Construction is in Michael McCutcheon’s blood: His grandfather, uncles, and father all worked in the construction industry for the family business, C.R. Crane & Sons, and he began working on jobsites when he was 12. After graduating from UC Berkeley with a biology degree, he decided academia wasn’t for him and returned to construction.
By 1980, he had earned his general contractor’s license and had been working for another contractor for a few years when he approached his boss to ask about a raise. “He looked at me and he goes, ‘Michael, it’s time for you to go out on your own,’” McCutcheon says. “And so I did.”
He created McCutcheon Construction, based in Berkeley, Calif., in 1980 and was the company’s only employee for the first few years. He estimates that he worked from 7:00 a.m. to 10:00 p.m. seven days a week, but for no more than five years.
His first business lesson came very early on, during an infamous time of year for business owners: tax season. In 1981, McCutcheon was filling out tax forms as a business owner for the first time. “I was horrified to realize when I looked at the whole tax form that we were going to owe $1,700,” he says. “I didn’t have $1,700.”
His wife, who worked in the financial industry, suggested McCutcheon talk to an accountant. She asked around at her office and found one for him to meet with. The accountant tallied all the deductions and told McCutcheon the government actually owed him $1,700. “So that’s the first clue of working with people who actually know better than you,” he says.
McCutcheon continued working with the accountant, and one year learned his business lost $25,000. He had money in the bank and didn’t see how he could have lost money. The experience quickly taught him “[losing money] is not just from an accounting standpoint … Accounting is real.”
Despite those few initial setbacks, McCutcheon’s business gained footing and more homeowners began requesting his services. Realizing he’d be unable to do the work on his own, he hired additional laborers. By 1985, he had around 10 field employees. That was also the first year he made more than a carpenter’s salary.
Demand further aided his business growth; he hired his first non-field worker, his office manager, in the late 1980s. As a business grows, McCutcheon says, owners need to figure out which parts of the business they can let other people handle.
“I thought it was easiest [to let go of the administrative tasks],” he says. He also had people “who were supervising construction, so all I had to do was estimate and sell.”
In 1987, McCutcheon restructured his company for growth by incorporating it. He also bought a business condo to use as his true office location, instead of his home’s spare bedroom and garage. Since buying the first condo, McCutcheon Construction has purchased two others in the same building. The company now employs 40 people both in the office and out in the field.
While growing his business, McCutcheon has learned that sometimes the best way to grow is by subtraction. “We’ve completely dropped design/build,” he says. After using the business model for 15 years, McCutcheon realized his company wasn’t managing the process as successfully as he would like. Now, he and his firm contract with outside architects and designers for their projects. “Eliminating design is a growth plan,” McCutcheon explains.
The firm is also developing its Home Care and Repair division, called MCare, which completes handyman-type tasks for clients. “This is a significantly different type of work from home remodeling,” Leigh Genser, president of McCutcheon Construction (and McCutcheon’s daughter), tells Remodeling in an email. “We have been defining new business processes and hiring specialized staff.”
As of 2016, the company is 100% employee-owned. Genser says she is looking forward to cultivating the employee ownership culture moving forward. “We are very excited to have all our staff engaged in improving and growing our company using the ideas and talents of our employees.”
The ESOP has allowed McCutcheon to begin his transition out of the company. While Genser runs the day-to-day business, McCutcheon’s current role as executive vice president allows him to advise and coach employees. He stopped actively selling a few months ago, though he still follows up with and helps old sales leads.
McCutcheon stresses that learning how to sell—he took Carnegie Sales Training when he started out—is a crucial part of growing a remodeling business. And he attributes much of his success to his philosophy: He believes in making sure the work he and his crew perform always meets customer expectations and in making things right if it doesn’t. In some cases, this extends to redoing parts of a project.
“If the customer doesn’t like it, ipso facto, it needs to be redone,” McCutcheon says, though he adds that remodelers should be realistic about what they can do to make things right with the customer.
“If this is just a business for you, I feel sorry for you,” he says. “That’s just so distant from the way I feel about it. Our passion is why we’re willing to go [the extra mile] to make the client happy. That’s a great satisfaction in life.”