In 1907, Martin Peterson formed Peterson Boat Works in Sturgeon Bay, Wisconsin. The next year marked the beginning of the distinguished shipbuilding career of his son, Fred Peterson. Fred gained experience through the construction of many wooden boats until the firm was destroyed by fire in 1918. Fred went to work for Leathem D. Smith Shipyard in Sturgeon Bay where, over the next 15 years, he gained experience in boat building and business practices.

During this period, Fred was involved in establishing the first self-serve grocery store in Sturgeon Bay, starting an insurance business and organizing the Sturgeon Bay Building and Loan Association. Fred earned money to start his own business by raising mink, running trap lines for muskrat and mink and by building canoes in his basement. Despite the economic conditions of the times, Fred achieved his ambition to operate his own shipyard. In 1933, he rented land and buildings and founded the company known today as Peterson Builders, Inc.

New construction and repair work in these early years included the fish tug Sally Lou, the first boat built by Peterson Boat Works, and wooden hull power yachts ranging from 38' to 59' in length.