The Right SizeMy answer to the question Jim Olsztynski presents in his August editorial on what’s the optimum size for mechanical contractors is this - exactly the size that the person/people in charge has/have the capacity to manage.
All of the problems Jim mentions are contributing factors, but the human factor - which in the final analysis is subtle and not subject to contemporary quantitative analysis - rules in the end. Any of us with an unrealistic estimate of our capacity can get into trouble. I speak from experience.
Analogous to Jim’s point is the oft-repeated saw, “This is a government of laws, not men.” That actually ought to read, “This is a government of laws administered and interpreted by men.” Without capable humans, the law can’t protect or aid any of us. Without humans who understand their capacities, failure is inevitable. Sometimes failure happens anyway.
Several years ago, a friend asked me if he should open his own business. I advised him not to, explaining all the difficulties of self-employment. His reaction told me he hadn’t considered the problems I enumerated. Three years ago, he did open his own business and is succeeding famously. When he did go off on his own, he had cold-eyed advice of one friend warning him what problems he might encounter. I like to think it helped him.
Fred Albrecht Drywall
Robert Morris Associates had a report that broke down all sorts of comparable data by company size. The information is 13 years old, but there may be current data for anyone who wants to search for it on the Web.
Bottom line according to this report: The smaller you are, the higher the gross profit percent, but there seems to be a sweet spot in the $10 million to $50 million contractor size. I’d have to guess its peak is in the under-$25 million size, if you could break it down further where there is a balance of size and income that is just about right. Just looking at the return on equity, it makes the case.
I worked for years at a large mechanical doing $70 million that got gobbled up by a utility and ejected its upper management. I can tell you it was a struggle to reach a 5 percent net before taxes and distributions.
Now, having my company at $15 million, we are at a great spot financially in every sense. I can’t see pushing it any larger than $25 million to keep the headaches to a minimum and the returns to a maximum. The money just is not worth the risk/pressure.
James C. Mooney, P.E.
Consolidation GameI wanted to let Kelly Faloon know that I enjoyed her article and found most of it right on the money (“Surviving The Consolidation Game,” August 2007). Having served on AMPAM’s original board of directors as a vice president from one of the founding companies (Keith Riggs Plumbing), I could relate very well to many of the issues listed. Hers is the first article I have read that not only listed “ego,” but put it in its proper place as the No. 1 problem, in my opinion, faced by AMPAM throughout its existence.
Being a part of an integration effort today in the SelectBuild group of companies, I see some of the same issues noted that we will need to overcome to be successful. Having some of these put into print should help us remember and focus our efforts better.
Sam B. Sherwood
Riggs Plumbing LLC, dba SelectBuild
Your Means, Not TheirsI just wanted to compliment Randall Hilton on a really great article on a subject I rarely see (“Empowerment,” August 2007). For 35 years I have preached in my own business, keep it “lean and mean” and build up reserves. Owing your life to your bank only makes your banker happy. It does nothing for your peace of mind or for the planning necessary to grow your business. Today, thank God, we have many banks that want our business, but we use them only to justify our means, not theirs.
Jo Rae Wagner
Slow PayGood editorial from Jim Olsztynski on “Slow Pay” (June 2007). Being a union-employing piping contractor, I never have trouble going to bed at night wondering if I am providing a good enough living wage for the families of my workers. I wish more million-dollar execs would consider the good of their people before the size of their bonus.
The Kauffman Plumbing and Heating Co.
Women ContractorsI read Cindy McKeon’s letter in your recent issue with interest (“Needed: Women Contractors,” July 2007). I have been trying for years to get young women interested in our industry. I attend the local vo-tech high school open house and try to steer them into plumbing, sheet metal or HVAC with little success.
Women seem to have many misconceptions about our industry. There are a number of female contractors in the PHCC-NA. Our present national president is a woman, as is our past president. I would suggest that Ms. McKeon consider joining the PHCC and attend Network ’07. She can call the Colorado chapter at 303/757-3956.
Calfo & Haight Inc.
Bill Of RightsI really enjoyed Dan Holohan’s column, “A Customer Bill Of Rights,” in the August issue. I have been operating my business in this way for many years, but I like the fresh approach that he takes to articulate these concepts.
Daniel R. Squires
Vincent’s Heating & Plumbing Inc.
Port Huron, Mich.