Taylor White welcomes construction veteran and legend, Jeff Cavanagh, to the podcast to talk about the history of his family firm, Thomas Cavanagh Construction, the importance of building vibrant communities, and investing and trusting in the right people. The pair open the episode by discussing Cavanagh’s company history and familiarity with vertical integration. Since the late 20th century, the firm has done nothing but grow, and Jeff owes a lot of that success to his tough team that runs 1200 people deep. Since his father let him join the family business, Jeff has dutifully taken the time to hire and invest in the right people, and according to him, that’s made all the difference in the company’s success.
Not only does Thomas Cavanagh Construction strive to develop vibrant communities around Ottawa at large, but they also aim to foster the same positive atmosphere within their organization. After all, taking care of Cavanagh employees is paramount to the company’s success. Given that Jeff and his family have been in the game for decades, Taylor and Jeff spend the remainder of the episode reminiscing on early land development lessons, market recessions, how they prepared for them, and the future of Jeff’s ever-expanding business. Filled with wisdom informed by extensive experience, Jeff truly has so much to offer listeners here today - you don’t want to miss this one!
- Cavanagh Construction’s history of vertical integration
- Building vibrant communities
- The importance of delegation
- Investing in the right products and people
- Taking care of Cavanagh employees
- Early land development mistakes
- Preparing for residential market recessions
- The future of Cavanagh Construction
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Taylor White: Welcome back, everybody to the CONEXPO-CON/AGG Podcast. I'm your host, as always, Taylor White. I first want to start by thanking everybody and the listeners for the 5-star reviews on the platforms where our podcast is streamed today.
We have an amazing guest that I feel privileged to have here and I know that a lot of listeners are going to be really excited to hear from, a construction icon that has quite literally taken over the industry, Mr. Jeff Cavanagh.
Jeff, it’s super to have you on.
Jeff Cavanagh: Thank you!
Taylor White: Listen, it's such an honor to have you sit down here. I know we were saying before we kind of came on that you've never done something like this before. And I know that it means a lot for you to cut out time, especially to even do this and I think that people are going to hear a lot of value that you're going to bring in having conversations, answering questions about the industry and people just hearing your opinion, so thank you.
I want to start off by asking and getting your input on a lot of construction stuff, but I know that maybe some of the listeners that are listening today might not know who you are and what you're about so if you kind of had to describe what you're doing, what you have kind of going on, how would you do that?
Jeff Cavanagh: Well, we have a large construction firm here in the Ottawa Valley of the Nation's Capital. We have over 1200 employees working for us. We do all things construction. We do home building. We're into land development. We build houses. We backfill houses, dig basins, we have aggregate pits and quarries, asphalt plant, concrete plant, all types of heavy equipment.
Taylor White: Yeah, no, I mean, you guys definitely do a bunch of everything. So, within all that you just listed off a bunch of different things, and that is to me even doing it at the size that we're at, I often wonder how somebody like you manages to do that, like, what is your role within all this?
Jeff Cavanagh: Well, I would say that I used to be a micromanager. But maybe I still am a little bit but we've hired a lot of people that work for us that take care of their sector of the business. They wake up every morning and rather than being reactive to that sector of the business, they're proactive and that's made a big difference.
Taylor White: I agree! So, hiring the right people, hiring good people is super important.
Jeff Cavanagh: Definitely!
Taylor White: As you kind of went from where Cavanagh started, maybe give a bit of background on that, like, where did Cavanagh start and kind of where is it now?
Jeff Cavanagh: Well, about 70 years ago, my dad purchased a dump truck, and went into business for himself. My mom, obviously, was very instrumental in collecting the bills and getting the bills out, and they were a great team working together.
I would say that they got a real break in business one time, they went to the seaway and they were working for, I think it was, I might get the numbers wrong, but I think they're working for $3.50 an hour here in Ottawa for a dump truck. And they went to build part of the seaway and they were getting $8 an hour for a dump truck up in Cornwall, where they're building the Seaway.
So, my father and his brother were up there with their two dump trucks, and the boss came up to them one day and said, ‘Do you have any more drivers like you back in Ottawa? We could use some more?’ So, my dad got 10 drivers from Ottawa, and paid them $7 an hour, and made $1 an hour on the difference. My mom said that was probably the only money they ever made trucking on the Seaway was that extra dollar they made from the hired trucks.
So, I mean, that's where it started, and they came back here, and they've had lots of lucky breaks, but there used to be a company called H. McCoy, they used to work in Ottawa, back in the day, and when McCoy kind of left the business, kind of left a hole for my parents to start selling gravel in a township called Goulburn Township, which is now part of the city of Ottawa.
And just a lot of hard work for my parents. We had six phones at the kitchen table and that was before you could have phones with different lines on them, and if the phone rang, we were taking an order right there on the spot.
So, I mean, it went from just selling gravel and building roads, and in 1990 we started into the land development a little bit and I guess we learned the hard way how not to develop land first. So, that was a pretty good lesson for us and we learned how not to buy land, learned how not to sell land.
So, we got a real clinic on how not to do things first. We've learned our lessons from there and now we have over 50 subdivisions on the go right now, in and outside the Ottawa Valley, selling lots of lots.
We originally would develop the land and sell the lots to the builders. Now we're kind of taking a different approach where we'll be developing the lots and selling them internally to our housing company.
So, in 1990, we started into the sewer and water business as well. We started with one crew, two crews, I think we have 7 or 8 crews right now putting sewer mains in the ground.
I'm not sure the exact year, but it was about 14 years ago or so, we started the asphalt business. We bought an asphalt plant and a crew and I originally thought that it would be hard to lay the asphalt and it would be relatively easy to make it.
That was exactly backwards. We had a great crew that could lay it with no problem, but we had trouble making it. The first stuff was right on spec, but it just wouldn't come off the spade shovel, it was really sticky. So, we had to learn a lot about how to make asphalt and we've had some great, great help over the years. Lots of the guys that worked for us were just totally invested in the company and they worked their hearts out to make it work.
We started another concrete business, probably about 15 years or so ago. We had a couple of concrete trucks. We worked delivering concrete for Lafarge. And then we started to get more trucks and more trucks until we had 16 trucks hauling concrete for Lafarge and we were selling concrete on the side.
Anyways, that relationship soured over the years and they didn't want us to sell their concrete anymore so we ended up making a deal with a local firm in Smith Falls, the McNamee's concrete, and we made a purchase agreement with them and that has worked out very well. That business has just been booming for us. The concrete is really doing well. The McNamees worked very hard and they stayed on for about two and a half years after the purchase to make sure it went very well, and then we hired another guy named Al Brown that came to work for us and he's just taking it to a whole new level.
Now it's a big part of our business. We’re a very vertically integrated business where it starts off with the pits and quarries and then we develop the land, we clear cut the land, then we have a land development team that puts it through the wringer, I’d say, to get it approved and then you know we have different crews that come in to do all aspects of it.
So, after we get it approved, then we clear the trees, then we blast the site, we prepare the site for the sewer crews who show up, sewer crews show up put the pipe in the ground, and then we have the road crews come put the roads in, and after that asphalt crews come in to put the asphalt on top. It doesn't stop there. We turn around and we have another sector of our business, the residential side that digs the basements, back fills the houses, and then the concrete crews come in, forming crews put the forms in the ground. After that, we have a landscape division that puts the topsoil on and then on top of that we have a division inside of the asphalt sector that puts in the paved laneways. So, it's totally vertically integrated top to bottom.
Taylor White: That was one of the things actually that I had written down here that I find super interesting with everything that you're saying like that coming from where you are now is amazing. You explained it in however long that was but I feel like it's so much more than that as well, too. I feel like there's so much to even comment on about your growth and what you guys are doing. I mean, there's not one person that you couldn't go up to in Ottawa and be like, ‘Cavanagh Construction?’ And they’re like, ‘Yep!’
You touched on vertical integration, which was something that I wanted to chat with you about, because I see that a lot of success from people I find comes from, like, we use a lot of rock, we need to buy a quarry. We use a lot of sand, we need sand. We use concrete, we need a concrete plant. We use asphalt, we need asphalt. What's the thought process with you going into that? Like, is it a dollar figure amount of like, ‘Okay, we've done this much and it makes sense for us to vertically integrate and buy a concrete company or start our own’? What's the thought process behind doing that? Even little things that you hear like Styrofoam, like you guys have a Styrofoam, like, don't you have a Styrofoam business as well so you can make your own or something like that?
Jeff Cavanagh: We're a distributor for Ontario. We purchase it out of Quebec and we're a distributor for Styro Rail in Ottawa.
Taylor White: Stuff like that, like, you have an amazing team, but what's the thought process behind making these decisions to be like, ‘Okay, pull the trigger, we need a quarry. Pull the trigger, we need concrete’?
Jeff Cavanagh: Well, my parents started in the pits and the quarry business when I was very, very young, obviously, I had nothing to do with it back then, and the opportunities in front of us, we just, you know, just kind of snowballed into where it is today.
We got into the asphalt business, because we landed a job that had 180,000 tons of asphalt on it, and we had over 100,000 tons of asphalt on the books to do next year. So, it just made sense that if we're going to go into the asphalt business, now's the time.
And as far as a concrete business is concerned, I've always loved the concrete business. We make the cement powder here in Ontario. We have the water here in Ontario. We have the sand and stone here in Ontario. So, it's a great local business that you can make the product right here. You don't have to go overseas to get the oil or anything like that. And on a 50-year lifecycle, concrete is a better value than asphalt. However, you know, politicians get elected in 4-year life cycles, so, we don't have concrete roads, we have asphalt roads. Asphalt is better in certain circumstances. It's more flexible.
But anyway, I like both products. I just believe in all things construction. We're developing lots of the City of Ottawa, and we're proud of what we do and we try to do it right.
Taylor White: Yeah, it's amazing listening to you talk because you're humble about it. It's pretty incredible. You guys are the whole package deal. Like you said, there's a set of vision, a customer wants it, or you guys are doing it yourselves and it's like, boom, ‘This is a 40-acre bush, and we're going to put roads and houses and it's going to be a community for families to flourish in’, which is pretty crazy.
But making the decision to, like you said, kind of with asphalt, like we had this on the books and that on the books, for maybe some people listening, that kind of decision obviously, happens when you're at a certain size, so how does the smaller guy that's, because we have a lot of people listening, majority of people listening, companies are small to medium as well, right? At what point do you think it's feasible for somebody obviously, having that on the books helps and having jobs and everything like that, but at what point do you think they should make decisions and be like, maybe it's time we do buy a pit or a quarry? Or maybe we do start doing our own asphalt?
Even a business that is subbing out a bunch of asphalt right now to another company and puts a couple points on it, at what point should they look at themselves and be like, ‘Okay, maybe we should buy a paver and start doing paving.’ Not even going as far as buying an asphalt plant and doing this, but at what point is it like, ‘Okay, we should get the right people to do this and build the right team and do our own?’
Jeff Cavanagh: There's no answer for that. It's all it comes from inside you. If you think it's a good time, I guess it is, but I wouldn't go risking everything to buy something because it’s on a whim. There's no answer for that question so I can't answer it. It's hypothetical.
Taylor White: Yeah, I get what you're saying. If you feel like you can make it work, you probably make it work. So, with that kind of response, you just eat, sleep, breathe construction, right? That would be fair to say. It's in your DNA. It's in your blood. Is that more fair?
Jeff Cavanagh: Well, I guess, I mean, we do all things construction. When I was growing up, my babysitter was a dump truck driver. So, it makes it easy that way, I guess. I like construction and there's no doubt about it. If we get talking when we're drinking on a Friday night, my cousin and I, it ends up inevitably going back to rock talk or whatever you want to talk about, or the equipment or what's the right equipment for the job, or what's the right truck configuration.
So, I guess, we do live, breathe, and speak it. On the other hand, though, we have other things that we enjoy as well. Like we have some outside activities like boating and race car driving or whatever it may be.
Taylor White: Yeah, I think it's important to definitely have other things outside of construction as well, like, hobbies and stuff. Even in business, I'm sure there's other business stuff that you're doing outside of construction that you're just interested in, right?
You have all these things but how does Jeff Cavanagh, how do you do what you do? What are you doing to manage stress? Again, you have to remember like listeners listening to this, it's like somebody when they talk to somebody who runs 17 different businesses, they want to know, what are you doing? Obviously, having the right people but what are you doing to manage the stress? Manage your day and have an agenda? Like, what's your regime for that?
Jeff Cavanagh: Well, you’ve got to let it roll off your back, it's not going to all go good all the time. You gotta take it in perspective. There's lots of times where you can go onto a job site and you see the guys aren't doing something right, or they're on break. You can’t go up to them with an iron fist, and basically tell them that you should be working harder right now because if you'd have been here 5 minutes ago, you would probably have caught them working, and lots of times you see things going wrong but lots of times you see things going right.
So, there's more right than wrong in Cavanagh construction, and I'm proud of the way all the boys work – boys and girls, obviously. I don't have an answer for that exact question but I would say let it roll off your back is a good one because lots of the times what I say is just put it in perspective and I say to myself to not mind about little things. But on the other hand, then sometimes I really drill down on little things. So, I guess that's a hypothetical question again. Each situation is a little bit different.
About six months ago, we started and tried to write down on paper, what our vision is and what our mission is. You can come back to that a little bit if you're trying to make a decision. Our vision is building vibrant communities. So, there's a lot to unpack in that little saying, it’s true that Cavanagh Group of Companies is always building and we're building houses, building subdivisions, and vibrant. When you look at a community inside of Cavanagh Construction, it's very vibrant. It's life itself. If you go to your local grocery store, maybe somebody that's working for Cavanagh Construction is maybe buying their groceries there, or buying their garden hose at Home Depot. So, it's a lot of just community driven, and building a vibrant community.
So, there's more than just actually building the subdivision itself. It's a community inside of Cavanagh Construction and it's the community that they live and breathe and work at. Also, the communities where if you go to a community center, you might see a Thomas Cavanagh Construction sponsored hockey team or Zamboni, or certain aspects of a hospital that we're donating to. So, that's building vibrant communities. It's more than just the community itself that we're building, its community inside of Cavanagh Construction. And the people that deal with Cavanagh Construction, the outside businesses that deal with Cavanagh Construction as well.
Taylor White: I actually had an area that you’ve touched on, the community. You do a lot for the community and we see your stuff everywhere. Growing up, I played at the Cavanagh Sensplex Complex and almost every fair and charity auction or charity event, you see something from Cavanagh. Why do that and what do you love most about doing that?
Jeff Cavanagh: Well, we try to give it back. Cavanagh Construction makes its money in this local community and we try to give back to the local community. We don't sponsor things in Toronto. Not that we wouldn't but we don't sponsor things somewhere in Europe or something like that. We try to sponsor things right here at home. That's where our interest is, though. There are sick people and there are poor people and starving people right here in the Ottawa Valley. We don't need to go too far to help somebody. Lots of help can be done right here and that's where we try to support, where we've got our support from.
Taylor White: It's everywhere. You’re kind of putting the money back into the community and it's definitely apparent because I mean, like the Car Fair’s this weekend, and I'm on the Antique Fair Board there and we do a sponsor as well, but the whole stage that we do our auction on it's like you guys donate it every single year, their mobile stage. You guys do way more for the Car Fair as well, too, but it's just really cool to see a company do that.
I would say that there's not another company in Ottawa that does give back as much as you guys as far as charity and sponsoring back to the community as well. It's kind of just everywhere, which is pretty neat.
I want to talk about if someone was in a small or medium sized company, what advice would you give somebody in today's world and the way that the economy is now with inflation and fuel prices and labor shortages, what advice would you give to that guy or girl?
Jeff Cavanagh: At first, you’ve got to be a micromanager because it's all on you and as you get your business to be more scalable or sized up, you can't micromanage everybody. And so, what I found is that just looking in the mirror, I found that I was becoming too much of a micromanager for the size of our business and we were able to empower the people that work for us, and in particular the bosses in that sector.
So, just holding people accountable to their job, yes. But hiring good people is obviously a very good answer. Hire somebody smarter than you. That's a good way to go. I have been able to do that. We've got lots of excellent employees working for Cavanagh Construction. And like I said earlier, they get up every morning and live and breathe that sector of the business, whereas we have somebody in charge of aggregates, somebody in charge of concrete, somebody in charge of asphalt, somebody in charge of the shop.
Mike Cavanagh is in charge of the shop, yes, but he also has somebody that's in charge of the truck side. Somebody is in charge of the heavy equipment side. Somebody is in charge of the paint and body shop. Somebody is in charge of the weld shop.
Each person looks after their section and wakes up living and breathing that section of the business so that they're proactive as to what we need, not being reactive so that's holding people accountable to their job, and hiring the right people would be my advice.
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Taylor White: You said something really important. You said when those people wake up, those men and women wake up, you said that they eat, sleep and breathe that job. I would argue that you guys have an amazing culture at Cavanagh - The Green Army.
How do you create that culture? Because that's what I create with social media and what we do. How do you create that? You guys have such a strong back and a week back, you guys had an event for families to come. I think it was last weekend or the weekend before, right?
I even had some guys that left me this year to go work for Cavanagh and they're posting pictures of it. It made me feel like, ‘Damn, I need to be doing this as well. Like, he's incorporating the families because that all builds culture as well and bringing your families because that's why we do what we do’, but how have you been creating that culture? How do you think those people wake up every day wanting to eat, sleep and breathe Cavanagh because I think that is true and fair to say?
Jeff Cavanagh: Well, I guess we just empower them to do their own job. We don't– you trust people as much as you can. You give them the tools to do what they want and get out of their way. It's empowering that foreman to look after his crew of guys, empowering that superintendent to look after the foreman that's under his realm or whatever the word might be. We just run a business where we try to trust everybody first, and it pays dividends in the end, I think.
Taylor White: Yeah, I totally agree with what you're saying. I think it goes even more beyond that with you guys as well, as far as the culture, because it's a really important conversation in construction right now, is creating culture around your business because now we live in a world where every other construction company needs people to work for them because of labor shortages and every other company is trying to offer more and more.
You guys offer obviously what you offer, but I think it even goes beyond that into your branding, and the branding and the culture kind of overlap with each other with the green trucks, the green everything, the shiny chrome dual stack dump trucks. Where did that all start because you're aware of it, but at what point were you aware, like, ‘That's what we are? We’re the long nose Peterbilt tractors with the stacks and the chrome live bottoms, that's us.’ When was it like ‘That is it’?
Jeff Cavanagh: I don't know the exact year but it was somewhere in the mid to late 90s, my cousin, Mike Cavanagh, and I were in the shop one day and we were rebuilding old trucks and fixing old trucks. Mike's mostly in charge of that branding of how it makes the stuff look so nice on the road, but we just decided at that point in time that if we were going to buy something, it was going to be best in class.
And so, if we thought Kenworth had the best dump trucks at the time so we started buying Kenworth dump trucks. If we thought Caterpillar shovels were the best shovels, we would buy Caterpillar shovels. If we thought Volvo Rock trucks were the best rock trucks at the time, we would buy Volvo rock trucks.
So, we tried to buy what was best in class because we were using the product and basically wearing it out, fixing it and wearing it out, then selling it. So, we didn't want to work on junk anymore.
So, we tried to buy dump trucks, and maybe not even the exact brand, but buy the truck with a little bit beefier engine or beefier suspension or the shovels with a better undercarriage on them, not just the cheapest product, but what we figured was best in class. That's when we started, It was somewhere about 97, I guess. I don't know the exact year but it was before 2000.
So, not only, we bought the best in class for maintenance, we bought the best in class for our team so they would have the best tools to use to get the productivity we were looking for.
Taylor White: Yeah, I think that's super important to touch on because at the end of the day, I'm not the one that's going to be sitting in the excavator for 50 hours a week, it's going to be the guy out there so I want to make sure what they're running is running. That's what you're saying, like, ‘Let's make sure our employees actually enjoy what they're sitting in all week because we want to make sure that they're happy.’ Because if they're not, then you're not going to get the work out of them, you’re not going to get the production and then it's just a whole domino effect. That is a good point to touch on.
The branding is really cool. If people are listening right now and you don't know Cavanagh because you're listening from wherever in the world, their trucks and machinery are very dominant, like, ‘This is us, this is Cavanagh.’ I think that's something really important that even with us with our black excavators, actually, people listening, Cavanagh is the one that paints our shovels black in their body shop, which is super cool. So, that's kind of like our thing. We do black and now there's other people recreating it but we were the first.
Issues in today's world – this is one of the things I really wanted to talk about with you today. As far as labor shortages, inflation and fuel prices, how are you combatting those things with what you're doing? Because estimating and pricing jobs, carryovers from last year, how's that affecting your guys’ capital?
Jeff Cavanagh: It hurts obviously, we got caught flat footed when the price of fuel went up, that was a real blow to the bottom line just because of the price of fuel, nobody expected fuel to go from, I think at one point, like 80 cents a liter to 250 a liter for diesel. It was crazy in the span of a 12-to-15-month period.
So, obviously, we got caught flat footed as most people did but we've rectified that now. Particularly with the trucking, we were– I think tri-axle dump truck rates went from $92 an hour in January to $95 an hour to $105 an hour to $105 an hour with a fuel surcharge.
So, maybe it's still not enough. I don't know what the right price is for a tri-axle dump truck. But with the fuel surcharge on there now, that's a good way to combat the rise and fall of fuel. I think that's the way to go and I believe it was the right answer for that problem. You mentioned two other things there, I can't remember what they were besides fuel.
Taylor White: Yeah, whenever I said fuel, your brain just went, ‘Oh shit! Fuel.’ Finding people to work and inflation, I guess it ties into the fuel, so finding people to work. Obviously, I would assume that you would have a recruiter or people out there looking for people or you know, a strategic plan as to how we are going to get people when it's incredibly hard to fill the seats of trucks or the trenches doing water mains, how are you filling guys in every position?
Jeff Cavanagh: We hired a full-time recruiter last year in-house. We're always looking for new employees. We are short right now on the dump truck end of things. It's just because we just had so many new dump trucks come in just recently. We ordered them a long time ago. They're just coming in now and it's probably not really a good time of year to hire drivers. It’s mid-September, so it's not like April, the spring of the year.
So, it is a tougher time but we have benefits, full benefits, full pension, and we have employee profit sharing. They don't start right away. The way it works in Cavanagh is you start off with your wage the first year and then after you've been here one year, you get full benefits and a 5% pension, and then after you've been here for two years, we like to say you start working for yourself, it’s then what we have is employee profit sharing 10% of the what the company makes me give back to the employees. But you don't actually get that money till about your third year here because that's how it works. And then after 5 years, we switch it to 10% pension. If you make 30 bucks an hour, you get $3 an hour towards your pension. There's no vesting period. It's your money. If you quit, your money's in your account.
So, that's a good way to, I think, retain employees. That's what you need to retire for these days. I mean, I don't want to punish people in the workforce. We want them to thrive and survive. And if you work for a company for 30 years, and you haven't got enough money to retire at the end of it, well, you can say ‘I didn't save enough.’ Well, we noticed, about 15 years ago, we had a pension plan that worked, like, if you put in 3%, we'd match up to 3%. When we looked at the numbers, the people that were the higher end wage earners of the company, maybe the accountants or something like that, or some of the bosses and stuff, they were all doing it, but if you went down to the laborers, or some people that just said that they couldn't afford to put 3% in, I said, ‘Well, if you put 3% in, we're gonna match it. You can't get any better investment than that.’
But they just found that they weren't able to save the money to get the free 3%. So, we changed at that point in time to 5% pension, and we didn't have to match at all and I think that was a good thing for the staff that sometime they'll be able to retire and have enough money in their account to do so.
Taylor White: Sounds incredible. If my employees are listening, we're having a pizza party on Friday. Somebody that's a smaller or medium sized company, sometimes I feel like, what we're trying to do right now is RRSP matching because we're not big enough where I can afford to, we can set up a pension and do all that stuff now, so I think that that all comes with size, but like, the fact that you're thinking about that, and doing that for your employees is really important. And the fact that you're sitting here saying a person that worked here for 30 years can't afford to retire and be like, I've done something wrong, I think it's important to touch on that and that you actually care which is refreshing to hear.
Is there a project that really stands out to you when I say that, and it's like, whether it be good or bad that you're like, this is a great story?
Jeff Cavanagh: Well, I remember in 1990, when we started a subdivision called Forest Creek, like I was telling you earlier, when we learned how not to do things, right? So, that really stands out a lot.
For anybody that's going into land development, you get a real learning experience. Your first time doing it, it ends up being a lot more expensive than you thought it was going to be. So, by the time you get to your second big land development project, it was Granite Ridge and it went very well, but the first one didn't go so well.
It was also bad timing. It was 1990 and there was a bit of a recession. So, it hit us hard, but like I said earlier, we learned what not to do. We learned how not to buy it with heavy interest rates. We learned how not to sell it. We sold it to people with interest free. It was just lots of silly mistakes and learned how not to develop it like we develop a whole subdivision and you register the whole thing and now you go to, say the lots aren't selling, now your taxes are up on those lots.
So, there was a real learning curve on that one. We have lots of irons in the fire for a future subdivision. So, the one that I'm most excited about is the one I haven't done yet. I have some big projects in mind right now and we're hoping that they go well. You're talking about going into a global recession right now and so it kind of makes us all worry a little bit but Cavanagh construction is not participating in the recession.
Taylor White: It’s funny you said it like that. That was one of the next things I wanted to talk to you about, the state of the economy and where do you see it headed and protecting you. You don't have to give away all your details but what does a construction company I guess that's in the industry right now do to protect themselves from, I just feel like there's uncertainty, like there's still a ton of work out there, like a shit ton of work out there, but there's uncertainty which is always overwhelming.
I know it’s for me at least. I've been in the hospital twice in the past year with a fibrillation just because I sit in my bed at night sometimes just grinding my gears, right? Just like, what is going to happen here? That's just my own thing but what does someone do? Do you fold up and be like, ‘Let's play safe.’ Do you go balls to the wall? What's king of your thinking?
Jeff Cavanagh: Well, every situation is obviously a little bit different. Don't worry about things that are out of your control. You can control yourself and you're able to do it with your staff or your company. We try and obviously line up as much work for a year out or 6 months out or however far people will wait, or sometimes it just takes that long to get the permits for a lot of these jobs.
I don't know if there's a right answer but if we're going into inflationary times, money in the banks is not good because it'll buy you less tomorrow. However, if we're going into a recession, maybe you’ll be able to buy something for half price tomorrow, so people are talking out of both sides of their mouth, right? Inflation and recession.
Another saying is keep your powder dry. You want to keep some money for a rainy day. You want to make sure you can make your payments. On the other hand, lineup as much work as you can for the future, not just residential work, I would say that we are very geared towards residential and if there's a residential slowdown in house buying, you need to make sure that you're prepared to be proactive, rather than reactive and line up some infrastructure work or something along those lines that will keep you busy if houses aren’t moving, that's what I would do.
Taylor White: Well, if that's what you would do, that's what I'm going to do.
Jeff Cavanagh: So, as far as what to do in recessionary times, or inflationary times, I'm not sure that anybody knows the exact answer or I wouldn't be probably here on this podcast with you. But you have to provide good value. When we provide a, say even a basement excavation for somebody, we're providing good value in what we do. Yes, Thomas Cavanagh Construction is going to make a little money on it, we wouldn't be able to survive if we didn't, but we are going to provide great value because we're efficient in how we do it.
That doesn't just end on the excavation. When we're building you a house, when you move into that house, there's good value in that product. When we develop a lot, we do it efficiently so that when we are able to sell that lot, it’s good value for the consumer. So, if you can provide good value for what they're buying, they'll come back and buy some more.
Taylor White: Yeah, I think that's a really important thing to touch on. I don't think it would be fair to say that no one's worrying or thinking about that. I mean, like, obviously, if you know someone had infinite money, which no one has, then you wouldn't worry, but sometimes you worry so much. But I think construction is a good industry to be in, like you said, like diversifying and making sure that if people are going to slow down on building new homes and stuff like that then go in and try to do something else or go heavier into something else.
Just to capitalize on it and kind of summarize, what's next for Cavanagh? What's next for you, keeping family tradition alive, growing the team, scaling back? What is it? Definitely not scaling back!
Jeff Cavanagh: Yeah, no, we're not scaling back, that's for sure. Next in line for us is more of the same, a little bit, not one more shovel, one more dump truck as required, as a need for them. You take a look at, ‘Oh, we have this many backhoes rented every day of the week or this many shovels rented.’ So, maybe it's worthwhile buying one more shovel or along those lines.
But for big ventures, we're looking more along the lines of growing our housing department right now. We've been a land developer that has been selling lots off to the builders for years and we're going to make a change in that where we're going to develop the lots, and I guess we'll eat them internally with building the houses ourselves on them. So, that's kind of the biggest change of recent. So, we're going to be more into housing than we ever have been before.
Taylor White: Yeah, we definitely see that because if I say this is the wrong name, then obviously this won’t go in, but I believe you guys have Patten homes, right?
Jeff Cavanagh: That's correct. Yes, yeah.
Taylor White: So, you're doing everything and then all of a sudden, it's like, you know what. let's create a company that also builds and sells the homes as well and that's under the Cavanagh umbrella.
Taylor White: Well, we'll keep it under the Patten umbrella as well but we've recently made a deal with Neilcorp Homes that next April is the purchase and sale closing date of that. They have a great system on how they build their houses and we're trying to mimic that and merge the two companies together, Patten and Neilcorp Homes, maybe have two brands with one house building machine.
Taylor White: Yeah, honestly, I can spend three hours asking you about everything, about what you have going on, and I know that you're busy and you have stuff going on. I feel like we've provided a crap ton of value for people here today.
I asked you the questions that at least I think that a lot of people would listen to unless there was something extra that you wanted to add as well. But like I said, I could spend three hours with you and hopefully when the new podcast studio is done, we can sit down and have a scotch and a cigar if you're a cigar guy or a scotch guy, I know I am, and just sit there and chat and talk about construction in the industry and have rock talk like you suggested.
Yeah, I appreciate you coming on today. Thank you for coming on and hopefully we see you at CONEXPO 2023. We're looking forward to it.
Jeff Cavanagh: Thanks!
If you need to meet them, they're here at CONEXPO-CON/AGG. You'll meet industry leaders and friends. You'll build new relationships in the community and you will find the equipment services and people within your construction field. Registration is now open. Save 20% off admission with promo code: podcast20.’ Again, that is promo code: podcast20.
I'll be going. Jeff will be going. Tons of people will be there. It is North America's largest construction trade show. It's March 14 to the 18th, 2023, in the beautiful Las Vegas, Nevada. Check out conexpoconagg.com to register and for more info.
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