Total Control

Total Control

CONSTRUCTION by Mark Gordon | Managing Editor

A pair of executives with established Gulf Coast construction firms has taken going independent to new heights. One's already hit $20 million in annual revenues.

eff Charlotte is fond of quoting Ralph Waldo Emerson, so much so that a tattered copy of one of the scholar's papers hangs on his office wall.

It's an essay partially about accepting, and then grasping, the challenges of life. "I don't take undo risks," says Charlotte, "but you have to take some chances."

Charlotte, 46, took a significant professional risk earlier this year when he left his job has head of the Sarasota office of Hennessy Construction, a $55 million St. Petersburg-based firm, to start his own business. It's the second time he'll be running his own firm, but the first time he's leaving such a big and successful company behind.

And in practice, Charlotte's Emersonian theories mean a lot not only to himself, but also to Mike Scherette, his fellow Gulf Coast-based senior construction executive. Even though Scherette has never met Charlotte, nor is he a devout Emerson follower, the duo has one major common bind: Scherette has also recently quit a top construction job in Sarasota to start his own firm.

Scherette, 51, had been a regional manager with Sarasota-based W.G. Mills for six years before going out on his own in the fall of 2005, turning down a potential ownership stake in the company in the process. And just like Charlotte - as well as Emerson - going solo for Scherette all comes down to self-reliance. "The construction part was not an issue," says Scherette, relying on his 25 years in the industry, both in Florida and the Midwest. "I wasn't thrilled with the administrative and corporate side of things."

Now Scherette runs his own firm, Palmetto-based Power Contracting LLC. Charlotte, meanwhile, is president of Sarasota-based J. E. Charlotte Construction Corp.

In addition to risk taking, the duo share some other business traits, such as sticking to their strengths and to customer-service first principles, something they both say the industry lacks at times.

Authority, responsibility

The Power Contracting story, so far, is one of phenomenal short-term growth. Scherette opened the firm in Oct. 2005, and by the end of the year it had $2.5 million in revenues. Solid, but insignificant when compared to the past 18 months, when the company amassed $20 million in revenues in a sharply declining real estate market. Scherette is projecting about $25 million in 2007 revenues.

That's a 700% revenue increase in one year, 900% projected over two years. Power Contracting has 10 employees.

The catalyst for the growth has been Jacaranda Trace, a $40 million, 430,000-square-foot condo ­building built for Bob Roskamp, a Sarasota area philanthropist and developer whose projects include an Alzheimer's institute that bears his name and other Gulf Coast-based senior living facilities. This eight-story, 201-unit Venice building, also for seniors, is one of the largest structural steel buildings in Sarasota County. The first two floors of the building are complete and the full building is scheduled to be open by the end of the year.

Scherette developed a relationship with Roskamp while he worked at W.G. Mills and the developer sought out the builder in April 2006 for the Jacaranda Trace project. Scherette hesitated at first, as his then fledging company didn't even have the bonding capacity for such a big project.

Roskamp, though, worked with Scherette and Sarasota-area banks to make sure Power Contracting had enough in reserve to start construction of the building.

Scherette didn't necessarily grow up dreaming of running his own company, but he did want to be in construction. A native of Hammond, Ind., Scherette's first job after graduating from Purdue University was with the Eichleay Corp., a construction firm that built mostly steel mills.

The work was a "fantastic technical challenge," Scherette says, but was limited as far as aesthetics goes. Eventually, Scherette worked his way up to other firms and projects. At one point, Scherette was the lead contractor behind more than 50 Circuit City stores across the country.

The Jacaranda Trace building, Power Contracting's third project, crystallizes why Scherette wanted to work on his own: He now has the authority, and responsibility, to work with architects and developers on an equal one-on-one basis.

With Power Contracting, Scherette has taken that new-found authority out for a spin. For example, Power Contracting doesn't charge clients a markup on change orders or initial problems in the design or structure of a project - an industry rarity.

Despite the extra costs, Scherette says it's an easy call. "If your general contractor is your partner," he says, "he should not be profiting from your problems."

And on prices in general, Scherette also likes the autonomy of being on his own. There are no corporate channels to go through, no layers of bureaucracy to peel away when setting a price for a project. Says Scherette: "I take more risks in being aggressive in pricing."

Another integral part of operating on his own, Scherette says, has been the ability to put more than lip service to customer service. While he didn't say his past firms failed in that area, working on his own has allowed him to be in total control.

"A big part of customer service is communication," Scherette says. "The more I communicate with a client, the less anxious they will be."

'The clean-up guy'

Jeff Charlotte doesn't have the growth patterns of Mike Scherette's Power Contracting - yet. But he does have the pedigree to succeed in the industry.

Charlotte was born in Youngstown, Ohio, where his grandfather was a mason and his dad worked in construction, too. The Charlotte family moved to Venice in 1972, when Jeff Charlotte was 11 years old. Charlotte soon became involved in the family business, as his dad began working on medical parks and condo buildings in the Venice area.

"My claim to fame was I was the clean-up guy for the condos," Charlotte says, remembering the days when he made sure units were ready for occupancy. "Later, I was the lawn guy."

And after that, Charlotte went to the University of Florida, where he graduated in 1983 with a Bachelor's degree from the school's construction management program.

After college, Charlotte faced his first big career decision: Take a job with Miami-based homebuilder Lennar for $22,000 a year or take a job with Federal Construction, a St. Petersburg-based commercial construction firm, for $19,000 a year. Charlotte didn't want to live in Miami and he also didn't want to start his career in residential construction.

So he took the Federal job, which became the starting point for several other opportunities and jobs, including working on a baseball stadium in Orlando and a large health center in Venice. And then, in 1994, Charlotte went out on his own for the first time, founding J. Charlotte & Associates with some help from his father.

JCA managed several construction projects over the next seven years, including office parks, medical complexes and even some homes. But Charlotte struggled with the balance of doing construction work with the daily tasks of running a business.

In 2001, Charlotte joined his friend Bronson Alexander at Hennessy Construction, an 81-year-old firm of which Alexander was currently president and chief executive officer. The firm was seeking an executive to open and run an office in Sarasota and Alexander knew Charlotte from when they both worked at Federal.

Charlotte joined the firm as an executive vice president and co-owner, although he admits he didn't have enough equity at the time to be a 50% co-owner. The breakdown was closer to 80-20.

Back then, in the last few years of the 1990s, Hennessy was somewhat small, with annual revenues hovering around $12 million. But the Gulf Coast building boom, combined with Hennessy's diverse building strategy, led to a condensed growth spurt. By 2006, the company had passed $54 million in revenues.

Around the same time, Charlotte noticed two things: One, the Sarasota and Venice markets were beginning to slow down and two, it was unlikely he would ever be able to match Alexander in business volume, as the St. Petersburg office remained the company's strongest location.

Plus, despite his close business relationship with Alexander, Charlotte was beginning to feel stifled and underutilized at Hennessy.

Charlotte sold back his minority share of the business to Alexander earlier this year and by June he had formed his own company, again. Hennessy shut down its Sarasota office.

It was a 'no hard feelings' kind of separation, both executives say. "The why," Charlotte says, "only lasted a couple of weeks."

Adds Alexander: "Jeff's a great guy with tons of energy. He just needs a construction economy that will cooperate with him."

Charlotte has already picked up a few projects, including the Galleria in Venice business park and a new office project near the Sarasota Bradenton International Airport. He plans to stick to building health care facilities, retail complexes and general offices with his new firm. No schools or prisons.

Like Scherette, the freedom of going out on his own has inspired Charlotte. And also like his fellow construction executive, Charlotte plans to guard closely against growing too big or too fast. The firm currently has six employees.

"I want to hit a bunch of singles for a good average," Charlotte says. "I don't want to go for a home run all the time and make a killing with every deal."

REVIEW SUMMARY

Industry. Construction

Who. Jeff Charlotte, Mike Scherette

Key. Construction executives discover branching out on their own is both rewarding and challenging.