112. Construction Entrepreneurship With Steve Kreitzberg

You cannot survive and cannot succeed if you are just like everyone else in the particular niche that you've chosen.

Welcome to Professional Builder Secrets, the podcast for building company owners wanting to grow safely and securely. I'm your host, Will Blunt, and today I'm joined by Steve Kreitzberg from Apparatus Contractor Services in the usa. Steve, welcome to the show.

Will. Thank you for having me. I'm looking forward to talking.

Very excited to have you on the show today. You're a recent new entrant as a rewards partner for the association of Professional Builders and really excited to have you on board.

Thank you. Yeah, we're excited as well.

So can you provide me a brief background on who you are and what work you do? Steve?

Yeah, absolutely. So I began my career in engineering school back in the early 80s and went to work in the computer industry, actually Hewlett Packard down in the Bay Area and did that for a number of years. And while I was there, I went back to school and got an MBA in finance. So I had that ideal combination of engineering and finance. But I left the computer industry in 1991 to pursue what became the development of a whole series of interconnected real estate companies. And it was that experience that began in 91 and continues to this day that ultimately led to what is now Apparatus Contractor Services. And the story there was simply that all of those businesses that I began to build starting in 1991 all relied upon really good, capable general contractors for us to achieve what we were trying to achieve. And I learned really early that some of my best contractors struggled mightily with the finances and accounting for their construction businesses. And as a client of their we would struggle, then we'd pay them and they'd apply it to the wrong invoice or they wouldn't bill us at all, etc. And probably in about 1992, I said for the first time, someday someone ought to start a service business that provides precision construction accounting for really capable contractors. And it wasn't until 2017 that I finally did just that. And that is Apparatus Contractor Services.

Yeah, it's a great story and it's certainly a very valuable service in the industry. I think there's a lot of construction companies out there, especially in our audience, that are, you know, that small to medium sized company that really do need a lot of help with their finances.

Yeah, that's right. That's right.

So what typically today we're going to talk about construction entrepreneurship, which is a bit of a different take on, you know, just running a business entrepreneurship for Me is something a little bit more inspirational and aspirational, I guess, as a business owner. So what motivates construction entrepreneurs to enter the industry?

I think if you compare it to what we might call general entrepreneurship. What's unique about construction entrepreneurship? I think it is more commonly what I would call inside and up or a role model that has shown someone what's possible. I think it is unique in that most construction folks that end up running residential builder or remodeling companies, at least as defined by the clients that, that I recruit and that we work for with apparatus, didn't start as entrepreneurs. They started in the industry and they saw a role model succeeding and they followed in those footsteps.

Yeah, that's quite a common path, isn't it? A lot of people start in a trade or they're a carpenter or something like that and they learn from someone else in the industry. And I think that probably plays into the part you mentioned in terms of the understanding around financials and needing help with that because they've probably been flying by the seat of their pants to a certain extent.

Yeah, great.

Great at their trade, great at building houses, but don't know as much about the business side of things. Exactly what are some of the unique challenges that entrepreneurs face in the residential construction industry?

Well, when you, when you compare it again to more generalized entrepreneurship, especially the way that I'm about to break it down, one would stand back and say, gosh, talk about picking the hardest possible path. Because let's be honest about what residential spec or custom home building or large scale remodeling really is. You're dealing first of all with a complex product. It is not simple. It is a highly regulated product. There's a body of law that surrounds everything from building codes to bonding and licensing. So this is a highly regulated space. It is capital intensive. If you are doing spec homes, you've figured out a way to raise large sums of money. And that's a bit unique. It's a complex supply chain. It's both localized and dependent on national sources for the key components that go into your product. And to top it all off, you have substantial competition. It is not exactly a space that is absent of lots of competition coming and going at all times.

Yeah, it's very. When you put it like that, why would anyone get into the industry?

I'm afraid I have some of your audience saying to themselves, yeah, why did I choose this compared to the other paths of entrepreneurship in life?

Well, maybe it's one of those things. I think it is a very Unique industry. I mean, entrepreneurship in general is challenging, right? Running any business is challenging, but for all those reasons you just said, it's quite a unique space and only the best can shine.

Yeah, that's exactly right. Yeah.

So if you do manage to handle those challenges and break through the other side, you can have a great deal of rewards come from that.

Yeah. And I think what folks who are succeeding have realized is that the way to solve the complex problem part of the challenge is customer tailored standardization. You're doing a series of operational decisions that allow you to have a relatively standardized product, but still highly adaptable to the needs of a specific client. And you're in a highly regulated space. So you're also developing methods for standardized production so that you're meeting the requirements of, as an example, the construction code, et cetera. Because it's capital intensive, you're developing skills and capital sophistication probably faster than most entrepreneurs, especially service business entrepreneurs who may never face those challenges. And because it's a complex supply chain, you're building networks and ecosystems of subcontractors and other professionals that are essential for you to achieve what you're doing. And finally, because there is substantial competition, those who are succeeding are recognizing they have to be both specialized and highly differentiated. You cannot survive and cannot succeed if you are just like everyone else in the particular niche that you've chosen. And we certainly see those attributes with the clients that I recruit in terms.

Of the most successful construction.

Yeah. If you look at the common themes of their strategy, this is what you see. You see those components as the way that they've defeated what is otherwise an insurmountable opportunity.

I want to dive a bit deeper. You mentioned financial education there, or you suggested it, that by working in this industry, you're almost learning quicker than other entrepreneurs in terms of financial education. But my question would be that that's almost one of the biggest challenges as well. Because if you don't learn about financial education, it's almost like a ticking time bomb in a construction company, right?

Yeah, that's right. And I'll come at that in a slightly different way. And that is what is unique about the people who come into construction and who come into these roles first. Like we said before, the common path is up through the ran. A lot of these guys and gals have been on job sites working in labor roles. And as I said before, they see a role model succeeding with a construction business and they follow that path. It is also very common that these are solo startups. My client group is Typically builders doing spec homes or custom homes and running between 2 million and 10 million in revenue, which means they do not reflect all residential construction. But it is very unusual for one of our clients to actually be a partnership. It is usually a strong individual founder that started as a solo startup. The third is that what's common in their background is technical. They came up through the skills of the product that they're building. They did not come through from the sales side. I'm not sure if you've ever thought about it this way, but the vast majority of what I would call non construction entrepreneurship is actually people who have some background in sales, moving into a particular niche or forging a new company based on their experience serving a customer group. These are technical people, much like my background in engineering, who come up through the ranks and then find themselves running a business. And because they're technical, they come commonly. Then little or no marketing background and little or no rote financial education as an engineer. I went back for an MBA to get that background. But that opportunity doesn't exist for most of the people who are now my clients. The fifth piece of what I think makes these people unique is that it's rare that you meet a successful builder or remodeler who didn't bootstrap their company. I mean, they literally started out profitable, they maintained a level of profitability, and they built a business that was built upon that profitable process. To the extent that they got debt later, it was because they recognized that there's leverage that comes from labor, meaning I can hire people, but then the next layer of leverage has to come from capital, which they do then with institutional debt in the case of spec build or client debt in the case of custom build. So I think the people themselves are different. Their trajectory into entrepreneurship is different.

Yeah, very unique, as you mentioned. I mean, interesting that you mentioned as well. That's very little partnerships that you see and more so individuals that come through. That's almost quite an isolating experience. I imagine it is.

Yeah. And I think one of the most dangerous things to happen to any entrepreneur, including construction entrepreneurs, is to become isolated with their own challenges and isolated inside their own goals. Because entrepreneurship, generally speaking, is a team sport. And the smartest and most successful entrepreneurs understand you do not have enough time in your life to learn through the school of hard knocks all of what you need to know. And the people who have achieved more in the time period that they are running those businesses are not actually moving faster. They're just not spending time in dead periods where their Ignorance acts as a barrier to their own success. There's a perspective out there that I think is true, that all of us, when we're doing anything in life, especially entrepreneuring, have to pay down an enormous ignorance debt. And the more rapidly we can pay down that debt, the further we will move and the more rapidly success will come.

Yeah, I think there's probably almost a badge of honor among entrepreneurs when they're starting out to maybe not ask questions or not feel that vulnerability around ignorance. But at the end of the day, you need to actually seek experts, information, people that have been there before.

Yeah, I think there's a corollary. It's a form of hard work that entrepreneurs adopt a Persona of rugged individualism and society idolizes that kind of the heroic figure that succeeds against the odds. But if your objective is to optimize for your own success, rugged individualism is actually the opposite of what you should be doing. And I can speak from experience. In my entrepreneurial career, which began in 91, I spent easily my first 10 years as a committed, rugged individualist. In fact, I almost took as a badge of honor that I would rather be wrong by myself than right with others. And in hindsight now I look back on that and realize that is what it was, which is simple arrogance. And if you can shed that arrogance and take the help that other people are capable of giving you, you can move so much faster. And you look around, the people who've succeeded tend to be those who are very quick to engage with someone else and say, either here, I need help in this domain, can you do it? Or at very least, I'm struggling here, teach me. But it's hard to do. It's hard to do. Most of us are what I call. We tend to spend our time being too cool for school.

Yeah, it's a good, it's a good phrase to refer back to. Do you ever find. Because you mentioned most construction entrepreneurs essentially bootstrapped and their. Their growth is probably progressive and slow in the first period of the. Of the company's existing. Do you ever find that therefore they're a little bit more gun shy on growth and investing in business at a certain point?

Yes, I do. In fact, I'm going to use that question as a springboard for what I think is quite interesting about what I've learned about the kinds of folks that I work with today with apparatus. And there is some really important mindsets that the most successful among my clients begin to adopt. And I spend a lot of my time talking about these mindsets with my clients because I think they are so instrumental to success. And the ideas I'm about to share are a mix of mine, plus a lot of the ideas that I have gleaned from a gentleman by the name of Dan Sullivan of Strategic Coach. I've been a client of Dan Sullivan's for about 20 years. So these are some of his ideas. And the first is that there are really four freed that come from entrepreneurship. The freedom of time, the freedom of money, the freedom of relationship, and the freedom of purpose. But the key thing that you have to understand is that the freedom of time has to precede freedom of money. A busy entrepreneur is less likely to accelerate their own growth. You have to free yourselves up. And so that leads me to point number two. Growth actually comes from simplification. So what I mean by that is that you have to narrow your own focus to allow yourself and your organization to grow. Another way to look at it is you can have anything you want if you are willing to give up what you hate doing. So if you can get out of your own way and get out of those things that are actually going to be limiters for you. But most of us have a tendency to hang on to things we shouldn't be doing. And then finally, when it comes to delegation and that hesitancy to delegate. And the second idea that all is really that all growth has to be preceded by simplification. You cannot grow complexity. And so it starts by you narrowing your own personal focus. And another way to think about it is you can actually have everything you want if you are willing to give up those things that you hate or shouldn't be doing in the first place. The other is that delegation is something that a lot of us fear. But a powerful idea is this notion of don't ask yourself, how can I get X done? Ask yourself, who exists out there that is expert in X and how do I harness them to get this done for me? Because the moment I ask myself the question, how do I get this done? I've put the burden on myself. Instead, if I say, who can get this done for me? And that's a very different position to take than what we would call delegation. Delegation has a bad rap because usually when you delegate, you're giving a task for which you have competence to someone who has less competence. And so you hesitate to do it because you know if it goes badly, you're going to have to take that task back. But who, not how? Thinking is instead, not delegation. It's instead me saying, there's Got to be someone out there who is uniquely qualified, far better than I am, to do this task really well. And if I build my company by creating points at which I can bolt on those capabilities, now I'm going to grow. Apparatus itself is designed to be bolted on to a rapidly growing construction company, because we are that who when it comes to finance and accounting. And we'll talk more about Apparatus later. The final thought about growth coming from simplification is a notion that it's actually easier to grow 10x than it is to grow 2x. And the most dangerous goals of all are the ones where you're setting relatively incremental growth, 10% this year or 20% this year, because those goals can still be achieved without radically standing back and redesigning your company from the ground up. When I started in 91, when I left the computer industry, I built out a residential redevelopment company and it got quite large. We did over 300 million of acquisition, renovation and resale of single family homes. But it wasn't until I stood back and realized that to grow from here, I'm going to have to reset everything. And now if you look at that business, it's actually not involved in residential at all. I own industrial parks from the west coast all the way to the east Coast, a total of 18 of them now. And that came from having a goal that was to 10x, not to 20% or 30%. And that escapes a lot of people for a long time. Really big goals can be achieved, oftentimes easier because it forces you to change everything. And then a third mindset that is, I think, essential for people's success is that collaboration working together with others is about hero targets. And what I mean is, as I grow Apparatus, I'm trying to be a hero to residential construction, business owners, entrepreneurial people that have a passion for growing. Anybody in the industry who is also trying to be a hero to that group of people is a perfect collaboration target for me. And if I set about to work with the other people who are trying to be heroes to the same clients I'm trying to serve, suddenly my own growth accelerates. And that applies to my clients as well. They are trying to be heroes to the clients for whom they're doing custom build or ultimately the people that buy their spec builds, if they stand back and say anybody else trying to be heroes to that same client group is a natural collaboration partner for me, that can really unlock a lot of growth very rapidly. So these mindsets, freedom of time preceding, freedom of money growth coming from simplification and collaboration being about hero targets are ideas you don't hear talked about. But if you embrace them, they can really cause accelerated growth.

Yeah, I'm big on the, you know, the, the big hairy, audacious goals like those long term goals like the 10x like you said. I guess on the flip side though, you certainly need to make sure in construction you've got your finances in order if you're going to grow at that speed.

Yes, you do. Yeah, you absolutely do. Yeah.

One thing you mentioned in terms of delegation as well, I found it interesting just reflecting on my own experience and I think what I realized at some point it was easy to delegate things that I was, I didn't know anything about or I wasn't good at because you know, you would, you would know that there was someone else out there that was going to be better than you.

Great point. Yeah.

When there was things that I'd done a lot myself, there was almost an arrogance inside and an assumption that I can't hand that across to someone. As soon as I were able to break, break that cycle in my head or that, you know, that inner talk and had a few examples where I handed something over I didn't think I could and someone else did it as good as me or better than me, all of a sudden it was a light bulb moment. Like you really can, you can hand over anything to someone that. And they'll probably do it better than you.

Yes. And so you get over that, that, that sense, like you say, of needing control or almost a form of arrogance, that I have to do this for myself. But I think the, the issue is larger than that. And that is if we measure in terms of opportunity cost, what does it actually cost me to continue majoring in this minor item when instead if I major in the majors and stand back and look at everything that I could my business and focus only on those things that I absolutely must do in the general case for my clients, every hour they free themselves up that gets reinvested in A building their team or B recruiting and working with customers. Those are very high leverage hours. And every hour they spend in the internals of their business are very, very low productive hours. And so again, you have to measure it in opportunity cost. It is absolutely true that if you have a background in finance and accounting, you can do your own bookkeeping. And it is also true that every hour you spend there is probably coming at enormous cost to the growth of your business. And that's true about everything. There are some people that have to be the HR manager. There are some people that have to be. I mean, a lot of guys who have to be the tech expert inside their company, keeping all the computers going, et cetera, because we have comfort in these roles. But if you really stand back and ask yourself every hour that pulls me away from building my organization and building my customer base is coming at enormous cost, then it's clarifying.

Well, a good example in construction, I imagine there's a lot of builders out there that feel a need to control every. Every build they do, every site they do, every little detail.

Yeah, that's right. Yeah. And it is hard. I mean, I make it sound like it's easy to hand off a task, and the point you made is so true, Will, that it's easier to hand off a task for which you have no talent. The tasks are the most difficult to get rid of, are the ones that you might be quite good at and you enjoy doing them. There's a certain satisfaction that comes from doing that task. But the proper way to assess every task is it's basically an ABC list. A being those tasks that only I can do that have enormous leverage on the growth and success of the company. B, being those tasks that I have decent competency and I enjoy doing them. C being those tasks for which I have no competency and I don't enjoy doing them. It's easy for everybody to get rid of their C tasks. It's the B tasks that they get hung up on. And when you see someone who has hit what I call a ceiling of complexity where they can no longer grow because they can't break that ceiling, it is almost always the case that they are retaining ownership and responsibility of B items for which there is a whole out there somewhere who will do that B item better than they can. But that doesn't make it easy to let go.

No, definitely not. But great advice to give all the builders out there. So if we. If we get your crystal ball out for a moment, what do you believe the future holds for construction entrepreneurs?

Yeah, that's a good one. Because things, especially now, feel like they're changing so rapidly, I would say that first and foremost, markets will always reward uniqueness and differentiation. So anybody that's an entrepreneur, and especially my construction entrepreneurs and your client group that is focusing on owning and dominating a niche where they have built an identity in that niche, and they've recognized that being narrow and deep is almost always the best strategy. I think the future marketplace will always reward that. That. The second thing that I think is absolutely true is that technology is. Is around us at all times, it's accelerating around us at all time. And technology ultimately does one thing. It makes everything abundant. So as we watch technology, the technology of energy production, the technology of materials and supply chains and etc. They all have the impact of making everything abundant. So as we choose niches to serve, we want to choose those that are going to grow disproportionately. And oftentimes, then those are going to be the niches that are served disproportionately by the advances of technology. And again, I'm an engineer by training, so I keep connected to this. I used to work in the computer industry, so I'm very tied in. AI is a buzzword. Everybody's hearing about it. But remember, AI is just software. AI is no different than the software of the past. It is driven by inputs and algorithms and outputs. But AI is unique in the sense that it will have impact more broadly and more rapidly than anywhere else or than any technology that preceded it. I am a techno optimist, so I look with favor on what's coming. I don't spend any time worrying about it. And what I tell my clients is, look, AI is simply the next evolution of software. And what we all should be doing is looking for what those tools will do. I'm looking for those tools internal to my industrial real estate enterprise. I'm looking for them internal to apparatus itself, itself. And I'm talking to my clients about looking for it for their own benefit as well.

Yeah, it's interesting that it's a good way to look at it, because there's no point in worrying about what the downsides could be. If you look at the upsides and the potential improvements in productivity and scale and speed and all of those great things, then you can really adopt it and get a leg up on your competition.

Yeah, that's right. That's right.

Well, Steve, it's been great to talk to you today about construction entrepreneurship. What other advice do you have for building company owners out there about being a great entrepreneur?

Yeah, I think about this a lot. And I've come to the realization, and maybe this was sharpened in my focus on working with construction entrepreneurs. And it didn't occur to me till quite recently, the last several years, as I work with the. Again, our ideal avatar of a client is quite successful. They've probably gotten. They're definitely over a million in sales, and that means they've figured out an awful lot to succeed. And now they're on a rapid sprint from a million to 2 or 3 or 5 or 10. I think every construction entrepreneur would benefit from the following kind of reframing, especially what we talked about when we said, where do these people come from and why are they unique and different as entrepreneurs? And here's the reframing that I would give to all of your audience. Rather than saying to yourself, I came up through the ranks and I now am a builder or I'm now a remodeler, Think of yourself this way. I am an entrepreneur who has a specialization in home building or home remodeling or spec homes. And that sounds like a subtle shift. But the moment you begin talking to yourself and others from the frame of you are first and foremost an entrepreneur who happens to be applying that set of aspirations and skills to the construction industry. Frankly, you begin thinking about your business and yourself and your goals very differently. Because generally entrepreneurs get stalled when they begin to think of their the size of their company being capped. And what I find is the people that are more what I would call pure form entrepreneurs rarely encounter a limit to the aspiration and size of their business. But construction entrepreneurs often feel a boundary. You know, gee, I'm 3 million, maybe I'll get to 5 million. I can't imagine being 7 million. And what I would submit to you is if instead every day you said to yourself, I'm an entrepreneur with a specialization in home building or home construction or remodeling. And keep that as your framing. It will begin to influence how you think about everything, including and most importantly your own goals.

Yeah, I really love that. It's a very subtle reframing, but very powerful.

It is very powerful. Yeah, it is very powerful.

Cool. Well, Steve, tell us a bit more about apparatus before we wrap things up. I will include a link to the Apparatus Rewards page on APB's website in the show notes. But otherwise, you know, give us your elevator pitch.

Yeah, okay. I could talk about apparatus really through a couple of points. Who do we help? What do we do? What problem do we solve? And then what promise do we make? And we help residential builders and remodelers, whether they're doing spec or custom and large remodel. And our ideal clients are folks who are growth centered. They are recognizing that having precision construction accounting is a critical problem they have to solve. They are coachable, meaning they are not too cool for school. They are goal driven. My most important attribute that I look for and one of my prospects is will they walk on broken glass to grow? Because if they are committed to their own growth, I know they will do what's necessary to allow us to help them grow. They tend to be decisive, collaborative and cash confident. They can't be in a position where they can't plan for the next two weeks. Now what we do is we build and operate QuickBooks Online Precision Construction accounting systems, which means end to end accounting, CMS integration, construction management system integration builder, trend co construct, job tread, et cetera, and of course, the financial reporting that goes on with this. Now the reason that I created Apparatus and the problem that we solve now that I began to try to solve when I formed the company is that ultimately clarity is the foundation of all confidence and confidence is the foundation of all aspiration and growth. So what we are doing is we're in the clarity business and we're solving the problem of people who are flying blind because they don't have the confidence or the competency in precision accounting that they need or unintentional neglect. They haven't given it to someone who's really good at it, but they aren't really treating it the way it needs to be treated. And their company is suffering or lack of skills, lack of time, expertise lack. In other words, they can't let go, but they don't have the ability to run it themselves. Or as I mentioned before, ceiling of complexity. The final problem that we solve for our clients, and we I see this more often than I'm, more often than I think I should, is fear. I encounter people who, honest to goodness, don't want to know and they're allowing their own aspirations to be clipped and limited because they don't want to face what their own finances might tell them. And yet they know intellectually if they cross through that period of fear, they'll have the company they always knew they could have. So the problem we're solving is we're giving clarity because that's the foundation of confidence and confidence is the foundation of aspiration. Then the promise we make is we're going to take whatever bookkeeping system you have and if you're open for business, you've got a bookkeeping system of some kind. And we are going to either build or transform that into a QuickBooks Online Precision accounting system. And we're going to do it in 60 days. And if I don't accomplish it in 60 days, our service becomes free until I do accomplish that outcome. And the outcome we promise is that it's a precision accounting system that's structured, it's based on the NAHB model chart of accounts. It's accurate, meaning all costs are properly booked to the right chart of accounts, line item and the right project. It's up to date, meaning it is near real time, honest reflection of the actual financial performance of your business. It's clear. Which means the reports that you're getting are useful to you because you understand what they're telling you. And finally, it's accessible. You have control of your own books. We just run them for you. But you are the one in control and you can Access those books 247 on your smartphone or your desktop machine.

Well, it sounds good, Steve. I love the idea of clarity, which gives you confidence. Really simple. But it has like a lot of a deep meaning there around. Anyone that's ever had fear around their finances before would know that when they have got clarity, it does give you confidence to make decisions from a position of strength rather than fear.

Yeah. And that lack of confidence is cancerous. If you think you can hide that from your staff, you're wrong. If you think you can hide that from your subcontractors, you're wrong. And it's that momentary hesitation where you don't have clarity that causes you to pass on that next build because you don't quite know where you are or it causes you to say no to that next opportunity. And this is what adds up. The other way to look at it is what would it feel like if at all times I had total clarity on where my finances are. And when you think about it that way, you begin to realize, well, wait a minute. If I had total clarity and I didn't like what it said, I'd be activated to fix it at all costs with total focus. If I had total clarity and I did like what it said, my goals would expand immediately. I would extend to that next project and the difference between the guys and gals that are really growing and really exceeding. They spend all their time in total clarity and therefore they maximize the confidence and that leads then to that higher aspiration.

Amazing. Well, Steve, thanks so much for coming on Professional Builders Secrets today. Highly recommend everyone checking out APARA apparatus. If you're an APB member, you can get a cash rebate for working with Steve and his team by going to our rewards page which we'll include in the show notes there. And really appreciate all the advice you've given the builders out there, Steve, on construction, entrepreneurship, delegation, mindset, and a whole bunch of other great tidbits that I can't cover off in this final outro.

Well, Will, I really appreciate the opportunity.

Yeah. Great to have you on. And also a Big thank you to all our listeners out there, wherever you are in the world. If you like the show today, please subscribe to Professional Builder Secrets on your platform of choice. And if you're feeling generous, leave us a review. But until next time, have a great day.