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Purchase Order Financing, or PO Financing, is a type of commercial financing that leverages the purchase order from your customer as collateral for the loan.

What Is PO Financing?

Purchase Order Financing offers you cash before the work starts, which makes it an attractive option for manufacturers with tight cash flow. PO financing is based on your purchase order, your customer’s credit, and your supplier’s reputation. A lender will charge an interest rate on the advance, usually somewhere between 1 to 6 percent per month.

How does PO Financing Work?

Funds from Purchase Order financing do not go into your company’s bank account. The money is sent directly to your suppliers. This ensures the money is only used for the materials or supplies needed to perform the work on the purchase order. After the work is complete, you’ll send an invoice to your customer like normal, but the customer will pay the lender directly. Once payment is received, the lender will repay the borrowed amount, plus any fees or interest due, and forward the remainder to you.

For example, let’s say ABC Manufacturing produces heavy-duty, preservative-treated wood for utility poles, marine pilings, and agricultural structural posts. ABC owner Lee gets an order to provide the pilings for a new marina. The purchase order is worth $750,000—a huge opportunity for her company—but, she doesn’t have the capital to order all of the necessary supplies. She works with a PO financing company to secure a loan of $245,000, which allows her to pay her suppliers and fulfill the customer order. After she submits her final invoice, the customer pays back Lee’s lender, and Lee is sent the remainder. The PO financing allowed her to take on a larger order than before, fulfill the order on-time, and STILL make a profit. This additional profit streamlines ABC Manufacturing’s cash flow, allowing her to start the next job without a cash flow crunch.

The Risks and Benefits of Purchase Order Financing

One of the greatest benefits for business owners is that Purchase Order financing starts before the job. It’s definitely less risky than Merchant Cash Advances, which promise fast cash but too often end up delivering a crushing cycle of debt.

On the other hand, PO financing relies on the credit of your supplier and your customer, rather than on you and the job’s contract. Many Purchase Order financing companies also ask that the business expect at least 30% profit margin from the total order. That might not give you pause, but how certain are you of your numbers?

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Is PO Financing Right for Your Company?

Purchase Order financing can help you free up cash before a job starts, but is it the BEST option for your manufacturing company? The short answer, of course, is: It depends. Do you already have an existing line of credit with your supplier? Don’t borrow money from a third source when you can get the materials you need on credit straight from the supplier. Instead, borrow for the things you can’t get on credit.

PO financing from a reputable lender, like us, empowers you to start work confidently. Without this financing option, you could miss out on new customers and larger orders that ultimately will help your business grow.

Manufacturing business owners want to grow and thrive like any business owner, no matter what the future brings. The COVID-19 global pandemic made reaching that goal a lot harder, with supply chain disruptions, operational shifts, and financial consequences all pressing down. The manufacturers who survived the spring and summer of COVID-19 now have to continue surviving AND position themselves for growth in 2021. What does that look like? We partnered with Dare Capital to bring manufacturing & banking experts together to arm manufacturers with the information, insights, and tools they need to succeed.

 

Missed one of our previous webinars? No worries. Click the link to watch a video or read the transcript.

The Future of Manufacturing

Planning for the Present

Becoming Bankable: Full Transcript Below

Adam Boyd  0:04

Good morning, I want to welcome you to Mobilization Funding and Dare Capital manufacturing series. Well, I’m really excited about this topic today. And we’re going to go ahead and kick off and I’m gonna introduce our guests here in a second. But I want to welcome everyone to the third webinar in our series for manufacturers. We’ve been really excited to do this with Scott Peper and the team of Mobilization Funding. One Welcome back, Robert Conley, and introduce him and Scott in a moment and I’ve got my colleague from Dare Capital Casey Conlon here as well.

So briefly, this the series we’ve done this summer has really been focused on the manufacturing, industry and Mobilization Funding has helped greatly in that they focus on purchase order, WIP and contract financing for manufacturers. Their unique loan program makes funds available for use before you actually invoice for products, with the capital you need on hand you can order raw materials, make payroll, negotiate better terms of suppliers and function more smoothly overall, their loan program is based on your contract or PO not your credit. I encourage you if you’re in manufacturing, if you’re a lender, you need to learn more about what they have, whether you need them now or you’ve got a client who’s gonna need in the future. So, go to mobilization funding.com. So, Scott’s going to have a chance you’re going to hear from him. He is truly one of the good guys in the industry. And I’m excited for you to hear from him today. It’s also brought to you by Dare Capital. Dare Capital specializes in finding small to midsize businesses that aren’t the perfect fit for a bank line of credit for whatever reason, they’re often growing too fast for traditional on credit. They’re really young, quite often under two years of age or they’re in a turnaround mode, many operate on progress or milestone billing have a hard time finding someone who understands their business or can help them close gaps in their cash cycle. The result is that they can’t get the working capital they need to grow. And so, we specialize in AR financing for those companies.

So my guests today are and this is where you’re going to be patient as I learned the slides, Scott Peper and Robert Conley, two wonderful guys, Scott’s the CEO of mobilization funding, and we’ve been working with, with Scott and his team for a while now, from the beginning, I’ve been impressed with his insights into building growth strategies for business owners that allow them to reach their financial potential and their other goals. His company Mobilization Funding, as I said, helps construction manufacturing business owners stay cashflow positive, and grow their businesses was a perfect guest to speak on the subject of becoming bankable. Robert Conley, I’ve known for 10 years or more now. 30 years of business experience and 10 years in private equity. He’s mentored and trained in private equity strategy and operations by Dr. Jim Ashton. And most recently, Robert was the CEO of Bagcorp where in four years he doubled sales from 25 to $50 million. He doubled first year EBITA from breakeven to 1.2 million, and he retired $3.6 million in debt via sales and utilization of efficient asset. So, he’s also a great one to talk about these issues. Both guys are phenomenal, really excited about what they have to say. So, guys, welcome for being here.

Robert Conley

Thank you.

Scott Peper

Thanks for the opportunity.

Adam Boyd  4:52

Absolutely, absolutely. Um, so guys, COVID-19 has thrown a lot of challenges to manufacturers. They’ve survived huge win, and they should take a moment to recognize that but now it’s time to continue surviving. What you do what they do over the next six months determine whether they’re recovering or growing in 2021. So, before we jump into some of the questions, we’ve talked about what have you guys seen and heard from manufacturers over the last few months during the pandemic and where they are now?

Scott Peper  5:17

Robert, let me go first and on that I did um you know it prior to the pandemic and the Coronavirus really kind of sold the whole spectrum I think manufacturing had all the normal concerns of a regular business and managing cash flow, finding good suppliers, consistent suppliers or supply chain terms being paid from their customers in a reasonable amount of time, managing employees, when to spend capital on certain manufacturing lines and then of course, just the general terms of a business what is the typical capitalization of the business. Is the debt load or the or the management of that debt on a monthly basis hurting or preparing the company? And then of course trying to figure out how to grow and get new customers.

I don’t think much of that’s going to change coming out of the pandemic, in terms of what you’re seeing in the spectrum of it, I think there’s two big things coming after is: there’s not going to be as many manufacturers, because some of them just couldn’t make it. We’ve seen some customers that are really in a tough spot, actually, because of the PPP loans and the EIDL loans, the two of them and the fact that they never, their business never really stopped, those two loan programs and access to capital actually drove them out of what was otherwise a really big disaster. We also had clients who got stuck in certain markets where  their employees are being paid, sometimes one and a half to two times more to stay home with the way that they were being compensated from the unemployment tax benefits, that it was really hard for them to get kickstarted again. So, I gave you the whole spectrum. I think it really depends on manufacturing is a broad term, it depends on what you’re manufacturing and who your customers are. I think the food manufacturers really saw a big surplus. We had a company that was a salad dressing company, you know, they were cranking through the entire pandemic, before, leading up to it, they had some cashflow problems, but you know, the PPP money and the EIDL money, frankly, you know, brought him right out of it. That’s general, I think we could dive into some more specifics, but I think from a big picture perspective, that’s what I would offer.

Adam Boyd  7:31

Robert, anything you want to add on to that?

Robert Conley  7:35

I, the fundamentals of business, regardless of the business that you’re running, are always critical. And manufacturing companies very specifically, are always challenged with the utilization of working capital and whether it’s pre-coronavirus, or current. Pre-Coronavirus, they’re dealing with normal working capital scenarios situations. You know, push out payables, fill in receivables, minimize inventory which supply chains effects, right because if I get a long supply chain I’d push in or inventory in. And so that at least from the guy that I was mentored for, by when you can understand how to facilitate and tactically manage those pieces, things can improve or get worse. The one thing that affects them more is the forecasting. So, if you’re not, it’s one thing because you’re running kind of a flatline for the most part. When you aren’t able, we don’t have that log in, you’re looking to forecast sales, and you have a lead time and you’re trying to satisfy a customer demand for You’re making decisions about working capital capex, etc. And the manufacturing environment is the most difficult one to try to figure out those equations for. In so I would say that those things will never change, regardless of as Scott said, they’re always going to be there. And so understanding how to facilitate those decisions, whether it’s based on customer demand, expected customer demand, or current backlog is there’s a lot of refined pieces that can come out of out of thinking through those situations, in structuring your business correctly, to meet whatever it is that you’re trying to accomplish.

Adam Boyd  9:47

So, it’s not necessarily going to get a lot easier. That’s what you’re saying. Now I’m hearing.

Robert Conley  9:53

If you can forecast, if you can understand the forecast customer demand, I think it’s you. I think if you hold on improvement, or anything related to the home or food? Yeah, you’re probably reasonably comfortable with your forecast. Except that it looks like that. It’s on this hockey stick, which is really difficult. Yeah, it’s good, difficult. Yeah, you’re not. It appears that all bets are off, although on the s&p and those kinds of things, companies are annihilating their forecasts in lots of scenarios. Scott?

Scott Peper  10:32

I couldn’t agree with you more. I mean, in some ways, the, if your sales are outpacing your capacity, it’s a really easy strategy. You do whatever you can, and you throw everything you got at it, because it’s not there. But to Robert’s point, if you all of a sudden, you’re you end up with one, one month, two months of inventory on hand and you’re used to only having two weeks, that cash constraint puts on you and sales starts to decline. What do you do then? I think the other piece that we didn’t touch on either is just talent and culture management. If you had a great culture going in to the to the pandemic, it probably helped you a ton to get through it. If you had a poor culture and talent was low, the training was poor or you were in need of doing training, you probably, those problems probably showed up real in a real big way through this pandemic. And I bet those folks that are really struggling right now to get a hold of that, yeah, it’s complex. There’s a those are two things that are really difficult to do. And you can’t just have one meeting and fix that problem. That’s a that’s a long-term strategy shift that needs to be worked on and nurtured daily and weekly. And that’s hard to do and a tough time whether you’re either growing fast, or you’re just in a tough time. Yeah.

Robert Conley  11:47

Can I say something to that? Use a little anecdote, which is to Scott’s point. I’ve been taught manufacturing by some of the best cats around that we’ve been extremely successful and one of them, guy name Dick Fagan, his favorite sayings, because we always did turnarounds in kind of, you know, highly complex and, you know, family kind of environments, and the statement is, fish stinks from head down. And the leadership in most organizations, because the lack of understanding of the components that drive the business is the biggest issue in most companies today. And the leaders don’t know that they need to step out of the way in most cases, because the people aren’t being utilized and maximized in the structures that enable the business to grow. That would actually make them more money if they weren’t running the business and running the people into the ground to Scott’s point. Yeah.

Scott Peper  12:49

You know, to add to that, I think a lot of people are getting the most out of their employees right now. And employees, team members, even you are more than willing to step up and they can drive hard and do monumental things maybe work at 150% of their normal capacity for three months, four months, six months, maybe longer if properly incentivized. But I think right now, a lot of these leaders need to really decide what is the limit that I can push these folks before I bring new people in, just because you’re having a great time now and the bottom line may look better, or you’re even more efficient. You can’t run people in 150% of that capacity forever. No one’s also taking vacations right now. So, all of a sudden someone takes a vacation. What happens? Yeah, about that time, I think people particularly leaders and management really need to start looking at Okay, what what’s going to be normal again, maybe I settle into what maybe it’s 120% capacity is the new norm isn’t but not 150 or 200 day you’re running some people. And I think employees are willing to do anything for a company that’s they love and admire, particularly the leaders that are there. But you got to be honest with them and you didn’t really either Really incentivize them to continue that pace, which is probably unsustainable, but somewhere match that incentive with that extra production, as well as the less amount of people that you have there now, so you can get a more efficient model that can last long term. And you’re probably getting pretty close to that right now.

Adam Boyd  14:17

Well, Scott, you touched on something that I would love for you guys to kind of pull out your crystal ball. I mean, you’ve talked about, we’ve got some people staying at home because the incentives from the government are greater incentives for going back to the business. We’ve got people potentially either running at 150%, because of increased demand. We just talked to a company that manufactures and sells bikes this morning. And they’ve seen sales quadruple because of COVID. Everyone is kind of locked down. So, we’re looking forward and they’re having to get more out of their people, they’re having to invest more. Or you may have people who just they lost some talent, and now they’re having to do the same level of production with fewer. So, what particular financial challenges do you anticipate, those of the manufacturing industry need to be prepared to face for the rest of the this fiscal year. And I’ll start to you, Scott.

Scott Peper  15:11

I think all their normal challenges are going to be there, they’re just going to either have a bigger light on them, or they’ll show up in tougher spots to touch on the touch on culture and people. You know, because there’s more people on employed, there’s more talent available to so and a talent doesn’t necessarily mean there’s going to win those jobs and opportunities come about your best people, if you’re not taking care of them are going to have a lot of options to go do things people cleanse their businesses and when they rehire, they’re going to learn from the mistakes or the things they wish they could have done differently that maybe they couldn’t have been a normal climate COVID allowed them to kind of clean the slate and when they go to bring people back, they’re going to have a new concept of who do I want to hire, what do they want to look like? What is that position like? How do I want to incentivize I’m in the savvy business owners and leaders are going to find the best talent. That doesn’t mean just because the unemployment rate is high and people aren’t working, that they’re going to pull that talent from that pool. It certainly May, but they may pull people are going to look your employees don’t have you’re always going to be looking at jobs and your current people if you’re not taking care of we can easily go look at a nice opportunity and move from one place to the next and you might be hiring from that pool instead. So, I think that’s one thing. I’m also I think, where and when to spend capital and invest in your business. I would really be concentrating right now if I was in manufacturing, how do I get leaner and meaner on my balance sheet? How can I what’s my strategy to pay down any debt I have especially if you had some new visa EIDL loans for 12 months, you have to make payments but you’re going to start to have to and yes three and three quarters percent money for 30 years is probably more inexpensive than any other note on the business. But how can you pay some of those other debt down free up that debt burden on a monthly basis so that you can still remain as profitable as you are now, even when your sales might settle in. Those are the things that I’d be really focused on if I was in manufacturing right now what I try to do.

Adam Boyd  17:17

Robert, you know Scott touched on people and culture, as a two times CEO in a manufacturing shop, is that an unrecognized financial driver that manufacturers aren’t paying enough attention to? In your experience?

Robert Conley  17:35

I would say that the short answer is yes. I don’t believe that, so, one of the things that you missed the question that’s up on my board, but I’m gonna answer your question as well but is what challenges will manufacturers face for the remainder of 2020 steps: on the balance sheet, and you made a reference to a bicycle for a company that had quadruple demand, and they’re willing to that demand. One of the things that happens in businesses from my experience is that we overestimate the future, right? In this hockey stick that a black swan event will create is not what the normal the new normal is going to look like, you’re going to have a smoothing effect on that demand. So, if you’ve seen this fight, you will know that trees don’t go to the sky. And so understanding that you can invest a ton of money right now to try to what you’re really try to do is you’re trying to squeeze the juice out of this particular fruit as much as you can. And what I would submit to Scott’s point is that if you squeeze this juice at an optimal level and don’t over invest in your business expecting this this this hockey stick like effect to continue, then you will strengthen your balance sheet through this opportunistic time. And you will, here’s what I consider: if you raise the bottom rung of the ladder. And your ability to compete in the aftermath of this will be stronger. Okay. And so, you know, it’s just again, it’s the smart or the aware kind of utilization of capital that’s being provided to you because of a unique occurrence. So, I’m being realistic bottom line.

I don’t care if it’s manufacturing to answer your question, business of any kind. I’m working with a coatings company right now, got an investment in and I, you know, there is a lot of structural components that business “leaders” miss in an organizational chart. If you go to business school or anything else and you look at organizational structures, they have to have accomplish a mission whether the Egyptians are building pyramids, or leader is building a structure to accomplish whatever the goal is. And so, you do it layer by layer. Same thing is true an org chart, if you get the right people to leverage the talent that’s going to be available in the market to Scott’s point. And you put them in the right box, and you define that box well, and all the boxes that are next to each other’s boxes understand each other, and it’s a big problem, and they’re all kind of working together and those boxes connected by lines of information because that’s what they’re processing, then the organization begins to accomplish more. And the leader, if they don’t understand that which is not abnormal, they many times don’t, has that’s the responsibility to leaders to connect those boxes with clarity and transparency, so that that structure maximizes itself to accomplish whatever that mission is. Strategy is not a whole bunch of things. It’s a mission, we want to have this level of market share, then you set about the tactics, which is what the organization has to do to go and accomplish those particular missions. And so, yes, leaders miss those pieces, and they throw people and money in different things, an imbalance and lack of understanding the organizational structure. Does that make sense?

Scott Peper  21:30

Yeah, you make a great point. Robert, I’d like to add one thing I made me think about that, you know, you think about that organizational chart. I think a lot of leaders if they’re missing and I did it myself for years prior to ever really realizing it. You give somebody the box, so to speak in the org chart, here’s your job, and here’s the job description. And then you say do your job, right. And old school way I was great. But you know what happens now and everybody doesn’t matter whether you’re in your 20s or 60s. Some people need to know what that box and job is actually working towards, not for them individually, but for the business purpose. And sometimes it’s a mission, and sometimes it’s a purpose, but aligning that job and that description and how it layers in and depending on where they are in the layer cake, their job, they may, they may have two or three other positions that boil up before it really they can really draw that line to what their role is in the purpose of the business and how it helps. And to connect those dots for each individual person is really important because then they know how valuable and important their job is. And sometimes it’s just having the information for the next step to make the right decisions. And that step to the next. And I think that’s one thing that gets missed a lot, probably the most, in my opinion that they meet that could if you just align what everybody does to what that purpose and mission is and how they play that role in it. Everybody starts to see how their rules come together because they all know how it gets to the top piece and that I think that makes a huge difference. For an organization.

Robert Conley  23:01

So, to that point, we use a tool, I use a tool called Operations Review and, you know, taught to use it, understand what it means and, and really it’s a monthly meeting where all managers departments and all the employees come to this meeting, and everybody presents kind of where they want to work we’re doing it’s there’s no right or wrong. It’s not a punitive environment. We’re not trying to you know, by God, correct anything in that. What we’re doing is really is to Scott’s point is creating transparency, top to bottom side to side. And what most leaders, and I don’t care if it’s an HR leader, or CEO or CEO, they say go get a job description. When you go to the web, and you approximate these job descriptions, from job to job to job. You’re like, well, this is close. No, it isn’t. Because you’re processing information for each other on behalf of the customer. That’s the manufacturing process that you’re going through every day. At Bagcorp, I said to the group was, look, I want in order to be able to go through this organization, such a level of understanding that no language is required. But think about that for a second. If an organization understands itself and each other connected why’s that they just feel things go through like this right? Will the customer feels that the organization feels that you have operating leverage, you have lots and lots of things getting done in short periods of time? And so that learning is the process that you need to go through to figure out but it’s not easy. But I’m suggesting that what Scott saying is, right, it’s that it’s that information processing, that is a manufacturing process. And you can go into complex ways to understand in, but it’s not that complicated. And it’s not a ubiquitous job description that fits for all companies. It is for your company, and say, just do these five things. I mean, if you do those 100% Oh, my God, the world gets beautiful for the people next to you, they’re taking the information and passing it along the line on behalf of the customer.

Scott Peper  25:15

Yeah, and you don’t have to come up with new things to say, the one message just over and over again. So, everybody knows and it’s consistent. And they know you mean it, and you’re serious. And that’s where it’s going. You don’t have to kind of create new thoughts and ideas every day just to make it interesting. It’s interesting all by itself, but it needs to be consistent.

Adam Boyd

It’s good. Robert had something.

Robert Conley  25:35

I again, I feel very, very grateful and appreciative for the mentoring that I’ve received, Jim Ashton said, and he’s a PhD in structural mechanics for MIT and Harvard Baker scholar. And I say that because I want to give him the credit for being able to do the things that I’m going to reference. He said, Robert, I can do the most complicated math formulas in the world. Literally. Better not that valid people unless you’re solving that specific problem because people don’t do complex and they don’t do fast.

Adam Boyd  26:11

They don’t do complex. They don’t do fast. No. All right.

Robert Conley  26:17

There’s been true.

Adam Boyd  26:23

Yeah. Good. Well, let me ask you guys. You know, in we’ll start with you on this one again, Scott. How do you when you’re looking because Scott, you’re financing a lot of these businesses, how do you assess their financial health? What are some of the key indicators or metrics you’re looking at? And I’ll ask Robert the same.

Scott Peper  26:39

Yeah. So, in our loan product, we’re short term to solve a specific scenario. And so, what we want to assess is really two things. Before we assess the scenario for which the customer is actually coming to us, the general financial health for us is a barrier that’s just where are you now? Can you sustain me Maintain where you are and what you’re doing. Whether that’s your debt coverage, can you are you paying your bills? Are you cashflow positive? Are you cashflow negative? Or are you just you’re making money you have good margins but you’re being squeezed by your customers just dragged out too long to too many days outstanding or you’re growing so fast that your supplier terms just don’t marry up to the your cash flow yet. So, you’re just a little bit of a struggle, but are you making money? And can you make it work? Or do you need this one project, or this one customer so badly that if God forbid something happened to them, it would bring the whole business down. That’s the first thing we’re assessing. So, for us, and it’s just for our loan product, we want to make sure that someone’s there, they’re okay. They don’t have to be great. They don’t have to be financially solvent they don’t need most of our customers aren’t even bankable. But they do need to at least be able to be surviving and moving through where they’re at in a current state. Once we assess that then we’re going to look at the financial viability of the project or the purchase order that you’re working on. So if you’re in a good state, but you have a project that has razor thin margins and a ton of risk associated to it, even if the PO dollars huge, it’s not necessarily going to help you. But if you are in a state where you’re sort of in a, you’re kind of humming along your bumps in the road, but you now have all that work you’ve done has now led you to this great opportunity that you do have good margin and it is a higher dollar value. And you need the financial backing to just execute on that purchase order without putting stress on what otherwise is just okay, normal, cash flowing business. That’s perfect for us. That’s what we’re looking at. We want to make sure we can finance that opportunity so that you don’t have a pain point in your normal business. Your normal business can continue to operate while you take advantage of this new growth opportunity to have those What we’re really assessing and how we do that is basic financials, bank statements, cash flows, seeing what the capitalization of the businesses, are they able to manage their normal expenses, AP, PE ratios, and then their overhead costs and debt coverage. Those are the things we look at to determine the first part viability of the company. The second part, we just build out the cash flow model, and we do it with them and for them, if they don’t have it already, or will utilize what they have, but we’re going to determine what is the cash, what is the margin? When is the project or project purchase order cash flow itself? And then can we help if we if we help provide the fuel that’s needed to either pay for labor or buy these materials? Is our product going to help them and can they pay the pay the financing cost of that capital, but also does it drive their business forward? Can they bring the money in faster Can they do it quicker so they can do it more efficient and actually save money or increase their margin? Those are the things we’re going to look at and then we present that to the customer so they can see exactly what it’s going to cost. And really our, our cost of capital is really nothing more than in that scenario than one of the line items as in their cost of goods sold. Of course, it’s not cost of goods sold, it’s not a material, but in that purchase order, the financing costs themselves because of the nature in which our loan is going to pay for goods that are otherwise associated to that. It really allows them to look at, Okay, you know what, I have this great opportunity, and it’s at a 25% margin. And, but I don’t have a way to do it, or I can use this funding for mobilization funding, I can get it done. And I’m going to have a 23% margin or a 24 and a half percent margin because I’m going to be able to dry use this cash to drive efficiency and actually executed quicker, faster. And here’s what my margin impact is. That’s really what we look at and we try to make sure we provide all that value to the customer because we’re not just a lender. We really want to have them understand the growth opportunities that they have in front of them. And how best to execute on it using cash because most customers, most of our customers, they don’t have it an endless amount of cash to execute on orders. So, when they do, even if it’s in the form of a loan from us, there’s a lot of efficiencies you can drive there versus just doing it the same old way with alone. Yeah.

Adam Boyd  31:18

Robin, you ran Bagcorp and other companies. What were some of the key indicators you were looking at determine financial health? I know most people are looking very often just sales, and that’s a bit of a straw man. But what were the things that you were looking at that other people may not think of as often that are leading indicators for the health of the company?

Robert Conley  31:45

So, I’m going to build on what Scott said in if you if you think about financing, and you need financing. There are elements of your working capital, or your capex that are out of sync with some aspect of your business. I think that’s fair statement. And so many times and I would say most scenarios in manufacturing, and one of the places that a guy who guys like you would go and look is inventory. Because most people, you know, you’re talking about terms, he talks about all this stuff in very general ways. What you’re really trying to do is take the available pool or bathtub level of cash, and invested into things that give you back cash, right? That’s the net. And so, I can go and hire people. I can go and invest in inventory. I’m effectively providing credit when I provide receivables to people and I’m taking credit I get payables. Right. And so, as I take that bathtub level of cash, and I deploy it in those ways, I don’t see good CFOs are really hard to find. Just because they have a title CFO does not mean that they’re a good CFO, but it’s been my experience at least. And the mechanics that go into these pieces can go into what’s called a 13-week cash flow model. And it’s really a marrying up of those effects, right, because I have customer demand, or expected customer demand. And what happens is the entrepreneur, the business owner, says, I’ve got this big pool of something that I need to mine, right, I’ve got this little thing that I’m after. And if I build all this inventory, I’m gonna sell it to that and I’m gonna mine that gain right. Well, when I mined that gold vein if I take records, it’s beautiful, right? Because it just comes right back. And if I estimate that even close, and I’ve got levels window I’m holding but not too much, right? But if I provide credit, then that mining of that gold vein, depending on that people pay causes the inventory now to turn into two forms of financing, right? I’m taking it out of my cash and I’m giving it to someone else is going to pay me later. Now I have to match up payables to those pieces at a rate, typically, our payables to be two to three x my receivables number, right? That’d be like your scenario, right? Because I’m getting cash faster than I’m actually paying it out. So, the raw materials that I’m turning into revenue, which then equals profit, right, whether it’s face margin, contribution margin, operating income, I don’t care how you look at it. Those are all financial kind of constructs as the numbers flow through the financials, but utilizing those metrics and knowing why do I buy that raw material, how long does it take me to turn it into inventory or an invoice? How fast do I collect that invoice? How fast do I have to pay the person that provided me raw materials? And how much do I make? And how often Can I do that? That’s what you guys are looking at every single day. And the lack of understanding as to what those pieces really are, is what causes companies to get out over their skis. Every day. I don’t care what business you’re in. I really don’t manufacturers is very complicated because margins are skinnier, and investment is high, right? Because I have to sequence those things along that line. And so, if you spend time sequencing those things, and that 13 week cash bar rule gives you the ability to kind of hone in on how you do that. Then you’re watching your cache really moved consistent. Simply, as opposed to having guys like you guys come in and say, you know what you’re doing on the cash flow, here’s what your cash flow looks like. They’re like, Whoa, you can do that same work. If you just take those elements, put them into some Excel model, and begin to watch them how they behave. And then you’ll take customer demand, and you’ll marry it up with how you deploy the cash. And then you’ll be able to see how your business is developing health or sickness, if you will. Hopefully, that makes sense.

Adam Boyd  36:35

Well, and if it doesn’t, they can always reach out to you guys after the fact and ask more questions.

Scott Peper  36:38

And we have a cash flow model that we’re I’m happy to share with any attendees that we could send it out. We have a full instructional guide on how to use it. And it’s a great starting point. It’s very basic. It gives us the basic information we need. But it’s plenty detailed enough for someone that doesn’t have something like this in place to totally get a sense So where things are going and then start to add what they want to it but it’ll give them the ins and outs as Robin just explained.

Robert Conley  37:05

You should take Scott up on that.

Casey Conlon  37:08

Yeah, it’s got I got I got a question addressed to you. It says what was a borderline funding opportunity that mobilization rejected and what was the reason why?

Scott Peper  37:22

What was a borderline funding opportunity? Yeah.

Casey Conlon  37:26

Someone looking, working for funding for you guys you’ve rejected on board on opportunity and why did that very specific?

Scott Peper  37:35

Um, okay, so I’ll give you two examples. We had one last week. financial health of the company was excellent. Normal doing well, fine. They’re trying to get a new customer and they It was a quite manufacturing but it was a purchase order financing. They’re trying to get a new customer, so they bid the bid the product really low. They didn’t have all their costs in line yet so some of their supplies that they had estimated were going to cost actually end up costing a lot some cases double. Anyway, what it did to their margins was it really ended up with a razor thin 5% margin. And in some businesses 5% margins are excellent and that’s great. But in the world that we live in, it’s not it’s too thin from a financing perspective, because they’re the other two problems were they weren’t paid quick enough to Robert’s point they were paid by credit card or paid COD upon delivery. Great No problem, but they weren’t they were actually paid on a 60-day term. And so when we put it in the cash model and showed it to them, and show them what that was going to cost them for, regardless of our financing costs, actually, even if they had their own capital, forget ours, before financing costs, their margins were going to be reduced so much that they actually this opportunity was going to suck all the cash out of their business and the terms they had with their supplier or their AP but they had to pay, they would never have the cash to do it. So, it was meaning they were going to get the new customer execute on the order make 5%. But they’re going to use every bit of cash in their business to pay down other AP because at 30 days, they were gonna, they already owe their accounts payable more money than they had in current AR. So, there’s new opportunity wasn’t gonna be available to pay down that AP, which then would have put their supply chain at risk if they couldn’t get new orders. And over the next 60 days, they certainly anticipated on getting new orders. And that’s again, we so we denied that loan, because if we provided that that would have that would have helped them from the AP side, but all they would have done was brought in revenue and a negative margin or negative cash flow, then bend margin, but after financing costs, and just time is too risky. That’s one example.

Another example I’ll give you the opposite of that had an excellent p o with super high margins, but they had financed themselves with so much debt already to get the business to where it was at and then Without thinking it through had gotten some really wrong forms of debt they were so they didn’t want to sell any equity. And I can certainly understand why you never want to do that if you don’t have to. But what they did in turn was they brought in debt at what I would call equity debt, meaning it cost just as much for the time it’s there, if not more, and that also pulled all the cash out of the business. And even though they had this great opportunity, we would have financed all day long 100 times over and worked with them forever. It was almost like the drain; they were circling the drain. And if they didn’t continue, they’re trying to outsell their way out of it. But the problem is they had already sold so much margin of their future margin to the pay this debt and the debt was too much at too high of a cost with not enough time to pay back. And so, by pulling all the cash out of the business, on the other side, not with the new people, but with the current business. It had the same effect and problem and we had to say no to that. And so those are two Examples and almost probably eight times out of 10. Those are the reasons why we say no to alone one of those two reasons or both.

We’re not the right fit for someone who is, hey, look at this huge problem I got myself into, and can you help me sell my way out of it, that that’s not typically how it’s going to work for us. And a lot of times, it’d be very blunt. It happens with merchant cash advances. Most companies that have utilized the merchant cash advances have put themselves in such a bad spot, cash flow wise using them, that it makes it really hard for any other type of finance or to come in and finance them because there’s not enough cash in the business.

Adam Boyd  41:43

Well, this leads me to the next question, Robert, how do you as an operator and as an investor distinguish between good and bad debt? Scott talked about some debt being so expensive, it’s really equity. How do you determine between good and bad debt?

Robert Conley  42:02

I mean, I genuinely like Scott’s explanation. The second one, specifically. I mean, most of them, but we’ve been talking about is the mechanics of what make a business run. Your money in, you have costs that are time phased related to those top line revenues. And if you understand that time phasing if you will, then you can quickly see and I would say there’s a — I’m aware of this book, there’s, it’s Good Accounting. And it’s by the same guy that wrote the Go, go out. And really it kinda treats all costs as a face sort of really variable costs that come out great contribution margin and then everything else has got fixed. And it gives you evens and understanding how you where you are in that cycle. Debt is a genuine cost. If it’s at higher rates, it has a higher level of negative effect on the amount of money that you’re harvesting on a weekly or monthly basis. Adam, Jack Long said I did daily cash flow forecast right not just weekly. And so, the higher the expense of debt, the more that your daily cash really technically is learning, right? Because if you don’t understand the microscopic aspects of how money is flowing in and flowing out. You don’t see the pockets that you hit because you go. Right? In so expensive debt has a very high cost on the energy of the business, if you will. And so no, all that is bad. But if you don’t understand how those mechanics and your business work, and this is I’m talking about in your gut in your in all this feels like this to me, but like see it, understanding it understanding how those reorganization then you can make that decision that looks good to Scott’s point ends up being really bad, right? I had a similar situation. So, I looked at recently to do a turnaround on their debt. I mean, there were so Over levered, it was ridiculous, there’s no way they were going to dig themselves out of that hole on an earnings basis. The only way you’re going to do that is to wipe the slate clean and reset all the debt because you can’t dig yourself out of the cost. And so, you know, what we really I think find ourselves talking about is guys like you guys who understand what are the mechanics that cause the numbers to filter through the financials, and how they affect the business and what you end up doing is teaching people and then either giving them good news? Yeah, your stuffs pretty good or bad news? I can’t do this deal. Right? But if the owner or executive had that awareness starting out, they’d be informing you as to where they were coming to you to the financing and you’d be like, you’re a lovely, here’s the money. Yeah.

Scott Peper  45:55

And Robert touched on a key point I really want people that are offering This webinar to listen, I think it was subtle, but it’s really, really important, particularly for the types of businesses that I think we see in finance the most. There are two things with debt. Everyone thinks of cost. And I have customers asked us all the time, what’s the cost? What’s the cost, I said, you know what the cost is irrelevant at the moment. But there’s two main problems that you can be over levered, which means you have just too much debt, it can be the lowest cost debt on the earth, you just have way too much of it. And the cost of that payment each month, hurts your cash so much. That’s  the short definition of over levered. The other side of it is you could have the right kind of debt dollar amount, and even at a high cost, but it’s in but it’s in the wrong terms, meaning you’ve got the money you need, but how fast you have to pay it back in the manner in which you pay it back or the manner in which you get it or how you can use it are so bad for your business that it just doesn’t fit. So even though it’s a good rate. In a good amount, it doesn’t work. And that’s really where I see more of the problem because we’re not inexpensive on paper compared to a bank or debt, we’re not inexpensive debt. Which is why when you heard me talk about how we look at the cost, if you have an opportunity to do a 20 or 25% margin product, or project that otherwise you wouldn’t be able to do because you don’t have the money you need, and you need an extra orbit and amount of money in it, maybe 50% of the actual purchase order amount. And you’re not collateralized with a property, but you just have that po for someone to give you 50% of a PEO it’s going to be fairly expensive. However, if you can use that money specifically for that it only cost you 2% of your margin. Well now Okay, you have a 25% margin opportunity. And yes, you borrowed a lot of money to execute on it, but it only cost you two or three or 4% even at that even at the highest. But now you still made 21% and an opportunity you weren’t able to You now have 21% of that pile of cash to Robert Sims to bring into your business and the structure if you keep doing that, and you properly put some discipline to the to the use of that cash when it comes into your business, you can take what otherwise is expensive debt and cycle it quickly and all of a sudden, six months, seven months, eight months down the road, or certain amount of dollar amount down the road, you now have all the cash you need to continue on that path. That’s the that’s the huge difference that is so important. Robert, hit right on the head, but I’m wanting to really reiterate this point. The terms of the debt are almost more important sometimes on the cost.

Robert Conley 48:39

That earlier Scott was merchant funding, when you may not want to tag that, but I’m going to tag it because if you have a lockbox and they’re drawing, weekly, daily, some kind of increments, then you aren’t getting all of your cash and they lock it away from you. And now you’re in this. Oh, I’m trying to catch up to what my cash needs are. And that dead. It could be so cheap that no merchant that’s gonna be too cheap. But the bottom line is, is you’re literally giving up daily, which you won’t have that in your model. Right. Excellent. You are you are. You’re trying to get through a straw.

Scott Peper  49:25

Yeah. I mean, if you’re a retail shop and you bought you have a merchant cash advance, and it’s appropriately sized and you pay it daily and the same point you’re charging credit cards every day. Fine. No problem. No, you’re a business you get paid every week, every two weeks, once a month, and you think you’re gonna make daily or weekly payments and it’s gonna be okay, you are literally just taking a bad problem and kicking the can down the road for 30 days or 45. But when that problem shows back up, it’s now on fire and it’s 16 Anybody that anybody that would provide that debt to you the first time, okay, they understand. But if they say, here’s another cash advance to solve that problem again, the lenders don’t really care about your business or they don’t know enough to tell you and guide you correctly. Either one is gonna have a negative outcome for you. One means they’re a bad person. The other one means they just don’t know any better. But that’s the problem. And then those are the situations I think folks get into. That’s unfortunate. But you know, simple things. Again, if I was going to say simple, I would listen to this one point. If you earn revenue daily and profit daily, then you can handle a daily payment. If you don’t, then you can’t.

Adam Boyd  50:47

Huh? It’s that simple. Yeah, that’s good. I think the net you guys answered these questions. And I think we’ve got we open it up another hour and a half with the next slide, I would like to ask you guys, what’s the one thing manufacturers should be thinking about? Going into 2021? And I’ll start with Scott, you know, start with Scott and we’ll go to Robert but like, one thing is that it is, you know, curly from city slickers. Yeah, one thing, what’s the one thing you’d say? lenders need to be talking to their clients about or manufacturers that we’re talking to? They need to be thinking about and then if Casey’s got any questions, we can go to those. But, Scott, one thing that you could be encapsulating everything you’ve discussed so far.

Scott Peper  51:39

So the question really is, what’s the one strategy or thing if I was a manufacturer, that I would guide or help offer up that you really want to grow in 2021 in this climate that you can, it’s going to help you the best. I want to put a caveat to it depending on your business, and what your strategy is. With it will guide what I’m about to say, if you’re our manufacturing business, that’s your top line revenue is the most important thing. You got to make money, but you’re driving top line and because top line you get to a certain top line, it’s going to allow you to immediately be purchased or acquired or something of that nature, then that’s a different, that’s one strategy if you’re trying to be the most profitable, and you see your manufacturing business as a business, you’re going to own a long period of time and you want it to be sustainable. I’m going to address that secondary version first. I think you need to take what we’ve talked about and Robert laid out very eloquently with a cash flow model. And you need to find that if you don’t have that, you’ve got to find it either some type of CFO and not anyone’s the same somebody that knows that cash flow really well, to show you two things, what to cash flow of your businesses and then take it one step further. What is the cash flow of each customer in your business, because you may find out. And most businesses do if you have a lot of customers, certain customers are gonna be a lot more profitable than others. And it could be because of the supply, not any fault of errors, but maybe the supplies you buy for one customer, you have better terms with and you can execute better. And if you know those margins, you can drive at the customers that are going to help you create more cash in your business. And that is the key for you. It creates so many opportunities, and sometimes it might it’s easier said than done. But what I mean by that is if you have the data and the numbers and you understand the cash flows, it’s not hard to make the decisions if you know that all of your customers are lined up and around. One of them is breakeven neutral under your current structure. And one of them produces a 35% profit but your average profit is 20. And you’re treating all five customers the same. It’s not hard for you to get that information. Now you might say well, why am I even sell them to this customer I’m certainly not going to give him a price break or you know what, it’s certainly there’s no problem with me taking the risk to go to that customer and tell him I need a price increase. And if they say, No, who cares, you’re actually going to make more money with less revenue. But without the power and the tools that Robert walked in, walk you all three are with the cash flow and a good CFO, you’re, you’re really never going to have the ability to even make that decision. And so that is the most important thing I would do if I didn’t have that ability, or I wasn’t capable myself making those decisions. And by the way, I’m not I have an excellent CFO, and I’ve been blessed with someone who produces a spreadsheet for me that anybody on earth can read and say, Well, I want to do more of that and less of that. But I could have never put that together for myself. No, no chance. So, it’s, it’s amazing. I say that because I’m one of those people that couldn’t do it myself. So, when I have that sheet in front of me, it’s like, it’s like making elementary grade decisions. It’s really easy like a guy want you to your point. In the face that hurts, don’t please do that anymore. And or this is great, I feel awesome. You know, hand me a stack of money. You know, it’s that easy to do. But it’s not easy to get the information to that pattern. So that’s the one thing I would really do is make sure you get that talent whether you outsource it or bring it in, into your business, you’ll make your life way easier.

Adam Boyd  55:23

Robert, we’ll turn to you one thing you just said, hey, there’s one thought I want to leave people within manufacturing, they want to survive and grow in 2021.

Robert Conley  55:32

Strengthen your balance sheet, said again, strengthen your balance sheet back there. Everything we talked about, rolls it into strengthening your balance sheet. If you want to go assuming that you’re looking at is 2021 is the opportunity you’re going to exit this vulnerable period. Then the balance sheet is where growth comes from. Hard Stop.

Adam Boyd 56:080

Hard Stop. Love it.

Scott Peper  56:08

Pay that debt down you sooner I mean pay paid down your business is profitable.

Casey Conlon  56:17

Yeah, Scott, we had we had a question for You are mentioning 2,3,4 percent coming out of the margin on that purchase order earlier was were you speaking to PO finance or AR Finance? In that example, this is from Matthew in the audience today.

Scott Peper  56:36

Um, you know, if you think about traditional financial aid, what I’m talking about is really the margin on the job. So, let’s just say that someone has $100,000 RPO and it cost them $80,000 to execute on that labor, cost of goods, material, etc. So, they’re going to by the time they do what they normally do it, they invest $80,000 over 60 days. period in their business forget financing at all. I’m just saying just take a business say, Oh, I got $100,000 PTO, this is what it costs me to bring the raw materials in. It’s a week’s worth of labor to make it, I ship it, and a week, a month I get paid. And that whole episode is creates $20,000 of profit. And you can’t do it because you don’t have $80,000. What I’m suggesting is if all of a sudden you borrowed some portion of that 80,000 let’s call it $50,000. And for round numbers sake, it cost you $5,000 to borrow that 50. So instead of 80,000, and now cost you $85,000. Well, that would be five additional push that now you’re only making 15%. So, the 20, 15,000 instead of 20,000. But you’re able to actually do that work, you’re able to really take on that piano that you otherwise wouldn’t have. That’s what I’m talking about where that 5% $5,000 using that round numbers. I’m not saying that’s the cost of our loans or anything, I’m just trying to give an example of what I hope is a question to give an easy example using just simple round numbers.

Robrt Conley  58:09

Again, I just want to give you a perspective to build on that. In every single case, you have a pie, you have a margin pie that you’re slicing up. And what Scott’s saying, I think simplistically is, is that everybody gets a pie. And if you take cash, in order to go get that pie that you otherwise can’t get, if someone takes a sliver of that pie, don’t get hung up on the sliver that they’re taking, because you’re taking the larger portion of that pie as a benefit for the money that’s being provided. It’s just like a tool and mining. I don’t care what you’re going after. If I don’t need to go rent a jackhammer to go through something and it cost me then it cost me I’m just taking Now out of this pie, now I get the majority of the pie. And people get all worked up about how much they’re giving someone to go do something. That’s not the point. Don’t step over dollars to pick up dimes. Look at that piece and see how much of the pie are they taking? Oh, this seems like a lot. Not really, because you’re getting the majority of that pie by that person that money. Don’t down the road, do it again. Right? Don’t worry about it. Don’t get hung up on somebody else. You know that you’re making and wash, rinse, repeat. You want that tool over and over and over. If you could do 50% on $100,000, you can do it faster. You don’t need to worry about the financing God give up your percentage of PO and move it and do it again.

Scott Peper  59:52

Yeah, and if you’re used to ordering your products from your suppliers and paying them in 30 days, and the cost is x but now you have this ability to go to your supplier. And let’s say you use the exact same example it costs you $5,000 to borrow that 50 in that example, but now you take the 50 when you have it and you say, Okay, well, you go to your supplier say, Hey, can I buy? What if I pay you COD, maybe they give you a 3% discount or a 2% discount? Well, you just, you just shrunk your costs in half. And now you’re not because you had the cash, you weren’t able to do it more efficiently. Instead of costing you 5000. You lowered your cost by instead of 80 down to 77, for example, and yeah, you added maybe 5000 of cost instead of 80. It now cost you 82. Well, you’re able to save add call add financing costs, but save in maybe negotiating through suppliers or we have customers on the construction side of our business because they have the money for a payroll and labor. They’re able to do the work and weeks faster, they say a week’s worth of labor. Other customs of ourselves. I’ve never had the case like this before to us, you know what, I’ve done this this whole time I’ve slept at night, because I’m not scared of how am I going to make payroll? or What am I going to do and you know how to pay a lot of money for that. Matter of fact, I just had a customer Tell me last week, Scott, this is not a big deal. Three weeks ago, I used to spend just at least one week a month chasing all my customers down for three days a week to take the money they owed me at a discount so that I could make payroll. And they would take three, four or 5% less from those guys all the time. So, there’s, you just got to look at the way

Robert Conley  1:01:36

No, no, no, I just gonna have a good build of that, which is, I’m not trying to take business away from you guys. But go to your suppliers and ask the same question. Because that’s all you’re doing really, fundamentally, is if you said, Hey, would you take a price increase in order to give me longer terms as to the longer terms for Christ’s sakes? You know, the last thing you never asked? You never get in you say, oh, by the way this looks happening. Here’s my financials. Here’s what looks like, hey, like that, but you don’t need Scott or their capital, you go with your suppliers, put the leverage on them, give them a portion of your margin that and continue to grow that way.

Scott Peper

Don’t do both, though.

(Laughter)

Scott Peper  1:02:29

Our purpose and mission is to help the people we come in contact with and what you just suggested, Rob those ideas. Those are the things that we come up with all the time, we lose business or deals if you want to call it that all the time, because it’s something we suggested they go do to try to make it better and then they able to work it out with their supplier, their customer, and that’s fine. It’s not a big it’s not a problem at all. Because now the supplier structure, they’ll go get the work that they said no two are the purchase order. They said no to before and they will need us later. It’s a long game. You don’t need to win every game, short, long game, so we’re, you know, we’re here now,

Robert Conley 1:03:04

One of the things that customers do. Most owners do think that having more vendors is better for them because they get price discounts. It’s not, we can sell the vendors in every single company we ever go into. Because if you go in and concentrate your business in, in, in smaller numbers of vendors, you think it’s risky. It’s risky all the time. But if you go get smaller numbers of vendors, larger numbers of your business, find that those vendors will do amazing things for you. If they’re the right vendors. You will find opportunities with that as true thing that you go do. Just that’s it.

Adam Boyd  1:03:48

Guys, we’re at the top of the hour, we’ve gone over a little bit. I just want to encourage folks, Mobilization Funding has some phenomenal resources, check out their site and their YouTube channel. If you have questions about operations, about sales marketing, I’d encourage you to reach out to Robert Conley. You can find him on LinkedIn. Find Scott there. Scott has a lot of great content. If you got any questions, reach out to us, and we’re happy to point you to those guys. So, Scott, Robert, Casey, thank you all for being here. Appreciate your help. Have a great day. Thank you.

 

Transcribed by https://otter.ai

Right now, women make up about 9% of the construction workforce. There are huge opportunities for women in construction, either as part of the workforce or as a business owner, but there are also challenges that must be met.

In this episode of Built for Growth, Sartura Shuman-Smith, Director of Tampa Bay Works for Women at The Helen Gordon Davis Centre for Women, and Robyn Donaldson, owner of Renew Construction Services, and Founder of the STEM Xposure Inc., join Mobilization Funding CEO Scott Peper for a discussion on the challenges and opportunities for women in construction, and what companies can do to encourage women to join the industry.

Full Transcript Below

Scott Peper  0:42  Hi everybody, welcome. I’m Scott Peper, CEO of Mobilization Funding. I’m really excited to talk today about women in construction and I have two awesome women. Very strong, powerful women, in my view, here to talk a little bit today. First is our Sartura Schumann-Smith. She’s the director of the Tampa Bay Works for Women at the Helen Gordon Davis Centre for Women, and Robyn Donaldson, owner of Renew Construction Services and founder of STEM Exposure Inc program, which exposes high school students to different STEM and architectural design programs. Welcome, ladies.

Sartura Shuman-Smith  1:17  Thank you.

Robyn Donaldson 1:20  Hi, thank you for having me.

Scott Peper  1:20  Welcome. I want to thank you guys so much for taking the time to do this with us. We always are looking for interesting and exciting topics. Today, I really feel like not only am I going to learn a lot, that I usually do from this, but I think it’s going to touch on areas that we’re just so not familiar with and in doing some of the research on both of you and the things that you guys have done being the fact that this is in our local community, to and you guys are all of us are in the Tampa Bay area. It’s nice that we’re gonna be able to see things and find out and things that I didn’t know existed really, I mean, I’ve known about different programs, but to see what you guys are doing and how you’re doing them and how they can impact our local area is really important to me, so I’m excited about that.

Robyn Donaldson  1:57  Awesome.

Sartura Shuman-Smith  1:58  I am too.

Scott Peper  1:59   Robyn, let me ask you a question, to start with you. You have different companies, you know, community real estate developer and you’ve had lots of volunteer work. Tell us a little bit about your journey, where you’re from how you decided to focus on the architecture and construction space. And mostly, maybe just round that through your whole career. How did you get into this?

Robyn Donaldson  2:22   Oh, well, let’s see I’ve always been interested in construction. I think it was to, to spite my mom because she always wanted me to go into the nursing field. So, while in high school, I went to Tampa Bay vocational tech, and I took up industrial electricity, just to make her mad, and I fell in love with construction. I just absolutely loved it. I’m a problem solver. So, it was just at the time an ideal fit. Upon graduating In 1987, I don’t want to say that too loud, I graduated from high school, I had a certification as an apprentice, and I worked for TC Hernandez Electric, Tampa Tribune, doing electrical maintenance, until I had an accident where my hand was caught in the machine. And I’m like, you know what, I have to stop doing all the laborer’s work. Let me get into a, let’s say the administrative side of things. I reached out to a great friend of mine, who’s a general contractor, and she just really exposed me to all of the different facets of construction. And let me say this, she’s my mentor. She’s the first African American to receive a General Contractor’s license in the state of Florida. And her name is Anne McNeil from MCO Construction in South Florida. She’s an awesome, awesome person. And again, she exposed me to the different trades, different aspects of construction. Whether it was aviation, transportation, and she just really gave me my start, she helped direct my footsteps. And I found myself in architectural design. Again, I’m a problem solver. I love to design things; I love to develop. And as a result, from that I took classes at HCC, I received my, my certification for architectural design. And then there was the building component. And it all just made sense. I just absolutely love involving, I say myself with hands, and then really just creating things. So that’s the gist of how I got into the construction side of things. But with all of the different business that I have, they all revolve around construction.

Scott Peper  4:49  Cool. Thank you for sharing that. And Sartura, you run the Tampa Bay Works for Women program and its construction-focused program of Women Building Futures. Could you tell us a little bit more about yourself, how you got into that what your thoughts are around your program, how you got to start it and where it’s heading and how you got into it yourself?

Sartura Shuman-Smith  5:07  Sure. Well, I’m, Robyn, I didn’t do anything in spite of (laughs)—so I, my start is right here in Tampa. I’m a Tampa native. So that’s a rarity in itself. I always wanted to be a school teacher and I guess you’re saying that how does that work into construction or careers, but I always wanted to be a school teacher and when the college, did that, taught school for a while, and ended up in nonprofit, decided that well, I don’t not sure if I really want to do this anymore. But I ended up in nonprofit my first nonprofit job was with Tampa Housing Authority. And then I went from there to PBS Television where stayed for a very long time. I would really date myself, but I don’t mind. I stayed there almost 21 years in children’s programming, education and in children’s programming. And when the recession hit in ‘08, everything fell apart. Um, my job went away. And so, it was like, Okay, all right, let me try to reinvent myself like everybody was doing then. But I ended up staying in a nonprofit sector and started doing contract work with different agencies. And someone referred me to the Centre for Women and said that, you know, you might want to check them out. So, they reached out to me and I went over and started doing outreach. And then a position came open as the director of one of the Center for women’s program called the Center for Girls. And I just was adamant in my heart, I didn’t vocalize it during the interview was like, oh my god, do not do this anymore. I tried to run away from children. Try my best. I love them though. And they really are my passion. So, I said, Well, okay, I’ll take the interim director’s position. So interim for me is like 30 days. I set you up, I get you straight. And then I’m out of here. Well, that interim position turned into six years. So, I’ve been with the Centre for Women for six years and in December this past December 2019. After a lot of prayer, a lot of self-reflection, I decided I wanted to do something different. It wasn’t that I want did not want to work with children anymore. I just felt that I had already made I had made a strong enough impact that I could light someone else’s torch, not passing the torch, because when you pass the torch, you give up your light. So, I wanted to light the torch of someone else to take that position. And actually, that’s where Robyn and I met through the Center for Girls. So, I came over into career development our Tampa Bay Works for Women program. I didn’t know that our Women Building Futures program was a part of that. So here I am, knew nothing about career development. I knew nothing about the construction field, but like Robyn, I am, I want to say I problem solver. I’m a fixer, I want to try new things. I want to see how much of an impact I can make somewhere else. And maybe we’ll get into that later. So, I’ll save that response for another question. But this is where I am, and this is what I’m doing.

Scott Peper  8:23  Well, I’m looking forward to getting into that topic next and make sure that we remember I guide you back there if I don’t. You know, one question I want to ask you guys, I thought it would be interesting to start with, before I dive into some of the other topics is you guys have met a lot of people in and around construction, both at a young age, in the middle of the prime of their career, and it sounds like even towards the end of their careers. Can you give us maybe one or two traits or talents that you see are the real separators between people that make it and are successful in the construction or the people that just kind of get into construction and are just stay there and don’t leave to either develop their company or make it all the way through their career? And the reason I ask the question that way is we see so many folks in construction that sounds such a hard field and people come and go in and out of it. Businesses fail and succeed. Maybe a little bit different pace than other industries. I think a lot of construction gets a bad rap. But yet, there’s really some amazing talent that’s in construction, mostly because it is such a hard field innately in my opinion to succeed at. There’s so many more dynamics, there’s way more challenges whether they’re cash flow problems, people, labor or material but the sheer dollars of a project, and I really want to see what is it in your guy’s opinion from your perspective that makes someone more successful or less successful? What are those traits that you see?

Sartura Shuman-Smith  9:46  I’m going to, Robyn I’m going to definitely toss this off to you after I say my little piece. Before we started, I put a disclaimer out there Robyn is the expert and I’m still learning but I’m going to compare my background to where I am now. So, I’m going to use the comparison with what I’m doing. I remember when I left the school system, I honestly thought that there was nothing I could do but teach, you know, what else can I do? And when I got an opportunity to go interview at the TV station, I’m saying to myself, what in the heck am I gonna do at a television station, but that’s because I didn’t know anything about television or production or media. But when I got there, I started out in sales, working in sales, and then moved into education and outreach and children’s programming. So for me, I think a trait that leads to someone’s success, and I think in any area Robyn can expound on it, when it comes to construction—I think just thinking out of the box, thinking outside of the box that okay, I don’t have to stay in a classroom to educate. I don’t have to stay here just to do this or I don’t have to just be a welder, or I don’t have to just be in business. Masonry, I don’t have to just be and I think when people understand the areas that they’re in and really do soul searching and realize their own potential, and when they get into an area, it’s like, you know what, because I tell people all the time when I talk to them, you know, you don’t have to do just, and I’m putting that in quotes because it’s not a just feel, but you don’t have to just focus on that one area that you know, broaden your horizons, educate yourself, and be bold enough to say, hey, Scott, I’d like to learn this side of the construction business. What you all do Scott at your company, like oh, okay, alrighty, so this is something different in that whole big area of construction.

Robyn Donaldson  11:47  I’m taking notes.

Scott Peper  11:50  Robyn, what do you think?

Robyn Donaldson  11:52  Really, it boils down to what time do you wake up in the morning? I wake up at three o’clock. I think that that would be definitely a trait of a successful business owner is the sacrifices and the time that you’re willing to dedicate to your ultimate goal or your ultimate business. Also, who they associate themselves with, I always recommend being a part of a mastermind group. Associate with people who are on the same journey or someone who has already achieved the type of success that you’re looking for. And also, feed your mind. Feed your mind always improving yourself, whether it’s in your speech, your skill set, whatever it is always be. In that learning, I’m always in a learning type of mode. And I’m, also more importantly, just really know what you want to say that you want to be a business owner. Again, those are just words. Now you need Have a plan, and it needs to be written. And I also think that having an accountability partner, which is in part also associated with the mastermind group, just having someone who can hold you accountable for what you’re saying that you’re wanting to do, I think those three things really are key in the success of an entrepreneur or starting or and running your own business. One thing that I did want to mention your subconscious mind, your mindset, the way that you think the way that you’re approaching things. And I know sometimes it’s, it’s a little roadblock because if you’ve been an employee for so long, you know that if you work 40 hours, you have a paycheck on Friday. But the mindset of an entrepreneur is so different. You have to literally make it happen every day. Like there’s no days off. And again, those things I think combined is what separates successful entrepreneurs from those who are just talking about it.

Sartura Shuman-Smith  13:58  You’re right, I agree with you Robyn on that one. It’s the mindset It really is got it and I didn’t want to interrupt you but you really have to decide and make up that mind of yours to say this is what I’m going to do and attach yourself to people who are sincere about helping you to achieve that goal not don’t attach yourself to someone who you just think is this great one because of their reputation, or their name or their association but attach yourself to someone who really has no other reason but to support you and to guide you and bring you to the next level.

Scott Peper  14:37  You know you guys are really speaking my language now I’m glad this question is on air because my team internally and certainly Autumn for sure, I understand this, but you know, you guys, I couldn’t agree with you more. One mindset is everything talking about what you are going to do not what you’re going to try to do is we talked about all the time. One of our core values is be a lifetime learner. If you’re not educating your mind every single day, somehow advancing yourself, you’re going to get left behind. Things I personally believe, finding a mastermind, finding a group who you surround yourself with, there’s people I follow and really listen to. And one of the things that’s come out of my mastermind group I think is relevant to the to two things really, that are relevant to what you guys said. One is, when you look at your inner circle, who you’re surrounding yourself with the people, you’re closest to the five, so people you spend the most amount of time with, you’re going to be some version of those five people. And the other thing I learned, which is a little more harsh, but I think very relevant, they were said to me, You have to figure out what type of hard you want to participate in. What that means is life is all hard. You know, being broke is hard. Working hard is hard. Getting up at three in the morning is hard, you know, getting up at eight in the morning, getting sleep and then not getting anything done, which leads to you having extra work at night is hard. And you really just have to figure out what hard you want to participate in. Right Oh, Nothing’s easy. There’s no such thing. And when I heard that the first time, I made me think you know what? Yeah, there’s a right you got to take time and pause with your family and do fun things. But you got to get back to it too. You know and know how hard you work smartly with goals with a plan with a group that’s helping us you’re not just run around like a crazy person activity and calling yourself hard work. That is the key. So, I mean, I really think you guys touched on some really important key topics. And I’m glad we touched on that because you’re right, it is all mindset.

Sartura Shuman-Smith  16:32  Hey, can I add one more thing, Scott and Robyn, no word, but oh my gosh, please. And I know it’s easier said than done. And we probably do it ourselves. But I try to make a conscious effort to not say that you just don’t know how many people I’ve talked to. Now that were remote on the phone, who they immediately start telling me what they want to do. And before I can say, Okay, well let me before I can say I’m trying to help them but this but that but it is and I tell them okay, I’ve given you five times to say it now stop. You’ve just talked yourself completely out of everything that you just said you wanted to do everything that you said you wanted to do you say that there was a but there. I said you have to eliminate that but and because all you can get is either a yes or no so but is not even going to hurt. If you say I really want to do this Scott, but we’ll just ask Scott. Or Robyn I really would like to go into architecture but. All right, we’re gonna say is what? But I can’t say but I don’t have the experience. But Scott, I don’t know anything about finance. I that word but has to go.

Scott Peper 17:47  The only time you can use the word but is when you respond to someone with, look all those excuses sound really good, but I just don’t care. I just want you to be able to get it done and so do you like mom taught me when, when I was learning how to apologize, which I still working on. But anytime you say I’m sorry, but you just negate the entire column. Right? If you say if you’re gonna use the word, but just realize just Mazal just skip everything you just said it’s not worth anything. And I realized, you know, I like talking and not having it mean anything. So, I mostly just eliminate that word from my vocabulary.

Robyn Donaldson  18:25  No, but.

Scott Peper  18:26  We’ll change gears on you guys. You know, currently the in the construction workforce, women make up just over 9% of it, at least according to the US construction workforce. Anyway, from your guys experience, what are some of the challenges that you think women face specifically as they’re entering into the construction industry?

Sartura Shuman-Smith  18:42  Robyn, I’m always jumping first because I know my two cents will lead into your 10 cents, because that I know this much. But one of the things I feel is that and I’m quite sure Robyn will agree with is there’s not enough women in actual leave to shift positions. So, they’re not enough. I mean, there’s some powerful women because I’ve encountered some of them. Robyn is one of them that are doing their own thing and are successful. But I don’t think that there’s enough women in leadership positions to make those decisions to bring a more diverse group to an organization or construction firm. I think lack of Robyn spoke of her mentor right off the gate. I don’t think there’s enough mentorship and opportunities or apprenticeships. And women are not visible enough in the industry, that you may hear about an Ann McNeil or a Mercedes Young or a Robyn Donaldson but not everybody has the opportunity to actually be able to engage with those people or those individuals. So, I don’t think there’s enough visibility with women and construction. The other issue is the pay gap. And I’m quite sure we’ll maybe go into that later. But there’s still for me, I believe with everything now and it has. And I don’t really think this has anything to do with the current climate, I just still think there’s a lot of unconscious bias. When it comes to women. Being in a male dominated industry, like construction, people will look at someone and immediately say, Oh, you don’t look like you’re in construction. You know, right off the bat. Oh, you don’t look like you know, well, what does that look like? You know, what does that woman in construction look like? Because I remember one time I went somewhere, and I heard somebody used the term drive by images. And for me drive by images of what you see literally when you’re either driving by walking by, whether that’s on media, so you have these perceptions and ideas and notions of what a construction worker looks like. But people don’t realize, well, the construction industry is massive, and they’re all types of Like Robyn, architectural design and electrical, this and all of these big things, and I just don’t think there’s enough of that in our faces. So, I think for me, those are some of the issues that I think women are facing in the industry.

Scott Peper  21:15  You know, according to the National Association of Women in construction, the pay gap, one of the things you mentioned, it looks like about 5% 90, women earn about 95% of what men are in the same field. And although that’s five percent, a lot, it’s actually a lot higher in construction or closer aligning construction than it actually is in other industries, which I found interesting. I wouldn’t have guessed that or known that to be accurate. I wouldn’t have thought I was actually worse candidly than the other industries. Robyn, I’m interested to hear your opinion. What why do you what do you think of those items? Why do you think it’s closer to the pay gap? But also, why do you Why do you think what do you think keeps more women from getting into the construction field?

Robyn Donaldson  21:55  Okay, so let me set the scene for you, right. You go to school for four years. As you achieve a degree, you want to enter into the construction field, whether it’s as a project manager, estimator, or even a designer, but then you’re paid considerably less than your counterparts. And then in some instances, you have to deal with different types of abuse, just because you are a female in a male dominated industry. So that’s an employee side, and wanting to change that you want to become, let’s just say a business owner or that entrepreneur. So now I think that is twice as hard. Because now you’re literally competing with the big boys as they would say, and they really don’t want you in their arena. Like I’ve so many times I have my How can I say my experience has been questioned because I’m a female. And so, it’s just they don’t they don’t see you the same and in my experience, you know, I have had wonderful, wonderful relationships with amazing women like Trail Blazers like Anne MacNeil. And then being a part of the organization called NABWIC, which is the National Association of Black Women in Construction. The women are out there is just the opportunities. And then the exposure. You don’t you don’t readily see that in the construction field. And then you have the situation where you can become a certified minority in the construction industry, but again, is all of these roadblocks that you encounter. So, it is a little difficult. It is not for the weak. I mean, you have to have some, you have to have some really tough skin because you’re going to have opposition that’s above and beyond a 40-hour week.

Scott Peper  23:50  One of the things I think you touched on I, I talk a lot about I think the greatest things in life come from a place of uncomfortability. You know When you get outside the lines, I call nothing, nothing great happens in the middle, it’s all on the edges. You know, if you’re going to get something that that other people aren’t going to have, you’re going to be outside the normal bounds working hard, either working hard, focusing on something that no one’s seen before. And what I like a lot from a sales background, I used to sell things in the medical field into hospitals, the accounts I’d walk into that I could sell the same day, I certainly liked and enjoyed, but I also knew that they could be taken away from me in the same day too. It was the things that had the extra hurdle or that much harder or the conversation or the person that I had to break through or resonate with or build a relationship with. That made it that much harder. I knew it was gonna stick. And so, I analogize that a little bit to what you just mentioned, as hard as it is to get those certifications. There’s such tremendous opportunity there that I think if there’s a way to educate women, minorities or even men that are trying to be in this field, figure out a way to really take advantage of that hard because if you can crack through it, there’s so much opportunity. It’s like you get through the hard part. And then there’s, there’s a lot of there’s some easy there. How do you see people navigating through that, particularly if they can see the other side? That’s what’s hard. Sometimes you see this huge wall in front of you. But you don’t realize the other side might be a green pasture.

Sartura Shuman-Smith  25:22  I heard somebody say the other day—and Robyn, you can write this down—I know your note taker. I heard this the other day, and I loved it. It said you can’t climb a smooth mountain. Right. And that just resonated with me. So, I literally visualize this slick mountain. And so, you’re right. You cannot climb a smooth mountain. You know, there has to be something for you to grab on to hold on to get your bearings in your foot footing. And as much as we don’t want to say things are hard or we want things to be smooth sailing. It’s not going to be that. And I used to do a lot of on when I was at the television station I used to I used to do a lot of trainings and workshops and presentations and for me, the person who had the biggest scowl on their face, the person who looked like they were writing their grocery list down instead of listening to me. That is the person I decided I was going to gravitate to. I’m going to stand by you. I’m going to place my hand on your shoulder. I’m going to look at your name tag, and I’m going to call you out and you’re just going to become my best friend before the end of this presentation. It’s like, that’s the challenge. It’s like, you’re going to like me, Robyn, and I’m looking at your name tag, Scott, oh, you’re going to like what I have to say. But it’s that not giving up and not seeing that, that one, that one detour sign or that one roadblock sign and decide that you’re going to turn around? You know, that that is like, you know, I tell people all the time, why would I go 50 miles to turn around and go back another 50 miles and go back to where I started from. We’ll just keep on pressing and go the remainder of the distance which may be shorter than from where I came from. So that’s just my little bit of knowledge and wisdom.

Robyn Donaldson  27:11  Oh my gosh, she’s so special. Um, I just really, she I love her though. You have to love Sartura.

Robyn Donaldson  27:18  Reiterating what you mentioned before, Scott, that you just have to decide what hard you want to play, or how hard you want to play actually, because a 40 hour week is hard, you know? So, but you’re building someone else’s empires, someone else’s dream, dedicate those same 40 hours to know what you have going on your business goal. And then also, I had just wanted to mention that I think is very imperative again, to have a mentor or someone to assist you with your journey because again, it’s very, very hard. You’re going to have rejection at every angle. And I’ll say whether it’s to contractors, whether it’s insurance, because there’s a lot that goes into being an entrepreneur, so you may have the best business plan the finances in order, but there’s always something that’s going to throw you for a loop. And just be ready for that. And then when you do see, when things like that do take place, you keep going and you find strength to just keep going through whatever you’re going through because again, is part of the process. And, and again, I just love that you have to choose your heart, because now you’re taking hard and impossible or difficult out of the equation, you’re going into this knowing that you’re going to have problems is just deciding how you’re going to deal with them when they occur. You know, I wrote that one down. I like that one too. I like that one too. Just choose your options. You can choose how hard you want to go, you know with diversity in the certifications, again, that was a way that I had to strategize myself or maneuver through the construction industry. When you have a certification, they have to let you play, so to speak, they have to let you in the playground. Now whether they let you own a screening or even give you a push, it’s something totally different. But I mean, you have to start there. And there’s going to be so many. And I have to just keep saying this, because there’s going to be so many failures, there’s going to be so many obstacles. But once you pass that first obstacle, and you gain some momentum is just, it’s just really part of the process. Because I expect people to tell me no, the first second or third times, you know, I expect those things. So, it’s just maintaining the momentum despite any type of mishaps that may occur.

Scott Peper  29:52   You’ve mentioned mastermind and mentors and I think, you know, a lot of that is talked about, but can you do you have any that you recommend or how would it feel As someone said, you know what I really do need a mastermind I need to surround myself with the most important five people are going to help guide me. And then they say, where do I go find them? Do you have any suggestions or folks that you would recommend or people that you think are good masterminds or places to find those masterminds so that they can make that make a good decision there and then be guided in the right direction?

Robyn Donaldson  30:21  Yes. And that’s a great question. There’s so many, really depending on your industry, or even your interest. I know I started out with Meetup.com, which everyone knows whatever your interest is, you can just sign in, put in your zip code and your interest, and it’ll direct you to groups that have that same interest. And they meet all the time. So again, now you’re connecting with people who have the same interest. And then from that there’s a lot of mastermind, you can google mastermind, there’s construction mastermind groups linked has a lot of them. So, I would get really specific as to what area or industry that you’re looking for. And just find I would go on LinkedIn of Facebook has lots of them. I know the one that my mentor, every Saturday morning is called the International Mastermind Association. And that’s a guided mastermind because we use Napoleon Hills Think and Grow Rich book. And I’ve been involved with that mastermind group for some years. And we literally reread Think and Grow Rich over and over and over again. Of course, the words are the same, but we’re different every time we read it. I think I’ve read that book maybe like 17 times now. Wow. And each time I learned something different because I’m different. And again, networking, of find people who, again, you would like to be like and find someone Who can add value to what you have going on? And not, we don’t deal in the negatives or any subtractions. And then, and or you can create your own mastermind group. So as of late, of course, I’m into the STEM side of things. And I’ve just associated myself with a lot of tiny home builders, you know, anything, any, wherever my interest is, I’m going to find the best of the best person to pour into me. And, again, I hope I answer that question. But yeah, you can Google or IMA. There are so many different mastermind groups out there some that are free, then you have some mastermind groups that have a membership, that’s very costly. But just keep it in mind who’s going to be in that room, who you’re going to have the opportunity to listen, converse with. So, it just really depends on how deep you really want to go with it.

Scott Peper  33:00  Yeah. One thing I want to what you said that I think is really important when you go on this journey, it’s so easy to think what am I going to get? Let me evaluate all these What am I going to receive? But if you really start with this the mindset of what am I going to give? First, what is my contribution going to be to going, your mind changes and you will bring and attract to you and this is my belief, you will bring an attract to you the things that you need people who will see that if you think first about what you’re going to give and what you’re going to do and what you’re going to put forth. Everything else will show up for you if your mind is looking right where you want to go.

Robyn Donaldson  33:40  You know, that’s my tagline. I make a living from given.

Robyn Donaldson  33:45  And if you find how you can add value, whatever it is that you’re in search of, it’ll come back and I think that that has been my whole experience with STEM Exposure which is the non for profit summer camps. I just simply, I’m in service to others. That’s how I feel. I don’t ever approach anyone asking for anything. I asked them, how can I be a value to you?

Scott Peper  34:16  And that’s it. You know, you mentioned your stem exposure. That is one of the things I really want to talk about next is a great segue into that, that for what if anyone doesn’t know STEM is something that really exposes these students to these different types of career paths and where it’s at, but can you tell us more about your particular STEM Exposure Inc program, how it helps the students what it exposes them to, and just the program in general?

Robyn Donaldson  34:41  Well, you know, I’m smiling because I love talking about my kids. I love the kids. A stem exposure, as you mentioned, is a nonprofit organization and our mission is to expose minority students to underrepresented STEM careers. Architectural and design camp is our signature camp. It’s all about revolving around providing affordable housing options. So, our camp started back in 2018. I had an investor asked me to design some conceptual drawings to help revitalize East Tampa. So, I said, You know what, let’s get these kids to decide what they want their neighborhood to look like. And as a result, we started a summer camp. It’s a two-week camp, which we again expose kids to architectural design, development and the construction trades. And what happens after that second week is nothing but beautiful. So, the first camp we had was in 2018, and as a result of two students designs were selected and those houses were built in East Campus. So, we have students designing and building homes to revitalize East Tampa 2019 it was just a really overwhelming response to the channel. And what we, how can I say, to the camp of the impact that we had on the children and the fact that students ranging from third through 10th grade. Again, they’re actually learning how to design a home and then building it. And then so from 2019, we had the opportunity to have the camp at the glacier Children’s Museum in downtown Tampa, which was an awesome opportunity because it created the perfect atmosphere, you know, for STEM, the stem camp, of course, 2020 came up and we had six camps have scheduled but then COVID-19 hit, however not but however, birth to a virtual camp, online presence. And so since we again, we were featuring affordable housing for homeless veterans, we ventured off into the Tiny Homes and then When you think of Tiny Homes, who do you think of other than that different from Netflix, Tiny Home nation or operation tiny house. So what? I reached out to him, and he was our guest speaker, along with HGTV DIY. We had Schooley. We had all of the tiny home community, they just really poured into the students the first week, by talking to them about their design. They showed them the exterior and interior of their tiny home, which really just helped influence the students designs. And it was just really awesome. We have students from last year that really advanced toward architectural design. We brought those students in as instructors. So, we have students instructing students, which created a marvelous, wonderful, sustainable learning environment. We were also able to give students out for those instructors 1000 Dollar scholarships. And then 25 students’ participants, they received a $50 stifling. And that was from June the 15th through the 26th. And again, it was such an overwhelming response from the community. Zach says, Robyn, we have to do something with this. And so, August the 14th, through this past Friday, we had a global camp. We did a 2020 Tiny Home global virtual camp. This was a camp that we put together in the matter of a week and a half. And it was by far our best camp, because we had students all over the world participate. So, we had students from Philly, Argentina, Finland, and India. And also, we had a course we needed more instructors. So again, we reached out to the tiny home nation because they use SketchUp every day and they designed to Tiny Homes every day. So, Zach, he got on his IG. And he just announced it and we had a portion of instructors just volunteering. We had an instructor from India. It’s 5am. In the morning, we’re instructed but you know, she was still there. Then we reached out to SketchUp because we’re using their software. They became a sponsor. They gave all of our kids a free license, student pro version license.

Robyn Donaldson  39:28   I mean, it’s just like, I like it. Like he was just saying, once you just put something out there, the universe responds. And it was everything that we needed. It was given or answered in the way of in the inbox of email. We needed someone to assist with the flyers. We needed someone to assist with the website, and volunteers, volunteers, and I could sit here and tell you all about the case. But that’s the design side of it. On this summer, we were able to expose 120 students to architectural design and the construction trades. And they ranged from first grade to 12th grade. That’s awesome. Yes. And all virtual in is a two-week program. And the beautiful thing about the program is because of what it offers. First of all, it offers options to these students, because we feel that third grade is a crucial time for students, as well as the sixth grade, which is where they choose their electives. So, we can reach these kids early on and give them some options. Now they can choose you know, their electives accordingly. Again, like I said, that’s the design side. The building component of that is that we’re wanting to build these Tiny Homes for these homeless veterans and I reached out to her are wonderful, the city of Tampa and there’s some lots that are allocated It Well, we can actually build these tiny homes and to help with acquiring those lots. There’s a campaign that we’re kicking off September the first. And Scott, you can really help us out with this win by spreading the word is a global ask in this called Give a Buck for housing. So, we’re asking everyone, all 8 million people who lived in, in the world, we’re just asking them to donate $1. And that would be to acquire the property and the building for a homeless village for our veterans here in Tampa, Florida. And it’s just, um, I think is a wonderful concept because all lives matter. And we’re encompassing so many, many lives, because again, we’re exposing the students more importantly, we’re letting them know that all things are possible. All things are possible, and then we’re guiding them and then also We’re looking at the veterans who has, I can tell you about the veterans and then how important this is for them to have a home. And for these students to be able to design and to build. We have a lot of businesses, our sponsors who have just jumped on board to help me you know, make it a reality. So, that’s really STEM Exposure in a nutshell.

Scott Peper  42:27  I think that’s really awesome. I could see that being very successful.

Sartura Shuman-Smith  42:31   Let me jump in and something else you can

Robyn Donaldson 42:32  Alright, come on, jump in. Let’s do this. You know, when we’re mastermind and right now, you know that right? We’re mastermind, this is what we do.

Sartura Shuman-Smith All right. everything you just said is amazing, amazing. And so, once these little ones grow up and become women, we can enroll them and the Women Building Futures initiative at the Center for Women. So, if I have an opportunity I can want to just share about that program as well. Robyn is actually if—when we start, I won’t say if. When we are able to start the program of women building futures is our construction initiative for women. And it’s a 16-week program and women learn various areas of construction from carpentry, drywalling, electrical, even the administrative side of construction. And after that 16 weeks they receive a NCCER certification as well as the OSHA 10 certification. Um, the program is amazing and has been in just a viable part of our community for the past, I want to say five years. Well, before I came into that position, and actually garnered national attention from the today’s show, at the end of 2019, the program had been fully funded, but the funding went away. And so that’s been our biggest struggle is how we’re going to get these women in a program that was once free and now it’s going to have to have a cost associated if we do not get support or funders or sponsors. So, I think Robyn was actually one of the contract facilitators for the program. And it’s amazing how what during this pandemic, of course, I get calls on a daily basis about people looking for jobs or looking for career development, but at least five calls a week are for the women building futures program. And we talked about how just opportunities I had a call from a woman last week, who’s actually a teacher, she teaches Language Arts in Italy, but because of COVID, she can’t go back to Italy. So, she said during this downtime, I would love to learn construction. And I see you have the women building futures program. And I said well, because of COVID. You know, we are not able to do this face to face, the location that we had been doing. It is not back open yet. That’s HCC. But we have currently two positions available. So, I’m putting that plug out there. We have two positions right now for two crew members with our construction services program, and if somebody wants to email me, I’m going to say really quickly, it’s my first initial S. And my last name Smith s.smith, at the centre, thecentre.org. Email me and I will refer your information over to our HR program, but we’re looking for two people to work in construction to be a part of the crew. And this woman as I called her back, as I know, you want to downtown right now and I know you wanted to take the class, but would you be willing to apply for the position? What better way to learn, then right there doing that? So, we have people in the program? I think Robyn can attest to this. We’ve had people who were in the program previously, who graduated, get their certification and start have their own construction businesses, or their own handy woman, businesses. Actually, the person who is my go-to for everything here at this house was an employee of the Center for Women in the senior Home Improvement ship construction services, and also participated in the women building futures classes. So, there’s so many opportunities out there to support the efforts that everybody’s out there dealing to. And I just think it’s amazing, amazing what you’re doing with the kids it is I mean, having worked with kids pretty much all my life, it’s just amazing that they’re being given the opportunities to think out of the box to explore other opportunities and to know that they’re, they don’t have to just be you know, whatever it is they might have thought they want it to be or how they can expand or broaden that. So, working with kids working with women and nontraditional job setting is just amazing, because like I said, at least five calls a week are women who Want to build into construction? So, just want to plug that in there real quick.

Scott Peper  47:05   Um, you guys have been so gracious with your time I just realized we’ve talked now almost an hour already. And I just want to make sure before we let you guys go, is there anything else that you guys want to touch on or talk about or that we missed that? I don’t want anyone to not get from you guys while we’re here, at least this first call, maybe hopefully we can do this again. As new things come out and we keep rolling down the road.

Sartura Shuman-Smith  47:27  I Oh, I’m sorry, Robyn. I had a couple of notes that were we talking about women going into non-traditional jobs or young people wanting to go into STEM. And just having those mentors I just think being able to, I think everything starts within the company. I know we talked earlier about what does one do to get someone to see them. But I think it starts within the company, get your company to understand that there are women that there are young people who may want to go into this field, so make it available to them. Change your marketing, you know, when you see billboards or signage, you know make sure you have a diverse marketing plan or, or advertisement in your fliers. net. Provide networking opportunities, like Robyn said with meetup, provide networking opportunities for people to, you know, meet a Scott or Autumn or Robyn Donaldson or Sartura. Make those opportunities available and just educate. You know, the education has to start within the organization. If, you know contractors or construction firms want to hire women, to educate the people that are with you, so that they can speak the language and when I say speak the language when they go out and start talking about what’s going on at their companies or what they’re looking for, or who they’re looking to hire. They can know that well. Yes, no, we are hiring women. We are hiring young graduates, you know high school graduates who want an apprenticeship So, um, and again, you know, research, you know, people should research that’s how out and found me by researching women in construction and found out about our women building futures program and then found out about the Center for Women. So it’s just, you know, getting the word out and working together. I think collaboration is the greatest.

Robyn Donaldson  49:22  Well, there’s three things that I always say is a formula for success, right? So, number one, is to know what you know. Number two, know someone who knows what you don’t know. And number three, that’s all you need to know. And that is going out to all of the women who want to start a business may not know exactly what direction to take. Just know what you know. And do not worry about what you don’t know. Because that’s a big roadblock. And a lot of women becoming successful they feel that they don’t have all that is needed. And in order to do so, however, you just simply find someone who knows what you don’t know. And nine times out of 10 that should be a person of your mastermind group. And, again, just associating yourself with like-minded people. As far as the kids are concerned, and STEM Exposure, spread the message, spread the word and what we’re trying to do with these students, because it’s a game changer. I was speaking with, her name is Teresa Welch at the Boys and Girls Club. And she says, Robyn, you’re doing something that there hasn’t been a school can do. I was like, Okay, what is that? What does that she said you’re able to teach a student 1st through 12th grade, a software that they have never used before in a two week period, and then they can turn around and make money that next day which is really what the program does. And because, I mean, we’re using the program for architectural design. But these kids have an opportunity to use a software where they can create anything. Knowing that all things have a beginning, you can learn how to design. So again, it’s just really exposing these kids to different options. And again, letting people know what it is that we’re doing. So we can impact more people. The whole mission is, of course, to expose but also to revitalize communities. And we can do that by the participation and the assistance that we get from our sponsors. So just sharing the word and I’ll get back with you on that given up for housing. But that definitely, we want that to definitely happen so we can house some homeless veterans.

Scott Peper  51:50  I gotta thank you guys so much. I’ve really learned a lot, I hope and I think most of our audience will too. And I just really want to thank you guys again for taking the time and for what you do. Both of you are very generous. Just with your time and your efforts and your energy, and I can see why your organizations are and will be successful even further. And anything we can do myself personally and our team will definitely help you do for sure.

Sartura Shuman-Smith  52:10  Thank you. Thank you for having us.

Robyn Donaldson  52:14  Yes. Thank you so much for having us.

Scott Peper 53:00  You’re welcome, everybody. I hope you guys enjoyed this. Thank you very much, sir. Thank you, Robyn. And as always, Autumn I appreciate your help on this too. And everyone, have a great day. We look forward to seeing you again next time. ­

Transcribed by https://otter.ai

In the beginning of 2020, the future of manufacturing looked bright. The 4th Industrial Revolution brought innovations that would make manufacturing leaner, smarter, and more transparent. Digital transformation promised more jobs, and the biggest dilemma faced was a widening skills gap and subsequent shortage of talent.

Then, coronavirus quickly swept across the globe and industries were forced to respond. Supply chains broke, inventory sat unclaimed in ports, and manufacturing plants across the U.S. had to close their doors—some temporarily, and some for good.

For some, the future altered irrevocably. But for many, the future we once had is not only still possible, but inevitable, and now closer than we thought.

There is no doubt that the manufacturing industry in North America is determined to survive and move forward. Working through a major crisis reveals gaps & weaknesses in operational processes that may have otherwise been brushed aside and saved in the “parking lot”. It seems impossible to make meaningful change when your company is in survival mode, but manufacturers that noted and acted on lessons from the pandemic are more prepared than ever as they become more agile, sustainable, and adaptable.

Manufacturers that are helping the industry rebuild have made a mindset shift, operational changes, and an investment in technological solutions. Their priorities may have shifted, but they have been required to make decisions that are accelerating them into their future even sooner than planned.

Prioritizing Safety Spotlights Efficiencies

Manufacturers were hit hard during the initial wave of coronavirus. As the adage goes, “You can’t build jets from home.” A report from Industry Week found that 40-50% of the manufacturing workforce was unable to perform on-site work. Now that the workforce is starting to return in many places, a new view of safety has become a prominent concern.

Putting employees’ safety first has always been a priority, but the pandemic brought forth challenges never considered. Provisioned with the recognition of a new risk capable of shutting down a facility entirely, having a protected workforce is even more important in maintaining morale and productivity.

Employee safety starts with new standard protocols such as temperature checks, wearing PPE, and hand-sanitizing stations. These are all low-effort and low-disruption tactics that support and protect your workforce. Other changes we’re seeing include operational shifts that can be leveraged as opportunities for improvement.

  • Refining shift hand-off meetings to focus only on critical and improvements and efficiencies
  • Town Hall meetings are conducted as recorded Zoom events—opening communication lines, creating cohesive cultures, and building confidence safely
  • Creating new shifts (nights, weekends) and spreading out workforce is allowing greater flexibility for employees and also potential production opportunities
  • Cross-training and mentorships are promoting a transfer of knowledge, improving employee retention, disaster preparedness, schedule flexibility, and overall productivity

A Refined Collaboration of People & Automation

With safety a more prominent concern in general, many manufacturers are turning to automated solutions sooner than they planned. The shift toward automation has proven to be smart financially and is a necessary evolution in the industry, but it has not eliminated the need for a human workforce.

In fact, automation supports manufacturing workforces. Automation programs help keep production moving during potential shutdowns or staff limitations, and makes social distancing on the floor easier as facilities fully re-open. Automation creates operational efficiencies, reduces workplace injuries, and attracts a new, younger pool of talent.

Traditional manufacturing has an aging workforce, and many chose retirement during the initial wave of the coronavirus. However, there is a shift in perception happening with baby-boomers retiring and newer leadership pushing smart factories and automation. The perception of manufacturing as a dead-end, low-paying, and dangerous job will fade as state-of-the-art technology and cutting-edge processes become the new normal. Roles such as Predictive Supply Network Analyst or Robot Teaming Coordinator are putting an emphasis on digital and soft skills and bridging the gap between robotics solutions and human workforce.

During March and April of 2020, 1.4M manufacturing jobs were lost. That is a lot of skilled workers looking for new opportunities.

“The pandemic has left tens of thousands of incredibly talented individuals searching for new opportunities. What we’re seeing now is that successful industrial organizations are taking advantage of this to not only scoop up the best of the best, but transition their entire business, and even their leadership, into a smarter, more innovative and nimble direction.” Brian Fowler, CEO of Skye Recruitment Solutions says.

“Where we once saw a candidates’ market and a gap in available talent, we’re now seeing larger pools of candidates competing for opportunities. But this means it’s even more important to be specific and strategic in hiring people that align with a more forward-thinking future that aligns with the new business goals.”

Investment in Value & Reliability Creating Predictable Success

Robotics, automation and big data give the power to make smarter, more informed decisions about growing but, they also all require an initial financial investment. As does hiring new employees and investing in training programs.

Successful manufacturers are not afraid of making smart investments, but they are ensuring the expenses are being used strategically to ramp up output and efficiency. The coronavirus response shut some manufacturing companies down for good, which ultimately means there is more market opportunity than ever for the survivors.

“The COVID pandemic has caused a lot of problems as we all well know,” says Mobilization Funding CEO Scott Peper. “The truth is, for those businesses that made it there is less competition for you now than before. There will be manufacturing businesses that look back on COVID-19 as one of the best things that ever happened to their business, and there most certainly will be ones that think it was the worst. I suggest you make the decisions to ensure you are on the right side of those two groups.”

Smart financial decisions are being made that support long-term growth through selective equipment investments. For example, if a company has experienced a surge of orders and is patching up old, less reliable machinery just to keep up with demand, now is the time to consider investing in either reliable workers to handle maintenance and troubleshooting or newer, more reliable equipment. Every hour that a machine is functioning properly is an hour of regained productivity.

Additional investment is being made in machine health monitoring and predictive maintenance techniques. Machines are working as much as possible for as long as possible utilizing data. When a plant monitors itself, output improves due to fewer shutdowns, and less extensive repairs are necessary should a shutdown occur.

Creating a Post-COVID Business Plan

The world has been changed forever by the coronavirus. It has touched every person, every nation, and every industry. Manufacturing is no exception, but it is exceptional. Manufacturing will survive the coronavirus, and many manufacturers are emerging leaner, stronger, and hungrier than ever.

It can be hard to see opportunity in a crisis, but it is important that business leaders outline a revived map of their company’s path through the next six months, and the next year after that. Now is the time to dust off the business plan and re-imagine it through the lens of the post-COVID world. How will goals change? Will they change at all, or will there be new tactics and opportunities to get there?

“Coronavirus has caused some uncertainty and challenged everyone, especially leaders and business owners,” says Peper. “If you are uncomfortable — good, you should be. Embrace it. Most great things come from first being very uncomfortable. Accept the challenge, make some new decisions, and drive hard at your new goals.”

Manufacturing is ready to continue its journey into the 4th Industrial Revolution. Now more than ever, not despite the pandemic but in many ways because of it. Things may look different now, but the future of manufacturing still looks the same: filled with potential.

This article was produced in partnership with Skye Solutions

What is a bid bond?

A bid bond guarantees compensation to the owner should the subcontractor fail to perform the work at the original bid price.

Why does the owner need a guarantee for performance and price? Every project has a budget and a timeline. Most owners have other stakeholders in the project to whom they are accountable, so there is a real need to stay within the budget and on schedule. A subcontractor who suddenly refuses to do the work or refuses to do it at the original price is a big problem for the owner, so they safeguard against it with a bid bond.

Bid bonds are common in government or municipality jobs, since they have budgeted specific taxpayer dollars to perform a certain project. They need to know when they put out  a bid that the subcontractors awarded the work will stay within budget and can perform the work.

How does a bid bond work?

What happens if the subcontractor doesn’t perform the work, or says they can’t perform the work at the originally bid price? The owner can then go to the subcontractor’s bond agency. The bid bond typically covers the difference between the lowest and second lowest bid, and this amount is paid by the bonding company to the owner. The bonding company may sue the contractor, depending on the bond’s terms, to recover the costs. The agency may also seek to install a new contractor at the original bid price or lower.

Recommended Reading

How to Make Your Construction Company…

Manufacturing business owners want to grow and thrive like any business owner, no matter what the future brings. The COVID-19 global pandemic has made that a truly legendary feat. Supply chain disruptions, operational shifts, and financial consequences are all pressing down on you, making your goals seem insurmountable. They are not. The truth is manufacturing in America can emerge from this pandemic stronger than ever. It will take a strategic plan that addresses your goals for the future AND the pitfalls of the present. That’s why Mobilization Funding & Dare Capital have brought together manufacturing & banking experts to arm you with the information, insights, and tools you need to succeed.

Full transcript below

Cole Harmonson  0:11  Hey everybody, welcome. It’s Cole Harmonson with Dare Capital and you know what time it is for the Dare Capital dialogues this week brought to you along with Mobilization Funding, and Dare capital which both of us provide capital on manufacturing and construction projects. Today, we are joined by Stephen Shang and Robert Conley. They are both longtime entrepreneurs in this space and have a wealth of experience operating, running, growing selling businesses, and today we’re going to talk about what’s going on with the changes in the space regarding pre-COVID, post-COVID and how you can deal with it. So, we’re very excited to have these guys joining us today, we’re going to go ahead and get started with the background. We’re going to start with Mr. Stephen, tell us a little bit about your illustrious background and how you went from Silicon Valley into the current business that you are running today. Thanks for joining us.

Stephen Shang  1:22  So, um, thank you for hosting this. It’s really an honor to be on here. And hello to all the participants, hope everyone’s doing well. So my background, I came out of school, went to a management consultancy, but then got the startup bug and so went to Silicon Valley and started pretty much about seven different companies and raised about $90 million in equity capital pissed it all away and all I have to show for it is a picture of me with blue hair. But in 2002, came back to Austin and said, Look, you know, can we really build a real business? And we thought about a lot of different industries and we saw the portable storage industry is a very interesting space. So, we started dropping storage in 2003. And that was really just buying containers and renting them out for $125 a month or so. My VC friends were joking at the time like, oh, wow, Falcon storage is that gigabyte or terabyte technology? Like, it’s uh cubic feet. But then over time that that portable storage business evolved into what it is today, which is Falcon structures, as we worked with containers, more and more shipping containers, we found that there was a lot of applications for them in building them into workspaces, living spaces, equipment, enclosures. And so, we really transformed the company from just a little portable storage company to now a manufacturing company that serves pretty much the entire US Caribbean, in Africa.

Cole Harmonson  2:42  Wow. That’s great. Thank you for that. Robert, tell us about yourself.

Robert Conley  2:50  ­­I refer to myself as a mutt. (laughs)

Robert Conley  2:55  I bought my first business at 21. Owned it for six years. Just kind of went on to do we help other companies grow. Sales and Marketing is kind of the base of my background. Went back to business school at 37, which is a little bit rare for most people and got what I consider to be a great education. Went on to apply that education with, and I give this gentleman this, like I state his credentials to give him respect and to kind of help folks understand how close to the heartbeat I felt like I was, but I went to work for a gentleman named Dr. Jim Ashton, Jim’s a PhD for MIT in structural mechanics and Harvard Baker scholar. And he started the F16 Fighter program for General Dynamics and went on to produce the most defect-free, on-budget, on-time airplanes that have been produced. And he took that that formulation and kind of created a management framework and tools around that. And when I went to work for Jim, we were doing private equity LBOs, kind of in the industrial space job shop manufacturing. And we applied those tools and principles throughout. And because we were a small group, we did not only the kind of financial engineering, but we worked with executives, took executive positions within the companies, to get them turned. And we typically bought under-managed businesses. So super-cool environment to take that business school knowledge, kind of entrepreneurial background, and then really refine it with a brilliant individual over, you know, a 10-year period. And so, we were industry agnostic as long as it was complicated. And in and so with a gentleman like Jim, he said to me one time he said, I can do most complicated math formulas in the world, Robert, but unfortunately, it’s really not that valuable unless you’re solving that specific problem. He said, because People don’t do complex and they don’t do fast. And so, we typically we’re dumbing down manufacturing complexity into simplicity, which is a challenge. And so, you know, that’s really what I’ve been doing. I just finished a turnaround, my actually partner is doing that. He’s the CEO now. And it still works. It’s very effective. And so that’s quickly how I got to where I am at this moment.

Cole Harmonson  5:30  Awesome. Well, great. We look forward to digging into some of that as we go along here. We’re also going to have an audience poll today. So, I know the audience has been growing and you just joined us. Today we’re again we’re talking about planning for the future in terms of what’s going on in manufacturing and we want you to take full advantage everyone now is Zoom efficient these days. We want you to take full advantage of the chat function, ask questions. We want this to be participatory exercise. So please feel free to, to join in. And we are going to have a poll question here in terms of what you think is the peak of disruption behind us, and maybe not what we wish to have happen. But what we believe is going on Yes, the peak is behind this or no, it’s not or, man, we don’t know you’re not sure. So, feel free to join in that poll. And we’ll talk about that at the end as well. But thank you guys all for being here. And again, please feel free to use that chat function liberally as I’ve got my partner, Casey Conlon, on the ready for questions. So, thank you guys very much.

Cole Harmonson  6:53  So, let’s talk about before COVID let’s talk about some of the biggest challenges in manufacturing. Let’s start with you, Stephen, tell us, you know, what you think is going on? And what was going on sort of before all of this disruption happened?

Stephen Shang  7:16  Yeah, for us, you know, before all this disruption happened, I think our biggest challenge was really, like Robert was saying, more of a Sales and Marketing Challenge. We had a certain physical plant that we had built up. And the question was, how do we utilize that to the highest level of efficiency, and really grow into this niche that we’re filling with container-based structures? And so, a lot of head scratching was really focused on sales and marketing, and how to how to dominate those markets. Gotcha.

Cole Harmonson  7:47  Robert, same question.

Robert Conley  7:50  So, one of the tenants that we work with and by the way, I forgot to say thank you for having me and welcome to everybody. I haven’t done a lot of these. So, I get a little bit lost sometimes. So, in manufacturing long supply chains are ugly supply chains. And I think there’s been a pretty consistent misunderstanding that low price is the siren song that you’re after and what we believed in. And typically we wouldn’t choose an overseas supplier if we could avoid it, even if you pay a little bit more. And, and so, I think that pre-COVID the universe was working on what I consider to be a flawed principle of long supply chains and low price, or what you should be pursuing. And what you really should be pursuing, at least from my perspective, is the close supplier that can satisfy you in short lead times with relative values of inventory and competitive price. And by doing that you effectively flush the system of working capital a bit. And reduce inventories. You do a lot of really cool things for your business. And so, I think, you know, if you look at manufacturing today, that probably is one of the opportunities that pre-COVID wasn’t really being viewed or looked at. And post-COVID or during COVID is in. I mean a high level of scrutiny right now because of the disruption and the inability to actually deliver products that you’re relying on those long supply chains to bring to you.

Cole Harmonson  9:48  So, for those of us who are not familiar with some of this industry jargon regarding long supply chains, could you just flesh that out just a little bit for us?

Robert Conley  10:00  Sure, I can probably give you an example. In the last company that I was running, we bought a finished product from India in China. And as we strategized, in this 50-year-old family run business that we were doing a turnaround in, what the premise was, is how do we buy our fabric product, because we have manufacturing in Mexico, closer to the heartbeat? You can buy it pretty cheaply in India. But if you looked at the unit economics, Jim always said raw material costs are not that materially different between, even if it’s high volume, between manufacturers. And so what we did was is we went to try to work with a fabric supplier in Mexico versus buying that same fabric from a supplier we’re getting finished product from an India. What we found is that the costs, our price for that product, weren’t materially different. And if you look at the long supply chain, so, if you go FOB or XWorks India, you then start — So you got to pay for something XWorks India on their dock. Now, you start a 34 to 45-day process of moving that material to you. Well, now my cash is being used in that process. And so, it really, fundamentally if I compress that down to effectively my backyard, I reduced the risk what if my container falls off the ship as an example. Now, it doesn’t happen very often. No, but does it happen? Yes. What if they’re late? Well, all of these things add risk to you being able to supply your customer with their finished product, if it’s A value add component that you’re buying, or the finished product if you’re buying it, so that risk is not preferable if you can avoid it at relative costs of supply. We might say that clearly enough.

Cole Harmonson  12:18  I think so. Stephen, I don’t know if you have anything to add to that, or if you share that same philosophy, I’d love to hear your thoughts on the differences.

Stephen Shang  12:29  No, I think I think Roberts encapsulated pretty well. But yeah, long supply chains are ugly supply chains. I would totally agree with that.

Cole Harmonson  12:37  Got it. And do we think that that sort of post-COVID look at reality is just because of all I know, the sort of the nationalistic sentiment, I think is going on across the world now. Do we think that that is going to substantially change? Or how do you guys think about problem now?

Stephen Shang  13:02  I mean, so our raw materials are shipping containers, right? So, it’s not the stuff inside the shipping containers, but we need a consistent flow of shipping containers coming in, from Asia, from Africa, from wherever. And I’ll say, you know, if all you believed was kind of the news and the nationalistic kind of news at the reporting on and all that you would think that shipping has ground to a halt. But based on our data, it slowed a little bit when the COVID first hit, but now it’s back to kind of the levels that were used to be at prices. Albeit they are a little bit higher, but I wouldn’t say they’re so much higher that we can’t absorb those costs or pass those costs on to the customer.

Cole Harmonson  13:42  Yeah, I would echo that sentiment. I have a client in the Port of Los Angeles who does nothing but shipping containers, and there was a dip in volume, but it’s back now. Although I feel like there’s more diversification and I’d like to just get your thoughts on how someone could diversify and in their supply chain if you know they were relying on China, will that still be the case? You know, going forward, you know, what will the relationship with China kind of morph into if any changes?

Robert Conley  14:27  So, I got a LinkedIn question from a woman who’s making garments the other day, and she was wanting to move her manufacturing back to the US. And what I would say is, is still consistent with what I said earlier, which is, um, textiles left the US and probably rightfully so those organizational structures, unions, different things cause prices to increase on labor basis. But if you look at our neighbor, Mexico, the unit economics and I believe strongly in unit economics, the unit economics of Mexico are not dissimilar from China. The capabilities of Mexico are very strong and the ability to move supply chains from a long distance to a near distance with preferable tariff structures, etc. is very valuable. Now, is there a risk? And is there a concern with being able to assess those supply chains? And I would say yes. All suppliers are not created equal and promise a lot deliver very little sometimes, but I think that China could be displaced in certain realms. Not all because they’re very good at many things and very fast and governmentally sponsored to invest in infrastructure. because capitalism structures are not. So, it depends. But yes, it’s very possible. what we would call high tolerance industries. There was something where you’re using a micrometer or where, you know, fractions of a hair distance between panels or parts matter. Those could return to the US in a nanosecond, the oil industry has had some experience with those things. It’s really a matter of being able to support that. I think that will some people find it hard to figure out. I don’t know if I answered that correctly or not. Clearly,

Cole Harmonson  16:40  There are no wrong answers here at the Dare Capital Dialog, so thank you.

Stephen Shang 16:49 Well, I would add that to that, too. I mean, yes, there definitely is risk of trade war, kind of sitting out there. And as a Chinese American who grew up in Oklahoma, my perspectives probably don’t represent the majority. But I’m reminded of as you know, my daughter about two, three years ago was starting to learn how to read. And she just was looking at me and said, Dad, why does it say everything is made in China? Right? And I mean, it’s legitimate if you think about it. And so, if we’re really going to kind of take all these different supply chains where we have so much product flowing into our country, so much capital flow in there, and then some product is going back as well. I mean, it would be extremely difficult to pull the two countries apart, to really disrupt kind of international shipping at that level.

Cole Harmonson  17:36  Yeah. And not to, you know, have a moral component about this. That’s not the that’s not the conversation. But is there the move to American manufacturing, is your take on that, that it’s more hype than anything else or is will it, will we onshore, will that actually happen? Or can it even happen? And if so, then what’s kind of the time frame?

Stephen Shang  18:11  So, I can speak about containers itself. Like to manufacturer containers in the US with US labor in US steel, you know, is probably two to two and a half x what it costs to do in China. So, the question then is, you know, Does that even make sense? And can we catch up to that kind of productivity and cost gap? I think it’d be extremely difficult. I think the offshoring of manufacturing that we’re seeing, like Robert saying is really for some pretty technical high value-add type products in China, and then India, for that matter will continue to produce some of the more commoditized type items, data.

Cole Harmonson  18:54  Any follow on there, Robert?

Robert Conley  18:59  So, my belief is that humans are a bell-shaped curve. And we revert to the mean over and over, meaning that we try to learn from history or current experience, and then we return to the crimes we’re comfortable with. The reason that Jim Ashton liked job shop manufacturing is because he liked solving complex problems. And I would submit that growing a manufacturing base in the US is a challenge. Very doable, but that for the most part, the human component will cause themselves to want to do something and then actually return to what’s comfortable and familiar versus taking the longer road which is changing their paradigm. I think it’ll happen in certain instances, opportunistically, but broadly speaking, I hope, I hope for Mexico, because I like Mexico and I like that environment. You can do a lot there that they benefit. If they’re smart, they will work on that. But, broadly speaking, I think Stephens corrected. You know, it’s not likely to be disrupted upon the whole.

Casey Conlon  20:33  Yeah. Stephen, there’s a question here from the audience. You mentioned there’s two and a half times the cost for those containers, what’s driving that cost increase?

Stephen Shang  20:46  I think part of it is just we don’t have steel foundries in the US to really spit out the kind of steel that you need to build containers with. And then the other component of that is just the labor rates there are just insanely low and — it’s a pretty, it’s not a complex weld that you have to put on it. And so, they’re able to achieve big cost savings. So, both material and labor.

Robert Conley  21:11  I also think from a Chinese perspective, one of the things that people don’t weigh in enough in relation to that is the government sponsorship of the companies that are producing the products, whether it be steel, labor, robots. Because I would, I would argue that a lot of those containers are probably made with robotic welds. And so, you know, the ability to set up a robotic line, what robotic tooling line that’s 100 yards long, with a government paying for a good portion of it, well that company doesn’t have the same unit economics or economics that that a US company or any other company would have. And so, you’ve got a strong imbalance in understanding why that’s true and an unnatural scenario with Chinese governmental support, skewing what would otherwise be very challenging, like capitalistic basis or free markets basis. From a supply chain standpoint, if that makes that makes sense.

Stephen Shang 22:18   Yeah, makes a lot of sense.

Casey Conlon  22:22  And I think, kind of following up a little bit different tack you mentioned, obviously the Chinese government subsidies help lower their costs. We have another audience member asking, you know, the NAFTA agreements been in the news or the rewrite lately. Have you seen any effect on that because of COVID talking specifically us to Canada or us to Mexico, the effects there?

Stephen Shang  22:48  I don’t do that much business with Mexico or Canada. So, Robert, have you had an answer that I don’t have a strong opinion?

Robert Conley  22:56  Yeah, we bought, we had about 700 employees in Mexico. I’m very aware of the NAFTA agreement in, in really the NAFTA, the new NAFTA is a very positive thing for all parties, let’s just say. You know, it still has the good effects in it. There were some aspects that, you know, the government was trying to kind of unweight it, if you will, to have Mexico kind of support some of its own costs in certain ways. But you know, we bought a company a Mexican company in 2019 as a vertical integration play and phenomenal, great investment, great conditions. Plenty to work with, I strongly recommend and am in support of strengthening the North American continent between all three parties.

Casey Conlon  24:04  How do you feel, you know, talking about the China trade deal as a follow on? Do you feel like it that will get done? Or how do you plan to that?

Stephen Shang  24:16  Again, I have a strong background in that either.

Robert Conley  24:25  No, it’s okay. I mean, this stuff is, so, I love it. I spend a lot of time in lots of different aspects of it, but I think you need to get a helicopter out on the Chinese deal and take a longer-term perspective of what’s occurring globally. When you talk about oil reserves, arguing about islands. I think there’s some aspects of the Chinese agreement that are more about leverage over the long term, not about the target scenarios and the Chinese have a very long-term perspective of what they’re accomplishing. And the US is not as good at that and needs to be better at it. But you’re talking about a global superpower. Changing the economic landscape, globally speaking. And in GDP right now is redistributing itself on a global basis. And they’re trying to siphon off as much of that GDP as is possible. You know, as it is it kind of changes the places that it goes. You got to watch out for China. I mean, bottom line, you got to watch out for China.

Casey Conlon  25:54  Awesome. Thanks. That’s, your answers are definitely been helpful, Robert. Appreciate it. We’ve got some more audience questions that we’re gonna go with. So, kind of jumping in here. You had mentioned, Robert, earlier the government sponsorship within China, do you see any role of for us defense, either the Department of Defense or any other organization in terms of US government sponsorship?

Robert Conley  26:22  I’m not I’m not sure I understand that question well enough to answer it’s more.

Casey Conlon  26:31  I’ll see if a Jason is listening. Maybe he can chime in. So, I’ll read it just straightforward. It says speaking of government sponsorship, do you see any role for US defense in this?

Stephen Shang  26:43  I’m able to take a stab at that. You know, we have traditionally done a lot of work with Department of Defense. And what we have seen is that some of these very large private contractors, defense contractors, they become part of this kind of industrial military complex where they’re just intertwined with the government. And you see people kind of leaving the government and going to work for these companies immediately. Right. And so, it did. We may not call it sponsorship here in the US in the same way that you know, China, when you start a business, the government really is a second or third partner in that business. But I do think there is quite a bit of support for these, especially these defense contractors that are part of that complex.

Cole Harmonson  27:32  That’s a good thing. So, let’s talk about and by the way, I know we were I think we had this plan for 30 minutes and I knew it would go longer. I just want to let everybody know if you do have to jump off you will be able to find this on YouTube on the dare capital channel on YouTube or you can find it in my Twitter feed at @coledoescapital and then we can also send out a little link to everyone, just in case you have to jump off, but our audience seems to be growing, not shrinking over time. So, so this is a really great discussion, we want to keep going. Thinking about, sort of with COVID situation, where we are today. What do you guys think the biggest challenges are for operators to think about? And then what are the steps that these operators can take in order to mitigate some of these challenges? So, problem and solution with COVID? So, maybe, Stephen, you want to kick us off on that one?

Stephen Shang  28:46  Sure. I would say, you know, as we’ve thought about it as a leadership team at Falcon, I think the number one challenge that we see out there is worker health. Right. And so obviously on the manufacturing floor as we’re still running, you know, how do you keep everyone healthy? How do you keep everyone productive? How do you maintain the levels of efficiency or increase from there when you have to socially distance? Those are kind of the more obvious answers. But there’s also the aspect of worker health for the office staff or the overhead in a manufacturing organization, because a lot of those folks start working from home to protect the worker safety on the manufacturing floor, and they become untethered. And so you really wonder about the mental health of those employees, how do you keep them engaged and all that and I think the opportunity there that we really seized upon is to really up our game as far as transparency goes. And I think in the last 90-120 days since all this has been happening, I think with that heightened transparency you know, really sitting down laying out what is the 90 day plan all the things that you and I learned in EO, Cole, you know it would really applying in spades now, and really being intentional about it, versus pre COVID you kind of took all that stuff for granted to some extent. Like oh, yeah, business is great business is great, you know, but now really focusing on worker health, as it has become the opportunity. And I think the companies who do that well, who can demonstrate leadership and then demonstrate transparency because really, nobody has the answers. And as a leader, you’d be faking it if you said you did. I think that’s really going to separate a lot of winners and losers in this environment.

 

Cole Harmonson  30:32  I feel like I’m always faking it, but Okay, I know I love that. I love I love Your love that on the mental health side, I’m curious on that. You know, that’s a, that’s a very personal area for people even to admit. So I applaud you for jumping in on that and just even acknowledging folks. Because I mean, what I’ve seen and again, we talked to thousands of lots of employees if you just count all the folks that we talk to, and, you know, anxiety, fear, people’s, you know, job security, you know, I mean, there’s a lot of processing, if you will, that’s happening with folks these days. And, you know, sort of the tools for doing so, are, are very limited, I would say, at a corporate level, or even folks even wanting to have that conversation just generally. So, you know, the, the caring and the empathy piece, you know, just to just even work, quote, unquote, hold space for that is, is, I think about 90% of it, but I’m just curious, how do you how do you even get into that with your team?

Stephen Shang  31:52  So, I would say there are two ways. One is pretty simple, and I think everyone could pull something like this off but the second one I’ve had to be more intentional about. The first one, you know, in the Rockefeller habits, Vern Harnish talks about doing your, you know, five-minute huddle every day. And typically, we would do that with the office staff, which is about 25 folks. We’d all get in the conference room, we would do that well, when COVID hit. You know, that was the last thing we really let go of, because that was just a daily rhythm, a daily habit that everyone kind of synced up felt connected because of that. And so now that we were all virtual, we kind of go on teams, and we still do the same huddle. And you know, I spent 15 minutes before the huddle, just prepping my mind, to be upbeat, to be optimistic, to tell my funny dad jokes that aren’t really that funny, right, just to get that so that when we do hit that we kick off the day correctly and really come together. Once again albeit through a different medium. The second one’s been harder for me, but I mean, I’m sure you can relate. You kind of get into your daily routines and you have like a to-do list of you know 20 tasks, you get all these emails coming at you now people are pinging your Microsoft Teams, and just never seems enough time to do all the things you need to do. Well, two days a week, I come to the factory. And I actually make space in my schedule, that’s just whitespace, not to hit all those to-do list items. But to just walk around, go talk to the factory workers, spend time with them, ask them how they are, asking how their family is, and not being in a rush about it to genuinely care for those that you’re responsible for. And we found that that, that’s I think, really helped us kind of hold together mental health piece because they can tell me about their fears. They can tell me about what they’re excited about, you know, and that’s been something that that I’ve had to be disciplined about doing and not letting my day get away from me.

 

Cole Harmonson  33:46  Wow, that’s strong leadership. Very strong. I applaud that very much. I think people need that and I think people are looking for that sort of stability, if you will. Robert, how about you what do you think are some of the biggest challenges and you know how to how to mitigate those are operators going forward?

 

Robert Conley  34:09  I agree with you, my heroes strongly tenants and connecting to people. And you know, one of the things in the frameworks that I use is really they’re fundamentally about people. And, and so you know, people deserve to be treated with dignity, respect and a non-punitive environment. When you realize there’s 168 hours a week, and as a single individual, there’s really not a lot you can do in those 168 hours that’s going to truly drive your business forward. He realized quickly, you need others and, and so, you know, I think one of the things I’m proudest of most in most companies that I have ever taken over or, you know, been involved in is, is a cultural change. Related to what Stephen is getting at. And that’s putting people in front of whatever the decisions are, whether it’s guiding the team, enabling them to understand what pieces they hold in the business and why it’s important and how that work goes into each other. And you know, that transparency, we use a tool called Ops Review every month, where, it’s basically we’re, you know, CEO, CEO, CFO, etc, come together, every department presents kind of where they are, what they’re working with challenges, they’re having successes. And what happens is the organization begins to teach each other and when an organization sees each other, that empathy begins to grow within the organization, not just for the work and the customer, but for each other and how they fit into each other. And in the leader, we have another saying, Fish stink from the head down. And so, in Stephens case, you know, the fish is doing, you know great things and helping people feel connected to the business. And that’s a missing piece in a lot of cases, at least from our experience of taking under-managed companies. So, I completely agree transparency, consistency, being patient, being tolerant, understanding, caring about others, those parts of business are not well formed enough, nor are they pushed enough in the business environment. Because leaders get locked into their egos or they’ll get locked into the mission or they get scared like over forecasts, or whatever it is, you know, and I’ll touch on this which is, if you if you don’t see me see you pay attention, what companies are reporting and the things that are happening in the universe related to COVID, forecasting is so difficult right now. The Black Swan effect, no one’s been through this, there isn’t a way to get concrete about most of these things because it’s, it’s like pushing down on a sponge, you know, it’s gonna pop out different areas. And so, it may not be the right visual, but this is really challenging right now. And being patient with the team or the organization to know that this too shall pass. But people are doing the best they can right now. I mean, in a lot of cases, I think that’s all you can do. So, you know, forecasting is very challenging right now, for all companies do it, from every single thing that I hear, have conversations about and understand. I don’t care what size you are.

Cole Harmonson  37:56  Yeah, I’d love to, if you don’t mind typing that link into the chat for the panelists, and we’ll get that published out that tool you mentioned sounds like something that everybody could benefit from. In terms of we got an audience question here, around challenges. A quick overview of the cost of goods increases due to logistic issues. And what is the plan to keep that low?

Stephen Shang  38:30  We’ve not seen dramatic price increases on our raw materials. We have seen it kind of shipping the final product would be a truck that seems to have gone up slightly. But I think that’s being offset somewhat by the price of fuel going down as well. So, it’s not something that we’ve identified as a as a big threat. If it does increase, we will definitely just increase our prices and see if the market will bear that.

Cole Harmonson  38:54  Yeah, spot rates I think have gone up just because there’s been a lot of trucking companies and logistics businesses in the US that have gone out of business because of, you know, too much supply. So also, this is specifically for you, Stephen, regarding I know you mentioned earlier sort of pre COVID that your challenge was on the sales and marketing side. Is it more of a challenge now and how have you worked with that?

Stephen Shang  39:32  Um, is it more of a challenge? I would say it’s, it’s a different kind of challenge. I wouldn’t say it’s more or less of a challenge. It’s a different kind of challenge. You know, before it was really we a big part of our business which exposed to oil and gas and with kind of COVID hitting and then the price of crude oil going negative and everything like that a lot of the oil and gas market is just a bloodbath. But you know There are two challenges we presented to our team in the first 90 days. One is like, okay, we’ve been hit by COVID we’ve got a product that can be applied to a lot of different industries, can we pivot to some industry that that may be using container-based structures? And if so, how do we go after them? How do we develop the products and all that? And then the second thing is, is you know, one of our other themes was sharpen the saw and that one was much easier to implement in the sense that Okay, we’re pretty good at what we do. But you know, what, if you’re sitting around at home and you have to do sales, marketing, sometimes it’s just it’s really hard to get inspired to, to make those calls or to really write that content. How can we sharpen the saw and so we really revved up the sales training in the first 90 days pretty dramatically and really focused in on that now the first part of UK so what else can we go after? You know, I just my team was just blew me away because one day said okay, let’s develop a COVID line of products, which are COVID testing labs, you know, mobile hospital rooms, Things like that, that you can put inside a container. And in a matter of, you know, a few days, they came up with the draft of it. And then a few weeks, they had fully published all the marketing collateral. I’m like, why can’t we do this and pre COVID? Wow, they came out with an amazing line. And we were able to get that out to the industry. And we’ve seen some really good hits on that. But then the other one was the sales team, they really focused on listening to the customer more. And so, you know, who’s doing well, in the COVID crisis? Well, grocery stores are doing well. Well, can’t we do like you help them with curbside pickup? Because that’s what they are needing. And so, we’ve been building a lot of curbside pickup units to give grocery stores additional space for that. And so, it’s that you know, it there’s that saying that if you focus on problems, you’re going to just come up with more problems. You need to figure out why you can’t succeed. But if you focus on opportunities, well then when luck hits, you’re going to be ready to take that right. And so, I think our team has done just a fantastic job on keeping their head up and focusing on what opportunities are really out there.

Cole Harmonson 42:01  Love that. I love that. So, to kind of sum up regarding challenges, and mitigation around those, and I’m curious if you guys have anything else to add, that really it sounds more like personnel issues. I won’t call it HR, but I’ll call it culture and being able to listen, being able to care, show empathy, and being able to, you know, actually do something about that and deliver to your team, which is always a challenge. But I guess what I’m hearing you say, both of you say is that most of the issues are centering around, you know, caring for the people on your team. Is that a good summation? And anything else to add, before we kind of move on to what, what are the opportunities?

Stephen Shang  42:57  Yeah, I mean, if you really kick it up to a whole other level, On the caring for the people on your team, when COVID first hit, you know, I think a lot of us were confronted with a choice, because we didn’t know how bad is gonna get or how long it was going to take. Maybe we should just hunker down and shut down or lay off a bunch of people and all that, right. I mean, those were decisions that we as president CEOs were faced with. And, and, you know, I really did a lot of soul searching and that like, you know, I love my people, and what’s the best way to care for them? We’re going to stay open, right? We’re gonna, we’re just gonna go for broke if it’s gonna last for a long time or whatever, you know, but we’re going to do that’s going to be the most important thing we focused on. And fortunately, it worked out for us. But there could have been a scenario where it would have just been, we all crashed and burned.

Cole Harmonson  43:43  Yeah.

Robert Conley  43:48  I, I will say that. And again, I applaud Stephen, like, what a great guy and a great guy to work for and those are the case. So that’s it. That’s a beautiful thing to hear. I would say, because I’m a bit different in that, you know, I’ve entered companies that are broken most of the time. And most of the time, what we say is that we’re freeing employees from their captors. And, and COVID from my perspective, is an emergency response to something that should be consistent throughout. You know, in in so, I don’t give a, but sometimes I say things very candidly, I apologize, that’s harsh, but I don’t give leaders a lot of credit for responding to something they should be doing all the time. And, you know, in the emergency because, you know, every single thing organizational chart ultimately is about operating leverage, and the better that the individuals feel, feel connected to and otherwise Understand the box that to you no matter what chart and the better the leader works with them, it connects to them, the more that that structure because that’s what it’s called organizational structure is able to produce more, and ultimately is literally about the human inside the box. And so, you know, I brought doughnuts and coffees and tacos, you know, on Fridays myself, stopping by the store. You know, these connections to humans is what people get pissed off about every single day in business every single day — they’re underpaid or undervalued, they’re not communicated with. And so when a leader steps into that particular position, and is patient and understanding and guides humans to the targets that businesses are trying to achieve, amazing things happen both in their personal lives and in the company’s life. And so, whether it’s COVID or it isn’t COVID I think leaders have to look at themselves very distinctly, and do more of what Stephen’s doing, and get out of themselves and into their people, you know. My karate instructor said, Don’t, you know, put your ego in your back pocket and let’s go to work. And you got to care for your people. So COVID can be an excuse for those things but the bottom line is these things should be happening and should have been happening for a long period of time and need to continue to happen regardless of emergency what’s in front of us.

Cole Harmonson  46:33  Agree 100% and I’m just having to throw this out there as we’ve been doing these dare capital dialogues and discussions with leaders across various industries slash things, we’re interested in. One of those things is culture. Communicating with your team, I would say I’m a throw out three sorts of tools here. I think that are helpers in accomplishing the things you guys have been mentioning. One is Workify, that’s an Austin based company here that it’s a sort of listening tool to measure culture to actually help you put some teeth behind some of the things that you put you know forth in your culture, that’s Workify. And then we had Rob Lynch on and talking about the Rockefeller habits. So a lot of folks have heard about that and there’s a book and then the tool set that we use is called Khorus.com, KH O R U S .com, and that tool is meant to help you keep some of those rocks that you establish in your Rockefeller habits present and communicated transparently across the team. And that’s Khorus.com as well. So as far as tools, at least for me as leader, you know, I need some something concrete you know, so I can look to it and say, okay, we either are doing this or not, we’re either listening or not the thing I liked about Workify so much is that it has an anonymous feedback function so people feel free to it’s like, Cole, hey, you’re full of shit. You said this, you did this, like, you know, how did this all work out? So just helps you kind of put some, some teeth behind it. I don’t think we have any more open questions I want to kind of move on to the opportunities that you guys see on the horizon that are coming up because of COVID specifically, what on your mind as far as opportunities that are going to be occurring for folks and how to take advantage of those. Robert you want to start?

Robert Conley  48:47  I’m gonna go back to forecasting and you know if you, if you buy and sell companies one of the things that private equity hates are, you know, the one percent of the market share or etc. And one of these things can cause us to go do is to, and I think Stephen said a minute ago, which is, we went back and try to listen to our customers and hear them better. And what that really is related to is doing it from the ground up. And you know, when you build a structure from the ground up, whether it’s the weld strength materials you use, or the humans that do that work to connect to the customers, the markets. I think that’s probably one of the biggest opportunities to realize, Oh, crap, we win this or lose this one customer at a time. What is it that they want and need and how do we forecast those needs built in? I think on my LinkedIn profile, I have a piece that Dr. Ashton wrote for Harvard related to understanding how deep you can go in your core business. Value is destroyed by moving outside of their core. But if you build your business up and you really focus on the customer, I think these are the opportunities and times where you realize, oh crap, we didn’t understand that doing well. And there’s a better way to understand it and getting granular and knowing why people buy from you what’s important to them, what they care about, is a way to strengthen your business during a time of what we’ll just call pandemonium, if that makes any sense.

Cole Harmonson  50:37  Got it. Understood. Stephen, same question.

Stephen Shang  50:41  So, we see plenty of opportunities in container-based structures, but I don’t think that’s interesting for the group as a whole. I think if we’re speaking about manufacturing, like what opportunities are there in manufacturing, I see two global themes that we are positioning ourselves to capitalize on the first one Is counterparty risk. And I think with COVID with, you know, companies going out of business and things like that, I think people who are looking for suppliers looking for manufacturers, their purchasers, their CFO, all that they have a heightened awareness of counterparty risk, which may not have existed in 2019 or 2018. And so being able to position a manufacturer as Hey, look, we’re the guys you want to go to, because we’ve been around and we’re going to be around, we’re going to take care of you, you’re not gonna have a disruption to supply chain, I think that’s a huge opportunity. And if companies that are healthy right now aren’t trying to figure out a way to talk about how they’re healthy and how they can help, you know, supply the materials that that their customers are wanting, that should be something that is, you know, mission number one. The second one would be, you know, the talent that is on the market right now. For example, one of the things that we just turn on the spigot on hiring as Director of Sales and I think During the kind of pre COVID days, man trying to get people to even apply for that was close to impossible. And our HR managers told me we’ve had like 30 applicants in the first two days, right? And half of those people are unemployed, unfortunately, and half of them actually are in current positions, but looking for a change, because maybe they see the writing on the wall. So, I think there’s a huge opportunity to bring on some talent in kind of this time, and the question is, when do you do that? From my own, you know, capital conservation standpoint.

Cole Harmonson  52:33  Got it. On the capital preservation, I mean, the, the counterparty risk. Could you talk a little bit more about that? I don’t know if I fully understand what you’re, what you’re saying there in terms of how to how to take advantage of that. How would one think about moving themselves there?

Stephen Shang  52:58  Yeah, so it really is I mean, the way that we’ve implemented at Falcon is twofold. One is what we’ve done is, you know, in the last four years, we’ve really invested in being a thought leader, its kind of a cliché term, in our industry. There are a lot of people thinking in the container-based industry. So it wasn’t that hard to become a thought leader. But to position ourselves as the authority on a lot of the trends that are happening in the industry, the other part of it is to really demonstrate Hey, look, you know, this is our track record. This is how we’ve responded in times of crisis. This is how we responded in COVID. And you know, what, we’re going to come out of this stronger and that’s more of a messaging, to potential customers so that when they’re looking at us versus, you know, Brand X, they’re gonna say, Man, you know, yeah, Falcons more expensive, but Brand X, I just don’t have the confidence that they’re going to be around to deliver on this entire project.

 

Cole Harmonson  53:51  We’ve seen some opportunities come about because folks across the globe are now requiring cash up front up front. And so, they can position themselves as almost distributors here in the US because other folks can’t afford to put down the cash. And that’s, again, what Mobilization Funding, you know, they help sort of pre-invoice funding, once it becomes an invoice then, you know, folks like us and asset based lenders and factors can then, you know, provide the working capital necessary. But I’m curious if you had seen any changes on the working capital side, in terms of what folks are requiring, you know, as, as you’re looking at your vendor list.

Stephen Shang  54:41  I think people are much more understanding when we do charge people for, you know, bigger deposits upfront, but I do think there’s a unique opportunity for folks like Dare to gain market share over like banks, because I think a lot of banks from a working capital funding standpoint because they have to reserve that cash and they’re less certain that they, that’s leaving kind of a market gap for that type of an instrument.

Cole Harmonson  55:04  Yeah, we’ve certainly seen more of that. And, you know, banks, I think are going to be in risk off mode.

Robert Conley  55:13   It’s interesting, is what you guys are really talking about is balance sheet strength. And, and balance sheets are not well understood by many, many people in business. And, you know, ratios and the ability to explain the value of those ratios, to Stephens point, about counterparty risk, what you’re really asking is, can you sustain me? Are you going to fail? And, and the ability to, to illustrate a balance sheet strength position is a is a pretty powerful message to send when you’re taking cash from, from customers. And it can, I think you have to agree with Stephen completely, which is, it actually can — if you can illustrate the strength of your balance sheet and why they’re cash is safe with you — really differentiate and give you probably that pricing power that you know, you can pay for certainty, you know, kind of thing from a messaging standpoint. And so, I think that’s a, I applaud you for having that perspective on counterparty risk. It’s a nuanced awareness of the market and I, as you said, banks are risk off how banks are always risk off, but if you understand the balance sheet and the nature of receivables, payables and you know, aging and different things of that nature and inventory hole I mean, question mighty you know, if you go strong balance sheet, you have the potential to win big in this particular environment. If that makes sense or not, but I like me some balance sheets.

Cole Harmonson  56:55  We’ve got a couple more questions here. We’re gonna throw those in and then We’re going to move to the last part, which is predictions in closing thoughts just right after we answer these guys. Yes, questions.

Casey Conlon 57:09   So, one question here. I know the four of us are all in Texas, but the question was where kind of what are your best, better and then you know, bad states to locate a company, specifically in manufacturing in the US. Where would you say, okay here are the best here’s okay, and then don’t locate here. A lot of laughter I know we’re all in Texas.

Stephen Shang  57:42  That might be too political of a statement, I’ll just say there’s a reason that Gigafactory is looking at, you know, camping out to two exits from us here in Falcon.

Casey Conlon  57:52  Got it. Robert, I think your laughter says your position pretty well here. So, no worries, that thing

Robert Conley  58:02  3800 companies left California. 1900 of them I believe, you can check the statistics and please don’t you know, give me if I’m if I’m really out of line here, but believe about a very large portion of those companies ended up in Dallas. Texas is, and I think what you’re really talking about at the end of the day is, regulations and business are like oil and water. And so when you find states, forget about political bendings, leanings, that welcome with low barrier, whether it be tax or otherwise, OSHA, you know, socialistic perspectives, etc. on business, you can you can count on those environments being challenging and remaining challenging. Bottom line. Done. I can tell you I may be unpopular for that. But low regulations are your friend as it relates to business. And I’m not talking about disrupting the environment.

Cole Harmonson  59:19  Casey actually changed the question, you know, to be a little bit more politically correct, because it was, why is Texas so much better than every other stae? Thank you for doing that. The very adeptly there, Casey, I think we got one other.

Casey Conlon  59:35  Yeah, we’ve got one last question very specific. It says, I have to import or export lithium batteries in Japan, their material safety data sheets, the form is still the same, but do you think because of COVID they can be quarantined? I did I read this word for word. So

Stephen Shang  59:57  I’m sorry. I have no expertise in neither of those things.

Robert Conley  1:00:01  MSDS sheets mean, I’m not so. But I think that anything you’re coming from locations where infection rates are high can be quarantine. I know that from an international Import Export standpoint, just having played in those arenas, all materials that have caustics in them, as batteries do, you know will have Import/Export requirements based on every government that you’re dealing with. And so I’m not sure I understand the question, but I mean it in these times, you can expect for governments to make knee-jerk reactions related to anything that they deem as being risk related.

Cole Harmonson  1:00:56  We are we’re going to go we’re going to go over lightning round here to you guys, which sounds fun on predictions, and we’ve got a number of topics supply chain diversification, Internet of Things. 3d printing, how to collaborate work, work force diversity. So lightning round supply chain diversification, Stephen go.

Stephen Shang  1:01:27  It’s good to keep your supply chain happy and yes, we are looking for alternate sources we have any suppliers on here watch out, but yeah, it’s a good thing.

Robert Conley  1:01:40  A fundamentally believe in small numbers of suppliers with high concentrations of those suppliers that can prove they can deliver within the criteria we have very specific criteria that we help them understand. Many companies will try to spread their purchases out and attempt to get better pricing, we find that that doesn’t work, as well as concentrating purchases with competent, capable proven companies.

Cole Harmonson  1:02:13  Gotcha. Gotcha. Okay. On to Internet of Things. How is IoT gonna change supply chain management? and How else will technology change in manufacturing operations from this? Stephen, your first lightning round.

Stephen Shang  1:02:30  No strong opinions on that either way. Don’t know.

Cole Harmonson  1:02:37  That’s a very fast answer.

Robert Conley  1:02:40  I can give you an example of a potential IoT effect in the last company that we were running. We were talking about putting RFID tags on the units that we were producing. If you think about the, as an example, I’ve got a stack of material and I’m doing vendor managed inventory. where I want to be just in time, once that stack shrinks to a certain point, being able to read when a bag or something leaves a stack and begins to travel. If you understand the count in that particular IoT environment and you have something that can track it, then you can be more just in time in that vendor managed inventory environment. Now, technologically speaking, it’s, it’s somewhat complicated to set those environments up and can be cost intensive. But trackability and IoT, ultimately, the window industry saved a ton of money and IoT by understanding how parts degrade and maintenance etc. There’s a lot there, but infrastructure is typically the problem in getting IoT to the point of concept from concept to practical applications. So beautiful pie in the sky. Think about it in the 2000s as being able to deliver the software that you can that you can sell, and actually a company have the ability to make use of that software that they purchase, hopefully getting all this value from it, you got to mature into it. So IoT has got a future when it really gets recognized as industry specific, I think

Cole Harmonson  1:04:28  3d printing will lower the barrier of entry for new, less capital-intensive manufacturing companies?

Stephen Shang  1:04:41  We are not currently using 3d printing. It’s really hard to 3d print a container. I know Evan Lewis is 3d printing concrete homes, but what more power to him on that but yeah, I don’t think we can 3d printers Pick your dinner.

Robert Conley  1:05:01  Yeah, I had I had a quick discussion with a young man on 3d printing this week or last week, maybe it’s 3d printing is just machining in a different form. And speed is critical specs are always critical that you know, 3d printing has got to come a long way and it certainly is perfectly valid in all industries is valid. The question is, what’s the infrastructure cost setup to get 3d printers to produce it the rate that a company needs, retail you’re talking about is displacing labor. If you do a unit economics on it, you know, it’ll be viable and high tolerance environments, maybe more so than others, but it’s a combination of machining and robotics. You know, from that perspective, and certainly viable, but, you know, maturity is required, and changes required in organizations to actually be able to benefit from it. And, you know, there’s advancements happening but fast all the time.

Cole Harmonson  1:06:04  Collaborations as far as the industry partnerships with universities and others, is this going to spark new innovations new ways of working together? Stephen go.

Stephen Shang  1:06:19  Are they actually having school this fall?

Cole Harmonson  1:06:24  I think they they’re all saying yes, we’re having school and then at the last minute they’re gonna slip over to What?!

Stephen Shang  1:06:32  I do think there are a lot of great ideas that come out of universities. It’s really like working with University of Texas, how, how do they have a technology transfer program and a licensing program that works for industry and works for academia. And so, I think it’s really University specific.

Robert Conley  1:06:49  I spent I spent time on the phone with a guy that’s very engaged in material science, um, a few days ago, a good friend of mine and he actually works with university He says on multiple boards related taking technology outside out of universities and I think the focus on those products and those technologies that are coming out and it was becoming larger, he said to me, there’s been 1000 research papers produced on a hydrophobic coating from universities in the last 48 months. So, you know, universities are a very, very key part. commercialization of those particular products is a challenge in the manufacturing environment typically is going to be the place that those things take place. Manufacturing doesn’t do hockey sticks. I think Stephen would attest to that. And, but universities have lots and lots to offer. It’s the ability to understand how to commercialize those things. That’s the real challenge, but there are definitely people out there that are working with them and working on those things at this time.

Cole Harmonson  1:07:58  Nice Last lightning round question, work, workforce diversity. How does a diverse workforce impact financial performance? No one wants to touch that one.

Stephen Shang 1:08:19   No, I mean, I’m pretty diverse myself. I just was hoping Robert would go first for once.

Cole Harmonson  1:08:23  No.

Robert Conley  1:08:28  So, part of the philosophy, the frameworks and tools that I use that we use, all humans are created intrinsically equal, hundred percent. However, in an organizational structure, you find whether it be through pay scales, or other ways of understanding people and their capabilities. You can’t look at it Diversity is being the thing you’re after. But what an organization and unfortunately, you know, when you’re a capitalistic society, which I would, I would submit that economics drives the universe period disconnect from that if you like, but what an organizational structure should be agnostic to diversity, because what an organization is looking for is the best person for the role that is required to propel it forward. And as an organism, as and that is what an organization is. You want the health and well-being of the organism to be supported by every single box that you put into it, regardless of its diverse nature. Now, that may be very wrong from political standpoint. But stack the deck with the best people you can find Regardless, and things end up happening in a very beautiful way. And again, all humans are intrinsically equal, deserve dignity and respect, and should be treated with the value that they bring, which is immense when you get the right person.

Cole Harmonson 1:10:21  I think you’re running for office. That’s awesome. I think you’re running for some sort of office. That was a great answer. Thank you for that. Stephen prop.

Robert Conley  1:10:31  Man, these are true beliefs.

Stephen Shang  1:10:35  I mean, the only thing I could add to that, and Robert, that was masterful. Thank you. Thank you. Thank you. The only thing I would add to that is, you know, we’ve got about 80 employees at Falcon and the way that it was just organically grown was it created a very diverse workforce. We have Hispanics, we have blacks, we have women. I mean, it’s just we have me, right? So, it’s a very diverse workforce, not by design, but because that was kind of how it grew. I think how does a diverse workforce impact financial performance. I think when you build it like that, almost like a meritocracy would Robert saying, you’re going to have a very good workforce, and you’re going to have a great financial performance. If you build your workforce, purely for the sake of looking good, or satisfying diversity requirements, then it will probably negatively impact financial performance. Not always, but it may do that, right.

Robert Conley  1:11:32  You’re such a bright guy. I mean, I, you know, here’s the thing, I believe what you’re trying to do is get a company to mesh, right, you’re trying to get individuals to mesh. And what happens is, is that people are smart, they come to work to do good things and want to be in a company that’s doing good things. All of these are parts of these principles and components that we use in running a company. And so, when you get a company, what you have is these individuals, and what they’re doing is they’re looking each other and they’re always looking And each other. And so, what they want is to know that you’re trying to put them in connection with the best person on the other side of the work that can be put in. And so, they know when you don’t do that, and guess what happens? they separate. And so, if they separate, do you get that structure to come together? No, you don’t. And so, we can kid ourselves into believing that we’re going to do something for the betterment of the universe. But if economics are the driver the world around, I don’t care what country you’re in, then and look at all of the countries are trying to become capitalistic but can’t separate from socialistic tendencies. Well, the bottom line is, is it’s about value. And the closer that you can that lattice work together to support whatever it is you’re trying to do the mission you’re trying to accomplish growth. You know, whatever it is, you’re the right person in there. Forget about it. Every single person that’s in that structure then begins to move. And guess what happens believe, because you are guiding the organization do something that is the best thing that you can do for each other, increase strength within it.

Cole Harmonson  1:13:14  I love that you guys are bringing the heat today. Really appreciate it. We put this slide up last, the best way to predict the future is to create it. And I know if it was left in the two of your hands, we’d all be in a better place. So, thank you very much. Any closing thoughts you want to throw out there? Again, your time is very much appreciated today. The floor is open to whoever wants to go first.

Stephen Shang  1:13:45  All right, Robert, I’ll take this one. Um, I mean, Roberts exactly right about forecasting. I don’t think anyone out there that can put out a good forecast. We told our board we’re not looking any further than 90 days out because it’s just, you know, ridiculous to try to do so. But when I would say about the future one, one very strong belief I have about the future is that, you know, if you’re constantly looking to the past and reminiscing about when we got to go to restaurants, when we got to go on business trips, when we went to football games and stuff like that, there’s no way you’re going to see what future is coming at you. And so, I think the future, the people who win in the future are those who are looking forward and not calling it a new normal or anything like that. But just looking forward to where the opportunities are coming from. Right. As opposed to just constantly thinking about the past. Being nostalgic and all that. Yeah, forget about that. Eyes wide, open, facing forward, see what’s coming, and then make adjustments as you need to who knows what this world is going to look like, but it’s going to look different. And that’s how you win the future is you’re able to assimilate that data and take action on it.

Robert Conley  1:14:55  Yeah, no, I do. I what you just said from is, you know, fear trepidation, if you if that’s your reality that will be your reality. And look, go back. And there’s some graphics out there that you can look I found on LinkedIn. But if you look at the pandemics and the Epidemics that have happened throughout history, we’re experiencing one, they’ve experienced some robotic plague, etc. You name it. Where are we today? We’re farther. All Things have continued to push forward. And the bottom line is that back to the humans are a bell-shaped curve, we move through this. And in business, you know, you’re talking about a disruption, not a decimation. Now, certain industries and things are gonna be decimated. But that’s a circumstance. It’s not the reality of the universe. as it sits markets are not going to completely disappear. You know, global trade and things aren’t going to disappear. They shrink Which is whatever scares everybody. And then you go, oh my god, the sky is falling. No, you just got smaller, you know, got a little closer to you. But the Universe Today is the same as it was before COVID. Today, you have the potential to get a higher probability of dying than you did before. But the universe is still the same. It’s going to be the same. And so, preparing for the sameness to return is to build on Stephens is I agree with him 100% look forward, deal with reality, dealing with the pain that it creates. And just move through it. You know, this too shall pass.

Cole Harmonson  1:16:48  Nice, nice. Well, we put this last slide up here. And it’s got everyone’s contact information. We’re gonna again, send this out to everyone. They can have a link to it again, it’s also on the YouTube channel for Derek capital. And we encourage you to go look at that or share it with your friends or whatever. If you found this valuable today, go and comment and follow us on the YouTubes and all of the other socials. I would do want to mention, too, that we have an upcoming webinar with the CEO and President, the chairman of Keystone bank. On August 4, he’s also a fellow austinite and fellow iau member as well, Jeff Wilkinson. We’re going to be talking about how community banking is going to play its part in the upcoming recovery out of where we are today. So, we encourage you to join us for that if that kind of stuff is interesting to you. And once again, thank you guys very much, Casey, thank you for participating and joining them. Robert and Steve You guys were excellent, excellent guys to have on and we really, really appreciate your time. We will see you next time. Hey,

Robert Conley  1:18:14  Yeah, absolutely I want to say one thing. So, Stephens got a full-time job right now. I’m just playing with things. But if there’s help that I can provide to someone that’s been on the call or that, you know, I’m 100% open and willing to have some dialogue about any of these things. So truly don’t hesitate to reach out if I can be valuable to you happy to do that.

Cole Harmonson  1:18:35  Yeah, we do some follow up with everyone who participated. So, we’ll make sure we include everyone’s contact information. So

Stephen Shang  1:18:41  I’m calling Robert after this. He’s got some really good ideas.

Cole Harmonson  1:18:49  Alright, thanks, guys. Everyone. Have a great day.

Transcribed by https://otter.ai

Cash flow can make or break the success of your project. Mapping out a project’s cash flow on a week-by-week schedule allows you to see the gaps and solve for them in advance. Getting it right starts by getting your bid right. Establishing the costs of your project, and the cost of running your business, is critical to estimating your bid. Finally, when you have the cash flow of every project estimated and scheduled, you have a solid foundation on which to build your business’s profitability.

CEO Scott Peper and Senior Commercial Underwriter Andrew Schwartz joined Michael Williams of Levelset for a complete crash course on setting up your cash flow to get the work done AND make a profit.

  • The difference between margin and markup, and how much you’re REALLY making
  • How to accurately estimate your company and project overhead for a smarter bid
  • Why properly mapped out weekly cash flow will save you from penalties and conflict

Recommended Reading

Cash Flow Management Tips for Small…

How do you determine whether a candidate will be a good fit in your company? Many hiring managers base the decision on skills and experience alone. What these managers do not seem to realize is that a good culture fit is equally, if not even more important. Hiring with your culture in mind can improve your new talent outcome, increase retention, build greater camaraderie among your team, and even increase productivity.

Why Culture Matters

Whether you have intentionally built your company’s culture or not, your workplace has a culture. Even a toxic culture is, in fact, a culture. It is the personality of your organization, and it greatly affects how your team performs. A negative culture has serious business consequences, including greater risk of workplace accidents. Employees are also more likely to leave a negative workplace culture when a new opportunity presents itself, and if word gets out about your culture it becomes harder to hire new employees.

Hiring a bad culture fit can have serious implications to your company’s productivity and employee morale. Companies are like any other community — they function on a network of agreements, compromises, and shared goals. When someone enters the organization and starts to make waves, it disrupts everyone on the boat. Processes start to fall apart,

A Good Culture Fit Should Be Part of Your Hiring Strategy

Increasing employee retention, decreasing employee turnover, increasing productivity, and cutting recruiting expenses are all good reasons to make “culture” part of your hiring strategy. How do you hire for culture? The first exercise is to understand your own culture so you can find a good match.

Once you know who your company really is, you can seek out candidates with similar values, work philosophies and personality traits. If you are a team of collaborators, put “likes to collaborate” in your job posting requirements. If your company isn’t great at communicating directions, be honest that you value “independence and self-direction.” If your company’s work environment is filled with stress, conflict, and aggression … maybe work on that before you hire someone new.

Improving Your Culture to Improve Recruitment

If talking about your company’s culture makes you cringe, there’s good news — you can change your company’s culture! And we mean YOU, specifically. Culture needs to be embodied and modeled from the top of the organization, so the change starts with you.

Define your company’s values.
What do you stand for? How do you want your company to be thought of among your peers, partners, and the larger community? You must first define the values that are true to you as a business leader, then implement those values throughout your organization.

Bring your team into the fold.
Culture cannot be mandated; it must be grown. That means sharing your vision and values with your team and listening to their feedback. Encourage an open dialogue of where your company is now in terms of culture, where you want to be, and ideas of how to get there.

Intentionally changing your culture may lead to a few uncomfortable moments — be prepared for it and remember the goal is worth the effort. If you are modeling the core values every day, your team will start to follow your lead. And if one or two of your employees don’t, it may be time to let them find a place where they are a better culture fit.

Set culture expectations early.
Make your vision and values part of your hiring strategy and on-boarding materials. Discuss your expectations with potential new hires and check in with them often during their first few weeks to make sure they are experiencing the values first-hand from the rest of your team.

Charles Covey, President of Alphapex, a waterproofing company based out of Austin Texas, says new recruits get introduced to the core values immediately. “They are in the on-boarding paperwork. They have to read them, they have to understand what they mean, and they have to agree to uphold them.”

Recognize employees who live your values.
Employee recognition doesn’t have to be complicated or expensive. A verbal “that’s the way we do it!” from leadership can mean more to an employee than a formal Employee of the Month certificate. It’s all about authentic recognition and feedback. Encourage your employees to recognize and reward each other when they are upholding the company values and promoting a more positive work culture.

Reflect and refocus often.
Everyone in construction wears a lot of hats and taking time away from securing new work and managing projects to focus on something “soft” like culture might feel like a waste of time. It is not. As soon as you stop prioritizing culture, it starts to slip. You have to work at culture every day. Make it part of every team meeting, every business decision, and every new hire.

Focusing on your culture, and hiring good culture fits, will improve your reputation among your candidate pool, build employee loyalty and increase retention, and create a workplace people are genuinely proud to be a part of.

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 Monday.com 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 Monday.com 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.

Transcribed by https://otter.ai

Leading a successful construction or manufacturing business can be tough. To survive, sometimes you have to be a real MF’er. We get it — we’re real MF’ers, too. MF’ers do what’s right, pay it forward, lead through action, and get the job done.

Wait … what did YOU think we meant by MF’ers? 😉

In THE REAL MF’ERS, 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.

Full Transcript Below

Scott Peper  0:39   Hello, everybody. And thank you for joining us today. I’m really excited to have one of our guests Charles covey from Alphapex — Founder, President, great friend. We’re going to talk about all kinds of exciting things today is from Whack-a-mole to unicorns to how you can grow your construction business, marketing, marketing during COVID, safety. Just differentiating yourself to be what a kick-ass construction company looks like not only in the old days, the new days, but now moving forward here through the Coronavirus.

So, Charles, welcome.

Charles Covey 1:11  Hey, great to be here. Thanks for having me.

Scott Peper 1:14  Great. You’re welcome, man. I really appreciate you joining us. You are the perfect guest to the start this series off. You know, when we think of, we talk about Mobilization Funding all the time, and we always refer to it as MF or — really what happened was our customers would just call us MF or friends, investors, people would say Oh, MF and shorten it. And then we have the idea, albeit six years after we started, that maybe we should start coming up with a bunch of a group of folks called Real MFers. Well, you are the first Real MFer Charles

Charles Covey 1:43  Very cool to see that to see that terminology. Like when I first saw when I first saw the invite I thought you know that’s that’s really good branding, matches MFer and their company. Couldn’t have done it better.

Scott Peper 1:55  I probably would get some cool gear and shirts made up around this whole theme which of course, we’ll definitely share with you and get you some stuff. So I’m actually very fortunate and glad that our clients have referred to us as MFers and shortened our company name has it turned out to be pretty good. If you would just for the audience, would you take a couple minutes and just let them know about yourself, your business where you’re at? And then we’ll dive into some questions that I have for you based on some of the things I know about you personally and collectively and really get into it.

Charles Covey 2:25  I started construction at 16. So I grew up on a farm and you know, on a farm, if you got something to do, you got to do it yourself. There’s nobody coming to help you. So we just learned how to build stuff, build barns and we fix cars and we built fences, we did all this stuff that was necessary with our hands. So, going from that to construction was really a very smooth transition. When I was 16 I started framing houses and just loved it. Just love constructions love the people. I love being able to see that building appear from nothing is right in front of you. And I’ve just always identified with that and just passionately love the business and the people in it.

So I really started — you know, that hammer swinging history really guides a lot of the stuff that I do now because yeah, I was that guy, I was the lowest man on the totem pole, making a few dollars an hour, you know, on that roof in the Texas sun. And so I’ve been in that position. And that’s really how we’ve built the business, is really prioritizing the field and prioritizing the people that actually grind this out every day. So, I think that perspective has been good. As far as the business itself, you know, I was working in commercial construction for a large general contractor. And I learned a lot and I was always looking, you know, what are those ways that I can get into business for myself, what are those ways that I can, can be an entrepreneur, and waterproofing came up pretty often as a problem area. Come on guys, is there anybody that can take care of this scope and get it done well, and I just wasn’t finding those guys. So, I thought that was our opportunity. That was a chance for us to really disrupt a little bit this market.

If you think about our particular space, so Dallas Fort Worth North Texas area. Very busy, always been a good construction, how a lot of growth here for the last 2030 years and the waterproofing space — there’s three or four competitors, and they’re all 25 or 30 years old. And they’re still doing it about the same way they’ve always done it. So that was a really good spot for us, you know, to be the innovator to be the disrupter, to kind of jump in that space and and turn it upside down a little bit. So we don’t have to completely revolutionize it, but we just have to do things a little bit better, a little bit more innovative. And that’s how we ended up where we’re at.

So, it’s just really taking the approach of, of every day trying to be a little bit better of seeking out what are the processes that can change? It turns out, almost everything can stand a little bit of change. So, we find out what those key elements are, and we try to change them a little bit and get more efficient, get better.

Scott Peper 4:37  Yeah, and it doesn’t have to be brand new, just doing the same thing in a different better way.

Charles Covey 4:43 Agreed. Agreed. Yeah, we just seek that out every day. Most of the things that I’m doing, that you’re doing, every single day can be improved on. Like, let’s not pretend that the human race has just perfected existence. There’s so many things that we do that we can improve on. So we’re always seeking out, What are those things? And what are the ones that really impact the bottom line and really impact the people around us and impact those buildings that we build? We try to find those.

Scott Peper 5:09 Well, it’s funny one of the things that I always admired about you and your story, I obviously share a similar background in construction. At least working in and around, my father had a commercial glazing business and I worked in and around that business all the time on the job sites and really develop the same passion for construction that you did. Albeit I ended up in this field, or in and around it in a much different way. But the genesis of the enticement to it was there. One of the things that I always found really intriguing about you is you did find this waterproofing space. And as you mentioned, I’ve always heard in and around our world here in the last six years, just that scope being very difficult, and if you can find someone that does it, they either don’t do it as well as they could or as wanted. Just it’s just hard and you seem to have figured out the hard but also how to maximize that opportunity to deliver a great product, do it efficiently and run a great business.

You started to touch a little bit on the origin of how you got into the waterproofing side. But can you talk a little bit about where you saw the problem area was and then how you decided to get yourself up to speed quickly on what waterproofing is, how to make it better? And then most importantly, how did you execute on that?

Charles Covey 6:26   Yeah, the biggest deal that I was seeing as a as a project manager, as a superintendent for GC, I did both of those roles is that the subcontractors in the waterproofing space, they didn’t have the clients interest in mind. They had their own interests in mind for damn sure.

But you know, where was that customer service? Where was that high level of care for what helps the client be better? So yeah, of course, they wanted that change order for them. But what about the client? What about the person, you know, who hired them on the job? How do we make them better? And it was really easy for me mentally to go from that approach. I don’t know why some people have that have an issue with that approach. But I’m in the business for my clients, plain and simple. And really, that was the spot that we saw. Nobody’s really operating at a high level of customer service. But it’s not that complicated. So if you come at it with the right, right mindset, it’s really been game changing, I think in our space. And it’s, it’s been a wake up call for a lot of subcontractors in our area to really elevate their game to a higher level of customer service.

Scott Peper 7:24  Did you find that to be in every scope or just particularly waterproofing? That opportunity?

Charles Covey: 7:31  There’s Yeah, great question. I think there’s space for improvement in every scope. Waterproofing is unique a little bit in that it’s not a scope that the GC has time to really understand on an infinitely detailed level. But the devils in the details with this scope, you have to know them. And so if they don’t have a trusted partner that they can go to, now it’s on them to try to figure this shit out. And that is not an easy thing with our scope just because there’s so much minutia and if it leaks, it’s a million dollar problem just that quick and so on. Having that trusted partner that could really elevate their customer service game and still be knowledgeable and still be a high quality installer. I think that was a spot that was underserved. And our clients can attest, it’s been a really, really welcome thing for them in the marketplace to have somebody like us to turn to, hey, we’re not we’re not perfect. We have a lot of human beings that do things wrong a lot because they’re imperfect. Me especially. But I think that mindset of Hey, we’re in it, to serve our clients and to really help them be better at their job. I think that’s the key.

Scott Peper 8:34  You know, it’s funny to hear you say that because I talk to a lot of our clients and just general contractors, people in general and, you know, few humans think that way, whether it’s on the general contractor side or the subcontractor side.

Maybe it’s the GC thinking about it for the owner, or the sub or really the GC thinking about how important the sub is on the contract for that on the project for them. I think if, one of the things I like to talk about, is if everyone would just sit down and have a real conversation and stop hedging against each other, as a third party on a construction project, seeing it from both sides, and really have an invested interest in in nothing more than just the success of the project. Because for us, we Yes, we have a client that is our direct borrower, but that general contractor and the owner on the project is just as much of a client of ours, because we are completely linked to one thing and one thing only, and that is the performance on the project. If that project performs that means our subcontractor performs that means the GC performed, that means the owner got what they wanted, and money flows all the way down the hill to everybody and everybody’s happy. And it’s what I always find is the lack of communicating sometimes on some of these projects, causes the issue. It’s like, well, I don’t want to tell them that and I want to I’m gonna fight this and push against that. And if everyone just sit down and say, You know what, this is what I’m great at  this is what I’m not, this is where I need help this where I don’t, it seems like it’d be so much easier for a construction project.

Charles Covey 10:00   Now I think you’ve hit that right, that nail right on the head. Because for us, I think that, at the very least, can we just get the real, the real stuff? Like, why do we have to like, well, you’re not gonna hold my card with my chest, I don’t want to let him know, Let’s just be real, let’s just be honest with each other, let’s just be upfront about the problems that we see. Because ultimately, that that upfront communication, getting all that out on the table, that’s what the project needs to move. And so trying to hold on to some information, because that might help us later … That’s bullshit. You know, like, we’re trying to get our client and their building to the end in a profitable and expedient manner with a quality building, like, you need the information to flow. And so I think that that’s something that I don’t know, like subcontracting and general contracting is gotten to a really interesting point where it’s a combative space, sometimes. You see this, you see jobs go south, and really, it’s really not the job going south. It’s the relationship going south is the communication going south. And if you can hedge that by just being real and just being upfront, just being honest with the client about what’s going on, and let all that information just be on the table as a discussion point. I think that perspective, maybe we’re not, we’re not perfect. We have communication issues at times. But I think that being upfront and real with our clients is a really big differentiator.

I think of an example, like, a lot of times when we’re doing contract buyout, I’ll tell the client, hey, you know, I really think that you should hold us accountable for this particular thing. Let’s make this language pretty broad, because, you know, you need us to finish this result and cover this whole scope for you. So let’s make this language a little bit broad, because I know that’s good for you. And then on this thing over here, it’s a little vague, like, you kind of got me wrapped into this other guy’s scope. Let’s clarify this one here. So I’m trying to buy a contract. It’s good for them and me. And it’s not that complex. Let’s just all work together as a team, we got the same goal, get this building built profitably at a quality level, and it’s not that complicated.

Scott Peper 11:52 You know, when you and I first met one of the things I admired, I don’t even know if you remember this part of the conversation, but as in your office, we’re talking through the scopes, just having a general conversation about the construction and one of the things I thought was really interesting about your particular scope and what you have to manage around. I always hear a lot of people talk about is they’re always blaming the other trade Oh, they’re slowing me down this trade slow me down, I don’t have the site or they screwed this up so I can’t do my thing. You know, more than any other scope, you probably touched just about one every other trade on that job. I mean, whether it’s walls erection, roofing, electrical, plumbing, your ceiling — for everyone doesn’t know what waterproofing is. I mean, your ceiling, the structure, you’re making it waterproof, obviously. So you’re you’re on the walls are around the windows, you’re near the joints, you’re near the roof lines, anything that connects anything. You have the opportunity to blame everybody for any problem you want. But yet, when you and I talk, you never blame anybody. Never.

Charles Covey 12:48  Never. We, we have to be careful with that. You know, like sometimes somebody screwed up and I can’t start because they didn’t do their job. But I’m not just going to send a letter. Hey, we’re delayed this other guy sucks. I’m going to come out and say, Hey, this thing needs to go, these four changes need to be made, and then we’ll be able to start as soon as possible. Yeah, sometimes there has to be some, some work back and forth, but doesn’t have to be in a combative manner. We can just say, Hey, this is the facts. I need this to keep moving. Let’s do it together. It’s like, you know, providing the solution instead of just putting the blame. But you see that you’re right. I mean, the blame gets pushed in, in the contracting space. So many times like, well, it’s just somebody else’s problem. We try to own the problem, you know, like some other trade has a thing. Let’s walk it through, let’s make sure that we’re there. Make sure it gets done right. and own the problem. We want to carry that on our shoulders. And I think our client appreciates that.

When a client comes at us and says, Hey, guys, you didn’t do this thing. I mean, if it’s true, I’m gonna take the client side, like, yeah, you’re right. We screwed that up. Now I look right at my PM. Like, what the hell is going on? And why aren’t you taking care of this client? There’s going to call them out because it’s real. That’s actually what happened. And to take the client side, I’m not going to push back and and pretend that we didn’t screw up because yeah, we’re human, and we mess some things up and we’re gonna own that shit. We’re going to fix it quick and move to the next.

Scott Peper 14:03  You talked about some of the early days. How did you maintain the success level as you grew and scaled hiring talent, finding talent and doing these jobs and keeping up that level of performance?

Charles Covey 14:14  I’ll tell you if you want, I’ll give you what I think is the absolute single biggest factor. I don’t worry about Alphapex money.

That seems crazy, right? Like how could that be? How could you run a business and not worry about the money? Yeah, I review the financials. I know what’s going on with the money, but I don’t make the money. My first concern. So I’m going to measure the other things. Are we the safest in the business, are our clients getting taken care of and the buildings getting built on time and correctly? Are we solving the client’s problem? Are we so good at helping them with their job that they’re not going to go anywhere else? So if I worry about all those things, ultimately, I’m worrying about their money.

So if you think about this, so I’m worrying about what gets them to their money, faster. So for the client that’s going to be getting the building done, getting the mobilized and off the site, no callbacks, no leaks, no warranty issues over the course of the job. And then for, now, what about my suppliers? They’re very critical to the, to the chain of things that we do. I got to worry about them. Yeah, I’m going to write them a check. But I still need to be worried about their money, because I’m going to need them. So I worry about getting them paid quickly, making sure that our ordering processes allow them to be efficient, they get to make more money, they love us. And then our staff, our team, people that on our team, I worry about their money,  are they being paid top of the market are they in a work environment where they want to be there. We’re not just working them into the ground, and in the way that construction is known for. So I’m worrying about everybody else’s money. And guess what happens to Alphapex company funds? Most of the time, it pretty much takes care of itself. Now, when I try to explain this to people at first are like, you know, this is pretty crazy. How can you not worry about your money, but I do I worry about everybody else’s money and then Alphapex gets taken care of.

Scott Peper 16:01  You know, instilling that culture in yourself is one thing we you know, you’ve grown now you have over 100 employees, culture is very important. You talk about it all the time on your website, it’s on your paperwork, it’s on your documents, it’s in your, it’s in your company logo, it’s everywhere, you can tell you’ve worked really hard on that. Talk a little bit about how you develop that culture, how you implemented it, and what you do to keep it going.

Charles Covey 16:25  So the core values are not done for show. They’re not done to impress. They’re done to create a mindset frame framework. And so, those core values are — there’s five elements in the Alphapex core values. And some of our other businesses have a slightly different set of values based on the decisions that need to be made in that business. So it’s a decision tree, and we create those core values. So it’s, this is not just the thing that we put on the wall, just because it looks nice and has bright colors, and it checks the box of Yeah, we have. It’s a decision making process for every single thing that pops up. So we had to run through these, you know, we think these are the core values, we got six or seven here and run through every possible scenario we could. Does this word or this phrase help our team make decisions and be better and take the company to the places we want to go? And I expect at some point, those core values will adjust as the goals and needs of the company changed. So it’s a decision making tree that goes that goes with us every moment of every day.

And I think some people just look at, well, you know, we want some, what’s some nice words that look pretty and we can put them on the wall? What are they going to do for you? What are those words going to do to actually improve the business and take it to a new level?

Scott Peper 17:35  When is your team first introduced to your core values?

Charles Covey 17:38  Immediately, the core values are in the onboarding paperwork. They’ve agreed in the onboarding paperwork that they read them, they have to understand what they mean, and they have to agree to uphold them. If you don’t uphold the core values, buddy you’re out. So that’s a pretty quick one. And I think that’s really it.

People understand pretty quickly that that’s the way that the business runs and we talked about to our clients too. It’s a selling point. I was at a client yesterday, client in Fort Worth, and we were doing a presentation for their field team. So all their superintendents and assistant superintendents, and we were talking about waterproofing and quality and the other items that we do every day, and just try to help their team be better. Just, you know, free information I got, I want to help these guys be better, and help to help them understand our scope of work. And they’re super appreciative, great group. But we talked about the core values, they’re like, hey, this is the expectation that we have of our team. And you see somebody not matching it, please let us know. That’s a really interesting thing. We promote those core values to the client. And I’ll get a phone call or a text occasionally, hey, just so you know, I saw one of your guys on the site, you’re probably going to want to know about this. I’ll get a text, they’re not upset at me, but they know that I would care.

And they know that I have a super high expectation, and they’ll let me know, I really appreciate that. That’s been a pretty cool thing of, you know, really pushing that to the clients, letting them know that hey, we’re a high-level organization, well developed. We have these core values that are a functional part of how we operate and they’ll help help us watch out for him, which is really neat.

Scott Peper 19:01  So this is such a good topic and it’s hard. It’s also a hard topic specially for a business owner and I speak from experience. It’s hard it’s hard for me I think it’s something I’m always working on is how can we make our culture better? How can we keep our culture the way it is, and always coming up with new and creative ways to do that, or, or keep new and creative ways to keep what we have going? You know, to your point.

Charles Covey 19:22  I always have to do a disclaimer, you notice my voice is monotone. It’s the same shit all the time. I’m excited. I’m sad or whatever, you don’t even know the difference, because I’m just kind of like this all the time. It’s really funny because like, Oh, you know this guy Charlie’s doesn’t seem to be very excited. No, I’m pumped. Are you kidding me? But this is about as animated as I get. So yeah, I’m excited to be here for sure. But you might not tell from my facial expression or my voice inflection.

Scott Peper 19:48   You’re a little more animated when you had about 17 inches more haircut and you went about four months past your normal date there during the Coronavirus.

Charles Covey 19:55  Yeah, I don’t look good like a gorilla. I wasn’t very happy. My wife thought it was cool as a novelty. Like Yeah, anyway, that was a good time. The other disclaimer is that I’m an asshole. It’s just kind of how I’m wired. My wife has to make sure when we go to client events, She tells them up front, Hey, just so you know, I’m the nice one. Charles is an asshole, don’t hold it against him.

Scott Peper 20:17  She called you a nice asshole.

Charles Covey 20:20  That’s true. Yeah, she does say that I’m the nicest asshole she knows.

Scott Peper 20:24  Charles, one of the other things I really wanted to cover with you was your I think you do a great job marketing your business. We’ve talked about some of the ways you’ve separated yourself, with your customers and your clients. But one of the things that I really want you to discuss is just your overall general philosophy on marketing, what you were doing in the past what you’ve been doing along the way, what you’ve learned, and I think we’d be a little remiss if you didn’t maybe talk a little bit on what you think might change with your marketing moving forward, you know, specifically as it relates to the Coronavirus or just what you think is going to change here and in construction, our approach to marketing

Charles Covey 20:59  Our approach is virtually the same thing that we do on the job site, and we talked about this and some previous things have, we’re worried about the client, what is the client need to be better. And so our marketing really is that, is that way too. So we’re giving a lot of information, the client wants to see their project, they want to see nice pretty video of their project. As it goes together. They’re emotionally invested in this project that they put hundreds or thousands of hours into. So we’re going to definitely showcase those projects and let them see it and let their friends see it. We’re going to share information with them, either in person, in their office, or with a lunch and learn or with videos on YouTube or on the different social media channels, or different things that we send out, that help them be better at their job with the things that we know which is our scope of work. So help them understand how to QA/QC our work, how to understand our work, how to help direct their project, regarding the things that we do in Division Seven. And so our marketing is very similar to the way we put work in place and that’s really be focused on what does the client need to be better. And then we don’t really ask that much we find that if we give a lot, when we do have that ask of, hey, let’s do this job together, that ask is welcome. Because we’ve been giving so much before that. So if you think about this, ties back to that whole thing of helping the client, get to their goals or be better at their thing.

So, birthdays, anniversaries, these things mean a lot. That’s an emotional tie. So as a marketer, as a business owner, you want to tie your business name, and the things you do every day, to an emotional connection. And birthdays are a really good way to do that. We found that a lot of a lot of our people that we work with, our clients, they, their own companies don’t even remember their birthday. The card that they get from us might be the only thing they got that day from somebody outside their family. So it has a really emotional connection and impact and it’s very, very long lasting. People remember these things for a long time. So just an example. I don’t believe I have one handy, but, we do pocket knives for birthdays. So it’s a pocket knife and it’s got their name on it and then we got a birthday card that is signed by everybody in the office wishing them a very happy birthday. And they receive that. Now, this is a big task, because you have to have a database of all your clients, their contact information, where they are, what company they’re at, how to get to them, their birthdays are it’s got to be accurate. Otherwise, you look like an idiot. But this is a lot of information. It’s hard. And that’s why most people don’t, that’s why most people don’t do it. And so I think that in marketing, you’ve got to look, what’s that next step? What’s that really hard thing that you don’t want to do? But nobody else is doing it? So you really should do it. And that’s what we found is the real differentiator, what’s the hard thing to do to connect to your client? Go do that. Chances are, your competitors won’t.

Scott Peper 23:41  No, you’re right. It’s invaluable. And anytime you’re attaching a memory to you and your business of something you’ve done that’s really been emotional to that person. It’s going to be more memorable and more impactful and those are two great things that every time

Charles Covey 23:54  But how often do you get gifts that’s just got … They send you a gift — we’re going to use gift loosely because it’s just an item that has the company’s name on it. That’s not for you. That’s just a general, they’re giving you a generalization of where we kind of feel nice about you. But if somebody goes to the effort to document all these things, took us forever to get all these names and emails and, and addresses together and birth dates. But once you do that, and you identify that you care about them as a human being on their birthday, which has intrinsic meaning, and something special, something custom, something you made for them. It’s, it’s really, it’s really a very important connection. I think. We don’t give anything to a client without their name on it. Does anybody throw away something with their name on it? Absolutely not. They keep that thing forever. So we’ve seen these, these different colored Yetis that we’ve given to people, they’re five, six years old, they’re just beat to shit. And they’re still carrying that thing around on the jobsite, every day because they love it. It’s got their name on it. And that’s really cool for us and our brand and what we stand for, and they really cherish that. So that’s cool. I would say putting somebody’s name on a gift is really impactful. Just don’t give it to them if you can’t put their name on it.

Scott Peper 25:04  I’m trying to think back. Am I throwing anything out that have my name out other than junk mail? And I would say probably say no.

Charles Covey 25:11  You should see our office around Christmas time, we might send out 500 or 600 custom gifts around Christmastime. Can you imagine the volume, like, how do you keep track of that many custom gifts? Got to check the names you got to check the addresses people moved between companies all the time. Got to make sure you’re taking it to the right location. Yeah, it’s a logistical nightmare but it’s totally worth it. I definitely give kudos to my wife Alicia who handles all of those elements of the business and she does a next-level amazing job to get that done and keep it organized. Everything goes out wrapped nicely with a bow on it with the name tag. You know, our branding, their name, custom gift.

Scott Peper 25:49  It’s awesome, man. That’s definitely an impact. People are gonna remember that. What are you doing different now with Coronavirus? I guess in general, what are your thoughts around the impact of the Coronavirus? What’s happened? I mean, there’s so many it’s impacted everybody there’s there’s no country, there’s no person, there’s no industry, everybody’s been impacted. What are the things you’ve done differently? How have you adjusted or maintained or, or etc?

Charles Covey 26:13  Yeah, so construction has been incredibly blessed. You think about it even across the country that Texas has been sheltered, maybe more than some, but there’s a few states that have had some construction shutdowns. But for the most part, construction, construction suppliers, construction manufacturers are still being able to operate. And that is, that’s just amazing. We’re very, very fortunate to be in that position, very thankful. But if you think about it, the world has changed a lot for construction and for everybody else. So yeah, we can still work every day. But the way that we do that, the way that we connect to our clients, the way that we get information from our job sites, the way that we interact with our team members, the way that we train for us has been very different.

You know, we can’t have that training meeting every Monday and pack 120 guys into a room. That doesn’t work anymore. We’ve got to come up with ways you’re like, how do we do this and film it ahead of time. And we text out a link to everyone. So they could still get the same information, but on a screen of a phone instead of in person, and then how do you connect from a screen of a phone is not the same emotional connection, as it would be as if you were in person. So now you do it in smaller groups. Now you do a one on one, you’ve got to find a way to connect, I think to your, to answer your question more specifically about the client relationship. Connecting with human beings is a really, really important part of construction. Like Yes, we build buildings, but hey, man, we are in the people business. And that’s not going to change with technology, but new building methodologies like we’re going to be in the people business forever. And because that we can’t lose sight of the fact that, Coronavirus or not, you still have to find a way to connect with the people that are in the business. So finding one of the ways what are the ways we can think outside the box, come up with something new, to get a contact so get an emotional connection like we mentioned. Here I’ll show you an example. This is the Alphapex Pandemic First Aid kit. If you can see that it’s whiskey and beef jerky, and a mask.

So it was a huge hit, you know, superintendents, project managers are just getting beat over the head every day with all this Corona stuff and having to sanitize job sites and, you know, make sure everybody’s washing their hands and check temperatures and all the different protocols, and whiskey and beef jerky was really impactful. So that one was just outside the box, what’s something we can do that will allow us to connect with our clients for just a second, just to get there and let them know that we care about them that we’re here for them if they need us. And it was a challenge to get all those delivered. Because you know, some people at the office, some people at the house, some people on the job site, and so we were able to get that done and send out a few hundred of those and it was pretty neat to see the reactions but we’ve got to think outside the box now.

Scott Peper 28:44  You know, finding new and creative ways man and helping people when no one else is or when fewer people are is so important and if you just generally focus on helping the person and helping people in general, anyone you come in contact with, but especially your customers, especially your team, you’re going to be so much better off and it’s so much easier to manage your business because the decisions are are easier you do what’s right you just do what’s best for each person and when something extra special for someone in the point where they’re especially when they’re getting beat down by everybody is a memorable and honorable thing, really is.

Charles Covey 29:22  You have to have the long game in mind. This this stuff that we do is not a short term thing you don’t see a monetary result quickly.

Scott Peper 29:31  No, no. And you know you’re not doing it for monetary result either. And who knows you you’ll never tie an ROI to how many custom gifts you bought, you know, doesn’t mean you can add more money to the project, doesn’t mean any of those stages means it’s what’s right help separate you keeps you more memorable a game where everybody’s everybody can be very similar, right?

Charles Covey 29:52  It’s a differentiator and I know absolutely for a fact that if you show people you care, your business will grow.

Scott Peper  30:02  100%

Transcribed by https://otter.ai