EP68: How Software Helps You Scale With Stephan Foos

absolutely. So I started in a, that must have been a three-person construction company, tile niche. We did tile service and tile installation work for about a year. After that, I jumped over to a new startup with a lot of people I work with today, even at Progel, where we started the same thing. It was a tile-specific venture, later took on bathroom remodels, kitchen remodels. Did that for seven or eight years, realized that our growth could only be scaled through software, couldn't find any viable solutions on the market, so we decided to create our own. We grew quickly. We started. When I started, I was the first full-time hire there. I was making about $11,000 a month. And by the time we closed our doors about a year ago, we were just pushing $5 million a year. So we grew quick and experienced a lot of the headache and even heartache along the way that I'm sure you can speak to, too.

Definitely. And I think that this is an industry too that I think is relatively just coming around to technology, really. I mean, I'm surprised just my day-to-day conversations, how many people I talk with that are still using pencils and paper and folders. And not only is that not scalable, but consider... I mean, I don't know about you, but so many times we've had folders left on site, you know, that customers are seeing what our actual costs are. Employees are seeing what we're charging customers. I mean, it's a nightmare across the board. And it's just, it's not realistic to scale, at least quickly. You know, you're definitely putting just an unnecessary handicap on yourself compared to a lot of your competitors out there.

Yeah. I used to have these big dry erase boards, my schedule and, you know, I'd live 45 minutes from the office. So if I didn't take a picture that evening, you know, I was making an hour and a half return trip in the middle of the night. If I forgot to give somebody, you know, their work order, let them know what it is they're doing tomorrow.

I would agree. I have a lot of people I talk with that are kind of misinformed too about what it is they're looking for. For example, I have a lot of people that I'm looking for a CRM. Well, if you're looking for a CRM, you know, there's Salesforce and there's HubSpot. But that word gets thrown around a lot with people thinking like, hey, there's some mystical software out there that is CRM and that's what I need. And it's interesting talking with people that A, don't know what they need and B, are looking for a solution that really doesn't exist right now. Really, you know, what we're looking for is construction management software, right? A CRM is going to be something like, we have a CRM at Progel and it takes, I've got two guys dedicated to just maintaining that system with workflows and ifs and thens and automated emails and text messages and this whole thing that goes into it. It's kind of a nightmare, honestly. But yeah, you have people that are totally coming from almost the stone age with folders and sticky notes and all that. And then you have others that they've heard, they know there's something out there. There's a CRM. What is that? I'm going to go venture out and look and try and find what that is. And the difficulty in that too is there's so many different solutions that are all answering different pain points. So yeah, I'd say that you're on track with that. Definitely two different types that we run into on a day-to-day.

The biggest roadblock is definitely the implementation, getting everybody on the team okay with actually switching systems because they do have a system in place and it's got them to the point that they are today and that's fine. But we have a struggle a lot with people that are coming from pen and paper, kind of wrapping their head around, hey, how do I get this all on my phone, my computer, it's accessible by everybody. And we'll usually experience there's, you know, a person or two on the team that has a lot of pushback, that doesn't want software, that doesn't want to be, I'd say a kind of a fair statement here is almost held accountable without really saying that, I suppose. I mean, with software comes certain things. You can clearly see where people have progressed in certain areas or haven't. One of the things that led us to looking for software in the beginning is we had a project manager that he was taking on more of our larger projects. He was overseeing our additions and stuff like that. And I could not figure out for the life of me, why were we not selling what we were supposed to during our busy time of year? And it turns out that he just had a huge stack of file folders from customers he had gone out with and met, but the estimates were going to take too long. So they got put on the back burner. And then two months down the road. We're sitting here when we should be busy and not. And the reason for that was because all these folders were kind of put aside. There was no transparent accountability. And incidentally, that was also an individual that had a lot of pushback when we were adopting a system that had this accountability built in and even quit, you know, just not wanting to do that, which I understand why now. You know, there's definitely people on the team that are not going to want that level of transparency and are going to push back.

I mean, we come across that every, so usually there's concern for the guys in the field. You know, they don't use software. They're not going to want to use software. They're not going to know how to use software. But generally, these individuals are still on Facebook and have apps on their phone that they're dorking around with throughout the day. So I think that there is a concern there that I'm sure it's justified in a lot of cases, but I think sometimes it's just an unnecessary concern. It's not that complex. Maybe compared to other things, I'm not sure, but it's something that there is some pullback and some fear from. But I think usually, you know, once people actually get fully onboarded and... whatever it is, projectile or otherwise, it just becomes part of the routine and it becomes simple and easy to do.

Plenty. Yep. Yep. I get that all the time.

Unfortunately. Yeah. And I don't think they're going to be too concerned about, you know, whether or not you arrived to your estimate meeting a minute later or not. Yeah.

Yeah, we have. At the end of the day, the location tracking is determined by the individual app stores, right? So Apple and Google, they make the decision. They're held to rules from the federal government, right? So when you download an app that tracks your location, regardless of what the app is, there's always three prompts for you. I guess one prompt with three options. You're told that this app, uses your location data and is tracking you. And then you have three options, either always allow, only allow while using the app or never allow. So at the end of the day, and it's what I tell people all the time, I mean, it's up to that individual that's downloading the app to select and make a decision on that. There's nothing that we can do. There's nothing that the app store can do. Really, there's nothing they can do other than enforce, hey, if we can't see your time logs, then we can't pay you. So that can be a little tricky. I think that over time, though, it's become an easier pill to swallow just because, you know, there's 10 apps on your phone right now that are tracking you that we've forgotten about. You know, even just the stuff that you download, the find my devices and, you know, whatever. But it's definitely something that I encountered more resistance to in the beginning a few years back. And now it's never even asked about, which is interesting.

Right. The time or the desire. I mean, in my opinion, what I love most about having that type of system in place is every morning, where are my guys at? Who's there? Who's not? There's nothing more uncomfortable than getting a phone call. Hey, I'm running late to this job. Well, you're supposed to be there half an hour ago. Why are you calling me now? Why can we not be proactive in this? So I definitely like it for some of those like day to day. OK, it's 8 a. m. right now. I should have 15 guys out on site. I only see eight people clocked in. What is going on? You know, and again, have that proactive approach in calling our worker, calling the customer, letting them know about the traffic or whatever it is, and just maintaining that control. Because the second that you slip on a job site and the customer doesn't trust you anymore for any capacity, it becomes harder and harder to manage that customer. And arguably. My opinion, managing the customer is probably more important than even managing the project. You can't have a project that goes south, but if the customer is managed along the way and the expectations are continuously set and you're staying true to your word, it's going to go a lot better, right? So to start a project and to be late the very first day without a proactive response to it is really setting you up for failure for the rest of the job, in my opinion.

It's definitely the ability to scale. People are getting more time back. They're more efficient. And I would say the number one thing is it's easier than ever to truly understand your numbers. I mean, I'll talk to a lot of people that have been in the business for five years,10 years,15 years that haven't even delved into job costing. And I understand why it's a big pain in the butt, especially if you're using QuickBooks or something like that. But it's surprising to me, but it's not because this industry has the highest failure rate. But it is surprising how many people just don't. reconcile. If I expected this job to cost me 10 grand, but it cost me 15 grand, why? And what can I do next time to ensure that that doesn't happen again and we hit our numbers? A lot of the people I talk to, small to medium-sized construction companies, a lot of that is if we're not knowing our numbers and we're not charging appropriately or estimating as we should be, that money is still being spent. It's coming from somewhere. We're not going to leave a job uncompleted because we didn't charge enough. And where does that come from? It really, I mean, you can directly trace that back to just robbing from your own family, basically, to pay for that job to finish it. And I've been there. I mean, we've done jobs where at the end of the job, it would have been less expensive to have never taken on that project, you know, and just not done it. You know, at the end of the day, we spent five grand to finish this job. And now not only did we spend that money to finish the job. But now we're held accountable for the next year. And any callbacks, we need to go out there. And we're all at the mercy of Yelp and Google reviews and everything else. But anyway, I'm going on a little bit of a tangent here. But yeah, the ability to really grasp and understand what are my numbers? Where do I need to be? What mistakes did I make? And how can I address that for next time to not make that same mistake twice?

We didn't do it either for several years, too.

Easily. Yeah. When we first started, you know, it was, well, what do we charge? So we went to like home-wise and we looked at these market rates and stuff like that. And again, at our core, we started as a tile company. So we were charging six bucks a square foot to install a floor or something. But after job costing, after understanding our numbers, I mean, that $6 a square foot for installing a floor became 20 to 30, depending on the size of the floor. And guess what? We were still selling, but we were actually making money this time and not just... every payday scrambling? How are we going to make it work? I don't know. We blew it all because we underbid the job. Yeah.

Yeah, that's a great point. I talk to a lot of people about that too because I still give a good number of demos every day. So I'm meeting a lot of small business owners and managers, operations and general managers generally. It's shocking to me, the resistance, because most people I talk to, they're doing a simple model of cost plus a markup. And I think you kind of subscribe to the same philosophy of, hey, at minimum, we need to double. If this costs me $100, I sell it for $200. And I tell people that all the time. And I get a lot of pushback on that. Well, what about materials? I only put 10% on it. What is that 10% going to do when you have to run to Home Depot 15 times? multiple Home Depots. During transit, you're responsible for that material. When you get out on site and find out you got the wrong size, whatever, you need to run back and grab that again. All the while, we're burning up hours on the job too that we should have been productive with the materials that should have been there but weren't for some reason. It's crazy to me. But I understand too because we did that for several years. There's a lot of hesitancy there.

Yeah. It's a heck of a lot

absolutely. And I don't know about you, but in the beginning too, when we priced our projects, competitively. The type of customers we got were impossible to please. It was impossible to get off the job. Nobody was happy. Everybody's miserable. There's always money that's being withheld, but just enough not to make it worth going through any sort of legal action for it. But raising your prices puts you into a new ballpark with different customers who are actually happy that you're there. They're paying when asked. They're keeping up with their progress payments. And just genuinely, everyone is having a better time out there from the guys in the field to the workers in the office and even the customers you can tell too it's very very interesting it's

Yeah, absolutely. And, you know, keep in mind to the average construction company or residential remodeler is operating on a profit margin of three to eight percent. So there's not a lot of room for error, especially in having payments delayed, because we all know like we get 10 grand in and that feels good for four seconds. And then 10,200 goes right out, you know, somehow every time.

Well, one of the interesting trends I'm seeing, especially as the younger generations are starting to take over, is a totally different take and almost lack of field management. So actually managing our workers, a lot of people are, I don't know if it's just scared to do so, don't know how to do so. But I encounter this a lot of a fear of disturbing the field workers and what it is they're used to in the conversations they're used to having. And I think that adopting a software that allows the software to be the bully helps with this lack of management understanding, if you will. And that benefits a lot because suddenly you don't have a manager, super, whoever, that's the bad guy. It's the software. The software is clocking you in and clocking you out, keeping track of where you've been and where you're going and allowing the management to actually reconcile and only have the hard conversations in and when they're necessary, I guess. But having that tool and having something to be able to understand without, I don't know, I guess harassing almost the workers about where you've been and where you're going and what you're doing, just having that third party that is not even a person be able to handle that day-to-day communication almost, if you get what I'm saying, that helps tremendously. It helps with just the uncomfortable conversations, the organizations for the day-to-day, and especially helps just you know, make, make the day-to-day more efficient too. And in setting the expectation, just like we want to set the expectations with our customers, we also need to be setting the expectations with our workers. Here's what's happening today and tomorrow, and here's where we need to be. Otherwise we're going to have problems down the road with the rest of the schedule. Right.

So even like that,

Right. And then take that to the finances too. You know, Hey, we actually lost money on this job. That's a hard concept for people to really wrap their head around. What do you mean? I lost money on this job. I charged 20 grand for it. Here's the numbers. Here's exactly what you lost and where you lost it. Yeah.

Yeah, that sounds right.

Yeah, just a better preparation for sure.

And then multiply that across 10 active projects you have going right now.

Scheduling for one. I can't tell you how many people I talk to where scheduling is all just run in someone's head. And that's fine when you're an owner-operator out there, but you need to know that things are going to move on if you walk outside and get hit by a car or something. People need to be able to understand what the next step is for multiple reasons. One, how do we communicate this to the customer? Two, how do we identify if we're going to be sliding on our schedules? And three, if we're sliding on the schedules, how are we going to actually be accommodating the rest of the schedules that we have? We don't just do one job and that's it. We don't do another job for six months. We're always going. So scheduling is huge. The time tracking is huge too. I mean, for all the reasons that we've already talked about so far. Personally, we used to have paper time tracking. It was hours for a bookkeeper just to track everyone down to get these handwritten time track logs that were thought of right then and there. So what happens is, And it doesn't even have to be malicious. But just what happens is a guy gets out on site at 8.05 and he rounds down to 8 o 'clock and then he leaves five minutes early and rounds up and there's 10 minutes lost multiplied by the wage, multiplied by every single day and by the number of workers that you have. There's a substantial material loss there in wages that we're paying that we are not charging for. So being able to reconcile that again is huge. For us, our payroll was about 40 grand every two weeks. right around there,40 grand mark. And when we switch to actual time tracking, incidentally, it dropped down to about 36,37 in there, just immediate savings. So scheduling, time tracking, and then the to-do lists, you know, to-dos, tasks, whatever you want to call them, just setting our workers up for success. I mean, I've had calls where, you know, I've got a guy that lives an hour and a half away from wherever he's working that morning. He gets out there. He had an understanding that he was doing one scope of work, but he gets out there. It's something different. He didn't bring the right tools with him. Now he's going back home again, another hour and a half, and then again an hour and a half to the job site. So we're burning four and a half hours in drive time just because we weren't prepared and we didn't properly understand what was going to be expected tomorrow. Those three all go hand in hand together, in my opinion. And it's definitely that in terms of the actual task management, it's that proactive approach. It doesn't make sense to send somebody out there and hope that they get it done. We need to tell them what's expected so they can prepare the tools, prepare vehicles, prepare materials maybe even beforehand, you know, before getting out on site out there.

Yeah, absolutely.

Yeah, I appreciate that.

I mean, we are, of course, a construction management software. We focus on the small to medium sized contractors and construction companies. Generally, our customers are residential focused. I'd say 80 percent of them,20 percent are commercial. With Progel, what we're focusing on doing is bringing everything all in one place. So we want to be managing your leads in Progel, creating estimates for those leads. We have follow-up reminders to ensure that those leads are, you know, we're following up on them. We don't send an estimate and forget about it. We convert that estimate to an invoice for the deposit when the job is sold. And then that shifts over to the project management realm of things with the schedules and the time tracking and the project management, the photo and file management too. One thing that I think is really important to be aware of is, like you said, I mean, no one software has everything. But I think it's also important to note that different software is for different types of companies, right? I mean, Progel is best for a more traditional, if you will, company format where you have employees and there's tasks that are going out. That's where Progel really shines. But if your company is more of like a contractor, like a GC, where we are gathering our subs together and issuing out our work orders, we're not a great solution for that yet. That's just not what we've built the company around. There are other options on the market that are going to be there for home builders specifically who don't perform work in-house. commercial builders downtown that, again, really need a huge set of tools that are interacting with all these different subs. But yeah, at the end of the day, we're kind of unique in this market for the niche that we're serving, which is definitely the small to medium-sized construction company or niche contractor.

The templates are huge. And a lot of that too comes from, you know, I used to watch our estimators poke through QuickBooks or even before that when we were just using Google Docs to write up our estimates, falling asleep, rewriting the same estimate for the fifth time that day. You know, how do we do that? How do we template it so we have a jumping off point, whether that's in estimates or projects or whatever, let's be more efficient. Let's reuse the work that we've already done to save time and save money and get back home.

Yeah, I mean, I'd say don't fear software. This is where the world is headed and has continued to head. Every industry is making record-breaking profits because they're leveraging software. And it's time that the construction industry really does that too. Times are probably going to be getting tough. So whatever you can do to minimize your overhead right now, leveraging software. I'm not a big believer in you should be setting out for software to replace people's jobs. But you should be looking at software as, like you said in the beginning, how do we use software? If I'm in the office here, how can I use software to do the job of four people and do it efficiently and not hate my job, right? So the accountability is going to be huge, ensuring that nothing is slipping between the cracks, whether that's a brand new lead, whether that is job costing and identifying areas that we can squeeze more profit or maybe STEM losses even. All of this is going to be a very critical component in surviving whatever it is that's coming right now, just like 2008. It's going to be tricky and software is going to help. It can help. But you got to set aside the time. You got to make it happen. You got to learn it. And it's going to help you stand out from your competitors. And maybe it may even cause you to be one of the only ones left standing, too, you know, of your competition, potentially, depending on how bad things get.

on your investment. Yeah.

Right. I mean, if that software is the right fit for them, I mean, whatever it is they're spending almost. almost becomes like it doesn't matter it doesn't matter how much you're spending because for every dollar i'm spending i'm making five more and that software is facilitating that just like our marketing dollars it's that it's that return if we're seeing a return it's a smart idea and the the cost almost becomes irrelevant but if it's not the right fit then you're not going to be seeing the roi and in which case maybe it's time to start looking for something different too Absolutely.

Yeah. I mean, check out our website, project. com. We've got phone numbers on there too. So if anybody wants to call in and actually talk to somebody, we're really big on that. That kind of comes from our construction roots of I've got five minutes in between deliveries or whatever it may be. And I want to talk to somebody, we staff appropriately. So if you want to poke through the website, learn more about us, you're welcome to do that. You can check out our YouTube channel or again, give us a call. We'll be happy to talk you through any questions you may have.

I like The Lean Startup. Okay. Yeah, that's my recommendation. I always try and keep a real lean mindset, minimizing everything across the board and maximizing efficiencies.

You know, I was a long time ago. I read those books. It's, it's been a couple of years, but yeah. Yeah.

Yeah. Two second improvements,1% growth a week, you know. What kind of shifts, those micro adjustments you can make that by the end of the year, you're just in a totally different place than you were just 365 days ago.

Yeah, thanks for having me on, Brad. I appreciate it.