Setting a Course for Growth

San Diego contractor T.B. Penick & Sons spurs profitable growth through a business plan that focuses on customer satisfaction.

The St. Thérèse of Carmel church in San Diego is a recent example of T.B. Penick & Sons venture into the design/build market. A variety of decorative concrete finishes are featured inside and outside the church.
The St. Thérèse of Carmel church in San Diego is a recent example of T.B. Penick & Sons venture into the design/build market. A variety of decorative concrete finishes are featured inside and outside the church.

Some business owners are content with the size and sales volume of their companies. Others know they want to grow but don't know how or aren't willing to dedicate the required assets for an expansion. Then there's another group of business owners who set a course for growth and aren't afraid to utilize the necessary resources to do so. San Diego-based concrete contractor T.B. Penick & Sons fits into the latter category. Over the last few years the company has experienced a nearly doubling of business from $70 million in 2004 to more than $122 million expected in 2007.

The pace of growth T.B. Penick is currently seeing has exceeded the brothers and owners Marc and Tim Penick's expectations. Although the Penicks have been working aggressively to expand the company, they set annual growth goals closer to 15 percent.

"Our growth is organic," explains Marc Penick, CEO of T.B. Penick & Sons, "meaning that work is being generated from satisfied clients and our ability to perform the work. We're not forcing top-line growth for its own sake. We've had a lot of success, and some fortuitous events for us to double our growth."

Part of that new revenue has come from an expansion into offering design/build and design/assist services for their expanding client base. The result of the expansion was a new company started last year, Convergent Inc., which utilizes in-house design, engineering and construction to reduce costs and speed the project timeline.

"Accepting the risk and expense of design in the design/build model has been an exciting growth avenue for us and an invaluable service for our clients", notes Tim Penick, company president. "Once we take on the design element, we put in place internal controls that help mitigate our own cost while producing efficiencies in constructability, allowing for a faster schedule and reductions in the cost of work and general conditions for our client."

One recent win for T.B. Penick in this category was a $93 million design/assist project with San Diego's Turner Construction for a 14-story student housing project for the University of California, San Diego. This project, along with others in the pipeline, will add $50 million to the bottom line this year.

Branching into divisions
Marc and Tim have brought the company a long way since their great-grandfather established the business more than 100 years ago, hauling construction materials with horse and trailer. Over the years as the business passed through the generations, its focus changed according to market expectations and customer needs. By the mid-1980s both Marc and Tim were working fulltime at the family business, implementing business management planning techniques they believed would put the company in a profitable growth position. By the late 1990s, when the brothers took full ownership of T.B. Penick, the company was moving upward on a revenue trend.

Today T.B. Penick has about 400 employees, and they perform a mix of general contracting and subcontracting work. T.B. Penick performs jobs all over the country, with about 60 percent of its work in the San Diego area. As quickly as the company has grown, the Penicks used foresight to avoid some of the pitfalls companies encounter during times of rapid growth.

"One of the keys to maintaining profitable growth is diversification within a market so you can reduce market segment risks. If one of your markets takes a nosedive, your company won't because you're engaged in other construction markets," explains Tim. "At the same time, you have to be a specialist in each area you're pursuing - you can't be successful if you're too much of a generalist. That's why we've set up different divisions within our company."

T.B. Penick currently has three divisions - Structural Concrete, General Construction and Innovative Concrete Systems. The Structural Concrete division, headed by Greg Lee, performs structural concrete, as well as prime trade contracting, civil engineering and design/build of mid- and high-rise Type I buildings. This division includes Convergent, Inc.

The General Contracting division, of which Marc is in charge, offers general contracting in the commercial and public building sectors. The division has found a niche in churches, completing several since 1995. It has also found success in military structures, schools, retail spaces and police buildings.

T.B. Penick is involved in the decorative concrete market through its Innovative Concrete Systems division, established in 2000 when Byron and Frank Klemaske came on board with the company. Today, the Klemaskes oversee 165 employees, and in 2006 the division performed more than $16 million in decorative installations.

Through Innovative Concrete, T.B. Penick has seven finishes patented or patent pending under the Lithocrete brand. Lithocrete is an architectural concrete paving system which can be colored and accepts surface-seeded materials. Innovative Concrete has 22 Lithocrete licensees across the United States, and the division added an Ohio branch this year. In addition, Innovative Concrete Systems established a residential department in 2007 and plans to introduce a line of self-levelers in 2008.

As the decorative market across the United States has exploded, the Klemaskes have worked to stay on the cutting edge of trends, establishing T.B. Penick as a "go-to" company for the decorative industry. "We work really hard to emphasize we want to be a resource to the architectural community and builders. When they have a question about concrete, we want them to call us," Byron Klemaske says.

The plan is working. Architects and builders often take advantage of T.B. Penick's resources and bring clients to see the hundreds of sample finishes and applications on view at T.B. Penick's headquarters. T.B. Penick also allows architects and builders the use of its conference rooms for presentations or meetings that might coincide with a visit to T.B. Penick's sample space.

Klemaske encourages clients to visit T.B. Penick's "candy store," a shed full of colored aggregates, glass and other materials that can be incorporated into decorative concrete. T.B. Penick's two full-time sample staffers turn clients' ideas into hands-on examples. Klemaske says he likes to see clients choose colors and finishes on their own because people are more likely to accept a sample when it's something they feel they had a part in creating.

When a customer comes to Klemaske with a challenge, his team works to find them an answer. "If a client has an idea but doesn't know if it can be done with concrete, we're willing to work with them to find out," Klemaske says.

'Green' growth
Another area of growth for T.B. Penick is the green building market. The company has LEED-accredited (LEED AP) employees on staff. Some of the Innovative Concrete division's offerings that contribute points toward LEED certification include Lithocrete, terrazzo, GrassCrete, alternative cementitious components and the HD Concrete Flooring System. T.B. Penick is also one of the leading installers of pervious concrete in the San Diego area. The company has worked with local architects to write performance specifications for projects to help ensure they get the sort of installation they're looking for.

T.B. Penick's other divisions have seen growth potential in the green building market, too. The company has been the designer/builder on five LEED-certified or compliant projects in the last three years - two facilities for the city of San Diego and three projects for the U.S. Navy. The company is currently involved in two more projects that are planning LEED certification. "Sustainable design in the public construction market has bloomed over the last five years," Tim says. "Over the next 15 years, it will continue to be a significant growth market. Folks who have experience and expertise in green construction are going to be in a good place."

Through their work in the green building industry, both as a general contractor and as a subcontractor, T.B. Penick has learned a few tricks to successfully executing sustainable design projects. "Gaining LEED certification is a complicated engineering task. You don't get LEED points by just saying you did something, you have to track how you build and have proof of what you did at the end of the project," Marc says. "You should also plan to achieve more points than the minimum number needed for the LEED certification level your client expects. If you need 33 points for a Silver rating, you should shoot for 40, and you might end up with a Gold rating."

Marc says the major key to success on a sustainable design and construction job is getting involved with project planning as early as possible. You want to know what the client is looking for, the level of LEED rating they'd like to achieve and the information you need to track and prepare for the project you're performing. "As a contractor, it's wise to be included in the design side," Marc says. "There's integration in design and construction, and most LEED projects are design/build."

Marc and Tim expect the growth of green building and the company's past success working with customers from the design stage onward to help T.B. Penick continue on its upward growth path.

Award-winning Safety
The Associated General Contractors of America (AGC) awarded T.B. Penick & Sons a First Place Construction Safety Excellence Award for 2007 in the "Specialty Contractor - 300,001-700,000 work hours" category. T.B. Penick's strong belief in safety has paid off on several levels.

"Some contractors might not believe safety is worth the money," says Tim Penick, company president. "We're spending money on safety day in and day out, but it's making us money."

Tim estimates the company spends $250,000 on its safety effort annually, but it gets at least a $400,000 payback, plus the benefit of a safe and healthy workforce. For example, T.B. Penick reports that in 2004 it had $14 million in payroll, but a mere $10,000 in worker compensation claims and zero lost-time accidents.

In addition to the monetary benefits, Marc Penick, CEO of T.B. Penick & Sons, says workers are impressed by the company's safety record and come on board because of the safe work environment waiting for them. And the safety record doesn't go unnoticed by owners and general contractors either.

"Many places use a safety record as a measure of a company's success," Marc adds. "Clients don't like accidents on jobsites, especially churches or public and military clients. They look to hire subcontractors and general contractors who work in-house to provide a safe working environment. Our safety record brings us work."