Aided by two acquisitions that provided entry into new excavating markets, James Peterson Sons Inc. of Medford, Wis., is now prospering in its fourth generation of family ownership.
The purchase of Sheboygan, Wis.-based Buteyn Excavating and Grading (now renamed Buteyn-Peterson Construction Co. Inc.) in 1999 and Lakeland Enterprises in Rhinelander, Wis. (now known as the Utility Division of James Peterson Sons) in 2005 illustrates the importance of market diversification, says Jim Peterson, vice president of Peterson Sons.
“Buteyn did more industrial work than we did,” says Peterson. “Our business mix was about 80 percent state transportation work and 20 percent industrial, and Buteyn was 20 percent state and 80 percent industrial.
“The acquisition gave our company more balance,” he continues. “Plus Buteyn was a major player in a geographic region we weren’t in - Milwaukee and eastern Wisconsin.” The Rhinelander division does underground excavation for projects such as sanitary sewer installations, which gave the company a presence in an entirely new market, Peterson says.
HUMBLE BEGINNING
Peterson Sons started on a much smaller scale when young James Peterson, Jim Peterson’s grandfather, established the company in the late 1930s. Armed with a homemade slusher (a small scraper) and a team of horses, Peterson moved dirt for road projects.
Today, Jim Peterson; his brother, Jack; Jim’s son, Tim; and Jack’s two sons, Scott and Jeff, own the company. And Jim Peterson’s grandson, Ryan, works in the field as an operating engineer - the fifth generation of Petersons to work at the company.
The company works throughout Wisconsin and Michigan’s Upper Peninsula, and a little in Minnesota. Its business mix is about 60 percent state highway transportation work (which accounts for about $50 million in annual sales), 20 percent general municipal work, and 30 percent private sector projects (excavating golf courses, residential housing site preparation, etc.).
SMOOTH TRANSITION
The decision to make offers for companies was relatively easy, Peterson says, because he knew a lot about them beforehand. With Buteyn, for instance, Peterson had developed a personal relationship over the years with owner Tom Buteyn.
Acquisitions are most successful when the buyer runs the new companies with a firm hand, but doesn’t micro-manage them, according to Peterson. It also helps to hire competent general managers and be flexible, he says. It helped that Buteyn agreed to stay on for three years, and one of the Lakeland partners stayed with the company.
“No one quit when we bought Buteyn, and most of the employees are still there. And all the foremen and upper management at Lakeland stayed with us,” he says.
“The toughest part is getting to understand their businesses without telling them what to do. You become a subcontractor of theirs, and they become a subcontractor of yours,” Peterson adds. “Their competency was never a question - it was just figuring out how to merge different philosophies of doing business. You have to be flexible and compromise.”
IN THE YARD
The company’s roughly $30 million fleet of equipment includes more than three dozen flat-axle dump trucks with an average 14-yard capacity; about two dozen backhoes; more than two dozen bulldozers; more than two dozen front-end loaders; about a half-dozen each of scrapers and graders; five concrete breakers; 10 brooms/rollers; about 15 compactors; five skid-steers; and eight articulated off-road dump trucks with an average capacity of 22 yards, Peterson says.
Caterpillar Inc., John Deere & Co. and Liebherr Construction Equipment Co. make most of the machines and equipment Peterson Sons owns. The company purchases the bulk of its heavy equipment from the Eau Claire arm of Fabco Equipment Inc., a Caterpillar dealer; the Chippewa Falls office of Nortrax Equipment Co., a John Deere dealer; the Sussex location of Miller-Bradford & Risberg Inc.; and the Milwaukee office of American State Equipment Co., Peterson says.
The company typically rents machines, then buys them at the end of the rental agreement if they fit well into the existing fleet. The rental period - usually four to five months - provides enough time to evaluate things such as productivity differential, Peterson says.
“If you take two front-end loaders from two different manufacturers, with the same ratings and specs, one is usually more productive than the other,” he explains. “It’s amazing.”
The company finances some machines through the manufacturer if terms are favorable, some through local banks and others internally.
“We’ve been very careful to avoid over-extending ourselves,” Peterson says. “Three or four years ago, we got super busy and did a lot of rent-buys, then ended up with a surplus of machines and had to sell them.”
Peterson says the company has been particularly cautious over the last couple years because he didn’t like what he saw in the housing market.
“At one point, I counted 18 developers with properties that had very few homes on them,” he recalls. “I knew that couldn’t continue, and I’m surprised it lasted as long as it did. The residential home market foretells a lot of things in the economy.”
PRODUCTIVITY CLIMBS
Peterson says he’s amazed at the changes he’s seen in excavating machinery since he started working during the summer for the company in 1950, between eighth grade and high school.
“The biggest change is the massive improvement in equipment productivity and reliability,” he says. “For instance, front-end loaders today that are similar in size to much older machines can load 25 to 30 percent more at a time.
“Component exchange has also increased our productivity. It’s amazing how fast we can get a machine back in circulation again. If your transmission or hydraulic pump goes out, the dealer usually has parts on hand and can fix it in a day, as opposed to having two or three days of downtime.”
The use of Global Positioning System technology also has changed how Peterson Sons works. Peterson says it reduces labor costs by 5 to 10 percent.
“No one needs to set stakes anymore,” he explains. “You just program the coordinates into the GPS on the dozer, so there’s no staking or monitoring the stakes. Plus, the work is very accurate the first time around, so there’s little regrading required.”
Cell phones have also changed the face of the workplace, allowing more timely management of projects. Peterson says he used to call a jobsite maybe once a day. But now that each machine operator is equipped with a cell phone, he might touch base six times a day.
“Project management is much more intense because we can communicate all the time,” he notes. “We run a lot more efficiently.”
MEETING BIG CHALLENGES
Peterson says one of the company’s biggest challenges is figuring out how to manage complex projects efficiently. It’s particularly difficult when municipalities hire their own subcontractors for municipal projects.
“A good example is a project we just finished (in Madison, Wis.),” he says. “It was a super complex job because of the short time span and the interface with subcontractors the state and city selected after the project was let. We were the prime contractor, but had no control over the utility subcontractors.
“There were too many adversarial relationships … that’s our biggest urban challenge,” he adds. “We finished on time, but it took a lot of meetings and a lot more management than we ever expected it would.”
Another challenge is the trend toward more night work, as municipalities seek to reduce traffic tie-ups caused by daytime road construction. “Working at night is a whole different animal,” Peterson says, referring to safety and productivity issues.
On the other hand, attracting and retaining quality employees - a vexing problem for many contractors - isn’t an issue for Peterson Sons. In fact, the company even boasts some third-generation employees in its ranks.
“We’ve been very fortunate,” Peterson says, noting that the stagnant construction industry, coupled with marginal farming conditions, creates a large pool of qualified workers. “I don’t know that we’ve ever advertised for employees except for one or two specialty jobs … almost all our employees were hired through word-of-mouth referrals.”
BUILDING A LEGACY
Peterson says he’s proud to carry on the tradition of honesty, integrity and quality workmanship established by his grandfather 70 years ago. He also thoroughly enjoys seeing a fifth generation of Petersons at work for the company.
“It’s pretty neat to go on a jobsite and see your grandson at work,” he says. “He’s seen big equipment run since he was 6 years old - it’s a way of life for him.”
