Article originally published in the Philadelphia Business Journal on May 9, 2016
Startup companies become successful based on many factors, two of which are how well they serve a growing market for their product or service and the drive, determination and leadership skills of the founder.
One such market is that of lifting low-lying houses prone to flooding along the east coast of the U.S., and one such entrepreneur is Andrew Baumgardner, founder of Baumgardner House Lifting (BHL). Unlike developing an app which has been the route for many young entrepreneurs, Baumgardner decided to enter the house-lifting market.
The frequency and severity of recent storms including Superstorm Sandy along the east coast, and subsequent damage and rising flood insurance costs have increased the interest of some homeowners in raising their low-elevation houses to avoid possible future flooding and costly repairs.
Baumgardner, the son of two successful entrepreneurs in the commercial window glass business and in the construction contracting business, grew up in a family where the business issues faced by his parents and their companies were discussed at the dinner table nearly every evening. Baumgardner said that based on that exposure, he developed a desire to follow in his parents’ footsteps, become an entrepreneur and someday start his own business.
As a sophomore at James Madison University in 2013, Baumgardner saw an opportunity in the growing market of lifting low-elevation houses along the New Jersey coast that had experienced storm related flooding in the past. There were a small number of firms serving the market and with government grants for the lifting of these houses, he thought that the market could accommodate another New Jersey-based entrant.
At the age of 20, Baumgardner decided to leave college and start a house lifting company, which he named Baumgardner House Lifting. Baumgardner said, “Not having any experience in this industry, I needed to hire expertise. The most similar industry to house lifting is house moving, so my first hire needed to be someone from either industry who had significant experience either moving or lifting houses, and who had credibility with general contractors who hired movers or lifters. I was very fortunate to find John Matyiko, a third generation house mover who had just left a firm in Louisiana, and wanted to relocate to the east coast. He was my first hire, and the key to getting my company off the ground.”
During their first year, Baumgardner and Matyiko spent all of their time networking with contractors, with the objective of getting their company’s first house lift. All startups new to an industry must establish credibility. BHL benefited from the fact that the Matyiko family name is well-recognized and respected within the house lifting industry, as is the Baumgardner family name in the construction industry. Baumgardner learned the business from Matyiko.
Baumgardner “bought” his first few house lifts at little profit margin to build his company’s credibility and reputation. This came at the expense of cash flow, an issue faced by many early-stage companies new to a market. Once established, BHL competed on the track record it was developing in the industry.
During the past three years, the company has expanded into a broader array of services needed after a lift has occurred, including rebuilding the foundation to the new height of the house, reconnecting utilities and rebuilding steps to a higher elevation. BHL now provides all construction services for lifting a house from start to finish.
BHL has grown to over 90 employees, and has established a joint venture with another firm in New York to lift low-elevation houses along the waterfronts of Queens, Brooklyn and Staten Island. In 2013, its first year of operation, BHL had revenues of just under $300,000. In 2016, revenues should exceed $30 million. Since its founding, the company has lifted over 500 houses.
Baumgardner was fortunate in that the initial funding for his new company came from his family, since liability exposure would have made it difficult to raise funds from outside early-stage investors. However, the funding from his family came with significant scrutiny of his operational decisions. This scrutiny was perhaps higher than if he had been able to raise funds from outside investors. Baumgardner shared with me that he felt a huge imperative to succeed and not let his family down, much more so than if his financial backers were outsiders.
I asked Baumgardner what keeps him up at night, and he said cash flow and his company’s ability to add the right people to keep up with rapid growth. “People are everything,” Baumgardner said. “We have been fortunate to attract the best people who focus on exceeding our client’s expectations. Our business would not have grown so quickly without our people.”
Given the need for hydraulic machinery and steel, the house lifting business is capital intensive. Baumgardner stated that in the first year he invested too early for growth that took some time in coming, which tied up cash for equipment that wasn’t in use every day. This is less of an issue today, now that the company has a steady stream of business.
Receivables are also less of an issue, now that significant growth is coming through the company’s expansion into New York, where BHL’s clients are construction management firms hired by New York City that receives funds from the federal government to reduce the impact of storm flooding. In New Jersey, BHL’s clients are individual homeowners and contractors, who tend to take longer to pay for the company’s services.
I asked Baumgardner why his clients contract with his company versus a competitor. How does he differentiate BHL from his competitors? He immediately responded, “Company culture and people. I want a company culture in which we strive to be the best at what we do, a value I learned from my parents. We are on a journey to be the best in the house lifting business by meeting our commitments and by providing a great client experience, which means performing a lift on time and with no problems. These are goals shared by all of our employees.”
Colin Schmitt, BHL’s vice president of development, said, “BHL has been able to find pragmatic solutions to complex and difficult house lifting problems. This has helped differentiate our company from others within the industry.” Samantha Danaher, office manager of BHL’s New York operations, said, “Andrew Baumgardner has a strong vision of what he wants our company to achieve; he effectively communicates that vision to his employees, and creates an environment where his employees develop a sense of ownership in their role within BHL.”
Baumgardner decided to enter the house lifting market with no experience or expertise lifting houses. What he saw was a market that would grow, and knew that if he hired the right people, created the right culture and delivered a great customer experience, BHL’s reputation would grow and his company would be successful. He is a role model for all entrepreneurs.
Stan Silverman is the founder and CEO of Silverman Leadership. He is a writer, speaker and advisor to C-suite executives on business issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com