The story of Petra Paving Inc. is a classic story of a contractor knowing how to work in the field, starting a business, and then almost … almost… losing it all.
But because Chris Tammany, owner/operator at Petra Paving, wasn’t afraid to learn what he didn’t know and because he was willing to apply what he learned to his business, his company today is a leading paving and sealcoating contractor in southern New Hampshire.
Tammany credits attending his first National Pavement Expo in 2000, which led to his hiring a local consultant, with starting Petra Paving’s turnaround. Today the 12-person company runs three crews (prep crew, sealcoating crew and paving crew) doing both commercial and residential sealcoating, pavement repair and paving. Tammany says 70% of the company’s paving work is residential (30% commercial) while 90% of their sealcoating work is residential (10% commercial).
Tammany’s route to Petra Paving is similar to that of many contractors. He started his own sealcoating and striping business at age 19, eventually working as a subcontractor for Petra Paving. When the economy slumped in 1988-1989 he condensed his work week to two or three days while Petra Paving condensed its week to three or four days. On the days he wasn’t working for his own business he worked on a crew for Petra Paving. In the winter of 1991 the owner of Petra called Tammany and they met over a cup of coffee.
“He said he was all done with paving and if I wanted he’d help me buy the business from him. Either that or he was going to shut it down and sell his equipment,” says Tammany, who has served on Pavement’s Advisory Board since 2009. So he took out a second mortgage on his newly built house and in 1992 became the owner of Petra Paving, Inc. He was 23 years old.
“I pretty much ran it the way the previous owner had because that’s what I knew. I was just trying to get my wits about me. I didn’t know much and it was a scary time to say the least,” he says.
He put himself on the crew and ran the company with four people. As the business seemed to be doing okay he slowly upgraded his equipment and he started learning about the business of paving and pavement maintenance.
Then came 1997-1998, when the economy started to pick up. Before he knew it Petra Paving had more work that they could handle. In fact they had so much paving work that he stopped pursuing sealcoating and sold off that part of the business.
He examined crew productivity and equipment and invested in dump trucks, trailers and a key piece of equipment: a skid steer loader that when used with its attachments was flexible enough to take the place of multiple pieces of equipment for the preparation of a paving work.
“We were trying to figure out how we could send a crew out to a site and do more than one thing and the skid steer with all its attachments was the answer,” Tammany says. “We were trying to figure out how we could get more work out of the crews we had.”
“The tragedy was the prices we were charging weren’t enough to cover our daily nut – though we didn’t know that at the time,” Tammany says. “I came from a mentality of if we wanted to make more money we have to get out of bed earlier, work harder, work longer and basically just do more work,” he says. “So the more work we did the greater in debt we got.”
But he didn’t know that at the time, he just knew his company was in trouble.
“The end of 1999 came and I’m scratching my head wondering what went wrong,” Tammany says. “Because that year we did twice the number of driveways we did the year before but at the end of December I still owed $80,000 and my checkbook was empty. I realized I needed help.”
Plus he had another, unexpected problem. By not offering sealcoating he had unwittingly created an opportunity for competitors to make inroads in his market.
“We were getting bigger and were doing a lot of work but outside companies started to come in to our market because me and another local contractor couldn’t keep up with the work,” Tammany says. “We were allowing outside contractors to come in to compete with us.”
At that point he realized that to protect his business and defend his market he would have to split the crew and offer both paving and sealcoating services, which he did. And then he attended NPE in Louisville to try to fix Petra Paving.
Looking for “the Cure”
Tammany says that at his first NPE in 2000 he attended sessions presented by Brad Humphrey and Jeff Stokes, partners at the time in Pinnacle Performance Group. “Like a lot of contractors I waited for them in the hall after one of their classes,” Tammany says. “I’m there looking for ‘the cure.’ I figured I’d go to National Pavement Expo and learn what I was doing wrong or go home and have a yard sale and figure out something else to do for a living.”
He says Humphrey and Stokes opened his eyes with one question.
“Looking back it was so rudimentary,” he says. “They asked me, ‘How much does it cost to be in business for a year?’ I had no idea and had never thought of the question let alone the answer.”
Humphrey and Stokes explained that was the first thing Tammany needed to figure out.
“They explained that once I knew how much it cost me to be in business for a year I could figure out how many days were in my typical season, then I could divide the total cost of the year by the number of days I had to work. That would tell me how much I had to earn each day to cover my nut -- to break even for the year. Then I could break it down to an hourly cost. Back then that was a real eye opener. It seems so basic now but back then I had no clue.”
The summer of 2000 Tammany didn’t change much as a result of what he learned at NPE. “We kind of went into that season figuring I just had to do more work.” But, as he eventually learned, “more work” isn’t always the solution and in fact just doing “more work” can dig your hole deeper.
After the end of that year 2000 – after Petra Paving had completed twice as many jobs as in 1999 yet still owed $80,000 with an empty checkbook – Tammany realized that he needed to apply what he’d learned at NPE in Louisville.
“It was sink or swim,” he says. “We either hired someone to help us or we weren’t going to make it. That much we knew.”
So Petra Paving spent what was “a pretty good chunk of money for us back then,” and brought in a local consultant, George S. May, who though he didn’t have the background in the paving and pavement maintenance business that Humphrey and Stokes did, took Tammany through a process similar to what Tammany learned at NPE.
“We literally were saved by NPE and consultants,” Tammany says. “There’s no question we would not be around today had we not learned and put in place what we were taught. Once we started making some changes it didn’t take us long to see how that was going to help us. Then we realized that what we were learning from the consultant was the same thing we learned at NPE so we started to attend more shows.”
Petra Paving headed back to NPE in 2001, learned some more basics, then came home and started implementing some of what they’d learned. Tammany says understanding and learning how to create a budget was a first step. That was closely followed by collecting and analyzing all data related to what it costs for each aspect of the job to be done, including the time it takes, the number of crew people deployed, the amount of time equipment is on the job etc. Essentially basic—though detailed—job costing.
“Some of it was inaccurate because we didn’t have much data to start with. But we were a lot closer than we were before, and we started to really collect data which we realized would help us in the future.”
Implementing Job Costing
Tammany says that learning what job costing is, what it can do and how to cost-out a job is both the best thing and the scariest thing that has happened to him.
“It’s the best thing because it enabled us to make money and become a profitable company. It’s the scariest because once you do it you know you have to get out of bed and earn $495 an hour to cover your nut,” he says. “That’s a scary number when you spread it out over a week and that’s before the cost of material. It really is daunting.”
“We’re very diligent now for all our costs,” he says. “Now through everything we learned at NPE we know our costs on each job to the penny.”
So, instead of bidding a job based on what the market calls for – or what the competition is bidding – all Petra Paving work is bid at cost-plus. “In other words, the cost of the job to be done plus the profit we expect to make above and beyond the cost,” he says.
“That makes things difficult for us because we are always getting calls from people who want to know what we charge per square foot,” he says. “We just tell them ‘every job is different’ and we can’t tell them a price until we come out to view the job and do an estimate.”
Job Costing Identified “Sweet Spot”
He says that after they had collected and studied a good amount of job cost data they applied that data to the various types of work Petra Paving typically performs.
“You record all job costing data so you can translate that to historical data,” Tammany says. “That helped us learn where our sweet spot was. We learned what size jobs we do really well on so we could pursue those – and that was something we had no idea about before.
“If you’re not job costing you can’t figure out what your sweet spot is. And if you don’t understand which jobs make you the most money you have no idea what jobs to go after.”
He says that by collecting and examining job costing data they realized that Petra Paving was losing money on almost 30% of the work they performed. “We realized we have to not do that work anymore or at least we have to price it so it’s profitable,” he says. “You have to be willing to lose those jobs.”
In addition, job costing data enabled Petra Paving to establish “basic” prices for certain kinds of jobs. Those basic prices now serve as a starting point so that every estimate doesn’t have to be created from scratch.
For a 1,000-sq.-ft. driveway, for example, Petra Paving’s estimators can go to the computer and where they already have a starting point for how much it will cost Petra’s crews to complete that job. That information includes how much the paving crew can produce, what the prep crew will cost us on that size job etc. The estimator then adjusts the rough bid by incorporating the specifics of the job.
“It gets us in the ballpark right away but because all jobs are different – a straight shot driveway vs. one with curves or with concrete walkways along the sides – we adjust the bid to the specific project. But we have a starting point,” Tammany says.
In 2001 Tammany decided to establish a full-time staffed office that has made the company more efficient and has helped set Petra Paving apart from competitors. “We used to use an answering service and most other guys just use an answering machine still,” he says. “We made the decision that when people called they were talking to a live representative of Petra Paving. And people are really happy when they get a real person from the company on the phone.”
Today that “real person” is Linda Alfonsi, operations manager, who serves as the in-office touch point for customers, handles Petra Paving’s financials, processes estimates and also schedules the jobs.
Alfonsi joined the company in 2003 (and is co-presenting a QuickBooks session at NPE 2016 with Gail Shaw, D &G Sealcoating and Striping) and since then Petra Paving has made huge strides in its job costing, estimating – and ultimately profitability. “We’ve really wrapped our head around job costing and really understand it and we live by that,” Tammany says.
So much so that at the end of each day he and Alfonsi sit down and examine the job costs from the previous day’s work. And every Friday Alfonsi pulls “flash reports” to make sure the company is on track with its needs and projections.
“We do it every week,” she says. “Now we know if that week was on track and we also know at the end of every month if we’re on track.”
Tammany says it’s rare they’re not on track.
“Very rarely at this point do we ever get surprises,” he says. “Because of what we learned and because of all the systems and procedures we have in place, we’re very rarely out of whack. We’ve pretty much learned what to do to take out all the surprises.”