There are many dictums for success in the construction industry. And for Kaufman Lynn Construction’s founder and CEO Mike Kaufman, “know your numbers” ranks right alongside the fundamentals of schedule, safety and project execution.
A self-described economics wonk, Kaufman explains that construction’s inherent performance and financial risks make trustworthy reporting and forecasting a must. “Only then can you make smart decisions about investments in growth, talent, technology and other essentials of good business,” he says.
Perhaps the best evidence of how well that philosophy has served the 31-year-old Delray Beach, Fla.-based firm can be found in the latest results of a strategic plan, crafted in 2016, that outlined goals for organic growth and expansion of the firm’s geographic footprint. Bolstered by strong demand for senior living and multifamily facilities in the firm’s home base of South Florida and an emerging presence with new branches across the peninsula in Naples, Fla., and in North Carolina, Kaufman Lynn’s Southeast revenue topped $480.8 million in 2019, a 73% jump from the previous year. The company’s expansion strategy also included a new branch in Austin, Texas.
CFO Doug Simms says close scrutiny of macroeconomic and other trends during the plan’s development helped get the company “uncannily close to the market we projected three years ago.” Balancing the firm’s project mix with public-sector projects has helped as well, Kaufman adds, as did a bit of luck and good timing, particularly when it came to establishing footholds in new markets.
“We saw diversification as a way to provide some protection from the South Florida boom-or-bust cycle,” Kaufman explains. “Going into a new region without existing clients or company leaders is very difficult.”
Kaufman Lynn’s plans to open an office in the promising southwest Florida market received a boost in 2018 when a budding client relationship coincided with a project executive’s desire to move back to the Naples area. Additionally, Kaufman’s 2015 marriage to native North Carolinian retail executive Lisa Kornstein gave him a personal presence in the Tar Heel state before several current developer clients began eyeing opportunities around Charlotte.
“I would love to say it was all a brilliant strategy,” Kaufman says with a laugh, “but our ability to peek around the corner and apply macroeconomic trends to local markets made expansion to those areas very logical.”
Innovation From the Outset
The “know your numbers” philosophy complements Kaufman Lynn’s philosophy of understanding clients’ wants and needs and providing innovation.
Mike Tiufekchiev, vice president of corporate services for JM Family Enterprises Inc., recalls how a Kaufman Lynn suggestion to relocate a proposed new employee training center turned into a full replacement strategy for the aging buildings that made up the automotive and financial services company’s Deerfield Beach, Fla., campus.
“The buildings were outdated, but we’d thought there’d be too many logistics and planning hurdles to keep the campus functioning through the demolition and construction process,” Tiufekchiev says. “Kaufman Lynn worked with us to plan the logistics and phasing and get the process started.”
The design-build program’s nearly complete first phase—which includes two 88,000-sq-ft office buildings, a 29,500-sq-ft, two-story dining facility and a 309,500-sq-ft, six-story parking garage—also provided opportunities for Kaufman Lynn to take JM’s suggestions for environmentally conscious features a few steps further. Innovations include using electrochromic glass as an alternative to combining standard glazing with automated blinds, a stormwater reclamation system and 1.4 megawatts of solar panels atop the buildings.
“Because they wanted office space to serve them for at least 50 years, we identified rigid, low-profile access flooring options that support changes to underlying cabling and technology systems,” notes Garrett Southern, Kaufman Lynn’s senior vice president of operations. “It has the feel of normal flooring and maintains height-to-ceiling distance in a more adaptive layout.”
As with most other businesses, JM unexpectedly finds itself studying how workflows altered by the COVID-19 outbreak may influence long-term facility needs and layouts. While the reassessment has put the next phase of facility construction on hold, Kaufman Lynn has come up with plans to turn a gaping space on the campus into a temporary landscaped park with fountains and tensile fabric-covered walkways.
“It’s a great idea, and shows the kind of things that come out of true partnerships,” Tiufekchiev says.
Those thoughts are echoed by Rick Slossen, senior vice president of development for Erickson Living, a Maryland-based senior-living developer for the Siena Lakes continuing care and retirement community in Naples. With travel restrictions curtailing his ability to oversee projects in person, “You need a lot trust when working with a contractor [located] hundreds of miles away,” Slossen says.
That high level of trust with Kaufman Lynn was established early, Slossen says, calling preconstruction budgets for Siena Lakes’ 445,000-sq-ft first phase “mind-boggling in detail.” He also notes that the numbers have held through what has been a seamless construction process. In addition to awarding Kaufman Lynn the project’s $70-million, 402,500-sq-ft second phase, plus a project valued at $50 million in the Charlotte area, Erickson Living has also adopted Kaufman Lynn’s reporting system. “It’s so detailed in telling us what’s happening and what’s coming up, allowing us stay proactive,” Slossen says.
Southern adds that such early engagement with clients is part of Kaufman Lynn’s DNA. “Allowing information to flow freely lets us be more nimble with them, and internally,” he says. “That sets everyone up for success.”
The same can be said for Kaufman Lynn’s safety infrastructure, which boasts a .68 experience modification factor. At the outset of the coronavirus outbreak, the company initially feared cutbacks in jobsite staffing.
“Our efficiency in implementing health and safety measures in real time gave our subs confidence to push their manpower,” Kaufman says. “As a result, headcount across 25 jobsites has increased by 15%.”
A New Ownership Structure
Of all the firm’s achievements in 2019, Kaufman takes the greatest pride in establishing an employee stock ownership program for all 250 associates. While putting a company founded with three employees on a sound footing for the future has long been on Kaufman’s mind, identifying the right strategy was anything but easy. Offers from larger national firms over the years were tempting, he says, but the prospect of integrating cultures carried too many uncertainties.
“I wanted a plan that made sense for everybody, especially our associates,” he says.
After initially discarding an ESOP because of its inherent complexity, Kaufman and Simms reexamined the approach in 2018. Getting input from other general contractors that had been through the process and working with investment bankers helped refine the plan.
“Putting the ESOP together was time-consuming to be sure,” Kaufman says, “but it maintains our culture and gives our associates the opportunity to build wealth as they carry the company forward. It was the most fulfilling thing I’ve done.”
New challenges await Kaufman Lynn and other Southeast contractors with COVID-19’s economic effects still to come into focus. “We have healthy backlogs, although some of that work has been postponed,” Kaufman admits.
Following what he expects will be 18 to 24 months of “massive disruption” in privately backed construction, Kaufman says the longer-term outlook is favorable, with renewed demand for multifamily, affordable housing and senior living. Kaufman Lynn’s established presence in South Florida’s health care, public safety, parks and related sectors will benefit the company as well, he adds.
“With a culture like ours,” Kaufman says, “we can do anything.”