See Our Collection of Industry Insights

The Well Built Series is a special podcast designed for decision-makers in the construction industry, as well as those aspiring to be leaders. Hosted by Chad Prinkey and Matt Verderamo, this series delves into the best practices perfected by successful contractors. Join us as we explore the “Do’s” and “Don’ts” that transform good companies into truly “Well Built” organizations. Whether you’re an industry veteran or just starting out, this podcast offers valuable insights to enhance your construction journey.

In this episode, we delve into the private side of the public-private discussion. We're joined by Neal Rackleff, Attorney at Law at Rackleff LLP, to uncover the challenges faced by professionals dealing with government entities. We’ll explore process-oriented reasons behind the distinct behaviors of government employees versus their private sector counterparts. Neal dispels common notions about the public and private sectors, sharing his unique experiences. Tune in to understand Neal’s impactful journey—from private roles to federal government positions and back again.

In this episode, Pat McGettigan, Vice President of Excellerate Manufacturing, joins us to share his unique insights into modular construction. From UPS data centers to driving innovation in off-site manufacturing, Pat's expertise sheds light on the pivotal role of modular solutions amid labor shortages. Throughout the discussion our guest host, Tom Hughes, Vice President of Genesis AEC, also shares his valuable knowledge, enriching the conversation on the convergence of manufacturing and construction.

As the economy goes, so too will the construction industry. It always helps to learn about economic trends and their likely impact on construction. Niladri Sannigrahi is the Senior Director of Product Management at Liberty Mutual Surety, and his passion is economics. He'll join The Huddle to talk about interest rates and their impact on developer-driven construction, the likely impact of the 2024 election on the construction economy, and many more topics to help you plan for what's ahead.

Mike Henderson has served the construction industry as a part of the Associated Builders and Contractors for over 30 years. In his role as the President of ABC Baltimore, his sights have turned to positively impacting the minority contracting community as well. Chad and Mike will discuss an innovative approach they're both working on in the city of Baltimore to create profitable growth for the minority contracting community and the good of the overall construction industry.

In this episode, we delve into the fascinating dynamic of semi-rivalry and discord between contractors and engineers. Join us as we explore each profession's crucial roles, uncover the valuable lessons they can glean from one another, and discover how they can unite to drive success as a cohesive team. Our guest, Sol Rosenbaum, owner of SR Engineering and Consulting, is a seasoned mechanical engineer who supports due diligence firms and building owners in the CRE world. The founder of Sol, sets an excellent example for younger engineers by inspiring them through mentorship. Join us as Sol lends his insights to this insightful discussion.

Sadly, too many construction projects fail to meet schedule and budget expectations and more than a few come completely off the rails in every mark in every year. Owners, architects, general contractors, and subcontractors alike retreat to their corners and focus only on protecting their selfish interests. In this episode, construction attorney Michael Wagner joins us to explore what happens to cause a project to become derailed, what behaviors worsen the situation, and what to do if it happens to you.

Most construction companies recognize opportunities to improve their business. Few have a track record of capitalizing on those opportunities and driving positive change. In the fast-paced environment of designing and building, companies become accustomed to their problems and focus on getting their work done instead.

In a first for The Morning Huddle, host Chad Prinkey will become a guest and share his experience driving organizational change as a consultant for the construction industry over the past 15 years. We’ll discuss why companies get stuck and what employees and executives can do to get better today.

New construction laws are passed virtually every session, leading to challenges and opportunities for contractors to navigate. Join us and our guest, construction attorney Jackson Nichols to discuss the 2023 construction legal landscape so you can learn about the legal changes that may impact your business.

If you've ever been a part of a project team that doesn't communicate and where every entity acts selfishly, you may have thought, "there must be a better way." You're not alone with that thought, and you're right. There is.

The Integrated Project Delivery (IPD) method is a teamwork-based approach to construction. Imagine pulling the GC, architect, engineers, and specialty contractors together to work collaboratively throughout preconstruction and construction. Kevin Hollenbeck has experience with real-world applications of IPD and joins us to share his story to help bring more attention to this game-changing approach.

Real estate developers drive a staggering amount of construction in the US today, and like all construction project owners, they have unique needs. Whether you are a design firm, general contractor, or specialty contractor, some or even most of your projects have a developer as your ultimate customer.

In this episode, we hear from a VP of Construction for an affordable housing developer, but Meade Rhoads has been on both sides of the table and brings a well-rounded perspective to the discussion. Join us to improve your understanding of developers as a customer and how you can improve your strategy for winning more developer-driven projects and building lasting partnerships regardless of your role in the industry.

Transcript:

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00:03
Speaker 1
All right, it's morning huddle time. Good morning. I'm not saying it works. I wish you God speed. Godspeed with all of that. I think that's really nice. You know, I'm not sure what kind of success you're going to have with that today because the world, my friend, has changed. Right?

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00:19
Speaker 2
A lot of American construction workers, they have different needs.

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00:23
Speaker 1
They have completely different needs.

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00:25
Speaker 3
These awards have a huge, like, criteria that you have to fill out and they usually community service or community relations portion, you know, the most productive with a high performance value. And, you know, sometimes it's 11 o' clock at night.

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00:43
Speaker 1
Funny, isn't? Yeah, not for me. Not for me. At 11 o', clock, I am guaranteed to be snoring.

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00:50
Speaker 3
So.

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00:50
Speaker 2
So.

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01:00
Speaker 1
Good morning. It's morning time. I'm Chad Prinke here with my co host and producer, Stacy Holzinger. Stacy, how are you today?

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01:09
Speaker 3
I'm doing great. How are you guys?

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01:13
Speaker 1
So far, so good. So far so good.

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01:15
Speaker 2
It's.

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01:15
Speaker 1
We're inches away from Thanksgiving. Our house is teetering on the edge of sickness, and we're hoping to be able to actually see family. So that's what's going on in my world. We have today, we have a good friend and guest, Mead Rhodes, who's with us from the NHP Foundation. He heads up construction for the NHP foundation, which is an affordable housing developer and an operator of affordable housing properties. Mead, thank you so much for joining us today.

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01:48
Speaker 2
How are you doing? Just fine. Glad to be here. Look forward to this chat.

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01:54
Speaker 1
Yeah, same. What's, what's exciting in your house heading toward Thanksgiving?

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02:00
Speaker 2
We're headed down to Pinehurst. It's typical plan, right? We head down there, meet some family down there, look forward to it. One of my favorite holidays. Right? Just a lot of food. Too much food.

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02:17
Speaker 1
Yeah, it's the best. An entire holiday that is actually geared around the idea of giving thanks. I think is. Gratitude is such a valuable thing. It's. I think if we can all stay there and not get into politics, then we will have a good holiday, I think, in our house. Stacy, what's. What's going on in your world heading into Thanksgiving? Oh, Stacy, we're not hearing you.

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02:49
Speaker 2
Shoot.

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02:51
Speaker 1
Stacy, with the technical difficulty. Oh, no, it's all good. It's all good. She'll get it straight. I'm confident. I do know that Stacy has not had Thanksgiving dinner with her extended family for three years due to the flu. Every time she's had, you know, Thanksgiving in the past three years and this year, their fingers crossed, gonna actually make it to a Turkey Day dinner. I'm hoping, I'm hoping for Stacy that turns out again. I'm sure she'll be joining us back. She just had some sort of glitch, but me, let's jump into it. So the purpose.

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03:30
Speaker 2
Sure.

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03:31
Speaker 1
The focus of today's conversation. And, and I, I've actually talked to a handful of people leading up to this that are really excited about this conversation to actually talk to a developer or somebody on the developer side of the multifamily building community about what matters from a developer's perspective. And I think you actually bring a unique combination to the table, both as a developer and as a construction guy. So let's start with your story.

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04:04
Speaker 2
Sure, sure. So I was that kid who used to stand on the corner watching the backhoe. Right. So even at an early age I was interested in it. And, and then in college, I got a real estate license when I was a sophomore and spent the summers on the business end of a hammer. Right. So I, in the summertime I was banging nails.

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04:28
Speaker 1
We have that in common. Yep.

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04:29
Speaker 2
Yeah.

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04:30
Speaker 3
Right.

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04:30
Speaker 1
All through high school and college.

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04:31
Speaker 2
Yep. Well, I haven't gotten too far away from it because I'm on a farm. I don't know whether you know it, but I live on a farm and so I still the business end of a hammer every now and again. So. Yeah. But, but anyway, in terms of my career, I started in property management and I, I've come to believe that they're some of the hardest working folks in the real estate industry. They're just, they're, they have to push rents with the tenants and then at the same time not spend any money with the owners. Right. So it's just you kind of caught in the middle in the balancing act. It's. Yeah, it sure is. Takes a little bit of another go between and then, let's see. So I figured out that was just some kind of all kinds of hard work.

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05:20
Speaker 2
And so I ended up going back and getting an MBA up in D.C. at GW and then got into asset management and property management at a REIT in Richmond. And we bought a lot of properties and left there and got into residential development with a regional development, regional developer in and around DC and spent. Worked on both ends of the spectrum. So I worked on the tax credit end. Right. But then on the other end of the spectrum, we also did luxury apartments and so and not so much in the middle and then got into commercial development, mixed use development, was a partner, a development partner in Northern Virginia. We did mixed use, commercial, residential and then, and now I'm on traction side and I'm, I work at NHP. We do mostly tax credit work predominantly.

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06:31
Speaker 2
We've got 190 million in work under construction, under active construction now. And let's see what else. I'm a licensed contractor and I already said that I've got a broker's license.

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06:47
Speaker 1
That's awesome. I mean it's an extremely varied career, really comprehensive experience surrounding professional real estate organizations. And the construction end is where you started, it's where you even are today, but inside of a development firm. So I think what you stand to bring to our audience and what I'm hoping that we can get into is helping us to put ourselves in the shoes of the developer community. And I think before I start asking you those questions and putting you on the spot to be a representative from the development community, I'll also say that it's possible that some of the stuff that you personally do or believe in may be somewhat different than what are the norms in the industry.

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07:49
Speaker 1
And I think it's throughout the course of the conversation valuable to kind of differentiate between those two periodically where you might say hey, this is what's normal, this is what I've seen, it's not what I do. And then, you know, vice versa along the way.

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08:04
Speaker 2
So that's fair.

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08:06
Speaker 1
I think at the core of people's desire to understand when I say people, I'm just going to go ahead and say general contractors and subcontractors have a deep desire to understand why developers procurement processes appear to work the way they do. So let's start if you would, in your shoes as a developer, what has been your experience with a typical procurement process for the general contractor?

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08:45
Speaker 2
Sure. So let's see. I've never, I've never had the luxury of working on a product where we had 100% complete plans and were putting them out to bid and you know, the RFP bid, you know all. I think the only people that are really able to do that are schools and the government.

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09:14
Speaker 1
People building that stuff might argue that even then, even though. Okay, yeah, but no, but I, I'm hearing you loud and clear and there is something really, there is something really, I don't know common about that in multifamily. Whether it's affordable or whether it's market rate doesn't really matter. That that seems to be a trend. I hear that almost all the time. So, so as for starters, you're saying we're starting off with incomplete plans, we're going through procurement and we're starting off.

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09:46
Speaker 2
With incomplete plans and running full tilt. So I've been in two worlds, right? We talked about the market rate world that I've been in and I'm currently in the tax credit world. And in both worlds we often, and I can't think of an instance when we haven't had a GC in the mix early on. Right. And there is a tremendous amount of value that a really good GC brings to the table.

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10:26
Speaker 1
How do you select? So if I'm hearing you right. Yeah. I didn't hear you say multiple GCs. I heard you say GC involved, AGC involved early on. How do you determine which GC to involve in that early stage? Are you, are you creating some sort of competitive process between GCs early?

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10:55
Speaker 2
It's not competitive. I mean it's competitive in the sense that we may talk to a couple GCs about a project, but it's not competitive in terms of like I just. It, it's what we look for is somebody who's got availability, who's got capacity, who can add value. We're about to get into a discussion about a three legged stool, I think. Right. At some point. So the three legged stool being the owner, the architect and the GC and assembling a team that can work at a high performance level.

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11:44
Speaker 1
And so I think what I'm hearing you say is that it's the competition, if you will, at that early phase is really about finding the right fit. It's not about. That's exactly a pricing exercise at that phase for you, right?

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12:04
Speaker 2
That's. Yes. And that's one of the conversations that happens very early on. Like we've got these schematics and we're trying to figure what it's going to cost to build. But we're, but you're looking for somebody who can come in and help with estimating and, and then make decisions around more efficient structures and substitutions and maybe even bring subcontractors or at least have good dialogue with subcontractors about concepts that are being pushed around and alternates that are available. And so there's definitely a value add with a good gc, the design process.

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12:56
Speaker 1
So does that general contractor at that time know that they've been selected? And is there a way for them to not to lose that at that phase in the game, you know, is it, is it a given that they're definitely going to be your partner through the course of the project if they've been brought in at that phase of the game? Like so to rephrase, do they know that they're the guy or they're the company and is that a given?

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13:27
Speaker 2
Yeah. So in my experience, yes is the answer. I mean we select some, we select somebody and they participate in the design, the refinement of the design and they're actively engaged in pricing and there's a target like we know what we want to spend. And so managing the design process so that we end up with a construction number that works is important. And so it just doesn't work to have multiple people, you know, having multiple discussions. You. Part of it is getting a contractor who's invested in the process.

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14:17
Speaker 1
Yeah, yeah. I as. So I have to say it. I'll be on a soapbox for roughly 30 seconds. Time me. I'm sorry. But one of the things I see that drives me crazy are situations in which developers create a competitive budgeting process on extremely early stage plans.

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14:45
Speaker 2
Yes.

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14:46
Speaker 1
And make their general contractor selection based on the lowest budget from the gc. At a phase in which there's so much ambiguity and so many questions about how plans can be interpreted and what they're begging for, literally begging for in that instance, is for general contractors to interpret the plans in the least expensive way.

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15:15
Speaker 2
Yeah, that's exactly.

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15:16
Speaker 1
Which may or may not be constructible, which may or may not meet design intent. Which may or may. Right. Like all those things are up in the air. And the earliest phase of the general contractor developer partnership is forged in lies, which is a terrible way to start a relationship. It's just a terrible way to start. And it's in there constantly digging out of it. I lay that responsibility directly at the feet of the developer. Creating a procurement process that is inherently flawed.

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15:51
Speaker 2
Well, even worse than that.

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15:53
Speaker 1
Things differently.

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15:54
Speaker 2
Yeah, even worse than that is not communicating that's what's going on. And have. Having multiple conversations with contractors. Right. And, and, and that inevitably they're talking to the same subs. And it always gets at and back and you do nothing but undermining, you know, what you're, what you're trying to do, which is to build a great high performance team to get this job done. So totally.

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16:19
Speaker 1
And by the way, word, we haven't even started construction. We're about to get married for about 24 months.

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16:24
Speaker 2
That's right. Right.

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16:26
Speaker 1
And imagine starting off, you know, marriage knowing that your spouse just cheated on you. You know, that's the way it feels for, that's exactly for both parties, I think. And again, the person driving the bus there is the developer. They have to take more, a more responsible approach to procurement. It really sounds like you and NHP are. I applaud you for that. Let's. I want to go to this idea of the three legged stool. I want to go in particular, I want to talk about the role that you want to see your contractor partner play with your architect partner. Describe maybe what a healthy dynamic looks like there. Because the way that you're doing this, with that early involvement, they really do need to be partners. What does a good partnership look like there?

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17:19
Speaker 2
So I think the best projects are projects where you've got the three legged stool. Right. So going back to that analogy, you've got the. An owner and an architect or design team and a contractor who are all high performance individuals and companies. Right. Just operating at a high level. And the goal should be to assemble a team that outperforms. And if things are done correctly and the process is good, then the outcome will be good. And the outcome, the good outcome will involve a higher level of design efficiency and quality plans, better costing because the GC actually understands, because he's been involved in the dialogue, understands what the design intent is and can help provide clarity to the subs as they're pricing things.

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18:30
Speaker 2
And then the owner is really is the conductor and should be the one assembling this team and setting the bar and making sure that the plans are tight and that the GC is, is, you know, pricing things appropriately and if the process really works, the outcome is a fairly high level of trust with a fairly high level, you know, group of individuals.

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19:03
Speaker 1
I think it's that term that you just tossed out at the end, trust is something that I, it's a topic I'm obsessed with. It's something that I spend a lot of time researching and exploring and trying to create on the teams that I work with. In your experience, what are the high trust behaviors that you see from general contractors that when they do these things, it cements that trust that you have for them as an owner?

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19:53
Speaker 2
God, that's a hard question.

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19:58
Speaker 1
Now.

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19:58
Speaker 2
So I think it may be easier.

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20:00
Speaker 1
To focus on the things that cause you to lose trust.

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20:04
Speaker 2
Yeah, that's, that's Maybe the. Yeah, but I, I like to think about the glass being half full. But it's a hard question because it's just, it's those behaviors that. So what is it? It's, it's perseverance, it's thoroughness, it's thoughtfulness, it's honesty. It's, you know, it's having the hard discussions before you're married, not after you're married. It's. Yeah, it's, it's taking responsibility, the things that you should be responsible for. But then if somebody stumbles, you know, one of the three legged, going back to the stool. If, if you've.

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21:02
Speaker 1
You, you.

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21:02
Speaker 2
Can still have a project that is successful, right? If you, if, if you have two really strong legs of the stool, it's awfully hard to stand one leg for 18 months. But, but if you, if somebody stumbles. We had it. We had a situation where we had an architect who ended up having some health issues and just evaporated. Right. But the project, the process and the project continued. Right. And, and then they were able to rejoin. And having two really strong players who could step in and carry the project makes a difference. And so, you know, high trust, I mean, it's all those things.

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21:51
Speaker 1
Love it. I love it. I think the, If I could share one thing that I, I share frequently when it comes to high trust behavior, it is to call out, call yourself out proactively for the errors, minor mistakes, accidents and things that you're trying to do to repair and put those things on the table and share your action plans for recovery. If anybody ever gets caught having made a mistake, the extent to which that damages trust is so much worse. And in fact, if you lead off by saying, hey, Meade, we just identified an issue that we had in pre con, we're going to own it. It's not your problem. But I wanted you to know that we have a bust. We're going to figure that out and try to create a solution with these three trades to see if we can recover it.

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23:07
Speaker 1
I'm bringing that to your attention just so that, you know, we're trying to figure out a collaborative solution that doesn't in any way change your expectations for the product.

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23:16
Speaker 2
Right.

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23:18
Speaker 1
It may even motivate you as an owner in that situation to say, really appreciate you sharing that with me, Chad. Just tell me what the damage is. We'll work through it together. Maybe it's something we can pull out of contingency, you know, or something along those lines. And we can work on that.

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23:33
Speaker 2
To do that, there has to be some level of self awareness and it just, it's, that's, it's beautiful. It happens and it elevates the whole team.

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23:45
Speaker 1
So yeah, I, I, I, I warned you when were preparing for this that this time would fly. And here we are at 9:25 almost already. I'm gonna pull Stacy in because I know that we've had a ton of questions rolling through our chat this morning.

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24:04
Speaker 3
Hey.

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24:06
Speaker 1
So glad to know everything's okay. In my brain. Your house was like hit by a missile and I was really worried and, but now here you are, you're back in your city.

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24:14
Speaker 3
I'm back. Lots of great questions. Let's start off. How do you see the multifamily residential industry pivoting in response to the rising cost of money, inflation and materials and increased cost of labor?

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24:31
Speaker 2
Holy smokes. So everybody's scrambling to the answer, right? Trying to figure out how to make it work. And so the opportunity is to sit down, take a closer look at these projects, you know, figure out how you can skinny them up and, and make the scope work. And, but it's hard. I mean, it's, it's hard. Yeah.

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25:03
Speaker 1
Are you, are you seeing, and you know, if you can't answer, it's okay, but are you seeing tax credit deals, futures being thrown into question right now? And are any tax credit deals stopping making sense in our current cost to build environment?

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25:24
Speaker 2
We haven't had any that operated. They just get a little bit harder. And so I don't know whether that, I can't speak for others. Right. For us, we haven't had any that have evaporated. We just, that's great to hear. You just dig a little harder. And you know, there's such, there's.

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25:45
Speaker 1
There'S such an incredible unmet need, undermet need, I should say, for affordable housing in the country, in this country. It makes me feel really good to hear you say that your tax credit deals haven't evaporated. I'm sorry they're getting harder, but that it is nice to hear that they're not going away. That would be, that would be a tragic situation for large population. So thank you.

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26:08
Speaker 3
Have you, were just talking about off site construction in our last episode, but have you explored off site manufacturing of modular units at all?

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26:18
Speaker 2
Okay, so we've looked at this and it's Hard with tax credits. They're front loaded. They take, they take dollars up front and we've just not been able to figure out how to make them work. And really the benefit is the quality. You just get higher quality product. But it's, the design is more complicated. It's six dimensional instead, you know, four dimensions. Right. The walls, you get the floors and you got to make verticals all work. And it, so that just, that's a degree of design that in the affordable world, as fast as we're moving, we haven't been able to get to. And then the footing of the funds is another computation that just, we haven't been able to figure out.

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27:10
Speaker 3
Are you moving towards integrated project delivery?

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27:15
Speaker 1
Yeah. This is an interesting question. I think about, you know, as you were describing the way that you like to operate, Mead, this idea of pulling in your architect and general contractor partners early, selecting people based off of their fit, not necessarily their price, and then conducting that exercise. There are formal contracting methods, you know, integrated project delivery being one of them, where, you know, you're pulling everybody together based on those themes, not just the general contractor, but most if not all of your specialty contractors, and really pulling everyone in for essentially a collective design build effort in which they're financially tied to project performance metrics and everybody's operating in an open book. Is that a topic that has entered the mainstream at all in affordable housing in nhp in your world? Where do you stand with that stuff?

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28:11
Speaker 2
Gosh, we definitely try to make sure that our design team is fully integrated and we focus on the coordination of how the architects work with MEPs. And oftentimes you get disconnects in the fans. And so we focus on making sure that process is tight. We focus on bringing the contractor into the process. Right. So that, so that they're involved in the process. But that's, I mean, today that's where our focus is and you know, wish I had a better answer.

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28:53
Speaker 1
Yeah, I think it's that I would, I love integrated project delivery as a concept and I love it in practice. In some really specific examples that I've had the ability to go through. Very, very cool. I think the learning curve is something that is intimidating to a lot of folks and if I can, I'll editorialize again yet again, maybe like for the 12th time today. Sorry about that. But the, the reality is that for owners, the willingness of the MEP trades, for example, to provide free design assist as a part of the process has removed a lot of the necessity to look into ways to make that happen. If I have a good GC partner who's got a good MEP partner that they feel, you know, confident in the process, everybody's.

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29:55
Speaker 1
That the GC is not charging you for any additional design assist on the upfront collaborating with the Arc deck, I'm assuming. And you know, same goes with the trade contractors. So I think that's a part of the reality is if, if we want to, if they truly want to change the way that happens in the market, they've got to stop offering the service for free. They've got to start saying this is how this ought to work. And, and developers will. Developers are just doing there. I think they're just buying the way that everybody else is telling them to buy. It's like you're bringing your service to me in this way. So anyway, I'll shut up. Stacy, More questions.

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30:36
Speaker 3
From Casey. So I know there's a lot of issues with subs getting paid on time. Do you think prepayment for change orders is possible?

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30:47
Speaker 2
Not, not in the world that I operate in today. And oftentimes the lenders and funders actually require reviewing change orders and yeah, not in the tax credit world. Not anytime soon anyway.

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31:07
Speaker 1
So I think if I can expand on that question. Ike also tosses in this note where he's asking is, can you suggest any strategies for subcontractors to avoid having to finance change orders? Is there any. Is there anything? Because, I mean, you get it. I know, I know you understand that if you were a trade contractor working in tax credit affordable housing deals, what strategies would you be thinking about to protect your cash position and make sure that you weren't floating in financing change orders?

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31:42
Speaker 2
Wow. I haven't thought about it from that perspective and I, I just, I'm focused on getting them funded, you know, and getting things funded and getting the approvals and I just haven't flipped it around to think about it. I don't have answer today. Not in the world I'm operating in today.

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32:05
Speaker 1
Yeah, I don't think there's a very elegant one in any case, I will share that one. One select strategy I've seen work, it's very back of the envelope, but it's still. It goes to trust is if you're a specialty contractor and you know that you're going to struggle to float some particular change order, preemptively going to the general contractor and talking about anything they can do to help you to absorb that. And I've, and I've worked with, I've had the good fortune to work with several general contractors that understand where their subs are coming from and will go ahead and cut them loose on that portion and float it themselves. But it just, it's hard, it's hard accounting and there's no elegant solution to it. It's nothing that I've seen.

‍ ‍

32:52
Speaker 2
Yeah. I just had a conversation yesterday with it with the GC and the conversation was we've done this, we've done 13 draws and. It's been 44 days. What it's been taken to get on this project, to get it done. And if we're not able to fix it, at least we can communicate about what it is and manage expectations so that people know what to expect. That's, it's just a, you know, having the hard con is what it is and you know, we just need to plan it accordingly. Awesome.

‍ ‍

33:40
Speaker 1
All right, Stacy, what else?

‍ ‍

33:44
Speaker 3
Just a couple more comments here from Paul and Jeff. Paul was just saying the federal mandates reporting, labor rates, insurance, except etc on the government's money is a huge issue. I don't know if you have any comment on that.

‍ ‍

33:58
Speaker 2
Can you say that? Can, can you?

‍ ‍

34:00
Speaker 3
Sure. Paul said the federal mandates reporting, labor rates, insurance. Oh, government's money is a huge issue.

‍ ‍

34:12
Speaker 2
Yes, yes. And, and it's a challenge for the developer. Right. Because make commitments on these projects, on these funded projects that we're going to make and have certain participation.

‍ ‍

34:29
Speaker 1
Participation.

‍ ‍

34:30
Speaker 2
Yeah, I just, it wasn't working. Right. And, and so we make participation requirements or promises and we really, I mean it's the Fed. Right. That's around. I mean we need to make them and we need to report them accurately. And so tracking that stuff is important, really important.

‍ ‍

34:55
Speaker 1
The, the best thing that a trade contractor can do, I think is to be bulletproof on their reporting requirements on a, on a, you know, tax credit job. You're going to have all these reporting requirements and also collaborating with your fellow specialty contractors to make sure everybody is also going to be successful. Because if, and I think maybe what Paul's alluding to, particularly as it relates to change ordered payment delays, is that one trade, if one sub doesn't have their stuff together and it can hold up the payment of a whole change order, not because anybody's trying to be a jerk, but because literally there's federal requirements that they will not release the money is not going to be cut loose and. Exactly.

‍ ‍

35:59
Speaker 2
Right.

‍ ‍

35:59
Speaker 1
You might have, you know, the electrical might be, you know, being held hostage by the concrete sub because the concrete sub isn't tight on their requirements.

‍ ‍

36:15
Speaker 2
And then the, and the gcs just need to step in and help with the paperwork. Get it done. Right. Whatever it takes.

‍ ‍

36:22
Speaker 1
And whatever it takes. I know it's tough. Paul's like, yep, that's what we're doing. I'm sure. So we're good. What else do we have?

‍ ‍

36:33
Speaker 2
Stacy?

‍ ‍

36:33
Speaker 1
Any other.

‍ ‍

36:34
Speaker 3
That's it.

‍ ‍

36:36
Speaker 2
Awesome.

‍ ‍

36:38
Speaker 3
Yeah.

‍ ‍

36:38
Speaker 1
Great conversation. I'm thrilled to see all the communication that came in through the audience. If people wanted to follow up with you separately, Mead, what would they do? Would they just connect with you on LinkedIn and reach out to you through that channel? Is that okay?

‍ ‍

36:58
Speaker 2
That would be fun. Sure. That would be fun. And I'm glad to help any way I can. You know, if we're asking questions, we must be trying to get, you know, improve and get better and with our understanding and all that. So, yeah, we'd be glad to help in any way we can.

‍ ‍

37:16
Speaker 1
That's great. Thanks so much, Mead. Yeah, I'm sorry. Go ahead. Is there anything that you want to say in parting?

‍ ‍

37:31
Speaker 2
I wish I had some, something profound to opera right now. I've tried to lay it there, you know, I've tried to lay it bare and just shoot straight. So, you know, I'm glad to have had the opportunity. It's nice to chat with you this morning.

‍ ‍

37:49
Speaker 3
Thank you.

‍ ‍

37:50
Speaker 1
Likewise. Likewise. I think, I think you did a great job being just who you are and sharing with us exactly how you approach the world as one person with your immense background. I think it's a great example of, for our audience what people in your shoes care about. So thank you for sharing that and I hope that you'll join us again at some point in the future.

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38:21
Speaker 2
Thank you so much. It's. It's always nice to chat with you, Stacy. Take it easy. Hope things, Hope things stay well, you know, for Thanksgiving.

‍ ‍

38:32
Speaker 3
You too. Happy Thanksgiving.

‍ ‍

38:34
Speaker 2
We'll see.

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38:35
Speaker 1
All right, Stacy, we have a little housekeeping to do here. Let's, let's talk about where things stand at this point. We've got one episode left in season three, which is episode number 38 with Kathy Hum, who is going to be joining us to talk about creating a strategic HR department as opposed to just a tactical one. And I think that a fascinating conversation for business owners, for people in the HR world. Maybe there are some frustrated HR folks who are trying to get things to change in their company and they. This would be useful to, to check out. So look forward to that. Stacy, do we have a Steeltoe Communications marketing tip heading into Thanksgiving week?

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39:30
Speaker 3
Yeah, for, I guess, Thanksgiving week to be grateful. Just a reminder to, you know, think about your internal marketing and recognize your employees. And we always say in the construction industry, the detail or the devil's in the details. Right. So when you're telling someone, just don't say you're doing a great job. Actually put some thought into giving them a nice compliment and being grateful for what they do. That's it.

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40:00
Speaker 1
I love that. That's a great. It's a great idea. I recently. Oh, you know what? I won't even say where I was, but I, I was checking out at a store and I saw something that I thought the, that three women on my team would really enjoy and ran over and picked those things up for them for Thanksgiving. Just thought, you know, people used to.

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40:24
Speaker 3
Do that all the time. Like, you know, my dad was always great with that, like recognizing people in his organization. And I feel like we lost a lot of the years. So.

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40:35
Speaker 1
Yeah, I, I'm trying to. I'm a terrible gift giver. I might be the worst. Just ask my wife. It's like, bad. But I'm trying to. It's not about the gift. Right. It's just about thinking about.

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40:49
Speaker 3
Yes.

‍ ‍

40:50
Speaker 1
Thinking about others. So at any rate.

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40:52
Speaker 2
Well, good.

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40:53
Speaker 1
I can't wait to see you again next week. I hope that this week ahead is a wonderful one for you and for all of our audience. And if anybody that you know should be involved in season four, we're going to be starting up over the winter. We'll be starting up after the new year. And we would love to fill out the schedule with folks that, you know, I think we have eight out of our 12 guests identified. So we do have at least four.

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41:23
Speaker 2
Slots open at this point.

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41:25
Speaker 3
Okay. Happy Thanksgiving, everyone. See you.

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41:29
Speaker 2
Thanks.

‍ ‍

Guest Jeremy Owens

Topic: Peer Networks

Transcript:

Speaker 1: 00:00

It's morning huddle time. Jeremy, thank you so much for being here this morning, man.

Speaker 2: 00:04

You're welcome. I think it's morning. It's still dark here in California, but.

Speaker 1: 00:07

Right.

Speaker 2: 00:09

You're.

Speaker 1: 00:09

You're. Did you do the. Did you do the all nighter, A Red Bull fueled? Just.

Speaker 2: 00:14

No, we talked about that. And to your advisement, that was not a good plan. I took a couple hour nap.

Speaker 1: 00:20

There you go. That's not bad. Couple hours a night. That's all anybody usually gets, Ryan.

Speaker 2: 00:25

Whatever. I'm a gamer.

Speaker 1: 00:27

I really appreciate you being here. This is awesome.

Speaker 2: 00:29

Yeah, no problem.

Speaker 1: 00:31

So we were talking a little bit. We were talking football. Just a little bit. I saw that helmet behind you. You're. You're begging for. You know, and I'm sorry.

Speaker 2: 00:39

Yeah, right there. Yeah, no, it's. It's one of those things, man. One and done is so difficult for football, but I know there's a lot of hurting fans right now. I'm currently one of them. But, you know, credit to the Niners, they. They whooped us and we didn't deserve to win. I'm not a, you know, whining about the call or anything like that, whatever. But it's now, now it's next season. I gotta wait till. So that's, That's a little rough.

Speaker 1: 01:03

It got really exciting there at the end, man. I was.

Speaker 2: 01:06

I like, their, Their compete in the end, I guess.

Speaker 1: 01:09

Yeah. I mean, look, it's. I'm. I'm a Steelers fan and we did not compete.

Speaker 2: 01:18

Not really.

Speaker 1: 01:19

Not really, though. We all saw that coming. That was. That was. At least. We were like, all right, we've made the playoffs one more week to, you know, to get destroyed by the Niners and by the.

Speaker 2: 01:30

By the Chiefs and to say goodbye to Big Ben, too. He's got. He's got to go.

Speaker 1: 01:34

Bye.

Speaker 2: 01:34

Bye.

Speaker 1: 01:34

Yeah, he's. He's. He's got good dude.

Speaker 2: 01:37

Yeah, he's.

Speaker 1: 01:37

He's our. He's our guy. But he's got.

Speaker 2: 01:40

He's.

Speaker 1: 01:40

He's got. It's time to hang him up. It is time. He knows that. That's good news. So we're the joys of live streaming. I just got a text from Stacy. She's got kids stuff she's wrangling through. Oh, there she is. I was just. I almost got away with not telling this story. Thank you so much, Stacy. I know it was hectic this morning.

Speaker 3: 02:02

I know. I hope I didn't panic you.

Speaker 1: 02:04

Yeah, I'm sweating, but what else is new?

Speaker 2: 02:07

Not me. Not at all.

Speaker 3: 02:09

I know, of course.

Speaker 1: 02:14

Jeremy's like, I'm way too tired to sweat. I'm good to go. All right, so we're getting started just a minute or so behind where we normally would at this point. So I'm gonna push forward and jump in. So I'm your host, Chad Frinky, alongside my partner and producer, Stacy Holzinger. I. I think you know, and we have our guest today is Jeremy Owens. And. And Jeremy has a couple of cool things going on I'm gonna let him tell you about. But today's session, or, you know, today's show that is, is geared around the importance of having a contractor peer network, a contractor peer group that you can lean on of trusted people, and the impact that that has when you do and you don't have a peer group. And so, just as always, Stacy is going to engage with our live viewer audience and. And please ask questions along the way. Engage with Stacy. Stacy's job is to capture the best and most interesting thoughts and questions from our audience and. And. And pose those in the final minutes of our session. So, Stacy, anything you want to say before I pop into my conversation with Jeremy?

Speaker 3: 03:32

I'm just excited about, you know, what you're going to bring to the table today. I know a lot of people over the years have wanted some type of community, you know, digitally or, you know, they looked for LinkedIn groups or Facebook groups for. To meet construction people, and we could not find something like that. So I'm interested to see what you're going to share with us.

Speaker 2: 03:55

Awesome. Thank you.

Speaker 1: 03:56

All right, here we go. So, Jeremy, US Construction Zone, which I know isn't your only gig, but, you know, is. Is, you know, something that is. Is obviously near and dear to you. Give us a little bit of the background. What is US Construction Zone, and. And give us a little bit of background on you.

Speaker 2: 04:14

Yeah, sure. I grew up in. In remodeling. I'm the third generation, so I own a remodeling business in Folsom, California, called Three Generations Improvements, and we do siding, windows, decking out here. It's been a awesome family business. I work with my dad. My grandpa has since retired, and unfortunately, we lost him this last year. So, you know, been a very blessed to have a family business and a dad that I totally admire. So been enjoying that part of my business and that part of my experience. And like I said, we have roots, started from the 50s. My grandpa started in 1956, my dad in 72, and myself in 2002. So it's just been a long history. It's been in my blood. Enjoyed remodeling every step of the way. US Construction Zone came kind of on the heels of. I went to a trade show and we were kind of doing a roundtable with other remodelers. And you know, on the way out, we were exchanging business cards and a gentleman from Tennessee said, hey, you know what? I wish there was a better way for us to connect through the year, you know, and chat about these things. And you know, that kind of idea popped in my head and just kind of rolled around there for a little while. Pandemic hit, you know, our connection point really went away. And I was thinking, man, we got as an executive, we don't really have a construction focus group. There's, there's everything, there's LinkedIn, there's, there's so much to do, but not really specific to us. And so I really started developing it during the pandemic is when I really ramped up development and just launched in October and it's been a fun ride.

Speaker 1: 05:57

That's awesome.

Speaker 2: 05:58

Yeah.

Speaker 1: 05:58

So, so this combination of longtime generation, multigenerational family business and then launching this new endeavor of U.S. construction Zone to create, you know, better ways for contractors to connect. Yeah. Leads to really what, what you and I are so interested in, in, you know, talking about here, you know, this morning, which is on some level the iteration of the contractor to contractor network.

Speaker 2: 06:37

Yeah.

Speaker 1: 06:37

Over the years, and you've gotten a chance to see it firsthand, I'm sure, hear about it. Countless stories and examples.

Speaker 2: 06:44

Yeah.

Speaker 1: 06:45

Over the course of time. The, the, the, the, you know, our, our parents and grandparents were so much more networked in the business community in, in a really grassroots way than, than our, I'll call it our incoming generation.

Speaker 2: 07:13

Right.

Speaker 1: 07:14

Is what did that look like when you think about, you know, your dad and your grandfather. What, what, what did their peer networks look like?

Speaker 2: 07:23

Oh man, you're right. I mean, with, with no Internet, if you weren't out, you know, skin to skin, you know, saying hi to people, you didn't have a network. So it was Rotary Club meetings, it was, you know, local community center mixers. It was multi level marketing. It was like all of these things is what I grew up. I mean that, that's just how you met people. And then, you know, it's funny, this thing probably if we have some young people listening, they had what's called a Rolodex. And the Rolodex is where they stored their contacts. That's where you would meet somebody, you'd get a business card, you would write, you know, their information, you write where you met them, and you would say, hey, call this person if you need X advice. And that's how they, that's how they had their contacts and they had a daily planner and they, you know, it was just so strange because watching what they did to, to hustle was so much more different than what we do to hustle. I mean, it was, you know, like I said, you had to be actually face to face with somebody before you had a network connection. I mean, unless you went to a trade show, you had to get involved in the community. And unfortunately, I don't think there's a lot of involvement anymore. Like just, you know, from a, from a local mixer standpoint, I don't really see that.

Speaker 1: 08:42

Yeah, it's, it's. I mean, I, I'm close with several different associations in the, in the building industry. There's no question that associations are talking about the importance of engaging the next generation and you know, the, I guess, sort of natural pushback that the younger generation has toward these types of what I'll call grassroots, you know, in person, physical local networks. That. Yeah, it is different now that, that, that in, you know, your grandfather, if he wanted to, if he ran into a challenge in his business, whether it was in the field or whether it was, you know, a business oriented challenge, he picked up the phone, he flipped through the Rolodex.

Speaker 2: 09:40

Yeah. Yeah. Without hesitation. Yep. Yep. Yeah. How weird is that? That the phone was the only way to connect, really? I mean, unless you, you met, you had a coffee meeting, it was like you had to pick up the phone to set up anything. Right. I mean, the funny thing too, I would ride with my dad on calls and he had a bunch of quarters in his pocket and there was quarters in his car. And you know, you would have to, he'd know where all the best payphones were. You know, I gotta stop off and make a call. Like, how weird is that? Like just, just, just the roll of quarters. I mean, he didn't, we didn't have cell phones and he had, he had the first, you know, giant brick phone, you know, in the, in the car. And that was wild. But it's just so strange how in three generations the business looks that there's nothing that looks similar.

Speaker 1: 10:29

Yeah, it's. Evolution did not prepare us for this. Speed. No, for, for the, for the, for what we're dealing with now and adjusting to. So for all the benefit, for all the upside that we get from technology. And the benefit that I can just pull out my, my new, my new phone is this is not a phone like, like our, like, you know, this is a, this is a device that attaches us to the world and it's a powerful tool. It's a wonderful tool. This is, you know, absolutely not technology bashing. But, but what I that same situation, I run into a business problem today, I'm much more apt to Google it.

Speaker 2: 11:09

Yeah.

Speaker 1: 11:12

And when you think about the number of questions that are just totally inappropriate to try to get answered by a search engine.

Speaker 2: 11:29

Right, right.

Speaker 1: 11:31

That's where the value of the peer network still exists. Right? Like that's where, that's where, you know, so yeah, if, if, if I'm interested in, in how am I going to convert this, you know, metric measurement to, you know, an empirical measurement, you know, system. Google is fantastic for that.

Speaker 2: 11:51

Yeah, perfect. Yeah.

Speaker 1: 11:52

Or any number of your apps are fantastic for that.

Speaker 2: 11:54

Yeah, yeah.

Speaker 1: 11:55

But if I'm interested in when is it the right time for me to hire a VP of operations.

Speaker 2: 12:02

Right, Totally. Right. I mean I, Google for me is, is, is so much more salesy than it used to be. And, and there's a lot of search engines. Right. I mean, using Google loosely. But yeah, you go to Google for, for some of these executive questions we have and you're going to get sold. It's going to be businesses, it's going to be apps, it's going to be things basically you have to, to pay for to get what your, your question is. And you're not going to get a peer that's going to come out and say, hey, I got, I can help you with that. You know, ping me. You know, there's, there's no people on there. And so this is really the idea is like we need that people connection and a personal thing is as close to personal as you can get without, you know, skin to skin thing. And that's where I'm, that's where I'm headed.

Speaker 1: 12:51

Okay, so, so enter social media now. Social media has, has, you know, obviously, you know, blown up in the past two decades. You know, how has social media filled the gap? And, and what are the, what are some of the, the I guess risks associated with trying to, you know, fill that peer network need in a social media platform.

Speaker 2: 13:12

Yeah, it was strange. 2003, MySpace was invented and it completely changed the landscape from then on. It was like a mad dash and obviously, you know, the writing was on the wall that we were going to change the way we communicated and that's when it just. The in flood of all the other different social media apps came out and really it was unfortunately it was a mad dash to get connections. It was like, I want as many connections. I don't care what industry, I don't care if we have any like, you know, similarities at all. It was just like I want to have a thousand people, you know, and so what happened was with wherever you went in socially, you just wanted to get a lot of connections and whether that was LinkedIn, Facebook or whatever. And unfortunately what that did is that did not prepare us for a pandemic. It did not prepare us for having political discussions. It, it prepared us to fail. It just, we set ourselves up to have this fake social media Persona and unfortunately that's not real and I think it's crumbling right now and I think that I'm frankly, I'm kind of glad it's, it's changing a little bit. So I think it was not a great way to network.

Speaker 1: 14:25

The. I've, I've had some visibility into speaking about the building industry. There's, there have been attempts and I think, you know, with varying levels of success, there have been attempts to create, you know, communities, online communities within these social media platforms. Heck, we're in one right now. Right. Which is that in, on LinkedIn in Stacey and my, you know, sphere of relationships, we, you know, I think if you looked at my connections, it'd be 94%, you know, building industry people that were, we, we've got these very, I think, personalized kinds of communities inside these broader social media outlets.

Speaker 2: 15:17

Sure.

Speaker 1: 15:19

And, and I think there have been some that have been successfully created. I think there have been some that, you know, fizzled. And at the end of the day, I think one of the biggest challenges that people have in social media is sorting out who is credible. You know, so when I need advice and I want to turn to an online peer network, where do I turn and who is actually credible? So, so talk about how us construction zone fills a different kind of need. It just give us a little bit of a. Yeah. Context on that.

Speaker 2: 15:54

Sure. Yeah. I think you're right that there's, there's groups everywhere. I think that it's been hard to get traction. I think part of the, the difficulty is that social media in itself is very distracting. So you know, you, you have a subset group in there and, and before you know it, you're getting all these pop ups and there's messages flying at you and it's just hard to focus. It's just a Very broad group. And so when you're with, you're within, like LinkedIn for example, you know, you have real estate agents, you have building industry, you have your mom, you know, all these, all these people that are, that are out there and pining for your attention. And unfortunately there's a lot more ads, there's a lot more push, there's a lot more bots and things that are coming your way that aren't even real people. So I think that that's distracting. So what I wanted to do with US construction, I would say, you know what, it's for all aspects of the construction industry, all, you know, really executives, management level people to come together in one place. And then eventually I want to have the members enough where we can create those subsets of, hey, you know, I want to create a siding and window group or I want to, you know, get a little bit more personal with these folks. But to the credibility piece, it's just going to take time. There's no way you're going to get a message from someone and just go, I trust it. You're going to just have to get to know these people on a personal level. And that's going to take a little bit of time. That's going to take a little bit of back and forth and, and before you, you take that as, you know, as a good vice or bad advice. But ultimately you just have to spend some time and invest in other people. And I think that's what needs to happen if you're really going to have a robust networking group.

Speaker 1: 17:32

Awesome. Awesome. Yeah, I agree with you. I think, you know, I'm excited about what you're doing. I think, you know, creating a space where I know this is for people who are trying to accomplish the same things I'm trying to accomplish, that we're not going to get on there and end up having a political discussion or we're not going to end up on there, you know, arguing about sports or whatever. But, but this is, it's a very specific place where can go to get a, you know, get my needs met. So when I want to talk about what kinds of insurances I maybe should be carrying or I want to talk about how people are navigating new compliance rules in my jurisdiction or fill in the blank that this is a place where I could potentially go ask my questions and, and, and find people, you know, who, who have a high likelihood of, you know, experiencing those things, caring about those things. And, and then when I see the advice, you know, credibility to me is like it's such a fascinating concept that I know for me, when I have, I, when I have anointed someone in my own brain. Right, right. With just ultra credibility. Like whatever they say on a certain issue, I won't research, I won't. I, like, I'm just gonna do it.

Speaker 2: 18:52

Right.

Speaker 1: 18:53

And there are people, I think if all of us think about it, we have people like that in our lives. And that's a gift. I mean, it's such a gift because it accelerates our ability to make decisions and to make right decisions, you know, and things along those lines. So, so what I'm hearing you say is as it relates to credibility, it's not, you know, that's something that has to be earned. There's no fast forward button on earning credibility. And I, and I happen to agree with you.

Speaker 2: 19:20

Yeah, I mean, you said it perfectly. I mean, I struggled myself with a network when I was, when I was coming up. I mean, being a business owner, I felt alone a lot. I'm on an island. Right. I, I have this decision to make and I look to my left and my right in my business, I can't really ask them. So. I have struggled with having real mentors. Really. That's what it was. The word for me is I want mentors. I want, like you said, if it comes to marketing, I want to call this guy. If it's an HR thing, I, I know I have this galaxy. So now it's like you have an actual network of people supporting you in your business decisions. And if you don't have that, then you have Google and then you have you learning it yourself. And I just don't have time, especially now, to, to go learn something new. I don't, I don't want to. I just want, I'd rather ask somebody that's been there, done that, and, and have actual people that I can network with to make decisions and, and so.

Speaker 1: 20:18

If we do it right. If we do it right. I think what you're saying is that instead of using, rather than thinking of technology as I use technology, instead of going to, you know, rotary events and, and, and building a network. Right. What, what I think we're saying is that if we do it right, we can actually use technology to accelerate that process and, and not to replace it. Right, Right. Because at the end of the day, having person to person, individual, highly trusted relationships of mentors, partners, friends, advisors that you're able to surround yourself with is the actual human beings behind it, not Google searches is something we desperately need.

Speaker 2: 21:06

Right. Yeah. And it's cool. Almost everybody that's, that's in the network now. I've had a zoom call with like that. That's been one of my strategies is when someone asks or I ask them, I take every meeting, I take every meeting and I just meet people and I don't know if I don't really know them, I don't know if they're going to bring me any value, but every single time they do, they say, hey, I'm gonna, I want to put you in touch with this person or, oh, this idea. And then I've been able to network people together. I've been able to say, I have someone for you for that. And so I, that's part of the strategy is I am investing a little bit in people. They're investing in me, and it's just creating all these win wins around me and it's super rewarding.

Speaker 1: 21:46

So obviously you're the founder of this thing and, and, and while I do, I think that's an impressive step. I'm also not surprised to hear that you're making that kind of investment right in, in, in your network. But I have a, just a, a, as a, as a member, how do I be a good member? How does somebody be a good member of a, of a peer community, of a peer network?

Speaker 2: 22:10

Yeah, I think, like I said, you got to show up, you got to spend some time, you gotta, you know, ask questions, answer questions. I think they're, they're seasoned veterans in construction that have a lot to offer and they're in a, maybe in a different position than a lot of us are, where maybe they have, they can carve out 15 minutes a day to be helping a fellow contractor to, you know, get to the next level. I think there's some of us, like, and maybe in my generation that I'm still need to soak up more knowledge. I'm not there. I'm not a finished product. So I'd rather, you know, I'd rather ask questions right now, but I think everyone's in a different place. But you have to spend some time and like I said, invest in some people and I think you'll get it back. I'm certain of that.

Speaker 1: 22:56

I'll say this one last bit, and I want to bring Stacy in because I know we've had some great engagement from the audience this morning. I try, and anybody in my personal life knows that, that it's something that I talk about privately a lot. I try very hard to stay a learner and to stay, you know, and to recognize there are so many things I don't know. One of the ways I think I really appreciate when people engage in, in a peer to peer environment is with humility, where they're sharing their experience, where they're sharing their perceptions, where they're sharing how they view things, but where they also have the awareness to recognize that, that that may not be universally true and it may be unique to their experience. And I think anytime I hear somebody give advice myself, chief among those. Right. Anytime I hear me give advice and anybody give advice, I always try to. It always resonates best with me when it has that layer in there of, you know, room for error and recognition that, you know, it's an opinion or a personal experience and not a hard and fast, you know, mathematical equation.

Speaker 2: 24:23

Totally. Right. I have a.2 teenage daughters, so 100% I can't just give advice anymore.

Speaker 1: 24:30

Yeah, you've got to get very artful with how you do getting teenagers to care about what you're saying.

Speaker 2: 24:36

Yeah, exactly.

Speaker 1: 24:37

That's awesome. Stacy, I know we've had a lot going on in the chat this morning. I think you've, you got more than you bargained for with some of those questions. Great work. I, I'd like to, you know, hear some of the things that we have going on from the audience.

Speaker 3: 24:51

Yeah, I have a couple questions. So residential, commercial, they're kind of two separate worlds. Does your platform cater to both of them or does it geared towards, you know, one or the other?

Speaker 2: 25:07

Yeah, so. Good question. I. This is for all aspects of construction. So any, any field, you know, if you're commercial, you're residential. I, I want them all because eventually, like I said, I want to be able to create, create more of those private communities. So I have the ability to create private groups as well. So for those trade organizations or those, you know, maybe it's a, maybe it's a business or that wants to have a private community as well. That's invite only. Then you can have that too. So I want to get to the point where really we're talking about executive things and you'd be surprised how similar a lot of those things are, no matter what part of the industry you're in. I mean, you could be in distribution or you could be a remodeler and you're having problems with employees. You know, there are very similar things that's going on right now. Labor shortage, you know, supply issues. Those are all work common. So I think that there's a, a little bit of a, it's, it's just the construction industry right now is so fractured with like, hey, I need to be a member of this trade organization and then I can get in that forum or I need to buy this software and then we can get. This is inclusive. And so I want it to be inclusive to start and then be able to narrow down into that private community as we go.

Speaker 3: 26:24

So another question is this comes up a lot before when people were trying to find communities online. Just as you're doing, the groups end up getting spammed with like tons of just sales pitches. So how do you filter that kind of thing? So you know, we're actually focused on thought leadership.

Speaker 2: 26:43

Yeah, it's a good question. It's very explicit in my communication with people is that this is a peer network. This is a person to person thing. There, there's not, you know, there's no bots that's possible. There's no, you know, if, if we find somebody get there and luckily I haven't had that yet, then I'm going to have a personal conversation about, hey, if you, if you have something to offer then you just need to, you need to, you know, maybe ask it in a different way. You need to say, hey, hey, I would like to get some feedback on this I'm working on or you know, instead of it being like, you know, you spamming people. And so far it's been really good because my, my communication has been like, I don't want it to be like LinkedIn where you feel like you're being, you know, partly sold by, by a large amount of the audience. I don't want that. So it's very explicit in my communication with people that this is really about a person to person, people to people conversations.

Speaker 3: 27:38

Another question too. We were talking in the chat about, you know, there's various types of software up there and people like to search on the Internet for problems and how to come to a resolution. And this1extra, CAD.com I believe is a forum for everyone that uses this particular software so they can. I don't know if your platform has like a search engine where if I'm struggling with something I can put in keywords and then find a conversation where someone solved the problem already or.

Speaker 2: 28:10

Yeah, yeah, that's what's cool about this is going to be a little mini construction Google. I mean once we have. And not only that I have, I have articles from all different aspects of construction in there in the feed constantly. So you're being fed information and then yes, there's a search engine that says hey, I'm, hey, does anybody use HomeAdvisor or whatever the question may be? And you will get articles and you will get comments already about that topic. So I do want it to be very useful. And then eventually this year we're going to be having, you know, education pieces come. We're going to partner with people who are, who are educating business owners, and we want to make it so that it is valuable. This isn't just a social thing. This is something that I want people to leave and say, hey, you know, that helped me, that helped my business. That's really what I'm looking for.

Speaker 3: 28:58

Cool. That's all I got for questions.

Speaker 1: 29:02

I, I just wanted to comment that, you know, there, there's. And I can certainly fall prey to this. I don't know if, if our parents would have fallen prey to the same traps or if this is something that is, you know, newly developed. This for as much for. As reliant as we've become on, you know, Google, as an exam, that's obviously, you know, a generalized term for utilizing the Internet to search solutions to our own problems. As reliant as we've become on that, what it's also given us to some extent is a sense of independence that, you know, I'm doing my own research and I'm, I'm identifying solutions to my own problems and I'm reading up on these things and I'm becoming qualified to solve these problems. And as a business owner, or frankly, anybody, but as I, in the context of being a business owner, one of the things that cracks me up is, you know, you're solving pro. You're taking all this time to become an expert to solve a problem that has been solved thousands of times before.

Speaker 2: 30:11

Right.

Speaker 1: 30:11

By really, really smart people.

Speaker 2: 30:14

Right.

Speaker 1: 30:15

And, you know, I really appreciate the gusto that you're, that you're out there trying to solve your own problems.

Speaker 2: 30:22

Yeah.

Speaker 1: 30:22

But for the love of God, you turn to the geniuses around you.

Speaker 2: 30:27

Yeah.

Speaker 1: 30:27

And, and, and, and save a massive amount of time.

Speaker 2: 30:32

Right.

Speaker 1: 30:33

And have the humility to just steal somebody else's stuff.

Speaker 2: 30:36

Yeah, exactly. I mean, and nine out of 10 of those people failed. They learned with failure. They did not learn because they figured it out. They learned because they stepped in a giant landmine.

Speaker 1: 30:46

And, and I, I think there is, you know, a, a big lesson that entrepreneurs today need to learn. And, you know, not everybody, obviously, this is, you know, I don't want to make my problems Everybody's. This is clearly one of mine is just, you know, having that awareness of what, what you are and are not expert in and what it does make sense for you to invest on becoming expert in and what it just makes sense to. To. To just find out what the experts do.

Speaker 2: 31:20

Yes.

Speaker 1: 31:21

And so I, I love what you're doing, man. I think, you know, creating this kind of online forum, you know, gives us opportunities to create some individual relationships. I know that Stacy and I have both created some wonderful individual relationships as a result of doing the Morning huddle. Yeah. Where you know, people who have engaged, you know, through the, you know, the online community have become, you know, one, one to one, you know, in person friends. And, and so I look forward to, you know, your success story on putting more of that stuff together. And, and I think it could be really complimentary with some of the stuff that my company, well Built is doing with. We have, you know, in person, peer group environments and I, I'd be really interested in finding ways to. To, you know, link up and, and you know, find ways to complement.

Speaker 2: 32:16

Sure. I know. Networking guy.

Speaker 1: 32:20

Awesome.

Speaker 2: 32:21

Thanks.

Speaker 1: 32:22

All right, great. Yo, thank you so much for being here. Any. Any parting words for us, Jeremy?

Speaker 2: 32:26

No, I just, you know, I appreciate the opportunity. Like I said, you know, taking every meeting and being very present for people. It's been, like I said, it's been so rewarding for me. So whatever happens with U. S Construction Zone, I'm already feel like I've gotten more out of it. So I'm, you know, like I said, I'm just like on this weird ride and it's like a roller coaster. But I'm having a good time, so I guess I must be doing something right. Very good.

Speaker 1: 32:53

Thank you so much. Stacy. Anything that you want to say before we jump?

Speaker 3: 32:57

Well, we have one more episode left, right?

Speaker 1: 33:00

Yes. So next week we're going to be. Next week we're going to be talking about change order management and it's going to be a fascinating discussion with a company that actually gets hired with. With the head of a group of a company that actually gets hired to manage change orders and you know, project controls actually for, for. For, you know, large scale commercial projects. It'll be fascinating discussion about how to simplify the change order process, how to avoid conflict and probably most importantly to everybody who watches, how to get paid. So, you know, let's, let's make sure that you visit us for that final episode of this season. We'll be taking two months off and we'll be back at the beginning of April, so we'll be, we'll be wrapping up here next week. Thanks again, Jeremy. Thanks, Stacy.

Speaker 2: 33:54

Thank you.

Speaker 1: 33:55

We'll see everybody next week.

Speaker 3: 33:57

See ya.

Speaker 2: 33:59

Bye.

Speaker 1: 33:59

Bye.

Join Host Chad Prinkey (Well Built Construction) and Co-host, Stacey Holsinger, (Steel Toe Communications) every Tuesday morning at 8 a.m. EST. on LinkedIn as they interview top A/E/C industry experts. Guests can participate in the conversation live!

Transcript:

So we're two days before Thanksgiving for the morning huddle. And, you know, it gets to be this time of year, and, you know, it's. At least for me, today and tomorrow is cram everything in before Thanksgiving. What's today and tomorrow look like for you guys? 

S

Speaker 2

00:26

Pretty busy for me. This is actually usually my favorite week of the year. Wednesday is like a half day kind of feel. But not this year. It's gonna be. 

S

Speaker 3

00:38

Yeah, not for me either, unfortunately. Me and Josh just realized we're both headed to Philadelphia to visit family in Bucks County. This is the first year that me and my brothers are taking over Thanksgiving and cooking for my mom. So my mom gets to relax, but we're using her house still. So is. 

S

Speaker 1

01:00

Do you think your mom will actually relax? Because I know if. Like, that sounds like a really cool theory for my mom, there's zero chance she would relax. 

S

Speaker 3

01:07

Exactly. I'm sure she's. You know, she says that she's going to be busy with my son, but I know she'll be popping in the kitchen checking. 

S

Speaker 2

01:16

And for the record, I said I was excited to go see my family. Stacy, I didn't say that. 

S

Speaker 3

01:23

Butts. 

S

Speaker 2

01:25

It was. 

S

Speaker 1

01:25

She just didn't. She didn't say. 

S

Speaker 2

01:27

I didn't hear it. I didn't hear it. 

S

Speaker 1

01:28

That's all. 

S

Speaker 3

01:30

Well, I have heavy responsibilities this year, so. 

S

Speaker 2

01:34

So. 

S

Speaker 1

01:34

So I got. I. I started on total accident. I started a little bit of family drama yesterday. We've got, of course, the obligatory family text thread, and I saw this article on how to prepare, like, the best Thanksgiving turkey, and I was like, oh, I'll send this along. And of course, it was like, my mother was like, sure, we can change the way that I do Thanksgiving turkey. Evidently, that's not good enough for you. And I'm like, no, I'm. So there was no agenda? No agenda. 

S

Speaker 2

01:59

It was awesome. 

S

Speaker 1

02:01

All right, let's go ahead and get rolling. For Tuesday, November 23, 2021. Welcome to the morning huddle. I'm Chad Prinky alongside my partner and producer, Stacy Holzinger. Stacy, how are you today? 

S

Speaker 3

02:20

Good. Great. 

S

Speaker 1

02:22

What? 

S

Speaker 2

02:23

So. 

S

Speaker 1

02:23

So going. Going to Bucks County. Is that, like, the standard? You always go to mom's? 

S

Speaker 3

02:28

Yeah. She would not give up her holiday for anything. For. I mean, she's an excellent cook, so I don't think anybody really wanted her to give it up. But this year, she's like, I'm taking a break. You guys got the kitchen. 

S

Speaker 1

02:41

So, you know, it. It's. It's. My best recommendation is to screw it up that way next year you get to return back to traditional. 

S

Speaker 3

02:49

That's a good idea. 

S

Speaker 1

02:51

That's my. That's what I do with the dishes when I'm given that task, you know, Anyway, so. All right, cool. So, Stacy, you know, Stacy's role, as always, is to come in that last 10 minutes and capture all of the awesome questions that come in throughout the course of the session. So for those of you who are viewing live right now on LinkedIn Live, please make sure that you get comfortable with that chat function. Fire your questions across. We want a chance to address those throughout the course of the session today. So, Stacy, we'll see you with 10 minutes to go. Thank you so much. I know you'll come locked and loaded with some good ones. See you soon. 

S

Speaker 3

03:33

See ya. 

S

Speaker 1

03:34

So today my guest is Josh Hauserman. Josh. Josh is a good friend of mine personally, but he is the head of the bonding group for HMS Insurance Associates, where he leads a team of 11 agents and three other support staff that help to make those agents successful. And Josh is also always behind the scenes to help not only his own clients, but the teams, the rest of his team's clients, to solve complex business and construction problems, you know, to help these contractor clients to get things done. I actually knew Josh before I ever met Josh through my clients, who anytime in a conversation over the years, you know, I've been serving the construction industry for 12, 13 years. 

S

Speaker 1

04:23

Over that time frame, I would get into conversations with contractors and talk about their most trusted advisors, you know, their lawyers, their accountants, things like that. And I would hear Josh's name a lot. So we shared a lot of overlap with our account base. And eventually I just thought, I gotta meet this guy. People talk about him. My clients speak about him the way I hope they speak to others about me. And so Josh and I got to know each other. He and I share so many views about the building industry. He's taught me a lot personally so that I've been able to better serve my clients as an advisor. So when I invited Josh to join, I was really excited that he accepted. We're here to talk business, and today's topic is Common Threads. 

S

Speaker 1

05:07

The most bondable contractors, from the view of someone whose team writes somewhere around $8 billion in bonds a year. So, Josh, before we get rolling, give us any additional intro on yourself to give some context. Who are you beyond what I've laid out for our audience. 

S

Speaker 2

05:28

Yeah, you nailed it. First of all, thanks for having me. And also thanks for hosting our client seminar last week. For additional background, I've been here for close to 17 years now. I started out just handling house account leads and basically supporting our producers. I was in that role for about five years and gave me a great deal of experience. I have my master's degree in accounting, which helps a great deal, as you can imagine, in this field, and ever since then been off and running. 

S

Speaker 1

06:03

Awesome. 

S

Speaker 2

06:04

So. 

S

Speaker 1

06:04

So I don't want to take for granted. There are going to be some people who are watching this morning or listening, you know, on the recording that are construction and bonding gurus. They know what they're talking about. Right. They've got years and years of experience in the industry. There are other. Also going to be some people who are kind of get the concept of bonding, but they don't. You know, they're not, they're certainly not experts. Could you give us like the 1 minute overview of what is bonding just to kind of give context to the remainder of our conversation today? 

S

Speaker 2

06:39

Yes. So I'll answer it as it relates to the construction industry specifically, but basically it's a credit transaction to give you like the Bond 101 answer. It's the underwriting is based on character capacity and capital. Character, meaning you're going to do what you say you're going to do. And you know, your references will check out, you haven't had a bankruptcy. Things like that. Capacity, meaning you have the labor, the equipment, the experience to handle the jobs in your backlog. And capital, meaning you have money. 

S

Speaker 1

07:14

Got it. And so a bond might be defined. 

S

Speaker 2

07:19

As what I would say. A bond in this context is synonymous with a guarantee. So you have a bid bond, which is a guarantee for your bid performance. Bond guarantees your performance of the contract. And a payment bond guarantees payment of subcontractors and suppliers. 

S

Speaker 1

07:36

Excellent. All right, cool. So with that as the backdrop, it's this, you know, question of credit worthiness. You know, that's going on. Capacity, character, capacity. And what's the last one? 

S

Speaker 2

07:50

Capital. 

S

Speaker 1

07:51

Capital. Character capacity and capital. Okay, good. 

S

Speaker 2

07:53

All right. 

S

Speaker 1

07:53

That's a good backdrop. So I think most. What bonding means to me. I think most contractors want to be able to brag about their bonding capacity. Most, most contractors, my impression is it's a way of sort of humbly communicating their financial stability, strength, trustworthiness, etc. As a bonding pro, what do you think high bonding capacities really signify when somebody says, you know, we've got X, you know, desirable bonding capacity? 

S

Speaker 2

08:28

Yes. First I would agree with you. I think it's a status symbol within the construction community. And really what it represents is staying power. And I would argue that the underwriting process is effectively a construction best practices checklist. You kind of, you get into a contractor's operation and you see, you know, look under the hood and see how they perform and, you know, all the upside, the downside, and everything else. 

S

Speaker 1

09:01

You mentioned best practices. Best practices in what way? What are some of the examples of best practices or the checklist? So if I were, if I'm a contractor, this is valuable information because there's a. There's clearly a list of, you know, are you doing things right that, you know, that underwriters are using? What are some of the things that are included in that kind of best practices? 

S

Speaker 2

09:28

Yeah, I mean, I would say it's in a word or two words, operational excellence. And that's in every department and throughout the organization. So that starts with, you knowing your costs and having a accurate accounting system, bidding, you know, having checks and balances in your bid process, obviously having the experience in the field, having the labor to support the projects that you're bidding. Good subcontractor relationships, whether you're a GC or a subcontractor, identifying risks on projects. And I think the biggest thing is you can tell in a conversation with a contractor if, when you bring up, you know, potential pitfalls or things that could drive a project to go sideways, if that contractor has a backup plan for their backup plans, I think that's the best way to put it. 

S

Speaker 2

10:21

So in other words, if, you know, I've been in meetings where there's concern about labor and, you know, we have a great crew here, but what if the next contractor over comes over and offers, you know, field labor $2 more an hour and, you know, they disappear one day, what do you do? So you have to think about scenarios like that. You know, how are you going to manage your subcontractors on the critical path? Yeah, just, you know, evaluating contract terms. You have to have controls in place and really just vetting not only project risk, but operational risk within your organization. 

S

Speaker 1

10:58

Interesting. I'll tell you one thing that I want to zoom in on is this idea as I listened to your checklist. Okay. Things went from in my mind, kind of, you know, basic to more and more complex as you kind of went down the line. So I'm, you know, just going through, like, knowing your costs. Gosh, I, I betcha that there's a substantial number of contractors that can't Check that box, you know, fully. So when somebody. And then there's, and then there's maybe the contingency plan for the contingency plan being that one's, you know, sort of really advanced. So if you've got knowing your costs as a foundational item, then there's contingency plans for contingency plans as something that is, you know, do you think about this at all in any kind of hierarchy? 

S

Speaker 1

12:00

Is that something that you know, look at or is that just my interpretation? 

S

Speaker 2

12:05

You know, I wouldn't necessarily look at it in that way. I would look at it more along the lines of you're only as strong as your weakest link. So if you think about it, if you, if there's 20 boxes to check and you check 19 of them, that one unchecked box could be the shortfall that takes a company under. So I, in my opinion, I think it's, you know, you try to have as much depth as possible in each line item. 

S

Speaker 1

12:32

Got it. So what. One of the things that I know, certainly most contractors spend a lot of time thinking about, and rightfully so, for lots of business reasons and personal reasons, is profitability. But what role does profitability play? Is it just one of the checkboxes? What role does profitability play in a company's bonding capacity? 

S

Speaker 2

13:02

It's huge, but it depends on the metric. So, for instance, I'm going to dig in deep and then I'll walk it back a little bit. But obviously profitability is paramount in the bond underwriting process because ultimately profitability enables a contractor to build their balance sheet. And once you have the working capital and equity, basically that effectively means that you do have staying power, and that's what getting bonded is ultimately all about. The caveat to that is you want to best practices relative to profitability. Except I'd argue one item that is counter to bond underwriting as it relates to profitability, and that's the return on investment metric. 

S

Speaker 2

13:50

Because basically you can drive that metric higher with a leaner balance sheet, which is counter, like I said, it's counter to bond underwriting where, you know, it's bond underrated based on balance sheet metrics and having the wherewithal to, you know, whether a bad job or, you know, weather downturns in the economy. And obviously all that starts with profitability. But that's one carve out that I'd say is ROI isn't necessarily a metric. But to answer your question, yeah, profitability is paramount. 

S

Speaker 1

14:28

At the risk of Going into real bonding. Geek land. Talk more about the ROI metric. 

S

Speaker 2

14:37

So we actually. Yeah, we wouldn't. Right. It's. So return on investment is basically net income relative to your equity or, you know, starting capital in the company. From my perspective, that's not, you know, it's cat. I say it's counter to our underwriting metrics because if you came to me and said you were going to start a construction business and you gave me two scenarios, one where you were going to put in a million dollars to start and another scenario where you're going to put in $2 million to start, I would probably recommend the 2 million, obviously depending on what you wanted to do. But that makes that checks that staying power box in a more effective manner, if that makes sense. 

S

Speaker 1

15:19

It does. So what are. Let me ask this question. I'm interested in what we can learn from the companies who consistently look the best in the eyes of underwriters. So for this audience that mostly consists of contractors and also people who, you know, deal with contractors on a daily basis, what can we learn from the companies who consistently are viewed as good risks in the eyes of underwriters? 

S

Speaker 2

15:55

I would go back to the, you know, the best practices approach. I think one of the very important things, and obviously this depends on where a contractor is in their life cycle and if it's a, you know, long standing contractor that has a, you know, long history of profitability, it's going to be a different scenario. And they might not need the level of advice. However, I mean, it comes back to operational excellence in every department. Right. So with your estimate going back to knowing your costs, I think that's imperative because you're making management decisions based on your performance. You're not going to know your performance unless you have accurate cost controls. You're not going to be able to bid accurately if you don't know all of your costs and know them accurately. 

S

Speaker 2

16:43

You're not going to know which customers to focus on or which scopes of work to focus on if you don't have those true cost figures. So I'd start there and then, you know, if you think about contingency planning, you know, having a stable subcontractors and suppliers having, you know, plan A, plan B, plan C, that also goes for capital as well. Right. Best practices would tell you to tell contractors to establish a working capital line of credit, but not necessarily use it and keep it for a rainy day. And that way if a project does go sideways or if there's a hiccup along the way, you know, you have an outlet. 

S

Speaker 1

17:22

I want to get back to this cost controls thing for a second, Josh, is that, you know, really practically, if I were a contractor and said I'm looking at myself in the mirror and I really don't have a handle fully on my costs, I get to the end of the project and I'm kind of holding my breath, and that's where I peek and see, like, did we do okay? You know, and some of them, it's even tougher, right? They get to the end of the year and they just, it's really like what's left, you know, if I'm in that boat, what are some tangible recommendations that you would have for getting my hands wrapped around my costs? Like, just what are some things that you've seen your clients do that give them better control? 

S

Speaker 2

18:05

That's a good question. Again, that would depend on the size of the contractor. But I think the easy answer is leverage technology. You know, whether it's having a project management system tied to your accounting system that ties to your bidding system and have everything integrated. From my perspective, I think doing a postmortem analysis is imperative. Right? That's how you know how your project teams are performing, how your customers, how valuable your customers are to you know, and types of work. So I would say leveraging technology. And the second thing is lean on trusted industry professionals. And in that world, it's obviously your construction oriented cpa. I think that's imperative. I think a lot of the time you'll, you can ask most CPAs if they specialize in construction. I would say most might say yes. 

S

Speaker 2

19:02

My recommendation is look at companies that you admire and companies, other contractors that, you know, you strive to be like them, and look at the industry professionals that they work with and, you know, start there for your cpa, for your attorney, for your, you know, construction consultant, bond agent, insurance agent. The whole night. 

S

Speaker 1

19:23

Makes total sense. Yep, I, I agree. I think, I think the answer, you know, said in maybe a different way is also don't. Don't try to go it alone. There's technology and there are professionals that are literally there to help you to get your hands wrapped around that stuff. And there's absolutely nothing that should stop you from reaching out to those folks. Just a quick reminder to our audience, please start firing in some questions from your perspective so that we can shift gears to that in just a few minutes while I move on to another question. So, yeah, what are the most common mistakes that you see contractors make that are most damaging to their bondability. 

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Speaker 2

20:10

Good question. The short answer is losing money. But the situations that I've seen lead to losing money. It's any combination of trying to grow too fast, owner disengagement, lack of internal controls. A big one that I've seen is obviously jobs can go sideways. The construction industry is very dynamic. But if you see that there's a systemic problem and there's systemic risk, either on the, you know, specific scope of work that you're pursuing or a specific customer or type of contract, if you see a systemic risk and you do not address it's going to come back to haunt you. So I've seen that quite a bit. Yeah. And then just not, I guess the attitude, not having the attitude of I don't know what, I don't know. 

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Speaker 2

21:05

I think obviously you need to be confident, but, you know, you have to have that little devil's advocate in your ear from time to time. 

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Speaker 1

21:14

To me, it goes down to what I'm, how I'm translating what you're saying is. It goes down to, you know, working on your business. So when it comes to working on your bonding capacity, what you're not working on your bonding capacity, you're working on your business. Yeah. That's what you're really doing. And, and so if a part of what you want is to improve your bondability, which will enable more growth, which will enable more opportunity and profitability and all those different types of things, if that's what you're looking for you can't accept your things as they are today and say, yeah, this is just, it's what I know, it's what you know, this isn't what I do. I'm not going to be great at these things. 

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Speaker 1

22:05

You know, one of the biggest problems or, you know, kind of, I don't know, nails on a chalkboard. For me when I hear is that like we don't, we don't want to overdue process. We don't. We just really don't. Like, we like, you know, kind of allowing our people freedom. 

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Speaker 2

22:18

Right. 

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Speaker 1

22:18

Which is to me, it's all. I'm not opposed to either of those comments, but usually when I look under the hood, what that is code for is like we like to wing everything. And, and that is a really good indicator of somebody that is. It's going to be really difficult if you have that mindset to actually work on improving, to actually improve your business because you're just Resisting adopting best practices and principles. So, all right, I want to open up the door for the questions that are coming in and toss the ball here to Stacy, who I'm going to bring back. Stacy, what do we got? What kind of questions do we have for Josh? 

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Speaker 3

23:10

Sure. So what advice would you give a contractor looking to grow their bonding capacity? 

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Speaker 2

23:18

The. And this actually ties into Chad's last question too. But focus on the bottom line. Don't chase revenue, don't chase the top line. Focus on the bottom line. Retain profits, establishment controls and systems. Lean on your trusted advisors. You know, you're just like we had mentioned, CPA, attorney, construction consultant, you know, bond agent, insurance agent, the whole nine, obviously leveraging technology. And I think the biggest thing frankly for me in life is just having a growth mindset and always trying to learn. You never want to be in a position to have the industry pass you by. And if you think about what it takes to maximize your bonding capacity and the goal of bonding companies in establishing a bond program with a contractor, it's staying power. 

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Speaker 2

24:12

And I haven't talked to any contractors who tell me the five year plan and that includes going bankrupt in year five. Right. So the goals are aligned in that regard. The friction usually comes with the amount of capital that's required to retain in the company to substantiate a larger bond program. So I think that's the key. Profitability and retaining earnings and then growing from there. 

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Speaker 1

24:34

So I have a follow on question regarding profitability. I totally agree with you that companies put way too much emphasis on top line growth and not nearly enough emphasis on what that ultimately means to profitability. But is there such a thing as too much focus on profitability? In other words, here, how about this? Are there costs that you wouldn't recommend cutting? You know what I mean? You're sort of saying don't do that, don't cut. 

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Speaker 2

25:12

So yeah, it's a good question. So you don't want to step over dollars to reach for pennies. Right. You don't want to try to maximize your profitability this year and sacrifice your profitability the following three years as a result. So obviously, you know, it's a balance. So when I say retain earnings and focus on profitability, that still requires leaning on your trusted advisors and industry professionals. Obviously there's a cost that comes with that. Leveraging technology, there's a cost that comes with that, but that's not, those are investments in my opinion. So I think differentiate between investing in the future, investing in your company. That's obviously imperative as it relates to staying power. But if you're looking to cut costs, do you need to go to an industry event across the country and stay an extra week, something like that? 

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Speaker 2

26:07

That's obviously not necessarily an investment in your company. So, yeah, to answer your question, I'm not saying cut all costs and pinch every penny. It's, it's, you know, invest in your company and keep an eye on the long term. 

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Speaker 1

26:19

And do underwriters get that? So if I'm able to, to show the underwriter, if I'm able to sort of say like, okay, yes, we did not improve our bottom line last year. We did 3% in 2020. We're doing it. We're going to do 3% again in bottom line in 2021. But I want you to see here this, you know, $140,000 worth of investments that we've made that I could have let go to the bottom line, but that we actually put into this training program that we put into, you know, employee raises so that we, you know, became more durable against, you know, rising incomes. And we didn't want to lose our key people to write. Do underwriters get that? Do they, you know, can you, do you get an opportunity to tell that story? 

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Speaker 2

27:06

Yeah, I mean, quite simply, that's our job as a bond professional and bond agent. Right. So a story like that doesn't necessarily jump off the page and, you know, it's not like it's highlighted in the financials. 

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Speaker 1

27:19

Right. 

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Speaker 2

27:20

But our job is to provide context around those financials. That's an easy story to tell. If a company's still profitable and making investments into the future. If it's a situation where, you know, like everything else, it's a balance. So if there's a scenario where, you know, you have a contractor who's lost money three years in a row and it's the same narrative all three years, like, it's not going to fly. So there's a balance there. But the short answer is absolutely, that's part of the story. And obviously it's an investment in the future. And, and obviously that matters. And that's ultimately what bonding companies want, is staying power and a long term view on things. 

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Speaker 1

27:55

Awesome. 

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Speaker 2

27:55

All right, Stacey, what else? 

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Speaker 3

27:57

Yeah, so Blake Radcliffe asked, with so many projects running over schedule and over budget, plus rising labor challenges, how are you calculating and managing risk? 

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Speaker 2

28:10

So I wouldn't say there's a set metric relative to that type of risk. It's, you know, let's have a conversation about how you're going to address it. So when I mentioned previously, you know, you have your plan A and your plan B and your plan C, that doesn't necessarily mean that plans B and C are still, you know, makes the. The job, whatever, you know, like a very successful job for you. But if it's something that keeps it from being a total disaster, that helps. So I think the biggest thing is just having contingency plans. So in other words, you know, with all the supply chain issues now, are you able to substitute products? Are you able to obtain supply bonds from suppliers, which, you know, in my world, it's. It's always mentioned, but I know in practice, it's. 

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Speaker 2

28:58

It's more challenging than it, you know, than it would otherwise appear. But just things like that and having. Having access. If you're a subcontractor, having access to not only the gc, but the owner to have those conversations of, you know, contingency plans relative to specified materials, things like that, and relative to labor. You know, if you can't staff a job, maybe not bid it. If, if you have the labor at the date and it evaporates by the time the project starts, then maybe plan B is subbing it out and you're obviously sacrificing margin. But at least, like I said, it'll keep you from. It'll avoid a large problem and maybe keep it a small problem. 

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Speaker 1

29:45

Yeah, I think that's a great point. So it's all about making sure that you have given consideration to what would be necessary if I still had to perform, how would I work through these things? What are alternate materials? What are alternate labor sources, what are alternate vendors? You know, all those types of solutions, and you still might struggle. But from an underwriting standpoint, that's what they. That's what they're looking. 

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Speaker 2

30:18

Yeah. And just go into a job, eyes wide open, and if. If you're concerned about something where you don't have, you know, you're not satisfied with your, you know, plan C, then, you know, talk to your attorney and see if you can have an outlet in that, you know, just contractually and, you know, have an outlet in that regard. 

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Speaker 1

30:37

Yeah, great point. All right, cool. Stacy, I think we might have time for one more. 

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Speaker 3

30:42

Okay. So, Eric TV said, we understand the most important things to a charity is equity, history, consistency, stability, routine process, procedure, and what are the three most detrimental attributes in the eyes of a surety? 

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Speaker 1

31:03

If you had to pick three Most detrimental attributes. 

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Speaker 2

31:06

Ooh, I like that. Yeah. I would say it depends on where the questioner is coming from. But from my seat, if somebody calls me and says they need a bond and we start talking through that process, if in that process I mentioned the character, the first seat that I mentioned in that first conversation, I might ask how their personal credit report looks. That answer is very telling. And the statistics behind somebody who's had a bankruptcy, for instance, it doesn't bode well for round two of starting a business. So I would say, you know, character and more narrowly defined personal credit is a huge item. I would say any. It depends on the contractor. But I would say as. As the underwriting process unfolds, look for systemic items that might cause either project losses or overall operating losses. 

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Speaker 2

32:12

So it might be as simple as, you know, we've had subcontractor failures on three projects and that, you know, tanked our year. Well, what are we doing about that process? Are we increasing your pre qualification? You know, it's always, it's the whole name of the game is identify systemic risks and understand why you aren't profitable if you aren't. So I wouldn't necessarily narrow it down to three specific items, but the bottom line is anything that prohibits you from being profitable is probably, you know, name those as 1, 2, and 3. And that depends on the scope of work and the trade. 

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Speaker 1

32:46

I like that. I like the overriding first bullet of like, do you pay your bills? 

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Speaker 2

32:51

Yes, exactly. You do what you say you're going to do. Good start. 

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Speaker 1

32:54

If you don't pay your bills as an individual, that might be a problem as a business and the systemic problems. And to me, that's really maybe how I would put a bow on the conversation or wrap up the conversation that we've talked through today is that you've got to identify those things in your business that are creating negative business outcomes, period. That's what you mean by systemic issues, right? 

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Speaker 2

33:28

Exactly. Yep, yep. 

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Speaker 1

33:29

And having identified those, be taking proactive steps to address those issues. And then you didn't say this, but I will do, do everyone a favor and don't just throw a body at it. Okay, so, so one of the biggest mistakes I see people make is, we're getting this problem. I need a VP of ops. We're getting this problem. I need a cfo. We're getting this problem and it's it. That may be true, but. But you also have to take personal responsibility for that. As a business owner, as an executive team, personal responsibility for how that thing is happening rather than just bringing somebody else in to deal with a broken situation. Because I cannot tell you how many people I see who are hired and who fail. Because the problem wasn't that they didn't have somebody in the role. 

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Speaker 1

34:22

The problem was that there are six other things that are contributing in that business to why that consistently happens. And that person hasn't been given control over changing those things. 

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Speaker 2

34:31

Right, Right. 

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Speaker 1

34:34

Anyway, we're up on time and we really like to finish on time. So, Josh, I really, again, Stacy and I appreciate you taking the time to join us today and to share your knowledge. I can honestly say that every time I speak with Josh, I get smarter. And I hope that you guys did today, too. I feel like, you know, I hope you feel like you learned something. So just a couple of quick things to wrap up. Number one, make sure that you. If you didn't catch this whole thing and you want to make sure that you get access to it. We are posting these on YouTube. Stacy and I are sending out a weekly email that has contact or. I'm sorry, that has the registration for the upcoming session and that has the link from the previous session. 

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Speaker 1

35:21

We're getting better at that part, so. So hang in there with us. But if you want to get an email distribution, shoot us a private chat and we'll get you added to our email distribution list. That's number one. We do this every Tuesday, though. In December, we're gonna take a little bit of time off. We do this every Tuesday and next week we will be running this on the 30th. And if I'm not mistaken, Stacy, is that you and I on the 30th. 

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Speaker 3

35:52

We need a guest to sub in for questions. 

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Speaker 1

35:56

Yeah. Stacy and I are going to be talking about marketing best practices for contractors, which I'm psyched about, and Stacy is a real pro on. So I look forward to having that discussion. And so, yeah, 8am Eastern next Thursday, next Tuesday, if you can't join, you can always catch the recording on LinkedIn or on YouTube. And if you want to make sure that you don't have to rely on LinkedIn to send you messages, send us your email address and we'll take care of that for you. Josh, any final word for the audience before we sign off? Anything you want to say? 

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Speaker 2

36:31

Thank you both for having me. Thanks for listening and happy Thanksgiving. Be safe. 

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Speaker 1

36:35

Thanks. You do the same. Stacey, anything you want to say to wrap us up? 

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Speaker 3

36:39

If we didn't get to your questions, feel free to reach out to Josh, and I'm sure he could help you with anything. And happy Thanksgiving, everybody. 

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Speaker 1

36:49

Thanks so much. Yeah. Happy Thanksgiving. See you, team. 

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Speaker 3

36:52

See ya. 

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Speaker 1

36:52

Bye.