What do you do when your market dries up?
That was the question faced by Valley Blacktopping, an Eagan, Minn., paving contractor that for years had generated the bulk of its sales from the new construction boom in and around the Twin Cities.
But when the economy hit the skids, new construction came to a screeching halt. Valley Blacktopping was hit hard, like so many other contractors.
A family-owned and operated business started by Russ Johnson in 1976, Valley Blacktopping worked for 20 years to become the go-to paving contractor for new construction, particularly new construction of houses. Ryan Johnson -- grandson of Russ, son of co-owner Ritchy, and nephew of co-owner Scott -- says Valley Blacktopping had an efficient, high-volume system for installing new driveways. The contractor ran one base construction crew and one paving crew and would typically construct between 40 and 50 townhouse driveways (16 ft. x 26 ft.) every day.
“We could do one driveway in 15 minutes, and there were days when if we didn’t do 50 driveways we were falling behind,” Johnson says, adding that the company’s record for driveways was 76 in one day.
But that was during the boom, when their relationships with builders made Valley Blacktopping first in line for contracts and when there was so much construction going on that there was always another driveway to build in the next development.
“Throughout the 1990’s big boom in homebuilding they couldn’t throw houses up fast enough and we saw it and we knew that would be a way to grow our business,” Johnson says. “So we pursued it and for about 18 years we were the only paving contactor one of the homebuilders used.”
He says that throughout that time 75 percent Valley Blacktopping’s work was new construction, 25 percent residential tear-out and replace “and maybe we’d do a parking lot here and there.”
“We had no time to do anything else,” Johnson says. “We’d literally throw away stacks of requests for proposals every couple of months just because we couldn’t get to them.”
Recession = reexamination
But as the recession hit they realized they were going to have to make a drastic change if Valley Blacktopping was going to continue its steady growth. How did they know? They got the hint from their home builder customer.
“The primary home builder we worked with underwent some changes and they changed the way they hired their contractors,” Ryan says. “They brought in one of our competitors and when we realized that and recognized that housing construction had slowed we decided we had to look at what we were going to do.”
To begin with the company took new work -- any work -- as it came up, including excavation, installing drain tiles, constructing concrete sidewalks and snowplowing. “We are a blacktop company, that’s our bread and butter. It’s what we do and we do it well,” Johnson says. “But we’re pretty flexible and adaptable, too, and sometimes you have to just find something to do if you can’t pave.”
Then they examined the recession market, decided residential work was their specialty, and made a concerted effort to become the Twin Cities’ driveway reconstruction specialist. Over the last couple of years, as their residential reconstruction work has solidified, Valley Blacktopping has become more involved in removal and reconstruction of residential and commercial parking lots as well.
Today Valley Blacktopping employs 15 people including Russ, Ritchy, Scott, Ryan and Russ’s wife, Marcia, who handles the accounting and is secretary/treasurer. The contractor generates 50 percent of sales from driveway overlays and remove-and-replace paving jobs, 45 percent from parking lot work, and 5 percent from new construction paving (including one or two new driveways every few weeks) and snow removal.
But how did Valley Blacktopping shift from 50 percent new construction to 95 percent repair? Johnson says that where 2008 and 2009 were slower years, “by 2010 the phones were ringing off the hook compared to 2009.”