Moving From Residential To Commercial

Platinum Const

Hey guys, I'm a high-end residential builder in the state of Idaho. We have done a couple small commercial jobs in the past, but with the slow down, would like the ability to start bidding on more commercial work. I feel like I'm spinning my wheels though.

First off the bonding is nearly impossible to get. We are able to find bonds for up to $250K with no problem, but being a GC, this is a very small amount. Most of the jobs we have been asked to bid on are in the $1-2 million range.

Second, everyone is looking for highly experienced commercial contractors. It's kind of a catch 22, not being able gain experience because no one wants an inexperienced contractor. I had original considered hiring an experienced superintendent, but with how slow things are I really don't dare right now.

Any great suggestions?

BKFranks

How about fake it till you make it?

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Solar Control

How about looking for ARRA projects? There is a lot of federal money being pumped towards subsidized housing projects. A lot of these are remodels and renovations that may bid under your bonding capabilities. The margins probably won't be great but you will get your feet wet and you'll find subs that can work with you and your team.

You could also try to partner with local GCs that are bigger than you are.

May want to shop around your bonding needs - chances are you may be bondable higher than $250K.

Good luck.

BTW, here is a link to a list of Public Housing Authority Websites Its a legit site, but you may get a security warning about site's security certificate. No problems with it for me.

mudpad

Try bidding some hard bid public work. If you are qualified it doesn't matter what your experience is. You will have to have the bonding capacity though. Also, alot of the countys and municipalities around here do a construction management contract, and the CM bids out packages, concrete, carpentry, drywall etc. etc. Or just bid as a sub to a GC on a traditional hard bid project and work under the GC's bond. Might see if any of that is going on near you.

KennMacMoragh

I have wondered about that too, if you want to be a commercial contractor, how do you start out? You can start your carpentry career doing nothing but commercial work, but then when you go out to start up your business, you would have to be bidding on large jobs mostly, which would not be good if you were unexperienced at running your business.

So you can start out your carpentry career doing residential work, then it wouldn't be so hard starting up your business just doing small residential jobs. But then how would you switch over to commercial? No one would want to hire you if most your experience is in residential. I always thought a way around that would be to start up your business doing residential. And when the time is right, hire a superintendent who's been doing nothing but commercial work for 20 years, and let him run your jobs.

marius07nc

It seems like that for me too in the subcontracting aspect i put out 100s of bids and I didn't get one job from it. It's experience that they look at and all the insurances were killing me pretty much.

mudpad

In the world of hard bid contracts, if you are low I guarantee you will at least get a call from the GC. Low bid is what it is all about, but the GC has to have some comfort level that your company can perform the work per plans and specs in a timely fashion.

XanadooLTD

You shouldnt have trouble bonding as long as you have the time shown as a contractor and the assets to back your company. If you have the fast track bond you should be able to complete a lengthy financial application to get the bond.

oldfrt

I just started doing commercial work as a sub for a friend.
He had prior experience in commercial and is doing quite a bit of work for this one GC .
Two jobs he won that were suppose to be started a couple months apart had to be started 1 day apart because of delays in permits and design changes.
He had limited employees,and had a hard time finding qualified help.

Even though they were responsible for the delays and caused the jobs to run concurrent,
they've been riding him to get both done. No excuses,just results, is all they want to see.
So make sure the time factor is in your favor for the number of employees you have or that you can access additional help if in a bind.

These are smaller jobs so I'm not sure of his bonding requirements.
I have ,in the past,had another contractor ,with the proper bonding bid for me to secure a job, and paid them for their paperwork,

I'm learning more everyday about how this side of the industry works,and the slow pace at which it seems to move.
Changes can take a couple of weeks to be approved because of the steps needed.Consulting and meeting with the owner on sight,drawing and engineering the changes, acceptance by the owner,rebidding the changes,and hopefully acceptance.A lot of different people to rely on that aren't necessarily concerned about your end.
Hopefully other things can get done,so there is no down time.
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https://www.facebook.com/pages/John-...94183374011504

bconley

This, and have already having a relationship with the super or PM.

As far as the bonding goes, there are many people in the position to bond if you make worth while to them, the trick is knowing them and being able to perform.
Easy right!

XanadooLTD

Actually this only works if you get in legal trouble. Surety bonding is quite different. They really don't want to bond you. You need all of your i's dotted and t's crossed. Dont forget to indemnify. Yes they even want your first born.

bconley

Yes I should have said indemnitors.

They go hand in hand a surety will not issue bonds to a contractor unless the surety has decided that the contractor can perform the contract and complete the project.

However, once this determination is made, a surety will then require security for its bonds.

This security is usually an agreement by individuals, indemnitors, who agree to indemnify the surety.

The surety will evaluate these individuals and their net worth to figure out their financial ability to stand for any loss that the contractor causes.

Ben of Hyde

It's tougher now because of the economy, a lot of buildings loans are gonna start coming due and the owners may have bought in high (most loans are 5-7 years in length) several will try to negotiate the new value of the property while others will just bail (why I lost 130k) ... right now is not a great time to learn Commercial ... but all economy is local and it may not be as bad out where you are, so go for it. Just make certain you know how to put a lean on the property, and take progress payments every chance you get.

Commercial is going to see worse before it gets better, so the trend is going in the other direction you want to go, back into residential.

wheeler

generally you need to set-up a legal entity structured to serve commercial markets and not commingle with residential. sureties will want capitalization. my guess is you're looking at 20% or more, meaning you need $200k in capital or subordinated assets for every $1mm p&p bond you're trying to pull.

don't mix your leadership. strong luxury residential PM's and supers are not tooled for commercial and vice-versa. very few successfully make the transition and those that do need a warm-up period. as a gc, commercial involves its own codes, practices, risks, exposure, liabilities, culture, laws and customer expectations. nothing like luxury residential.

CLWord77

Right now surety companies are working on very tight underwriting for contract bonds over $250,000. As someone on here mentioned, ample working capital is a plus, but in addition to that, pristine personal credit can be a huge help as well. If your personal credit score is under 700, you may have issues getting contract bonds over $250,000 no matter the size of your business.

Also, many sureties will require collateral for larger projects if it is the first project you've done with them, or if it is a large jump in contract amount in comparison with previous bonded work.

Some sureties have been known to accept a co-signer on a contract bond if collateral is an issue, but not everyone has a rich uncle.

custrel

Unless you start out bidding as a sub. GCs are always looking for good, cheap subs. While most work (at least around here) requires a minimum of a million dollar bond, you can sometimes get this requirement waved or lowered if the amount of work you are bidding is not large or the amount of damage you can cause is minimal.

Like someone else said, start submitting hard bids for a particular niche you are good at like roofing, cabinets, trim, flooring. or doors & hw. If you are low enough, a GC will at least consider using you. One nice thing about commercial work, is that even when you don't get the bid, you can often ask the GC what your competitor's bids were and then see how far off you were.

Also join an association like Associated General Contractors and start attending their functions/lectures so you can begin networking. Some larger GCs like Turner hold seminars on construction management, and that is another great place to network.

You can also cold call established commercial GCs in your area and ask what types of subs they are looking for. Chances are they are looking for a new sub in one area or another. If you can fill that niche, then bid on their upcoming jobs and schedule time to go in and meet either the estimators or project managers. Those folks are the primary gatekeepers who will be the ones recommending who gets the bid and who doesn't.

Eventually someone will remember you and either send you an invitation to bid, or recognize your name on bid submission and that, combined with you being the low bid, will get you work.

Do good work for an established GC, and they'll call you back and send you invitations to bid for their upcoming work.

Finally, if you (or your owner) is a woman or a member of a minority group, then get state certified as a women owned business or minority owned business. This is an advantage when it comes to public work as a lot of that type of work requires a certain percentage of the GC's sub-contracts are with women/minority owned businesses. And it is another association you can join that increases your networking opportunities.

custrel

Great point.

Project 'schedules' for commercial work are about as precise as Nostrodamus' predictions. I don't think I've had a single job yet where the start date for my work wasn't at least a week or two, before or after (usually after) the original start date.

Schedules are like the weather. They change daily. You have to keep calling the GC to try to get the most updated start date. Even then, you have to be flexible.

You'll plan to work a job early december, just to have it pushed back to mid-February, and then get a frantic call on Jan 16th from the General "Can you guys be out here tomorrow??? We really need you to start tomorrrow!!" So you'll show up the next day with a full crew only to find that the GC is still a week away from being ready for you.

Every time.

CINEMASUPER

As a commercial superintendent I am blessed to be working, however if
I was laid off I would take my personal relationships and network of contacts with me. There are a whole lot of great quality supers out of
work right now, if you were to find the right person they would bring there
work/projects with them such as a restaurant chains etc.

nestbuilders

I agree that it is definitely harder to work in commercial vs. residential. Many different dynamics to be aware of. I've worked in both.

That being said, everything is hard work in this economy, and if you are really interested in learning about it then go for it!! We're considering going into commercial electrical later on this year if I can get it all together like you are doing.

I recommend looking at resources such as
Assoc. of Gen. Contractors - agc (dot) org
Amer. Society of Prof. Estimators - aspenational (dot) org
Assoc. of Walls and Ceilings - awci (dot) org

Attend a local meeting and see if you can meet someone to partner with. They will also tell you the best way to find projects to work on as a GC, and help with bonding info/contacts. Subscribe to their magazines, etc.

If you start doing the work as a sub first before becoming a GC it's easier to bid (not necessarily easier to win jobs), you can get your feet wet with jobs posted on bluebook, bidclerk, isqft, smartbidnet, dodge plans, and other bidding sites and plan rooms. Some are free to join as a sub - they charge GCs for posting the plans.

Get yourself some estimating software or at least takeoff software such as oncenter, or planswift. With the amount of bids you put out, you need help with getting accurate measurements of the online plans.

Also do a google search on your local builder's exchange. I can't remember who's in Wash. state. They can help as well. I know Barryhund does Calif, and Oregon, not sure about Wa. Rex Klein is the owner there - shoot him an email to find out.

Hope this helps, I thought I'd put it all down there. Sorry if you already have this info. (I can't put links in until I've done more posts - lol - oh well)

Good Luck!

nestbuilders

My apology - I was looking at Wash. state for some reason. You're in Idaho - same info applies