In the spring of 2011, University of Michigan fraternity brothers Alex Riley and Paul Kaser, along with their friend Patrick Beal, encountered an unexpected problem in the construction sector. While working a project in greater Detroit, Riley and Beal discovered that not all workers are suited for the same tasks.
"We had a labor force of 150 demolition employees, but we were supposed to be doing a residential rehabilitation, which involves carpentry, plumbing, roofing, and masonry," Riley tells Inc. After trying unsuccessfully to recruit the proper workers themselves, Kaser, Riley, and Beal decided, that same year, to launch their own staffing portal, billing the website as a sort of "LinkedIn for contractors."
Over the past seven years, that company--MeritHall--has expanded beyond construction-job fulfillment into landscaping and worker training, among other things. Although MeritHall clients are all nonunion workers, the founders' training center arm has worked with several labor unions, which are staples of Detroit infrastructure. The company has around 350 employees, and has worked with more than 400 clients across the Detroit metro area--including Warner Brothers Services and Bruttell Roofing--helping it book $10.5 million in sales last year.
"We developed this niche of being a staffing agency in Detroit that could fill the hard-to-fill positions, and over time we added different industries," says Riley, who notes that in the past year alone, the company has connected more than 1,000 workers to jobs in construction.
'Bridging the skills gap'
The founders insist that the issue they are trying to solve isn't a lack of talent, but rather a lack of access to talented workers. "When people think of Detroit, they think of riots, poverty, population decline, and illiteracy rates. What we saw was opportunity," says Riley. "There are a lot of people in Detroit who just never had the chance to get an education. Our focus has been to bridge the skills gap, getting Detroiters working on projects within their own city."
In addition to connecting labor to local employers, and taking varying, though undisclosed, cuts from the clients, MeritHall now brokers road salt for companies in the landscaping, snow removal, and construction industries. Through its affiliates--Ringo Services and Detroit Training Center--it also offers facility-management services, as well as training programs and, on occasion, management consulting services.
All told, the three businesses project booking $16 million in sales this year, while helping to revitalize the infrastructure of the Motor City. Meanwhile--and perhaps most impressively--the founders say that all three business arms are profitable. It helps, they suggest, that they've been able to achieve all this on their own terms. Riley, Kaser, and Beal have yet to take a penny in venture capital funding, although they personally invested a collective $100,000 in the early days.
That's not to say there haven't been challenges. Early on, the founders struggled to learn to complete such simple projects as processing worker compensation claims, documenting late payments, and writing up commercial contracts. In the beginning, funds were tight. At one point, Riley had to take out a loan from co-founder Kaser because he couldn't afford to pay his rent. "Once we were able to get that first loan and write the business plan, it got easier," says Riley.
Their landscape arm, meanwhile--which accounts for the largest share of annual revenue--can be erratic. On Super Bowl Sunday in 2013, a massive snowstorm stranded multiple laborers, so the founders physically picked them up and drove them to their various job sites. "That snowstorm was one of our worst days," recalls Kaser. "I remember working a 17- or 18-hour shift and then just going home smelling like gasoline and collapsing," adds Riley.
Analysts suggest the company could face new challenges moving forward too--especially as competition in the staffing industry mounts. "The market in Detroit has changed, and there's more demand than there are people," explains Matt Camp, the president and COO of the Initiative for a Competitive Inner City. The Roxbury, Massachusetts-based nonprofit recently recognized MeritHall as the No. 4 fastest-growing business on its annual list of 100 businesses serving inner-city communities across America.
"Moving forward, they are going to be tapping into a smaller pool of potential employees, Camp says, though he adds that because the founders have invested in training new workers, with their Detroit Training Center branch, MeritHall could have a leg up over the competition.
Ray Waters shares that sentiment. The president of the nonprofit Detroit Development Fund, which provided a roughly $100,000 loan to MeritHall in its early days, says he was won over by the plan the founders had established to expand into new areas of business, including the training center. "They had an excellent business plan, and a thoughtfulness about it, which we don't see very often," Waters tells Inc., adding that he wouldn't hesitate to lend the company more capital in the future. (The founders have already paid him back.)
Despite the risks associated with growing the company, Riley says it is just getting started. "Our friends always ask us how we deal with uncertainty," he says. "We've gotten so used to it that it's hard to think about not taking big risks."