Running Head: MOONWORKS CASE ANALYSIS

Case Analysis of Moonworks Jenna Berthelsen MGT 351.01- Small Business and Entrepreneurship November 12, 2013

MOONWORKS CASE ANALYSIS Moonworks Background a) The Idea Jim Moon, a graduate from the University of Rhode Island, first got the idea to open Gutter Helmet of New England after his father enthusiastically showed off his new Gutter Helmet covers that had just been installed. Prior to this, Jim had opened a kitchen remodeling

business and was satisfied with it, but he saw something innovative and inspiring with the Gutter Helmet design and took a leap of faith. The Gutter Helmet is a uniquely designed gutter protection system that keeps debris and animals out of gutters and lasts through bad weather because of its PermaLife Finish, a protective paint system, as well as its textured surface which increases surface tension and strength. Not only do Gutter Helmets keep gutters clean, but they also prevent people from risking injury trying to clean out their gutters themselves. Therefore, by selling Gutter Helmets, Jim is selling both a product and a service to families so they will not have to put themselves in potential danger. Initially, Jims Gutter Helmet business consisted of only one employee, himself. He made the sales calls every other day and did installations the remaining days. The demand continued to grow and Jim had to pull together a team and gain financial backing. (moonworkshome.com) b) Gaining Initial Financing Eventually, Jim founded Moon Associates in 1993, and experienced great success through high demand for the Gutter Helmet product. Moon Associates needed to raise capital in the beginning and needed help from a bank. Help came in the form of Steve Russell, the Senior Vice President of Business Lending Bank Rhode Island, who decided that Jim Moon would be a worthy investee. Steve stated that before investing, you have to know who it is youre lending money to, know what their business is, how they make or lose money in that business, and how

MOONWORKS CASE ANALYSIS this management team is going to operate in good times and bad times (Cengage video). Steve respected Jim and his work, and provided him with a mortgage, and then eventually a working capital line of credit, and a term loan to support working capital through the Bank of Rhode Island. The relationship between Steve and Jim is important for Jims business, because Steve made it a point to not only invest, but to learn the business and remain involved. According to Longenecker, Petty, Palich, and Hoy, the authors of the Small Business textbook, it is wise to

cultivate a relationship with a banker sooner rather than later and that is exactly what Jim Moon did (2010). Steve and Jim go through financing every year, along with meeting quarterly to monitor progress to maintain their relationship and to benefit the company (Cengage video). c) Ups and Downs Jim, with the help of Steve, founded the first company to sell gutter protection throughout New England, New York, and southwest Florida. Moon Associates headquarters is located in Woonsocket, Rhode Island in a 10,000-square-foot building. Jim spent the first several years doing installations and being truly hands on within the company. Endorsement from local celebrities helped Moon Associates grow to $14 million in revenue by 2005 (Longenecker, Petty, Palich & Hoy, 2010). Eventually, Jim switched from doing the work to growing the team, managing the company and teaching [his] approach to [his] employees (moonworkshome.com). By 2006, the market and rise of competition created a major decrease in Gutter Helmet sales. Moon Associates decided to sell the Florida operation and partner up with a full-service window replacement division, Renewal by Anderson in attempts to expand means of generating operating cash. However, in 2007, Gutter Helmet sales dropped 50 percent (Longenecker, Petty, Palich & Hoy, 2010) . Clearly Moon Associates did not need a new product line or partnership, they needed an industry veteran and new capital to move forward. Jim brought in Paul Thibeault,

MOONWORKS CASE ANALYSIS Home Depots Home Service northeast manager to build the sales force and looked to Bank of Rhode Island once again for financial support. In doing so, Moon Associates decided to focus more on repeat customer business, and changed its model from being solely an exterior replacement contractor to being a leading regional home improvement company (Longenecker, Petty, Palich & Hoy, 2010). d) Becoming Moonworks In 2009, along with this shift in focus, Jim decided to change the name from Moon Associates to Moonworks. Jims reasons for this are clearly stated on the Moonworks page as such: First, given the growth of the company into other home improvement product lines, the name Gutter Helmet no longer best described everything we did. Second, to demonstrate

to my employees, partners, suppliers, and most of all my customers that I literally put my own name on everything we do. And third, as a tip of the hat to my dad, whose enthusiasm for the original Gutter Helmet product is what got me into this business in the first place. (moonworkshome.com) This expansion into other related work clearly paid off for Jim and for Moonworks because by the end of 2008, revenues had grown 39 percent (Longenecker, Petty, Palich & Hoy, 2010). Since then, Moonworks has been honored on Remodeling Magazines Big 50 List in 2010, ranked number 2307 on the Inc. 5000 List of the fastest growing private companies in the US in 2011, and ranked 37th largest Replacement Contractor in Remodeling Magazines Top 550 List in 2011. (moonworkshome.com). These achievements and recognitions are great testimonials to the success of Moonworks. However, they have had their fair share of difficulties along the way

MOONWORKS CASE ANALYSIS and will have them in the future, and Jim and his team will have to try to continue overcoming these difficulties. e) Moonworks Today Moonworks is now in their twentieth year of operation, and offers much more than the original product, the Gutter Helmet. Now, Moonworks offers many environmentally friendly alternatives for windows, roofing, and even a service called Dr. Energy Saver. This service includes a home energy audit and review to identify specific energy-saving needs, and then proceeds to transform homes into ecofriendly and high-efficiency spaces. They provide these

energy efficient changes with their insulation services, residential roof spray foam, and EcoView windows. Another service they now offer is Ice Defense, which is a Heated Helmet so to avoid having frozen gutters. Moonworks provides potential or current clients with a Perks Program as well as MoonWrites The Home Improvement Blog, and both can be found on their website. Moonworks continues to improve through the expansion of its product and service line, reaching out to client needs and wants, and becoming more environmentally friendly. (moonworkshome.com) Analysis of Moonworks Situation a) Table 1: Revenue Timeline Year 1993-2005 2006 2007 Revenues $14 million revenue Weakened market -Sales dropped 50% to $6 million revenue -Total company revenues dropped 30%

MOONWORKS CASE ANALYSIS Beginning of 2008 End of 2008 2010 (Longenecker, Petty, Palich & Hoy, 2010) The table above depicts the typical hardships that startups face; however, the difference for Moonworks is that their revenue and market decreases did not occur until a decade after opening, rather than the typical business failures which occur within the first five years. As the case states, economic conditions, products, and customer bases can change, sometimes leaving a once-sustainable company in jeopardy of not meeting the day-to-day expenses of operation Negative bottom line Revenues grew 39%, cash flows positive $12.7 million revenue

(Longenecker, Petty, Palich & Hoy, 2010). This was the case for Moonworks around 2007 when economic conditions made it harder to meet operation expenses. b) Statistics According to statisticbrain.com, the percentage of construction businesses that are still operating after four years is 47, while service businesses are slightly higher at 55 percent. The top two businesses with the worst success rates after five years are plumbing/heating/air conditioning, and single-family housing construction. Incompetence and unbalanced experience or lack of managerial experience are the top two major causes of business failure. The specific traits pertaining to these causes are poor credit granting practices, expansion too rapid, and inadequate borrowing practices. (statisticbrain.com)

MOONWORKS CASE ANALYSIS c) Table 2: Positive Business Moves Positive Business Moves 1. Initial marketing through local celebrities to build client base 2. Management began implementing industry-leading business systems 3. During hard times, sold Florida operation 4. Partnered with Renewal by Andersen to try to generate operating cash 5. Recruited industry veteran Paul Thibeault (Longenecker, Petty, Palich & Hoy, 2010) Evaluation Table 2 outlines the strategies, ideas, or methods that Moonworks has adopted since it was founded in 1993 that have proven successful, even if only for a period of time. One of the best, most sustainable improvements that Moonworks developed was the addition of their Dr. Energy Saver. This is a strong marketing technique targeting the move toward a more environmentally friendly and energy efficient society. Along with the value that will come with added client interest, it also will lead more people to purchase Moonworks products after the home energy audit, to make homes as energy-efficient as possible. This is essentially a way that Moonworks can tell people that they need to invest in their windows and insulation, and clients will view it as a positive and necessary investment. According to statistics above, Moonworks basically had a fifty-fifty chance of surviving after the first five years within its industry, and it easily beat those odds and thrived throughout the first thirteen years. However, the problem turned into sustainability in a bad economy. Once again, Moonworks beat the odds and adapted to the changing economy and managed to pull 6. Approved for an increased line of credit

7. Refocused emphasis on repeat customers rather than generating new customers 8. Expanded services to become a regional home improvement company 9. Developed an energy-efficient, valueoriented approach, including Dr. Energy Saver 10. Created the Moonworks Perks Program

MOONWORKS CASE ANALYSIS revenues back up. Based on the analysis and how the company is doing now, Moonworks has shown its adaptability to changes in economic conditions, products, and in customers. Although it appears that Moonworks has adapted well in the past and is doing well now, there is still room for improvements. One concern is expressed by Lisa M. on Yelp, who commented that, Moonworks is nothing more than a business that is a jack of all trades and a master of none. Consumers, do your research and pick a company that cares about quality and not quantity (Yelp). Jim started out installing the Gutter Helmet, but since then has expanding Moonworks to become a home improvement company, and according to Lisas comment, Moonworks could be slacking on its standards of quality. They provide enough products and services that should continue to be household necessities so instead of switching focus to new products to satisfy customer demands they should first improve consistent quality of products

and installation across the board. Part of Jims reasoning for the name Moonworks is that he puts his name on everything they do, and if that is the case, he needs to make sure his name is consistently on high-quality product and service. Another problem Moonworks faces is the growing number of competitors in New England, and addressing how they plan to beat out competitors in a cost-effective way while at the same time upholding its standards. Recommendations Based on the background, analysis, and evaluation of Moonworks, here is a recommended action plan in order to sustain and thrive in the future. Moonworks should: 1. Clearly define quality standards for each product and service and perform to those standards consistently. 2. Remain a top competitor by improving quality standards as well as improving customer service methods. This could involve providing helpful feedback to negative complaints,

MOONWORKS CASE ANALYSIS listening carefully to clients specific needs, and performing in a professional, efficient manner. 3. As long as financials allow, continue developing the Dr. Energy Saver program and stay up-to-date with the latest energy-efficient home improvement tools.

These recommendations are in order of importance because Moonworks first and foremost needs to improve what is already offered. From there, they can consider how improving customer service could make them beat out competitors. After both of these issues are addressed and on the right track, they can continue improving a service that has great growing and sustainability potential. These three recommendations will focus on improving what they already offer, working on customer service attitudes that are not quite where they should be, and keeping the company moving forward through one of its services.

MOONWORKS CASE ANALYSIS References Business failure percentages. Retrieved from statisticbrain.com Longenecker, J., Petty, J., Palich, L., & Hoy, F. (2010). Small business management. (16th ed., pp. 717-718). Mason, OH: South-Western Cengage Learning. Moon, J. (n.d.). The story behind moonworks. Retrieved from moonworkshome.com Moonworks home improvement. Retrieved from http://www.yelp.com/biz/moonworks-homeimprovement-woonsocket

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