Rebuilding Your Home Improvement Business After Bankruptcy | Keith Smallwood (Ep. 206)

Ultimately, in 2012, we bankrupted the company. Not because the company failed, because I failed the company. I actually had a great team of people and we had a good company.

I like that you took responsibility for it. You said, I put it here in quotes, I failed the company. You didn't blame other people. You didn't blame outside stuff. That's how important it is, is to take responsibility. Because they think if you don't take responsibility, how can you ever rebuild and do things the right way? Hey everybody, welcome to another episode of the Wealthy Contractor Podcast. This is Brian Kaskavalciyan, and with me today I have Keith Smallwood from Smallwood Renovations. Appreciate you being here.

Glad to be here, Brian.

So Keith, welcome. Glad you're here.

Glad to be here.

So you have been to a number of our events. Give everybody kind of your backstory.

So backstory, short version. I started selling home improvements in 1995 in Fairfax, Virginia, which is Northern Virginia. I worked for a company up there as a salesperson for approximately a year and a half, 2 years. Got offered an opportunity to open a branch of that company in Richmond, Virginia. So we got married, Lisa and I got married in July of, or excuse me, June of 1996. And we moved to Richmond in July of '96. We started our company in August of '96 and we had our first sale in August. So I was with that company as a partner for, I don't know, several years, and then ultimately bought out my partners and ran ran that company until 2012. So 16 and a half years I ran a company in Richmond called Creative Energy.

2012?

Yeah, in 2000. Well, if we back up a hair, so we had decent success. We ran that company to about a $4 million company for multiple years. And then in 2005, I bought some property, I developed Uh, I bought some commercial real estate, developed some property, and found myself upside down as soon as we moved in. And it wasn't just that, but we had moved our company into the sunroom business. And right at that moment, about 2008, home values had dropped dramatically. And so getting a $50,000 loan for a sunroom on the back of the house became hard to purchase. So we had to kind of reinvent ourselves. We had real estate pressure. Ultimately, in 2012, we bankrupted the company, not because the company failed, because I failed the company. I actually had a great team of people and we had a good company, but my real estate risk that I had taken at the top of the market in 2006 kind of came back to roost on me. And I just, and I didn't have the wherewithal to turn the thing around. And so that's where we were in 2012.

And started back up again.

Yeah. Well, so then, yeah, we got knocked down and then, you know, really we closed that company down and it was a good company and we served about 4,000 customers in that time, did a lot of good work, had a really good reputation, really good name in this market, but I was forced to step back. For a year. I went and worked for a, a friend, a person I respected in Northern Virginia for a year as a sales manager, ran a sales team of 16 to 20 salespeople selling mostly decks and porches. And, but we, they were at the time were selling windows and doors and siding and roofing. I did that for just under a year and I thought I knew everything when I went there, but I found out I didn't. So I learned some good things there and really that was a good reflective year. It was, that was a tough year actually. I'd never had a problem with wallowing in self-misery. My confidence did take a hit for a little while, but I have 6 children. We have 6 children. So I didn't really have time to worry about me. I had to get up and get going. So I got up, got going, got to work after I cleaned up the mess there with that prior company. Moved to work during the week, actually 5 days a week for that company in Northern Virginia. I'd come home on the weekends. I'd go back early Monday morning. I'd come home late Friday afternoon every week for that year. So that was tough. And, you know, my wife and kids were kind of used to taking a lot of things in life for granted. They were used to dad being invincible. So we kept everything going forward in our family life and in our marriage. It was a tough little minute. So then I was driving home one time, one night. So I guess we closed down 2012. I went and worked for that company in spring of 2013. I was driving home one Friday night, October, November, and I called Lisa. I said, hey, you know what, I'm ready to start up again. I said, it's, it's time for us to start back at this. I'm ready to go. So I'm going to start moving that direction. So she was like, okay, let's go. So came back. So by December, I resigned from that company and we got to work in January 2014. So this January will be 10 years. Started a new company, which is Smallwood Renovations, based on the many things we learned, which would take too long for this podcast to go into.

We're going to go into some of them though.

We simplified who we were and I really had a different mindset. And truthfully, Brian, my mindset before, I don't know if it was from just being scrappy in sports and things as a kid and I was always a very competitive person. So when I first was with my other company that I ran for 16 and a half years, I really survived on willpower and just vigor and determination. And, but it, I did have a, I think I was overconfident and just thought I could will whatever I thought I could do. I could just will it to happen. I found out that that wasn't enough. So that kind of laid the groundwork. And then the things I learned during that time of reflection prepared me for Smallwood Renovations. You know, I had a different mental approach when I started this company. I started this industry as a salesperson, a marketing guy. Well, I started as a salesperson. I became a marketing guy.

Marketing guy. Yeah.

So I was strong in sales and marketing, and I'm not a perfect human by any stretch, but I try to keep my word as much as I can. And so. We developed good relationships with a lot of suppliers, a lot of contractors, manufacturers. So all those relationships I was able to plug back in and everybody I ever did business with was ready to open us up when we opened up the new company. So we opened up the new company, but my mindset this time, having been, you know, like a sales and marketing executive before, was I wanted to start from the bottom, bottom this time. And I wanted to really work on what I felt like was the Achilles heel, kind of always a challenge, which was the labor. And so this company I developed with a different mindset. First of all, a more humble mindset that just working hard and just being, believing in yourself wasn't enough, that I needed to, I needed to really do things a little different this time. And I really wanted to be in control of my labor. And so this company, I started out small. I got back my window and door guy. I got back, you know, siding people, my roofer, my decking construction manager, pretty much some major pieces together. We were missing some good players. We had some really good people at Creative Energy and some are here still and now and back. And so I'm blessed to have them. I really started working on labor control because I really wanted to raise our standards and we really could deliver on the promise. And so our first 5 years, I would say my confidence was a little down, you know, so I was, I was a little risk averse, even if I wouldn't admit it when I would think privately to myself that the idea of taking on a lot of risk wasn't really attractive to me.

You know, we know a little something about that too.

So. From 14 to, yeah, well, yeah, 14 to 18. Because in 2018, I came to Accelerate. And that, I remember seeing you and you mentioned something last time we talked when I saw you at the Yoho event. I mentioned, you know, you had mentioned you had heard something about our story. And then I had complimented you in 2018. That was the first time I met you. And really, that was the first time I really wanted to hear, I really wanted to hear people. You know, it's tough when you, you know, when you're the top sales guy and you are always the winner and you, you know, your company's doing great and you're getting a lot of accolades and pats on the back and people think you're great and your family thinks you're amazing. And then you eat humble pie and you find out you're not that amazing. That's tough. It was the greatest thing that ever happened to me. It's the greatest thing that ever happened to my my marriage, my family, now my cousin, my company now. So we're a better company because of that experience.

Yeah.

I'm, I'm a better person because of that experience. But I was definitely, even though I maybe didn't admit it, I think my confidence was shocked a little bit and I was a little risk averse. And, but then I don't know why I came to that Accelerate. I can't even remember why I came to that Accelerate. But I just, I think I'd saw your video and it's because you're a marketer. The video was intriguing and it was high energy.

It was different.

And yes, it was different. It wasn't, you know, I don't want to pick on anybody, but it wasn't dry. It wasn't low energy. It wasn't, you know, the same monotone message. That's what attracted me. I just saw this video and I was like, I like this. I like the way this feels. Let's go to this. I told Lisa, I said, all right, let's go to this. That moment just before I even came to Accelerate was When I was like, okay, I'm ready to jump back in and take a little risk and maybe turn it up a little bit. Let's go see what this is about. And, uh, and I loved it. I loved it because you shared your story. I like real people. I like real stories. Yeah.

Well, cool. And you've been back since?

Yes, we've came multiple times. Let's see, 18, 19. I don't, I don't, we missed one in there. Yeah, I think we've come to—

COVID one.

Yeah, we missed one.

Well, cool. So there's so much here. Tell us a little bit about the business today. You have a sales team. How many people on your sales team?

So we have 3 salespeople right now.

Yeah. Are you running leads?

I am not. Not.

Okay, good. What do you do?

I lead the company. Yeah.

Good. Good answer.

Yeah. We have another salesperson joining us in January. All locked up. So we're excited about that. And we're in, we're in planning, planning growth mode. Yeah.

For next year.

Good.

For next year.

Yeah.

Part of the reason why your story is such a good one, but it's, you know, in a lot of ways it is unique. In a lot of ways it's not unique. We all deal with adversity. I've told my story here lots of times, like you overleveraged, found myself. I did it in business, not in real estate. I made a bunch of really stupid decisions. I like that you took responsibility for it. You said, I put it here in quotes, "I failed the company." You didn't blame other people. You didn't blame outside stuff. And I talk about that in the Seven Secrets book. It's actually, you know, secret number 2. That's how important it is, is to take responsibility because they think if you don't take responsibility, how can you ever rebuild and do things the right way? Without looking at yourself and saying, hey, I caused, you know, whatever happened. The other thing here and where you and I are different than a lot of other people, and fortunately for us, unfortunately for them, our wives stuck by us. So I screwed everything up. I had to go home and say to my wife, honey, I took on way too much debt and we can't pay our bills. And she didn't leave. She didn't get mad. She was sad. But she didn't get mad. She didn't throw me out of the house. She said, all right, what do we have to do? And Lisa did the same thing, I believe, with you. She, she believed, she believed in you.

She did.

A lot of people didn't make it through that time. A lot of marriages didn't make it through that time. What do you think it was that helped you guys as a couple get through that?

Jesus.

Okay. That's besides Jesus. What else?

Besides Jesus, not quitting, you know, getting up and getting to work and not focusing on yourself and focusing on the bigger objective. And the bigger objective is our marriage and our kids and our family. And the well-being of all the people we're responsible for. And I mean, that, that's really, that's the answer.

Yeah. Yeah. And that's, and that's a great answer. It's the marriage is more important than anything else. The family is more important than anything else. That's awesome. So you said that you were very confident, but then you got slapped hard, but we get basically a 2x4 I say to the head and to the down below. You know, happened to me too. It's not easy to deal with. How did you deal with it? How do you deal with adversity? Because look, people go through it at different times of their, of their life. And I think that it's important. And it's part of the reason why I wanted to have you on because you have such a great story of overcoming adversity. And people maybe even that are listening right now that are where you were, where I was 12, 13 years ago. So what are some ways that you dealt with the adversity and overcame that hit to your confidence?

So that's a good question. And it's funny because this interview is going exactly the way I thought it would last night.

Okay. You sent the energy beams to me.

Yeah, I had a feeling just because we've spoke briefly and you know this experience. So fortunately or unfortunately, and I see this as a blessing, I had some adversity as a child, as a kid, you know, a fair amount. And so it wasn't my first time facing adversity. So, you know, it didn't impact me that way in terms of like, oh my gosh, what about me? It was just like, it was, you know, I was heartbroken because I'd let some people down. And, but I felt a strong sense of responsibility. I gotta keep going. I mean, I gotta keep going now. It was a little tougher on Lisa because she never really had adversity like that per se. So that was shocking to her. And you know, for her, she thought, you know, he's invincible, he's unstoppable. You can't, he'll be, everything's great. And so when you come home and say, honey, I turned the keys into the bank, she's like, wow, really? So it was more, once we shut that down, I was determined to, you know, to make money and I, I, I, You know, I didn't go out and make any wealth per se in that transitional time, but I was determined to make money. And whether it was selling or leading, I knew I could. So I got to work to do it and earned enough to take care of my family. Fortunately, we had some retirement money that helped us in that transition time. But really, it was just, I had to go to work. I just put, I woke up, put one foot in front of the other, thought about what I have to do and didn't Tried, I tried my best not to think about yesterday. I will say those thoughts always creep in. Well, they don't always creep in now. That's not something that I allow into my brain if I can, but I just focused on what I have to do today. What I have to do today is go to work and what I have to do is give my best and I have to work hard and I have to tell the truth and I have to, you know, and then I got to go home. And I just focused on one foot in front of the other and let's go. I got it. I got to get this done. I got to focus on my kids and I got a football game. I got a baseball game. I got a dance recital. I got to do this and I got to go to a soccer game or I got to— many things, you know, we have now we have 6 children. Our youngest is 14, oldest is 25. 2 are married, one's in college, 2 in high school. I got to work here. So there's always a lot going on. I just got to work. I was most concerned about people I'd impacted and I wanted to make that right any way I could. And I was concerned about focusing on my family.

And that's great advice is focus on today because that's all we have. Part of my issue, part of my problem was that I got caught up in thinking about the future. And oh my God, I just ruined my entire life. And so I made it not about them. And it didn't take long, obviously, I had to, you know, snap out of it. But at first, that was what consumed me was, oh my God, I just ruined our lives. This is it. We'll never recover from this. How are we ever going to become what we wanted to become? Because I messed up, but one mess up or two mess ups or three mess ups don't define a life. And I like what you said about, I got to work, I had to make money. I had to, and I was the same thing. You know, it's like we had to figure out a way to feed our kids, put a roof over their head, send them to school. So that's the dealing with the adversity part. You got through it. Your wife was there, was supportive, which is awesome and great. Now let's talk about what you did different in the new business that you learned from the old businesses that didn't work in the old businesses. Let's talk about 2 or 3 things that you did different.

I wanted absolute accountability on everything we did. Yeah. Well, you know, some of the things transferred when I came to Richmond and started that company. I had partners, but You know, and they were supportive and, and, and good partners. And I'm thankful for them, but I was basically in Richmond by myself. And so got office space and put a couple desks in there, got some phones at the time, you know, telemarketed, canvassed, did what we had to do. So I knew how to start with nothing. I did it before. It's humble to start with nothing, but that's what you got to do. So when we started Smallwood Renovations, we started in our home. I just told friends and family and neighbors and other people and put out an ad and, and got to canvassing and went out and got leads, made sales, installed jobs, made people happy. And I did. I went with what I had. I had this, my wife gave me this poem, Rudyard Kipling's If poem on the wall. So it's worth reading if you're somebody who's gone through a struggle like this. And, you know, I just, I went with what I had. And so we got started again and we set leads and we sold jobs. And we were, there was more clarity based on experience. You know, we knew what we wanted to do, what we didn't want to do. So there was definitely more clarity, but we didn't want to do sunrooms. And, you know, for those of you that do sunrooms, I don't have a problem with them. It's just not for me in our company. We wanted to focus on decks and I wanted to do something different. And that's what we're doing. Uh, we're selling decks. We started out selling everything because I needed to sell what I could sell and went back to all of our previous customers. So we, you know, overwhelming majority of our customers still come back to us from other company. I mean, we had, we had a respectable name and so we've got a lot of previous customers from that company and now we've created a lot of new customers with this company, and we just focused on our margins, committed that no matter what happens, that we're gonna have correct margins or we don't do jobs. So that was the most important thing we did to this moment.

And so I want everybody to hear that. So when you lose everything and you come back and you start again, what becomes most important are margins. Because you realize, hey, the way I did it before, and I see this, I mean, you know, I talk about profitability all the time because too many people are focused on revenue rather than being focused on margins and profitability. And this is one of the things that, you know, and unfortunately for some people, it takes losing everything and struggling and suffering to say, oh my God, maybe it's, maybe there's something to this, you know, focusing on margins and getting our pricing right and making sure that the business is making money. How long did it take for you to replace yourself as salesperson and move more into the role of leader of the company?

For the most part, after 2, 3 years, maybe going into the 4th year. Yeah. But, you know, obviously I started— I was the salesperson. Oh, yeah. Yeah. You know, I think after a year, the following spring, I hired my first salesperson. And then slowly, you know, would come and go and new person and all that. But I'd say after 4 years, by the time I came to Accelerate, we came because I was like, okay, we got a base now, we got a foundation. Let's look a little bigger and let's open up and let's find out what we want to do. And so I'd say about 2018.

2018.

Yes.

Yeah. And then since then, so what are some of the things— so you've grown since then. You're not doing sales. You said you're the leader now. What does being a leader of your company mean to you?

Establishing, seeing all the things of defining who we are, who we aren't, what we do, why we do it, where we do it, when we do it, and managing managers and developing managers. I mean, you know, the old company to the new company, here's the biggest difference. The old company, was a good company with good people, good leaders. There was a little bit of too much Keith self-focus. I learned now in this company to focus on the people, teaching, teaching, teaching, teaching, training, training, follow-up, accountability, leading them in creating and helping them become leaders so that, you know, they get what they want so the company can get what it wants. Everybody wins. So I think mindset, you know, and I'm not perfect at that, but I think our mindset now is it's about the employees. It's about developing them, growing them, and in return, the company grows and gets what it wants. So our construction manager is, he was with me in my old company. He's outstanding. And so we have a person back to what I was saying about labor. We, our construction manager every day goes to every job. And checks on every job and communicates with customers and makes sure that everything's laid out correctly every day, all day. That's what he does. And then we have a production manager here. She's also my mini right-hand person. She's amazing. And we have a marketing assistant that I have. I still lead in the marketing, but I have an intern, if you will, that she's not an intern. She works here full-time and she's amazing and she does a fine job. And she's learning. And we have a sales manager now. Wow. And so he's, you know, it's not sales managing all the time, obviously, but he's a sales manager, selling sales manager.

Great. And so your size, that's perfect.

Yes. So he leads and teaches and leads in the field and rides along and does all the things. And so, you know, we're hiring this new person, so he'll train with them. We have 2 crew leaders in the field. We have a good, good, strong base and team. We have some good— our support staff in the field, our help, our hands, everybody in the field. We have a good— we have a really good team. They're hardworking and we do a good job. We're delivering.

Well, what's really interesting about basically what you were talking about, there's a couple things here. One is you're leveraging through other people. And this is the thing that keeps companies small, is that everything goes through the owner. The owner is the central hub of everything— sales, leads, production in the field, dealing with customers. And what you realize is in order to really grow a really great business, you got to surround yourself with really good people. That are held accountable. You know, it's funny, I say it all the time. I say we're sales and marketing companies that just happen to sell decks, fill in the blank, right? But that's only a foundation because you have to have leads. You have to have people to go out and close those leads. But really, really what we become, as my good friend Brian Gottlieb says, you know, Brian from Tundraland, I mean, built one of the most successful home improvement companies of all time. He says that it's, we become a people development company that just happens to sell, you know, decks or windows or whatever it happens to be. And you just laid it all out and you just proved it is your, what your role is today is that of developing your team and your people. And that's what gives you leverage. That's what gives you the ability to create more wealth for you and your family. Because obviously with 4 salespeople, that's a whole lot more being sold than just you, one salesperson. You have more ability to control your time. I should say, forget managing time. You can control your time. So if you want to leave for a week with, with Lisa, hopefully you're at a point where you can leave for a month and you come back and things are great. Maybe you're working on that. That's the only way you're going to do it is you got to build and develop people. And I wonder, do you have any advice to people that are not quite there yet or want to get there, but they just don't maybe have the confidence yet in their ability to manage a team of people? What advice would you give to to those people? What advice would you give to young Keith that didn't understand managing of people?

It's not about you. That's what I would say. It's not, you know, and that's easier said than done, but it's really, but at the end, right answer. At the end of the day, when you, you know, you go home, your mindset has to be, it's not about you. It's about them and them. Is your leaders, your staff, your people, your labor, your relationships with suppliers, your relationships with your customers, and your word. What you tell people, deliver on it. And it's not about you. And if you can focus that it's not about you, because when you focus on yourself, you get selfish. That's what we do as humans. And I do it too at times. So I am guilty. But On my better days or my best days, it's not about me. It's about them. And if I do that, if I try to always remind myself, if I do that, then we will be all successful and then we have win-win. So we try to focus on win-win relationships. If, if we don't have a win-win relationship with suppliers, it's not going to be good because, you know, and you can't always call in favors from people. Right. Sometimes you got to let things slide and sometimes you got to go the extra mile when maybe you, you know, you shouldn't have to. But, you know, sometimes you can't always call in favors. You got to have a win-win relationship with suppliers. You got to win-win relationships with your labor. You can't have win-lose relationships where it just focuses on your money. Of course, you got to get your— you got your selling price right. You got to know your costs. You got to know what money you want to make and then develop your system and your numbers around that idea and double-check it to make sure on the back end it actually is delivering the way you expect it to. And if it's not, you adjust it. I mean, you have to have a win-win with your customers. I mean, you can't apologize for making a profit. You have to make a profit and you have to make a good profit. My other company, we met, we were a profitable company. You know, on reflection, we weren't as profitable as we needed to be. I'm encouraged to go to Accelerate. I love that the focal point is 20% now. I can tell you from my own experience in business, and I think you know this, that's why you're promoting 20%. 10% is not enough. Nope. It's not enough.

Yep.

Because 10% can disappear. On a few mistakes. Yep. Literally. And you will make mistakes. So it's not if you will, it's when. And when you do, if you have 10% left over, you're still profitable. So I agree with that completely. And that's what we try to focus on. And, you know, are we successful in every job? No, but we're looking at every job. So the next job, we get it back to where it's supposed to be. So my advice is focus on win-win, teach, train, stay humble. Don't get in love with yourself because everybody says you're great because you really are not. And, you know, I mean, just, just be honest with yourself. Be honest with your team, your staff, your customers, but get your margins right.

To everybody listening, go back about 2 minutes and re-listen to everything he just said because he just gave you a winning formula for how to create success, wealth, and freedom in this business or any other. Business. Thank you, Keith. I appreciate it. You shared a lot here. I appreciate you being so open and honest. I hope that you, the listener, got a ton of value from this. And Keith, thank you again. I appreciate you being here. To everybody listening, until next time, this is Brian Kaskavalciyan, and this is the Wealthy Contractor Podcast.