How I Did It: Jeffrey Smalls, CEO, Smalls Electrical Construction
As told to Patrick Cliff
2007 Inc. 500 Ranking: 168
Three-Year Growth: 1,213.6%
Jeffrey Smalls took up the electrician's trade out of high school, and during his four-year apprenticeship developed an expertise in mass transit--a good move in New York City, where the Transit Authority will spend $20 billion on construction over the next two decades. Smalls Electrical Construction, which began 10 years ago as a scrappy company ready to jump in anywhere, is now an $11.6 million business. The road to growth, it turned out, led through the International Brotherhood of Electrical Workers, Local 3.
Our first project was a station rehab that the original electrical contractor couldn't finish, so the GC needed to scramble. I had the men available. We worked for four months, seven days a week, three shifts just to bring the job to schedule. The job ended up being worth $250,000. It was pay as you go, which means there wasn't a contract. It took probably three to four years of just doing miscellaneous projects, finishing up work for different guys, before we broke in.
We primarily work on New York City transit. The subway's very dirty. You can't really see it, but when you get down to track level there's an inch or half inch of steel dust, just black soot. It's hot. Conditions are not good. The first time down there, it's pretty intimidating. The train looks a lot bigger because you're on the same level as wheels. Then there are what they call shoes. They stick out from the train, and they're live. Get hit by one of those, you know, it'll take you out.
We do station rehabs, and projects can take a couple of years. We wire the turnstiles. We wire the lighting. We wire the card machines. We do the CCTV and communications. Working for transit is like no other place in the world. Transit's standards go well beyond anywhere else because they've got trains moving in and out, with 600 volts. They've got to protect the circuits from that high voltage.
In 2003 we decided to go union. New York is a union city, especially Manhattan. That's where all the larger projects are. And the larger the projects, the higher the profit margin. The clients we had were all nonunion builders; I had to put those clients aside and go try to market to all new businesses. It's tough. You lose everything. I went from doubling my sales to nothing. We were lucky to survive it. But we just finished a five-station project--five stations in a row, on one line. That was an $8.5 million project for us, and we were the only contractor to walk off on time.
You lose a lot of control over your electricians when they answer to the union. Your productivity definitely decreases. There's actually guys joking around, walking around on the job site with the same pipe for weeks. Never install it. They think if they work harder, they'll end up losing opportunities for one of their brothers to come off the workbench. They don't realize our budget is set.
The challenge is to give builders some kind of incentive to choose us as a subcontractor when they've been dealing with the same guys for 30 or 40 years. Builders do have women-minority business programs, but those are just goals. There's nothing set in stone. It's truly price that's the equalizer. The $8.5 million job we just did, the others bid around $12 million.
The average electrician works for six months and he's laid off. There are 4,000 unemployed electricians in New York City. Our guys never stay home for six months because we always have projects. A journeyman electrician in this city can make more than $90,000. My thing is to make sure that we have ample work so that they know they're in a company they can count on for the next couple of years.