85: The Magic of Peer Groups with Ken Wingate

26
Dec

Kenneth Wingate is the founder and president of North Point Builders, a general contractor focusing on designing and building government facilities, hospitals, medical centers, K-12 schools, universities, churches, and community centers. We talk about the benefits of having a business mentor, tips for growing a general contractor business, and the average number of employees in small businesses in the US. 

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The Magic of Peer Groups with Ken Wingate

Our guest is Kenneth Wingate, the founder and president of North Point Builders in Baltimore, a general contractor focusing on designing and building government facilities, hospitals, medical centers, K-12 schools, universities, churches, and community centers. Ken is the graduate of the Baltimore Polytechnic Institute and Cornell University. Ken, welcome to the show.

Welcome to you.

Yeah, it’s great to have you. And we don’t often have people from the construction industry. And so we will dive into some of the details of that. But first, let’s talk about your entrepreneurial journey. You’ve been an entrepreneur since the age of since you’re mid-30s. How did you get to this point and how did you get to own your business at such a young age?

Well, certainly I was, I had a lot of help and I was somewhat lucky, but I was working for another firm and I was in my 30s and I was thinking about the future and beginning to think well maybe I might want to consider having a company and what was that what would that be like and I explored a couple possibilities but then a possibility came through with really a high school classmate and his father and they had a they had a paving business and they approached me and said, would you be interested in running a metal building side of our industry? And I said, well, not really, but I’d be interested in starting a general contracting company with you.

And they said, OK. And with that, we started talking. And we started this company with three people putting up $500 each. That was it. Now, I had to leave a nice job as vice president where I was and a nice desk, and I had a nice car, and I went to having nothing. So, it was very humble beginnings. I tell the story that I started when I went to work. I went to work in this other guy’s office, and I was in a half of his conference room, and we shared the phone with the shop and I was trying to put bids together, and I would get these calls about somebody needing a tire, and I had to say, okay, and put my bid aside, and it was very, very humble beginnings when we got going.

But the company began to grow, we got some work, and eventually bought a building that was not too far from where we were, and moved into there, and started to grow. And then I ended up in a conversation with the owner who was underwriting the bonding. And the construction industry on my side requires bonding. I had really zero money when I was starting, so he underwrote us to begin with. And I had a conversation and I said, well, what happens if something happens to you? And he says, I guess you want to buy the rest of the company now. I said, well, okay. And so we went to lunch and a half an hour, we had a handshake on how to make this work.

And then a year and a half later, after the attorneys got the paperwork straight, we had a deal and then we went from there. So I had to, uh, I had to pay some money out, but it worked out pretty good. So that’s how I got started and then the company began to grow and you add people and you begin the process. And as most of us know, we start companies, it’s a 24-7. I just have to survive so I can eat on Friday. That’s how you start. And then you just work and work and work to try to get work, do work because you’re one person and then you realize you can’t do it all and you add a person and then you add two people and you add three people and that’s how it starts. So that’s sort of how I got into it.

That’s really interesting. So this been quite a few years, like 30 years ago, and how did you build up the company? Did you use any what I call management blueprints, some kind of frameworks that help you build this company or it was just basically completely trial and error?

Well, initially, you don’t pick your nose up. You work – you can work for five or ten years and it just goes by quick as heck. And you’re – you know, I was trying to deal with – eventually, I was trying to deal with a young family at home and got married and had kids and I was trying to raise them and build this business. And it’s just – at the beginning, it’s sort of seat of the pants. You just do what you think is right. You don’t really need an organization because you don’t really have an organization. And so it gets complicated as you start to add people. I got myself involved in two different owners groups over the years.

And I forget the first organization, but the second organization was Vistage. And that really helped as you start to have 20, 30 employees. Now you’re managing people as opposed to managing jobs, or actually we’re doing both. And so that’s very complicated. And all of a sudden you realize you need people to kind of help guide you. And even though you’re educated on maybe organization or business management, as I was, there’s still nothing like in the heat of the battle, how do we organize and run a company?

How do I deal with all the personalities of people? That becomes more complicated, not to mention clients and issues and factors. I mean, none of us are perfect, so you’re always trying to deal with something that maybe didn’t go exactly right and how do you correct that? And of course, that’s what builds your character. And that’s what you get a reputation for, of whether you address issues or do not address issues. And how do you do that? Are you fair? Is it the right way, etc.? And that’s how you get a reputation around town.

Okay, let me just ask, because maybe not all the listeners know what Vistage is. It’s a peer group of business owners and CEOs. So how does a peer group like that help you in building a company?

Well, a peer group of that nature becomes basically your board of directors and also your conscience and not necessarily in a positive way. You can bring up well, the one thing I would tell you is that when you go to these meetings, you may think that you have the worst problem in the entire world. And then you listen to somebody else who’s there with their problem, you realize, oh, my problem’s not so bad.

Secondly, you get to be critiqued about issues that you bring to the table that are difficult for you to kind of sort through, but you now have a group of a dozen men and women who are going to ask you questions and by the end of the day, they’re either going to convince you you need to change direction or they’re going to confirm that what you’re doing is the right way. So, or sometimes you come away with a mixed feeling. But the point is that you get input that’s independent, and they’re just from the outside looking in, and that can be incredibly valuable.

Well, I can certainly imagine it’s very lonely to be the owner of a company, you cannot really discuss these issues with the people around you who depend on you for their livelihood. So in that vein, which may be a little bit connected question, you told me when we had the previous conversation that you had a mentor who was a great influence on you. Why is a mentor helpful and how can a mentor help? And would you recommend other people to seek out mentors?

I believe that everybody needs a guide in life and whatever personally as well as business wise but having somebody who’s been there, done that, who’s a little bit older, who can tell you or show you the ropes, it’s like, you know, you have a tendency to listen to a mentor, you know, we never listened to what our parents tell us but we have a tendency to listen to what a mentor tells us, somebody that we really trust. And sometimes you can go to that.

Everybody needs a guide in life, having somebody who's been there, done that, who can tell you or show you the ropes. Click To Tweet

When I started my business, before I did, I went and talked to a gentleman who happened to be my father’s best friend and, you know, was this the right thing for me to do? Should I jump in, whatever? And the bottom line was, you know, look, if this fails, you can always go and flip hamburgers at the local hamburger store. So, you know, if you don’t try, then you’ll always regret it. So I had that mentor. And then when I actually got in this business, this fellow’s father who underwrote me was a subcontractor and allowed me to see through his eyes the way a subcontractor operates monetarily, financially, and sort of mentally.

And it really gave me an insight to that side of life that I really didn’t know. And he just treated me very well and allowed me to ask questions or sort of showed me the way to do things. And it was really quite a positive experience for me. And so I’ve been very lucky to have a few of those gentlemen in my life to really kind of help me just sort of look at the big picture and determine maybe this is the pathway I should consider.

A couple of things that strikes me as you talk about the mentor and subcontractor, they have a different perspective. You also mentioned in our preamble that you were asked to run, it was a metal sheet company, I think it was, and you said that you’d rather do a general contracting company. So my question is, how is it different to be a general contractor, rather than to be a subcontractor or some kind of a trade, you know, running some kind of trade company that focused on a segment of the work for a building. How is it, how is it different and how is it better or how is it worse?

I think you have to look at it from a couple different perspectives. Let’s just begin with the money. So you’re at the top of the heap and you’re going to collect the money and then you’re going to give the money out to the subcontractors. So the money is going to run through you. So I always liked the idea of us collecting the money first and not relying on else to pay us third, fourth tier down the road. So that’s one piece of the puzzle.

The other piece of the puzzle is that, you know, for me personally, I like to build the whole building. I like to do all the components. I like to see what the final job is, and I like to make a client satisfied by us trying to help them. So, generally speaking, as a general contractor, you’re a jack of all trades. You know a little bit about everything, but you don’t have to know a lot about anything. And so you learn how to tap knowledge from good subcontractors to help you explain what they’re doing.

But the truth of the matter is that we’re going to look at the big picture and we want to deliver the whole building. And that’s a personal thing. I mean, there’s nothing wrong with being a subcontractor, being a specialty contractor. You can get really good at what you’re doing. For me, I just like to build the whole buildings. Now, that’s what I did when I came out of college, so I’m kind of used to that. And so for me, it was a little bit more rewarding for doing the entire picture.

So, does it mean that it’s more of a management job rather than a technical job, rather than a technical expert job? 

Well, yeah, I mean, a subcontractor may have, you know, they have multiple vendors, they have maybe some subcontractors, but typically as a GC, we may have 25 or 30 subs that are working for us. And you know, you can have projects where you have hundreds and hundreds of manpower on the job working. And so your job is to manage all these components. And the way I describe it to young people, it’s like conducting an orchestra. And your job is the conductor. And you have to determine that when are the trumpets supposed to play, when are the violins supposed to play, when do the drums come in. So, it’s your job to manage all that.

And at the end of the day, you have potentially a beautiful song. However, everybody’s listened to music that an instrument’s out of tune, or they came in late, or the rhythm’s not right. Well, that is the reality of construction. It’s not a perfect song. We are not the Philharmonic, you know, but it is all those components of getting everybody to play in the sandbox at the right time with the proper tools and make your building happen. What gives you character is when the French horn comes in, when the clarinet is supposed to be playing, and somehow you have got to deal with that and correct that and keep the song going. So, that’s how I would describe it, but I like that conductor part as opposed to just being the oboe player.

I like this analogy. It’s very visual. That’s awesome. So switching gears here, how does a general contractor get business? So you’re in the front line, you’re collecting the checks, but that also means that you have to create the customer at the front end. What are the ways for you to do that?

Well, there’s many ways to do obtaining work. So, and I’ll just kind of go through it. So, one way is that in the public sector part of the world, for the most part, it’s open competitive bidding. So, you can pick up a set of plans and you can bid upon it. Although I would say that over my career, I have seen a shift in the public sector to go into more selective bidding, RFPs, you have to have technical stuff. And that’s a double-edged sword. If you’re in the arena of the job that they’re bidding, you can maybe get a fair look at that. However, what the government is going to say is that if you’ve never built a school, we’re not going to give you an opportunity to build a school.

And I have a problem with that because it’s public sector money. It’s not their money. It’s one thing for a college, private college to tell you that. It’s another thing for the public sector, but at any rate. So you can do hard bidding. And at the beginning of our career, that’s what we did mostly is we picked up plans and bid on the job and we were low bidder or not. Certainly that’s a challenge to get work. But at times during my career, work has been plentiful and, you know, we’ve tried to make money during those periods of time, but certainly in the past four or five years, things have not been quite as rosy.

Now, the other way is negotiated. And you mentioned design-build, which is actually a negotiated thing. So, we do a lot of that type of negotiated work that we’re doing all the time. And we have to get clients and get people that are around us that trust us, and that’s how you get work. So one of the true issues about getting work is trust. You have to gain trust with clients. And in today’s age, we call that relationships. So relationships is gaining trust. So other ways to get work, you know, you can have standing clients that you get and there’s repeat business. You can do construction management type of projects. I mean, so there’s different delivery methods and there’s different ways to obtain work.

One of the true issues about getting work is trust. You have to gain trust with clients. In today's age, we call that relationships. Click To Tweet

So, you mentioned that it’s not always competitive bidding. Sometimes it’s negotiated, like design-build, typically negotiated bids. a company seek to have a negotiated agreement with one bidder as opposed to having a competitive bid and getting lower prices? What are the benefits for the customer?

Well, I’m going to go back to the word trust. The customer has to trust you as a builder. You’re obviously controlling a lot of money. You have a lot of pieces of the puzzle. And once they trust you, then they know that you’re going to try to get the best pricing, you’re going to try to do it the fastest as possible, and they’re going to support you in financing the project and getting the job done in a reasonable fashion. So that’s the major thing. I think what owners are looking for, to be honest with you, is to be treated fairly.

And when you come into a project from a negotiated standpoint, there’s a couple of different advantages of doing that. One, we can report back to the owner of what the architect is designing. We can report back that what they’re designing is a Taj Mahal and going to cost you a fortune. Now, in today’s world, it’s not so much the money because everything is a fortune, to be honest with you. But it’s really, can we get it? Can we get that product? Today’s world right now, if you want to buy steel joists for your building, it is going to take you a year to obtain them. I mean, it’s total absurd, but that is what the truth is.

And so, we may say to the owner, I think you ought to design your roof to be out of structural members, which we can obtain more readily, but steel joists and deck, forget it because we can’t get it. So these are the kind of considerations. So it may cost more, but you’re going to get your building done six months earlier, which obviously has a major impact on a developer or an owner as far as their concern for money. So that would be some of my top reasons. You can provide input to help them make some really good educated decisions.

So, it’s basically a risk management technique. They are reducing their risk because they’re dealing with someone that they trust. They know that they’re most likely going to treat them fairly. They’re going to do a good job. They’re protecting their reputation as opposed to the low bidder who will basically cut all corners to make a profit on the project and you run the risk of it not being finished and you lose more money because of the delays than you otherwise would have paid for a quality work.

I think that’s fair way to say it. However, I want to remind you that sometimes we are the low bidder, and we have to get it done. And we have to do it right. But I would tell you that it’s a it’s a win-win and I think design build is also a win-win for the reasons I stated earlier.

So, you also mentioned in our previous conversation that you actually like to bid against quality competitors and I was wondering if I can play in the U.S. Open and Djokovic is not playing and I get the 150th ranked player, I probably will choose that, right, to get to the next round. Why would you not think like that and would want to go up against quality competitors rather than easy to beat ones?

Well, I think there’s a couple of different reasons. One is that when we look at a project and how we administer it and the kind of cost that we put on a job to administer a particular project, a quality contractor and us are going to look at it in the same way. So it’s going to keep you competitive. Number two, which is also related to competitive, is that generally speaking, they’re going to use subcontractors that are of high quality, have the right scopes, and they’re going to do their due diligence. And so they’re going to know the job and they’re going to bid it quote unquote correctly.

So we enjoy that kind of competition because we feel like we’re on the same playing field and that we lose to someone like that, we may not be happy. But often, often owners will call me and say, this guy is a low bidder on this job, you know, do you know him? What is he like? And I’ll go, well, he’s okay. They’ll get the job done. I mean, so there’s a lot of discussion on these types of things. Now, I would just say that in the arenas that we play in, you always don’t have that opportunity, especially if you start drifting away from your home base.

And let’s say for us, we start to go into Virginia or the Eastern Shore or up in the Pennsylvania, you don’t really know who your competition is. And so that makes it even more challenging because now you’re dealing against people that you have no idea what they’re like. I’ve been around long enough. I know most of my peers here in Baltimore, and I know, you know, how they approach things. So we can be very competitive against the folks that we know what kind of jobs they do.

So, Ken, tell me, is it important for a general contractor to grow or is it possible just to play it safe, have a lifestyle business, kind of keep it steady and just save money for retirement on the side and not worry about growth and hiring new people and stuff like that?

Well, the first thing you have to do is define growth. Growth comes in many different forms. So you’ve got volume of business, you’ve got staff, and you’ve got then quality, and then you’ve got bottom line. So it depends on what kind of growth you’re talking about. I think that in the beginning, you’re just trying to grow to do more volume, to work for different clients. You’re just trying to survive. As you move on and your company begins to mature, then it begins to get more into staff and how do we take care of our people, and then it gets into the bottom line.

And really when it comes down to it, it’s are we making money or not making money? I mean, when you first start out, you’re just trying to make enough money to earn a living. However, as you get to my age, then it’s an investment, and now the question is, how do I make my investment better? And so growth does help because as you grow more people, of course, you add more people, you got more overhead. How do I cover the overhead? And the bottom line is, you do not have to have a huge amount of volume to be successful.

When you first start out, you're just trying to make enough money to earn a living. However, as you get to my age, then it's an investment. Click To Tweet

You could do $10 million in volume and you could make $2 million a year. I mean, if you can make 20% on 10 million, well then, okay, the heck with it, I don’t need to get any bigger. But what we find is that your overhead starts to grow, and this is the real dilemma. As your overhead grows, everything else has got to grow. And now the question becomes, is the bottom line growing or not growing? And the company makes, goes to 50 or $100 million. Are we making more money or are we making less money? This is a big question as you start to mature as a company, what am I trying to achieve?

And then when you got people like me who are starting to think about exit strategy, what’s important to me? Am I worried about volume? Am I worried about bottom line? Well, I would say I’m worried about bottom line So, you know, there’s a change as a company matures. There’s a change now not all companies are like that I mean some of these some companies are built to make millions of dollars right from the day one But if you look at the some of the histories of all the bigger companies and even the you know The Amazons of the world, I mean, these guys made billions, but in the beginning, they were losing, I can remember them reporting they were losing, you know, $10 billion a year when they first started out.

And you’re like, how can this company survive? And then all of a sudden, here we are, we’re sending people to the moon. So, you know, I think you really have to think about growth in a lot of different ways. Now, I would just add that at this point in time, with all the people issues that we have out there, how do you grow a company? Can you really grow a company organically? Can you really add people in the kind of numbers that you might want to to grow your company? Are you going to have to find another way to grow?

I think that you’re looking in the country right now, and M&A is at a huge all-time high and it’s probably going to go worse because companies can’t grow by hiring people. They’re going to have to buy other companies. And it’s going to be interesting to see what happens in the next five years because it seems to me that we’re going to see the big getting bigger and the smaller guys leaving. And it’s going to be an interesting… I mean, in Baltimore, the architectural world, engineering world has seen, I don’t know, 15, 20 acquisitions in the past two years from out-of-state companies. I think this is the trend.

Companies can't grow by hiring people. They're going to have to buy other companies. Click To Tweet

So, does it mean that small companies are under pressure to consolidate and to grow bigger, to be able to survive, but they can stay in a niche and they can still be profitable and be successful. So what is the M&A tendencies show? Is it a pressure or is it just an opportunity?

The key is that do you have clients? Do you have clients? Do you have repeat business? Do you have people or companies that want you to continue to do work forever? forever. And a lot of people think that. And then classically what happens, it’s somebody in the company that you’re working for changes and all of a sudden that relationship’s gone and all of a sudden that’s not, that’s no longer there. So it’s a real mixed bag as we look forward, I think about staying small or staying competitive versus getting bigger.

Look, America is built on small business. And so small business is always going to be there. There’s always a place for small business. But once you get to a certain level, then there becomes a question of whether you can compete a small business against a big business. And do you have to partner? Do you have to do other things in order for you to be competitive at a different level? And this becomes a question that most business owners are going to be faced with as their company grows.

And some companies will be able to grow right on through it, and some companies may say, well, it may be better off for us to partner with this other company. So that’s happening all the time. That is classic business. That’s never going to stop. But I think right now, with this great resignation or whatever you want to call it, and a limit on people who are going to be in the working for a living, that is making these questions a lot more intense right now.

Well, that’s definitely true. And I’m also wondering if there is a way for small companies to stay in a niche and not grow. I had a client who was in the niche of doing sidings for commercial buildings, and they stayed around eight to 10 million for several years and they made a really good profit, something like, I don’t know, 5% to 15% somewhere there. And they basically figured out that if they wanted to blow, it would have been really difficult because then the owner would have needed another layer of management, and then quality people would have sucked up all the profit and he would have had to like five times his company in order to get back to the same profitable level.

And he just decided it was not worth it. And he stayed in his niche and played golf two times a week. And then there is this no man’s land where you have to get through to get to the next level and maybe at North Point Builders you are on the other side of this no man’s land and you have the opportunity to to grow successfully with the second level management. I don’t know. I’m just assuming that this may be the case.

I believe the statistic is that 70 percent of all businesses in America have less than three employees. It’s an amazing number of small businesses that are out there that are successful. Successful meaning they’re earning a living. I think that’s the other issue is, how do you measure success? Well, generally speaking, it’s that I can eat every week. I have shelter, I have a vehicle, and I have a cell phone, of course. I think you have a cell phone before you have a house. But, you know, there’s nothing wrong with that.

And I think that, you know, 75% of the companies are actually at that level. But then they have the other 25% that are going through these growth things. And no, we haven’t gotten to the other side yet. We’re actually at a crossroads. We’re at a crossroads trying to determine where are we heading? Are we going to remain where we are, or are we going to change in some fashion that will allow us to grow? We’re right at that crossroads trying to figure that out. And we’ve been talking about that for a long time. COVID sort of just put a hold on everything. And so we’re now sort of coming out of that and beginning to do our due diligence on the final plan.

It’s an interesting time to be in business and hopefully that we’ll be able to work through it and come up with a good plan for us. Because I don’t have that plan as I sit here talking to you. I have plenty of ideas. Plenty of ideas and we just have to see. I mean, look, in life and business, doors open, doors closed. So an opportunity comes along, you have to decide whether you’re going to step through it or not. And sometimes you step through it and it’s great.

Sometimes you step through it and you’re like, uh-oh, shouldn’t have done that. But that’s continually for all of us in our personal life, in our business life. But one thing’s for sure, if you don’t step through the door, then you’ll never know, you’ll never gain wisdom, you’ll never have an experience that’s either positive or negative. And so stepping through the door is probably the most important step.

It’s required for learning. Well, that’s a great thought to finish on. So if our listeners, or when our listeners rather, would like to learn more about North Point Builders, and maybe reach out to you, maybe they have a project, or maybe they just want to connect with you, where can they find you?

northpointbuilders.com or our phone number is 410-477-8541. We’re right in the heart of Baltimore, so you can just look it up and it’s North Point Builders of Maryland LLC.

And you can also find Ken or Kenneth Wingate on LinkedIn, so you can look him up there as well. So Ken, thank you so much to come and talk on the show and share your wisdom. Definitely a lot of experience and situations you have lived through and learned from, which is awesome for us because that’s a shortcut for us. And for those of you listeners who would like to meet another exciting entrepreneur next week, please stay tuned and don’t forget to read and review us on Apple podcast read and review us on Apple podcast and YouTube. Thank you.

 

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