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Employee Strength
Employee ownership gives some companies a laser
focus on growth. One Fort Myers-based construction
subcontractor is finding just how well in tough times.
by Jean Gruss | Editor/Lee-Collier
Ask any building subcontractor how business is these days and you'll likely get rolling eyes and a shake of the head.
But one Fort Myers firm is bucking the trend. B & I Contractors' revenues grew 18% to $63 million in 2007, quite a feat considering the general construction decline in Florida. It is now the 150th largest company on the Gulf Coast by revenues.
It builds and installs heating and cooling systems, plumbing and electrical contracting in large commercial projects for builders such as Kraft Construction in Naples and W.G. Mills in Sarasota. B&I was itself the 20th largest construction company on the Gulf Coast by revenues in 2007.
"The ESOP has everything to do with that," says Gary Griffin, president of the firm. That's the acronym for an employee stock ownership plan, a popular estate-planning tool for business owners who want to sell their closely held firm to their employees.
ESOPs and other similar plans sometimes get a bad rap because employees are risking their retirement savings with a single company rather than prudently spreading out their money with broad mutual funds or portfolios of publicly traded stocks.
But when ESOPs are good, they're great.
For one thing, it's a great tool to recruit and retain employees. Consider this: In 1994, a share of B&I was worth $32.50. Today, each share is worth $113, or a compound annual growth rate of about 10%. That's one percentage point better than the Standard & Poor's 500-stock index over the same period.
B&I's plan has been debt-free since 1991 and has assets in excess of $16 million. That's money pledged to the employee-owners when they retire. The ESOP was started in 1988 by the company's sole proprietor and by 1994 employees owned 95% of the stock. Griffin owns the remaining 5%.
Results speak for themselves. The company's revenues were $24 million in 2003. "We've more than doubled our revenues in the last six years," Griffin says.
"The ESOP changed the nature of the company," Griffin explains. The company became more focused on growth and management focused on employees as its most valuable asset. What's more, the tax benefits of the plan allowed the company to retain more capital.
The company's strong financial position is boosted by its ability to obtain as much as $100 million in bonding insurance. This kind of insurance is often required on big projects to protect investors from any problems. B&I's excellent track record means it can get bonding insurance for competitive rates, giving it an advantage over competitors whose financial position has deteriorated in the last year.
B&I also has invested in training and new equipment. For example, it has put $3 million in its facility in Fort Myers in part to create a manufacturing plant where it produces air-conditioning and heating ducts. This gives it an advantage over its competitors because it can move faster to build a system.
Fortunately, B&I stayed out of the condo building boom, preferring to stick to what it knows best: commercial buildings. "We've been asked so many times it got old," Griffin says.
But that doesn't mean B&I is immune from the construction downturn. Griffin estimates revenues will be down about 5% this year. "We have a good, strong backlog in '09," he adds.
That's quite an accomplishment these days. Griffin estimates 70% of B&I's business today is public projects in areas such as education and health care. "We have a chance to be flat next year," he says.
SUMMARY
Company. B & I Contractors
Industry. Construction
Key. Employee ownership is a competitive edge.
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