While local contractors are hit by the housing market fallout, subcontractors are catching the end of the whip-crack. And some are feeling it snap mightily.
“There are guys out there who are at a point where they will do a job, knowing they will lose money, just to get out of the house and do work,” said Jim Misner, owner of Brush Prairie-based Pro-Touch Painting Inc.
Many local subcontractors are bidding jobs low, slashing staff numbers and going months without pay to make it through the economic trough.
“It’s really gotten quiet in the last six months,” said Randy Graves, executive director of the Southwest Washington Contractors Association.
Bid requests submitted to the nonprofit have dipped from 100 per week to 60, and only one-sixth of them are local.
About half of SWCA’s members travel north for work in Olympia, Tacoma and King County, Graves said.
“That’s where the word journeyman came from,” he said. “They’re willing to go on a journey.”
For those attempting to make lemonade from already-squeezed lemons, useful strategies have been diversification, marketing, financial cuts, restructuring and plenty of patience.
Snapshots of the struggle
Pro-Touch Painting Inc.
Pro-Touch Painting employees are still working, and Misner attributes much of that to foresight.
Two years ago, he met with his managers and asked how many of them knew a person who could afford a $220,000 first home.
“All of us sat there silent,” Misner said. “It was at that very point that we decided to reinvent ourselves as a residential repaint specialty.”
Since then, he has seen contractors ask for low bids while material costs increased at least 13 percent.
Misner has cut staff numbers from about 55 to 20 and discontinued some services that were in low demand. And for the first time in 13 years, Misner added advertising to his budget, and shares some of those costs with fellow members of the Hockinson Alliance business and community network.
He said the effort brings in about five new jobs per month.
Frontier Electric of Washington Inc.
Vancouver-based Frontier Electric of Washington Inc. might be an anomaly in this economy, ending 2008 with $4 million in revenue.
The commercial electrical contractor has had no economy-related lay-offs, but Owner Larry Gibson said he’s making “a little less profit for the same amount of work” because material prices are down and competition is up.
“We’re bidding against a lot of residential contractors who have decided to get into commercial work,” Gibson said.
He said continual improvements on efficiency and customer service have helped make the company adaptable.
“I don’t see the economy as being worse, I see it as being different,” Gibson said. “If we would find all these efficiencies when things were good, we wouldn’t be in this (economy).”
Action Paving
After seven years in business, Elton Mask, owner of Brush Prairie-based Action Paving, has laid off three of his 10 workers and gone without pay for at least two months.
“There is no work,” Mask said. “Our margins are so low – where a general contractor makes 70 percent to 80 percent on each project, we make 10 percent.”
Mask recently shifted focus from residential projects to commercial. But now both sides have dried up.
“I don’t know if my company is going to survive,” Mask said. “If I let my project managers go, I don’t have anyone qualified to do the work if I get it. And if I let sales people go, I can’t get the work.”
He and the staff are seeking new avenues of work, searching for client leads and trying new marketing efforts.
“Every job that comes out … we try to be the first in line,” he said.
Dynamic Drywall and Painting
Tracy Evans, owner of Brush Prairie-based Dynamic Drywall, hasn’t paid himself in five months and is sending out fewer company vehicles, swapping parts between the vehicles and trying to round up as many jobs as possible.
“I’m trying to get every single (job) we can possibly do,” Evans said. “We’re trying to keep our bills as low as possible and weather the storm. I have not been through anything like this before.”
He’s waiting on more than $100,000 in payments from builders, and whittled the staff of 30-plus employees down to 10 last year.
“Your good name doesn’t mean anything if you’re going bankrupt because people can’t pay their bills,” Evans said.
He is seeking new clients and said he might have to make further cuts in 2009.
“Every $100 here and there that adds up,” Evans said. “Things will get better – it’s just a matter of when.”
Get smart:
Source: Jan Stockton PC, Vancouver
Work with financial advisers or tap into free public assistance at www.score.org or www.wsbdc.org
Cut extraneous costs
Look for alternative, trustworthy cash sources
Consider partnership with other businesses using firm written agreements
Consider alternative employment
Avoid bankruptcy if possible
Boost financially literacy at www.360financialliteracy.org
Keeping your financial house in order
The most important financial element a business owner can pay attention to in this economy is cash flow, said Vancouver Certified Public Accountant Jan Stockton.
“It sounds so basic but it’s not an easy thing to do if you don’t have a system,” Stockton said.
“Even if it’s just on a spreadsheet or graph paper, look at how much is outstanding and how much you can collect week by week. Look at how much is coming in week by week to determine how much credit you will need.”
That includes watching receivables closely, even if it means calling people with outstanding bills to set up payment plans.
“My instinct is to make it my last resort to call them for payment, but I find if I do call, it’s much better,” Stockton said. “They have a chance to tell you what’s going on and it allows them to understand that they’re not the only one in this (financial) situation.”
Communication is also key for business owners who owe money to vendors, creditors or the government.
“Keep communication open with bankers and make sure they have good financial information available (from you),” Stockton said. “The IRS is pretty much bending over backward to help businesses and individuals through this.”
Charity Thompson can be reached at cthompson@vbjusa.com.
