Adventures with lyrical - buying a business

Lyrical said:

Funny, I was under the impression by talking with people from other schools that U.T. was one of the only schools in the top 20 that had a forced curve. And thats from talking with people at other top 20 schools. There"s really not much difference between most students at this level, and its like one of the top rated Finance professors said, since we are all so close, he has to resort to trick questions to get any sort of differentiation between us, since especially in Finance, grading has to be fair.

And yeah, no employers care about grades. I spent many a sleepless night trying to be the 15% of the class that got the A, and from all the interviews I did, only two recruiters said, "Hey, nice GPA!" Neither of them gave me an offer either.

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Dunno about you but making that extra effort paid off for me. When I got out of school I knew my shit in structural engineering as far as basic design. Sure, I had a lot of practical knowledge to learn and learning how to design a whole building instead of a single column/beam but busting my ass for A"s in my structural classes paid off. My boss left me behind in the office to do the design work while a guy I graduated with went to the field. Sure you could say my boss liked him more but in the end, the hard design stuff came my way because he trusted I could handle it.

Lyrical said:

Its like some professors said, they had to ask things in unclear ways so they could force out lower grades, or even worse, make the tests so long that they could give C"s to the people that couldn"t finish. Its like one prof said, he made his tests 25-30 pages long, so if you couldn"t get through it, you were the C. So if you were feeling under the weather for the day, guess what? You had a C. He said he knew there was a problem one day when the test was supposed to be four hours long, and no one got up to leave.

There are two extremes to it, I guess.

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Both of my structural analysis classes were like that. The challenge wasn"t just knowing the material, you had to master it so you could work the problems lightning fast and even that wasn"t enough because the teachers presented us with problems that took highly intelligent people to solve them at all. A guy sitting next to me in my first class was in it 3x before he pulled a D and it was a requirement to get an engineering degree at all. The advanced class was even worse. The final was 3 hours and none of us had finished more than 2 of the 4 problems before the next class forced us to get up and turn out exams in. Sucked leaving that final and literally not knowing if I had passed of failed the class depending on what the teacher did with the final since it was obvious we were all fucked. Only 1 of 10 of us made an A. I was more proud of that B than any grade I ever earned. A guy that was typically a straight A student was holding like a D average going into the final and worried the whole semester if VA Tech was going to kick him out of their Master"s program he"d already been accepted to lol. Hell one day in class we joked how hard the tests were and then we started coming up with crazy shit like spring reactions with moving loads over curved elements to do by hand with like the worst method. That"s shit even computer analysis would struggle with but his tests were so gd hard. Sorry for the tangent...

Lyrical said:

You can try to talk to frachisees, but they won"t usually talk to you unless you have permission from the franchisor.

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I went digging through my agreement just to double check and there is nothing that requires me to get permission to discuss stuff with a potential franchisee. Obviously I can"t divulge proprietary information (such as recipes), but if someone came and asked me if they should join up, I could tell them exactly how I feel about that state of the system right now.

Again, other agreements may (and will) differ, but mine doesn"t have that stipulation in there.

Ah, that makes sense. I misunderstood what you were saying.

Lyrical said:

I was taught a lesson by one of the wealthiest businessperson I ever met (a car dealer). In business, you need to decide if you are going to be the guy who lets business come his way, or the guy that is aggressive and goes after it. I want to control my destiny and my demand, I don"t want to be sitting around waiting for the phone to ring.

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Yeah, that"s definitely something we"ve got to improve on. We"ve been too reliant on our reputation and existing relationships, and are suffering for it right now. Barely picked up any work from last July-November because our estimator quit, leaving me to try to administer the company as well as tender projects, so we were only bidding 1/2 as many projects or less than we would have otherwise. And unfortunately basically everything we DID bid, we either didn"t get because some idiot was stupid low (at or below our cost), or the project simply didn"t end up going ahead.

Thankfully we"ve picked up several projects in the past month or two; 88, 138, and 120 suite condos. Unfortunately even though they"ve already begun digging the parkades, we won"t be needing to man up on them for a few months, so we"ve had to lay a ton of guys off as other projects have finished. We"ve gone from 60 field guys in November down to 30 right now. Probably will hover around there for the next few months before things start to pick up.

We"ve also been training a new estimator over the past couple months. Slow and frustrating, but I"m hoping he"ll work out okay in the long term. That will allow us to pursue a lot more work and hopefully allow us to smooth out the yo-yo"ing we"ve been doing the past couple years as projects start and finish. We"ve had to let a lot of pretty good guys go, unfortunately, and ones that we"ve invested a lot of time in training as they worked their way through their apprenticeships. Unemployment is below 5% right now, so hopefully they won"t have much difficulty finding new work.

Aside from bidding, we"ve got to do a lot more "business development", which quite honestly right now we don"t do any of. The big thing with construction is bidding on work that general contractors have construction management, meaning they haven"t given a lump sump price to the owner for the project, but will instead charge a mark-up on the total project costs. So instead of an owner having 5-10 generals bidding on a job, and each subtrade having 10-20 competitors bidding, you bid to the CM who might have only invited 3-5 people or less. Sometimes the CM will just outright give the job to a preferred subtrade provided they meet the owner"s budget. However most CM contracts stipulate that the CM must seek out a minimum number of prices for major trades. But on the flip side, some generals will tell you "hey, we have this CM, we want you to do it. Who else should we call to get a couple other numbers?" *wink* Then you call up your competition, remind them of the favor they owe you, and feed them a number. Ah the joys of construction. No wonder the mob loves it.

It"s huge not having to beat the shit out of 10 other mechanicals to try to get a job, because generally if there"s that many guys on it, the one who wins the bid is the one who is going to make the least or lose the most money on the job.

2011 ended up being a better year than 2010, but our net margin after overhead was still only 4%. That"s just not worth the stress.

How come finding an estimator has been so hard for you? I"ve done construction and I"m an engineer now so I fully understand you need a guy that is extremely diligent and has an exceptional working knowledge of construction then needs to learn how to do take offs. It"s no simple task but it seems like you could have found someone for it by now right?

I worked estimating doing volume calcs for a road contractor. It wasn"t at all my cup of tea digitizing existing and proposed contours in but there"s a lot more to estimating than just that.

We are forced to take material take offs for our cost estimating dept here and there. Personally I hate that shit because I"ve always got better things to do and if I"ve done the takeoff all I need is the material cost and some labor rate to build an estimate from at that point for what we do.

Seems like you could find a guy that enjoyed grinding out estimates somewhere, it"s kinda similar to accounting.

Biggest reason it took so long is that my bro and I put it off. More on his end. I"d ask him "what are we doing?" and he"d say he was thinking about it, and that went on for awhile. There was two routes to go: bring up someone from the field and train them, or hire an experienced estimator. The previous guy had been from the field, as is the new guy right now.

We decided not to go with someone from the outside for a number of reasons. Estimation is the core of any construction company. If you can"t estimate well, you"re fucked. If you bid everything high, you won"t get much if any work and starve. If you forget shit all over the place, you end up "buying" a bunch of work and go bankrupt. Experienced estimators are hard to come by, so if we were to bring someone in they would probably have high salary expectations, or more likely ownership aspirations. Neither is necessarily a big problem by itself. But if they"ve already been estimating for 10+ years, there"s a good chance that they"ve got their own way of doing things that may not mesh with how we operate. They might be used to different software, different take-off methods, that kind of thing. They might have connections and relationships with contractors (both generals "above" us, and sub trades "below") that don"t fit well with our own or the type of work we want to pursue.

In addition, because they"re already experienced and have their own way of doing things, they might not react well to having us hover over them for the first year or two, checking everything they"ve done to ensure it makes sense and they"re not doing things differently than how we want them done. And on our side, there might have been a temptation to NOT hover over them and just assume they"re doing things well until we realize a year or two later that all that great work they picked up was way underbid.

In the 80"s when my dad and uncle expanded from Edmonton to Calgary, they sent their junior partner down to run the office there. They thought everything was going well as they were picking up a lot of work, but within a couple years it became apparent that things were NOT going well at all, with a lot of jobs that had gone sideways because the partner was only worried about picking up work, not following through and doing good work which resulted in a lot of additional costs to go back and fix shit. It nearly sunk the company. So that experience was also coloring our thoughts.

We felt that it had the potential to be really disruptive to the company and ourselves if we were to bring in an outside experienced estimator, is what it boiled down to in the end.

In addition, it"s not like there"s a School of Estimating that is cranking out estimators. Nor is estimating a job that"s generalized. It"s very specific to each discipline. For drywallers, painters and other similar trades it"s basically just measuring square footage and not exactly rocket science. A mechanical estimator has to not only be a good plumber who can take off the piping systems from the drawings (including all the stuff that isn"t shown, or is only shown schematically), he has to have a handle on the subtrades that work for us like HVAC, fire protection, controls, insulation and so on. When we"re tendering a project not only are we submitting a price to the GC, we"re also soliciting pricing from numerous subtrades. The estimator has to know who is carrying what, what is missing or duplicated between the various mechanical disciplines, and how it all fits together. So again that really limits the field, you can"t just hire an engineer or tech out of school and train them on how to be a plumber, tinbasher, sprinkler fitter, controls electrician, and insulator.

So the pool of good experienced mechanical estimators would actually be pretty small. And if they"re good at what they do, why would they be out looking for work?

So after all that we decided that we would again go the route of bringing someone in from the field that we felt was a good fit for the position, and potentially someone to put in an ownership position down the road assuming that things go well. If it doesn"t work out again, then we"ll seriously have to consider bringing someone in from the outside, and/or using a placement agency to find candidates. As far as why it took so long to bring someone, like I said that was plain procrastination on our part. We could have had someone in the office the day after the previous guy quit.

You know one thing that may help in the future is BIM, building information modeling. It"s basically 3d cad modeling of a building. My old company was looking into it as early as 07. I"m sure it was around in some form before that. If you don"t know about it already it draws the building 3d and adds in all the plumbing, wiring, layers of the walls (sheetrock, studs, air space brick veneer for instance). Basically programs like that could do most of the take off for you.

You made some great points about reasons why bringing up a new guy from within is a better option but I do have to add someone from outside the company may have more efficient estimating practices that could help yall out. Just never know what you"ll learn.

Definitely agreed that it could well be a good injection of knowledge from outside.

As far as BIM goes, yeah I"ve heard of it. It works pretty well in commercial and industrial projects, less so in steel/concrete multi-unit residential construction, and far less so in wood framed construction. It"s almost impossible for a program to truly be able to determine every fitting, hanger and so on when there"s no way of knowing what idiocy the framer is going to get up to. BIM"s pretty rare in the kind of projects we do.

But yes, one of our biggest issues with estimating is that our current system is literally from the early 90"s, if not 80"s. It"s very, very basic and a lot of the stuff we do manually can be automated. We did buy a newer package back in 2005 or so, but again because of procrastination, genuine lack of time, and sheer fear of moving to an unfamiliar system we"ve never implemented it. The more the program automates, the more time required for the initial set up and implementation and the larger the chance of tremendously large fuck ups because the program was doing something under the hood that it shouldn"t have been. We"d have to use both systems parallel for at least a year before we could move exclusively to the new system with any peace of mind.

So the goal for the time being is to get the new guy up to speed on the old way of doing things to take some load off me, and once that"s going well then I can start implementing and setting up the more modern system.

Saw that same stuff when I was setting up mobile homes with my uncle. My uncle built a hitch that made setting up homes easier and attached it to a small semi truck. Add in a 2nd vehicle to haul tools/supplies and trailers to haul block, full time employees, all the proper taxes and fees taken out of salaries and we lost business to guys setting up houses out of the back up a pickup. It"s doable to use less equipment but you work hard as a mofo doing it that way and it"s not as safe, plus when you get tired you aren"t going to line the houses up correctly (double & triple wides) so quality goes down.

Usually those contractors would do a house or 2 for a dealer, shit would hit the fan with low quality or unfinished work and we would be right back...

Mobile Home business sucks though. My dad had a roofing company and he worked his way up from doing any job he could find to doing mansions on the James River in VA that ran from 750k to 1mil. Profit was better on the high end houses and he had a LOT less problems with getting payment.

Oh well, I guess somebody has to be the fly by night contractors that don"t understand all the cost of doing business and go right out of it!

I thought some people might find some of the information in the attached survey interesting. It"s only for construction fields. Sure enough estimators are one of the positions where a lot of employers report difficulty in hiring. I"m glad that I agreed to participate in the survey and asked for them to send me a copy, this will be a great negotiating tool when my pain in the ass project manager once again demands a 10% raise for the 10th year in a row. He"s already overpaid by 10-20% as far as I"m concerned.

Gotta love Alberta, where even receptionists are making 45k a year.

Eomer said:

I thought some people might find some of the information in the attached survey interesting. It"s only for construction fields. Sure enough estimators are one of the positions where a lot of employers report difficulty in hiring. I"m glad that I agreed to participate in the survey and asked for them to send me a copy, this will be a great negotiating tool when my pain in the ass project manager once again demands a 10% raise for the 10th year in a row. He"s already overpaid by 10-20% as far as I"m concerned.

Gotta love Alberta, where even receptionists are making 45k a year.

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Wouldn"t it be prudent to bring in a younger PM and have him work with your 10 year guy (or you) until he learns the role, and use the competition to draw down the PM"s salary demands?

The dude"s either worth his demands, or not. Look at it from his shoes -- you aren"t bringing in anyone else to compete with him, you"ve given in to his raise demands (I assume, given the tone of your post) for a decade, and he can make a sound educated guess that he"s relatively invaluable to you, and that it"s much less of a pain in the ass to pay him an extra 10% than refuse, especially if the market"s hot for his kind of work and you don"t have a "next man up" to fill the hole if he departs.

Either way, if you"re going to crack down on his salary requests, I"d have a backup plan for what happens when he up and walks. Even if he comes back begging and pleading for his old rate, you still need to have someone that can fill in for him that"s not you -- whether it"s because he gets a wild hair up his ass and quits when you deny him a 10th straight 10% raise, or he gets hit by a bus crossing the street.

Of course, if I"m talking out of my ass here (which is quite possible), let me know!

Yall make me want to go into estimating. Pay better than 80k/year (assuming full time work) and let me do the work remotely?

That"s 80k American $$$ Eomer! Don"t be trying to jack me with Canadian!!!

Cathan said:

Yall make me want to go into estimating. Pay better than 80k/year (assuming full time work) and let me do the work remotely?

That"s 80k American $$$ Eomer! Don"t be trying to jack me with Canadian!!!

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Canadian and American dollars are pretty much equal atm, so feel free to go estimate for Eomer.

Evelys said:

Wouldn"t it be prudent to bring in a younger PM and have him work with your 10 year guy (or you) until he learns the role, and use the competition to draw down the PM"s salary demands?

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We"ve got another PM in the office, not necessarily younger but less experienced. He"s a lot more reasonable to deal with. But at the end of the day the main problem is that the PM I spoke of is just kind of an unreasonable, unrealistic person when it comes to money, his worth to the company and so on.

you"ve given in to his raise demands (I assume, given the tone of your post)

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Actually no, not really. He was given a big raise a few years back, but since then we"ve been adamant that he"s essentially "topped out" on his salary, and that he"ll only be receiving cost of living/inflation increases. Last year nothing, but most years 2-5% generally. Along with the possibility of bonuses at our discretion.

It"s just a pain because every year we know he"s going to bitch and complain about how he can"t make ends meet and he knows someone at another company making 50% more than him and so on.

and he can make a sound educated guess that he"s relatively invaluable to you

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He"s not, at all. It might be a pain to replace him for the first while, but in the long run it wouldn"t be a serious loss. He pisses a lot of people off, not just my bro and I, but other employees. Outside of work he"s a good guy, but he steps on a lot of people"s toes at work. Nothing is ever his fault when things go bad, but when things go well it"s all on him. That kind of thing.

Saskatchewan is stupid busy right now. They never had a slow down in the recession. It"s like perpetual 2007 there. They are desperate for trades of all kinds. The entire province is only about a million people, so they had little or no "slack" in the labor market when things started to pick up.

We don"t go after the big box retail type of projects either. Too much competition, and too much bureaucracy. We just bid a 140k square foot warehouse yesterday, and one of the GC"s we bid to indicated that there was another mechanical 10% lower than us when our margins before overhead are 10% right now. It"s ridiculous. We had all the best subtrade pricing, which was about half the job in terms of dollar value. There weren"t any better numbers to be had, we know for a fact. So some idiot apparently thinks they can do the plumbing portion of the project for 1/2 to 2/3"s of what we estimated it at. And the majority of that cost again was equipment that we had the same pricing on. So basically they think they will use half as much labor and material as us, or they fucked something up.

Frustrating to say the least. I woke up at 3am yesterday to close that job by 2pm, and worked most of the weekend on it as well.