Last year, our “Top Companies” story focused on a local housing market that had “cooled down,” and we mentioned that average revenues for construction companies on our list had increased a mere 6 percent in 2006. Turns out those were the good old days.
This year, revenues for the home building and real estate industries dropped 23.7 percent. In fact, our list of Sarasota and Manatee companies with revenues of at least $20 million contains eight fewer companies than last year and $1.6 billion less in total revenues.
The rule of thumb is that for every job lost in the construction industry, a job in another industry goes with it. “Initially, home builders were the hardest hit,” says Steve Queior, president of The Greater Sarasota Chamber of Commerce. “But now we have seen in the last few months some other types of businesses seeing flat sales or even slightly decreased sales.” That means other industries are in the same boat this year as home building and real estate were last year—revenues haven’t decreased, but they’ve leveled off. In 2007, the retail, food/beverage and business services companies on our list all averaged smaller increases in revenues than in years past.
“The downturn in housing starts has a ripple effect,” says Queior.
In addition to that ripple, he adds, there are “local business climate factors—increased cost for insurance, cost of living, property taxes, housing—that make it more challenging for business to compete.”
Still, some local industries are doing quite well. Queior points to the success of specialty manufacturers like Sun Hydraulics (which upped its revenues by a whopping $25 million) and the smaller L-3 Communications (which notched a 7 percent gain). Bradenton-based Pierce Manufacturing added 100 jobs as its revenues leapt 200 percent. A coup for the area is the relocation of billion-dollar, high-tech manufacturer Roper, which moved its global headquarters to Lakewood Ranch in 2007.
Queior explains that while the local economy bends with the real estate slowdown, the current international exchange rate for the dollar makes it easier for these local manufacturers to sell their goods overseas.
The dollar’s current exchange rate is also responsible for invigorated international interest in local real estate.
And some industries that serve the local area are thriving. Healthcare boomed in 2007, up 8.3 percent overall with Manatee Memorial, Doctors Hospital and Blake Medical Center each increasing revenues by upwards of $30 million. Hospitality companies like The Colony Beach & Tennis Resort and Charter One hotel management remained steady through a quiet hurricane season. “Tourism seems to be holding its own quite nicely, thank you,” Quieor says.
Indeed, some business leaders say they are learning from the lean times. “This is an unusual situation and we won’t be here forever,” says Bartz. “We need to plan ahead.”
Total companies: 89
Total revenues: $18.8 billion
Top Companies by industry
Construction/contracting: 33 percent
Manufacturing: 26 percent
Business services: 9 percent
Healthcare: 9 percent
Retail: 6 percent
Food/beverage: 5 percent
Agriculture: 2 percent
Real estate: 1 percent
Other: 9 percent
Average revenue increase by industry
Healthcare: 8.3 percent
Business services: 2.8 percent
Agriculture: 2.1 percent
Food/beverage: 1.6 percent
Manufacturing: 1.5 percent
Real estate: -3 percent
Construction/contracting: -4 percent
Retail: -13.7 percent
Other: 19 percent
Michael Corley, president of Progressive Employer Services (PES), a fast-growing professional employer organization (PEO), says his company had a very good year in 2007 with revenues of $50 million, a 10 percent increase over the previous year. Despite being one of the largest PEOs in Florida and the country, Progressive Employer Services is low profile. “We’ve got a very modest owner [Steve Herrig] who likes to let our work speak for itself,” says Corley, adding that the Manatee Chamber of Commerce called recently to find out if PES was new in town.
The company has been in an expansion mode lately, acquiring three companies in 2005-06. Now, with six offices around the state, Progressive Employer has 183 employees (100 in Sarasota), and handles $600 million in payroll for 1,700 clients and 19,000 worksite employees. Ninety-nine percent of Progressive’s clients are in Florida and most are blue collar. With the economy slowing and the downturn in the construction industry, payroll is slowing, too, Corley says, so Progressive is starting to do more white-collar business. It has also added 15 to 20 of the downsized Gevity (another regional PEO) employees. “We’ve got a lot of the good ones,” he says. “When the customer says things are tough, our people are extremely empathetic and flexible.”
A Healthy Forecast?
Blake Medical Center increased its gross revenues about 8 percent, from $544 million to $588 million in 2007. CEO Dan Friedrich III cautions, however, that hospital collection figures (net revenues) are much lower, probably one-third of the gross. Why? A big part of the reason is treating individuals with no health insurance. “It’s one of the biggest issues facing hospitals and physicians today,” he says. “We received only $40,000 [in reimbursements from Manatee County’s Assistance Fund] last year.”
Another trend affecting revenues is the growth in outpatient procedures, which is keeping people out of hospitals. Medical advances have moved treatment away from in-patient care and baby boomers are taking better care of themselves, which means Blake and other hospitals haven’t seen the great influx of people they anticipated.
Nonetheless, more patients are headed to Blake and that has positively affected the bottom line. As part of the attraction, Friedrich mentions the hospital’s “People First” campaign, its recognition by outside organizations for its cardiac care and its focus on joint replacement, which has led to Blake becoming a Joint Care Center for Excellence. Blake has refurbished a wing in the hospital to care of these patients. “It’s a nonhospital setting, more like a nice hotel,” Friedrich says.
Kimal Lumber, which supplies building materials primarily to Southwest Florida home builders and contractors, lost 50 percent of its revenues and 80 percent of its sales volume to a depressed housing market in 2007. Still, CEO and co-founder Al Bavry sees reason for optimism—and investment.
Even as falling revenues forced Kimal to drop from 220 employees in 2007 to a scant 100 now, Bavry and his free-thinking management team, whom he calls “mavericks,” invested $2 million in an all-green, multifunction office building next to the company’s Venice factory. That year-old structure houses an auditorium where Kimal hosts “Green 101” classes to educate its clients on the hows and whys of green products like soft-sock air conditioning and renewable layered-strand wood—all of which are incorporated into the building, and all of which Kimal supplies. Not only is there demand for green building, Bavry says, but “it’s the right thing to do. We believe that.”
And while Bavry predicts the home building market will show marked improvement in the coming months, Kimal recently spent $400,000 on a new showroom targeting the current remodeling trend. The retail space was built almost entirely by Kimal employees, keeping them employed with the company for as long as possible.