Beatty Drywall Systems: Not Sacrificing Profits for Volume

Thomas G. Dolan

November 2007

Bigger may not be better and small can be beautiful. This is the philosophy of Beatty Drywall Systems, Inc., Wilmington, Del., a family business now in its third generation.

The company was started shortly after World War II, in 1948, by Charles F. Beatty. It began as a construction company for residential housing. Charles F. Beatty Jr. followed in his father’s footsteps in 1953. The company moved into drywall, then split up, the elder Beatty and his brother running the construction business until about 1970, before phasing out. His son continued with the drywall.

The third generation, Charles F. Beatty III, who joined the company in 1974, recalls, "We gradually added commercial work, and when interest rates went through the roof in the 1980s, our residential work came mostly to a stop, although we still do some custom homes.” When his dad retired in 1993, Beatty III took over as president.

Growth has been gradual, but steady. Through the 1970s the company stayed at about $1 million in annual sales. With the addition of commercial work in the 1980s, the figure practically doubled. Now the momentum is beginning to pick up again. About three years ago, annual sales were between $2 million and $3 million. Today sales are between $3 million and $4 million, and Beatty says, "Our goal within the next couple of years is to build annual sales to between $4 million and $5 million. We’ve never been in a big rush to grow.”

Why not?

"I’ve seen too many companies come and go,” Beatty says. "Part of the problem, from my observation, is that they grew too fast or priced themselves so cheaply that they priced themselves out of business. We don’t want to do that. Yes, we would like to be a $10 million company and still make a good profit, but we don’t want to sacrifice profits for volume. As someone once said, ‘I don’t want to be the biggest, just the richest.’”

Stay Close to Home

One reason for Beatty’s attitude is that he works in a concentrated geographical area that has always been intensely competitive, and is even more so now when the economy there is a bit down. The company’s market area is Delaware, Southeast Pennsylvania, Southern New Jersey and Northeast Maryland.

"We stay within a 50-mile radius, or two-hour drive time,” Beatty says. "You get beyond that and it begins to eat into your profits.”

Also, he adds, "We limit ourselves to the size of the jobs we take, so we don’t go over our head. Typically we do jobs under $1 million, and most jobs are under $500,000. Because the competition is so intense and we’re surrounded by much bigger companies that can do the larger work, there’s no sense in our trying to compete with them. Sometimes this backfires and we don’t have the work load we would like, but overall it works out pretty well.”

Beatty works for a few developers, but most are general con¬tractors. He’ll do just about any commercial work—office, hospitals, industrial, retail, and so on, but finds his niche in the smaller but generally more consistent price range.

For similar reasons, Beatty works within a relatively narrow offering of services, basically drywall, with light gauge steel framing, insulation, carpentry and acoustical ceilings. Whereas other wall and ceiling contractors tend to gradually expand their offerings into more and more different areas, promoting themselves as a one-stop shop, Beatty has not.

"We’ve always wanted to stay with what we do best,” Beatty says, "and haven’t wanted to get into areas where we don’t have the expertise. The focus helps us work efficiently and produce high quality results.”

When asked whether he thought this focus gave him a competitive edge, Beatty replies, "There are obviously a lot of drywall companies out there making a living, so they must be doing something right. I can’t say we’re better or faster than our competition, but we make critical points in the schedule happen and satisfy our customers. All our office and field managers have cell phones and have quick communications with our customers. I try to follow up on jobs, see if there have been any problems, anything that needs to be taken care of. I think they appreciate that.” Beatty reports that about 80 percent of his work is bid and 20 percent negotiated.

Beatty is not interested in saying he does anything out of the ordinary. When asked what distinguishes his company from the competition, he just says, "We show up every day at work. We heard a saying once that success comes 50 percent from hard work, 40 percent from being honest, with the other 10 percent a dogfight in the free enterprise system. When we heard that we said, ‘That’s us.’”

Another Reason for Success

Like most successful business owners, Beatty gives a lot of credit to his employees. But, even here, he says, "We offer medical coverage, benefits, bonuses, and vacations, but nothing out of the ordinary.”

Four employees are in the office and about 35 in the field. Many have been with the company for 20 years or more, which is no doubt one reason for the company s success. A key reason they stay and remain loyal, Beatty says, is that "We sub out work when we need to, and have access to a pool of labor when we need it, so we’re not constantly laying off employees.”

Some of the key managers, Beatty mentions, are "Dave Westerinen, who’s been here more than 30 years and runs our major projects. He’s very good at coordinating more with the customer and managing the work force. Tom Estep has been with us about 20 years. We like to put him on the most difficult jobs because he’s able to keep things moving in spite of many obstacles put in front of him. Doc Johnson has been here more that 15 years and works hard to get the most out of everyone around him. Chip McHugh is our head estimator and has been here for more than 10 years.”

Beatty has also been involved in estimating and bidding. He’s hired a new estimator so he’ll be freer to visit old customers and seek out new ones. Beatty, who is 57, has a brother, John, 47, who is vice president, who works as general superintendent over¬seeing all of the work and works with customers on the job.

"Once in a while we’ll shout at each other, but generally we work very well together as a team, and one of the things we try to do between us, is to get to know our customers on a personal level,” he says.

More Reasons It Works

In addition to good estimating, one key dynamic to keeping up margins, especially dealing with commodity type work such as drywall, Beatty says, "is tracking job costs. We track from job to job and continually make adjustments if the profit margins were too low or even too high.”

As another example of Beatty’s approach, he reports that he purchased his estimating software in the early 1980s from a company called Carter Associates, no longer in business; but, he says, "We never looked back. We’re still using it today.” Although there have been many other packages of estimating software to reach the market since then, he says none work as well as his.

"It’s an invaluable tool, a very fast and simple program to use. It allows us to build wall systems with the current pricing of materials so we know our exact costs of material and labor. It’s helped make us very competitive,” he says.

The company is also very successful when it comes to safety.

"We have a very low accident incident rate,” he says. "The strange thing is that the main injuries over the past five to 10 years have not been due to accidents, but things like back problems. We constantly work on safety. Every employee gets on-the-job safety instructions along with toolbox talks.”

When asked whether he’s used incentives for safety, he replies, "We’ve tried incentives, but found they really don’t work. The important thing is to keep safety in front of them so they are always aware. Beatty credits the safety program from the Association of the Wall and Ceiling Industry in helping to define and refine his.

The Challenges

In terms of challenges to the industry, Beatty says, "the biggest is finding qualified labor. The industry has to look for new ways to recruit and train people for drywall.” He says that in his area many contractors are trying to reach recent high school graduates who are not going to college. ‘We’ve looked into that but haven’t had much success,” he says. "Young men are more interested in going into the mechanical and electrical trades. Not too many are interested in drywall.”

Another problem, Beatty says, is that "the whole industry is not taking enough time with starting a project properly. It starts with the architects. They are not given enough time so we get poor documents in the field. Then the construction schedule is compressed, which adds to the problem. It’s all about getting it done faster and cheaper, not necessarily better.”

Challenges aside, Beatty has always worked a routine 40- to 50-hour week, with weekends off. He likes to spend time outdoors in activities such as hiking and bird watching.

"I’ve always believed it’s important to spend time with your family,” he says, "and keep your life in balance.”