EP264: How Contractors Are Making Money With Government Jobs (Inside Peacock Floors with Daniella Devine)

Thank you so much for having me, Brad. I'm excited to kind of jump into some sub-trade stuff, specialty trade stuff, and how we work with government entities.

Yeah. So my family, super humble beginnings. All four of my grandparents immigrated from different countries. It all ended up in San Francisco. And one of the ways that my grandfather learned how to make money was... getting Oriental rugs and selling them out of his garage. And he used to create so much traffic on their San Francisco, what used to be residential street, that eventually cops got called on him. And then the cops came and then the cops bought carpet. So he realized he needed to open up a storefront. So my family has been in, you know, super small, super small shop in the city since the 60s. And we've been... you know, iterating in different companies and such. And so as things changed, they had to learn new things. And we backed away from sort of being your, I walk into the store and I can look at samples and buy carpet shop to strictly commercial firm, no public, no retail element. And the majority of the contracts that we do just so happen to be with public entities.

think, you know, retail is the kind of model. And I mean, I think a lot of I think a lot of folks can agree to this is that it's people heavy, right? Like you have a shop and you've got to have Sally, who's your admin, your secretary. You have maybe Joe, who's in the showroom. You have a janitorial service. You have people coming in and out of your shop. And it's like a totally different element than going. I'm a flex industrial warehouse space, three offices. That's what we do. Everything else is warehouse storage. We are turning and burning. Material is coming in. It's coming out. And it's just like a really different machine. It's also in what I have seen. And granted, I'll have retailers screaming at me about this. But it's easier to scale and replicate some of these things. Like I get into, I get in with a multifamily investor. He's got 6,000 apartments. cookie cutter, right? The same effort for me to go and get 6,000 different homes from Joe and Sally and Mrs. Jones, totally different situation. I think it's just, you know what you know, and you grow, you grow where you're comfortable. But my family definitely spent some serious time getting uncomfortable and trying new things.

think so. I think a little bit of it was somebody called him and goes, hey, can you provide an estimate of I don't know if you've heard of the Presidio Trust, but over in San Francisco, the Presidio Trust is an old military base and it's turned into all those military homes and military housing has turned into housing. offered to Gen Pop, general population. So they have their own property management needs, and they also have commercial spaces for tenants. So it's an entire huge park, over a million square feet of livable space. And they called them one day,30 years ago, said, hey, can you provide a quote? And the quote was too low. And he they chose not to go with him because it was too low. And so we started to understand what a client like that would need. And he got a couple more opportunities before he wiggled his way in there. And I think ultimately this is the difference. When you're dealing directly with a homeowner, you're dealing with somebody who has a very, very strong desire to control their money, their budget. Right. They're like, but what about this? And what about this? When you're dealing with a facilities manager, a procurement manager, these guys are government employees. They're going to level your bid and they're going to go, oh, she's crazy or oh, they're super low. What's wrong? But they're not going to sit there nickel and dime on you. They're just not. And so the margin is healthier. The paperwork, definitely worse. Manpower requirements, labor reporting requirements, totally different. But it's the drip. It's the foundation. It's the bread and the butter so that when we have other kinds of projects walk in the door, you know, I'm sure you guys on your program talk about like margin, right? Certain clients can get this kind of margin. Other clients can get this kind of margin. I'd say, you know, your high-end residential clients, you get a really high-end margin. Government contracting is really not that low. Like it's really kind of up here. And when anytime I work underneath the GC, I'm like, all the way down here, my margin's super tight.

So we mostly do city and state. So check this out, right? There's three levels of government. You've got your local, which is city, county, that sort of thing. And you go up to your state, and then you go up to the federal government. I actually find it to be the most challenging to work with the federal government. procurement process and language feels the most alien-like. It's really hard to understand. And I find the locals the easiest. But when I say government work, I mean any kind of work that is publicly funded. So schools, school district, universities, gosh, affordable housing, anything that has a dollar of public funds, even if it's a portion. is technically considered public work, government work, because it's publicly funded by the government, right? There's a thousand ways you can find this work. You can find it directly on their websites, your local school district. When I approach a public client, I ask multiple questions. I go, I try to find their facilities guy or their procurement office, and I ask them, look. What is every single way I can compete for work on your property, right? Because, for instance, University of California, San Francisco, one of the largest biomedical billion dollar enterprise public institutions, hospital and university. They also own the most the most property of any public entity in the state of California. So as a contractor, what are we looking for? We're looking for people that own square footage, whether they want to build square footage, whether they want to renovate square footage, whether they want to repair and maintain square footage. It doesn't really matter what trade you are, what sub trade you are, right? So when I get in front of these entities, I'm asking them, I want to know every single way I can compete for flooring work on your property. And oftentimes there's a couple different lanes. There's always a preferred vendors list, right? But sometimes that's not enough. I don't want to just get on a list and sit. Like I want to work that list and I want to know what's going to turn into something. Another way is a jock contract. This is called a job order contract. What they're doing is they're setting aside half a million dollars, $800,000 over the course of probably three to five years where they're going, we're going to give you a list of kind of work to bid. So let's say they have apartments and let's say they have a couple classrooms or whatever it is, right? You're going to put your per square foot price. You're going to put whatever it is. And if you are the lower bidder or you get chosen for the contract for the duration of those years, they get to just write you purchase orders. They just write you purchase orders for whatever comes up up to the limit of that budget. Those contracts can get extended. They often do. Those projects can get large budgets that roll in. Because of whatever initiative that comes down the policy pike, right? They often do. So job order contracts, preparing maintenance contracts, they don't sound sexy. They don't sound sexy at all. But they lead to all of the foundational work in your business. They lead to healthy margin business. And what they lead to are long-term relationships with that institution where people just call you up for those bigger projects rather than you having to wiggle your way through whatever channel. And the third way... I typically work with public institutions on new builds, ground up development, things like that. It's GC work, right? They're not going to do individual contracts to subtrades. Once they hit multiple trades on a project, they're going to have a GC, pre-qualified GC take it over. And I want to make sure, whether it's building connected or whatever the heck you're using to solicit for work, I want to make sure that I'm in front of every single one of those invitations. And everybody listening to this, you're going to have a different preference, right? There's different areas of comfort you're going to find in these bidding processes, whether it's repair, jock, big GC work. I personally am way less attracted by large ground-up development with GCs. The margin is stupid tight. It's always lowest bidder. And I'm a finish. I'm the last guy to the totem pole, right? And there's hardly any route for change orders or any other flexibility for me. So that's how I've learned my personal preference in kind of bidding in that area.

Directly to the institution or organization. It's kind of like B2B.

Exactly.

prefer it. My margins are the safest. I don't have a middleman that I have to go through, you know, the GC, right? I get to develop that relationship myself, which is amazing because it leads to other referrals across campus or whatever kind of institution I'm working for. there's just so much more flexibility when you get to go direct to the consumer, to the client, to the organization, to the business, right? Anytime there's a middleman, it gets a little challenging and your margin goes down. Yeah,

Well, let's think about like the majority of people in the audience, right? They're probably solopreneurs, small staffs, not a ton of ability to scale immediately with manpower or whatever it is. Capital outlay. Capital outlay matters huge. My government accounts, I am like net 30 if I'm lucky. No deposits. My best account, my highest margin best account is like net 120. So like my capital outlay sucks. My payment processing sucks. I'm not union. But I still have to pay prevailing wage on government jobs. So I got to do payroll reporting. There's ways that you can make this math for super small companies. Like there's overseas VA help that you can get to do all the payroll reporting. There's even, I'm even testing AI agents, like agents to do payroll reporting because it's a repeatable task, right? So this feels big and heavy because it is. And because it's new and those contracts are scary. But one thing that I find is that I always like to look at my business in terms of diversity. Like if you were to look at a pie chart of your... clients and you were to go, this is my ideal avatar client. It's this super like wealthy homeowner. They've got a designer. They've got an architect. I don't even deal with them. Like whatever it is, right? For me, I look at that and I try to diversify that. The government contracting, although right now, which is a huge risk to my business, is more like 80% of what we're doing. I'm trying to bring that down to like 50% of what we're doing because it's the me. For my business model, I'm like, okay, I figured out how to do this, but I can't have everybody on 120 days net, right? Like that doesn't work, but the margin's there. So I take, it's like I compromise for certain accounts, right? Like we all do, but I try to layer the cake. Like when you really start making a lot of profitability in your business, it's not because you are killing it. Like there are riches in the niches for sure. But sustainable business is about diversity. It's also about diversity and margins. So that government, that's like my main base layer of the cake is like the government contracting. And as the cake goes up, right? I've got different tiers of clients I work with at different margins. Where my business starts to kill is when all the layers are going at the same time, right? Not just one here, not just one there, but it's when you wake up and you've got manpower going out too. five or six different kinds of projects with five or six different kinds of margins. That's when your risk starts to spread out. That's when your profitability starts to stack. Yeah. Yeah.

It's not shocking. I hate to say that.

sure. I mean, my dad was so frugal. I mean, to this day, he buys everything at Costco. Shoes, socks, whatever. His Costco gets loose, like, oh, let's go get lunch. Let's go to Costco. I'm like, Jesus Christ, dad. But he's a frugal guy, right? And so for him, you know, every year at the end of the year, right, you have a choice. You can either pull all the money out of your business. You can keep it there for working cap. You can keep it there to reinvest. Like, okay, I need to. bring on another project manager. I need to do this or we need this tech platform, whatever it is, right? He'd keep the money in the business every year. So he had a working cap of about three to 400 grand at any time, which is wild. Most people cannot afford to do that. He was a man that really was dedicated to living below his means. I'm not that way, right? Like I want to grow the business. So I have to push that profit. into reinvesting in different positions and assets and things like that. But yeah, I mean, every time I get paid, I do the profit first model, right? Like I got to take a chunk and put it into OPEX, which is really my working cap. I got to take a chunk and put it into taxes. And sometimes I have to clear out that working capital account to pay for normal bills, right? Because I'm paying all these huge material bills, paying tons of manpower and labor, and then I'm waiting and waiting. to get paid. So there's for sure downsides to this. And one of the ways I've been hedging against that is to diversify my client base. I'm like, oh my God, man, like I could have hundreds of thousands of dollars. Like I don't have this money. I don't have this money. I've got a working, I've got a, I've been able to get a credit line for about 140K and I have another business credit card that goes to about 150K, but, and I've got AR financing, but like your, your margin is getting cut. every day that you're living off of borrowed money, right? So I know that for us, an answer, like a way out of this is to diversify our accounts so that we have plenty of clients that are coming in paying 50% down. We need deposit clients because those government clients are not deposit clients.

I think six months for us. You know, we're in San Francisco. We pay a premium on rent. We pay a premium on manpower. A lot of the government accounts I have, they have local hiring policies. So, you know, we've got, we're really lucky. We've been around a long time. And we have flooring installers that live in San Francisco. When the majority of our competitors, they really can't operate in San Francisco. They're operating outside in the greater Bay Area and their manpower is even further outside. So coming into the city to do work for them is... even more, it's much more expensive. Like their overhead's way higher than my overhead, which is another reason, like we're small, we're nimble, we can get in and out. And that's another reason why I can compete with people doing, you know, like I'm competing with people doing 50 million a year. I do not do that. I'm a small frog in a big pond. And so I have found as many ways as I can to sort of bring in a competitive advantage. I can't wake up tomorrow and be a $50 million company, right? So I've got to figure out a way though, because I've got to figure out a way to compete with these folks because they're my competitors.

Well, I've been in this company for about 16 years now. And, you know, my dad's been in flooring since he was a kid. And when I retired him, I had a big old shindig and I asked all of his longtime clients, why do you love working with my dad? And they were like, he shows up and he does what he says he's going to do, which is the most frustrating thing to hear in the world, because we all want to do that as business owners, right? There's plenty of schmucks out there that can say, oh, I do that, that literally don't do that. But a lot of us who have a lot of passion and integrity for what we do, they're like, I'm doing that. Why not me? And I've started to notice that it really is in the boring, mundane, awful, monotonous work that we hate as business owners, right? It's in the follow-up. It's in the follow-up game. It's in the, I cold call people, I door knock. Like I still do that. And when somebody snaps at me and goes, oh, I have a guy, I'm like, that's great. But you need to.

If you want to do volume, you need to, because there's always going to be a day. There's always going to be a day where somebody gets sick or somebody this. And another edge for me too against my competitors is the fact that we're in the city. So I can say, yes, I do know who you're working with. But I have warehouse space. I can bring in your material. I can respond within 24 hours. Like that's why that repair and maintenance thing is so much more meaningful to me than TIs or ground ups because I want to have a hook in somebody. It's like kind of like those subscriptions that you sign up for people, sales organizations, they call them sticky. It's like Spotify. You sign up for Spotify Pro and you forget. It's a sticky subscription. It's cheap enough so that It doesn't really bug you. And you don't really ever turn it off because you're like, oh, I don't want to listen to commercials or whatever it is. Repair and maintenance is that in contracting. It's sticky. And so if you can be the person that shows up in an emergency, that brings in a pallet of their material, that can hold some steady pricing with them, one of the biggest ways I've been able to do this is I make a relationship with that mill, that distributor, whoever owns that product, and I bring it in. I specify it. right? I have leverage in specifying building standards and materials. If I can bring in a product and specify it in that building, I can go to that rep and go, this building, I own this building, I brought in your product, I'm asking for preferred pricing, I'm asking you to hold that pricing, and I'm asking you to jack it up for my competitors. And I will continue to do that for you. I will continue to go out of my way to specify your product above anyone else's. I've built a ton of leverage like that. And that's really the whole package game, right? I go in, I can respond within 12 hours. I've got a warehouse 20 minutes away. No bridges, no traffic. I've got manpower down the street from you. And then I show up and I do the thing and I make sure that we keep doing the thing. And it becomes really hard for somebody to go. We're not going to work with Peacock. Why? Yeah. Why would they? Right? You got to make it easy. When's the last time you got a quote for something?

What was that process like? Did it feel easy? Did you have to pull teeth? What did it feel like?

So this is a great follow-up question. When you say they've always taken care of us, what does that mean?

That's all it is. That is all everybody. Everybody has ever told me. My husband's a contractor, too. And I swear to God, for the love of Christ, we cannot get our fence done. I cannot get this man to fix our fence. And so finally, I was like, you know what? I'm calling. I'm calling the fence contractors. I kid you not. It has been the most miserable experience of my life trying to get a damn fence quote and get questions answered and talk about the contract or the deposit or the fine, like whatever, right? And it made me realize that when people said all he did was do what he said he was going to do, what that meant, like the significance of what that meant. And so it might not work like these sales funnels. And what I mean by like the sales cycle is the point like soup to nuts. You calling someone, trying to get that work and then actually finishing a project for them and making money on it. The soup to nuts process, when you go about it in that way, it organically takes longer. But you're building a client base of people that will come back to you when you make a mistake, when you're more expensive. all the other things. And so patience is a brutal reality in this game.

I have found the same to be true. I really have. Like we've become a lot less price. conscious. The only time I know where price is an issue is if I'm working on a public bid and it's literally lowest bidder is awarded. And I think that's another reason why that footprint for me, especially working under GCs, like on affordable housing and such, it's shrinking because I'm going, you don't care about my service. You don't care about the things that are important to me in my company, about my integrity, about all the other things we're willing to do. You are not allowed to care. Because if you're not the lowest bidder, you're not going to get the project. I don't want those kinds of relationships. Like, I don't want to break my back and risk capital and risk everything for, like, a job that could bankrupt me if I make a mistake. You know what I mean? Like, that sucks. I don't want to do that. I completely agree with you. Like, the client that I want is so, this is so cheesy. But it's me. I'm trying to get the damn fence. Answer the freaking call. Tell me about the, talk to me about, I'm next to the ocean and salt water. So what kind of metal are we using? Like, where are you driving into my concrete that I just poured two years ago? How quickly is it going to get done? And if something goes wrong, I can't even get people to come back to me and go, this is what it's going to look like. For all y 'all contractors out there, let me tell you something. Most women, we don't know what the, it's going to look like. Okay, we can't visualize a dang thing. And I'm not trying to send any, I actually got a contractor go, well, send me some Pinterest photos. I don't have time to send you Pinterest photos. I am not on Pinterest. I want you to do your job. And I want you to send me pictures of what you do every day. And I'm going to go, okay, A, B, C, or D, B. Boom. Let's go. Let's get it done. Like, I realized that recently. I'm going, oh my God, man. Contractors oftentimes are put in a bucket of distrust. They're put in a bucket of distrust because they don't do the thing they say they're gonna do, right? Send the pictures, answer the questions, get the schedule done on time. If you mess up, own it. If there's a change order, explain in depth why. Don't be a salty dog about it, right? We don't, the consumer doesn't understand. When I pull up a floor and there's moisture in the concrete and I go, whoa, doggy, pause. This completely changes our substrate preparation. They have no, I'm speaking Chinese. They don't know what the hell I'm talking about. It's my job to educate, to create comfortability so that when I do the change order, I'm not doing it for free. I'm doing it at a margin I can survive on. You know, like. I think it's, we forget. Like, we're so tired. So many business owners are just so tired. We forget that the client, the end user, the consumer, they want to feel cared for. And it's hard to do that sometimes in construction when you're tired, you're physically beat, and you don't have time.

It's so true. I mean, what stinks is, you know, I keep using this example because it keeps coming up for me in the way that I think about how I sell flooring, right? The guy who calls me back and is able to answer the questions and deal with my, like deal if I'm being annoying or whatever it is, right? He's probably going to be the guy that gets the job. And what sucks about that, it doesn't make him the most qualified. It does not make him the most qualified. I could be passing up an absolute master carpenter who simply does not have bedside table manner. And so what I say to that guy, if you're listening, you're out there. I know you're out there. If you're listening to this, get somebody to sell for you. Get somebody to nurture for you. selling and nurturing, they're related, but they're two different things, right? Get somebody to have the patience to talk to Mrs. Jones or whoever it is about the kind of wood and like get someone to do it because you're, I started to lean into this recently, Brad, and it's so woo-woo and lame, but it's so freaking true. It's like do what is your highest and best use in your business. Because that is the thing you're going to kill at. And if you are a master technician, electrician, plumber, whatever it is, then where are the tools? Don't be the construction executive. Where are the freaking tools? And get your wife, get your sister, get whoever with a little bit more like of a softer touch to get out there and help you grow your business so that you are focused on like, hey, strongest workmanship in the world. And Anna, my wife, answers the phone just like that. Right? It's like that to me is the easiest way. It's the best way to grow and not hate your life.

Yeah, exactly.

I think that the best place to start is with your local. So go to your county. If you live in a county, go to your city. If you're in a smaller municipality and go like you literally just walk into the government offices and ask for procurement, ask for the contract monitoring division, ask for, hey, who does facilities here? The facilities guys are going to be different. Like the facilities guys are managing facilities work. The procurement people are who are dealing with the jock contracts and the opportunities and the big bids and the small bids and the repair and maintenance bids. You want to talk to them and you want to go, look, I'm going to get into this. I need support. I need to understand how y 'all bid, how often the contracts come out. And there are so many resources available to you. through those procurement offices. I just left an event today. It was held by the San Francisco Port, which is just one of their government agencies in their larger city and county. And they had probably 70 tables there. People that dealt like lunchy money for working capital at 5% interest below market rate. People that can teach you cash flow analysis so that you don't get ahead of yourself on these big projects, right? There's people out there waiting to help you. They want small businesses involved. It does take time and energy. Yeah. So that's all I'd say is budget that.

It really depends on the city. So sometimes, yes, it's one procurement office, like for a smaller county or city that deals with all the agencies, like transportation, whatever it is. For the city and county of San Francisco and for larger cities, you're going to have government departments that get funded by the main, let's just call it. by the mayor's office, like the nucleus, right? And then you're going to have other government agencies that are called enterprise agencies that make their own money. So in San Francisco, we have SFMTA, public transportation. They're charging money. They're making money, which means they get to have their own processes if they so choose. Same thing with San Francisco International Airport. They're making money. Right. So they have their own budget. They can decide to do contracting and procurement the way they want to do it. That sort of thing. School districts. School districts are separate than the city of Milpitas or, you know, the city of Boise. The school district is its own entity with its own budget. So every time you have a budgetary bifurcation, they get to have their own way of contracting and giving out that work.

You may. And I mean, honestly, like variety is the spice of life. The more of these opportunities you have is probably the better. But again, this is something that you can hire overseas admin to help you mine the bids. line up the bids, scrape the websites, all of the things, because business owners don't have time for this. I mean, I get probably 30 bid opportunities a day. And it's only because I'm not because I'm special by any means. It's just because I signed up to be notified every time there's a bid from whatever agency and whatever it is. Once I've had some experience working with that agency, I figure out, okay, like this is a practical thing for me. I do want to work with you guys or no, that guy is. I'm not going to work for that guy. He stinks or whatever it is, but it just takes time. And so one of the ways I've been able to handle that is by hiring overseas help. You know, I have people scraping websites for me, organizing like a bid list for me to take a look at, see what sounds juicy to me, what I can make, what I can handle, what I can make work, that kind of thing. And I also have overseas help helping me with certified payroll reports and all this other stuff. I mean, these admin hours, add up. And the last thing I want to do by any means is promote not having Americans doing American jobs by any stretch of the word. But if you're a small business owner and you're struggling and this is a real opportunity for you, the last thing I want somebody to feel is I can't do that because I don't have the resources or enough time or I can't hire a $20 an hour person to help me. I've been there. I have been there. I've been there during years where I'm dying. I can't handle. I can't hire a janitorial service to help me with my warehouse. I'm in there cleaning the bathrooms, you know, good years, bad years type of thing. But I've just tried to learn when can I bring in the right people to help me so that I am not passing up opportunities that can change the course of my business.

Hey, if my boys were teenagers, I'd be paying them to scrape the internet for me. You know, my kids are still too young to help me out part time. I'd be paying them to organize the warehouse and get on forklifts and whatnot. And I highly encourage everybody out here. If you've got nieces, nephews, you know, these kids, they're so deep in AI. They're so intelligent. They're so resilient. And they're a totally different breed than when we were in the 70s,80s and 90s. Give them the part time work. And make a commission. Go, hey, look, the first job I close, I'll give you 2% of the net profit. You know what I mean? Like bring some entrepreneurial flair into there and get them hungry. Yeah,

That's freaking awesome. I am all about like, dude, bring the kids into it because they do not. I mean, nobody taught me how to balance my checkbook. Nobody taught me anything about finances. And if you get into contracting and if, you know, you go into the union, right? You start at 18 and by 30, you're like, oh my God, I hate this. And you've been doing side work for eight years and you're going, I could probably do my own thing. You got to know these lessons. And so the more that we pass on to our kids and we pass on to the younger generation on just how to make basic money, doing basic things, the more opportunity they have. I'm such a strong believer, like, y 'all, we have to. We have to keep this generation going. We got to bring people back to the trades. We got to keep it local. We got to give people opportunities to not have an income ceiling, right? Because that's what we're dealing with is, hey, I've been working for this government agency for 40 years and I'm never going to make more than this. Why? Why should anybody in America have to live like that? Nobody should. There's too much opportunity here.

No, no, no, absolutely. You can Google me. I'm at thedanielladivine. com. My email's there. I do 15-minute free consultations. I do one-to-one consulting if you need more help than that. You can find me on TikTok at thedanielladivine. You can find me on Instagram at thedanielladivine, D-E-V-I-N-E. Just DM me. Hit me up. And, you know, I'm happy to help. I've been doing this a long time and had the Army crawl my way through a lot of it. So happy to help. Well, we're going to

do. Yeah.

Very good, Brad. Well, thank you so much. I appreciate you having me on.

gosh. Okay. Right now, and you guys are going to think this is kind of cheesy, but I'm reading, I'm by Bethany Laflamme. I'm reading a book called, the total title is escaping me, but it's called OPE. And the premise is called It's other people's everything. So kind of breaking you out of your mindset that I can't do it because I don't have the money. I can't do it because I don't have the credit. I can't do it because I don't know how. She kind of shows you how to leverage anything you want or need from other people. And so for small business owners.

Mindset's your biggest problem.

Bethany, and last name is Laflam, L-A-F-L-A-M. She comes from Humble Beginnings in Ohio. She became a big-time attorney and now lives in California. Awesome.

Appreciate you. Thank you.