Building a Multi-Million Dollar Construction Business

I play almost exclusively in the commercial construction industry. There is no world that I've ever been exposed to in a B2B services industry that has been more commoditized than commercial contractor. The low bid is the game. That's what everybody is sort of sucked into. Obviously, value proposition matters. And, and I'm working in a market that is, that is brainwashed into believing that it doesn't matter. So how to build it starts with understanding what your customers value. Today I really focus on what does your customer care most about? What do they care most about in the market. Let's make sure we are delivering something that we are extremely proud of and let's let our customers do our value proposition for us, man. Let's let their story about how great we are be the thing we bring to the foreground.

Guys, have me welcome to one and only Chad Franke. How you doing, man?

I'm doing great. How are you, Steve?

Dude, I'm excited. You know, reality is I don't get to talk to people a whole lot on the show that also kind of like really understand the kind of the construction industry specifically. You know, it's when I was exiting my business, I was just sharing with you a little bit before we got started, you know, I went through the process and learned that historically, unless you have built a machine, which I know you guys specialize in, your chances of getting a high multiple on a construction business are rare and.

Yeah, very slim.

Yeah. So, you know, so I'm curious to know, you know, I managed to scale my business from literally a hammer and a nail, top rate in three states and just under nine figures of top line revenue. And obviously that made me somewhat attractive to, for, for an acquisition. I'm curious to know what actually you see in the marketplace that contractors getting completely wrong that are preventing them from competing with the guy that's got a bunch of quote unquote money and he's like just buying business left and right and the guy that actually gives a crap who needs to scale his company.

What are they doing that where they're getting it completely wrong? That's the question.

Yeah.

Oh, man. What? Yeah, there's a list.

Feel free to. Feel free to verbal vomit because I, you know, the reality is I, I didn't realize how rare what we had built was until after I'd actually exited, which was kind of crazy.

So contractors are. I'm going to give you my take my. I believe that most contractors, certainly most contractors that I've worked with and I've worked with over 200 contractors, you know, personally, in a way where I know these people and if I called them, they'd answer my call. You know what I mean? Yeah. And. And with those, with that group of people, I found that they're good human beings.

Yeah.

Which is what they're doing wrong. No. Okay, hang in there with me. Here's what I did.

That's not true. I did both.

Yes, yes. No, I'm kidding. But because they're good human beings, they have this, this, I, I think a high level, A high degree of personal responsibility, personal ownership. And when something, anything happens in the business that isn't exactly according to plan, they view it as their responsibility and they put on the cape and they launch into action and they go solve the problem, whatever the problem is. And they're doing that because they're good humans. What they don't realize is that every time they do that, they are teaching their team, they will handle their problems for them. And as a result, they tend not to groom leaders. They tend to have people underneath them who aren't decision makers. They don't, they don't feel empowered. And it's not that anybody's doing anything, quote, unquote, wrong. Right.

That's.

That's what's hard about this, because that owner is just. They're just trying to be a good guy. Yeah. They're just, you know what I mean?

They're just trying to get the job.

Let the customer down. They're trying not to make that installer's day the worst day of the week. You know, they're trying, they're just trying to help, but in, in helping, they're enabling and, and they're actually disabling their team.

Yeah, I see that a lot too. In fact, it's got me thinking. I'm aware of a, A business that is rapidly growing. It kind of has a new management team. It's got some, some, some legacy players, but also has some new team members. The new team members that were brought in are obviously, you know, skilled at scaling businesses. The, the incumbent team members are good at running the existing business. And I'm sure at times, or from what I've seen on the surface, it appears to be a bit of a push and pull scenario of trying to get the systems and the sophistication in place to grow and scale the company, you know, to well past nine figures and beyond, versus trying to operate the business how it's always been. And one of the things I see a lot of times, and I dealt with this early on, As a, in, in the, in the business myself before I kind of woke up was this need to control everything.

Right.

Like it'd be a bit of an over controller like you know, and no one can do it as good as I can. No one cares as much as I do. No one will do as much as I do. And then I left me depleted, exhausted and empty. Meanwhile, my team confused. Can you talk to the leader that maybe is struggling with releasing control? Because I know I, I struggled with it for a long time. I was scared to trust anybody else was something that, you know, I felt like it should be done in a particular fashion. And as a result I was in my own way for a number of years.

Yeah, you gotta, so, so if the problems that you're afraid. I think it's just a question of, of having the right perspective. If the problems that you're afraid are being created. Think about, you know that that's what's going on. Right. You picture, you picture, oh my gosh, we're not doing X perfectly. And you know, this is, this is right. How dare you know. And they're going to damage our reputation or they're. Whatever fear you have, which is, I'm sure it's founded. It's, it's a, it's a real fear, whatever that fear is. You also have to train yourself to, to ask different types of questions and say what happens? What is the risk of me stepping back in? What is the risk of. And I'll. Because I'll tell you, I'm going to walk you through some of those things. I've watched unbelievable, talented people quit.

Yeah.

Because they felt like they were working for a micromanager for somebody who did not give them the authority that they deserved. I've watched countless situations where high potential people were. Their growth is stunted. And you know, fast forward maybe you got the energy to solve every problem at 30 and 40 and 50 and maybe even at 60. Darn it. But at some point you're in your life, you're going to be like, what am I doing? For some of us that happens at 35. For some. Right. And for some of us that happens at. You know, there's one guy I cannot, I got to protect the innocent. There is one fellow that I know who's running a super successful business that he cannot, he, he has no ability to sell that business. He's like 70 some years old. Yeah. It's 400 plus employees. It's, it's making a ton of money and nobody knows how to do anything. But him, wow. You know what I mean? Like, so.

At some point you got to look at that and say, is that responsible? Like, is that. And, you know, even if you're not going to do it for yourself, no.

It'S a thousand percent irresponsible. And that was one of the things I had to wake up to about 12 years ago. I had to start moving from this is my baby to this is our baby. Yep. Start and start really coming up with ways to. The best term I've ever heard it communicate is delegated by rope. Dave Ramsey has this, this analogy he did with his daughter where every time she achieved a certain level of, you know, grace or mer, like, you know, a certain level of womanhood that he aspired for her. She got a little more rope, you know, at the end of the journey and she's heading off to college. He shares a story about how he gave her that rope with the, with the, each of the little bands that had, you know, purity and integrity and character and responsibility and, you know, and, and I think that's one of the things that I, so I went from one extreme. I went from not wanting to let anybody have any authority, any control to giving too much, which calls it, calls it, it's like a complete pendulum swing to trying to figure out how to do it in the middle. What tips or advice would you have in trying to help us structure how to find the middle ground? Because that's where the middle ground actually seems to work.

I love the rope analogy. Huge Dave Ramsey fan myself, as well as a fan of yours, by the way, just for whatever. That's worse. Yeah, man. But, but so, so I think Dave Ramsey's advice is right on. I think the idea that you give a little at a time is right on. So one of my favorite articles on the subject, I, I, I, I refer to it all the time, is it's an article. It's, I think it's called who's got the Monkey? It's a, it's an old Harvard Business review article, like 1979.

Yeah.

And, but it's so on point. And the thought process is like all these managers now, it's not talking about business owners here, but it's 100 analogous that, you know, all these managers are carrying their teams and it really, the opposite should be happening, that the teams should be all carrying their workloads. And, and the, in the monkey in the analogy is the work. Right. Like who's got who the monkeys on your backers? Monkey on my back or, you know, or What. So with. With that, what he introduces is this framework of five levels, of five levels of delegation. It's the five levels of, you know, people being ready to receive. Sorry, it's five levels of initiative is what he calls it. And it's. It's what. To what degree are people ready to receive delegation? And level one initiative is the very bottom where the person is. They're. They're in a mode on. On that item where it's. I. I just wait to be told what to do. I don't do anything on that. I just wait to be told what to do. That's level one initiative. And you can't delegate things to people at level one initiative and expect them to be, you know, highly successful. You got to drag them up. And level two initiative is where they at least come to you and say, what should I be doing? Yeah, I think there's this thing that's going on. I. What should I be doing? But the real goal is to push everybody past level two initiative and get them to level three. And this is probably the best advice that I have for that, giving little in bits of the rope. Level three initiative is where people come to you and they tell you what they think they're going to do and they check to see if that's how you would want them to do it. Yeah. And that level three initiative is what starts to give you, as an owner, as a manager, as a leader, confidence that these people are getting it. Like, they're. I can see it. So when. So. And I literally just did it today where a guy came, one of our team members, he came to me and he said, issue, right? I've got this issue. And I said, do you want me to tell you how to do it or do you want to tell me how you plan to do it and get my feedback? And he was like, that's a great. Because he knows exactly, right?

He's like.

Yeah, he knows.

What I'm asking, are we level two or three right now? Like, what's it? And. And it's okay to acknowledge you're at level two in a moment. That's actually in this particular case. He was like, first time this has ever happened, man. I'm at level two. And I said, cool, I'll tell you how I'd handle it next time it happens, though. My hope is, and I know that you're going to come to me and tell me what you think you ought to do. And. And as those things happen, man, and they come and I say, what do you think? You ought to do. And they say boom. And they nail it. Yeah, get. Builds my confidence. I give a little bit more rope. Builds their confidence. They, they, you know, they operate at a higher level. They feel like they're, they're contributing at a higher level overall. Eventually they're just taking rope, man. You know, it's, and, and you have these people on Your Team Level 4 and 5 initiative are those people who are just, they're humming, they're, they're, you know, they do what they do. You keep in, you know, in contact with them and you say, all right, that looks good, that looks good. Let me know if I can help.

Yeah.

And, and, and if you sold your business, if you were successful in an exit as a contractor in the construction industry, if you were successful in an exit, what you definitely had were people who had all the rope.

Yeah, absolutely, absolutely. And that's such a, you know, I love the feedback on that because, you know, there's, there's so many different things that revolve around the team atmosphere of the business. You know, I've heard you use the word team just in our conversation here, and that tells me that we're like minded in that respect. I don't believe in the employee philosophy. I believe in team. Like if you actually have a team, you're all working together to achieve a goal for mutual benefit. And I see a lot of companies get this wrong, especially ones that are going from mom and pop to maybe another level, then, you know, essentially to a scalable organization in that you, you have this concept or seem to have this concept of somebody else will take care of their accountability. You know, somebody else will kind of work through it. And one of the struggles that I was having a number of years ago was trying to get the team to be accountable for the actions. And we used to use a similar framework that you just mentioned there, which is. All right, here's the issue. Okay, well give me your three tentative solutions. Let's go through those and maybe I'll choose a fourth, maybe I won't. But at the end of the day, when I use those two or three items, we're also taking the next step and teaching them critical thinking.

That's right.

When they own the idea, it seems that they have to be accountable to the solution. Would you agree with. Totally.

I mean, that, that's part of the magic of the whole thing, right? When I tell people what to do, it's my idea. If it goes wrong, it's on me. If it goes right, they were the ones that were courageous and followed the, you know, the commands. Right. But if it was their idea, they're way less likely to let that. Let that, you know, patient die on the table.

100. The other thing I was thinking, too, is I was. I actually. I was having this. Literally having this thought this morning as I was leaving the gym that it seems to me that leadership is 75% coaching and mentorship and 25% accountability and responsibility training. So basically, the way I view leadership now is different than the way I use leadership. When I first started the business, I think first part of the business I was trying to learn to lead myself, which then gave me elements of leading teams. And there's a lot of trial by fire and trial by error. But as I look back now, I can build an organization quicker, probably 10 times quicker now than I could then. Right. Because I feel like I've realized that it's my role to do kind of what we've been talking about, which is mentor them into quality decision making. Because if you can trust the decisions they're making, you can trust the results we're going to get, which therefore, now you're building a sophisticated framework or at least a framework to kind of, you know, build a business on.

It's all what you're focused on. Right. So if what. What most owners, going back to that first. The very first question you asked, Right. Which is like, what are they doing wrong? What most owners are doing is they are worrying about what the, you know, getting. Making sure the right thing happens today.

And. And that's a very understandable and noble focus, but it's also going to keep you from building a business that scales.

Yeah.

If you shift your focus to how do I make sure that the people I entrust get the results they need to get today?

Right.

Yeah.

It'll change your action all of a sudden. I think I completely agree with you. You're gonna find yourself coaching and mentoring instead of putting your, you know, boots on and going and doing it.

Yeah, yeah, yeah. Just. Again, it's funny, I'm having all these flashbacks of all these thousands of different interactions I've had over the years. And one of the other things that I think was pivotal, you know. All right, so it's no, it's no. It's no secret nowadays that people want to feel more recognized and more appreciated in their position working for whatever business it is. It doesn't matter if it's construction or I T or whatever everybody need is.

Higher than it has been in past generations.

Exactly. But. Well, I think the need is higher because the suppression has been higher prior, prior generations.

I think that's probably true too.

You know what I'm saying? The boss is like, well, he's the guy that's getting all the credit, getting all the accolades, getting all the awards and the team members. Like, we did that for that joker.

Yep.

He was playing golf or doing this other thing. You know, I, I think that's why, like, I, I know for me, I made a decision probably about 10 years about. You tell I had about. I had a massive shift in my own leadership style about 10 years ago because about 10 years ago.

I went from being someone who appreciated the recognition from my peers and from the marketplace to being someone who 100% gave away any recognition that would come my way for the team. And I would only take responsibility for negative outcomes that the team generated. So I kind of flipped it on its head. And then what I saw the team do is I saw the team feel more empowered. And also a level of humility came through me that then they attributed to them that they kind of caught for themselves. And then accountability, responsibility began happening. Like, basically, it became safe to say I screwed up.

Yeah, yeah, yeah, yeah.

Like, we made it safe to say I screwed up. I, I'll share this publicly. I don't have a problem with it. I made one decision one time to promote a financial, a senior financial accountant into a controller role, thinking they had been with the company for 7, 8, 10 years. This is a big, this is a big learning lesson for everybody listening and watching. They've been, for seven to 10 years. They were, they had done a phenomenal job at that role. But the moment I promoted them to a role that they had never been trained for on how to execute, and then my expectations didn't change. It created a nightmare that cost the company millions of dollars in, in a year's time frame. Right. Just in errors or bad reporting or bad data.

So much of that is determining who to hire for the right seat at the right time on the right bus. And I feel like, especially as founder owners, founder entrepreneurs, it's more difficult for us to not see the forest for the trees because I feel like we, again, we get back in our heart, like you mentioned earlier, where we want to promote from within because they've been with us a long time. But really what we need is someone super talented in a COO role or CEO role or CFO role or, you know, I, I, when I, when I chose to exit, we brought in a new CEO with the full anticipation this Guy's already built nine figure plus businesses. He knows Stu, he knows stuff that I don't know. Yep. So talk to me a little about the importance of hiring and how we hire. Well, because again I, I'm, I'm looking at organizations and, and there again, there's a lot of really good mom and pop organizations that really need to get to the place where they have a structure in place that gives them some more freedom.

So I am a huge proponent of whenever humanly possible, grooming your own talent. Some of the most successful companies that I've had the ability to work with.

You know, that's a common thread, they grow their own it. I think it really depends on your objectives. That's a very difficult thing to do if you're trying to grow and scale a business to X.

So that you can get to a place where you're exiting on a 10 year, 15 year time frame. You probably don't have the 10 years that it's going to take to get Sally to learn how to be a controller.

Yeah.

And, but I just will emphasize that I think what, you know, you send a message. Every business is different in, in its, in its intent. If you're in a long, long term hold mentality and you're a really, you know, mature business today and you're, and you're not, you're looking to achieve, you know, 7% to 10% growth year over year type of thing, you know, can, you can follow what, what I just described is like the, the dream probably more consistently because it really is a beautiful thing to watch people progress in their career in your company. One of the things, one of the reasons I love the construction industry is that it is a traditional mindset of like, you know, I want to come here and I want to build my career here. It's not loaded with, it's not, it's just not loaded with the same number of people who are, are jumping jobs. Like there are some industries that I'll get exposed to periodically and I'm like, oh my God, I'm so glad I'm not working. And like he's been there six months.

He's, he's the longest guy here.

Government contracting for, you know, IT companies and stuff like that. And they're like, yeah man, you know, like I, I work for, you know, four companies a year on average. Like, oh my God, you know, how, how do you, how do you. I'm just a loyalty, you know, I, I don't know, I'm old school that way and I'm sure, that, that, that I'm wrong, but it's how I feel. But, but. So it's very hard to bring in people from the outside to be your boss and not screw up your dynamic. Yeah. You know, culturally, all that being said, you, you do have to do it sometimes. And I'll talk about hiring at the management role and then I'll, I'll talk about like hiring as a, as a, a discipline to build your pipeline.

Sure.

I'm going to start there because I think that's really the habit of, of just hiring. Well, number one, I do believe in hiring young.

I again bear in mind the industry that I'm coming from. So if you're like, that's just not applicable in my world. It's up to you. But I do believe in, in getting people in that first, second, third job right out of school and you know, grooming these people and, and bringing them up the, the XYZ company way. Yeah, I see so much value in being able to create that heartbeat. These culture warriors, the people who are going to make sure that new folks, when they come in, they understand the world that they just entered. And it's this, you know, it's this well defined, healthy, productive culture that they're going to help to uphold. When you're hiring those people.

I think you got to hire for aptitude.

At some point everybody's resume sucks, right? At some point everybody's resume was blank. And so it can be difficult. You know, I know people are like, you know, they gotta be an athlete if they're gonna look. I know a lot of dummies that, you know, you know, weren't worth hiring that were D1 lacrosse players. Okay, Right. Like, it's not, it doesn't necessarily indicate.

Experience is not a great indicator, especially when you're hiring young. But, but you. I. So for, if you're hiring for aptitude, how do you do that test? Yeah, you test, man. Like have tests I want, you know, math tests, writing tests. Yeah, right. You know, like, what are the building.

We use disc bags and attribute just for tendency and culture fit. And, and that was incredibly pivotal. You know, I've always told people that from my perspective, we, so what we did internally to kind of balance the need, because you're right, there is definitely a time to hire from within. And I've also learned the hard way, there's also a time to hire from without. You know, and what we did is we decided to open the position up to both internal and external forces, but with the, with the result that the, the 1, 2 and 3 year result that we had in mind because most businesses have a, about a three year line of sight on what they want their, their profitability to be over three years. You know, some markets are more, more fickle than others, you know, in, in terms of kind of how the, how the market performs. So as a result, so what we did is we opened it up and then we sat down as a team and really evaluated with no bias to the best of our ability. Okay, who's really the best fit for the role. Yeah. Now and then I'll take it a step further. The other thing that we did internally that I thought was really helpful was say we did have to bypass an internal team member for a role and bring somebody else in from the outside. We decided to go the extra mile and say, all right, let's bring the team member back in that's just not ready for the role and let's tell them exactly why they're not ready for the role. And 100.

Exactly.

And then, then, and then what we do is we allow that and then we also allow a training methodology to learn those things if they choose. And about, honestly, about, about 30% of the time it worked out where we were able to grow in that same, an existing team member into that role at a later date. And some others, you know, just self selected out. You know, not necessarily out of the business, but self selected out of that role.

Yep.

Out of curiosity, have you seen something similar like that that you guys obviously do with your consulting practice? Because I know you guys have a lot of contractor entrepreneurs that you guys help scale organizations to build great businesses. I mean, I know that you took one from 300 team members to 3,000 plus, you know, so you guys obviously understand the sophisticated need for a system. And that's one reason I wanted to have you on is because you guys could kick butt for our, for, for our audience here. But have you, have you used similar frameworks or see similar frameworks and as far as graduating some team members and then hiring from without, Definitely.

One of the so simple, simple tool that we advocate for is you can, you can call it a career pathing document, you could call it a levels document, something along those lines, but something really shows people the path. I was just talking actually to a client this morning who is talking about, you know, hey man, we got to have a way. We've got like three or four unbelievable high potential people that we want to make sure stay here forever the same time. We don't want to like, you know, Just start throwing money at them and create weird behaviors and, and habits. It's a. Right.

And really tank your overhead.

Yeah, right. And, and, and also start to develop all kinds of weird expectations. I've met people who are in roles that should be getting paid 180, $250,000 a year. They're getting paid like $750,000 because owners have created a monster. I, you know, I've watched that stuff. But anyway, not, not where I was at. But he said, you know, how do we get. Keep these great people? I said, you know, you have this unbelievable vision for ten years from now. Right. Like you, you're so, so passionate about where the business is going to be 10 years from now. Let's do a 10 year org chart. Let's show, let's create an org chart and show people what positions are going to exist and what opportunities are going to exist in 10 years. Are we going to change it between now and then? Yes. Right. That's not the point. The point isn't to say 10 years from now is exactly how we're going, but the point is to say here's where we know we're going in the next 10 years and here's what we could look like in that time period. And you know what? You know, Jennifer, we see you as somebody who could grow into one of these roles. Is that something you want? Here's what that could look like. And then you start to, it's very prescriptive. It starts to be like, okay, so for you to make progress toward that today, this week, this month, this year, what does that look like? What book should you be reading? What courses should you be taking? What results should you be delivering? And how will we know that you're on that course to becoming that person and guy if you start to create that.

Yeah.

With, with all all these key roles across your organization, what I found is your growth rate will far surpass what you thought was possible.

Yeah, dude, that's so good. You know, I was also thinking too, as, as we're kind of rolling through things, another thing that I, that I made a mistake on early on and then also see a lot of, what do you call them, early stage construction business, even mid stage construction businesses struggle with, is honestly communicating their actual value proposition to the marketplace of what they actually do that brings value. And inevitably what happens is, is if you can't communicate that, at least that my experience has been if you can't communicate that, then it's only a race to the bottom on, on who could be the cheapest price. Right. And at our best, our highest peak with my construction business, we had people who would literally say, we're paying you X number of percent or X number of dollars more. Because we know what we're getting. We know what we're getting. So talk to me a little about how to shape a value proposition either holistically with a story or, you know, in utilizing kind of, you know, what the market differentiator that that construction business might have. Because there's. There's a reason why some plumbing companies or H vac companies or siding companies or roofing companies or concrete companies stay small, and others, like our good buddy Brian, grow a larger business. Right. You know, it's just there's. There's a reason for it, you know, so talk to me about the. The. And they're all competing in the same marketplace. So somebody's getting paid more money to do better work.

Yeah. Yeah. So. All right. I play almost exclusively in the commercial construction industry. There is no world that I've ever been exposed to that, that. In a. In a B2B services industry that has been more commoditized than commercial contractors. Yeah, right. The low bid is the game. That's what everybody is. Is sort of sucked into. And. And the. The story that I often present to people is like, you know, do you have any. It's just some questions to get people thinking. Do you have any clients that do pay you more for what you do? And the answer to that's inevitably. Yeah. I mean, we have some, but they're special. Wait, hold on.

They love. They said Christmas cards, right?

Yeah, they said, exactly.

They're just.

They're. They're special. What if I told you they're not special at all? What if I told you that you can create those people that XYZ company that you think is low bid only is only low bid only because they don't think you're any different or better than anybody else. So how do it. The value proposition? My message overall is like, obviously, value proposition matters. And I'm working in a market that is. That is brainwashed into believing that it doesn't matter. So how to build it starts with understanding what your customers value today.

What.

What are you getting? We got. And you gotta. You gotta actually ask your customers, why do you work with us? Why do you want to work with us? What are the things we're doing great for you? Side note, what could we be doing different or better? What are other people doing great for you that make you want to Work with them instead. And at its core, man, I believe that, you know, what you say about yourself is not nearly. Again, in a business to business environment where you're doing business with the same companies over and over and over again. Okay.

Yeah.

What you say about yourself is not nearly as important as what you do consistently. Yeah. And so you're going to prove it. And what I want is for people in the market to be saying amazing things about you. Now it's important for you to be able to articulate your value. But in the, in the commercial construction industry, you're going to be forced to prove it and then you're going to have an opportunity to do it again or not. Right. And so I really focus on what does your customer care most about? What do they, what do they care most about in the market? Let's make sure we are delivering something that we are extremely proud of and let's let our customers do our value proposition for us, man. Let's let their story about how great we are be the thing we bring to the foreground. So testimonials and the use of, you know, brands and images and things like that to help to drive that point home in marketing really do make a difference. And when I'm, when I'm, you know, XYZ Contracting and I'm thinking of buying my landscape contractor and I'm scrolling through, you know, the website and I see, oh man, my biggest competitor just gave these guys like a crazy testimonial. There's, there's a value prop. So I don't think it's, you know, yes, I'm a big fan of like, you know, what's your 32nd commercial? I think it matters in a, in a networking environment. But, but in, in my world, Stephen, where the people are doing business with the same folks over and over again, project by project, the, the value proposition is what people say about you, not what you say about yourself.

Dude, that's so good. Yeah, no, that's, that's absolutely true. You know, again, I, I built a, I built a reputation on that with my, my organization. And yes, we, you are in. You, you do get yourself into a competitive landscape.

But if you can't communicate how you're different.

For someone to give you a test, give you a test run. Right. They're going to rely on those testimonials. They're going to rely on outside expertise and outside experience to kind of drive the point home. You know, we're trying to shape one organization and again, we've kind of centered the Conversation a little bit around like really kind of the brass tacks or nuts and bolts or principles of going from a small organization to a scalable organization. You know, I'm gonna go back to hiring for just a second because there was a time where we had hardly any attrition of the business for probably a good 10 years. Then we had a lot of attrition, then we had some attrition, then we had next to no attrition, then back to some attrition. Like, you know, it was like, it was this really wonky scale. And then I went and found. I remember I was teaching the team one time because at the time we were about a 50 million dollar organization. We were trying to get to, you know, 80 that year, which is a pretty substantial jump in a year's time frame. There's a lot of growth pains going from 50 top line to 80 top line.

Amen.

You know, and there was a lot, you could tell there's a lot of tension on the team. And we were, we were watching as, you know, team members that we loved and admired and we set them free in Jesus name and, and they went on to do some, some different things and some good things in their own right. But at the same time we also had to bring in new team members to facilitate that growth. And I was surprised to learn that they, they say that from $0 to $1 million of topline revenue, you can keep about 98% of your team. From 1 million to 10 million, you get to keep about 75% of your team. From 10 million to 50 million, you get to keep about 55% of your team. By the time you go from $1 to $100 million in topline revenue, there's 2% of your existing team left. And as I looked at my organization at the time, I was like, that's kind of what I'm seeing here. But caveat, the caveat that I saw with it was this. It, it came down to whether or not the team member wanted to grow with the business, right? So words. The business is going to grow the leaders H. Which forces the leaders to grow, which forces the operational team to grow, which then forces the direct staff to grow and the administration staff to grow. And if so, I guess what I'm saying is is that stat is only true if one, the culture doesn't support continual personal development growth within the team, or two, the team member itself just doesn't want to grow. What are your thoughts?

So what you're describing is a rapid growth and therefore rapid Change environment, growth equals change. It just does.

Yes.

And it does not like that statistic. I think that that sounds, I'll buy that for a rapid growth company. I will buy that.

Yeah.

Particularly for rapid growth companies that are not deeply decentralized. And let me tell you what I mean by that. One of my favorite growth models when we're working with our clients to help select the appropriate growth model, is it, you know, you know, go after your existing geography and, and capture as much market share as you possibly can. Is it, you know, diversify into different services and you know, lines of service and you know, build a 5 million dollar this division and an $8 million that division and you know, stack them up all in the same geography or are we looking for like geographic dispersion branches and opening offices and you know, that type of stuff? What I found is that the office, opening the offices is actually one of the most growth resistant.

Models where you actually get to keep a lot of your employees because your branch is only ever going from 0 to 10 million.

And we just happen to go from 1 to 10 branches. Yeah, but my branch is a small business.

And it, we all contribute to this big business. And the majority of your employees are operating in the branch environment. Yeah, I think in, in that type of world I have seen, you know, personally over the course of, you know, time way, way, way lower turnover numbers. Like you know, significantly more of that original team stays. But, but bottom line is in a rapid growth environment you're experiencing rapid change and one of the things if you know you're going to be doing that and you want to have gamers, people who are going to stick with you over the long haul. One of the things that you should be looking for, people who love growth and change.

Yeah, no, it's. I, Dude, I'm so glad you're saying that. I, I just remember some of these pain, painful moments with team and whatnot. A bit of having to let great people go and to pursue other endeavors because they just didn't want to grow.

Like, which meant they didn't want to change.

Yeah. Which is which you know, ironically is, it's okay. Like it's, that's, that's what I'm trying to help on. I guess people who are watching and listening right now as business owners in general because this, this is not just excluded to the construction industry. This is business in general. When you're building teams, there comes a place where people either choose to grow at additional level to grow with the business and you, and that you include you as the owner, like, you can totally like screw up your entire team because you won't grow. I've done that. I mean, the biggest mistake I've ever built in building biz, in building a business was not building myself along the way, like, was like, yeah. Therefore I got to hit the wall, which wasn't fun.

That's right. It's possible to just want more money, but not actually want all the things that go with wanting more money.

That's.

Sorry, man.

That's right. Well, and this now, the one I'm going to mention now is, is, can be construction related and because again, I, when, you know, I end up, we end up growing into about three states, you know, and having good sized operations. Obviously we had our, our lynch pan or a home market doing, you know, 1500, 2000 units a year. And then we had these subsequent markets that had, you know, 300 here, 200 there, 100 here, you know, kind of concept. And I'll tell you the one thing that we struggle with the most.

We as a company did not want to just increase overhead by just getting additional office space or really warehouse space. Right. So we chose as a, as a rule of thumb when we did a cost analysis to ship certain products to different outside satellite markets, if you call it. Okay.

Okay.

The one tr. The one challenge we were never, ever fully able to work out entirely is a mechanism that allows those that are operating in the satellite markets to feel like they're part of the extended team. I one time paid for our entire team to go to one of our outside markets five or six hours away to just kind of let. Let the leaders in that market know, hey, you're awesome, you're valuable, we love you. We, we had brought those team members back up from the, from that state back to the home office. And that was the one thing that I always found as being the most difficult thing to do in scaling in outside markets is having enough touch points along. We, of course, we, I'm sure our team was zoomed to death because we would zoom everybody in every week and you know, kind of have like a, kind of a, a town hall, we call it a production meeting, you know, and that, that was just one of the things that we always had a really hard time doing is no matter what we did, if we had one team member there to kick things off, you know, because we would say, okay, we need a certain amount of volume here to put this team member in place, which we would execute on the sales front. And then subsequently they would, we, they would increase A little volume. We need another team member. We never could get the. The nut crack where the. It doesn't matter if it was one to six people in that market, it was different than the 60 people at the. At the home headquarters. You know, everybody feeling connected. And I'm curious to know your thoughts if you've seen that one and two, how do you guys handle it or what you guys consult or advise against.

Or on see it all the time. And they definitely get the feeling like, you know, the. The proverbial redheaded stepchild, though. I hate that anal. It's just so in our lexicon, I. I figured I had.

Yeah. They always said we just feel like.

We'Re on an island. What I had.

I'm on an island, man.

Yeah, there you go. Feel like we're on an island. You know, we're not. We're not part of the mothership. So the companies that I've seen overcome it. Here's the. This is pretty radical, man. Like, I've got. You gotta. This listeners got a ride with me here. I'm sorry, your headquarters, that, that office. It's just a branch. Yeah, it's just a branch. And it's no different than this branch or this branch or this branch or this branch just happens to be the branch where we originated. And. And what. What you have to do is you have to install corporate.

Yeah.

Corporate is a resource for every branch and they spread evenly across the branches. Every. They love every branch. So you got to take those people who. You who like, let's take company. Whatever Your. Your old company. And. And is. Is that company, you know, grew at the headquarters location. And you said, man, there's an opportunity to go out here as quickly as possible, as quickly as it's feasible to do so. You got to take it. It's painful. You got to take like the two, three people who are essential for getting this business up to that level. And you got to take them out of the branch and you got to make them replace themselves. They've got to have people who are running this new. Let's just pretend like this is Nashville. That home base is Nashville. It's no longer home base.

Yeah.

Nashville is just a branch.

Yeah.

And now we have our. Our Louisville branch and we have our, you know, Cincinnati branch and we have. And Louisville. I'm sorry. And there's no difference. This. The only difference is this one does more because it's older. Yeah. But this branch now gets up to here, and this branch gets up to here. And these core people who help to make, you know, your, your original branch strong. Now they're corporate warriors that are spread across all your branches. And their job, like, you don't need to work on the, the, the home branch. The home branch. The first branch is killing it.

Yeah.

You need to work on Cincinnati. You need to. Because what I found is the companies that do the HQ satellite thing is the satellites are little and they, and they, and they're separate from. And they're little. But if the, the companies that do the everybody's a branch thing, all of a sudden everybody gets about the same level. This one's doing 40 million, this one's doing 40 million instead of this one doing 60 and everybody else doing eight.

Yeah, dude, that's so good. And I guess it also re. It reframes a certain level of quality across the board. So no branch feels more special than another branch.

Correct.

You know, and all branches expected to perform. Let's do it.

It's just a big branch. Yeah. And what. And I've actually watched this where companies, over their life cycle, that original branch actually gets surpassed by lots of the other branches.

Yeah. Well, if you got five extra minutes, I'd like to go over time a little bit.

Yeah, man.

And here's. I'll give you a. A specific issue that I see a lot of. There's always. All right, so in a couple of markets that my former company was in, believe it or not, a lot of my competitors came out of my business. We were, we were uber successful. And as a result, we got imitated on a regular basis. Most of those businesses or spin offs were not successful. However, one of them ended up getting extreme financial backing and is currently essentially the person that's the hashtag. Plenty of resources. Uses the, Uses their competitive organization because this person is incredibly wealthy, uses their, this, Their organization as what equates to a loss leader for tax purposes. But they're currently supplying bids in the marketplace that are far lower than anybody else in the marketplace. So they're not even setting baseline. Okay. And you got companies like the one that I used to own and others that are similar in price concept. So how do you, how do you. And this is good. This goes for everybody. How do you price against someone who is willing to lose money? Is it possible?

That's brutal. You know, so I'll, I'll. I'll give the. It's probably not an extremely satisfying answer, but my, My straightforward answer to this is you, you have to be better. You just have to be better.

Yeah.

At the end of the day, You've got to be able to paint those. Your competition in that case, not, not by saying anything about it, but just by living it.

Yeah.

As, as well, you know. Yeah, they're the low price provider. Yeah, they're a behemoth, but you know, they suck. You know, they can't.

The crazy part is that is the market feedback.

Right. So, so when you're, when you're selling against that, you've just got to get people to quantify the value of that problem.

Yeah.

You know what I mean? So, so when you're, when you're selling against that, you have somebody that's like, you know, well, yeah, I'd love to work with you guys more, but you're just pretty much consistently 20 higher than XYZ Co. You know, then I would say, you know something to the extent of why would you rather work with us and get them to articulate it? And they would start to say things like, well, you're more responsive, you're more reliable and you're just easier to work with and all that type of stuff. I would say it's interesting to me to hear you say that you'd like to work with us, but we're 20% more. So you can't even though you've got this list of things because usually what I find is that the reasons that I like to spend more money on. I'm sorry that I like things more cause me to spend more money on them.

Oh, th percent, th percent. And not only that, I was just, just a random thought. They're probably going to articulate the areas that are come back to bite them. So they're saving a dollar today but spending $10 later.

And you just do it by asking questions. You don't have to be like they're gonna screw you here and they're gonna get you there and they're gonna. Right. You don't have to, you don't have to do the threatening thing and the trash talking thing. All you gotta do is just ask questions. What is it? What does it cost you when they don't do that? When they, when they fail to meet a deadline that they tell you that they're gonna promise like the last time that happened. What, Tell me the story. What happened? Oh Gosh, you lost four days. What's the value of four days, huh? $22,000 or $22,000 on a hundred thousand dollar cost. Sounds like it actually cost you 20.

Actually saving you money.

Right? Sounds like. And a lot of times that actually is the case. But at the End of the day, here's, here's what I, what I've truly found is that relationships with people who would prefer to work with you.

Combined with your being superior in quality and you know, delivery and all that stuff will earn you.

More money consistently. You will be able to get paid. And when you can't, when you just can't, they'll tell you, they'll be like I'm sorry man, I can't. This one is just too far out. And you know what? In a, in an account based project sale like commercial construction. Yeah. You're not going to catch them all anyway. It's okay.

Yeah, absolutely.

In fact, I'd kind of rather they did some business with my competition that continues to remind them why they love working with me.

I and it's crazy. So we used to deal with this situation and I think a lot of companies as a company who genuinely cares about doing a great job, building great relationships and building a great organization, okay.

One of the things that we had to get accustomed to is what I call the six month hiatus. So that means that any, at any point in time, the hiring contractor, the GC in, in many cases for most of the subcontractors, the plumbing, H vac, roofing, etc.

A lot of times they're getting pressure from corporate entities. Doesn't matter if it's commercial residential. They're getting pressure in the new construction space, specifically maybe the remodeling space to quote unquote, save cost, cut cost because it a lot of them are reporting to private, A lot of them are reporting to publicly traded funds. So you know your national home builders are lotted are, are typically publicly traded. You're a commercial national commercial contractors are typically purple traded. Very seldom are they actually owned and operated by the original founder. Some are in the grand scheme of things. We had to make a decision in our organization back in the day to we are going to be us and we're going to be the best. We're going to offer the best service, best reputation, we're going to work on relationships. We're going to do all we can to make it so stupid for someone to say no that they let, they seldom would. But when they did, we're going to give it about six months because our experience within about six months this low cost person or whatever comes in and within six months they've already quote unquote pooped the bed as they say in the construction industry. And the next thing you know that person's calling you back. And not only are they paying you the fee they should have paid you to begin with. Now they're actually paying you to fix the other guy's stuff because it was done so poorly. That's been my experience as part of that, that handoff or that thing.

Agreed. I, I, you know, I think there's a, there's a certain value that we gain from the contrast of our good work when we are consistently better. And that's really, at the end of the day, I talk about it as operational excellence.

It's universally. There are a lot of strategies that I talk to businesses about in terms of how they want to grow, what markets they want to go after. There's a bunch of, in a lot of the stuff that we talk about might not be for you. Right. There's different. Every, everybody's different. I'm going to tell you what's for you, I promise. Operational excellence, being operationally excellent is something I promise you should be obsessed about.

Yeah. Well, the tricky part is this is again, I'm caveat that because I totally agree with you a th percent like the only way to be the best is to freaking be the best. Period it. Right. So. But then let's say you got an outside salesperson like well, no, I just, they're just, they're just too cheap, man. Like we're gonna, we're gonna have to, we're gonna have to drop our bargen by 3%, 10%, 5%, 6% to compete. And I'm like if, if we can. All you're doing is racing to the bottom. You're racing to bankruptcy is what you're doing from my opinion. So to me, I would rather lose that little bit of business, build an amazing business and go out and capture the, the people that actually give a crap about the service we provide. Because a lowcost guy, nine times out of ten, not always, but nine times out of ten.

Is doing it to gain market share because they're trying to position themselves for something else. However, it's going to bite them in the butt because it takes a certain amount of capital to operate a good company like to have warranty staff and customer care and accounting staff. And like you, it costs money for that stuff.

Right.

No one works for free.

Totally. It's a catch 22. Yeah.

So as we're kind of like, we're kind of looking at all this, we're trying to piece it together. I just, you know, it seems to me that you have to make an organizational decision to build the processes and the sophistications in place that of the machine you need to build, and then you hire to the machine. Right. The one mistake I would. I used to make all the time. And this, and this is just bonus content for fun. Just because we're over on time. I can't help myself. I'm passionate about this stuff, as you can tell me too, is you don't build the company around the person. No. You build the business as a system, as a machine, and you hire the people for the business. Right. And I know we're over time. I got one final question for you. Shoot.

Yeah, shoot.

If there was one thing that you needed to share with the marketplace that you think is so vital, important, it's so passionate, you have yet to be asked about it, you have yet to have a chance to share about it, what would that be?

Oh, my gosh. Oh, this is like I'm being given maybe a gift. I don't know. Here we go. I'm going to. I'm going down that road. Here's something that I've not been asked about, but that I feel like is.

Creating massive problems for contractors. Not just contractors, lots of different industries in the United States, and we've gotten addicted to it. We need to fix immigration. We have got to stop relying on black market labor.

When we really need to have people. Number one, let's optimize. Let's get everybody working in the United States that should be working. Let's, let's, let's make that happen. Take that however you need to politically, but just let's get everybody working that needs to be working. There's a lot of people that could be and should be, and we need operating effectively in our workforce. Let's get them in our workforce. And let's also get the border to be a place where it's, it's a reasonable ask where people can come here legally and where people can come and join our workforces. We have some awesome people who at one point in time broke the law, and I wish they didn't.

Everybody came through Ellis island, technically.

Right? Right. At one point in time, they broke the law and they came here and they're. And they're awesome people, and they're working their butts off that they're awesome people that did this crappy thing by coming to the United States illegally. I wish they hadn't done it, but they have. And, and the, the, the workforce in, in construction, in hospitality, you know, in. In a lot of the home services that we're used to in the United States. This is loaded with black market Employees. And the biggest problem. Here's why it matters. The reason it matters is that companies who. You can't hire those people legally. So the only people who are able to hire these people are lying. They're breaking the law. And so, and, and that sucks to have to be a business that's like the only way we can operate is to break the law. Guess we break the law. That's terrible. It's like speeding is a side note. Like we all do that. Right. But that's, it's different topic, different day. But we're, but we're all. People are doing this. They're participating in it. And what it does is they're 1099 in them, which means they're not getting this, that and the other benefit. It means that they, some of them aren't even getting minimum wage. And, and it's causing companies that don't want to break the law to be uncompetitive. Yeah, it's. It's a huge problem in, in the construction industry. And it's one that we've normalized and it's not normal.

No, I think I'll share that, that belief. I, I would also kind of add to that in that. That that's a culture thing that needs to shift as well. What I mean by that is when I was coming up through high school, like, so when I grew up, I grew up in. My grandfather survived Pearl harbor, came and started a construction business. I'm like, I think I'm third generation construction. Okay. This is back as a teenager. I was on job sites at the age of 11, carrying studs, moving things around. Was running framing crews by the time I was 16, reading blueprints by the time I was 17. Right. And the one thing I remember is that I, that I wish was still here, that I don't see a lot of anymore, is when my grandfather shook someone's hand is if he had written the. It was as if he had signed the most detailed contract on the planet. He did not budge. If it cost him money, it cost him money. If it cost some time energy. And I saw that weighted benefit of just being a man of your word and being consistent with your word being huge. I see less of that because of the pricing pressures of the marketplace.

Yeah.

Which necessitated during my high school and my high school days seeing signs of a construction worker in tattered jeans, wearing a hard hat, a lumpy vest, and saying, you should, you know, make sure you're ready to go to college. You don't want to be like this guy yeah. Like throughout the entire high school. However, most of the people that I went to school with that went and gotten degrees and four and eight year degrees in different circumstances. Most of them are not financially successful. They're strapped with debt. Meanwhile, people like myself and others that I know that went into the construction industry actually end up building a pretty lucrative lifestyle. And that, and that's not just saying because I own the company. I'm talking about C suite professionals.

I agree.

In the business, the apprentices that come up, you know, it's like I, I.

Know, I know plumbers that are making 250, man.

Yeah, yeah, exactly. And that's so, it's, it's weird to me. How so? I think we hit it from two fronts. I think we have to showcase to the marketplace that the culture will bear the fact that the construction industry is a professional industry.

Yep.

It says if I know guys that are so stinking good with a coping saw, interior trim, that they may as well be a stinking surgeon.

Yeah. I'm being dead serious. I know people that are so talented at the skill. Yeah, right. And I don't know, that's why I love siding, because I didn't have to get that that detailed. I could play with an eighth of an inch, but you know, put it on a break. Yeah, right. So anyway, dude, I've loved the conversation. I thank you for hanging out, Alex, your time with me, you know, I just, there's a lot that, there's a lot of reasons why I wanted to exit that had to do with the construction industry as a whole. There's also a lot of things I wish I could play a role in fixing in the construction industry as a whole. So I'm trying to, I'm actually trying to walk that world out as we speak.

I, I'm, I'm living that life every day, man. That's, that's, I, I, I thought about being in it and you know, I, I realized the right place for me to be is on it. Working on the industry is where I belong and, and you know, I'm happy to do that with you, buddy.

Dude, I love it. Well, a lot of our listeners and viewers actually are in the industry. So if you want enough for them to get connected with you, can we learn, figure out how to maybe work with you guys and scale their organizations? How do they find out more about you and more about the, the business?

There's a bunch of different ways to do it. I'll give you three quick ones. One is our website, which is well built Consulting dot com. That's well Built consulting dot com. And then we wrote a. I wrote a book that just is being released as we speak, and it's called well Built. It's how the top 2% of contractors create superior value, profits, and excellence. And it's really a story of what I've seen of the best of the best kind of put into a system for success. And then we also have a. A podcast of our own that is. It's called the Morning Huddle. And. And we bring in people who are inspiring positive change in the construction industry to just tell their story and what. And what they're doing. So definitely a lot of cool ways to interact and engage, and I. I sincerely hope that we hear from some folks.

Dude, I love it, man. Thank you so much, brother.

Thank you. This has been awesome. Stephen, thank. I. I would come back and chat with you anytime, whether it's recorded or not.

Oh, we're gonna do that for sure.

All right, man.

All right.

I hope you liked that video.

And if you did, make sure you check out this next video right here. I think the reason most people are.

Frustrated in life is because we're living out of alignment with the way we're designed and wired. And it's really easy to do that, right, because there's a lot of pressures externally and internally to conform, to do what everyone else is doing.