The Real MF’ers Episode 1: Part 2: Charles Covey

Posted August 19th, 2020

In THE REAL MF’ERS, Mobilization Funding CEO Scott Peper sits down with leaders from construction, manufacturing, and related service providers to see how they built their business, what they are doing differently, and why it works.

This is part 2 of our first episode. Scott interviews Founder and President of Alphapex, Charles Covey. They talk about everything — growing your construction business, core values, marketing, unicorns, and Whack-a-mole.

Full Transcript Below

Scott Peper  0:33   Okay, we’re back. I originally planned to have Charles with me just for maybe a half hour, 45 minutes, but we got into such a good conversation. We broke this into two separate parts. So I’m really excited to get us back here to keep going and continue this conversation. So without further ado, we’ll keep it rolling from here. One of the other key things that you have talked about a lot with me before is the systems that you’ve implemented and processes And how those have helped you really scale not only your team, but your internal and external capabilities, your customer experience, how you interact with your clients. Can you talk a little bit about some of those systems where you got how you put them in place, how they help you and what they what they do for you what they have done for you.

Charles Covey  1:18  I think systems are hypercritical in scaling a business. You can run a small business, and you can do a few hundred thousand or a million bucks a year and you can run it all out of your brain. But you’re not going to grow that much because you become the weak link. And I’ve done it, I’ve done it anyway go, how come I can’t grow this business? What’s going on? Oh, wait a minute. I’m the weakest link. And I think in construction we get, it’s kind of like the snowball starts rolling down the hill. And we’re just kind of going down this hill and things pick up momentum and you start getting clients and you start doing work and the work keeps coming in. And you’re going so fast and the speed that we have to operate in this problem and this problem and this problem and this problem is just I like to call it Whack a mole. You ever play that game, you know, take the kids cheese or whatever and you got to just so you’re just whacking but really What makes a big difference as an owner or as a manager, or as somebody that has a place to control what’s going on, is to slow down a little bit.

If you let it construction will drive you 100 miles an hour for the rest of time, you’re never going to get caught up. So you have to make that pause happen, you have to create that pause, sit back, look at your business from 30,000 feet, or look at your department that you manage from 30,000 feet and say, hey, what can I do to extend my abilities as a manager or as an owner? What can I do to extend my team’s abilities? And I think something that construction is really known for. And this may be, I think this section on systems is probably going to be the most critical. It’s a little bit boring at times, but it’s probably the most critical for your listener if they really want to make some money. And so I hope they’re paying attention because this is this is what’s been really impactful for us. So you think about construction, and know the systems are oftentimes just lacking. We’re running down that hill, so fast and the momentum is going. And so we’re just playing this Whack a mole. And just trying to get to the next thing and by the time you solve the next problem, boom, the other one’s already popped up, and boom, then the next one, and we’re just trying to just try to get to the next day. You ever felt like that, Scott?

You know, just trying to get rid of the shit from today so I can go home, kick back for 20 minutes, and then get tomorrow morning and do that shit again. And in construction because we’re gonna step back a little bit, look at those problems from a higher level and find out how we can extend the team’s abilities. So from what we found, that slowing down a little bit is super hard to do, and super valuable. So you’re thinking, Oh, well, you know, I need to be out on the jobsite. I need to be managing I need to be doing these things. You might actually need to just be still from it. You might just need to sit in your office with no noise and no phone and think about where you want to go. And what things in your business you’ve been avoiding. I’m guilty of this. What’s that big problem that’s in the room and you’ve been pushing. I’m real busy so I can just deal with it later. Well, then you look up and it’s two or three or six years later, and somebody else they handled that problem, they kicked your ass.

But we’ve got to take those problems, we got to tackle them head on. So I think system creation is really critical because you want to be able to step back as an owner. I’m not trying to grind this out taking 100 phone calls a day, playing Whack a mole for the next 40 years, are you? Hell no.

Scott Peper 4:17  No, no.

Charles Covey 04:19  But we see people do it. I know guys that are 70 years old. They’re doing everything exactly the same as they did when they were 30. And they’ve made some money and they’ve done okay. But are they at a peaceful and comfortable state in their life? No, but they could have been. And I think systems are a big part of that.

So you have to step back, you have to map out how your business works. And you’ve got to find a way to create processes so that things don’t get lost, and I digressed a minute there, I want to go back to a point. That construction has been in this rut, I call it hiring unicorns.

As you look at a lot of businesses and how they operate. You look at the, you know, the field ops manager or you look at you know, that head estimator, maybe the project executive that runs a whole team. Maybe the president in a bigger organization, they’re a unicorn. They’re a 1% guy, they’re very special in the way that their brain works. They can handle more shit than most people, you know. And the business hinges on them. And constructions really bad about this, or that foreman that really good for me. He just wants to be a foreman. That’s great, he does an awesome job. And, you know, that big project can’t run without it. That’ as big deal. What if he’s out for a week? What if something happens? Heaven forbid he has an accident and you don’t have a system to accommodate information. And now your unicorn leaves and everything crumbles. So construction has got to really wake up about hiring the unicorns. You can’t scale hiring 1%. There’s not that many 1% guys, that’s how percentage works.

So you’ve got to be able to hire and you’ve got to be able to put in place good people that identify with the core values — hard workers — can’t give up on that. But you can’t hire the 1% guy for every position. You got to be able to hire, maybe maybe, they’re in the 80% or the 70% or the 60% into the population, that they can follow the things that you do. And they can work really hard and identify with those values. So you’ve got to build a system so that that person can function just as well in the business, you know, the 60% person, the 80% person, as the 1% person. And I think that’s what systems really do. They allow you to scale.

And yes, you’ve got to have good people. But it doesn’t have to be that one unicorn. It’s so hard to find. And you do see this guy, do you see this in the businesses that you deal with? The one unicorn or the six unicorns? Maybe they’re at the top end of a company, everything comes to them, and if there’s a problem with them, it’s a shift.

Scott Peper  6:38  Yes, we see that all the time. One of the other things systems do for you and process is it allows the one percenters, it allows them to scale their department. Those one percenters and one thing that one percenters have in common is you need to grow because they’re going to want to do something different. And they’re going to want to grow and hire and teach and train and do the things and you need those systems and processes to help them do what you needed to do.

And on top of that, one of the things we’ve always talked about, you know, you kind of hit the nail on the head is getting on top of your business instead of in your business. And one of the things we hear a lot of our business owners tell us as they’ve grown from maybe 1 million to three or four or 5 million, and they become essentially a unicorn running around doing everything, and it’s they’re barely holding on and having everything in their head. And this is the key, one of the thing they say to us is, you know, I’m getting the same paycheck right now that I had when I was a $1 million company as I am when I’m a $5 million company.

Charles Covey 7:33  Yep.

Scott Peper 7:38  And so if you’re listening to this, and you hear this, and that’s You, go back to listen to the systems and processes piece again, because the systems and the process are the difference between you having the same paycheck with 100 times more stress as you grow your business or actually eliminating some of that stress. While you’re actually able to have more than just a single paycheck. Same as you did when you’re making when you’re only a million dollar company.

Charles Covey  7:58  People ask me a lot Well, why don’t you start with the system. You know your business better anybody, you know, the person at the top, I would assume, in most cases knows a little bit about each department and how it runs. You’ve got to think about how the information flows and you can’t allow there to be a disconnect in the flow.

Think about how construction goes. Okay, so we’ve got, you know, got Sally in Accounts Payable, and you know, she just gets those invoices that come in, and she just knows that on Thursdays, you know, usually on Thursdays, she just takes that stack of paper over and she gets them approved. She just knows that; she’s been doing it for 10 years, so she knows. But what if she forgets, and now you got all those suppliers that don’t get paid. Or what if you had to hire somebody else, and that new person — well, they don’t know because they haven’t been doing it for 15 years. So you’ve got to have a process.

Things like lists, things like flowcharts, things that connect the dots so that people can get this information comes in, then it goes to here. And then this person checks off and goes to here, and then it goes to here. It does this thing, the checks approve. It’s that level of detail. It gets stamped and it gets sent out. You’ve got to have things delineated and defined so that you can manage them so that you can train people for them. If you’re growing, you don’t need just one Sally in Accounts Payable, you need three, because your business is going to do 100 million dollars. And how do you scale that? How do you take all that information and document it? So systems really are just documenting, and then monitoring and managing all of those different things that happen in your company, and contracting and subcontracting. There’s a lot of stuff going on, when you start breaking down the processes. Oh, my gosh, there’s hundreds of steps to some of these things. Now they happen.

Scott Peper  9:35  And it’s the kind of work that nobody wants to do. I mean, I don’t, you don’t want to do it. It’s terrible. It’s the most … it’s not fun. It doesn’t feel rewarding when you’re doing it. There’s a great book for those of you that want more information that’s in a tactical guide executing this and it’s called the E-myth Revisited, by a guy named Michael Gerber. It’s an excellent book. It talks all about systems and processes and scaling. It’s very relatable. It’s not boring. It’s actually a great storytelling book on how it goes from chapter to chapter. It’s really, really excellent, well done. I highly recommend reading that for those of you as a quick sidebar that want to get some more detailed tactical info on systems and processes, we could probably have 6, 40 minute conversations about that and not give you nearly as much as in that book.

Charles Covey  10:22  Can I give you an example a story about one particular system that’s massive for us?

Scott Peper  10:24   Yeah, absolutely. Please.

Charles Covey  10:26   Okay. And this is a this was an issue I saw. I worked at a GC, they do, I think they did 600 million last year, good size operation. And they didn’t have a good system for pay apps. Didn’t have one. It was just up to the project manager to make sure they didn’t miss anything. It wasn’t documented. Nobody was checking on it. If something got missed, like literally, if they didn’t turn in an owner pay app. There was no check and balance to make sure that happened. And we see it really, really see it in subcontracting. I mean, it’s just, it’s a shit show.

And we’re, we’re built to do a lot of projects, a lot of volume. And as we continue to grow the size, the average size of those jobs keeps getting bigger. But we’re built to do a lot of volume. And to do that you have to manage the information. So and you know this really well pay apps and getting all that billing done in a month, they like 20th, 15th to 25th, depending on what the job requires, you know, that timeframe, those, you know, 7 to 10 days of the month. The business hinges on that shit, you cannot screw that up. And we’re doing I think we might do 40 pay apps a month or something. And there’s a lot of parts and pieces that go with those. And so we were saying, though, at first, we created a list to make sure that every pay app got done, make sure they got done on the date. Do you know a random GC has a pay app due on the fifth? That’s kind of an oddball. But if you do it on the 25th, guess what? You’re screwed. It’s getting pushed to the next fifth. And you just missed 30 days with the cash flow, big problem. So that happens two or three times and you’re like, wow, this is not something we can continue.

So we make a list of all the jobs that are active and that way we check off. You know what happens we can, you can do an Excel, you can do it. We do web-based systems, we use because it’s it you do on your phone on your computer, it’s cloud based, so everybody can see the information. It’s very modular. So you can make a list, talk to another list. Monday, comm is really next level phenomenal for us. But the basic idea is you create a list of every pay app that has to be done. And every and then then, you know, as that pay gets done, how much the amount was for what the retainage is, and then that flows to the bottom line. Now you know exactly what your billing was for the month.

Well, the other part was, you know, projects were not getting predicted correctly as to what was available to build during the month. And so you just get to the 20th. And okay, well, this is how much we did. So in the past, that was not a proactive manner of managing the money in the cash flow. And so we started doing  — we use the same list. So the list, it’s got the pay apps. Now that gets an analysis on the first of the month of what work is ahead of us for the next 30 days. What are we going to do? We’re going to do this percentage of this and we’re going to have this many feet of this and you just go down each Job, we’re going to hit this mini percentage, we’re going to this percentage. And then we know on the first, by the, by the third, I know on the third what my billing is going to be on the 30th. So from a cash flow standpoint, now I get another extra 30 days to know what the hell’s going on. And I can work with that.

Also, from a field management standpoint. Now our team knows, okay, we got these to do, oh, well, we’re going to be a little bit short. Because we start dividing these up. And we know on the first that about the middle of the month, we’re going to have kind of a flood of stuff to do. We need to accommodate that we just bought a couple of extra weeks, we’re not going to get that that pissed off Superintendent asking us why we’re there, or we’re not there because we already predicted this. So that that whole predictive, proactive nature of that system that really allows us to move quickly.

Scott Peper  13:42  That’s key. I mean, without getting those payoffs on doing them correctly on time, not missing things, being proactive. I mean, in a world where you’re paid once a month, and you only have the ability to invoice once a mom, if you mess it up, it’s catastrophic.

Charles Covey  13:57  Absolutely, it could be. Yeah, I remember early the early days of the business ….  I don’t come from any money. My dad’s a firefighter. My mom’s a nurse. Like, we did not have any advantages. Alicia, my wife and I, we do this together. And we started this from zero, and almost went broke a few times, as we were working through things in cash flow. And that’s, that’s the deal. The first two or three years of the business, cash flow was the deal. That was what could have made or broken us a few times in a row. And I think we’re at a point now where we’re able to have facilities in place to manage that but you’ve got to manage the money coming in and coming out and a system really is the way to go. So anybody has questions, I’m here. If you, if you want to do, we could, you and I could probably do another call or a webinar, actually, on subcontracting systems. I think they’re probably pretty helpful for your for your listeners.

Scott Peper  14:45  You know, I’ll take you up on that because that would be helpful, very helpful. If we did just a webinar purely on systems and particularly around pay apps that would be extremely valuable.

Charles Covey  14:51   I think we’re probably 30 … 30 to 60 days away from having our system built to where the information flows. Listen to this. This is going to be great. See if we can make it work, I think we’re close. So when the job gets sent to us as an opportunity to bid, that information goes in, in this in the list, and then it will flow to a job that if we select a bid, and it flows to another list, if we bid it, then it goes to another list to follow up on, for sales and business development. If we win it, then it goes to another list, that when we get the contract, and it goes into our contract department to do submittals shop drawings, make sure the contract insurance is all done all those processes. And then from there, it flows to project management. They do their review, put together a review meeting with the field team, then it flows to field and then field knows now it’s on their list. And it flows to the calendar so they know what to schedule it over the next 24 months. And that builds into our schedule system and then it floats to completion, close outs, all those last items to finish up the job. And we’re done. So literal, front to back lifecycle of the of the project. I think we’re pretty close to making it happen. It’s going to be

Scott Peper  16:00  That’s cool. You can get it right from the beginning when you first touch it when it just isn’t right. It might not even be a project yet.

Charles Covey  16:07  Yeah, it is a challenge and in subcontracting, you’ve got so many fragmented systems. You got your payroll on this system, your timekeeping on this system, and you got your submittals on the system. And then you’re doing, well, you’ve probably got change orders  on this one, when you got contracts, they’re on Dropbox, and it’s very fragmented. So there are there are ways to try to streamline that and make it more efficient.

Scott Peper  16:25  You’re now the first cut large subcontractor in the United States to have trained 100% of their field staff with OSHA 30 certification. I know that’s something you work really hard at it. More than 400,000 hours of work time with a non-event, and I’m going to knock on wood now. Right because your return on that. And, and that’s across 100 and plus employees and multiple projects and jobs. So one: I think that’s great that you’ve done that. I think it’s a big commitment to your group. I want to recognize you for that. I think it’s awesome. They should be really proud of that. I’d like you to talk about aside from protecting people’s lives and that they don’t get hurt. Maybe you could talk a little bit about what that does for your, what that’s done for your business. I have some ideas, but I’m wondering how that’s really helped you and where you’ve seen some real benefits. Your focus on safety?

Charles Covey  17:19   Well, this one’s interesting. And it kind of goes back to what I talked about earlier, I’m worried about every everybody else’s money, or their safety, or them in general, I’m worried about everybody else. And ultimately, I was just really worried about making sure that all of our guys get home safe every day.

I’ll tell you this story. If we have time, I’ll tell the story about how this all originated. I’ll get a little bit emotional cuz it’s, it’s tough one. So we had three guys we hired first started the company. And two weeks after we bring them on board, one of the guys falls off a ladder. He’s two rungs high, he’s literally two feet off the ground, falls off the ladder, breaks both arms, snapped, some bone sticking out blood everywhere. It’s just catastrophic. So we go, I get phone call, you know, they get into the ER, I go to the ER. I had to look his wife in the eye and tell her that I was responsible because I had not trained them on ladder safety. We, just like, they’re in construction, you know, they should know. No, that’s not how this worked. It’s my responsibility. So I looked his wife in the eye. And I told her that it was my fault, and then it wouldn’t happen again. And so every single day since it’s on my mind, how do I solve this? Because I’m not looking another wife in the eye and tell her that it’s my fault.

That’s just not happening. So you think about it from that perspective? How do we elevate the safety of our team members to where this cannot happen?

Scott Peper  18:39  It’s great that you’ve tied that desire and goal to something that impactful because that’s really what’s made it turn into a positive event for you and something that you’ve actually probably come through with, what uh, what I’ll add to, as I’m sure from a economical perspective, you know, your insurance premiums are significantly lower.

Charles Covey  19:00  Yeah our insurance company loves us.

Scott Peper  19:02   Yeah, that adds more money to your bottom line. What you do with that money, then with your culture that you’ve built, is give back to those employees and give back to the different charities that you support in your community. And so it’s important to not only save that money, but saving that money does things that are even better for those employees. So while you’re focused on their safety, you’re also allowing yourself at the business to be more profitable, save costs on what otherwise are a huge expense item, the lack of worker safety can increase your insurance premiums to the point where you could go out of business. You need insurance, by the way, and now you’ve been able to not only create that as an opportunity to keep everybody safe, but you’ve made yourself more profitable and you’ve given back to your employees with some of those dollars to do that. So I think that’s something important. And the client.

Charles Covey  19:47  Yeah, it’s been a huge selling point for us. And we probably don’t push this enough only because we’re, we’re just so focused on the team members being safe and we didn’t even realize at the time, what a selling point that would be.

You know, you look at some of these big clients, you know, on these multibillion dollar international general contractors that we work for, this is a very key item for them. In fact, it may be one of the key items for them on their list of things that they’re looking for. In a subcontractor, they got to have safety. They don’t need some bullshit on their job, they need to know that when they bring you on their project, the safety is handled, they don’t need a problem child. They just know that when Alphapex shows up, we’re the safest waterproofers in America. We say that one pretty often because it’s factually true. There’s not another company that can match our record or our training level when it comes to safety. So I’m assuming, and I hope that more companies will match that level, because I think that will just elevate our industry as a whole. But at least for now, we definitely are the safest waterproofers in America. And that’s a pretty good selling point. When you know, you could put guys on a jobsite and you could promise that GC, Hey, there’s not a safer company that you can hire right now. We’re going to help you be better at your job.

Scott Peper  20:50  I think it’s a big accomplishment, something you should be proud of and, and I also want to point out for our listeners to be able to understand the importance of it but also how it can help them as a business gain more customers, do a better job, and be more profitable? Who would have ever tied job performance and employee safety to those other three items? And they directly relate. So, again, kudos to you, man.

Charles Covey  21:11  Thank you. It was a very, very expensive process. Yeah, guys, you got you pull them out of the field you had at the cost of the training, of course, but then it’s the hours that they’re sitting in that train, and they can’t be out producing revenue for the company. So it was a very expensive process. I don’t think you can say safety is ever too expensive, because it’s working. And so from that standpoint, we’re very happy we have the opportunity in the idea to do it, I would suggest it for everybody. It’s a big, it’s a big bullet to bite, but I think you should consider it.

Scott Peper  21:40   Well, to the point what was two broken arms could have easily been two people dead if it was a little higher up and a different job, will longer, if you didn’t have safety protocols in place. Today with the type of work and the type of jobs you’re doing. It could have easily been a 20-foot scaffolding instead of a two foot ladder.

Charles Covey  21:58   Right. That’s a great point you bring up I get that We were working on smaller projects are much smaller company three people. And now we’re working on high rises all across Texas. And yeah, that’s a slip trip or fall from 33 stories up. There’s no coming back from that one.

Scott Peper  22:14  Yeah, man, this has been an awesome conversation. Charles, I really appreciate your time on this. I think you fit the bill perfectly. And I’m reading this point. So thank you so much for being so open and honest and sharing all the great value you have for us and our customers and clients.

Charles Covey  22:29  Man, it was a pleasure. So thanks for putting up with my monotone and my asshole nature. As we work through this just trying to make subcontracting better.

Scott Peper  22:36  You’re a nice asshole. I think your wife’s right.

Charles Covey  22:38  Appreciate it. Thanks a lot, Scott.

Scott Peper  22:41   You’re welcome, man. Take care everybody. Have a great day. Thanks for joining us. Talk to you soon.

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