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Goldilocks knew how to get it right. She knew too big when she saw it, and she could tell when too small just was not enough. Most importantly, she understood the concept that something could be just right.
Such is the case with many midsize electrical contractors. Being in the middle brings many opportunities that are beyond the abilities of a small contractor. But it does not have many of the weighty and potentially crushing difficulties that can shackle big contractors.
Just what is a midsize contractor? A contractor near the middle of the pack in New York or Los Angeles may equal the biggest contractors in Birmingham, Ala., and even dwarf the industry leaders in Waco, Texas.
Nonetheless, many would agree that an electrical contractor of 100 employees or more is a big organization, regardless of where it fits in the local list of other contractors. Therefore, a midsize contractor is a company that employs 10–99 employees, even though some will say 10–25 is too small to be midsize or that 75–99 is too big.
So what is life like in the middle, and what does it take to prosper there? Consider the experience of four midsize contractors from different markets across the country: CMSH of Sacramento, Calif.; Green Electric Inc. of Colorado Springs, Colo; Kastle Electric Co. of Dayton, Ohio; and Woodall Electric of Meridian, Miss.
Serving the local economy
The most often mentioned reason that contractors are midsized is because that is the size the local economy and competition level will support.
“We currently employ 40–50 electricians and apprentices,” said Brad Woodall of Woodall Electric. “In recent years, we have been up as high as 100 plus but have found that we are much more comfortable at our current level due to the geographical region we serve and the level of quality we can provide.”
Andy Stuhlmiller, owner of Kastle Electric, explained that his company employs about 65–70 electricians and that maintaining that size has been a struggle in economically depressed Dayton.
“In recent years, we’ve seen the loss of a lot of the city’s industry and prosperity, but this is still a good size for us,” Stuhlmiller said. “We are big enough to take on projects that many smaller shops can’t, but we don’t have to take work that is not profitable. With our core group of field personnel, we can ebb and flow with the market, and can afford to walk away from a project when we need to. That might be harder if we were bigger.”
Pinched in the middle
According to Woodall, one of the challenges midsize contractors face is that they can sometimes be pinched between small and large contractors.
“The small contractors, many of whom operate beneath the radar [without licenses and avoiding compliance issues with OSHA, codes, IRS, EEOC, etc.], working out of the back of their trucks with very little or no overhead, are constantly pecking away at some of our smaller accounts and service work,” Woodall said. “Many of these customers that initially fall for the ‘cheaper’ rates usually come back, many times looking for us to correct work that has been done improperly and, thus, costing more in the long run. On the other hand, we compete with the large contractors who are locked in with national accounts and buy material in bulk volume. We have found the best way to overcome this is to provide quality installations by trained professionals, [and by maintaining personal] relationships with our customers.”
Of course, being a midsize contractor can sometimes mean being looked down upon. While the smaller contractors promote a perception of being specialized and the bigger contractors promote the perception of having power, midsize contractors are sometimes not seen as possessing either trait.
“We have about eight general contractors that we like to work with,” said Jack Baker, who co?founded CMSH. “If possible, we want to work on a team with one of them, where we have a say in what is going on.”
Furthermore, midsize contractors often must compete for business retention. If service quality slips even slightly, a client may wonder what kind of service it could see from a larger competitor.
Richard Green, owner of Green Electric, explained how his company of about 30 employees cares for its anchor client, Centura Health of Colorado Springs, Colorado’s largest family of hospitals and healthcare services.
“Probably about 25 percent of our work is for Centura, a 20-year client for us,” Green said. “We keep that preferred relationship because of our willingness to provide absolute immediate responses to them when they call, be it a question, a problem, an on-site meeting or whatever. If they need us on-site, one of us will gather his stuff and be on his way in a matter of minutes.”
That level of commitment has brought Richard and his co-owner (and brother) John into multiple design/build and design/assist projects with the healthcare giant. Good client relationships grow out of a contractor’s quality work and a dedicated staff.
“We have a near-zero callback rate,” Richard Green said. “I can count on one hand the significant callback issues that we have ever had.”
“I take pride in our quality of work,” Baker said, “and in being profitable. We are not always the cheapest, but our work is worth it. But keeping qualified electricians is a challenge. I want a staff with the same vision [of quality] that I have, but only one in five that I hire is worth keeping long-term. And only one in 15 will I put in supervision.”
But Baker said once he finds quality employees, they tend to stay with him. Nearly half of his staff has been with him for 15 to 20 years.
However, after handling the loyalty issues internally, a midsize contractor has to handle the loyalty issues with its clients, and the question of where to find loyal customers comes to mind.
“We like to do government-funded work, things like schools, federal and state projects, military and Corps of Engineers projects,” Baker said. “With government work, the money is there, so you know you are going to get paid. If you are willing to do the paperwork, it can be very profitable. Private work can be a problem, even if you do everything right.”
Large institutions also noticeably populate Brad Woodall’s preferred project list.
“Being in a smaller market, we bid most any type of project that is in our area. Some of our preferred projects are industrial/manufacturing facilities, medical facilities, airfield lighting, fuel storage facilities, military projects and any project that requires a higher level of skill to perform,” Woodall said.
While all four contractors prefer repeat business and no-bid contracts, the realities of the marketplace leave all of them consistently seeking new sources of revenue. Three of the firms have found that in low-voltage work.
“We find that low-voltage work can be less competitive and more profitable than traditional electrical work, especially on larger?scale projects,” Stuhlmiller said.
Kastle Electric performs its low-voltage work under a separate division, Kastle Technologies.
“A lot of that work in our area is driven by mom?and?pop operations. That makes us a preferred vendor due to our larger size and experience because we can do high-volume skilled work at a level that the smaller firms can’t. And we can provide manufacturers’ certifications.”
Green reported similar success. His company has been doing low-voltage work for approximately a year and a half.
“Electrical contractors have typically subcontracted out low-voltage work,” Green said. “And the work tends to be spotty, so they can’t keep a full-time [low-voltage] team going. We offer BICSI-certified services to both our clients and competitors and have had a full-time project manager for over a year.”
But regardless of the type of electrical work, managing labor costs is essential to any contractor’s success.
“Labor costs are managed by not over-manning projects and expecting a higher than average amount of production from our people,” Woodall said. “I think and hope that our productivity versus labor cost is above average.”
“It gets especially hard when we face labor rate increases, so I am continually pressuring the local to help keep [union shops] competitive,” Green said. “I’m working with the local now to explore ways to increase our market share. We are partnering together to address the competitiveness issue.”
“We’ve seen more cooperation with the union in recent years,” Stuhlmiller said. “Our relationship is better due to increased competition.”
These midsize contractors have found that providing local clients with personal service and high?quality workmanship are fundamental to their longevity and profitability. Those traits have allowed them to select preferred markets and to turn away work that is not in their best interests. Managing labor costs has been a key to their success, as has been offering a diversity of services.
All of that has added up to life in the middle being good for these four companies. Like Goldilocks, they may have all had their challenges getting to the right fit, but once there, they have become a household name to people who know them.
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.