Welty Takes Steps to Remain Viable

Tips can help other construction and contractor businesses ride out weak economy

Published June 22, 2009
Jim Mackinnon
Beacon Journal business writer

Photos
Top: Don Taylor (left) the owner and CEO of Welty Building Co. Ltd. and Dale Ruther, a partner at the Fairlawn firm Bober Markey Fedorovich, look over the field at InfoCision Stadium under construction at the University of Akron. (Karen Schiely/Akron Beacon Journal) Bottom: Dale Ruther, partner at BMF

Donzell Taylor, owner of Fairlawn-based Welty Building Co. Ltd., has seen firsthand the ups and downs of the construction industry since buying the company some 10 years ago.

And with those good times, bad times and in-between times, Taylor said he's learned a lot about how to keep the high-profile business viable.

The results are all around the greater Akron area, including the under-construction InfoCision Stadium at the University of Akron. Welty continues to work through the current deep recession, and has been managing its business with the help of Fairlawn-based accounting firm Bober Markey Fedorovich.

''When business is good, you can get lax at not following good practices because the money is constantly flowing,'' said Taylor, Welty's president and chief executive officer.

That can come to really hurt a business when bad economic times hit, he said.

Taylor and Dale Ruther, a partner at Bober Markey Fedorovich, discussed how construction and contractor businesses — as well as others — can take steps to continue riding out the rocky economy.

''The general feeling in construction is, construction may be the last in [a recession]
and the last out,'' Ruther said. ''There are jobs that are on the schedule and backlogs. When the recession began to hit, there were a lot of the contractors . . . that had a number of projects that were already financed, were already on the table, ready to go forward.''

Now, fast-forward about 18 months since the recession started, he said.

''What happens is, people start to become more concerned with the second half of '09 into 2010 on the construction side, as to where the impact will really start hitting the construction industry, '' he said. ''Because credit has gotten tighter, all those kind of things.''

Right now, a lot of businesses are in survival mode, looking for any kind of work to stay alive, Ruther said.

That has put pressure on businesses such as Welty when it comes to bidding on projects, Taylor said. In some instances, they are finding themselves being undercut by businesses new to the area, he said.

''We see a lot of people wanting to migrate into what we do,'' he said.

Protecting cash is critical, Ruther said. That includes such things as managing receivables, utilizing appropriate trade terms and getting payments out and getting payments in, he said.

Taylor agreed.

''Managing cash really has to do with customer service,'' Taylor said. ''If you're taking care of people, they're going to pay you on time. . . . It's your core business, of blocking and tackling, of taking care of your client and having good practices that will help you manage the cash.''

Bober Markey Fedorovich said in addition to managing cash, construction firms and contractors need to look at five other areas that it believes are the most important to focus on now:

  • Customer acceptance. Businesses must carefully scrutinize their customers, including long-standing ones, because downturns affect everyone. See proof of financing and confirm a history of timely payments.

  • Two budgets. Prepare a traditional conservative budget that includes revenue forecasts and detailed cost structures. Then prepare a ''doomsday'' budget, just in case something such as funding fails for a key project. Understand in advance which employees face termination if the company can't meet revenue targets.

  • Cost structure. Owners and chief financial officers need to openly and honestly challenge the company's cost structure line by line. Encourage everyone at all levels to drive out costs, including publicly congratulating and rewarding employees who find savings.

  • Review labor and staffing more than usual. Identify unproductive or redundant labor and inefficiencies.

  • Leverage underused equipment. It might make sense to rent or sell an idle machine to raise cash.



Ruther said businesses also need to look into diversifying their products and services, particularly if it leads to what he calls an ''annuity cash flow'' that provides steady revenue. If possible, businesses should look at diversifying geographically as well, he said.

Welty has been following that exact path, Taylor said. It also hasn't been easy, he said. He and others at Welty have learned lessons the hard way about expanding into areas where they thought they had proper expertise, he said.

Welty is looking at expanding geographically beyond its Northeast Ohio roots, Taylor said. It also is expanding into providing facility services at projects it built that provide steady income as well as a continuing customer relationship, he said.

The expansion into services also has improved how Welty goes about its construction business, Taylor said.

Taylor also said he now strongly believes in the use of advisory boards, made up of people outside the firm, to provide constructive advice, guidance and criticism. He said he's had an advisory board since buying Welty in 1999. Members include an organizational psychologist and Richard Fedorovich, chief executive officer of Bober Markey Fedorovich, he said.

''I can't over-emphasize how important the board of advisers has been to me,'' Taylor said. ''I pay them to ask me very difficult questions. . . . They hold your feet to the fire.''

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For more information on BMF's construction services, please contact Dale Ruther, partner, at 330.762.9785 or by email.