Company credits growth to ESOP structure

Established in 1960 by Gordon “Buck” Horbuck and his wife, Ira, B&I Contracting began the transition into an employee-owned company in 1986. It completed it in 1991.

The move to what's commonly referred to as an ESOP, at least based on share price, has been nothing short of remarkable: privately-held shares of the company are now worth nearly $230 a share — up more than 500% from the value of a share in 1995. By comparison, the S&P 500 has increased 334.6% in that time frame, according to MarketWatch data. 

Beyond dollars, the employee-owned model has been a boost for B&I in a myriad of ways. 

Led by President Gary Griffin since 1995 — he started with the company as an intern in 1984 — B&I has grown in revenue, for example, from $59 million in 2016 to a projected $119 million by the end of 2018, a leap of 101.7%. Over that time, employment grew from 377 to 670 people, an increase of 77.7%.

The company specializes in construction and building maintenance services for HVAC, electrical, plumbing, pipefitting, refrigeration, sheet metal and CAD engineering for clients in commercial, institutional and industrial industries throughout Florida and beyond. It is headquartered in Fort Myers with offices in Tamarac, Sarasota and, most recently, Tampa. It fabricates products at its 12-acre complex at its headquarters.

A Fort Myers native, the 55-year-old Griffin is an active community leader. He's chairman of The Foundation for Lee County Public Schools; president of the Horizon Foundation; serves on the board of directors for the Southwest Florida Economic Development Alliance; is chairman of Healthy Lee; a member of the state board of directors for the Associated Builders and Contractors; and is chairman of the Advisory Council for the U.A. Whitaker College of Engineering at Florida Gulf Coast University.  

In a recent interview with the Business Observer, Griffin, also chairman of B&I’s board of trustees — employee stock is held in a trust — detailed the company’s rapid growth and the role its employee stock ownership program (ESOP) has played in its financial stability and employee retention. Edited excerpts:

Based on your year-end projections for 2018, you company’s revenues will have more than doubled over a two-year period. How has the B&I positioned itself to grow so quickly?

A: When we went through the recession, we recognized it was going to be short-term so we kept our key people here. We saw in 2014 it was really coming back in a big way, and so we invested in our company, we invested in resources, and we invested in technology like CAD. The other thing we did that helped us react quickly to this rapid three-year growth is we added recruiters. We don’t use outside services. We have three staff recruiters who go out and they make contact with trade schools and engineering schools. 

The second thing we’ve done is hired a training manager who runs all of our training programs for pipe fitters, HVAC technicians, plumbing and electrical. If we didn't have that ability to focus on training, we couldn’t have brought in so many young people who are less experienced and brought them up to a level of competency so we could put them on some of these highly technical jobs and have them be successful.

What role did an employee-owned company play in helping B&I weather the recession?

The ESOP was a big deal. As an employee-owned company, we don’t pay income tax. The taxes are paid when we pay out to our ESOP participants who get their retirement benefits. What it’s allowed us to do is build up our financial security so we didn’t have to borrow money during the recession, We had no debt, and we have no debts right now.

And frankly in 2010 and 2011, we kept our key people in place. We didn’t give a lot of raises in those years, but we didn't cut wages. We maintained and we had all those components in place so when the economy came back we could react quickly. I think we increased our market share since the recession because so many of our competitors had to let go of good people and we were there to snatch them up and put them to work when the economy improved.

You’ve nearly doubled your staff in the last two years to keep up with your business growth. Does being an ESOP provide you with a recruiting advantage?

t’s a much better retention tool than it is a hiring tool. That’s really the key. Since 1990 when the ESOP really took hold, we have seen people stop leaving and becoming our competitors as they did in the 1980s and 1990s. The employee puts nothing into it, it just accumulates on their behalf. The company contributes dollars each year out of the ESOP to fund repurchasing. Last year we contributed $3.6 million to that ESOP trust and that is split up among our employees based on what they earn. Then there is a stock component, which is held in that trust as well, and the value of that stock is based on our profitability. 

What is the value of your stock today? How many shares are there?

When I became president of the company in 1995, a share of our stock was worth $37.50. Now those same shares are worth $228.75. All of those ESOP participants form 1995 have seen their stock go up over the years. There are 80,000 shares.

Under what conditions can an employee receive the value for their shares?

There are three ways to get your money: death, disability or retirement. I always recommend retirement. There is a five-year waiting period after retirement to receive the money. There is also a six-year vesting period for new employees, so if they leave before then those shares return to the company and are redistributed.

Who are your customers?

We have two different groups. We’re a construction company, meaning we build new buildings and renovate existing buildings. Those customers are large construction managers and general contractors. Then we also have a service side, which is building maintenance and repairs. Those customers are building owners. They're often hospitals, government entities, school districts, office building owners, property managers, assisted living facilities, but it’s usually large institutional owners with myriad HVAC systems that we could provide support to keep them maintained and running properly.”

With such rapid growth in personnel, how have you overcome the lingering labor shortage?

With our recruiters, we are spending more time in high schools and trade schools building relationships with those young people either in their senior year in high school or they have chosen to go to a trade school and are coming out in the workforce. We find there is a limited number of people in their 30s, 40s and 50s who are available and there are not enough young people coming up into the trades. That’s been a key for us and I think that will be a key 12 to 15 years from now because when the boomers like myself are retiring and are no longer available, we hope the outreach to young people will provide us a new crop coming up into the business to keep us successful.

One of the things we’re trying to do with Horizon Council is to focus on making Southwest Florida more inviting to young people. There is a stigma, but there is truth to it. A lot of folks like this area to retire here, but we need to make it just (as) attractive to young people, and I think it can be and will be, but it needs some specific focus. We need to encourage the type of growth in entertainment and the type of community that will be inviting to young families as well as retirees.

Are you making plans to continue to grow at a rapid pace?

We feel like we are in a good place at $120 million in sales. We want to focus on serving our customers’ needs at that level of business. We could grow beyond that, but we think this is a good spot for us. We’re not aggressively looking to grow significantly beyond that in the coming year. I think in subsequent years as we continue to develop our resources we have our eye on Orlando as a potential place to go. 

For our service work growth strategy, Tampa has been a good market for us, and we are seeing some opportunity up there and we are adding to our staffs to grow our service presence there. We feel like we are going to level out and grow at a more stable rate. The growth will much more measured over the next two or three years.