Phoenix Industrial rises to success
Vancouver industrial general contractor’s execs share insights
Sunday, December 25, 2011
Ken Johnson thought he was getting canned.
It was November 2001, and the Canadian company that owned the U.S. engineering and construction outfit he worked for was hurting and looking to off-load its American operation.
His boss, Joe Hutton, stepped into his office. “Let’s get a cup of coffee,” he told Johnson.
The prospect of getting fired came into sharp relief when, instead of heading down the hall to the company’s coffeemaker, Hutton suggested they walk to a nearby coffee shop.
There Johnson learned that his hunch was right: His job was going away. “But I’ve got an idea,” Hutton told him.
“That’s when he laid out Phoenix Industrial to me,” Johnson said, recently recalling the story of the rise of the Vancouver industrial general contractor — a business that pours the concrete, lifts the heavy equipment and installs the giant pipes that keep manufacturers, food processors and other heavy-industry employers humming.
‘Something of value’
Fast-forward to today. It’s December 2011, and Phoenix Industrial has grown from $4 million in annual revenue 10 years ago to $27 million this year.
The company is profitable, Johnson said. And its managers and partners — Johnson and Jon Scott, both vice presidents, and Hutton, the company’s president — have, over the years, secured multimillion-dollar contracts for work on everything from building metal-recycling plants to setting up a gold-mining operation in Nevada.
December marks the company’s 10th year in business. It’s a time to celebrate, Johnson said, but it’s also a time for reflection.
Indeed, the company’s experience offers lessons for others looking to make their own way in business. The way Johnson tells it, would-be business owners need to keep an eye on some key guideposts:
• If you’re just starting out in business, plan on building up some working capital, which means you might not be able to pay yourself for a while.
• As you grow, don’t forget the clients who gave you a shot in the first place.
• Know your market well, and be prepared to adapt as the inevitable changes come.
“You have to have something of value to offer, first and foremost,” Johnson added. “Anyone can go out there and market themselves, but you have to have something of value.”
Rising from the ashes
That’s what Johnson and his partners figured they had back in December 2001 when they decided to launch Phoenix Industrial.
The company’s name derives from the mythological bird that arises anew from fire and ashes. So it’s fitting that Johnson and his partners persuaded the Canadian company — UMA — to sell them the remaining assets of its U.S. division so they could make a go of their own business.
“They were very good at giving us the ability to buy assets at a very reasonable price,” Johnson said. “They felt badly about closing the operation down.”
Since then, Phoenix Industrial has plowed steadily forward.
The company employs 105 full-time employees, including managers and office support staff, but can put to work as many as 150 people as the demand for industrial construction work warrants.
Phoenix employs craftspeople, including millwrights, electricians, pipe fitters and welders — people who know their way around a construction site.
The company — which holds general contractor licenses in multiple Western states and general engineering contractor licenses in California, Hawaii and Arizona — plies its trade for a variety of industrial business sectors, including manufacturing, food processing, energy, minerals, metals, and pulp and paper.
Phoenix counts Evraz North America — which has a steel mill in Portland — and Portland-based Schnitzer Steel — a steel manufacturer and metal recycler — as clients. It’s also done work for Owens Corning, which makes fiberglass insulation, asphalt and roofing products.
In Nevada, Phoenix Industrial recently completed $14 million worth of work for Round Mountain Gold Corp., a joint venture between Kinross Gold Corp. and Barrick Gold Corp. “They’re digging for gold,” Johnson said. “We basically moved their equipment so they could expand their pit mine.”
And Phoenix is currently doing another $7 million job at the same location for Round Mountain.
‘Philosophy is loyalty’
Although Phoenix has the wherewithal to land big contracts and clients, it remains willing to do work for clients that helped it grow in the early years, even if that work pays only tens of thousands of dollars instead of millions, Johnson said.
“The philosophy is loyalty,” he said. “These people took a chance on us when we first started out and helped and watched us grow, and they still have needs today that we’re not going to turn our backs on.”
The company’s success may seem counterintuitive, given the downbeat economy. The U.S. financial crisis of 2007 dealt hard blows to the nation’s construction and manufacturing sectors.
In Clark County, construction workers were hit particularly hard as that sector shed about 30 percent of its jobs. Manufacturing lost roughly 20 percent.
But Phoenix Industrial’s niche is industrial construction — the building, repair and installation of everything from boilers and pumps to retaining walls and heavy pipes. It’s the opposite of homebuilding.
And nonresidential construction spending in the U.S. was about $279.6 billion in October, according to the most recent Census data — about 1.3 percent above the revised September estimate of $275.9 billion.
Scott Bailey, regional labor economist for the state Employment Security Department, said nonresidential construction spending is seeing a slight upward trend. “The bleeding has stopped, and there’s slight improvement,” he said.
‘It wasn’t easy’
For Johnson, seeing where Phoenix Industrial will go next is a matter of staying plugged into his industry contacts and the relevant market trends. As he put it, his job is to answer a difficult question: “What’s going to be the next big thing?”
Part of the answer, he said, lies with serving emerging Asian economies, where “they’re changing their markets to supply us, but, in the process, they’re building up their own middle class.”
What Johnson is certain of is that he’s not taking Phoenix Industrial’s success for granted. He credits the company’s employees for getting things done. He also remembers how difficult it was to move the company out of the starting gate.
Amid the recession of the early 2000s, banks initially declined to lend to Phoenix. “We took out second mortgages,” Johnson said of how he and his partners financed the company early on.
“Now we have a multimillion-dollar credit line,” he said. “We have real equity in this company.”
And real memories. “It wasn’t easy,” Johnson said of the company’s beginnings 10 years ago. “There was both skill and good fortune involved in where we’ve come from.”