Turning a regional family business into an SME that can compete with tier ones is more than many companies can handle. Executive director Dave McGoff reveals how his firm is taking on the challenge.
When a company says it prides itself on being a ‘family business’, it often follows that the company focuses on traditional, loyal values, handed down through generations.
These traditional values sometimes come at the expense of aspiration, as locally owned, family businesses can trundle along as they always have, resistant to the evolving market around them.
But when Construction News meets Dave McGoff, executive director at family-run McGoff Group, it appears that in the case of this Manchester business, those stereotypes are wide of the mark.
The company, based on the outskirts of Altrincham in south Manchester, is moving away from its traditional roots as a regional contractor into new territories and sectors – and wants to challenge the status quo in the process.
A traditional family business?
The group’s head offices immediately banish any thoughts of this being an old-school family contractor. In an open-plan, modern meeting room adorned with signed rugby shirts rather than framed project photographs, the 46-year-old Mr McGoff greets Construction News not in a suit, but in jeans and a jumper.
South Manchester born and bred, Mr McGoff has worked in the industry since 1988. He trained as a quantity surveyor at leisure contractor Multibuild, based in Stockport, a stone’s throw from the McGoff family base in Altrincham.
Having risen to the role of operations director at Multibuild by 2003, the lure of the family business eventually brought him back to head up McGoff & Byrne’s Villafont Homes housing venture.
As he describes the family business, the first thing he wants to make clear is its transformation from a regional contractor into an SME that can offer an end-to-end suite of services.
“Traditionally we were known as a regional contractor, working predominantly with local breweries – Hyde’s, Boddington’s, Greenall’s – on public house refurbishments,” he says. “Mum and dad were joint managing directors of the business and picked up all that work within a 50-mile radius of the head office [in south Manchester].”
“Whatever the client needs – new build, refurb, FM – we can provide it. I don’t know of any other SME that has that range of services”
But when his father retired and resigned as a director of the company in 2007, the structure of the company began to change dramatically. The four brothers – James, Declan, Christopher and Dave – decided to come together to run all of the McGoff Group’s different ventures, which ranged from luxury housing to principal contracting to refurbishment, under one banner.
Mr McGoff explains that the mantra of “acquire, design, build, operate and maintain” has driven the group away from being a main contractor and into a firm that can offer a one-stop shop of services for clients.
“It’s quite an evolution from being a regional contractor, and it’s a different way of looking at a traditional construction business,” he says. “Whatever the client needs – new build, refurb, FM – we can provide it. I don’t know of any other SME that has that range of services.”
Reinventing in the recession
Like the industry as a whole, the recession is what caused Mr McGoff to tackle a system that he felt was “broken”.
“I was brought up on [the idea] that if you’ve got enough tenders in a business, it’s always a good bellwether for how successful that business is.
“During the recession, it became clear to me that this philosophy was flawed. What was happening was you were getting more opportunities to price work because clients knew they could get work cheaper. We were getting more enquiries but less of a chance to win the work.”
McGoff and Byrne Sealife Centre Manchester
He adds that there was a time when 70 per cent of the group’s work was in general tenders. It was a wake-up call that led to the company changing its business model to build a more sustainable way of winning work and, crucially, repeat business from clients.
And the recession helped the firm to target those clients, with the leisure sector – driven by Mr McGoff’s background at Multibuild – as a crucial focus.
The firm now counts Butlins, Greene King, Whitbread – parent group of Premier Inn, Costa Coffee and Beefeater, among others – and entertainment firm Merlin among its clients, all borne out of the idea of ‘staycations’ – when the economy struggles, more people will stay in the UK for their holidays.
Mr McGoff says negotiating with those clients directly has been an example of how the firm has shored up its client base and built a strong level of repeat business.
Through a combination of self-generated projects and projects with repeat clients, the business has now moved to 90 per cent of its work being negotiated and 10 per cent select tender since the recession.
Mr McGoff is strict on margins, too, and reveals his bafflement at the way some main contractors are run.
He says that he “struggled to make head nor tail” of this year’s CN100, with margins among the industry’s top 25 contractors down to just 1.2 per cent.
“They’re just giving it away,” he laments. “It’s so difficult to plan a business on those paper-thin margins, and if you’re picking up problem jobs, that margin’s going to get wiped out. That makes a very vulnerable environment, and we’re trying to protect ourselves from that by controlling what we’re doing.”
He says that the company typically targets margins of between 8 and 12.5 per cent on jobs across the business, with margins “balanced” between projects developed by the company and those won with third-party clients and new build work.
“Once you get into the rhythm and absorb yourself into a brand, you become very important to them as a business. They have efficiencies because they have such an aggressive roll-out programme, and they’re more likely to usurp the tendering process and move straight to negotiations because you know what you’re doing and you know the brand.”
He adds that this approach is reciprocal, making the design and planning process more “light touch” for the client.
“Clients don’t want to go through a learning curve with new contractors each time, nor do they want to go through an elongated tender process to end up with a contractor that they don’t want to do the job, but that is cheap,” he says. “That’s the dichotomy of it; clients will end up with someone they don’t want because the tender process says the ones they want are unaffordable.”
But the business doesn’t want to simply rely on building Premier Inns, Nando’s restaurants or Greene King pubs – it has bigger ambitions of its own.
Among those is its new Downtown development in Manchester city centre, a £75m private rented scheme comprising 368 apartments, a gym, a business centre and full concierge service. The group acquired the land for the site in November 2015, with works set to get under way at the start of next year.
McGoff Group Downtown Manchester
Entering the already crowded Manchester rental market with a £75m developer-contractor scheme is a bold move for a firm with a turnover of £40.5m, particularly one that has not built a residential scheme on that scale before.
But when asked whether the company had bitten off more than it could chew by going forward with the project, Mr McGoff is bullish on its prospects, saying that it has been all about “building it up from first principles”.
“If you were looking at it as McGoff & Byrne tendering and winning a £50m build project, and we’ve got to back-fit a price that doesn’t work on a design that we haven’t been involved with, yes, that’s a risk and that’s a challenge.
“It’s less of a challenge and less of a risk if you’ve got two years to plan for it. You’re able to handpick the consultants to work with. While it might not be something that you’re familiar with or that you’ve done before, you’re confident that you know the people in the market that have.”
He says that, broadly speaking, the processes behind the scheme “aren’t dissimilar to a £1m new build pub for Greene King”.
“The plan is to build a Downtown in each of the Northern Powerhouse cities”
And asked whether the company has the skills to deliver a project that’s outside its traditional comfort zone, Mr McGoff is again full of confidence.
He says the firm has managed to attract senior people from tier one contractors, and has picked big-name firms such as Capita – the structural engineers – and Clancy – the service engineers – to work on the job.
“We’ve either developed our own people to have the skillset to deliver a project like that, or we’ve bought it, whether that’s human resources or physical resources,” he explains. “I feel confident if we get in front of anyone who’s right for the business, we can take them out of a tier one environment.”
He adds that the group has done its homework on the consultants and contractors – “who’s done it well and who’s done it not so well” – that have worked on major city centre residential projects.
“You need to follow a pragmatic process and have the skillset at each level of the supply chain to support you.”
And the approach to the Downtown falls under the group’s mantra, which Mr McGoff says is all about making buildings into an income stream for the wider business.
The firm will offer a suite of services across the development, including laundry, car hire, a gym, and a business centre, as well as facilities management through its own FM arm. “It’s about having a business stream that feeds off something we’ve created,” he adds.
Changing client dynamics
The plethora of PRS schemes going up in Manchester raises some questions over whether it’s the right move to be spreading into a crowded market, competing with the likes of X1 and Renaker to attract potential tenants.
While Mr McGoff acknowledges that the market may overheat “in a couple of years”, he says that the company has already had 80-90 reservations, boosted by promotional events held in Singapore and Dubai, while Chinese agents have visited the site in the past month to drum up interest in their home market.
With one project already given the green light, the company is not resting on its laurels and plans to spread the model across the UK’s major regional cities.
Dave McGoff executive director McGoff and Byrne 2
“We’re not a one-hit wonder,” he says. “The plan is to build a Downtown in each of the Northern Powerhouse cities. We’ve identified sites in Liverpool, Leeds and Birmingham to look at next. The plan is to get this one started and we’ll very quickly move on to contracting the other sites we’re looking at.”
“Rather than building something to sell off, our interest is the business that runs the building”
Acquiring land, developing and building its own projects, and managing those buildings is now the group’s offer to the market. “It’s not just about being a one-in-five tendering monkey,” Mr McGoff adds.
“Land is the lifeblood of any construction and development business. If we’ve got land, we can go to Whitbread or Greene King and see if they’d be interested in developing a site – it’s a completely different dynamic to that relationship.”
He says this means clients start to “value you more as a business”, meaning the company can negotiate turnkey developments on sites brought to them by McGoff. “We’re looking at different ways to connect with a client, rather than being perceived as saying, ‘We’ll be dead cheap’ – that’s what we’re doing our level best to avoid.”
That runs through all the company’s developments – from its New Care care homes business through to its Villafont homes development arm, and its new Applebarn Nurseries venture, which will build and manage childcare facilities.
It has shaped McGoff Group into an SME that has its eye on sustainable growth – and one that has the potential to challenge tier one contractors.
As our conversation concludes, talk drifts to the local area and the travails of local non-league football team Altrincham FC, for whom McGoff & Byrne built a new community sports hall.
“I should really get down and watch them more,” Mr McGoff admits, adding that time constraints are preventing him from doing so.
A reminder, then, that while McGoff Group has evolved far beyond its traditional position as a regional contractor, the challenge will be maintaining the local connections as it continues to grow.