BY ROY HARRYMAN
This article originally appeared in The Kansas City Star.
There’s nothing like a recession to test a business plan.
Straub Construction hasn’t been spared the pain of belt tightening, but its longtime strategy of diversification has helped keep the company afloat while others have foundered.
Although Straub has prospered during other economic downturns, the current crunch has finally blunted the company’s steady growth curve. In March, the firm laid off about 10 percent of its work force, while the remaining 65 employees took pay cuts.
“I’ve never seen anything like it,” said Ernie Straub lll, president of the Shawnee-based general contractor.
The company, founded in 1920, saw its revenues grow from $13 million in 1996 to peak at about $78.5 million in 2006. Straub expected 2008 to be its best year ever, but the financial crash left the company at $74.9 million for the year.
In addition to cutting its payroll, Straub has responded to the downturn by expanding its geographic reach beyond its traditional 150-mile radius. It’s searching for work throughout Kansas, Missouri, Iowa and Oklahoma.
“It’s deadly competition everywhere,” Straub said.
The geographic outreach has already paid off, with the company landing two school construction projects in the Wichita area.
Straub said the firm’s strategy of managing multiple types of projects is part of the reason for its longevity. In 1988, the company was forced to expand its range when the multifamily market grew sluggish. Today, the firm focuses on multifamily as well as commercial, institutional, religious and historic renovation construction.
“We branched out just to survive those times and it turned out to be a really smart move,” he said. “In construction you don’t know what any year is going to bring. If you are going to survive in this business, you’ve got to be able to do a lot of different things. Don’t paint yourself into doing one type of construction.”
As part of that philosophy, the firm doesn’t shy from public sector jobs that come with an abundance of regulations. Straub said some construction companies avoid such projects.
“It’s because of the bureaucracy and the red tape and the hoops you have to jump through,” he said. “Either you figure out how to do it … or you just don’t play. We’ve been able to figure out how to do the permitting and the regulatory stuff. It doesn’t scare us.”
Straub said the company’s ability to navigate the maze of regulations makes it a resource to customers.
That was the case when the firm tackled the renovation of the historic Armour Boulevard Apartments in Kansas City, which was completed last year. The project’s tight timeline and the unpredictability of historic structures proved challenging. But the biggest obstacle was complying with several layers of regulations, said Todd Alexander, managing director for acquisitions and development for The Eagle Point Companies, the project’s Portland, Maine-based developer.
“It was the mix of four different sets of rules we had to abide by and sometimes those rules just do not marry very well at all,” Alexander said. “Despite the level of complexity, they [Straub] were just fantastic. They finished everything exactly on schedule.”
Kansas City University of Medicine and Biosciences has been a Straub customer for about a decade and reports a similarly reliable track record. Straub has constructed an alumni center, a classroom/lab facility and a 1,500-seat auditorium. The company will begin work on a student center and library this fall.
“We’ve had an outstanding relationship with them,” said Richard Hoffine, the school’s COO and CFO. “Straub is probably about as responsive as we’ve ever seen as a general contractor … probably far more than most.”
Straub has been willing to consider some unconventional approaches to get work. A few customers have asked the company to invest in their projects as a condition of doing business. It’s a term that has been accepted when the request made economic sense.
“It’s a sign of the times,” Straub said.
The firm has also reshuffled its work force, often using its own staff instead of subcontractors. It has assigned more employees to prospect for business and fewer to work on job sites. Not only does this save money, it helps retain workers.
“Things will get better and I want to keep the people here who will be able to respond and hit the ground running,” he said.
Straub doesn’t see a recovery on the horizon, but he’s trying to be an optimist.
“Half the battle is the psychology of it,” he said. “Construction is on sale. That’s a good reason for everybody to go buy some construction. It’s on sale today and it will be for awhile. If you are going to build something, this is the time to do it.”