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Breaking into commercial work

EJCinc | Posted in Business on January 18, 2005 01:36am

I’m very frustrated with this lately and would just like to vent and hopefully get a little advice.

I’m currently the owner of a small residential building company that was started by my Grandfather in the late fifties.  I’ve been running it about 5 years now, and successfully.  I have 3 great carpenters on the payroll and build about 1-3 houses a year with some large remodel/addition projects mixed in.  Do our own Carpentry (sub out the framing if it is much more than about 3500sq.ft. with cut up roof lines), Roofing, and Siding.  Sub out the mechanicals, drywall, insulating.   I do all of the bidding, selling, book keeping, etc…

Anyhow I have always wanted to go more towards commercial work.  We’ve done some interior office renovations but that’s about it.  But the thing I worry about is bidding a commercial job winning it, and then not having enough employees, not having the right procedures in place, not having any one in the office.  And then scrambling to put together a team that is unfamiliar with each other.  I’m not saying you need an office staff at first, I know you don’t, but sooner or later you would.  I don’t know the first thing about having an office staff.   And I’m guessing a lot of  commercial companies started this way.  What I want to know is how did they do it?  Have any of you guys done it?   Do you just sub out a lot of the work at first until you get established and then hire slowly?  I guess the other thing that worries me is that I don’t have much experience with commercial work and commercial building codes. 

I saw this company in Cleveland this weekend at a few job sites and checked out there website.  www.Marousbrothers.com They are quite impressive.  The two brothers started out doing little remodeling jobs and now just 25 years later they are a major company with over 400 employees.  I’d love to sit down with those guys and take some notes! 

I know I threw alot of questions out there.  I don’t know if they make any sense or not.  Any advice is appreciated.  Any questions that I can clarify let me know.

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Replies

  1. woodguy99 | Jan 18, 2005 02:44am | #1

    EJC, why do you want to go into commercial?  To diversify, to grow, to make more $$$?  For the challenge of it? 

  2. User avater
    JeffBuck | Jan 18, 2005 03:03am | #2

    what Mike said ... and where are U at?

    Jeff

      Buck Construction 

       Artistry in Carpentry

            Pgh, PA

  3. User avater
    GregWerner | Jan 18, 2005 03:09am | #3

    We've been doining residential framing and trim for 8 years now. January 1st we started doing the 'trim packages' for two very impressive commercial jobs. Federal courthouse in Va and a 400 unit building at Penn State University in PA.

    We hooked up with the trim and cabinet manufacturer and got in the door that way. They bid the materials and the labor and we in turn took the labor end. So far things going very well, pay is sorta streched out longer on commercial work though.

    Thats all I can say right now. I'm interested in what everybody else has to say cause it seems I've been thinking about the same thing as you.

    Greg Werner- Werner Building & Remodeling

    Huntingdon PA

  4. Gabe | Jan 18, 2005 05:16am | #4

    The major differences between commercial and residential would be the contractual obligations and the documentation supplied.

    In residential projects, you are normally given very little in the way of details whereas in commercial, the norm is details. To be successful you have to KNOW what is DEMANDED of you. A missed detail can cost you big bucks and it comes without mercy.

    The architect specified dovetails in an obscure note and you didn't notice it when you were pricing it could cost you your shirt.

    You can't walk away from a commercial contract without damages of some kind.

    So the first issue is contracts and understanding them.

    The second issue is being able to properly read and understand drawings and the details contained therein.

    The most important document is the specifications and the relationship between the different divisions.

    Being a craftsman is not the end all and be all of commercial work, it's only one component.

    I would strongly advise that if you are serious about venturing into this type of work that seems to be a little foreign to you would be to do a few joint projects with an experience commercial shop first so that you can learn without major risks at first.

    Gabe

  5. Mooney | Jan 18, 2005 05:46am | #5

    Im a little bit confused about what you are headed for and why.

    Theres quite a bit more to codes and lots more red tape. Archies are involved big time along with engineers. Takes quite a bit of savy to get a commercial building out of the ground with the planners , utility companies , fire marshal, zonning, plan and sitre reviews with inspectors and  city engineers. There are a bunch of requirements that you arent used to in residential, but you will learn it. Ive seen jobs held up for months waiting on the above. Thats one side of it .

    Ive done quite a bit of commercial sub contracting and it pays a lot more than residential. All contracting pays more even if from just volume. The work is can til caint , then the job is over for a long needed rest. Its a lot different . Commercial work normally is 7 days a week and lots of hours a day. When its over , its r&r time.

    Your post asks a lot

    Tim Mooney

  6. JRuss | Jan 18, 2005 06:03am | #6

    Gabe is right on line.

    You will be held to your contractual obligations.

    You will be held to your schedule.

    You will be held to your bid, however, always, always, get a sign off on any extra or additional work.

    Don't take on too big or complex a project or projects to start. Get your feet wet, before you jump.

    It a little intimidating at first, but if you feel comfortable after a while, it's a great opportunity. You are dealing with professionals, not some of the hair brains you run into in residential work.

    But always insist and know where and how you are going to be paid. On most straight forward commercial jobs you'll be paid on your approved waiver by the Title Company or Bank. That's what you want. Make sure you know where and how you're going to get your money.

    Never serious, but always right.
  7. Isamemon | Jan 18, 2005 08:25am | #7

    sounds like you have a good thing going

    i did comercial for a while, no intention of gong back, its a different game

    1) the big boys who might use you as a sub have no problem holding out money for long periods, often time they aren tpaid for ong periods either,so be ready for that

    2) even if your the gc, many comercial projects do have longer periods between draws,l so if your the gc, be ready for longer periods with no pay and subs coming to you and asking for money

    3) comercila can have a different set of codes and rules to play by and stricter safety guidelines, to the point of anal

    4) a 10% error on a 400k house hurts, a 10% error on a 4 million project kills

     

    however , all that said, there is a ton of money out there in comercial work

    1. jimblodgett | Jan 18, 2005 05:53pm | #8

      Well, you don't necessarilly have to get a lot bigger to take a taste of commercial work, EJ.  Here in WA every school district has what they call a "Small Works Roster".  You can sign up for jobs of various sizes and your name rotates through the list.  They have certain requirements regarding certain size contracts, like, they can "invite" certain bidders for jubs under...I THINK it's 200k or something.  Other jobs they have to make public (internet postings) for a period of time.  I'm pretty certain they can even just call and ask you to do certain size jobs without bidding them out.

      Anyway, the work itself is similar to residential, except for "prevailing wage" requirements.  And the school districts around here have a ton of work every year to parcel out.  Last year we did jobs as small as 2.4k, just missed a bid close to 160k, and there were several other jobs in between.  And we are only on the list of one district.  There are probably 15, or 20 districts within our normal work radius.  If I wanted to, I bet I could keep a crew of 2 or 3 busy pretty much year round with that stuff, or at least come close.

      Another small scale commercial area is what's called "Tennant Improvement".  In the 80s we made some serius money travelling the Northwest building stores in malls for a well known clothing store and a jewler.  We're talking anywhere from 50k-200k sized jobs, depending on the mall.  Anyway, all these chain businesses are responsible for their own construction and have a person who's job is to oversee building new stores and remodelling older ones.  They are always looking for contractors they can count on (like everyone else).  Spend a day on the phone and I'd be surprised if you don't have some good leads with more than one chain.

      Like others have said the big difference is in how you operate.  Most commercial jobs are on a deadline.  That means pressure.  Which you might respond well to, or you might not.  There's LOTS of money to be made doing commercial work, but it can be hard on your family and your serenity.    

      1. EJCinc | Jan 19, 2005 02:47am | #9

        Thanks guys for all the replys.  I'm in Erie, Jeff.

        I want to get into commercial I think for almost all of the reasons mentioned above.

        Jim those are good ideas.  I'll check with the schools.  The tenant improvements sound interesting.  Would I contact the mall about that or focus directly on the stores that aren't already in our mall but may be moving in someday?

        I passed up the chance to bid on all the carpentry work on a Krispy Kreme here last year.  I don't know how that company got our name but we have not been contacted by any others since. ??  I keep on kicking myself about it.  I was just afraid of missing some obscure detail.  But hey it was only a small donut shop I'm sure it wouldn't have killed us.

        I signed up for a free trial of the F.W. Dodge report.  We'll see if anything on there looks like a good jumping in point.

         

        1. jimblodgett | Jan 19, 2005 04:23am | #10

          Well, you could start by calling local malls to ask about planned expansion or any tennents that will be moving into existing space in the coming year.  Then contact each business and ask to speak with their construction coordinator.  Ask that person about plans they have for opening new stores or remodelling existing stores in the near future.  Of course, keep a list of who you talk to - a follow up letter reminding them of the conversation, thanking them for their time and reminding them you are looking to get started in tennant improvement will make an impression.

          If that proves a dead end you could simply make a list of businesses in your local mall(s).  Then contact every company in the same manner.  It won't take long, you'll find out who's growing/moving/updating, that type business is volitile.  Those folks are constantly coming and going.

          Of course, you could look into any new commercial office buildings that lease space to small companies.  Lots of times the building manager has authority to hire contractors for tennant improvements for office space, or at least you could ask that person to forward your name/credentials to any prospective businesses that are looking for small contractors to customize their work space.

          I'm telling you, man, this is some fertile ground for growing your business.  Most people equate "commercial" contracting with big companies (read "high overhead").  All you have to do is find the right contacts and you'll have work coming out of your ears...and of course, all these businesses employ, or are run by, upwardly mobile people who have bought into capitalism bigtime.  They need houses, cabins, additions, new kitchens...

            

        2. User avater
          JeffBuck | Jan 19, 2005 05:16am | #12

          Erie ...

          that's close enough to Pete Draganic ... he's in Cleveland.

          that's why I asked ... pete's been doing some commercial work as of late ...

          even got a contract or two that he was looking for a hand with.

          track him down ... he's around here off and on ....

          email him.

          I'm sure he'll help with as much info as he can.

           

          Jeff  Buck Construction 

             Artistry in Carpentry

                  Pgh, PA

        3. Robrehm | Jan 22, 2005 03:09am | #14

          EJ, I've started to speacilize in doing resturant build outs and other commrcial build outs. I don't build new buildings. I stay away from the large chains , they will drag the pay out knowing you can't or won't fight them about it. I also don't take jobs where the person who writes the checks is more than a 3 hour drive from me. ALWAYS get a deposit up front that not only covers initail materials but some of your time too. In this arena as has already been stated, mercy is a rarity. My first eral commercial job was the first bar I ever built about 15 years ago. It was a horrible experience, i swore off commerical.

          About 6 years ago kinda fell into a couple of jobs, one for a hotel, another for a resturant. Both took forever to pay me, had screwed up specs and when the hammer came down on the screwed up apecs treid to blame me. fortunetly the top brass new who was snowing them & I still got paid. It just took 8 weeks, one with my money having purchased the materials.

          a couple of years ago archy buddy finally convinced me to run a job on a large resturant as a project manager. I still do this, charge an up front non refundable $2500 plus $60 an hour for what ever I have to do to run the job.  You might consider getting in this way, I did & it worked well.

  8. boulderbuilder | Jan 19, 2005 04:54am | #11

    I am a commercial contractor in CO, we do about 500,000 sqft/year.  I have been evesdropping here for a few weeks because I will be "helping" with my own house and don't know much about wood building techniques.  We primarily do production level tenant finish.  What that means is there already exists a core and shell building and we go inside and build out an individual office(s) for the tenant(s).   I am convinced that many of the same principals apply to commercial and residential.  One of the repliers was correct however, the scale is just much greater. 

    What I like about tenant finish is that (commercially speaking) you get in, get out and your done.  No weather, not severe hazards, no homeowners. 

    Our company builds from a cocktail napkin.  We basically service one developer and know their style and standards.  Deadlines are golden, lease dates don't move.  A typical job is 8-12 weeks start to finish.  Our typical tenant finish is $30-50/sqft.  Mostly concrete and steel, virtually no wood because for building "types" and fire codes.

    ask anything else you want.  Just like residential, align yourself with quality people.

     

    Dave

     

     

  9. buildingbill | Jan 19, 2005 05:53am | #13

     I do alot of repair work for both commercial and residential. Doing repair work I often get the chance to bid on commercial work.

     My theory is too easy to get burned on a big job.When you think of how little markup there is because of the lowest bid winning why bother.

     Besides I usually get called later to fix somebody else's mistake and this is always done at cost plus.

     Sounds like you have a nice niche..Why change.

     Remember the grass is always greener.....

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