpay for vinyl. And now you’re not making the same products. I think the biggest failing of a bunch of these companies in the consolidation of the last couple of years was that they bought pieces of a puzzle that didn’t fit together. They bought a window made by X and then they bought another window made by Y. Now the company up North is busy as heck and the company down South has no work. The factories can’t help support one another.

I think it’s imperative for us that every person that works for us shares in our culture. One thing people in my company like to do is win. We enjoy winning, taking over market share and conquering business.

Emphasis on Partnerships

To do so, one of the most important things for us is to develop partnerships with our customers. We consider our customers partners. We want to grow strong, long lasting relationships. If a customer has a problem, if he’s in a financial straits, we’ll work with him. If he has shown loyalty to us, we’ll do almost anything for him. I can’t stress that enough. We’re not looking to sell the world. We want to conquer business with people that want to be partners with us and work together as a team.

W&D: Does this emphasis on partnerships represent a new philosophy?
KS:
It’s been more of an evolution in our philosophy over the last two or three years. A lot of competitors want to “sell everybody.” But what do you do when you sell everybody. All you do is bastardize your product. If John has it next door and James has it just down the road, the only difference becomes, “What’s the price?” Now if you make your product more exclusive, is the price as important? No, it isn’t as important. You have to partner with your customer. You have to protect them and they have to protect you. We can’t lose deals, so together we partner up with builders. We want to know the builder as well as we know our distributor.

In some circumstances, we’ve developed new products together with our distributors and builder partners. Should one of our distributors help us develop a new product I’m not going to sell it to the guy next door. Why? Because we worked on this product as a team together. That’s how we’ve built up loyalty. Yes, we can sell it to other distributors throughout the country, but we’ll protect our partners.

Our customer loyalty is incredible. I wish I could take you on a trip. I’d like to bring you to visit of our customers, both distributors and builders. You’d get a perspective on us from the consumer end that there is no other.

W&D: Consolidation has obviously not only taken place at the manufacturer level, but at the distribution level as well. Is that one reason you’re emphasizing partnerships?
KS:
Yes, you have to have partnerships. You have to protect your distributors. You can’t open everyone up. I think the guy that tries to flood the market is making a big mistake. You can’t sell everybody. That’s why I chose one big box to sell. And I support that big box. I think the Home Depot taught me a lot about vendor partnerships. I partner with all my other customers in the same way. These partnerships are key to our success in all channels.

Maybe, I’ll partner with a guy who won’t do as much volume as the guy next door, but I’ll tell you one thing, with us in back of him, he will grow as big as the guy next door, because we’re going to work together, because we’re going to set mutual goals and work together until we achieve them. That’s one of the ways we’re getting stronger, not only by growing the business but building relationships as well. Our aggressive growth plan, the building of all of these new plants, is to give better service to our customers. The name of the game is customer loyalty.

Anybody can sell a window at a certain price today. How long they can give those customers the support, the support and help they need, and help pull business through them, is the key to the a loyal customer base.

W&D: You’ve talked a lot about the changing philosophy. What other plans or goals do you have for Silver Line?
KS:
Our goal is to be 100 percent vertical if we could. I think we’re highly automated and becoming more and more so. A key is to continue to invest a lot of money in engineering and design. We’re always look to the future for new products and better ways to produce them. We just don’t stop when we reach our goals and say, “We’re done.” We’re always thinking and building toward the future, and you have to re-invest in your business everyday. To grow your business, you have to come out with new products and services every year.

We started in vinyl some 20 odd years ago already. While it’s our core business, we’re looking at other products. We’re starting to make wood composite decking as we speak. I don’t think that many of our competitors are spending as much on R & D. Some just don’t have the resources. We don’t like debt. We need money to reinvest. Every dime we make in this company, we put in our business. I can show you numerous products that just didn’t work. We are continually trying to develop products that bring value to our customers. We’re always looking to see what makes a better window. We just don’t stop. Everybody from my dad—all of us—are very simple people. We’re down to earth people, up at 6 o’clock in the morning and leaving work at 8, 9, 10 o’clock at night. It’s not a 9 to 5 corporate thing. We can’t run it like that, we’re too competitive.

W&D: Silver Line is getting fairly large now. Do you think you’ll be able to avoid the “9 to 5 corporate thing?” Are you going to be able to maintain the entrepreneurial spirit within the company?
KS:
I think that by being hands-on and educating people on our corporate culture that we can. I spend a great deal of time with my team, promoting an entrepreneurial spirit so that they can run the company. If you meet any of my head guys, you’ll find they’re as crazy and hyped up about this business as I am. This company is not ruled by me. Everyone has a voice. My thinking is that we don’t look for or need ‘yes’ people. We look for people who want to express their opinions on how to make us successful. It might not always be right. But we look for the exchanging of ideas. For individuals who express themselves and who’ll be entrepreneurial in nature. It’s difficult sometimes, having all of these entrepreneurial managers agree on a course of action, but we do a pretty good job at it.

We hiring a new transportation guy right now. He’s going to literally go to Home Depot and load stock on the shelves. If he can’t get down in the trenches with my people, the guys working in the field, he’s not a Silver Line person. If I go into a Home Depot store, if there’s someone in the aisle looking for help, I’m going to try and help the customer. That’s what we’re all about.

W&D: Already, you have plants throughout the country. Is the culture the same from location to location?
KS:
Our core culture, our commitment, is the same everywhere. It may be applied a little differently from plant to plant or region to region, but the basic culture is consistent. It’s amazing how different the motivation factors can be from plant to plant. One thing that I believe is that people have got to be treated like people. Treat them with dignity and respect and they’re going to happy with their jobs. People have to be patted on the back. They want to know they’re part of the team and they’re just as valuable as everybody else.

Let me tell you something, it’s harder to stay on top of what we’re doing today than it was to get to that plateau. It’s harder to keep it up. It is not always easy keeping everyone as motivated and focused as we try to be. Can we continue to do it? I think so. As long as we continue to cultivate our corporate culture. As long as we don’t think we’re indispensable. We have to think smarter and wiser than we ever did before. And we’re going to act much more carefully than we ever did before.

Future Growth

W&D: What changes do you foresee? Will you diversify to continue growing?
KS:
We’ll diversify as we can. You know it’s funny. We looked at tons of ways to diversify, and we always come back to the fact that we’re window people and if you stay with what you know best, you’ll be successful at it.We’re working on a decking project, which is similar to our vinyl extrusion business, so we’re looking at it. We’re looking at new products and product line extensions. We’re going to continue to expand our business. There’s so much business out there. We will be on the West Coast in the next 36 months.

W&D: Vinyl windows aren’t growing at the pace they once were. Does that concern you?
KS:
We still think with our entrepreneurial style, with our ability to grow our business and take market share, that we’ll continue to grow. Vinyl windows are hitting a plateau to a degree, however, I think there’s still a little more room to grow. I’m always looking at construction sites. I was in Illinois the other day, and I saw a project that wasn’t using our windows. There’s more business than I can take. We’re also pushing the commercial business.

We always had an aluminum commercial product line. We’ve dedicated a plant to this business. We’ve done some sizable school and high rise jobs. With the recent completion of our new heavy commercial window, we’re going to start pushing this program. We’re not going into residential/ low-rise aluminum, strictly commercial. It will be a nice market for us, we feel.

W&D: Have you looked at other materials?
KS:
Yes, we’ve looked at composites. We have worked on some other things. We can’t talk about it at this time. If we’re successful, we think it’s really going to create some waves, but that is yet to be seen. Our goal is to offer better products at lower costs. Not something cheap. We don’t want to go that way. We’re trying to come out with products that provide better performance, offer low maintenance convenience and are affordable. That’s where our business is going right now. I believe that as wood composites evolve and become more cost effective, that they will gain in popularity. Eventually, I think the business will evolve to where you have a handful of wood manufacturers and the large producers or small niche providers in vinyl and composites. I believe that residential aluminum is going to go by the wayside.

W&D: Speaking of going by the wayside, with companies like Silver Line growing and taking market share, do you think there’s still going to be room in the market for the small vinyl fabricator?
KS:
He can make it. He is often more flexible. He can survive by finding a niche. But above that, it’s kind of difficult. Unless you’re extruding, unless you’re highly automated, it’s difficult to compete with larger, vertical companies. And you can’t grow the business to this size unless you have a strong flow of cash, and you want to lose money for 10 years. You can’t. Automation today isn’t cheap. Do I know if that’s good or bad for the industry? I don’t really know.

You have to be pretty profitable to re-invest and grow your business today. You have to put it on the line every day. And there’s few people in our industry who really do it. There’s only a few people who really worry about tomorrow. We’re always thinking about tomorrow. If somebody buys a product from us, we’re obligated. We’re here today and we’re going to be here tomorrow.

We’ve designed and built our product for tomorrow as well. For example, we’ve just released a new DP-60 rated vinyl single hung that meets the 2000 Florida Building Code. We expect Dade County approval in the next month or so. We’re currently working on an impact resistant window as well. Our ambition is to be at the forefront of the market.

We could have made something less, but I’m not taking on the liability to make a lesser window—especially at our level. There are many other people in our business that are also taking the high road. At our level, you just can’t take the chances associated with building an inferior product. I know there are people making windows that are not certified or to spec. We don’t worry about competing with these companies. I can’t do that, nor do I want to do that. I’ve got to present a quality product that can be used all over Florida. That’s how we’re going to market. I think we’ve quietly done a good job of building a quality image. I don’t want to do anything to jeopardize that.

W&D: Talking about your image, a lot of people in the industry have certainly heard of Silver Line. Do you expect to raise your profile and become more of a brand name?
KS:
Oh yes. Branding is a critical part of our marketing plan. I think we’ll do a lot more advertising which will start to address the consumer and tell our story a bit. And we’re going to work more with the Stanley brand. You need the structure before you can promote it, and we’ve been putting that structure in place.

I think all the guys who are on top, who have established themselves, are going to survive. The non-consolidated corporate guys are going to survive.

There’s a question about whether the other groups are going to survive. I really can’t tell you. You can’t be everything to everybody in this business. You have to point yourself at certain markets and certain philosophies. You can’t be everything to everyone. You’ve got to have the ability in our business to say no.