Be your own boss. Own your own business. Control your own destiny. Many people have grown up believing in that American dream, which is undoubtedly part of why there were about 650,000 new small businesses launched in America in 2007, according to the U.S. Small Business Administration (SBA).
Additionally, the SBA defines a small business as having less than $6.5 million in annual revenues for most service industries. But how does that apply to the electrical construction industry? According to the 2008 Profile of the Electrical Contractor, 69 percent of electrical contracting firms are small firms, which each carry less than 10 employees.
ELECTRICAL CONTRACTOR spoke with three small business owners, each with about 10 employees or less. None see the small business phase as something to simply pass through on their way to becoming bigger. All three own multidecade-old firms that are smaller by choice because the owners prefer the benefits of being that size.
A traditional contractor
L R Brabham Inc. of Springfield, Ore., spans both decades and generations. Company president Larry Brabham Jr. was 13 years old when his father, Larry Brabham Sr., started the company in 1973. The elder Larry retired in 1998.
L R Brabham is a traditional electrical contracting firm that does not specialize in any certain niche but rather bids out where the work is.
“We did a lot of traffic-signal work when I first started full time because the competition was less for those projects,” Brabham said. “But we have branched out since then, and now, we bid what’s there. We seek diversity as a hedge against the economy.”
“Really, we don’t shy away from anything,” Brabham said. “When I am bidding projects, I look for what is best for the company. I used to shy away from projects that were hard to bid, like, say, sewage treatment plants. But then I realized that those harder projects can have less interest from others, which means that they can be easier to win and make money at.”
Brabham understands having enough work sometimes comes down to bidding, which is a responsibility he shares with one other staff member.
“Sometimes we bid more work than we can do with our regular staff, intent on bringing in help from the union hall to get the work done if we win it,” Brabham said. On occasion, Brabham has hired outside estimators to bid even more jobs.
“That is risky but doable,” he said.
Currently, Brabham maintains a staff of about 10 to 12 electricians. But at its peak in the late 1980s, L R Brabham had about 30 field staff.
“We stay this size now because that is what our current office team can support. I would only grow bigger if I had the right office team in place to support it. The right staff addition would let everyone in the office be more specialized in their work and make the company more efficient. But that is a hard leap to make. You need enough work in place to bring that person on, but you also need that person before you can get the additional work to justify him. And it would really need to be the right person,” Brabham said.
But in the end, he does not see L R Brabham’s current size as a weakness.
“Being smaller is more profitable. We gross less, but net more,” he said.
Brabham maintains the business size he wants in order to meet his overall priorities.
“There is an endless amount of work that needs to be done,” he said. “But my life is not here. It is at home with my wife and kids, at their school and sporting events. I don’t want to ever say, ‘I should have been there for them.’”
A woman-owned enterprise firm
Like L R Brabham, Gunnar Electric Co. Inc. in Eden Prairie, Minn., is a family-owned business whose owner works hard to keep her priorities straight. Lois Walters bought Gunnar Electric in 1986. Twenty-two years later, Gunnar Electric remains an established contractor that employs nine electricians. But getting to this point has taken the hard work and dedication that characterizes many small businesses.
“[In the early days,] we operated by the seat of our pants, learning while doing,” Walters said. “[My husband] took his master’s license, so we could remain contractors. He ran the guys. We trained an estimator; retained the bookkeeper, who was worth her weight in gold; and I learned the contracting business. That was all while we had five children at home between the ages of 4 and 12, who were, and still are, our main priority. It was a difficult time economically as well as personally.”
Walters believes the aging of the electrician core group is an issue for both her business and the industry, in general. Two of her electricians are her own children in their 30s.
“Both are journeyperson electricians, and one has her master’s license. But they don’t have the experience, which my older guys have. I am hoping they will learn the ropes and be able to take over the company in five years when I plan to retire,” Walters said.
Four of her electricians—nearly half—are in their 50s. Of her other three “younger” guys, one is in his 40s and two are in their 30s.
“They are all excellent and can really put in a job in a timely manner,” Walters said.
Beyond age, other issues affect smaller contracting firms.
“The main problem of small contracting is that you need to wear a lot of hats. I am the paper supply person, the ink pen resupplier, the copier fixer, the calculator replacement person, the floor sweeper, toilet cleaner, vacuum pusher, dish washer, lawn-mowing arranger or mower, snow plow scheduler. You name it. As the owner of the property and business, you get it all. None of those even affect the actual contracting business,” Walters said. “Human resource needs, union issues or complaints, marketing attempts, and computer issues all are part of my job. I need to oversee the office personnel if I have any. If not, I am the customer service representative, the dispatch person, the estimator, the project manager and the bookkeeper all rolled into one. The small contractor gets inundated with urgent issues, and the important issues get left hanging.”
But Walters knows that is not the only side of being a small electrical contractor.
“There are many benefits, many good things like wonderful customers who love our ‘customers first’ mantra. We have made many good friends through this business,” Walters said.
A specialty contractor
R W McGhee Jr. Inc., Sandston, Va., typically employs between two and six electricians.
“I’m really happy about the size of McGhee Electric,” said Raymond McGhee, company owner. “I like the work. I like meeting customers, and I like the variety. And I like being able to schedule my own time off for vacation, missions trips, or whatever, but I give a high degree of service when I am in town.”
McGhee does not take the good parts of his small business for granted.
“[Building a] business does not come quickly. It is important to maintain ethics, integrity and honesty. Not every company will do that. But you can’t buy a reputation, and that is worth more than a low bid.”
Reputation also is worth more than a single project.
“I bid a lot of jobs, but I only bid them to my liking after looking at the risks and rewards,” McGhee said. “Longevity lets you choose your clients, but you must have the reputation first. I usually win my big jobs just on reputation.
“There is lots of work available, but you don’t want it all,” McGhee said. “You want to work for a fair price for clients that will pay promptly. You want them to value what you offer.”
Though McGhee and his staff still perform a variety of electrical work, including some commercial, government and high-end residential work, his company has evolved into primarily providing electrical security installations, partnering with ADT Security.
“ADT lands the work. Then I bid it to them if I like it, and they contract it out to me,” McGhee said. “So ADT takes all of the weekend calls from their clients, and I don’t need a sales force to competitively bid.”
A 10-hour day is typical for McGhee. On top of that, he works in his home office three nights a week for an hour or so. Payday is Thursday, so he does payroll on Wednesday nights. His wife, Pam, who has an accounting degree, works four days a week as a dental hygienist and manages the company books one day a week, further emphasizing a small business owner’s need to split attention between duties.
“I really like what I do,” McGhee said. “I am happy to have a trade where I can help others.”
Owning and operating a successful business of any size is never easy, but many small business veterans have affirmed it is rewarding and worth the challenges.
MUNYAN is a freelance writer in the Kansas City, Kan., area, specializing in business writing and telecommunications. He can be reached at www.russwrites.com.