Executive
Summary of Interview
Interviewee: President Ed Witherington
Witherington Construction
Mobile, Alabama
Topic:
How Witherington Construction came
into being and other salient points to starting a construction company.
Points
Covered:
· Experience Prior to Starting Witherington Construction
· Structure of Witherington Construction when it was formed in 1976
· Benefits of a C-Corp
· Bonding issues with forming as a Developer-Constructor
· Bonding Reporting
· Bonded Subs
· Bank Account Method
· Experience is the key
· Overview on insurance companies
· Credits for insurance: Safety and Drug programs
· EMR
Conclusion:
Although Witherington construction took a very different approach to getting their company stated than did DE/TE builders they both developed solid companies through smart business decisions. Running a construction company is a tremendous amount harder than just knowing how to build a building. Building a company takes knowing what to do and knowing when to defer to other professionals when your experience is lacking.
Interview Notes
Ed
Witherington
President
Witherington
Construction
Mobile, Alabama
· What experience did you have when starting your construction company?
9 years as a Project Manager, Estimator with last 3 years as a Vice-President
3
years as a contractor for a developer of mainly shopping centers
·
Started a Developer/ Contractor with a real-estate developer and a
financial backer
·
Bought out partners after five years and started doing only contracting.
This was possible because the company was started as a C-corp.
·
The C-corp. is good for contractors because the bonding companies do not
like the S-corps.. This is because
in a C-corp. the company’s capital cannot be raided as easily.
The capital has to be distributed as dividends.
·
As a developer they could not be bonded.
They had to self-bond all the jobs they preformed.
This involved having a large amount of liquid capital assets. Assigning an agreed amount of CD’s from the financial
partner directly to a given project did this.
Some of the clients at this time said they preferred this route.
·
When Mr. Witherington bought out his partner he dropped the development
side of the company and focused on being only a contractor. As a contractor they
were then able to begin a relationship with a bonding company.
Mr. Witherington was able to bring a five-year track record to the table
when shopping for a bonding agent. He
started off with a 4 million dollar bonding limit. This limit grew to where it is now at 10 million dollars.
This of course doesn’t limit Witherington Construction to 10 million
dollars worth of work by contract.
·
They may have 10 million dollars of work to be put in place at any given
time. They turn in there bonding
report every three months. The
bonding report detail what contracts they have in work at the time of the report
minus the percent of work that has been performed under each contract.
·
They also have a protocol where by subs that have over $100,000 in a
contract must also be bonded. The
very often pay for these bonds and will include this cost as a line item in the
bid.
·
Witherington Construction uses the same banking method as DE/TE.
They call it a sweep account. In
this account the money is swept out of the checking account each day to the
money market account.
·
Scope: 13 past years have been mainly on federal remodeling work with
some commercial work. They work all throughout the Southeast and more.
·
Mr. Witherington says that experience is the key to being successful as a
contractor. On his first job he had a open shop set up and the labor
union picketed his site. He had
purposely put contingencies in to the suppliers’ contracts that said they had
to deliver regardless of labor disputes. They
had also written two entrances into the contract and the picketers are only
allowed to picket on one gate.
· Insurance
- Ins. Company comes in to audit records on a periodic basis to check for certificates of insurance on the current jobs
- They don’t help much with ways to cut costs
- Witherington shops around for new insurance about every three years
- Make sure you get all the safety credits possible for each state
- Safety Program
- Drug Program
- EMR, experience modification rating, is currently at approximately .83, it has been down to .75. the industry average is 1.0
- Mr. Witherington says they probably save about $20,000 dollars a year for these programs
- They spend a considerable portion of those savings on these programs