How LI construction company grew during the recession
Kevin Harney, principal and chief financial officer of Stalco Construction Inc., found a way to grow his Islandia-based company even as most of the industry was shrinking. Since the 2008 recession, Stalco has boosted its annual project volume from $40 million to $140 million, increased its staff by 50 percent and established itself in the New York City market. Part of the process was to become known, Harney says. When he's not overseeing projects or expanding his market, he's raising money for families of sick children with his charity, Contractors for Kids.
Harney, 49, started as a construction laborer and launched his company in 1992 with $1,700 and a desire to do things "differently and better." He and his partner, Alan Nahmias, grew it slowly. "I had a rule that we could never ever take a project for more than 10 times what we had in the bank," Harney said.
How have you expanded while the construction industry is shrinking?
We put together a six-phase plan of attack in early 2008. We knew there were going to be some changes coming . . . we knew that the profit margins were going to decline, because they do in a bad economy, and there's only so much work in Nassau and Suffolk counties. So we opened an office in Manhattan and put branches in Brooklyn, Queens and the Bronx. Now, probably 50 percent of my total volume comes out of that move.
You also changed your marketing plan. How did that help?
I didn't know what marketing was. I thought marketing was sales. In 2008, my marketing budget was $29,000, and at the time, we were probably a $35-, maybe a $40 million-a-year company. In 2009, I spent more than 10 times that.
How did you afford that?
Most companies, if you pay in 15 days, you'll get a 2 percent discount, or 30 days, a 1 percent discount. So I went to [my subcontractors] and said, "I need to develop a marketing budget. We need to get out there and get known" and asked them for the discount. I gave them my word that I would not put a penny of that money in my pocket as profit, but I would use it to help develop Stalco and in essence, my subcontractors would also benefit from the growth.
What's the most challenging project you've worked on?
Pier A. The building [near Battery Park in Manhattan] was built in 1884 to bring and quarantine immigrants. [It] sat to rot for the better part of the last 75 years and we were retained to come in and rebirth it to its original form. The building was scheduled to open on Nov. 7 and then the [superstorm Sandy] flood occurred. It got six feet of water through it and destroyed an insane amount of work that was already in place. We almost had to start all over again, but it's really going to be a place everyone goes to visit when they go to Manhattan.
Was it difficult to compete as a Long Islander in the New York City market?
Most people who start up in New York City are little companies without the support staff to put together the presentation . . . but then we came out of nowhere with a whole team with architects and PowerPoint presentations and we took some really nice work early on and we still do. I asked the president of a very, very large company, "We're breaking into the market now. Any advice?" And he looked at me and he said, "Go home." I compete against him all the time now.
What is your charity, "Contractors for Kids"?
It's the most important thing we do. Families are devastated when a child is sick. Either the mom or dad stops working, there are experimental treatments that insurance companies will not pay for . . . We also pay for cars, cellphone bills, mortgages, light bills, and unfortunately, for funerals. We were just accepted into United Way about two years ago, so we get donations through payroll deduction. This year, we hope to break $1 million raised.
How did you change things within the office to cut costs?
I was going through probably $100,000 a year just in printing paper. We began using an online system and the first year alone, we saved $89,000 in paper. We started a little recycling program. We were generating a lot of [waste] paper and paying cleaning people to take it away. Now we brought in recycling bins and a company takes the paper for free and recycles it.
Why didn't you choose to downsize?
Our goal -- and my employees were well aware of my goals -- was to break even. I felt that if I can come through the economy intact, then I'd be ahead of the game. We have a great team here, a very dedicated team, and I knew that if I did what most other companies in my industry did and downsized, that when the economy did turn, it would probably take me two or three or four years to build the company back to a point where we could position ourselves for all the new work.
Name: Kevin Harney, principal and CFO of Stalco Construction Inc. in Islandia
What it does: Full-service general contracting and construction management firm
Revenue: $64.2 million in 2012