Thoughtless slashing of expenses when business is sluggish can do your company more harm than good Frustrated by delays in obtaining materials for excavation work, the leaders of Schoone Construction Inc. looked at the lay of the land and unearthed a novel solution: own their own gravel pits.
“We were fortunate enough to find two gravel pits for sale over a two-year period,” says Greg Schoone, director of field operations for the Tomahawk, Wisconsin-based homebuilder and excavator. “Plus we obtained a lifetime lease on a third pit.
“Owning our own gravel pits allows us to better control our costs, as well as have product at our fingertips when we need it,” he says. “Overall, it helps us be more competitive.”
In addition, Schoone—a certified builder for Wausau Homes Inc.—sells everything from landscape boulders to pea gravel to sand. That provides another revenue stream for the company, established in 1965 by John “Jake” Schoone.
There was a bit of a learning curve involved in operating the pits, says Schoone, but in the long run, the expansion into this new market has served the company well.
“You have to figure out the most cost-effective way to produce the product you’re trying to market,” he says. “It’s that simple.”
About 40 percent of the gravel pit business centers on landscape boulders, 35 percent from sand and 25 percent from pea gravel and septic system trench stone. The busy season runs May to November.
“We’re lucky because the gravel occurs naturally in an esker,” Schoone says. “All we have to do is screen it out and wash it.”
Diversity Spells Success
The ability to recognize new markets—and the confidence to risk entering them—drives the growth of the family-owned and operated company. (It truly is family operated: Jake Schoone leads residential field operations; his wife, Jackie, handles billing and customer service; Greg’s wife, Tracie, takes care of billing and invoices for the excavation arm of the company; and Greg’s sister, Jessie Dahl, is the company’s accountant.)
In 1974, for instance, the same circumstances that prompted the company to become gravel-pit operators spurred its entry into the excavation business, Schoone says.
“We found we were constantly waiting for excavators to get to the job site and get basements dug or lots cleared,” he says. “So we bought a single-axle dump truck, a small Case bulldozer and a Case tractor backhoe and started doing our own digging.”
Schoone developed that can-do attitude at an early age. At age 14, he worked for his father, carrying cement blocks to masons. By the time he went to college and earned an associate’s degree in architectural design and drafting, he was a lead mason.
Later, he ran a framing crew that built custom homes. In 1990, Wausau Homes—a leader in manufacturing modular- and component-built homes—asked Schoone Construction to give their products a try.
“We took a few of those in summer, and it worked out real well,” Schoone says. “It’s a good way to control our framing costs. We also can increase volume without increasing overhead and personnel. You don’t need as big a crew because the home comes pre-built in panels (for walls, floors and roof trusses).
“It also gives us a controlled environment in which to build a home—we rarely get rained on,” he continues, noting a crew can erect a 1,500-square-foot ranch dramatically faster than a conventionally built home.
“We can be laying shingles within three days,” he says.
Doing the Dirty Work
About 70 percent of Schoone Construction’s business volume comes from residential building; the remainder stems from excavating. The excavating end of the business has grown dramatically and now includes a fleet of more than 20 vehicles and machines.
The equipment includes: a 2001 Freightliner dump truck, two 2007 Freightliner dump trucks and a 2000 Freightliner tractor, all from Truck Country Freightliner; a 1990 Mack tractor, from Scaffidi Motors Inc. in Tomahawk; a 2000 Sterling dump truck, from V & H Inc. in Marshfield; a Caterpillar D5 XL bulldozer, a 2003 Caterpillar 303CR mini excavator, a 2005 Caterpillar 322 excavator and a 2004 Caterpillar 277B skid-steer, all acquired from Fabco Equipment Inc.; a 2003 Kobelco 160 trackhoe, a 1992 Bomag compactor, a 2000 Case 821 loader, a 2002 Case 821B loader, a 2005 Case 821C loader and four trailers, all bought from Miller, Bradford & Risberg Inc.; and almost a half dozen Chevrolet pickup trucks, purchased from Heritage Chevrolet in Tomahawk.
About 75 percent of the excavating division’s business comes from homebuilding, 15 percent from road building and the rest from agricultural projects (land conservation work and hog pits, for example) and building roads for the logging industry.
“I love the tougher, more complex jobs—projects where there’s unstable soil,” Schoone says. “We’ve done shoreline work for the (Wisconsin) Department of Natural Resources that involved steep banks. It’s pretty technical work.”
In the 1990s, soil remediation work kept the company’s excavators busy.
“There were lots of mom-and-pop gas stations with leaking tanks, and the state established a fund to clean up all the contaminated soil,” Schoone says. “We over-excavate the soil and take it to a landfill. Or if it’s really porous, sandy soil, we can install a groundwater drainage system and do in situ remediation … that removes the gas from the soil.”
Unfortunately, the cleanup fund slowly dried up—and so did Schoone’s soil remediation business. But again, company officials recognized a new market: site preparation for residential developments.
“We saw there was a lot of land development going on in the area, so we started to buy more dump trucks and backhoes,” Schoone says. “Along with site preparation, we got into town road construction, especially for waterfront developments, and bought land and built a couple of our own subdivisions, too.”
Slowdown Hurts
Schoone says he’s never seen excavating business as slow as it is now. Thanks to concerns about storm water runoff by state and county officials, obtaining permits has become a marathon experience for contractors.
“Six or eight years ago, you could get a permit in two to three days,” Schoone recalls. “There’s demand for development around here, but the permit process is so long, it bogs down business. I understand the need (for review), but there has to be a better way to process permits. If you’re building 25 homes a year and each permit takes two to three weeks to obtain, that’s huge financially.”
Coupled with skyrocketing fuel prices, the slowdown makes it even more critical than ever to keep an eye on costs.
“You’ve got to stay competitive,” Schoone notes. “A lot of guys don’t know how fast their costs are going up. Right now, we adjust our bidding by the week. That’s a problem if you’re going up against a company that only reviews costs on a quarterly basis … all of a sudden, you’re the high bidder.”
To keep maintenance costs in line, Schoone employs a full-time mechanic and closely scrutinizes the costs associated with running machines.
“We assign every machine a number, and then we assign the cost of every gallon of oil, every nut and bolt, to each machine,” he says. “We review the costs on a quarterly basis. When we see a trend that shows excessive cost per hour for a particular machine, it’s time to get rid of it. We perform preventive maintenance, not major rebuilds. If a machine is down for two weeks to put in a new engine, well, we just can’t afford that. Downtime is everything in this business.”
SPREADING the Word
Keeping the company’s name out in front of the public is also critical during an economic downturn. That’s especially true when there are eight excavators within a 10-mile radius of Tomahawk, which has a population of only 3,500, Schoone says.
“Word of mouth is huge in a small town,” he says. “But we also advertise in the Yellow Pages and advertise on local radio and television stations. Our Web site has also been very effective. We’ve had one for seven or eight years … it makes it very easy for people to access your business.”
Of course, the only way to generate good word-of-mouth references is to provide superior service, and Schoone is confident his workers do just that.
“We’re successful because of our quality of workmanship,” he says. “We also perform. When we say we’ll be somewhere, we’re there on time, with a machine that’s in tip-top working condition and ready to get the job done in a timely fashion. That’s the ultimate customer service.”
But Schoone says the company also measures success in other ways, like how well employees succeed in their careers.
“Watching your employees gain knowledge and grow—gain confidence and pride in what they do—that’s pretty neat,” he says. “That applies to almost everyone who works for us. It’s very gratifying to see a guy come in as a 21-year-old who’s not sure what he wants to do with his life, and 10 or 12 years later he’s a lead foreman on an excavating crew, plus he’s got a family, built himself a house and got his feet on the ground. That’s what life is all about.”
