A Competitor’s Spirit on the Fast Track

Thomas G. Dolan

April 2007

Michael Newman races cars professionally, competing with the likes of Tony Stewart, in one of the fastest cars on the tracks today. He also competes with the very best in his business, Firstline Systems, Inc., in Kirkland, Wash., just outside of Seattle. His company ranks about fifth in size compared to approximately 30 union shops in the area.

"I’m comparing my¬self with my competitors all of the time,” Newman says. "It motivates me.”

Newman grew up in the trade, working for his father who was a supervisor in a drywall company in the Tri-Cities area in Eastern Washington. His ambition revealed itself at an early age.

At age 24 he started his own residential drywall company. "The economy went south and it lasted only a year,” he recalls, ruefully. He moved to Western Washington and found the economy much better, especially in the commercial sector, which became his new focus. He worked hard for a number of other companies, moving up in those organizations before striking out again on his own when he was 29.

"We opened Firstline Systems in June 1986,” Newman says. "As a start-up company we struggled to get work, manage our cash flow, get through all the things most new companies don’t get through.”

The Wingman
Jeffrey Heald was a licensed CPA with experience as an accountant in both the public sector and for a large contractor in a different trade. Newman credits Jeff Heald, his partner and Firstline’s controller, with much of the company’s success, both in getting through the difficult early years and then helping the company grow successfully.

"Mike had a good construction background, and I had the back¬ground that allows me to be in charge of the cash management,” Heald says. "That relationship has worked well. Banks like working with someone like me, someone who speaks their language. We had to rely on bank financing to capitalize us at the start. We secured the credit lines, insurance and bonding, so that got us off to a pretty good start.”

"At first we had the hardest time getting enough work,” Newman says. As we have grown, we have worked to create good relationships with our customers and our employees, and that, along with our ability to complete the projects within budget, and on time, has allowed us more opportunities at negotiated type work.” About 30 percent of the work is negotiated.

Many contractors start out specializing in one trade, and then gradually expand their offerings. Newman did just the opposite. He started offering a wide variety, including metal stud framing, drywall, insulation, plastering, acoustical ceilings and fireproofing. "Over the years, as each of those trades has become more specialized, we have too. We concentrate on metal stud framing, drywall and insulation; the others we sub out.”

This has been a gradual and not necessarily straightforward process.

"We’ve been in and out of plastering and acoustical ceilings,” he says. "Where the market looks good and we think we can fit in, we do it. But then when the market slows down, it doesn’t make much sense, because there are some contractors that do only that type of work.”

One of the forces pushing this drive toward specialization, Newman says, is that "there is a lot of competition and it’s very tough.” He adds, "One of the best things about belonging to the Association of the Wall and Ceiling Industry is that it helps teach wall and ceiling contractors how to survive.” Locally Newman also belongs to the Northwest Wall and Ceiling Contractors Association and the Northwest Wall and Ceiling Bureau.

Chatting with the Crew
The Northwest economy also plays a role. "When I talk with AWCI members from different parts of the country, I often find they have a more level economy,” Newman says. "Here it will spike up pretty high for a time. You take on a lot of contracts, and then the economy slows down. You have a lot of capacity, but then you find you have just enough work to get by.”

He attributes the boom or bust economy to companies like Microsoft and Boeing. When the Northwest economy is good, it is one of the richest areas of the country, but typically there are three good years and seven poor ones out of every 10 years.

When asked how it feels to be running a business during these reoccurring cycles of uncertainty, Newman replies, "As time goes on, you become a little more secure. You have the retained earnings in the company, so the mistakes and pitfalls aren’t as serious as they were at an earlier time, when bad luck or bad timing can put you out of business. You’re going to keep making mistakes, otherwise you’re not taking the risks to grow your company. Hopefully, the mistakes are smaller and less frequent as you gain knowledge and experience.”

"Personally, I’ve always liked to watch my competitors who have been around a long time, to see what they’ve done to become successful, how they survive in slow times and grow in good times. My guess is they became as large and successful as they are because they set reasonable goals and then achieved them, which is why they’ve been around 30 to 40 years. This encourages me to set my own goals, and then work hard to achieve them.”

In the Right Lane
Newman works both the public and the private sector. Some current challenging public projects have been Granite Falls High School, Woodridge Elementary School and Newport High School. He’s also done the Redmond City Hall project. In the private sector he’s working on Microsoft and Safeco, both fast-track projects.

"In negotiated work, you have a little more comfort in that they’ve come to you since they appreciate your ability to value engineer and bring in the project on a reduced schedule, so you hope to make a little more,” Newman says. "With the public projects, the bid is on the drawings, and the low bidder gets it. So you have to choose the right project and manage it better than most to do it successfully.”

But it’s not always a matter of managing successes, Newman says, candidly. "Sometimes you have to manage well to reduce losses. Projects can look very good, but they may not come together in the right way. The general contractor has a lot to do with it. If he doesn’t do his job well, the subs are going to have a hard time on the project.”

One management technique Newman utilizes is having the estimator and project manager for any particular project be the same person. "This way you have accountability on both ends,” Newman says. "You don’t have the estimator blaming the project manager or vice versa. We’ve tried it both ways. This way makes more sense. A person learns from his mistakes on either end. Managing makes you a better estimator, and when you’re estimating a project you’re going to manage, you’re going to manage it better.”

Let Go of the Wheel!
When asked if he’s had any trouble delegating authority, Newman replies, "I come from working in the field with my hands, so it’s hard to just stand back and not be involved. My guys probably think I’m too hands-on, and proper management would prob¬ably involve delegating more. I’m always catching myself. But I do delegate. I couldn’t manage a company this large without doing so.” Annual revenues approach $20 million, and employees number from 150 to 200.

Each estimator/manager focuses on his own market area. One looks at government projects, mainly schools and public works. Another works a lot on tenant improvement and medium size shell-core work, and a third works on larger shell-core work. All three do retro¬fits. A fourth estimator/manager is in training.

Newman credits much of his success to his employees. "The success of any company is its employees and the relationships they create,” he says. "I couldn’t ask for better employees. They treat this company as if it’s their own, and that’s all I could ever ask for. I’ve been told this is a good company to work for. I do my best to help, and am always pushing for more training and benefits.”

Newman notes that six years ago there were no Hispanics in his work force. Now they comprise 50 percent. "I feel great about it,” he says. "They want to work hard and to learn. If it wasn’t for them we would not have been able to grow the way we have.” He adds he’s working to improve the language communi¬cation from both sides.

Off and On the Track
Newman and his wife, Kimberly, have three children: Mikayla, 11; Mason, 14; and Jay, 16. Newman likes to fish and golf when he can, which isn’t often, because his competitive nature has typically had him put in long hours, though he’s cut back some. "I used to work from dark to dark,” he says, "but now I start at about 5:30 or 6 a.m. and leave between 3 and 5 p.m.”

This still doesn’t mean he’s leading a laid-back life: He devotes as much time as he can to what is almost a second pro¬fession—racecar driving. He races at a professional level with some of the fastest cars in the world, cars that have between 800 and 900 horsepower and weigh about 1,300 pounds. Newman not only races, he builds his own cars. Typically, as do others, he buys different components from different manufacturers, and then has them assembled in his own shop.

He doesn’t make his living in this profession, as do the other drivers. If he did, it would be a job that requires 70 to 80 hour a week. As it is, during the periods when he is racing, he is at it every evening and during weekends. He can be on only 12 outings a year, but these usually involve considerable travel.

At age 50, he says he has been too old to drive for 10 years, so now he is in the process of handing over the wheel to his oldest son, Jay. But at Firstline Systems, Newman shows no signs of slowing down.