Corner Office Part 3: The Power Of Three

(Left to right) Brook Gardner, Mark Pennington and Mark Fox have succeeded by dividing management responsibilities based on each principal's interests.  Photo by Ed Wheeler

"The best thing that ever happened to us was partnering up," says Mark Fox, the Bryn Mawr, Pa., firm's vice president. "We got lucky falling into that."

Ask the three — president Brook Gardner, secretary/treasurer Mark Pennington and Fox — the biggest reason they've been able to grow annual volume above $40 million and they'll point to their partnership.

"A one-man operation, you can only grow it to a certain level and that's that," Gardner says. "There are three of us sharing the decisions and headaches."

The three all met in the mid-1980s when their careers brought them to the Philadelphia area. Gardner, a civil structural engineer, had moved there to work for the Navy in the local shipyards. Fox, a Louisville, Ky., native, moved to the area after graduating from the University of Kentucky's architecture school and accepting a job with GBQC Architects, one's of Philadelphia's leading firms. Pennington came to Philadelphia to work for General Electric's financial management program after earning a degree in economics from the College of William & Mary in Virginia.

Gardner and Fox ended up buying decrepit shells of town homes down the street from each other in central Philadelphia with the intention of renovating them. They became friends and eventually coworkers when Fox joined Gardner at Historic Landmarks, a historic renovation company he had moved to in 1985.

It was just a short time later, in March 1987, that they left Historic Landmarks to start Gardner/Fox. Pennington, who was working with Gardner's wife at GE, helped with the finances on a part-time basis. For that first year's worth of effort, Pennington received a bike from Gardner and Fox. ("But it was a really nice bike," Fox is quick to point out.) Pennington came on-board full time in 1988, and the three are now the majority owners.

"Mark (Pennington) handled everything from a corporate standpoint," Fox says. "He was the glue that held everything together as we were getting started."

Pennington's addition allowed Gardner and Fox to focus on selling the jobs and ensuring quality work without having to manage the day-to-day operations of the company.

"The commonality you're going to see across successful companies is somebody to run the business side of things," Pennington says. "A remodeler who wants to succeed needs to take that step of adding a partner or at least a highly compensated individual to take care of those things."

Originally, Gardner and Fox envisioned becoming a construction management firm and leaving the labor to somebody else. After a few bad experiences with projects, they decided to take a hands-on approach.

"We had to get out there and put our tool belts on," Pennington says. "We also started making some of our own hires because we weren't happy with what we got from subcontractors."

By 1991, Gardner/Fox was established as a quality residential design/build firm in the Philadelphia area and the principals had left field work behind. That year the company landed its first commercial projects, remodeling a series of mental health clinics for a client whose home Gardner/Fox had previously renovated. Gardner wanted to work with commercial clients and Fox preferred homeowners, so they quickly decided that each would focus on the area he wanted to. The company was reorganized into two divisions with dedicated staff for each and a shared overhead structure, run by Pennington.

"The diversification is a strength," Gardner says. "Every year, one of us is doing fabulously. They mutually support each other."

The commercial side of the business has grown so much that this year it will account for about $30 million of the company's expected $45 million volume, even though it's only a little more than half of the jobs. The average residential job is about $250,000, while the commercial projects usually fall between $500,000 and $2 million — which is small for commercial work.

"It's nothing compared to what the big guys do," Gardner says. "We're not taking on gigantic, expensive projects. We're a big residential contractor, but we're small for a commercial contractor."

Gardner/Fox's high-end residential clientele often run their own businesses or are at least high-ranking executives, helping the company land high profile commercial work. Gardner estimates he gets about a dozen referrals a year from the residential side of the business.

"The residential work is what opened the door for commercial," Pennington says. "It gave us the recognition to get business."

Competing for large commercial work is very different than the residential arena. While price is very important, companies are coming at the project from a level playing field.

"Typically, there's an approved list of bidders and everybody's going to put a good number in on the job," Gardner says. "About half our work is straight low bid, but we're dealing with a knowledgeable consumer who understands the remodeling process."

The decision makers in commercial remodeling are usually people who have been through several remodels before, unlike a homeowner who may experience only one or two major projects in their lifetimes. The scale of the projects makes it nearly impossible for a small company to get into the process.

"In residential, you've got all the pick-up truck contractors, and that changes the way you do business," Gardner says.

On the residential side, Gardner/Fox doesn't even try to compete on price, because there will always be someone with less overhead who can deliver a cheaper project. Instead, it's about selling service and quality.

While Gardner/Fox will sometimes work with outside architects on commercial projects, the company's in-house architects design all of the residential jobs. Clients have to sign a design agreement and pay a fee that varies based on the size of the project for the design services. If the clients hire Gardner/Fox, the fee is credited back to them during the construction phase.

"We also use that design process to weed out some people," Fox says. "There are some people we know we don't want to work with. If they're price conscious, we know we're probably not going to get the job."

With a design process that can take as long as six months, Gardner/Fox has plenty of time to show clients the benefits of working with the company.

"Our business model is for the designers to get them so addicted to the quality of our service that they'll stay with us," Fox says. "Half of the clients don't even go look for other bids. Of those that do, half are just checking our price and the rest are out looking for the price deal."

While luck, fate or whatever may have brought Gardner, Fox and Pennington together, the company didn't get where it is without some smart planning.

"We were always aggressive; we always wanted to grow," Gardner says. "We just wanted it to be as manageable as possible."

Having experience outside the construction field was crucial to their success.

"None of us were contractors," Gardner says. "We came from corporate environments, so we're really interested in the next 10 years, not just the next week."

That meant implementing systems and three-, five- and 10-year business plans that look at where they want the company to be down the road. This has also given the company value as they face their biggest challenge: a future without the principals.

"That's a very personal challenge. We don't want this to dry-up and die if Brook and I quit," Fox says. "We're looking at how we can bring in new partners, because our systems and technology give us value to an outside investor."

At the same time, they want to make sure Gardner/Fox continues to provide the quality work for which it is known.

"You have to produce a good service," Pennington says. "There's got to be that foundation."

That's why Fox has changed his focus on the residential side. Until recently, he was concentrating on meeting clients and supervising the design stage. Now, he is putting his efforts into managing the construction.

"The hardest part of this business is construction, and that's where all the money is," he says.

Fox now spends his time attending weekly project management meetings, job kickoff meetings with the client and a lot of the punchlist meetings at the end of the job. Those visits make a big impression on clients and have the most impact on the bottom line, Fox says.

"I used to meet all the clients at the beginning, but it was a brief superficial thing — probably a negative, actually, because it was such a short amount of time," he says. "Now I meet them later on in the project, and it has the potential to really make a difference."

He's also spending more time examining job costs and issues like how much work is done in-house and how much is subcontracted to make sure the company is spending its money wisely.

"Nothing I do now is the stuff that feels productive, honestly," Fox says. "Now it's all overhead, but it's important for me to do that if we're going to continue to be successful."