With the current slump in the residential market, many fabricators are investigating commercial work, particularly for solid surface, which has seen an increase in demand in the healthcare and food service industries over the past few years. But be warned, although the rewards can be high, it’s easy to lose in a big way.
It’s A Tough Game, Clue #1: Fabricators generally aren’t very keen to share their secrets of how to succeed in the commercial arena. One fabricator wished to remain anonymous, lest his competitors get wind of what he is doing and somehow gain an advantage. But others were a little less secretive and provided some insight into this market segment.
“You need to have a passion for it,” said the anonymous fabricator. “What drew me to commercial work is the same thing that interests a lot of other people — a bunch of zeroes on the check. I do love the game. I love working with engineers and design professionals. It is exciting.”
Yet, you have to keep things in perspective. A $50,000 job is a big deal for just about anyone in the countertop trade. Compare that to a $30 million project for the general contractor and your 50 grand works out to less than one-tenth of one percent. In contrast, it is commonplace to be the hero on a $4,500 kitchen install.
“You are pretty important when you are working in a person’s home,” said our not-to-be-named fabricator. “In commercial you are not important at all to the GC. You go in, do your job and get out. If you end up going bankrupt on a project, it’s no skin off his back.”
Lesson learned: Check your ego at the door. To the general contractor you are small potatoes.
It’s A Tough Game, Clue #2: A savvy fabricator wouldn’t dream of taking on a commercial project without checking credit ratings and references for the general contractor or millwork house. And most who are experienced in commercial work either have a person dedicated to executing contracts, or they retain a lawyer to go over every contract they sign.
“You can’t afford not to have someone to go over the contract,” explained Mark Converse of J-Con Inc., a Connecticut-based millwork house that also fabricates and installs its own solid surface projects. “In addition, you need a project manager, an estimator and someone to do billing. You can’t do it yourself. If you try, you will get into trouble.”
Converse and his wife, Hilary, have been in the millwork business for 25 years. There has always been a mix of commercial and residential projects on the books and the company has, at times, done a fairly brisk business in solid surface countertops. Currently, J-Con’s mix between commercial and residential is 90/10, although that number tends to be rather fluid, depending on market conditions.
“Three years ago it was 70/30,” said Hilary. “At the first of the year it was 50/50.”
And on the subject of contracts, keep in mind that once you land a job there will almost always be changes you should make to the contract to protect your company. “Cross out conditions you can’t live with, initialize the changes and send them back to the contractor,” explained Mark. “Most of the time the contractor will accept the changes you made. When submitting a bid put your exclusions for the job at the bottom of the bid sheet.”
Not all commercial projects require a contract. Depending on your relationship with the contractor, millwork house or, sometimes, the owner, your agreement to perform services may take the form of a purchase order.
“We would rather have a purchase order than a contract,” said Hilary. “The PO allows you more freedom to execute the work. A contract is very rigid and binds you to certain conditions.”
Keep In Mind
Jon Lancto of Surface Products Inc. offers the followings points to keep in mind when considering pursuing commercial work:
• You need to be service-oriented. You need systems in place where you can provide the right level of service and quality.
• You also need protective systems in place. The ability to ramp up and to ramp down makes all the difference. Especially if you are not able to ramp down when you need to, it can really affect your company. We do that by attention to fixed costs and variable costs. An example of variable costs is subcontract labor. We pay them per piece as opposed to by the hour.
• The risk issue includes: capacity, controlling costs and switching gears. It’s a whole different animal when you are thinking about installing in a high-rise or a hospital. You have to get the material there, get it inside and work around the different trades.
• When doing both residential and commercial work we have people dedicated to both types of work. If it is a large commercial job, for example, we would want to send our commercial people.
• Communication is very important. If you miss a jobsite meeting, it may not mean much to you, but it can be a big deal to the contractor and the millwork house. You can talk with the project manager or anyone else who can provide you with information, but eventually it all comes down to visiting the jobsite personally. You just have to figure that into your bid.
• The larger the project, the more orchestration is required.