Moore General Contractor
What Happened Greg Moore's company had handled restoration and high-end renovation projects for 26 years when he decided to actively pursue more commercial work. That decision, combined with his denial of the problems that would arise, snowballed into financial issues that proved to be fatal.
When Moore decided to make the switch, 25% of the work performed by his company (called Greg Moore, Restoration Carpentry at that time) was light commercial. He decided to pursue larger commercial jobs and municipal work. “We knew the margins were lower on these jobs, but the dollar volume of the jobs was higher, so the gross profit would be higher,” he says. “It looked like easier money.”
He was, of course, wrong on that count. The municipal jobs proved to be tougher than expected. “The light commercial work we had done was more like residential work,” Moore says. “I was naive about getting into what turned out to be a scrappy part of the industry.”
He had discussed the idea with his board of advisors and talked to his bonding agent and lawyer. His general manager of 16 years, Sara DeLeon, thought it was a good idea. The crews, she noticed, enjoyed working on the historic renovations that were part of the city park system. They all agreed Moore's decision would work if he made sure to study the margins.
Moore began working with a past client — the city of Philadelphia. He had worked with the city on historic homes in an urban park, and “we thought we were familiar with government requirements for paperwork and oversight,” Moore says. “In retrospect, we did not realize how casual their approach was compared to larger authorities within the government.”
Moore soon found that he did not have the capital investment needed to handle slow-paying commercial work. And because Moore doesn't like estimating, he often procrastinated on that part of project preparation and ended up “winging it.”
“If you ‘wing it' on a $50,000 job, you have ways to recover if you make a mistake or overlook something,” Moore says. “But winging it on an $800,000 job is a problem.”
One job in particular, a park building addition, became the company's Waterloo. DeLeon says they did not receive firm pricing from the subs before signing a contract with the city. “We did our shopping after we signed the contract,” she says. The city did not provide final plans by job start.
City officials also expanded the scope of the project to include renting out the building for parties of 150 people. Moore had to include a new septic system to accommodate the large crowds. Installing the system added six weeks to an already tight job, and the weather caused additional delays. He finished the job, but the city still owed him $28,000. Instead of running on the “punch list treadmill,” Moore decided to give up the money and end the job.
On top of that fiasco, Moore had another job that did not go well, partly because he was distracted by the municipal addition. The clients on that job — a $175,000 kitchen remodel — did not pay him the last $25,000 they owed.
Moore still owed his subcontractors, who went to the bonding company for the money. Having signed the bonding documents on the large job, Moore and his wife were personally liable. He hired a lawyer to negotiate on his behalf. “He knocked 35% off the total,” Moore says. “In the end, we had to pay $95,000.” He and his wife also had to pay $20,000 in legal fees with their own money.
Moore ended up declaring bankruptcy. “I had to mortgage my house to pay legal fees and liens,” Moore says.
- Reaction to problems was too slow.
- Moore lacked assertiveness.
- Incomplete knowledge of new market.
Looking back, Moore can see that his biggest mistake was his slow reaction to the problems. His networking peers had often told him that he needed “to get in there and face the good, bad, and ugly.” DeLeon says she and several other employees approached him about the municipal project. “We said this project is sinking the ship, and we need to do something,” she recalls.
“I stuck my head in the sand. I did not want to look at the job cost report,” Moore says. He paid a high price for ignoring their warnings.
On the advice of counsel and his accountant, Moore started Moore General Contractor a year before declaring Chapter 7 bankruptcy at the old company. His new company focuses on the residential restoration projects that were once Moore's bread and butter.
He has made changes to prevent the same problems from happening at the new company. He jumps on issues before they grow out of control. For example, on a recent $43,000 job, when the client did not make the final payment, he stopped the job. “I talked to him, to his attorney, and asked the architect to come in as arbitrator,” Moore says. “In the past, I would have cajoled him and taken on more responsibility to avoid confronting him. This time, I handed it to my attorney.”
When he discussed the situation with his general manager, she reminded him that she told him she thought the client was flaky, but he ignored her. They agreed that anytime DeLeon wants to communicate something important, she will write it on a piece of paper and hand it to Moore. “I respond more appropriately to a written message,” Moore says.
Moore is working on being more assertive. “If I see something on a project I did not like, instead of swallowing my reaction, I give it voice,” Moore says. “I'm learning to balance between being a nice guy and protecting myself.”
Moore also reactivated the board of advisors for his new company and now subcontracts all construction. “It is liberating to only have payroll for two people every week,” Moore says. He updated subcontracts to include “paid-when-paid” language. He is more stringent about pursuing negotiated bids. And he faithfully repeats his new mantra — “My job is to go to the bank” — when evaluating issues.
Almar Building and Remodeling
What Happened Terry Quinn took over Almar Construction from his father in 1972 and took on a partner in 1976. At the peak of their business they were running three in-house crews and two sub crews with a sales volume of $384,000. (This is roughly $1.2 million in today's dollars.) When their partnership soured, Quinn closed the exterior remodeling company to separate from his partner.
As the lone salesperson and administrator, Quinn was working 70 hours per week and was a self-described “zombie.” His partner worked 35 hours per week maintaining equipment and heading up one of the five crews. “Legally, it was a partnership, but not by the division of work,” Quinn says. “We did not have an agreement on who was doing what. His attitude was, ‘I'm entitled to half the profits because I own half the business.'”
As the company grew, so did the inequality. Quinn joined a networking group and began educating himself about running a company.
“We set up a real business operation with a storefront. I had a phone room for working leads,” he says.
Quinn had also hired a commissioned salesperson. “He sold at the numbers I set up. If he did not sell, he cost me nothing. But my partner was jealous of this guy — said he was making too much money,” Quinn says.
The company operated on Quinn's capital. “I mortgaged my house to finance the business,” he says. Quinn was making money for the company and his partner was spending it. “He thought if we had $100,000 in the bank, it was money we could spend. He never understood liability, yearly debts, insurance bills, or cash flow,” Quinn says.
Quinn also began hearing about his partner's work ethic and practices. His crew worked four hours per day. He gave equipment to employees to gain their friendship and did things like putting up a gutter on a detached garage because “it needed it,” even though he knew the customer would not pay for it.
Quinn slowly realized the toll it was taking on the company. “In those days, I did not do job costing well. But I realized his jobs did not make money,” he says. Quinn asked his partner to leave the field and move to doing sales, but he refused.
As the grievances continued to escalate, Quinn decided the only way out was to walk away. The company's assets included the office and warehouse. Quinn took over the mortgage on the real estate, and gave his partner $5,000 for his share. “I paid off all the outstanding invoices with suppliers and gave him all the jobs in progress and all the deposits. I wanted the name of the business because I did not want him running down the name I had worked hard to build,” Quinn says.
That was in 1981. After that, Quinn spent 10 years working for his largest supplier. In 1990, he decided to revive the old company. He changed the name slightly to Almar Building and Remodeling. Now he has two office and seven field employees and expects to reach a sales volume of $1 million this year.
- Business agreements were too loose. There was no buy/sell agreement between the partners, and their duties were not well outlined.
- Partner compensation was not equal to responsibility.
- Too much time spent in the business caused Quinn to lose his perspective.
The new business has the benefit of hard-earned experience. In hindsight, Quinn says he should have put everything in writing, including compensation and a buy/sell agreement. “Compensation has to be equal to the investment. If the partner is a salesperson, they are compensated as a salesperson; if they are a carpenter, they are compensated as a carpenter,” Quinn says. “Then you look at splitting partnership profits.”
He will never take on another partner. “My daughter has joined the business, and she will buy it from me. I won't be her partner,” he says. And she won't have the option of taking on a partner herself. “I have set up an arrangement that will prevent anyone from sharing in the profits of her business,” he says.
Quinn believes strongly in continuing education and wants his workers to understand how to run a business. He shows them the labor burden attached to their job, offers in-house training, and takes them to JLC Live seminars. He also made a vow never to work on weekends.