Small and Balanced Is Best Path Into Light Commercial
Most home builders who have ventured to the commercial side of the construction business agree that having a two-sided portfolio of residential and commercial can strengthen a company’s bottom line.
As with investing, “it’s good to have balance,” explained Sam Manzitto, Jr., general manager of Manzitto Bros, a custom home and commercial builder based in Lincoln, Neb. “There have been times when the commercial end has carried us and there have been times when residential has.”
For Manzitto Bros, the crossover into commercial began about a decade ago. Manzitto’s father started the company 30 years ago as a custom home builder, when a residential customer asked him to do a commercial project. Today, commercial makes up 30%-40% of the business, depending upon the season.
On the residential side, “We build higher-end homes in our market — many for professionals such as dentists and accountants. When they decide to build or remodel their offices, they come to us,” said Manzitto. He advises other residential builders who consider venturing into commercial building to “listen to your customers.”
“When you hear them say they have a need for a building of some kind, take the next step and say, ‘Hey, I can build that for you,’” Manzitto said.
He cautions that it is important to understand your market and your competition because, in most cases, with commercial business, there are going to be multiple bids. To succeed in getting a job, “You have to know how to price high enough to make the right amount of money but low enough to attract the client,” he said.
“The biggest mistake people make when they get into commercial is, they don’t do their homework,” said Matt McCoy, president of South River Construction, a luxury home and commercial builder in Wimberley, Texas.
“There is a huge difference between commercial and residential, just as there is a huge difference between commercial work for the public and commercial work that involves public funds. “You have to understand what each requires,” he added.
South River Construction does much of its commercial work for the city of Wimberley and the local school system. McCoy said his company first ventured into commercial on a very small scale.
“The best advice I can give to companies trying to get into commercial is to look for jobs that are so small that other contractors will say they aren’t worth the headache,” said McCoy. “You need to go out and get those headaches.”
Small jobs require the same paperwork, filing requirements, payroll requirements and procurement procedures as the large projects, he said. “You have to make your mistakes to learn any business, so you want to make those mistakes on jobs that are small.”
Taking on small jobs also creates valuable relationships that will lead to long-term business. “People actually get excited when you show up and you’re interested in the job no one else wants,” McCoy said. South River Construction can often be found filling potholes, remodeling bathrooms or painting walls at local schools and at nearby Texas State University. Plus, those small jobs have led to large projects.
“You’re dealing with the same people, whether it’s a big job or a little job,” said McCoy. “When a job comes up, these people become your advocates.”
Considering making the move into light commercial construction? Tap into the resources available through NAHB’s Commercial Builders Council. For more information, e-mail Carmel Nayman, or call her at 800-368-5242 x8410.