Firm friends

In the middle of this mess were two good friends, Nick Kelly, the MD, and commercial director Peter Jones. It was a horrible experience that left everybody feeling shaky. They even attempted a management buy out (MBO), which failed.

After an experience like that, would you consider going into business with a mate however firm the friendship?

They did. In September 2001 they set up contractor Opco in South Wales. Kelly is MD, Jones is commercial director. They started with 13 staff and just one client who was prepared to work with them. Now they employ 70 people. In January they unveiled a profit of 2% on a turnover to August 2003 of £23m, a turnover which was up 100% on the previous year.

Jones and Kelly often discuss their relationship over a pint: why do they work so well together?

"He recognised in me bits he was missing and I recognised bits I was missing in him," says Jones. He is the one who provides the firm foundations, sorts out the detail. Kelly is the visionary, the forward-thinker. Jones appears jovial and laid back. Kelly sounds like a dervish, always out and about, mixing up business and home life, larger-than-life. They seem to make a perfect pair.

Jones' devotion to Kelly goes back a long way. Jones, 39, his wife and Kelly's wife were all at school together and they met Kelly, 46, through a mutual friend. They both worked for the same firm, Fairclough Construction (which became part of Amec), at the beginning of their careers. Kelly then worked for Balfour Beatty from 1988 and Jones went to Tarmac International and then Kier International.

Jones reckons that their time apart is key to their successful partnership. For 15 years they met as friends, sharing their experiences.

Jones was happy to come back from Hong Kong, where he was working for Kier, to be Kelly's second in command on Balfour Beatty's projects in the south. They believed they would graduate to run the whole southern region.

A friend in need
But less than a year after Jones arrived Kelly decided to accept an offer to run Brunswick in South Wales, where he had spent 13 years with Balfour Beatty before his London posting.

At first Jones decided not to follow, but within days he had to reconsider. "He called me from his desk, crying," Jones says. "And said 'You have got to come down and help me out'."

Things at Brunswick Construction, part of the Brunswick Group, were not as they seemed. Encouraged by the group's financers, Jones and Kelly planned a MBO, but debts within the Brunswick Group of which the construction business was a part made that impossible. In September 2001 they called the receivers in.

It was a rough nine months for the pair, running the company and trying to do their day jobs. The worst thing, remembers Jones, was carrying on as normal, trying not to set panic running in the business. And coping with the shock when it all went down.

Post-receivership Kelly and Jones were left wondering what to do. They spoke to Brunswick's clients, none of whom were interested in working with them, except Westbury Homes. "They had a very refreshing attitude," says Jones. "They said 'We don't know who Brunswick is. To us Brunswick is you two and your site team. So put a proposal together." But there was also an offer from Kier to employ the two and their remaining people. They didn't know what to do.

It was Jones' wife who decided it in the end. An ex-bank manager who currently manages the home, she brought in a cup of tea for the two men who were deliberating over the future at Jones' house on a Friday night, and told them to get on with it. "You've got 13 people hanging on for you," she said. "They are going to be desperately disappointed if you go in on Monday and tell them they are working for Kier. They could have done that themselves."

So the pair managed to scratch together £250,000 between them, since the banks which had been keen to back an MBO weren't having any of it, and Opco was born. The name, by the way, was a working title which sort of stuck.

Kelly was the obvious choice as the figurehead because, although he isn't a Welshman, he was well known in the market. This is vital in South Wales: "It's a pretty incestuous pit," says Jones.

He recognised in me bits he was missing and I recognised bits I was missing in him

Peter Jones

They have staffed Opco through their little black books. It's getting tricky now, though, because that route's exhausted. Employing someone even after several interviews is always tricky, says Jones. "We've had a few problems."

People persons
Dealing with personnel has been the most unexpected part of his owner-manager role, says Jones. He has been surprised by the sheer volume of issues which people come to him with, from what car people drive to who won't work with whom.

Having enjoyed a rounded training programme at Fairclough, Kelly and Jones have put the same rotational system into place for Opco. They have an impressive 19 trainees and recent graduates on the books who get six-month stints in commercial, head office, planning and design coordination, engineering and site management.

Opco man – or woman – is a flexible free-thinker: "I don't want a surveyor to be a surveyor, I don't want an engineer to be an engineer," says Jones. "They've got to have a bit of everything in there.

"I am quite heartened by the fact that people do not know what JCT98 is. I don't want amended contracts, we don't screw people around on payment terms."

In its business to date Opco has had one adjudication with a subcontractor and no claims. If firms don't play fair, the likelihood is that Opco won't work with them again.

Jones estimates that 80% of the firm's work is negotiated, with 90% design and build. They like to work with an upfront profit margin – for example it is set at 5 per cent on a series of care homes – so that the QS's energy is spent on looking at alternatives and best value rather than claims.

You might make a similar profit by making plenty of claims, screwing the subcontractors and hanging onto retentions, says Jones, but his approach brings certainty.

The pair have also started succession planning, bringing their three most promising managers from site into head office to groom them for a place on the board.

The sort of person you are means everything in the Kelly and Jones school of management. "I believe that 75 per cent of the professional working person is their personality," says Jones. "Provided there are some basic skills in there, we can work on the rest."

Outlook sunny
Nigel Coulter, 36, James Coombs, 30 and Neil Armstrong, 32 all came to Brunswick from Balfour Beatty. All agree that the attraction of a smaller firm is the opportunity to progress more rapidly, rather than do your time for promotion. "You can deal with problems differently," says Coombs. "In larger firms there is too much structure, you can't talk to the clients or think about different ways round a problem. In big companies you can get embroiled in paper exercises." They now face a tailor-made training programme to knock them into senior management shape.

So what does the future hold for Opco? Kelly has bullishly predicted turnovers of £35m for 2003/4 and £40m for 2004/5, whilst bumping up operating profits to 2.5 per cent and 3 per cent respectively.

Jones reckons that tight reporting from the projects means that he knows the financial health of the company almost day-to-day. The system, adapted from those they have worked with in the past, is "second to none", he boasts.

There could be a problem breaking the £35m barrier if the business remains within South Wales, says Jones. There is an invisible ceiling which the market applies to contractors of a certain size: if you're busy they won't ask you to tender because the price won't be competitive. So the plan is to sit tight for a couple of years and develop the people within Opco.

In the longer-term, Opco wants to expand into other regions. "You have to have people on the ground that know the business and know the area," says Jones. And that means acquisition. "It's a minefield."