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Start (Or Restart) a Construction Company
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In this exclusive chapter, I’m going to tell you the stories of two successful construction business owners I spoke with on my podcast who pulled their companies out of the fire—one from the forge, one from the refiner’s fire; one a startup, one a restart.
The insights you’ll glean from their journeys may be the difference between low margins with little fulfillment, and high margins and great satisfaction. Then you’ll get straightforward, no-fluff exercises you can do today that will shift the odds of success in your favor forever.
Construction companies are one of the riskiest businesses to start. But yours doesn’t have to be.
Peter’s Story: Getting It Right from the Start
Peter Worhunsky is the president and CEO of Live Oak, a construction company he started with partners in 2019. Peter is an industry veteran with over twenty years of experience. Thank goodness for that, because he began his company right at the start of the COVID-19 pandemic. When we talked, he was insightful and brutally honest about the challenges facing a new construction company.
Construction is in Peter’s blood. So is business ownership. “I grew up in construction. I saw my dad run a construction business started by my grandfather. That was just normal to me, to see a business owner managing the company. So it had always been a goal of mine, the regular course of my career.
Rather than work in his dad’s business, Peter branched out on his own. “With my new employer, we were focused on doing large public works projects. That had always been a goal of mine, I wanted to do big high-profile jobs. And the market for those projects was just terrible. You can look back in the news and see a lot of larger companies bailed out of that space.” But Peter’s employer didn’t handle business the way he grew up seeing it handled. “The company that I was at was trying to get into it, and it wasn’t going well. I had a real strategic sense of misdirection and was concerned we were chasing a goal that wasn't good. We got to a place where I knew that we needed to make a market change. I wasn't having any luck doing it where I was. I also wasn't having any luck moving my position forward in the business.” In short, Peter felt stuck without any say in the business or his career.
Many entrepreneurs get stuck and frustrated. Someone else calling the shots is fine when they’re doing what you know is right. But when they do it wrong, the sense of unease is often enough to launch would-be owners into action. Peter was no different. It was time to build his own company.
Unlike a lot of entrepreneurs who start the company first and ask questions later, Peter began with laborious market research. He knew how serious a construction business was and the amount of work it would take to start one on the right foot. He spent years learning and studying and shaking hands with network contacts.
Part of Peter’s journey was finding a partner to help manage the company. He’d cultivated good relationships in the industry, which made the next step seamless for him. “When we originally launched Live Oak, it was to go after work in the utility sector. But as we were launching the business, the opportunity came to bring a heavy civil operation into this, which we did. And it turned out that every civil operation was with the people that I'd known! It wasn't something that was planned. It was just a natural decision. I said, ‘Hey guys, I'm starting this utility business. There's an opportunity to bring you guys in. We're going to do something different. Want in?’ And all of a sudden, we were on two platforms from the beginning.”
Relationships made the process easy.
What didn’t make the process easy? Location. Peter started out in San Francisco. He had to sell his house and move to the central coast of California to make his business work. And that was tough, but relationships made the difference again. Because his wife had grown up with a father who owned a construction business. When Peter started talking about opening his business, he still wasn’t sure. She told him, “Look, it's May right now. If you're going to start this business and we're going to move the kids and put them in a new school, we have to list the house now. So are we listing our house now?”
They did. Peter’s family made the move and started up his new company.
The first problem, as every construction owner knows, is money. “The challenge for a new company, and a lot of established construction companies, is just financing the start. That was the first thing that I started on. ‘I don't have enough money to really make this go. I don't know how to work with banks. I don't know how to raise capital. I need to connect with people who can help me do that.’ So I did.”
Relationships helped Peter there, too. “The first person who started working with me was a fractional CFO. He worked pro bono, and I couldn't believe how good he was. We'd discuss a new project, and he'd get on a whiteboard and start just sketching out financial models by hand. ‘How much revenue? What are the expenses? What does the cash flow look like?’ And from there, the business plan was developed, and I invested money on getting a good business plan done by consultants that looked good. And so when it came time to sit down at the bank and ask for financing, we were miles ahead of a lot of their other customers because we had a plan to address their typical questions. And I was sitting there with someone that spoke their language. We just looked ready to go, and it was very helpful.”
Just as things started to look good, COVID-19 hit the world. “COVID changed a lot. That really disrupted us. Yes, I know it impacted people and construction differently. But we were a business just starting. We literally earned our first nominal amount of revenue at the tail end of 2019. And so we're just getting the business started, and then all of a sudden—it happens. Boom. At that point, it was a scramble. That wasn't in the plan.”
“But even if it had not happened… There's this funny dichotomy that I'm learning about. As you're starting a business, you have to have a plan, and you have to have goals, and you have to be able to step through this. But at the same time, you have to be hyper-opportunistic about what's immediately in front of you. If you're too focused on what's down the road, you're never going to get anywhere. And if you're too focused on what's immediately in front of you, you're never going to get down the road. So it sounds strange, but you have to do both.”
Peter did both. And his relationships helped make that happen, too. “We have a third business now in the traffic control and safety space. It was never really on our radar screen, just an idea brought to us by a customer who was exploring this business for themselves. And as big construction guys we looked at it and said, ‘Well, this is an easy business. But it isn't sophisticated enough for us. Should we try it?’ Once we dug into it and we looked at it as a startup, we were pleasantly surprised. So we made the decision to start exploring it.”
That exploration came just in time. “Then COVID hit. And there we were, sitting around in July, a few months into COVID. Customers canceled their expansion plans because the world shut down. And my fractional CFO asked the question, ‘What's to prevent us from starting this business right now? We are on our own right now. We have people who've got equipment. Let's do it.’ So we just started the traffic control business, and it put some guys to work. It put some equipment to work. And it has built into something now that's a really good add-on to what we've developed. It meets our longer term strategy and vision in terms of what we're trying to build for an organization. But that whole market was nowhere near our radar screen when we found out about it. COVID forced us to adapt, and we did.”
Peter attributes his success to two things: His conscious growth of good relationships and his ability to adapt to any circumstance. When other companies folded during the 2020 global pandemic, Peter’s new venture launched to success. He built the right relationships with the right people and seized the right opportunities. That’s getting it right from the start.
Tony’s Story: Pulling Yourself Back Together
Tony Moayed is the CEO of the TriCorp Group out of Sacramento, California. In May 2014, Tony had a record amount of construction under contract: $198 million USD. But when he spoke to me, Tony revealed that period was the darkest time in his entire career as the owner of a construction business. “May of 2014 is when we realized that the company had record losses of over six million dollars, and with equities that were less than that. We were in deep trouble.”
I sat in shock after Tony told me that. He saw the look on my face and nodded. “It was devastating. Very scary. I had two partners, and we got together and we discussed what to do. Our first question was, ‘How do we recover?’ And the first solution offered by the partners was bankruptcy. And I stood there and said, ‘Absolutely not.’ We had two hundred and seventeen employees, and we had been in business for ten years. We’d sacrificed everything personally to get to that point.”
Tony’s business started in 2004. By 2007, TriCorp Group had been named in the Sacramento Business Journal list as the fastest growing company with 3,400 percent growth. “Which is in the top ten in the history of the competition that's been held for years by the Business Journal. We went from zero to about $25 million in three years. That was controlled growth. Every year we had a business plan. And it was simpler projects and a lot of pain hiring new folks. And we made money all the way through.”
Tony was no newcomer to construction, either. “I have a degree in construction management and have worked for almost all the major construction companies. Four of the big ones. Turner was the last company I was with. And my two partners were also with Turner. We decided to break off in 2004 and form our own company.” TriCorp even acquired another construction company in the hospitality industry to help diversify their company as America recovered from the 2008 Great Recession.
Even with all that experience and extensive business plans and tremendous controlled growth, Tony’s company still found itself in dire straits in 2014. The reason: The growth itself required new experience to manage, and some lessons had to be learned anew. “A flood of work just started coming into the company. And it was very difficult to say no. And that's a big lesson I learned from that entire period, that we should have said no to a lot of projects where we said yes.”
“The opportunity for expansion was to go from doing 30 million dollars’ worth of work to 100 million dollars. And we got there in three years. We went from 30 million to one hundred. And in order to meet that goal, we had to have the volume, the revenue inside the company to do it. That was an internal pressure that we basically brought on ourselves to expand the company. So it was not a surprise. It was a planned attack, which actually didn't turn out too well. But there are reasons why it didn't turn out too well.”
Tony is clear about exactly what happened and pulls no punches. “The genesis for our failure was not being able to keep up with the number of projects. And it related to the locations. We had so many projects in Northern California, Tahoe North, Shasta, the Bay Area, San Diego, Los Angeles, and Bakersfield. We had to try to keep all that intact. At one time we had over twenty ongoing projects, all major projects over ten million each. One was worth twenty-five million. We had a fifty million dollar project ongoing at that time too. So this was all going on at the same time. And to try to keep up with all that really required a lot of time and effort. It was a huge management task that was just over our heads, and we were all running around with our heads cut off. I have the great privilege of having lots of mileage on my frequent flier card, free flights and everything, because I was flying down there all the time, once a week and sometimes multiple times a month to keep track of things.”
One major issue Tony highlighted was how the fast growth negatively impacted relationships inside the company. “The talent was an issue. Some of the people that we hired were not tested. And through that process, I've learned that if you're going to go through an expansion you've got to train your folks. We didn't have time to train a lot of these folks, or they were not trained with our system. They didn't have our culture down. Some of the predatory employees saw what was going on with the expansion and they took advantage of us. We had theft inside the company where employees were setting up warehouses and emptying out projects into warehouses and selling them in other states. It was a pretty extensive process, selling our equipment and materials. We had a handful of cases where that did happen.”
All this brought Tony to that meeting in May 2014. He sat with his partners and discussed how to dig themselves out from under a mountain of financial trouble. “The first conversation was ‘Let's just bankrupt the company.’ But that wasn’t so simple, because you have obligations. The first and most important obligation is the bonding company. So we opened up our agreement with the bonding company. And just because you file bankruptcy does not exonerate or get you out of your bonding indemnity obligations. That wouldn’t solve our problem. It was very clear that no matter what you do, you can be held responsible and you can't just walk away from this. And so after that, it was really trying to figure out if we could make it work. And I was always a believer that we could make it work. But my partners didn't want to stay in that situation. There was just too much liability. So I asked them to give me time to figure out how to buy them out.”
That would be no small task. Tony’s company held a record amount of monetary contracts and a ton of moving pieces. “We had three companies at the time. There was a construction company, a construction management company, and a concrete company where we were doing self-perform concrete work. It took nine months of lead, for me to put it all together. I had to purchase the stocks of the construction company and sell them [his partners] the stocks of the concrete company. The construction management company was always mine, so I kept that.”
Tony owned two companies now without partners. But that wasn’t the end of his trouble. “I had to do the swap, to bring some money in to pay for some of the debt that I had to get out of. But that was not enough. So I had to figure out after that how to move forward. The key was to, first of all, not file bankruptcy. And number two was that I needed additional cash so I could fight the fight.”
“So I brought in a new set of partners as an LLC inside of a new corporation. And that new corporation became the basis for moving forward with TriCorp. I remained as the CEO of the new corporation.” Where did he suddenly find new partners? “They were developers I had done other projects for. They knew me and they had confidence in my abilities. And they knew the situation. And in a way, there were incentives for them financially to get involved. But there was also an underlying incentive for them to help me out because they wanted to see me through so I could continue to do work for them.”
Tony’s message is clear: When you grow, train your people. Pick your projects wisely and don’t get to aggressive. Say no when you need to say no. And protect the relationships you form as you go. If you’re growing too fast to manage the relationships inside your company, you’re growing too fast. And even if it all seems hopeless, the good relationships you’ve built along the way can save you when you need them.
Tony picked up these lessons the hard way. By ignoring them, his record $198 million company almost went bankrupt. Once he pulled himself together, Tony relaunched right. Now his company is stronger than ever. Without clear vision, he never would have made it. As the Proverb of Solomon says, “Where there is no vision, the people perish.” The same is true in construction. And that means a new vision can bring a business back from the brink.
Construction Is Hard, So Don’t Make It Harder
Construction is a difficult business, which is why owners have a tough time selling their company to a manager or employee when it’s time to release the reins. Anyone who starts a construction company and signs a contract knows they are putting a personal guarantee in the process, including putting your house on the line as collateral.
Peter brought in partners but still took risks. He left a cushy job at a great company and launched just in time for COVID-19. Then Tony had to build back up again from a string of bad projects that nearly bankrupted a record-holding company. These were both seasoned professionals with decades of experience, and they still nearly failed. Their vision, their relationships, and their determination kept them going through the hard times so they could reach the good times again.
How to Start (Or Restart) a Construction Company
Right people, right seats. That includes clients, projects, locations, and employees. Make sure it’s a good fit. And whenever possible, you need those people in place to execute the work before you get the work.
That means hiring with a conscious purpose. Hiring is everything. And teach your new workers the culture you’re building so they don’t bring their own bias. Be clear on the purpose and values of your company. Be ruthless in hiring. You’re not just looking for a technically good person but a good fit on values.
And be smart about where you’re hiring from. If you want to crush your competition from a business perspective, hire your most ruthless competitors to work for you. I don’t mean the bad or unethical types, but the ones who want to win so badly they’ll work harder than anyone else.
You also need to make sure you’re staffed with the right people. That means you make sure someone has project management experience and that your crews are dialed into their tasks. Identify your productive and self-motivating people early on so you can get them into leadership positions. You don’t want to have to look over someone’s shoulder to make sure the job gets done.
Money can be a factor in hiring. If you hire first before you take jobs, that means you need to come up with the money to start or restart after a lull in projects, a seasonal shutdown, or even bankruptcy. How do you get capital? Use a line of credit, if possible. But your relationships with banks matter. Remember Peter’s story about going in with a fractional CFO who knew money. He was able to build a great relationship with his bank because he was prepared.
It also matters who you go into business with. For Peter, the right people in the right seats meant good partners. Tony, too, but he had wrong partners at first. He also had the right projects but wrong locations and wrong clients.
For you to launch or relaunch and find success, you need the right projects, right locations, right clients, and the right relationships with banks, vendors, and other service providers. You’ve got to have at least three of those four. Ideally, get all four. Tony only had one of them and it nearly bankrupted him.
Those four pieces don’t just fall into your lap. You need a plan to act upon. A vision that carries you through while you’re running around with your head stuck in your projects. I’ll show you next how to build that plan.
What to Do Right Now
You need to know what pieces to assemble as you build your plan. To do that, follow these templates inspired by Andrew Neitlich. Fill them in with your answers. By doing this, you’re building a rudimentary business plan to get started.
Vision
| Vision |
| Here is a clear picture of where we want to be in: |
| Time Frame | We are famous for | Our customers include | Locations | Revenues | Profits | Project Types/ Services | Breakthroughs |
| 1 year | |||||||
| 3 years | |||||||
| 5 years |
Target Markets
| Target Markets |
| Target Markets 🠊 | ||||
| Growth Potential (High, Med, Low) | ||||
| Profit Potential (High, Med, Low) | ||||
| Life Cycle (Emerging, Mature, Etc.) | ||||
| Definition of an Ideal Customer in that Segment | ||||
| Definition of a "B" or "C" Customer in that Segment | ||||
| Our Current Share of Market | ||||
| Our Potential Share of Market | ||||
| Their Key Buying Criteria | ||||
| How They Learn About Us | ||||
| Competitors and their Strengths | ||||
| Opportunities to Better Serve Each Customer | ||||
| Fit with our "Sweet Spot" | ||||
| Possible Initiatives |
Competitors
| Competitors |
| Competitor Name 🠊 | ||||
| Their Strengths | ||||
| Their Weaknesses | ||||
| Their Niche | ||||
| Their Strongest Target Market | ||||
| Main Threat to Us | ||||
| Potential Initiatives to Beat Them |
Strengths and Weaknesses
| Strengths and Weaknesses |
| Start with the list below and add other strengths and weaknesses within your company. |
| Factor | Strengths | Weaknesses | Implications for Our Strategy |
| Market Knowledge | |||
| Marketing | |||
| Sales | |||
| Bid Strategy | |||
| Bid Accuracy | |||
| Value Engineering | |||
| Project Planning | |||
| Materials/Sub Management | |||
| Quality/Rework | |||
| Safety | |||
| Productivity | |||
| Change Order Management | |||
| Operating Costs | |||
| Cash Flow | |||
| Financial strength | |||
| Financial controls | |||
| A/R | |||
| A/P | |||
| Understanding customer needs | |||
| Customer loyalty | |||
| Innovation | |||
| Alignment of executive team | |||
| Information systems | |||
| Strategic alliances |
(Continued)
(Continued)
| Factor | Strengths | Weaknesses | Implications for Our Strategy |
| Scale/size | |||
| Recruiting, retaining, and developing top talent | |||
| HR systems | |||
| Other | |||
| Other | |||
| Other | |||
| Other |
Opportunities and Threats
| Opportunities and Threats |
| Key Opportunities | How We Will Build on Strengths to Seize Opportunities | How We Will Shore Up Our Weaknesses to Seize Opportunities | Key Threats | How We Will Build on Strengths to Defend Threat | How We Will Shore Up Our Weaknesses to Defend Threat |
Initiatives
| Initiatives List |
| Given all the previous work done, what are the key initiatives to put in place during the period that the new strategic plan covers? Rank each one so you know which the top 3-5 priorities are. For this exercise, focus on large-scale organizational initiatives. The next tab will allow you to have "trickle down" initiatives for various divisions and individuals. |
| Initiative | Initiative Champion(s) | Priority? |
| Initiative Plan of Action |
| For each initiative, list what needs to be done for the initiative to succeed: | |
| Initiative Name: | |
| Champion: | |
| Definition of Success/Metrics for Overall Success: | |
| Key Stakeholders Involved: | |
| Budget: | |
| Key Short-Term Milestones to Prove Momentum: | |
| Additional Milestones | |
| New Roles Required: | |
| Training Required: | |
| Communication Plan: | |
| Other Support/Success Factors: | |
| Key Risks and How We Manage Them: | |
| What We Stop Doing or Take off People's Plates to Free Time and Capacity: | |
| What Else is Required for True Accountability and Alignment: |
| The following areas must cooperate as follows: | |
| Area | Their Responsibilities/Sub-Initiatives |
| Marketing | |
| Project Management | |
| Field | |
| Office | |
| Human Resources | |
| Finance | |
| Accounting | |
| Other | |
| Other | |
All of this plan leads up to the initiative piece here at the end. Because all the planning in the world is useless if you don’t act. That includes both starting or restarting your company. Your initiatives might direct you to tighten up processes in the field, increase your backlog of projects, finish your succession plan (please refer to Construction Genius book for more material on this), or break into new geographies.
Where you’ve made a plan, act. Both Peter and Tony built careful plans and then acted upon them. That’s how they both survived the threats they faced and grew into construction company success stories. You can, too. Plan and act.
Construction Entrepreneurship: Still Worth It
I’ll always remember this direct quote from a client: “Construction sucks, but it’s fun.” I couldn’t agree more. The pain is worth the reward when you can drive down the street and point to a building and say, “I built that.”
Construction companies are a mixed blessing. Run one correctly, and you can make a really, really good living. It’s all on you. But it’s not for you if you’re not willing to take the risk, not willing to work more than forty hours (this field is sixty-plus for several years), if you’ve got an unsupportive spouse, if people don’t like to work for you, if you can’t build relationships with other project partners, if you can’t sell (you don’t have to be the best salesperson but you’ve got to be able to get out there and sell work), or if you’re OK with letting things slide, overpromising, or lying. These issues will destroy you if you don’t resolve them.
But nobody is perfect, and we all have to start somewhere. If you are struggling with any of these issues or your team is, and you’d like to talk about if or how I can help you, let’s book a quick 10-minute conversation. We’ll talk about where you are and where you’d like to be. If I can help, you book a second call. If not, I’ll point you in the right direction. Schedule your call today at www.constructiongenius.com/10minutes.
The good news is, I eat problems like this for breakfast. When we talk, I want to focus on three things:
- How you want your business to look in a year’s time. The clearer we are about how you want it to be, the easier it is for us to make a plan to get you there.
- Then we’ll talk about how things are right now, what’s working, and what’s not, so I know what we’ve got to work with.
- And finally, once I know where you are and where you want to go, it’s just a question of what are the obstacles that are holding you back. So we create a plan to help you win.
Thank you for reading this business chapter. It’s been my pleasure. You probably relate to the passion I have for this industry. It’s warranted. We build the structures that make the world function. Without us, surgeons and executives and school teachers would be working out of caves. Construction needs passion. And it deserves good business owners who run projects smoothly so the world gets what it needs on time.
You’ve got all the tools you need to make your business work. If you want more, reach out and connect with me.
I can’t wait to hear from you.