Construction Equipment Owner

If my previous blogs didn’t get this across, this one surely will: 2009 has been a year of vastly different contractor stories. I’ve heard from contractors who are barely making it, from contractors who are doing the same volume with less margin, and from contractors who have seen parts of their business grow unexpectedly. But I haven’t talked with a contractor who reports he’s having his “best year ever” and attributes it to the economy.

Until now.

I won’t reveal the company or the city, except to say it on the eastern seaboard in the South, but the owner of the 20-year-old sealcoating-focused business says this year has been his best ever. Go figure.

“The economy has helped, there’s not question about that,” he says. “We’re a sealcoating contractor and people all over our market have not paved — they’ve sealcoated instead.”

More than half of this contractor’s sales are to the commercial market, with the rest going to residential work, and the owner says buyers seem to be reluctant to get involved in construction. “They have become very maintenance oriented and very maintenance conscious,” he says. “They are paying close attention to the costs of things and are becoming more frugal too.”

He adds that his residential work has increased at least partly because fewer people are selling their homes. “They are staying in place so they are maintaining the properties they have,” he says. “All that combined to give us a great year.”

But it’s not just the market that has helped his company. He says he has well-trained employees and a good fleet of well-maintained equipment that enables them to do a quality job in an efficient manner. “Through September we’ve only had three call-backs all season,” he says. “That’s good work, especially considering the number of jobs we’ve done.”

And he adds that the good 2009 has laid the basis for a good 2010. “Already we are scheduled more than one month out next year,” he says.

Well, that headline ought to cause a few people to pause. Of course one answer is “No, there is no upside to 10% unemployment levels” — especially if you are one of the 10% out there seeking work.

But there might just be something positive contractors can take from these unfortunately high unemployment figures: Quality workers.

For years I and my fellow Cygnus editors and salespeople have made regular visits to contractors throughout the country, learning about individual businesses and markets, putting all that information together so we have a good sense of the industries we cover. We refer to these visits as “reader calls” and we do them so we can cover these industries effectively and so our advertisers know that we know what we’re doing.

In each of those visits we ask contractors what they consider to be their “critical issues,” the one or two things that keep them up at night. And year after year almost every single contractor we’ve visited mentions “finding good employees” as one of the biggest problems. In fact, many contractors (over the years) have said they could easily grow their business or add a crew if they could find the quality employees to staff it.

Well, if that’s the case then now is the time to be looking and hiring. With unemployment at 10% nationwide — and higher in some areas — there are plenty of hard-working, quality people out there looking for a good job with decent pay. Most of them might not have considered working for a paving or pavement maintenance crew, but many people change careers over their working life. So if you’re looking for quality people to build your company around this might be just the right time to get aggressive about hiring. (Plus, there’s word that a federal government is going to institute a tax break job credit equal to 15% of wages on newly created jobs in 2010 and 10% on newly created jobs in 2011.)

One of the problems with reporting information from specific contractors is too often that information is read to be indicative of the entire industry. In some years that might be fine, but not this year. Whether the differences are geographic, contractor size, contractor experience, weather.. or something else (who knows what it might be), contractors are reporting a 2009 year that varies widely.

Consider:
* A contractor out West has always offered paving services, which he subs out to various paving contractors. This year his paving has overtaken his sealcoating work by leaps and bounds.
* On the other side of the country a sealcoating specialist is having his best year ever, partly, he thinks, because people are unwilling to spend the money to pave.
* Down South a small pavement marking contractor who just a year or so ago was so busy we was having to bid jobs by phone and fax — and he was getting the lion’s share of that work — is now out pounding the pavement to drum up business.
* A Plains State sweeping contractor is fighting to maintain sweeping frequency — after eating fuel cost increases the last couple of years — as commercial clients are trying to save money by cutting back.
* In the Midwest a multi-faceted contractor has been going great guns all summer, with crews working seven days and week and 60 hours a person. But competition is tough, often going up against five or six bidders as opposed to maybe three a couple of years ago. And here’s the kicker: His business is down from last year and profits are down 20% from a year ago.
* Another midwestern contractor reports he had plenty of work — and was waiting on many, many bids — into August. But work just came to a screeching halt in September, but by Oct. 1 he was up and running full steam ahead with more than five weeks’ work on the books.
* Contractors from Minnesota through Maine are struggling to decide how to finish off their season. Temperatures have been unpredictable or predictably too cold to sealcoat, and in many New England areas snow has all but shut down (temporarily, we hope) most pavement maintenance work.
* And a consultant we talk with who handles more than a dozen pavement maintenance clients nationwide says half are doing as well as last year while half are not doing as well sales-wise but through cost-cutting and efficiency efforts will manage to turn the same profit as they did in 2008.

Which of these situations represents the “real” paving & pavement maintenance industry of 2009? All of them — and depending on your market and how you’ve approached your business this year any of the above statements could represent your company.

It’s great to be able to talk with the consultants who work in this industry. Not only do they know their stuff but because they work with a number of companies throughout the country they have their finger on the pulse of what’s going on in this industry and can provide information and insights from their customers — property managers or contractors — that I might otherwise not have access to.

Had a great conversation with one such consultant earlier this week. He handles more than two dozen accounts and more than half of those are contractors in the pavement maintenance industry. His verdict: Contractors are weathering the year pretty well, with “weathering” being an appropriate term. A number of his contractor clients (and many others he has heard from or heard about) have been battling rain all season and unseasonably cold weather as autumn hit (and as if to prove the point, yesterday parts of the Northeast got hammered with an early snowstorm, as much as 8 inches, with more snow in the offing). Contractors certainly don’t need that at this point of the season.

But what about his more than a dozen pavement maintenance clients? “They are doing okay,” he says. “About half of them have added a service or picked up work in one area or another so their sales and profits for them are up over a year ago.” He says he has spent much of his time encouraging them to aggressively pursue more work from existing accounts and to add services that dovetail with their existing business. “That’s been a hard sell because everyone wants to cut back, but now is the time when contractors can solidify their hold and even expand their place in their market, and the contractors that have been able to do that have seen very good results.”

But not all contractors feel they can pursue new work or add services — they want to cut back. So how are those contractors doing? “Actually, they are doing well,” he says. “Some of my clients just don’t feel comfortable spending and being aggressive in a market like we’ve had this year, so I’ve worked with them in a different way.” For those contractors he focused on cost savings, increasing efficiency, and making cuts — including staffing cuts. “Those contractors in many cases are in markets where work has not been as available as in the past, so they are experiencing fewer sales and will end the year with lower sales volume than last year. But, as a result of their efforts they will see the same profit as last year.”

You might think that publishing a magazine devoted essentially to paving & pavement maintenance “best practices” might deter fly-by-night folks (as usual I won’t call them contractors) from plying their poor service and thievery in a nearby town but apparently that’s not the case. Pavement is headquartered in Fort Atkinson, WI, and in nearby Jefferson a disreputable contractor has been going door to door offering a “good deal” because he has “leftover asphalt.” Local police won’t call it a scam but I will.

I haven’t received the typical number of calls this year complaining of this kind of operation, so maybe there are fewer of these people out there. On the other hand, maybe the market has gotten so accustomed to dealing with them that these charlatans are just a “normal” part of doing business in this industry, but I hope not.

Here some easy ways to differentiate yourself from the fly-by-nights that plague your customers and damage your market and the industry image:
* Carry insurance and reference it in your bid and marketing materials
* Use a pre-printed bid form that includes your company name, physical address, and phone number
* Have a website — even a basic site is better than no site — and refer prospects to it
* Paint your name on your vehicles — magnetic signs can mean there’s a reason to remove the name from the truck
* Have strong references and encourage prospects to contact them

These are only a few ideas — respond with some of your own tips — but perhaps the most important step you can take is to provide this type of information to your marketplace so your prospects know what to look for.

Want to help the environment and maybe help construct a new type of pavement? Well, have a beer or soft drink, then send your empty bottle to Presto Geosystems as they can use it. (Actually, just recycle the bottles and Presto Geosystems will buy them from your recycler.) The Wisconsin company has developed a process to use recycled glass in a new type of pavement called FilterPave that contains 40% voids the company says trap pollutants and water – all while using up between 70 and 90 recycled glass bottles per square foot.The bottles are recycled and the glass is ground smooth into pebbles, then it can be used on parking lots, driveways, and walkways. (Morton Arboretum in Lisle, IL, recently used the recycled glass product on a paved walkway.) The material also can be used in different colors.

Most people would think there’s little relationship between “pavement” and “pizza” — other than the “Ps” — and they would be correct. But is there a similarity between a pizza business and a pavement business? Could be.

Sunday’s Chicago Tribune did an interesting article on Great Lake, a small (a very small) pizza place in Chicago. The place only has 14 seats, is open four days a week for only a few hours each day, and all the pizzas are made by hand (leisurely by hand) by co-owner Nick Lessins. His wife, Lydia Esparza, handles the counter and takes the orders… and you wouldn’t believe how many orders there are. Most days there is a 4-hour wait for a seat and a 2-hour wait for a carry-out pizza. Oh, and Great Lake only makes three kinds of pizza each day, determined by Lessins each morning when he heads out searching for ingredients for the day.

Still not sounding like a pavement business? Okay. But consider this: Great Lake does what it’s good at, does what it wants to do, has identified a market to serve, and is the type of business the owners want to operate. And it’s successful. Not only do the long waits hint at the quality of the pizza, but Great Lake has been named the best pizza in the country by a number of magazines and polls, and the couple has been encouraged to expand, add locations, add staff, hire a PR firm, and in general to become a bigger business.

But Lessins and Esparza aren’t interested. They know what they’re good at and they know what they want. They want to run the type of business they have, the type of business they’re good at, and they want to be able to spend time at home with their dog and their newspaper. So by knowing what they want and doing a good job at what their customers want they’ve got people from throughout the country beating a path to their door — and standing in line waiting for the product they provide.

The Great Lake approach sounds an awful lot like many contractors I’ve talked with in this industry, and it sounds like an approach many contractors are encouraged to pursue: Know your market, do a very good job, serve your customers, (though Great Lake has some disgruntled ones but even their take on that is worth taking a look at), and know what kind of business you want to operate.

No matter how you slice it (there’s an ongoing debate in Chicago about triangle-cut vs. square-cut pizza) business is business — not that I’d want Great Lake to sealcoat my parking lot or XYZ Contractor to make my pie.

Last week I passed along some numbers from manufacturers and material producers I’ve been talking with — this week it’s the contractors’ turn.

Not surprisingly most contractors I talk with report business in decline and tough competition — both of which lead to tighter margins. That’s pretty much what we’ve been hearing all year. Here are a few comments:

* “Our business is down 7%,” says one southern sweeping contractor. “The good news is the decline is all cutbacks in service, not cutbacks in price. I can get the service back I can’t get the price back.”

* “We are actually down about 9%,” says an East Coast sweeper, adding that there still has been a nice upside to his business this year. “Our maintenance division has been doing very well. I have had only one red month this year (and I know exactly why it happened) so overall it’s steady as she goes. What I have been telling other folks is ‘We are working twice as hard to break even.’”

* On the other side of the country a western pavement maintenance contractor reports that sales for the first quarter were down over 2008 but that April sales jumped and May sales jumped even more. June sales for this contractor dropped from 2008 but July sales in 2009 skyrocketed. So it’s been an interesting year made even more interesting by where the sales came from. This contractor notes that in 2008 sealcoating, cracksealing, and pavement marking lead they way accounting for almost 55% of sales. This year, however, HMA overlays dominate the work, and a recently added service, sweeping (primarily for construction sites) also plays a role, accounting for almost 9% of 2009 sales.

“This year the 2-in. overlay, 1 1/2-in. overlay, remove & replace, rotomilling and about 90% of the patching has been subcontracted out. Last year they were subbed as well, however we did 90% of the patching our self and only subbed out around 10%. We have had excellent luck with subcontracting this year, its honestly amazing,” the contractor told me. “Our sweeping is a new service that’s only a year old (accounting for less than 3% of 2008 sales). It has helped cover some of the other lower numbers and has been a consistent source of revenue. Almost all the sweeping (90%) is contracted following a large road slurry company around and only 10% or less is doing one weekly account or our own work.”

Respond to this blog and let me and other Roundabout readers know how your business is doing and what you think the rest of your season likes like. I’m hoping for dry weather and a long, long time before winter sets in.

August seems to be a month where I’m talking to an awful lot of contractors and manufacturers, and without giving away any company names or locations, here’s some of what I’ve been hearing from manufacturers:

* One sealer producer says sales are down about 5% from 2008. A small percentage of that can be attributed to the economy but almost all of the decline is more likely the result of poor weather which has put customers way behind in getting their work done. So here’s hoping for an extra long season with a nice long Indian Summer.

* Another material producer says sales through June were up 30% — maybe you want to read that again to make sure you got it right. That’s a huge number in any economy but especially in this one. Some of that is attributed to the federal government’s stimulus package which has opened the door to short-term maintenance projects that can get started and completed so public agencies don’t have to commit long-term dollars to them.

* Not surprisingly, equipment sales are lagging, and that’s particularly true of the larger, more expensive units. Manufacturers are seeing some sales in less-expensive equipment but big pieces are a harder sell…plus, contractor are encountering issues obtaining credit despite the fact they might have a very solid credit history. This seems to be in line with what most manufacturers were anticipating for 2009.

If you’re a manufacturer feel free to let us know how your season is going — you can do it without letting us know who you are.

Next week I’ll report on what contractors are saying.

Usually when magazines and newspapers write articles about the “sounds of summer” they mention “I Get Around” by The Beach Boys, “Groovin’” by the Rascals, “Surf City” by Jan & Dean, or even “4th of July, Asbury Park” by Bruce Springsteen. That’s all fine “summer” music but this morning on a trek to Chicago’s northern suburbs I got a chance to listen to some different, and possibly “better,” summer music. Temperatures this morning were (finally) in the eighties, the sun was high in a bright blue sky… and I sat in six traffic backups of varying lengths that transformed a 90-minute roundtrip into a 150-minute roundtrip. Yes, summer is wonderful! Seriously! And the sounds of summer are music to my ears — even if I have to sit in traffic to listen.

I jumped on I-294 (which allows drivers to circumvent downtown Chicago) just at the end of the rush hour and had plenty of time to watch crews hard at work on the I-294 reconstruction project. While passing hundreds of orange-and-white barrels and hundreds more bright orange cones of varying sizes I counted 17 arrow boards and at least 7 message boards — and I might have missed a few. Work zone speed limit signs and signs designating lane shifts and new traffic patterns were plentiful, and I had plenty of time to watch the Big Boys and their crews hard at work — no paving work yet but an awful lot of big equipment out there making preparations.

Once I got off 294 the traffic continued in a snarl — but all to a good cause! A Wirtgen W2000 cold planer had already done its job on eastbound lanes of Dempster Avenue and was beginning its work milling what looked to be about 3 inches of pavement off the westbound lanes. And not too far behind it was an Elgin Eagle sweeping up leftover millings. And a few miles down more milling had been completed and temporary lane markings had already been sprayed onto the surface. It all sounded good to me.

And then, possibly the best news of the trip, was my destination featured a recently sealcoated and newly striped parking lot, a good-sized one too. I took a tour of the lot to check out job quality … only to realize it must have been done by a Pavement reader as the pavement appeared to have been recently cracksealed, new stripes were straight, ends of stripes were sharp and lined up, and all the places I checked there was no spillage or overspray of sealer on brick or concrete. The work there was complete so there were no summer sounds of sealcoating systems or striping equipment, but the evidence was obvious: They’d been there working.

So next time you’re in a conversation about “songs of the summer” let other folks bring up Alice Cooper (”School’s Out”) or Steppenwolf (”Born to Be Wild”), but make sure to mention the real music made by construction equipment working in every city, making every jobsite its own outdoor music festival. (But don’t forget about “Summer in the City” by the Lovin’ Spoonful, the first rock band to include the sound of a jackhammer in a pop song.)