Inside Track: Being his own boss
Despite limited cash flow for many years, Paul McGraw is glad he took leap to begin construction firm.
Twice in Paul McGraw’s life, he believed he had his career figured out.
At 39, right before the Great Recession devastated the economy, McGraw felt like he was on top of the world. The construction firm he started at 21, McGraw Construction, had grown significantly the previous 18 years, and McGraw believed he had life and business figured out.
The hard times made McGraw refocus, downsize and realize a business can be run much more efficiently.
“By the time I’m 39, when the recession hit, I was in business for 18 years, pretty experienced, feeling good,” McGraw said. “The recession was a lesson for me in how much I didn’t have figured out, what it looks like to have a company that is stable and solid and able to make it through tight times.”
It’s only now, nearly 10 years later, McGraw can look across the spectrum of his business and see the fun times of his early career and the tough mid-career road bumps and know his business is financially strong, disciplined and stabilized.
McGraw jokes now he might have been a dentist if he did it all over again, but he truly loves the career he began as a young man in 1989. However, it certainly could have gone down a different path.
Despite everyone in his family working in the office world as a CPA or engineer, McGraw developed an entrepreneurial itch at an early age.
“I always wanted to have my own business, be my own boss,” he said. “When I went to college, I bounced around a lot, because ultimately, I wanted to be my own boss. College was not a very interesting experience for me, and to some degree, it was more in the way of the path to do what I wanted to do.”
He took finance and accounting classes at Central Michigan University and Grand Valley State University, but ultimately, he did not finish school. He began working at an area construction firm during the summer when he was 18.
“The bell went off, that’s where it struck me construction was something I really enjoyed,” McGraw said. “From there, it took me a few years to make the leap.”
Despite less than three years of experience, McGraw launched his own construction firm.
Recognizing he had very little experience and couldn’t manage major projects, McGraw took small one-operation jobs, such as doors, kitchens and roofs.
“It was all under the idea that as I did each part and piece, eventually, I would combine two or three into a larger project,” he said. “When you’ve done 15 doors, you get to know doors pretty well. Then you combine doors with building a wall, now you’re able to know drywall, studs, electrical and painting.”
His first major project was a renovation of Universal Forest Products’ research and development center. The first ground-up building was an adult-foster care home for Hope Network, also his first stake in a development.
“We ran across a build, own and lease-back project, and I brought the deal to some real estate business people I knew, and they gave me a very small stake in ownership,” he said. “I think I owned a bush out front, but it was an ownership stake.”
For years, McGraw Construction dabbled in development work along with its general contract work, concentrating on projects he believed would add value to a distressed neighborhood.
McGraw decided to pull back from development work and fully concentrate on contracting, the core business.
“Development is high risk, high leverage and not very compatible with the construction side, where you have to keep a strong balance sheet and no debt, lots of cash to get through slow downs” he said.
For McGraw to build the cash cushion took years, however. Had he not started the business so young, the slow cash flow could have been detrimental. Living with two roommates and eating pizza and macaroni and cheese kept living costs low for McGraw.
“I was able to leap over the need to make money, and certainly, the company was profitable; there just was no large salary to draw,” he said. “It was very tight living, but as a 21-year-old, that’s what it looks like anyway to some degree.”
Work in his 20s and 30s was a blast, he said. But now, work keeps him busier than ever, but McGraw said he wouldn’t change his career. The hardest part was the launching of the company.
“Once you jump into it, you don’t have a choice but to make it work,” he said.
Today, the company is a little more than half the size it was pre-recession, with 14 employees completing approximately 60 projects a year while “punching above their weight.”
Prior to the recession, McGraw Construction worked in a variety of industries in many project types and sizes. During the recession, McGraw realized the importance of specializing, and it was then the company refocused and became “unbeatable” in renovations under $2 million.
When describing his firm’s scope of work, he uses a dollar range rather than industries. He did mention the firm could be making a push to larger projects once again in the near future, but in a more controlled growth.
He said while the firm is doubling and tripling its size each year, it has steady growth, and it’s an intentional fight against the urge to be as large as possible, as he said project success is more important the company’s size.
“Unlike when I was younger, we’re being very methodical in how we’re coming back and have realized the value of having a core market we do so well in and not willing to give it up,” McGraw said.
The patience McGraw unknowingly established as a young entrepreneur biding his time to earn money as he learned the trade has paid dividends now as he looks back on his career.
“Right now, it feels like we’ve hit balance of growth and fun and making sure it’s professional,” he said. “I really feel now we’re hitting our marks and have the staff and balance sheet strength and customer base and reputation. All those things add up to where we are today.”