How big is “big enough”?
Small specialty contractors frequently wrestle with this question as they try to optimize their firms’ growth strategies. Taking full advantage of an opportunity-rich market would seem, at first glance, to be a no-brainer. But what may appear manageable can quickly become overwhelming and increase a small firm’s vulnerability to missed deadlines, quality issues and compromised credibility.
That was an outcome Clint Packo sought to avoid when he and a partner formed the Littleton, Colo.-based specialty firm Freestone Aquatics Inc. in 2006. Focusing solely on aquatic-habitat creation, enhancement and restoration in the Mountain West, Freestone handles about eight projects a year, mostly for private landowners, municipalities and nonprofits. Packo declines to provide revenues but notes that, while Freestone typically bids for only about half the viable projects that come its way, the stay-small approach is both sustainable and balanced—not unlike the ecological equilibrium its projects seek to achieve.
“I feel strongly that, had we grown, we wouldn’t be able to deliver the same quality,” Packo says. While his competitors may have bigger profit margins, Packo notes, “Our clients can trust us to deliver the perfect product.”
True to the Land
Owning an outdoors-oriented construction firm is a natural outlet for Packo, a Denver native from a multi-generation Colorado construction family. While he credits his grandfather for introducing him to heavy equipment, it was a passion for fishing that first led Packo to stints as a guide and expedition outfitter. But it was the great indoors that ultimately brought him into construction. He started his own homebuilding business shortly after graduating from the University of Colorado.
When he sold the business to a developer in 2006, Packo was ready for something new. Luke Kelly, an acquaintance, had the answer. As a scientist working for an environmental-restoration contractor, Kelly had become discouraged by some of his employer’s business practices. He and Packo felt they could do a better job of serving both clients and the environment.
“He had the science side, and I had the construction side,” Packo recalls. “We wanted to be the opposite of everything we saw as being wrong with the way some contractors operated.” Freestone found a ready market among high-end private landowners for its services, which include stream restoration, fisheries consulting and pond construction. As the firm’s project portfolio gradually grew, Freestone’s reputation spread, as well.
In early 2009, an assistant to the then-governor of New Mexico contacted Freestone about tackling a particularly difficult issue on the San Juan River Restoration program. Measures to accommodate endangered fish downstream had resulted in low flows and accumulation of sediment behind the Navajo Dam. That, in turn, had compromised some world-renowned fishing areas on the river. However, feasible solutions to correct the problems were elusive.
After meeting with conservation representatives and visiting the site, Packo sketched out an innovative strategy of in-stream improvements that would improve flows behind the dam without affecting downstream areas and thus restore habitat for the San Juan’s prized game fish.
Because of restrictions on out-of-state contractors, Freestone was unable to compete to build the improvements, but the high-profile project bolstered the firm’s standing as a habitat-restoration specialist. More inquiries into Freestone’s capabilities soon followed, but Packo remained committed to the firm’s founding principles.
Indeed, since the San Juan project, “we really haven’t changed that much,” says Packo, who bought out his partner seven years ago and is now Freestone’s sole owner. His staff remains small—a biologist, an engineer, an architect and some field personnel, as needed—but it’s a model that he characterizes as “super-efficient.” Freestone provides all design, permitting and construction services.
“Not a whole lot of contractors do what we do,” he says.
Landowner Mitch Solich says those qualities are evident in a restoration project Freestone is performing for him along a 1.8-mile stretch of the North Fork of the South Platte River, outside Denver. The riverfront property, which Solich says was “in poor shape,” with deteriorated banks and low water-oxygen levels, is gradually coming back to life through phased improvements.
“By using the same hydraulic models as the oversight agencies, they were able to get permits for their design with great ease,” says Solich, a senior managing director for SFC Energy Partners, Denver. Although just one-third of the project has been completed, Solich calls the results “spectacular,” noting that the phased approach better addresses how ecosystem elements interact.
By designing restorations around the fish habitat, rather than the ease of the angler, Solich says the improvements “don’t look artificial, as restoration projects often do.”
Maintaining the Balance
To be sure, Freestone’s keep-it-small strategy is not without its challenges. Demand is such that landowners sometimes have to wait to get their projects underway.
“Usually they’re patient,” says Packo, but his firm’s current backlog extends into 2019. “If not, they’ll go to a competitor, which can be risky. If the project doesn’t turn out well, it makes all of us in this specialty look bad.”
Scheduling only eight projects a year increases the risk of strained finances if a client backs out at the last minute and no replacement project is immediately available. Packo says that’s happened only a few times, but the firm’s contracts now include substantial cancellation fees.
Remaining small also means keeping a tight rein on expenses, a practice Packo says makes sense in any economic scenario. “We survived the 2008-2010 downturn because we weren’t highly leveraged,” he adds.
Packo also has resisted offers to join larger firms on flood restorations as a subcontractor, citing a reluctance to drive down his hourly rates to create a competitive bid. Such pressure has become “cutthroat” since the recession, he says, adding, “We’d rather not play that game.”
Being the point person for projects involving multiple stakeholders might be a daunting job for some small contractors, but it’s a role Packo manages admirably, according to Kirk Klancke, Colorado Headwaters Chapter of Trout Unlimited president. It’s one of several groups that hired Freestone for the recently completed Fraser Flats restoration in Grand County, Colo. The $200,000 project will rehabilitate a 0.9-mile section of the Fraser River, which loses velocity during low-flow months, the cumulative effect of water-supply diversions.
Whether patiently working out contract details with seven diverse sponsoring partners or being on site every day with the field crew, Packo “was 100% committed to the project,” Klancke says. “We gave him a wish list, and he accommodated it.”
Klancke has high praise for the channel-within-a-channel restoration design, which uses a series of strategically placed point bars to create high-flow areas, pools and other features that can survive low-flow conditions. Faster flows mean better sediment movement and lower temperatures, which are better for trout and other aquatic species.
Particularly impressive to Klancke was Packo’s strategy to make the Fraser Flats’ improvements maintenance-free. “Other bidders included follow-up work every few years as part of the contract, so Clint’s approach really stood out,” he says, adding that stream work is fraught with unpredictability. “Clint gave us a price and stuck with it.”
Amid margin-constraining challenges, Packo sees little reason to change Freestone’s approach. “We might grow slightly if we find the right person,” he says. “Otherwise, we’ll continue doing exactly what we’re doing now.”