Scott Kimpland: thing that always intrigued me about it, Seth, was it's one of the few industries now that kind of builds something of lasting value that 20, 30 years from now you can kind of drive by. My dad would drive by and point to things that he built 10 years ago and you know, very proud of it, but it has kind of lasting value compared to a lot of things that we learned in business school, you know, like financial products and you know, kind of smoke and mirror kind of businesses that are maybe service related, but they didn't create anything of real tangible value.
Seth: trying to be constructive instead of destructive. And I feel like there is a pretty interesting distinction there. There's a lot of people in the world that like to break things apart and break it down. I like to see if I can build it up.
Scott Kimpland: My experience with the family business, it's it's almost binary. It ends up working really, really well or it ends up being a terrible disaster.
Seth: in my book, this all comes down to like the physical things being built. And there's somebody who has to do that. And we got to keep those people happy.
Scott Kimpland: There's still some self-performing general contractors out there. But on average, general contractors, construction managers today, they subcontract everything. They are not builders, right? They manage risk, they manage contracts, they manage schedule. and ultimately the builders end up being, you know, the trade contractors, the people with labor that go out and, you know, site work and you know, the concrete. But it that's changed in the industry. I think that's created some challenges. you can either be the Nordstroms and you're going to compete on value and you're going to deal with a different set of buyers and segments of the industry, or you can be the Walmart and you can do hard bid, you know, municipal work. in my 39 years in the industry, if I look at really what I would consider to be meaningful changes that have really impacted the industry, it's it's really interesting. Most of those I think have been driven by owners.
Seth: kind of approaching this thing from the owner perspective and really want to help the owner. But I think this is the part that I'm excited to talk to you about is I think owner and laborer need to kinda come together. I I'd love for you to tell any version length of your background story that you're willing to, but maybe start from the beginning. Like what was your first exposure to this industry? Did you grow up as a kid liking it? How did you get into it?
Scott Kimpland: Yeah, good good question. I actually grew up right outside of Tampa here, just east of where my office is today, but grew up in a family my dad was an estimator for a masonry contracting firm for a long, long time. Kinda got exposed to the industry through that. ended up going ended up going to college right here at the University of South Florida in Tampa. I got out in like nineteen eighty four, my undergraduate degree in business, and looked around at the jobs my friends were getting. And they weren't you know, they weren't too inspiring. The the the economy wasn't great that time. So I actually went and hid in graduate school for a few years and got my MBA at University of South Florida. got out. My my dad was smart enough not to hire me. I was smart enough not to go to work for my dad, but I love being around the industry. you know, it it it it The thing that always intrigued me about it, Seth, was it's one of the few industries now that kind of builds something of lasting value that 20, 30 years from now you can kind of drive by. My dad would drive by and point to things that he built 10 years ago and you know, very proud of it, but it has kind of lasting value compared to a lot of things that we learned in business school, you know, like financial products and you know, kind of smoke and mirror kind of businesses that are maybe service related, but they didn't create anything of real tangible value. And right out of graduate school, I kind of stumbled into a couple of my classmates were interviewing with FMI at the time. ran into one of them one evening at the mall, I think, and said, Hey, hey, if you have an interview to talk to these guys, you should talk to them. So I got hooked up with FMI eighty seven. interviewed with them, came to work for them, and at the time we were a pretty small organization. and at the time our model was a little bit different. We would kind of hire freshly minted MBAs like myself, not a lot of industry experience, but we'd kind of staple them to the hip of one of our senior people and they would travel around and one day they might be helping a contractor with strategic kind of stuff. The next day they might be working on operational things. you know, you might be helping them with compensation. So you were kind of a generalist, a a business generalist. And so I kind of got some broad exposure and started to learn a little bit about the construction industry and the nuance of contracting and construction and how it's you know a little bit different kind of business. So that was kinda how I got my starts with FMI in nineteen eighty seven.
Seth: Before you move on from the early history, tell me about like you just briefly mentioned, didn't go into the family business exactly, like going to work for your dad. And I know you probably have stories about that too, about why you're grateful you never did that in the first place. But talk about that, like family businesses in our industry. Do you think they're I'm sure it's a mixed bag, but what's your general opinion about keeping things in the family?
Scott Kimpland: Yeah, my my my dad actually worked for somebody else, so it wasn't his business. but with that said, a lot of our clients, Seth, I'm I I'm guessing probably forty percent of my clients are family businesses somehow. Matter
Seth: Right.
Scott Kimpland: of fact, I was just with a contractor this week. dad started the business probably back in the sixties, seventies. the Tucsons have have kind of come in and taken over the business, but we have an opportunity to work for a lot of family businesses. My experience with the family business, it's it's almost binary. It ends up working really, really well or it ends up being a terrible disaster. And and
Seth: Yeah.
Scott Kimpland: so I've got a lot of opinions and insights and war stories from family businesses, but you know, in some cases yeah.
Seth: I hope we do also get to kind of contrast that with like maybe the other end of that pendulum is like private equity just kinda going crazy and creating chaos in MA. I don't know what which side of that pendulum you prefer. Investors doing their bottom line driven thing or families getting into drama, you know?
Scott Kimpland: Yeah, yeah, there's definitely advantage pros and cons of each and it's always an interesting dynamic when there's two siblings in the business. that's usually a unique dynamic. usually one of is, you know, really running and controlling having an impact on the business. The other one's oftentimes along for the ride. But and it it it can work it can it it can work really well. I've seen second generation, third generation actually take businesses to the next level and I've seen you know, run it in the ground. So it's a it's a pretty broad spectrum of experience there. So
Seth: Okay, again, you I mean, you you got to FMI so early in your career. I I hate doing this because it makes it seem like I'm aging you, but I did notice you say you graduated your bachelor's in 84, and I'm like,
Scott Kimpland: Yeah.
Seth: you started your career when I was born, which is kind of a cool thing for me. Like, I was born in
Scott Kimpland: Yeah.
Seth: eighty-four. I spent a while getting through my education, so 22 years before I got into the industry after that. But it just makes me think like, Generationally, that's kind of cool to me. You were you were getting started on your career. I was being born. you're ahead of me like by 22 years. But in any case, I kind of want you to talk about you've been there your whole career now. and what is FMI? Just for people who maybe have never heard of it, it seems like a pretty broad scope of services they can offer. So tell me about it.
Scott Kimpland: Yeah, it is. And and it it's interesting. you know, I think our generation and actually, you know, my parents' generation, it was more likely somebody would go to work somewhere and have a thirty five, forty year career there. My generation, probably a little rare, I will tell you at FMI, there's a number of people like me that have kind of come and spent their entire career here. We we kinda joke that once you've been here five years, you you're pretty much unemployable anywhere else. really unique company. But a a little bit about the company from a high level, and I'll try to make this as as quick as I can, but we really there's two sides to our business. We're we're based out of Raleigh, North Carolina. I'm actually in our Tampa office. We have an office in Houston and an office in Denver. Then we have we have a handful or so of kind of remote employees that kind of sprinkle throughout the country that kind of report back to one of those offices. But we we kind of look at our business, Seth, really uniquely. So one side of our business is our FMI capital advisors. So think of MA activity, anything transactional,
Seth: Okay.
Scott Kimpland: buying, selling, and it could be buying or selling with private equity, it could involve a strategic buyer, it could involve a sale to a group of, you know, four or five internal managers or leaders. or today, you know, the the the hot model right now is the eSOP. But anything to do with transfer of stock ownership, that group gets involved with. Generally, that side of our business is is typically fifty percent of our revenue or so. They kind of continue to be about half of our business. Right now, I would say most of their work is seller rep. you know, selling, representing sellers, people that are exiting the business, you know, guys like myself that are baby boomers that have been in it for a while, they're looking for an exit, you know, the buyers are strategic. You mentioned private equity, you know, spending a ton of money in the sector right now. And then ESOPs have been pretty hot. So that group kind of does those kind of transactional kind of things. And then the side of the business I'm on is our consulting business. And think of kind of traditional management consulting. So we've got, you know, strategic strategy, strategic planning. They're kind of married up with a pretty robust research group. We do a lot of industry research. You might read some of our publications that we put out periodically on construction spending and trends. But that group primarily works with people in the built environment. Most of our clients are contractors, but we do a fair amount of work in the building products. Anybody sells their products to contractors, do a little bit of work in AE space. That's not a big sector of where we operate. I'm in a group. Called the performance practice. Most of what we're doing in there is operational improvement. So working with typically
Seth: Mm.
Scott Kimpland: very labor intensive, self-performing trade contractors, helping them get better at managing the largest controllable cost in their business, which happens to be labor, you know, and kind of as labor goes, their business goes. We've got a group that does compensation consulting, designing incentive comp plans. you know, think of salary benchmarking. benefits, benchmarking, anything related to compensation or benefits. And then the third kind of leg of the stool is our leadership and organizational development. So soft skills, leader development, training, you know, organizational development kind of work. They do a fair amount of management succession, helping people get, you know, figure out who's the next generation of leaders to run this business, helping current leaders get that next group developed and Ready to kind of run the business going forward, not the transactional piece of ownership, but more who's going to be the next generation of senior leaders in the business. They do a lot of that kind of work. And then stacked on all of that, we've got about 40 active peer groups of various trades. You know, think of six to eight non-competing companies, very similar, maybe trade from different parts of the country, get together several times a year, share everything from financial performance to best practices. And then Most of the senior people like myself at kind of a shareholder or director level, we're most of us are involved in a number of boards. I'm I'm currently on four ESOP boards where I've got kind of a fiduciary role, and then I'm on three or four just pure advisory boards where I sit on the board directors, but I don't really have a vote. So you know, that's kind of a a high level
Seth: Surely.
Scott Kimpland: yeah, high level summary of what we do and different things that we do between that. You know, we're not builders, we don't get into the nuts and bolts, we're not technical. we really kind of get into more of the management and leadership and understanding, you know, what really drives and grows what what really drives value in a construction firm and helping companies, helping our clients really grow the value of their firms is really so you know, we we think of it kind of as a life cycle. We can help you if you want to get into the business through acquisition. we can help you grow value through our consulting services. And then on the tail end, when you're ready to exit the business, again we go back to our you know investment banking side of the business and they can help you exit the business. So that's kind of in a big picture how we kind of envision you know the life cycle of a contractor and how we have a relationship with them kind of through that whole life cycle.
Seth: Yeah, again, I'm I'm relatively new even to the MA side of construction and the money side of it. I've been the guy in job trailers with the computer, basically. I'm the PM, like
Scott Kimpland: Yeah.
Seth: not the laborer, but the guy that's out on site just not swinging any hammers. but been more in those like higher level business discussions lately. So it's endlessly interesting to me how companies are built and organized in this industry, maybe especially. The actual builders. Something I think about a lot is there's a lot of people in our industry who aren't designing or building buildings anymore. And that's a problem, in my opinion. sure, I I I just think we can work on it. But in any case,
Scott Kimpland: Yeah.
Seth: the way people organize businesses, especially like a con a general contractor or somebody who has the labor piece of this industry, like. How should those companies be set up to keep those people happy? Cause in my book, this all comes down to like the physical things being built. And there's somebody who has to do that. And we got to keep those people happy. And I'm hearing, I I don't know for sure. It seems like suicide is more common than yeah, the most common cause of death in our industry is from suicide, not from workplace dangers. But so I'm just curious, like it feels to me like there and I'm new to it, like I was saying, but there seems to be fads. Like sometimes it's all about employee ownership. Sometimes and yeah, Eesops got popular and then I hear a lot of downsides. Is it like that where ideas come and they get popular and then a new idea comes and are we or Is there really good ways to set up a business that we know and you should all do it that way? Or it's just kind of cater to your personal situation?
Scott Kimpland: Yeah, you know, we're a very fragmented industry and and to some degree that, you know, creates some challenges for industries, just y you know, literally hundreds of thousands. I I don't know how many contractors are in US, but you if you included
Seth: Right.
Scott Kimpland: all the you know, the mom and pop up up to the you know, the the ENR top one hundred, you're probably looking at hundreds of thousands of contractors and then you've got you know, you've got general contractors, you've got tr you know, every trade, so It's a very fragmented industry. And I and I'm not sure there's any one right or wrong model. but there, you know, there I think there's fundamentals that kind of survive the test of time of, you know, what grows value in a construction firm. And I'll, you know, full disclosure, I I am very much trade contractor focused. In our business, you know, I'm kind of the one of the people that does a lot of work with the trade contractors. We've got other people that spend most of their time with the general contractors, construction managers. really different businesses and the things that drive those businesses are are are uniquely different. but y you know I think there's some things that stand the test of time that that you know were were the right things back in the late eighties when I got into the business that are still fundamental today. But I think there's also trends that kind of come and go through the business based on you know the world changing. And a a a good example, Seth, is when I got into this business late eighties, early nineties, most general contractors at that time actually self-performed a a fair chunk of work, right? They would they would typically they would typically do concrete, they would do some carpentry, framing, but they often did things that were kind of on the critical path of the project. And they were builders. They they understood
Seth: Yeah.
Scott Kimpland: they understood you know managing labor, they understood productivity. But one of the trends that I've just seen over the years is on average, and there's There's obviously exceptions to this. There's still some self-performing general contractors out there. But on average, general contractors, construction managers today, they subcontract everything. They are not builders, right? They manage risk, they manage contracts, they manage schedule. and ultimately the builders end up being, you know, the trade contractors, the people with labor that go out and, you know, site work and you know, the concrete. But it that's changed in the industry. I think that's created some challenges. Because you've got general contractors who have certain things that kind of drive the success of their business. And sometimes I think those are almost maybe at odds with the trade contractors, who, again, as a trade contractor, they they live and die by their ability to manage labor and manage productivity. Right. If they you know, if they estimate on a large project that it's gonna take five million dollars worth of labor to s to produce it, you know, if they end up spending ten, fifteen percent more and spend you know, whatever that is, five million five hundred thousand labor, at the margins we operate, they're in trouble. And so general contractors who don't manage labor don't really understand kind of sometimes how when they do certain things or don't do certain things on project, how it really has impact downstream on the trade contractors because they're they're just in two different they're really different businesses.
Seth: I can imagine a future too. Like I'm in the company I'm with now is very much of the mindset someday AI will design buildings and robots will build them. We don't know how long into the future that is, but I can imagine a closer, more near future where AI does a lot of the designing and robots might do some of the building. but my guess is like consulting kind of goes away because AI can basically consult the owner now, I think. And you could basically have an owner just kind of ideating over a project he wants and get most of it designed and organized. And the team could get organized without much consulting, but there will still be a labor piece, which I think is a subcontractor that that
Scott Kimpland: Absolutely.
Seth: owner maybe has enough intelligence in their tech system to just like contract everything, think about it out loud, use an LLM to create bid docs, send them out to and I think it would go straight to subcontractors in that near future. Do you do you see that happening
Scott Kimpland: don't shrink to some contractors in that near future. Do you do you see that?
Seth: before some other iteration?
Scott Kimpland: Yeah, I I I I tell you what, I'm kind of excited, you know, even as a as a guy, you know, as a baby boomer and kind of later in my career as an industry, I think we have been way behind the curve in terms of adoption and use of technology to improve our business. I I think I think we're in a new time. I think that's changing dramatically. you know, kind of living in the part of the world that you live out and you're on the west coast there, but you see all the businesses popping up the amount of the amount of money and venture capital being spent on technology in the construction industry is just, you know, it's off the chart, which is good. And I I guess like anything there, you know, we're seeing some of that technology having real meaningful input, impact in terms of value proposition. But I I I think you're gonna continue to see in the next five years just transformational change based on technology, not just AI, but but technology and software and And all that stuff is gonna, I think, kinda bring us into a new generation. I think you're always gonna have kind of a a we've always predicted this, and it's true, you're you're gonna end up with kind of a a bifurcated market where on one end you're gonna have sophisticated owners, we call them serial owners, people that have, you know, they're building all the time, right? Every year they have a a capital budget, but you know, think of big hospitals. in and people, you know, universities that are constantly gonna have capital projects going on that are gonna become more and more sophisticated. You're gonna have contractors that operate in that world. I think those owners are gonna drive a lot of the change. But I think you're also gonna have kind of the one-off developers, people that build one building every ten years, they're not you know doing it consistently that are gonna probably stay like the more traditional markets. There's gonna be less adoption of technology, probably less change from kind of the traditional model. That'll end up being kind of a commodity market where people just go in and low bidder gets stuff and you know, kind of the Walmarts of the world. you know, as long as you can be the low cost producer you know and and buy really well and manage productivity well, you can do okay. But I think you're gonna see the market change and you're always gonna have two markets, one on the top end that I think is going to be much more sophisticated. driven with technology, you know, more eager to adopt technology. And you know, in my 39 years in the industry, if I look at really what I would consider to be meaningful changes that have really impacted the industry, it's it's really interesting. Most of those I think have been driven by owners. I I found that
Seth: Mm-hmm.
Scott Kimpland: general contractors you know If an owner's asking them to do something or kind of demanding it, they'll get interested in doing it, but left on their own, they're just typically not going to make those kind of investments. And so y you know, if you look at safety, for example, if you want to see really who's kind of driven safety in our industry, go to the industrial world. People in the Petrochem, you know, heavy industrial, those owners years ago just became just emphatic about, you know, if you're gonna work on our jobs, you know, your safety's gonna be, you know, it's gonna be completely different. So it, you know, I think eventually that started to kind of migrate over a little bit into the commercial and the building world and that kind of stuff. But generally a lot of the trends that I've seen that have been helpful to our industry, they they've they've really started from owners just saying, hey, we're gonna change something or going to do something different. You know, some of the big hospital change right now, you know, out on the West Coast, you've got what, Sutter Healthcare, you've got some
Seth: Sorry.
Scott Kimpland: of these big guys, but they're they're really driving prefabrication, they're really driving
Seth: Mm-hmm.
Scott Kimpland: modularization. But a lot of those trends are kind of starting from some of the big healthcare people who spend billions and billions every year. Yeah.
Seth: Totally. why do you think though, like what my premise of that question was kind of I think the subcon the the trade contractors are gonna sur survive possibly longer than everybody else. Do you agree with me on that?
Scott Kimpland: Yeah, you know, I think they have and it's really being exacerbated right now with all of the the the hyperscale projects and the mega projects that are just consuming
Seth: Right.
Scott Kimpland: all of the you know labor. But
Seth: Yeah.
Scott Kimpland: I I I've always scratched my head wondering why the trade contractors who have the most valuable resource needed to get a project built, people, right? Labor, talent, trades, how they haven't leveraged that.
Seth: Mm-hmm.
Scott Kimpland: y you know, and I think I think that's starting to happen. you know, but to me, the people that have the most the the resource that's in the most demand, the most valuable resource people ultimately at the end of the day should be the ones starting to kind of drive changes and have a little bit more leverage in terms of
Seth: Yeah, is there anybody else on a construction project that if that whole group said we're not gonna do it anymore, it wouldn't happen? You know, like I think you could say trade contractors are that group, right?
Scott Kimpland: Yeah, I I think the challenge though is is like I said, there's literally hundreds of thousands of companies out there and i y you know, I I think there's kind of this owner
Seth: Yeah.
Scott Kimpland: mentality or sometimes a general contractor mentality as well. If they don't want to play by our rules, there'll be somebody, you know, there'll be five people behind that are interested
Seth: Okay.
Scott Kimpland: in talking to us. But I I would say on the higher end, the more sophisticated projects, the more challenging projects, the more we're, you know, big pools of labor needed. I'm starting
Seth: Yeah.
Scott Kimpland: to see the trade contractors begin to kind of you know be a little bit more assertive in terms of what they're gonna do and what they're not gonna do. being selective and what kind of projects they're gonna pursue. heck if you just look at the contracts that they're being asked to sign by general contractors today. You know, most general contractors would tell you they wouldn't sign their own contract, right? And so I I think on the upper end we're starting to see that where some of the more sophisticated trade contractors are becoming a little bit more in control of their own destiny. Right. They're there's certain things they're not gonna do. Here here here's the kind of people we wanna align with, here's the value system that we want to work with. And you know, they're they're starting to have a little bit more leverage and control some of the shots with that, I think. But It if that isn't gonna
Seth: Well we're
Scott Kimpland: happen across the industry, there's always gonna be the commodity buyers that are gonna buy low price,
Seth: Mm.
Scott Kimpland: and there's gonna be the commodity contractors that can only compete on price because they really don't have a compelling value proposition. When you ask them, hey, beyond your price, what what do you bring to the table? They don't have a compelling story. So but the trade contractors that are heavy into innovation, prefab modulation, you know, they have something else to talk about other than their price. And general contractors that are competing on certain types and scales of projects, you know, they're they're interested in listening to that 'cause 'cause that allows them to take some new ideas to the owners and and and kind of sell some different ideas to the owner upstream.
Seth: Yeah, I I worked at a well, I guess I don't know if you'd call it a trade subcontractor. It was a structural glazing EPC company as a PM. And yeah, they would had manufacturing in in China and Turkey of glass and then fabricating steel in Wisconsin. And most almost all of our projects were in San Francisco where I was. but it It did just make me think like the these guys know how to accomplish this. And their differentiator was these are maybe the hugest pieces of glass. Like we're not talking about windows, you know? So it was like they're one of the few people manufacturing that size of glass supported by that kind of steel structure. and it was kind of funny because like when one of those pieces of glass broke, They didn't have very many other people to call. You know what I'm saying?
Scott Kimpland: There you go. There you go.
Seth: And it just it is an advantage if nobody
Scott Kimpland: Yeah,
Seth: else can do that thing.
Scott Kimpland: Yeah, and you you kinda bring up a point, Seth, that just i again, I think it's one of the things that has attracted me to working with the trade contractors and just kind of attracted me to the industry. But trade contractors are incredible problem solvers. You know, at the end of the day, if you look at the quality of plans and specs that they're having to bid from, y you know, it's it's half baked. And on bid day, they're having to kind of bid on that, but ultimately they're having to build something from this. And at the end of the day, you know. the the trade contractors are the ones that are kind of responsible for, hey, you gotta kinda figure this out and make it work in the field. And I I I was having a discussion a couple of weeks ago with a client of mine just about kinda how resilient the trade contractors are and how how they just seem to solve you know somehow they somehow they have to end up getting the project built and they figure it out. But I I we were reflecting back to like March of twenty twenty. I I don't know if you know if I vividly remember kind of when COVID you know, hit. you know, we kinda we kinda had I don't remember the exact day, but it was in, you know, mid-March, but it was like, holy crap. you know, projects are getting shut down. you know, we our business depends on us being traveling and being in our clients' offices a lot of times. Like, holy cow, you can't get on an airplane. How how how is the world gonna survive? Well, within a week, if you think about it at that point, nobody had ever heard of Zoom, nobody had ever heard of Teams. we we had no idea what that was. But within a week you had contractors that had figured out how to get people set up at home. You know, they got their two monitors. they were figuring out how to get people safely onto a job site and distance and meet all those requirements with mask and all the stuff we had do. But y you know, and there were some states that y you know it was it was more impactful, but generally speaking, the industry within a week or two, many of them were back in business and and getting stuff built and hitting schedules and and to me just kind of watching how the industry y you know, we're kind of faced with a problem one day of, you know, what does this mean for all of us? and within a week, people kind of figured out how to navigate that. But I I that just kind of amazed me about our industry of how quick we were able to kind of pivot and you know talk about throwing a rock in the road but you know, again, in most places, and i with the exception with states that almost closed, you know, jobs down, other places, you know, figured out how to move on. I actually had clients that some of the best years they had were during COVID. And I'm like, that's unbelievable. But incredibly
Seth: Totally.
Scott Kimpland: resilient. It you know, and again, that just speaks to kind of just the the grit, the problem solving. You know, trade contractors, they just they figure it out. Somehow they get it done.
Seth: It's so true. And I saw it in practice so many times throughout my career where it's like I'm looking at drawings and then looking at the site and then looking at the materials that just arrived. And I'm like, wait, this isn't even right. Like, how is that gonna do that? And what is gonna happen with that? And then the foreman comes up or one of the laborers just starts putting the thing together and like I'm like, what about these centimeter millimeter tolerances? And they're like Just I mean, not saying they always cut corners or anything, but they have to jerry rig stuff to get these things built. Like people don't understand how hard it is. I don't think architects understand how hard it is to do what they've drawn. You know what I'm saying? It's just crazy.
Scott Kimpland: Complexity you know, complexity of buildings today. you know, just the amount of things that go into a building, the complexity, the technology that's going into building, you know, the MEP systems today are just incredibly sophisticated. You know, smart buildings and and you know, how do you make all that fit? You know, how do you how do you eliminate all the you know the the conflicts and the disruptions
Seth: Yeah.
Scott Kimpland: and and things? But yeah, it's it's a it's an amazing industry in terms of being able to kind of solve problems. And I know
Seth: I spent I spent some time selling paver driveways to people and getting pretty close to the labor of that work too. And so I would be there, I would go knock on people's doors and talk to them about do you want a new driveway? You know, and and I was decent salesperson, but at the end, like it always gets to a point where they're like, Well, tell me how much. And then they go crazy. They're like, $20,000 for my driveway and backyard or whatever. And they're just like I don't like those pavers cost two dollars per square foot or whatever. They look it up at Home Depot and I'm like, do you not understand? Like, we don't just throw the pavers in your driveway. And then I
Scott Kimpland: That was.
Seth: would watch these guys go out there and do the work. And now I'm actually trying to do some hardscaping at my home by myself. And I'm like, dang, I even know how to do this. And it's just funny because I actually thought of it as like instead of a gym. I'm gonna do a bunch of yard work all the time, you know? And and
Scott Kimpland: There you go.
Seth: so I'm purposefully doing as much manual labor as possible. Like I got a tamper and started doing some hand compaction and it's fun, but it was like this experiment for me reminds me back to the times that I would get mad at our laborers for doing something that didn't look right or whatever. And I just have so much more empathy. I bet you have this too. So like I'm kind of approaching this thing from the owner perspective too. I'm I've been in owner's rep roles for the past eight years or so and really want to help the owner. But I think this is the part that I'm excited to talk to you about is I think owner and laborer need to kinda come together. I d you know what I mean?
Scott Kimpland: Yeah. Yeah, I I think one of the other things that's just happened, if you look at a large complex project today, but look at all the different stakeholders that are involved, right? You've got an owner, you could have an owner's rep, you could have a general contractor, you've got an architect, you've got consultants, subconsultants, you know, you've got subcontractors, sub subcontractors. But the number of stakeholders involved in a project, when you start looking at the complexity of communication, the more you add stakeholders, y you can begin to understand, you know, why there's so many communication challenges on a project. But I I know in one of you know maybe the original conversation you and I had offline a few months ago, I remember talking a little bit and and about, hey, you know, if you were kind of in the owner seat, what what you know, what would you think of differently? But one of the things that that I really see, Seth, if I was an owner and again I was building large, sophisticated stuff, if you think about it, I if you were trying to figure out the most productive, the most efficient, the most cost effective, the most functional, the safest way to build something, who would you ask? Right? It's people that do it every day. And one of the problems or challenges that I see right now in this industry is you got an owner, they go out and hire a general contractor and a designer, you know, they do all their work. And classic case, I was with one of my fairly decent sized electrical contractor clients earlier this week. And they were talking about they received a call last Thursday on a fairly significant project that you've been awarded the project, you've got to be out there Monday. And and and my point is as an owner, if I wanna build design and build something as efficiently and effectively and as safely as I could, one of the things I would figure out how to do is to get my key trade contractors on board earlier and deeper back in the design process. I I'm a big proponent of design build, but my experience has been the earlier and deeper your key trade contractors are involved, the more constructible project you're gonna have, you know, the better probably plans and specs you're gonna have. You know, you're not gonna have a designer producing something that the contractor can't build. But I I'm I'm a big fan of You know, anything that gets the key trades, and you can't do this with every trade contractor on the job, but certainly, you know, things like MEP, you know, in many cases, maybe your your interior walls and framing guys, maybe concrete, and certainly anything that's kind of on the the critical path. I I would have them on board early in the design process and being part of how do we do this? Because quite frankly, a lot Of the loss of productivity, the lot of the friction, a lot of the loss of schedule, I think is the con subcontractors, you know, trying to build something off a half bake half-baked set of plans, and they're running back upstream every day trying to get RFIs answered, questions answered of things that aren't even constructible, that they're trying to figure out a workaround or solution to that if they were involved earlier and deeper, I think on average you'd you'd see much lower cost in terms of delivering projects. I think you'd see schedule durations dramatically reduced. but I think there's a disconnect there is we just bring on the people who really understand how to build what you're trying to build. We bring them on at the last minute and then we kind of
Seth: Yeah.
Scott Kimpland: throw into the fire you know, with a half baked set of documents and plans and you know, under live fire. You know, they got the general contractor on them and, you know, somebody from their office is, you know, chasing them about the budget every week and you know making sure they're productive, but you they're throwing in the fire and and then we kind of wonder why projects struggle and don't get built on time. But to me, to me,
Seth: yeah.
Scott Kimpland: I'm a you know, I'm also a big fan of kind of the old model of the master builder where you go out and hire somebody
Seth: Yes.
Scott Kimpland: that can design it, build it, there's one throat to choke, but you don't have all these different stakeholders that are kind of pointing fingers and y you know, blaming the other guy. But I I I'm a big believer in that.
Seth: I have a bunch of being like you said in the
Scott Kimpland: Well, you still
Seth: in the Bay Area, Silicon Valley area. I have friends who many of which went into tech. and I remember back yeah, like I ha I was in CM and I had a bunch of software engineer friends that studied that and left and watched their careers and felt like, man, I'm missing out. Like they're making tons of money. And some of them the especially the ones that were building or working with SaaS companies are now like, Hmm, you know what, Seth, I should go buy a mechanical subcontractor. And I'm like, interesting that you would identify it. I don't want tons of people who have no knowledge of this industry being like, Let me just go buy a trade contractor.
Scott Kimpland: Okay.
Seth: But I do think it is kind of a good business model right now. Do you agree? And and how would you let's say you wanted to do something like that successfully, It's not like just willy-nilly, hey, I come from tech. I'm gonna AI the business administrative side of a mechanical contractor and then yeah, it'll be great. There what what
Scott Kimpland: Ye
Seth: advice would you?
Scott Kimpland: Yeah, I I construction, you know, I I've got an MBA and most of the case studies and most of the coursework in the MBA program was always designed around manufacturers and service kind of businesses. And you know, when you get into construction it's you know, it's different. You know, you're you you're not manufacturing the same F one fifty down a s assembly line that doesn't change every day and y you know, you're you're an environment that's changing. What you're building is different. you know, there's some process and consistency to the process, but it it is a uniquely nuanced kind of business. And you know, you're seeing a lot of private equity get into the business and and quite frankly, it's good for us because we end up we end up having to be a translator between construction
Seth: Yeah.
Scott Kimpland: and private equity. You've got really smart financial minds, but they don't understand the nuance of construction. They don't understand how can you sell a widget on bid day for twenty percent margin and when it's all over, you know, it only came in at an eight percent margin. But th there's you know the the the percent complete accounting and how you recognize earned revenue, those are all kind of unique to our industry. but i you know I've got a lot of examples where smart business people that didn't have construction background, you know, got into the construction business, but they darn sure hired and made sure they had really
Seth: Mm.
Scott Kimpland: good field people that understood how to build things. They really had really good project managers, understood, you know, construction and the nuance of managing it. you know, and as long as you've got kind of the right resources and right skill sets on your team. But I think it's also one of those industries where it looks a lot easier from the outside in. It's a high risk business. And and you know especially these trade contractors with that labor on these, you know, on these big big hyperscale projects, I've got I've got mechanical and electrical clients that are doing hundred million dollar electrical contracts on one project. And you know, for electrical contractor on a hundred million dollar project, he's probably spending somewhere in the million or thirty range of thirty million on field labor. You know, what if it ends up being thirty three million? You know, again, the risk and it it could be somebody else's fault as to why the project runs long or why it's not productive. It you know, it could be a poorly coordinated project by the G C or you know, slow decision making by an owner, but it's a high risk and it's not it's certainly not for for everyone. And again, the people that I see that do consistently well over time, they're kind of unique people. you know, they've got a lot of grit, they're competitive. y you know, they they never, you know, they somehow always figure it out, but it is a it is a truly
Seth: Yeah.
Scott Kimpland: unique breed of character that runs a successful trade contracting business over a long period of time, but they're they're they're unique individuals and they're unicorn. They're unicorns. they are.
Seth: I imagine right. No, I agree with you. I imagine though that it's very easy to get busy and stay busy as a trade contractor. I feel like there's a big distinction between like finding a way to compound wins and value over time instead of just like, man, we've got tons of work and we're bringing in plenty of revenue, but who knows if we're pulling in a profit, you know? Is is that a big distinguishing?
Scott Kimpland: Yeah, I think y you know, and that's kind of the market we try to work with is kind of the higher end. We we want to work with industry leaders and help them pull the market forward. and and you know, we I always say we work with good companies to try to help them become great companies, and then we work with great companies to help them become kind of greater companies. We don't we don't do a lot of work with jacked up companies to fix that's not our business is doing turnaround work. But it seems to me the key is you've gotta find something other than price to compete on. Right. And and it could be speed. it and a lot of times that's what's driving, you know, the prefab kind of world is how do we get a project delivered? You know, somewhere recently I read what one of these average, you know, mega hyperscale data centers, the revenue that they are able to produce in a month when that data center is open, it it's it's an insane amount of money. But As contractors, if you can help them figure out how do we get this project delivered 30 days quicker, or if you're a hospital, how do we get butts in beds 30 days quicker? that's a huge value proposition that people will pay a premium to that. Like you know, Sutter, HCA, these big hospital chains, they can tell you almost to the penny that every day that hospitals open, how much revenue they generate per bed. and so things that You can sell in terms of speed. you know, getting a building dried in, you know, if you're in a cold, wet climate, but prefab exterior building panels and envelope, you know, the ability to get a building roughed in or dried in in a short period of time versus using traditional stick belt that might cause you to be exposed all winter, you can sell that. And you don't necessarily have to compete in a low bid competitive environment. So the contractors that have a genuine value proposition and can can really demonstrate that and really sell that you know they can do well but the contractors who just you know hey I submit a price and if I'm low you know kind of the Walmart model versus the Nordstrom model which to me is kind of the value you could you can play on either end of the market. I've got clients who are successful doing their ones the contractors that get in trouble are the ones that get stuck in the middle.
Seth: Hmm.
Scott Kimpland: And They're really kind of a high value company, but they're trying to sell to the commodity buyer and it
Seth: Right.
Scott Kimpland: doesn't work, or vice versa, they're a low-cost producer and they're trying to sell to the value, you know, people that want to buy value and buy something uniquely different. Those are the people that seem to get in trouble. So you can either be the Nordstroms and you're going to compete on value and you're going to deal with a different set of buyers and segments of the industry, or you can be the Walmart and you can do hard bid, you know, municipal work. school work, whatever, and and it's a different business. In that kind of business, you have to be the most productive guy in your market. You gotta be a low cost producer, just like Walmart, right? Walmart's a very successful company. But if you look at their buying practices, they're all about how do we how do we take cost out of the business? How do we be productive? so how do you negotiate with your vent you know, if you've ever tried to sell something to Walmart, they understand how to buy things at a better rate. Which is kind of a different model than on the value end where you're trying to work off of relationships and predictability and you want certainty of delivery, those kind of things. So there's
Seth: Totally.
Scott Kimpland: clients that operate well at both ends, but when you get caught in the middle, you're stuck.
Seth: I feel like I can think of a bunch more questions, but I kinda wanna give you I wanna I wanna make this an opportunity for me to say, I'm gonna call you in six months or a year and we're gonna do an update. But did I forget like I feel like we kinda covered the the whole like do you see a f do you imagine a future for this industry and how would it look different? I feel like we did talk about that, but is there anything else like you wanna add? I know we discussed things offline and don't wanna forget anything.
Scott Kimpland: Yeah, a a couple things that I see. I I do think the industry is gonna look a lot different you know, five to ten years from now. I think technology, you know, a lot of the y there's some really good technologies out there that have, you know, just like I talk about a value proposition for the trade contractors, I'm seeing the same with technology. There's I I probably get one to two calls a week from somebody that's got some new technology for the construction industry. And it could be AI related, it might be a new ERP. And and and I guess just like anything where there's a lot of money being thrown at it, you know, a bunch of those, when you kind of spend a few minutes kind of digging around saying, all right, what problem are you solving? And what value does that have to the contractor, you eliminate some of them pretty quickly. It it's kind of cool technology, say that's neat, that's interesting, but at the end of the day, it's not really gonna make the contractor more money, it's not gonna reduce their risk profile, it's not gonna deliver a project quicker. So there's a lot of them that I think are are are just, you know, they're burning through other people's money. You know, when you're venture capital or private equity or working on other people's money. But there's some great ones out there that I'm seeing and I had just in anticipation of our discussion, Dusty Robotics. They're one of my favorites, but these you know automated robotic layout for job sites versus doing it the old school way. I've got a number of clients that are using that that will tell you here's how many dollars of layout labor it saves,
Seth: Mm-hmm.
Scott Kimpland: here's the quality issues it eliminates because it's accurate versus human error. but there's you know there's a a bunch of these out here that I'm kind of tracking. in your part of the world, there's a company called Track 3D. If you don't follow, watch these tracked
Seth: Yeah. We're partners now. they're they're part of our workflows too. We have a a c partnership with them so that we can always offer
Scott Kimpland: Track reading, yeah.
Seth: that to owners. It's we want reality capture. I do think that's gonna make a difference.
Scott Kimpland: Yeah, so so one of the things that they are working on is the ability to kind of walk a job site with, you know, 3D camera, using AI and actually quantify what work has been put in place. I will tell you that if they're able to crack that code and be able to do that for mechanical, electrical, framing drywall
Seth: Mm-hmm.
Scott Kimpland: and quantify what's in place, that'll be game changing in terms of a contractor being able to know where they're really at and what's really installed versus Somebody saying, hey, I think we're 62% complete, right? they're gonna know that. And so I I think they've got some groundbreaking stuff. I'm starting to see on the estimating side some AI generated stuff that can do takeoffs. you know, one of the one of the challenges with that, if you talk to experienced estimators, AI can already kind of tell you, you know, what's on a set of plans and quantify that. What it can't quite do really well yet, but I think eventually it'll be trained to is tell you what's not on those plans that you're gonna have to build. And if you miss it, it's gonna kill you. and for mechanical
Seth: Mm-hmm.
Scott Kimpland: guys, that actually is a big pie it's not necessarily what's on the plans. It's what's not that you know you're gonna have to do. So that's I I but I think you're gonna see break off, you know, you you're gonna see you're gonna see there's there's no reason five years from now for people to be sitting there quantifying and counting what's on a digitized set of plans. That just doesn't Make sense to me, right? Yeah.
Seth: That's exactly right. And that's kind of why I'm at Zero RFI, by the way, is like I've done these PM jobs for 20 years now, and I've done a lot of it manually. I started my career actually in forensics, getting document discovery on failed construction projects way before AI. We were just doing like optical character recognition at the time. So I was scanning stuff, getting it into searchable documents, but like I spent my whole career trying to help. Project managed construction projects. And there's a ton of manual data manipulation that's actually very error prone. And I think if the owner can figure out, we can create what I call or Claude Anthropic would call a low temperature deterministic workflow that's not like we're just throwing the drawings in a chat bot and being like, How do you build this thing? No, like we're creating expert in the loop. learnings for an AI system that's really a workflow. It's not just AI, you know, it's we're we're telling it what to to look at in order to interpret these other things. And so we're just our pitches basically. We think owners should have representation that spends less time in front of the computer. Basically a lot of our da our task is turning a P6 schedule and a change order log and RFI log and some stuff from the design team into something that the owner can make good decisions with. Like how do you translate that information into now the owner can make a decision faster with better information? And I think so much of that can be automated from my perspective. If I'm just trying to help the owner make these decisions better and faster, I really should create automated workflows. I shouldn't be Looking at that P6 schedule and then inputting something in some other report because then I'm gonna screw it up. Do you see what I'm saying?
Scott Kimpland: Yeah. Yeah, and and again I'm a little bit biased on the on the subcontractor side. I'm I'm I'm a little further away from the owner side in terms of understanding what works there. But you know on the contractor side, the first thing I look for is will this technology have any impact on saving labor?
Seth: Mm.
Scott Kimpland: you know, smart barrel, pretty simple. That this thing is kind of it uses biomet it's a biometric time clock. You you You sign into the job, it takes a picture of you
Seth: Yeah.
Scott Kimpland: and says, Yep, that's Seth, that's the same Seth that was here yesterday. And by the way, it's 7 06, he's clocking in. and when you leave, and so if you look at you, you know, if you've got a couple hundred people on a job site, and you know, they're nobody shows up exactly at seven and leaves at exactly 3 30 or whatever the time is, right? You've got all these fractions, but over time, there's huge labor dollars in terms of just tracking what time are you actually paying them for versus what's getting written down on a traditional time card or on a Excel spreadsheet, but there's some things like that that have impact on labor. I just I just read an interest somebody on LinkedIn within the last few days was commenting about they just read I thought he said I can't imagine this, but I thought he said 10,000 pages of construction documents. And it's like there there's nobody there there's nobody out there that's gonna read and consume and you know but the ability to kind of go through documents, you know some of the things like document crunch and just some of the things that you can kind of go through all these documents quickly and pull out risk, identify risk, identify conflict, identify problems, identify gray areas, things that somebody is reading and you're paying your attorney to do. I I again I'm I'm starting to see some real you know anything heavily administrative, I think we're gonna be able to take things out. But if we can take field labor out as well, huge opportunities there.
Seth: Thank you for bringing up those two. Episode thirty-three of Constructive has Al Albert from Smart Barrel and I've had Josh Levy and Trent Miskelly from Document Crunch on as well. So if you're interested in hearing more about those startups or tech construction tech companies, not even really
Scott Kimpland: Yeah.
Seth: startups anymore, but go listen to those episodes. love those companies. my gosh. He's the I
Scott Kimpland: I Albert's always fun to listen to, isn't he? Albert's a character. He's a character. I love that guy.
Seth: I meet so many people by doing this where I'm just like I'm i interested in having them on my podcast and then I'm like, my gosh, I wanna be your friend. He's one of those, you know, like
Scott Kimpland: Yeah, Albert is one of the most passionate guys about what he's doing and you know, it's kind kinda hard to replace passion, right? You you don't have
Seth: Yes.
Scott Kimpland: to be a great salesperson as long as you're passionate. People sense that. Another one's sightline, they're out in your part of the world, but in terms of billing, billing technology and you know, they've got some pretty strong value propositions around improving cash flow and collection time. there's certainly one that I looked at, but there's probably six or eight that I'm pretty familiar with that are getting traction and and and and I've got clients that will tell me, Hey, this has been good for our business, right? So yeah,
Seth: That's what you want, yeah.
Scott Kimpland: absolutely.
Seth: Well thanks again, Scott. Like I said, I'm gonna probably bug you in six months or a year and try to get an update and do some more because I think a lot's gonna change too, and you might be a good guy to check in with.
Scott Kimpland: Yeah. Yeah, no, I enjoyed the opportunity, Seth. I can help you in any way. I you know, I love being on these podcasts and you know, just kind of bantering around ideas, even if I don't like you know, I enjoy the conversation, just kind of thinking out loud in terms of where the industry could go or could be. I I just I think there's so much opportunity for us. you know, I don't you know, my vision is I think because we're so fragmented, we'll never all be there, but I do think the leading, you know, the leaders of this industry, you know, we're gonna be much further down the road a year from now with all this AI and technology, but I I'm seeing it, you know, almost on a daily basis now, more adoption of this stuff. So thanks for having me and I I I hope this is valuable
Seth: Well, I'm very glad yeah.
Scott Kimpland: for your listeners.
Seth: I I hope so too. I'm very glad to have you in this industry. Please stick around and thanks for coming on. We'll talk soon.
Seth: trying to be constructive instead of destructive. And I feel like there is a pretty interesting distinction there. There's a lot of people in the world that like to break things apart and break it down. I like to see if I can build it up.
Scott Kimpland: My experience with the family business, it's it's almost binary. It ends up working really, really well or it ends up being a terrible disaster.
Seth: in my book, this all comes down to like the physical things being built. And there's somebody who has to do that. And we got to keep those people happy.
Scott Kimpland: There's still some self-performing general contractors out there. But on average, general contractors, construction managers today, they subcontract everything. They are not builders, right? They manage risk, they manage contracts, they manage schedule. and ultimately the builders end up being, you know, the trade contractors, the people with labor that go out and, you know, site work and you know, the concrete. But it that's changed in the industry. I think that's created some challenges. you can either be the Nordstroms and you're going to compete on value and you're going to deal with a different set of buyers and segments of the industry, or you can be the Walmart and you can do hard bid, you know, municipal work. in my 39 years in the industry, if I look at really what I would consider to be meaningful changes that have really impacted the industry, it's it's really interesting. Most of those I think have been driven by owners.
Seth: kind of approaching this thing from the owner perspective and really want to help the owner. But I think this is the part that I'm excited to talk to you about is I think owner and laborer need to kinda come together. I I'd love for you to tell any version length of your background story that you're willing to, but maybe start from the beginning. Like what was your first exposure to this industry? Did you grow up as a kid liking it? How did you get into it?
Scott Kimpland: Yeah, good good question. I actually grew up right outside of Tampa here, just east of where my office is today, but grew up in a family my dad was an estimator for a masonry contracting firm for a long, long time. Kinda got exposed to the industry through that. ended up going ended up going to college right here at the University of South Florida in Tampa. I got out in like nineteen eighty four, my undergraduate degree in business, and looked around at the jobs my friends were getting. And they weren't you know, they weren't too inspiring. The the the economy wasn't great that time. So I actually went and hid in graduate school for a few years and got my MBA at University of South Florida. got out. My my dad was smart enough not to hire me. I was smart enough not to go to work for my dad, but I love being around the industry. you know, it it it it The thing that always intrigued me about it, Seth, was it's one of the few industries now that kind of builds something of lasting value that 20, 30 years from now you can kind of drive by. My dad would drive by and point to things that he built 10 years ago and you know, very proud of it, but it has kind of lasting value compared to a lot of things that we learned in business school, you know, like financial products and you know, kind of smoke and mirror kind of businesses that are maybe service related, but they didn't create anything of real tangible value. And right out of graduate school, I kind of stumbled into a couple of my classmates were interviewing with FMI at the time. ran into one of them one evening at the mall, I think, and said, Hey, hey, if you have an interview to talk to these guys, you should talk to them. So I got hooked up with FMI eighty seven. interviewed with them, came to work for them, and at the time we were a pretty small organization. and at the time our model was a little bit different. We would kind of hire freshly minted MBAs like myself, not a lot of industry experience, but we'd kind of staple them to the hip of one of our senior people and they would travel around and one day they might be helping a contractor with strategic kind of stuff. The next day they might be working on operational things. you know, you might be helping them with compensation. So you were kind of a generalist, a a business generalist. And so I kind of got some broad exposure and started to learn a little bit about the construction industry and the nuance of contracting and construction and how it's you know a little bit different kind of business. So that was kinda how I got my starts with FMI in nineteen eighty seven.
Seth: Before you move on from the early history, tell me about like you just briefly mentioned, didn't go into the family business exactly, like going to work for your dad. And I know you probably have stories about that too, about why you're grateful you never did that in the first place. But talk about that, like family businesses in our industry. Do you think they're I'm sure it's a mixed bag, but what's your general opinion about keeping things in the family?
Scott Kimpland: Yeah, my my my dad actually worked for somebody else, so it wasn't his business. but with that said, a lot of our clients, Seth, I'm I I'm guessing probably forty percent of my clients are family businesses somehow. Matter
Seth: Right.
Scott Kimpland: of fact, I was just with a contractor this week. dad started the business probably back in the sixties, seventies. the Tucsons have have kind of come in and taken over the business, but we have an opportunity to work for a lot of family businesses. My experience with the family business, it's it's almost binary. It ends up working really, really well or it ends up being a terrible disaster. And and
Seth: Yeah.
Scott Kimpland: so I've got a lot of opinions and insights and war stories from family businesses, but you know, in some cases yeah.
Seth: I hope we do also get to kind of contrast that with like maybe the other end of that pendulum is like private equity just kinda going crazy and creating chaos in MA. I don't know what which side of that pendulum you prefer. Investors doing their bottom line driven thing or families getting into drama, you know?
Scott Kimpland: Yeah, yeah, there's definitely advantage pros and cons of each and it's always an interesting dynamic when there's two siblings in the business. that's usually a unique dynamic. usually one of is, you know, really running and controlling having an impact on the business. The other one's oftentimes along for the ride. But and it it it can work it can it it can work really well. I've seen second generation, third generation actually take businesses to the next level and I've seen you know, run it in the ground. So it's a it's a pretty broad spectrum of experience there. So
Seth: Okay, again, you I mean, you you got to FMI so early in your career. I I hate doing this because it makes it seem like I'm aging you, but I did notice you say you graduated your bachelor's in 84, and I'm like,
Scott Kimpland: Yeah.
Seth: you started your career when I was born, which is kind of a cool thing for me. Like, I was born in
Scott Kimpland: Yeah.
Seth: eighty-four. I spent a while getting through my education, so 22 years before I got into the industry after that. But it just makes me think like, Generationally, that's kind of cool to me. You were you were getting started on your career. I was being born. you're ahead of me like by 22 years. But in any case, I kind of want you to talk about you've been there your whole career now. and what is FMI? Just for people who maybe have never heard of it, it seems like a pretty broad scope of services they can offer. So tell me about it.
Scott Kimpland: Yeah, it is. And and it it's interesting. you know, I think our generation and actually, you know, my parents' generation, it was more likely somebody would go to work somewhere and have a thirty five, forty year career there. My generation, probably a little rare, I will tell you at FMI, there's a number of people like me that have kind of come and spent their entire career here. We we kinda joke that once you've been here five years, you you're pretty much unemployable anywhere else. really unique company. But a a little bit about the company from a high level, and I'll try to make this as as quick as I can, but we really there's two sides to our business. We're we're based out of Raleigh, North Carolina. I'm actually in our Tampa office. We have an office in Houston and an office in Denver. Then we have we have a handful or so of kind of remote employees that kind of sprinkle throughout the country that kind of report back to one of those offices. But we we kind of look at our business, Seth, really uniquely. So one side of our business is our FMI capital advisors. So think of MA activity, anything transactional,
Seth: Okay.
Scott Kimpland: buying, selling, and it could be buying or selling with private equity, it could involve a strategic buyer, it could involve a sale to a group of, you know, four or five internal managers or leaders. or today, you know, the the the hot model right now is the eSOP. But anything to do with transfer of stock ownership, that group gets involved with. Generally, that side of our business is is typically fifty percent of our revenue or so. They kind of continue to be about half of our business. Right now, I would say most of their work is seller rep. you know, selling, representing sellers, people that are exiting the business, you know, guys like myself that are baby boomers that have been in it for a while, they're looking for an exit, you know, the buyers are strategic. You mentioned private equity, you know, spending a ton of money in the sector right now. And then ESOPs have been pretty hot. So that group kind of does those kind of transactional kind of things. And then the side of the business I'm on is our consulting business. And think of kind of traditional management consulting. So we've got, you know, strategic strategy, strategic planning. They're kind of married up with a pretty robust research group. We do a lot of industry research. You might read some of our publications that we put out periodically on construction spending and trends. But that group primarily works with people in the built environment. Most of our clients are contractors, but we do a fair amount of work in the building products. Anybody sells their products to contractors, do a little bit of work in AE space. That's not a big sector of where we operate. I'm in a group. Called the performance practice. Most of what we're doing in there is operational improvement. So working with typically
Seth: Mm.
Scott Kimpland: very labor intensive, self-performing trade contractors, helping them get better at managing the largest controllable cost in their business, which happens to be labor, you know, and kind of as labor goes, their business goes. We've got a group that does compensation consulting, designing incentive comp plans. you know, think of salary benchmarking. benefits, benchmarking, anything related to compensation or benefits. And then the third kind of leg of the stool is our leadership and organizational development. So soft skills, leader development, training, you know, organizational development kind of work. They do a fair amount of management succession, helping people get, you know, figure out who's the next generation of leaders to run this business, helping current leaders get that next group developed and Ready to kind of run the business going forward, not the transactional piece of ownership, but more who's going to be the next generation of senior leaders in the business. They do a lot of that kind of work. And then stacked on all of that, we've got about 40 active peer groups of various trades. You know, think of six to eight non-competing companies, very similar, maybe trade from different parts of the country, get together several times a year, share everything from financial performance to best practices. And then Most of the senior people like myself at kind of a shareholder or director level, we're most of us are involved in a number of boards. I'm I'm currently on four ESOP boards where I've got kind of a fiduciary role, and then I'm on three or four just pure advisory boards where I sit on the board directors, but I don't really have a vote. So you know, that's kind of a a high level
Seth: Surely.
Scott Kimpland: yeah, high level summary of what we do and different things that we do between that. You know, we're not builders, we don't get into the nuts and bolts, we're not technical. we really kind of get into more of the management and leadership and understanding, you know, what really drives and grows what what really drives value in a construction firm and helping companies, helping our clients really grow the value of their firms is really so you know, we we think of it kind of as a life cycle. We can help you if you want to get into the business through acquisition. we can help you grow value through our consulting services. And then on the tail end, when you're ready to exit the business, again we go back to our you know investment banking side of the business and they can help you exit the business. So that's kind of in a big picture how we kind of envision you know the life cycle of a contractor and how we have a relationship with them kind of through that whole life cycle.
Seth: Yeah, again, I'm I'm relatively new even to the MA side of construction and the money side of it. I've been the guy in job trailers with the computer, basically. I'm the PM, like
Scott Kimpland: Yeah.
Seth: not the laborer, but the guy that's out on site just not swinging any hammers. but been more in those like higher level business discussions lately. So it's endlessly interesting to me how companies are built and organized in this industry, maybe especially. The actual builders. Something I think about a lot is there's a lot of people in our industry who aren't designing or building buildings anymore. And that's a problem, in my opinion. sure, I I I just think we can work on it. But in any case,
Scott Kimpland: Yeah.
Seth: the way people organize businesses, especially like a con a general contractor or somebody who has the labor piece of this industry, like. How should those companies be set up to keep those people happy? Cause in my book, this all comes down to like the physical things being built. And there's somebody who has to do that. And we got to keep those people happy. And I'm hearing, I I don't know for sure. It seems like suicide is more common than yeah, the most common cause of death in our industry is from suicide, not from workplace dangers. But so I'm just curious, like it feels to me like there and I'm new to it, like I was saying, but there seems to be fads. Like sometimes it's all about employee ownership. Sometimes and yeah, Eesops got popular and then I hear a lot of downsides. Is it like that where ideas come and they get popular and then a new idea comes and are we or Is there really good ways to set up a business that we know and you should all do it that way? Or it's just kind of cater to your personal situation?
Scott Kimpland: Yeah, you know, we're a very fragmented industry and and to some degree that, you know, creates some challenges for industries, just y you know, literally hundreds of thousands. I I don't know how many contractors are in US, but you if you included
Seth: Right.
Scott Kimpland: all the you know, the mom and pop up up to the you know, the the ENR top one hundred, you're probably looking at hundreds of thousands of contractors and then you've got you know, you've got general contractors, you've got tr you know, every trade, so It's a very fragmented industry. And I and I'm not sure there's any one right or wrong model. but there, you know, there I think there's fundamentals that kind of survive the test of time of, you know, what grows value in a construction firm. And I'll, you know, full disclosure, I I am very much trade contractor focused. In our business, you know, I'm kind of the one of the people that does a lot of work with the trade contractors. We've got other people that spend most of their time with the general contractors, construction managers. really different businesses and the things that drive those businesses are are are uniquely different. but y you know I think there's some things that stand the test of time that that you know were were the right things back in the late eighties when I got into the business that are still fundamental today. But I think there's also trends that kind of come and go through the business based on you know the world changing. And a a a good example, Seth, is when I got into this business late eighties, early nineties, most general contractors at that time actually self-performed a a fair chunk of work, right? They would they would typically they would typically do concrete, they would do some carpentry, framing, but they often did things that were kind of on the critical path of the project. And they were builders. They they understood
Seth: Yeah.
Scott Kimpland: they understood you know managing labor, they understood productivity. But one of the trends that I've just seen over the years is on average, and there's There's obviously exceptions to this. There's still some self-performing general contractors out there. But on average, general contractors, construction managers today, they subcontract everything. They are not builders, right? They manage risk, they manage contracts, they manage schedule. and ultimately the builders end up being, you know, the trade contractors, the people with labor that go out and, you know, site work and you know, the concrete. But it that's changed in the industry. I think that's created some challenges. Because you've got general contractors who have certain things that kind of drive the success of their business. And sometimes I think those are almost maybe at odds with the trade contractors, who, again, as a trade contractor, they they live and die by their ability to manage labor and manage productivity. Right. If they you know, if they estimate on a large project that it's gonna take five million dollars worth of labor to s to produce it, you know, if they end up spending ten, fifteen percent more and spend you know, whatever that is, five million five hundred thousand labor, at the margins we operate, they're in trouble. And so general contractors who don't manage labor don't really understand kind of sometimes how when they do certain things or don't do certain things on project, how it really has impact downstream on the trade contractors because they're they're just in two different they're really different businesses.
Seth: I can imagine a future too. Like I'm in the company I'm with now is very much of the mindset someday AI will design buildings and robots will build them. We don't know how long into the future that is, but I can imagine a closer, more near future where AI does a lot of the designing and robots might do some of the building. but my guess is like consulting kind of goes away because AI can basically consult the owner now, I think. And you could basically have an owner just kind of ideating over a project he wants and get most of it designed and organized. And the team could get organized without much consulting, but there will still be a labor piece, which I think is a subcontractor that that
Scott Kimpland: Absolutely.
Seth: owner maybe has enough intelligence in their tech system to just like contract everything, think about it out loud, use an LLM to create bid docs, send them out to and I think it would go straight to subcontractors in that near future. Do you do you see that happening
Scott Kimpland: don't shrink to some contractors in that near future. Do you do you see that?
Seth: before some other iteration?
Scott Kimpland: Yeah, I I I I tell you what, I'm kind of excited, you know, even as a as a guy, you know, as a baby boomer and kind of later in my career as an industry, I think we have been way behind the curve in terms of adoption and use of technology to improve our business. I I think I think we're in a new time. I think that's changing dramatically. you know, kind of living in the part of the world that you live out and you're on the west coast there, but you see all the businesses popping up the amount of the amount of money and venture capital being spent on technology in the construction industry is just, you know, it's off the chart, which is good. And I I guess like anything there, you know, we're seeing some of that technology having real meaningful input, impact in terms of value proposition. But I I I think you're gonna continue to see in the next five years just transformational change based on technology, not just AI, but but technology and software and And all that stuff is gonna, I think, kinda bring us into a new generation. I think you're always gonna have kind of a a we've always predicted this, and it's true, you're you're gonna end up with kind of a a bifurcated market where on one end you're gonna have sophisticated owners, we call them serial owners, people that have, you know, they're building all the time, right? Every year they have a a capital budget, but you know, think of big hospitals. in and people, you know, universities that are constantly gonna have capital projects going on that are gonna become more and more sophisticated. You're gonna have contractors that operate in that world. I think those owners are gonna drive a lot of the change. But I think you're also gonna have kind of the one-off developers, people that build one building every ten years, they're not you know doing it consistently that are gonna probably stay like the more traditional markets. There's gonna be less adoption of technology, probably less change from kind of the traditional model. That'll end up being kind of a commodity market where people just go in and low bidder gets stuff and you know, kind of the Walmarts of the world. you know, as long as you can be the low cost producer you know and and buy really well and manage productivity well, you can do okay. But I think you're gonna see the market change and you're always gonna have two markets, one on the top end that I think is going to be much more sophisticated. driven with technology, you know, more eager to adopt technology. And you know, in my 39 years in the industry, if I look at really what I would consider to be meaningful changes that have really impacted the industry, it's it's really interesting. Most of those I think have been driven by owners. I I found that
Seth: Mm-hmm.
Scott Kimpland: general contractors you know If an owner's asking them to do something or kind of demanding it, they'll get interested in doing it, but left on their own, they're just typically not going to make those kind of investments. And so y you know, if you look at safety, for example, if you want to see really who's kind of driven safety in our industry, go to the industrial world. People in the Petrochem, you know, heavy industrial, those owners years ago just became just emphatic about, you know, if you're gonna work on our jobs, you know, your safety's gonna be, you know, it's gonna be completely different. So it, you know, I think eventually that started to kind of migrate over a little bit into the commercial and the building world and that kind of stuff. But generally a lot of the trends that I've seen that have been helpful to our industry, they they've they've really started from owners just saying, hey, we're gonna change something or going to do something different. You know, some of the big hospital change right now, you know, out on the West Coast, you've got what, Sutter Healthcare, you've got some
Seth: Sorry.
Scott Kimpland: of these big guys, but they're they're really driving prefabrication, they're really driving
Seth: Mm-hmm.
Scott Kimpland: modularization. But a lot of those trends are kind of starting from some of the big healthcare people who spend billions and billions every year. Yeah.
Seth: Totally. why do you think though, like what my premise of that question was kind of I think the subcon the the trade contractors are gonna sur survive possibly longer than everybody else. Do you agree with me on that?
Scott Kimpland: Yeah, you know, I think they have and it's really being exacerbated right now with all of the the the hyperscale projects and the mega projects that are just consuming
Seth: Right.
Scott Kimpland: all of the you know labor. But
Seth: Yeah.
Scott Kimpland: I I I've always scratched my head wondering why the trade contractors who have the most valuable resource needed to get a project built, people, right? Labor, talent, trades, how they haven't leveraged that.
Seth: Mm-hmm.
Scott Kimpland: y you know, and I think I think that's starting to happen. you know, but to me, the people that have the most the the resource that's in the most demand, the most valuable resource people ultimately at the end of the day should be the ones starting to kind of drive changes and have a little bit more leverage in terms of
Seth: Yeah, is there anybody else on a construction project that if that whole group said we're not gonna do it anymore, it wouldn't happen? You know, like I think you could say trade contractors are that group, right?
Scott Kimpland: Yeah, I I think the challenge though is is like I said, there's literally hundreds of thousands of companies out there and i y you know, I I think there's kind of this owner
Seth: Yeah.
Scott Kimpland: mentality or sometimes a general contractor mentality as well. If they don't want to play by our rules, there'll be somebody, you know, there'll be five people behind that are interested
Seth: Okay.
Scott Kimpland: in talking to us. But I I would say on the higher end, the more sophisticated projects, the more challenging projects, the more we're, you know, big pools of labor needed. I'm starting
Seth: Yeah.
Scott Kimpland: to see the trade contractors begin to kind of you know be a little bit more assertive in terms of what they're gonna do and what they're not gonna do. being selective and what kind of projects they're gonna pursue. heck if you just look at the contracts that they're being asked to sign by general contractors today. You know, most general contractors would tell you they wouldn't sign their own contract, right? And so I I think on the upper end we're starting to see that where some of the more sophisticated trade contractors are becoming a little bit more in control of their own destiny. Right. They're there's certain things they're not gonna do. Here here here's the kind of people we wanna align with, here's the value system that we want to work with. And you know, they're they're starting to have a little bit more leverage and control some of the shots with that, I think. But It if that isn't gonna
Seth: Well we're
Scott Kimpland: happen across the industry, there's always gonna be the commodity buyers that are gonna buy low price,
Seth: Mm.
Scott Kimpland: and there's gonna be the commodity contractors that can only compete on price because they really don't have a compelling value proposition. When you ask them, hey, beyond your price, what what do you bring to the table? They don't have a compelling story. So but the trade contractors that are heavy into innovation, prefab modulation, you know, they have something else to talk about other than their price. And general contractors that are competing on certain types and scales of projects, you know, they're they're interested in listening to that 'cause 'cause that allows them to take some new ideas to the owners and and and kind of sell some different ideas to the owner upstream.
Seth: Yeah, I I worked at a well, I guess I don't know if you'd call it a trade subcontractor. It was a structural glazing EPC company as a PM. And yeah, they would had manufacturing in in China and Turkey of glass and then fabricating steel in Wisconsin. And most almost all of our projects were in San Francisco where I was. but it It did just make me think like the these guys know how to accomplish this. And their differentiator was these are maybe the hugest pieces of glass. Like we're not talking about windows, you know? So it was like they're one of the few people manufacturing that size of glass supported by that kind of steel structure. and it was kind of funny because like when one of those pieces of glass broke, They didn't have very many other people to call. You know what I'm saying?
Scott Kimpland: There you go. There you go.
Seth: And it just it is an advantage if nobody
Scott Kimpland: Yeah,
Seth: else can do that thing.
Scott Kimpland: Yeah, and you you kinda bring up a point, Seth, that just i again, I think it's one of the things that has attracted me to working with the trade contractors and just kind of attracted me to the industry. But trade contractors are incredible problem solvers. You know, at the end of the day, if you look at the quality of plans and specs that they're having to bid from, y you know, it's it's half baked. And on bid day, they're having to kind of bid on that, but ultimately they're having to build something from this. And at the end of the day, you know. the the trade contractors are the ones that are kind of responsible for, hey, you gotta kinda figure this out and make it work in the field. And I I I was having a discussion a couple of weeks ago with a client of mine just about kinda how resilient the trade contractors are and how how they just seem to solve you know somehow they somehow they have to end up getting the project built and they figure it out. But I I we were reflecting back to like March of twenty twenty. I I don't know if you know if I vividly remember kind of when COVID you know, hit. you know, we kinda we kinda had I don't remember the exact day, but it was in, you know, mid-March, but it was like, holy crap. you know, projects are getting shut down. you know, we our business depends on us being traveling and being in our clients' offices a lot of times. Like, holy cow, you can't get on an airplane. How how how is the world gonna survive? Well, within a week, if you think about it at that point, nobody had ever heard of Zoom, nobody had ever heard of Teams. we we had no idea what that was. But within a week you had contractors that had figured out how to get people set up at home. You know, they got their two monitors. they were figuring out how to get people safely onto a job site and distance and meet all those requirements with mask and all the stuff we had do. But y you know, and there were some states that y you know it was it was more impactful, but generally speaking, the industry within a week or two, many of them were back in business and and getting stuff built and hitting schedules and and to me just kind of watching how the industry y you know, we're kind of faced with a problem one day of, you know, what does this mean for all of us? and within a week, people kind of figured out how to navigate that. But I I that just kind of amazed me about our industry of how quick we were able to kind of pivot and you know talk about throwing a rock in the road but you know, again, in most places, and i with the exception with states that almost closed, you know, jobs down, other places, you know, figured out how to move on. I actually had clients that some of the best years they had were during COVID. And I'm like, that's unbelievable. But incredibly
Seth: Totally.
Scott Kimpland: resilient. It you know, and again, that just speaks to kind of just the the grit, the problem solving. You know, trade contractors, they just they figure it out. Somehow they get it done.
Seth: It's so true. And I saw it in practice so many times throughout my career where it's like I'm looking at drawings and then looking at the site and then looking at the materials that just arrived. And I'm like, wait, this isn't even right. Like, how is that gonna do that? And what is gonna happen with that? And then the foreman comes up or one of the laborers just starts putting the thing together and like I'm like, what about these centimeter millimeter tolerances? And they're like Just I mean, not saying they always cut corners or anything, but they have to jerry rig stuff to get these things built. Like people don't understand how hard it is. I don't think architects understand how hard it is to do what they've drawn. You know what I'm saying? It's just crazy.
Scott Kimpland: Complexity you know, complexity of buildings today. you know, just the amount of things that go into a building, the complexity, the technology that's going into building, you know, the MEP systems today are just incredibly sophisticated. You know, smart buildings and and you know, how do you make all that fit? You know, how do you how do you eliminate all the you know the the conflicts and the disruptions
Seth: Yeah.
Scott Kimpland: and and things? But yeah, it's it's a it's an amazing industry in terms of being able to kind of solve problems. And I know
Seth: I spent I spent some time selling paver driveways to people and getting pretty close to the labor of that work too. And so I would be there, I would go knock on people's doors and talk to them about do you want a new driveway? You know, and and I was decent salesperson, but at the end, like it always gets to a point where they're like, Well, tell me how much. And then they go crazy. They're like, $20,000 for my driveway and backyard or whatever. And they're just like I don't like those pavers cost two dollars per square foot or whatever. They look it up at Home Depot and I'm like, do you not understand? Like, we don't just throw the pavers in your driveway. And then I
Scott Kimpland: That was.
Seth: would watch these guys go out there and do the work. And now I'm actually trying to do some hardscaping at my home by myself. And I'm like, dang, I even know how to do this. And it's just funny because I actually thought of it as like instead of a gym. I'm gonna do a bunch of yard work all the time, you know? And and
Scott Kimpland: There you go.
Seth: so I'm purposefully doing as much manual labor as possible. Like I got a tamper and started doing some hand compaction and it's fun, but it was like this experiment for me reminds me back to the times that I would get mad at our laborers for doing something that didn't look right or whatever. And I just have so much more empathy. I bet you have this too. So like I'm kind of approaching this thing from the owner perspective too. I'm I've been in owner's rep roles for the past eight years or so and really want to help the owner. But I think this is the part that I'm excited to talk to you about is I think owner and laborer need to kinda come together. I d you know what I mean?
Scott Kimpland: Yeah. Yeah, I I think one of the other things that's just happened, if you look at a large complex project today, but look at all the different stakeholders that are involved, right? You've got an owner, you could have an owner's rep, you could have a general contractor, you've got an architect, you've got consultants, subconsultants, you know, you've got subcontractors, sub subcontractors. But the number of stakeholders involved in a project, when you start looking at the complexity of communication, the more you add stakeholders, y you can begin to understand, you know, why there's so many communication challenges on a project. But I I know in one of you know maybe the original conversation you and I had offline a few months ago, I remember talking a little bit and and about, hey, you know, if you were kind of in the owner seat, what what you know, what would you think of differently? But one of the things that that I really see, Seth, if I was an owner and again I was building large, sophisticated stuff, if you think about it, I if you were trying to figure out the most productive, the most efficient, the most cost effective, the most functional, the safest way to build something, who would you ask? Right? It's people that do it every day. And one of the problems or challenges that I see right now in this industry is you got an owner, they go out and hire a general contractor and a designer, you know, they do all their work. And classic case, I was with one of my fairly decent sized electrical contractor clients earlier this week. And they were talking about they received a call last Thursday on a fairly significant project that you've been awarded the project, you've got to be out there Monday. And and and my point is as an owner, if I wanna build design and build something as efficiently and effectively and as safely as I could, one of the things I would figure out how to do is to get my key trade contractors on board earlier and deeper back in the design process. I I'm a big proponent of design build, but my experience has been the earlier and deeper your key trade contractors are involved, the more constructible project you're gonna have, you know, the better probably plans and specs you're gonna have. You know, you're not gonna have a designer producing something that the contractor can't build. But I I'm I'm a big fan of You know, anything that gets the key trades, and you can't do this with every trade contractor on the job, but certainly, you know, things like MEP, you know, in many cases, maybe your your interior walls and framing guys, maybe concrete, and certainly anything that's kind of on the the critical path. I I would have them on board early in the design process and being part of how do we do this? Because quite frankly, a lot Of the loss of productivity, the lot of the friction, a lot of the loss of schedule, I think is the con subcontractors, you know, trying to build something off a half bake half-baked set of plans, and they're running back upstream every day trying to get RFIs answered, questions answered of things that aren't even constructible, that they're trying to figure out a workaround or solution to that if they were involved earlier and deeper, I think on average you'd you'd see much lower cost in terms of delivering projects. I think you'd see schedule durations dramatically reduced. but I think there's a disconnect there is we just bring on the people who really understand how to build what you're trying to build. We bring them on at the last minute and then we kind of
Seth: Yeah.
Scott Kimpland: throw into the fire you know, with a half baked set of documents and plans and you know, under live fire. You know, they got the general contractor on them and, you know, somebody from their office is, you know, chasing them about the budget every week and you know making sure they're productive, but you they're throwing in the fire and and then we kind of wonder why projects struggle and don't get built on time. But to me, to me,
Seth: yeah.
Scott Kimpland: I'm a you know, I'm also a big fan of kind of the old model of the master builder where you go out and hire somebody
Seth: Yes.
Scott Kimpland: that can design it, build it, there's one throat to choke, but you don't have all these different stakeholders that are kind of pointing fingers and y you know, blaming the other guy. But I I I'm a big believer in that.
Seth: I have a bunch of being like you said in the
Scott Kimpland: Well, you still
Seth: in the Bay Area, Silicon Valley area. I have friends who many of which went into tech. and I remember back yeah, like I ha I was in CM and I had a bunch of software engineer friends that studied that and left and watched their careers and felt like, man, I'm missing out. Like they're making tons of money. And some of them the especially the ones that were building or working with SaaS companies are now like, Hmm, you know what, Seth, I should go buy a mechanical subcontractor. And I'm like, interesting that you would identify it. I don't want tons of people who have no knowledge of this industry being like, Let me just go buy a trade contractor.
Scott Kimpland: Okay.
Seth: But I do think it is kind of a good business model right now. Do you agree? And and how would you let's say you wanted to do something like that successfully, It's not like just willy-nilly, hey, I come from tech. I'm gonna AI the business administrative side of a mechanical contractor and then yeah, it'll be great. There what what
Scott Kimpland: Ye
Seth: advice would you?
Scott Kimpland: Yeah, I I construction, you know, I I've got an MBA and most of the case studies and most of the coursework in the MBA program was always designed around manufacturers and service kind of businesses. And you know, when you get into construction it's you know, it's different. You know, you're you you're not manufacturing the same F one fifty down a s assembly line that doesn't change every day and y you know, you're you're an environment that's changing. What you're building is different. you know, there's some process and consistency to the process, but it it is a uniquely nuanced kind of business. And you know, you're seeing a lot of private equity get into the business and and quite frankly, it's good for us because we end up we end up having to be a translator between construction
Seth: Yeah.
Scott Kimpland: and private equity. You've got really smart financial minds, but they don't understand the nuance of construction. They don't understand how can you sell a widget on bid day for twenty percent margin and when it's all over, you know, it only came in at an eight percent margin. But th there's you know the the the percent complete accounting and how you recognize earned revenue, those are all kind of unique to our industry. but i you know I've got a lot of examples where smart business people that didn't have construction background, you know, got into the construction business, but they darn sure hired and made sure they had really
Seth: Mm.
Scott Kimpland: good field people that understood how to build things. They really had really good project managers, understood, you know, construction and the nuance of managing it. you know, and as long as you've got kind of the right resources and right skill sets on your team. But I think it's also one of those industries where it looks a lot easier from the outside in. It's a high risk business. And and you know especially these trade contractors with that labor on these, you know, on these big big hyperscale projects, I've got I've got mechanical and electrical clients that are doing hundred million dollar electrical contracts on one project. And you know, for electrical contractor on a hundred million dollar project, he's probably spending somewhere in the million or thirty range of thirty million on field labor. You know, what if it ends up being thirty three million? You know, again, the risk and it it could be somebody else's fault as to why the project runs long or why it's not productive. It you know, it could be a poorly coordinated project by the G C or you know, slow decision making by an owner, but it's a high risk and it's not it's certainly not for for everyone. And again, the people that I see that do consistently well over time, they're kind of unique people. you know, they've got a lot of grit, they're competitive. y you know, they they never, you know, they somehow always figure it out, but it is a it is a truly
Seth: Yeah.
Scott Kimpland: unique breed of character that runs a successful trade contracting business over a long period of time, but they're they're they're unique individuals and they're unicorn. They're unicorns. they are.
Seth: I imagine right. No, I agree with you. I imagine though that it's very easy to get busy and stay busy as a trade contractor. I feel like there's a big distinction between like finding a way to compound wins and value over time instead of just like, man, we've got tons of work and we're bringing in plenty of revenue, but who knows if we're pulling in a profit, you know? Is is that a big distinguishing?
Scott Kimpland: Yeah, I think y you know, and that's kind of the market we try to work with is kind of the higher end. We we want to work with industry leaders and help them pull the market forward. and and you know, we I always say we work with good companies to try to help them become great companies, and then we work with great companies to help them become kind of greater companies. We don't we don't do a lot of work with jacked up companies to fix that's not our business is doing turnaround work. But it seems to me the key is you've gotta find something other than price to compete on. Right. And and it could be speed. it and a lot of times that's what's driving, you know, the prefab kind of world is how do we get a project delivered? You know, somewhere recently I read what one of these average, you know, mega hyperscale data centers, the revenue that they are able to produce in a month when that data center is open, it it's it's an insane amount of money. But As contractors, if you can help them figure out how do we get this project delivered 30 days quicker, or if you're a hospital, how do we get butts in beds 30 days quicker? that's a huge value proposition that people will pay a premium to that. Like you know, Sutter, HCA, these big hospital chains, they can tell you almost to the penny that every day that hospitals open, how much revenue they generate per bed. and so things that You can sell in terms of speed. you know, getting a building dried in, you know, if you're in a cold, wet climate, but prefab exterior building panels and envelope, you know, the ability to get a building roughed in or dried in in a short period of time versus using traditional stick belt that might cause you to be exposed all winter, you can sell that. And you don't necessarily have to compete in a low bid competitive environment. So the contractors that have a genuine value proposition and can can really demonstrate that and really sell that you know they can do well but the contractors who just you know hey I submit a price and if I'm low you know kind of the Walmart model versus the Nordstrom model which to me is kind of the value you could you can play on either end of the market. I've got clients who are successful doing their ones the contractors that get in trouble are the ones that get stuck in the middle.
Seth: Hmm.
Scott Kimpland: And They're really kind of a high value company, but they're trying to sell to the commodity buyer and it
Seth: Right.
Scott Kimpland: doesn't work, or vice versa, they're a low-cost producer and they're trying to sell to the value, you know, people that want to buy value and buy something uniquely different. Those are the people that seem to get in trouble. So you can either be the Nordstroms and you're going to compete on value and you're going to deal with a different set of buyers and segments of the industry, or you can be the Walmart and you can do hard bid, you know, municipal work. school work, whatever, and and it's a different business. In that kind of business, you have to be the most productive guy in your market. You gotta be a low cost producer, just like Walmart, right? Walmart's a very successful company. But if you look at their buying practices, they're all about how do we how do we take cost out of the business? How do we be productive? so how do you negotiate with your vent you know, if you've ever tried to sell something to Walmart, they understand how to buy things at a better rate. Which is kind of a different model than on the value end where you're trying to work off of relationships and predictability and you want certainty of delivery, those kind of things. So there's
Seth: Totally.
Scott Kimpland: clients that operate well at both ends, but when you get caught in the middle, you're stuck.
Seth: I feel like I can think of a bunch more questions, but I kinda wanna give you I wanna I wanna make this an opportunity for me to say, I'm gonna call you in six months or a year and we're gonna do an update. But did I forget like I feel like we kinda covered the the whole like do you see a f do you imagine a future for this industry and how would it look different? I feel like we did talk about that, but is there anything else like you wanna add? I know we discussed things offline and don't wanna forget anything.
Scott Kimpland: Yeah, a a couple things that I see. I I do think the industry is gonna look a lot different you know, five to ten years from now. I think technology, you know, a lot of the y there's some really good technologies out there that have, you know, just like I talk about a value proposition for the trade contractors, I'm seeing the same with technology. There's I I probably get one to two calls a week from somebody that's got some new technology for the construction industry. And it could be AI related, it might be a new ERP. And and and I guess just like anything where there's a lot of money being thrown at it, you know, a bunch of those, when you kind of spend a few minutes kind of digging around saying, all right, what problem are you solving? And what value does that have to the contractor, you eliminate some of them pretty quickly. It it's kind of cool technology, say that's neat, that's interesting, but at the end of the day, it's not really gonna make the contractor more money, it's not gonna reduce their risk profile, it's not gonna deliver a project quicker. So there's a lot of them that I think are are are just, you know, they're burning through other people's money. You know, when you're venture capital or private equity or working on other people's money. But there's some great ones out there that I'm seeing and I had just in anticipation of our discussion, Dusty Robotics. They're one of my favorites, but these you know automated robotic layout for job sites versus doing it the old school way. I've got a number of clients that are using that that will tell you here's how many dollars of layout labor it saves,
Seth: Mm-hmm.
Scott Kimpland: here's the quality issues it eliminates because it's accurate versus human error. but there's you know there's a a bunch of these out here that I'm kind of tracking. in your part of the world, there's a company called Track 3D. If you don't follow, watch these tracked
Seth: Yeah. We're partners now. they're they're part of our workflows too. We have a a c partnership with them so that we can always offer
Scott Kimpland: Track reading, yeah.
Seth: that to owners. It's we want reality capture. I do think that's gonna make a difference.
Scott Kimpland: Yeah, so so one of the things that they are working on is the ability to kind of walk a job site with, you know, 3D camera, using AI and actually quantify what work has been put in place. I will tell you that if they're able to crack that code and be able to do that for mechanical, electrical, framing drywall
Seth: Mm-hmm.
Scott Kimpland: and quantify what's in place, that'll be game changing in terms of a contractor being able to know where they're really at and what's really installed versus Somebody saying, hey, I think we're 62% complete, right? they're gonna know that. And so I I think they've got some groundbreaking stuff. I'm starting to see on the estimating side some AI generated stuff that can do takeoffs. you know, one of the one of the challenges with that, if you talk to experienced estimators, AI can already kind of tell you, you know, what's on a set of plans and quantify that. What it can't quite do really well yet, but I think eventually it'll be trained to is tell you what's not on those plans that you're gonna have to build. And if you miss it, it's gonna kill you. and for mechanical
Seth: Mm-hmm.
Scott Kimpland: guys, that actually is a big pie it's not necessarily what's on the plans. It's what's not that you know you're gonna have to do. So that's I I but I think you're gonna see break off, you know, you you're gonna see you're gonna see there's there's no reason five years from now for people to be sitting there quantifying and counting what's on a digitized set of plans. That just doesn't Make sense to me, right? Yeah.
Seth: That's exactly right. And that's kind of why I'm at Zero RFI, by the way, is like I've done these PM jobs for 20 years now, and I've done a lot of it manually. I started my career actually in forensics, getting document discovery on failed construction projects way before AI. We were just doing like optical character recognition at the time. So I was scanning stuff, getting it into searchable documents, but like I spent my whole career trying to help. Project managed construction projects. And there's a ton of manual data manipulation that's actually very error prone. And I think if the owner can figure out, we can create what I call or Claude Anthropic would call a low temperature deterministic workflow that's not like we're just throwing the drawings in a chat bot and being like, How do you build this thing? No, like we're creating expert in the loop. learnings for an AI system that's really a workflow. It's not just AI, you know, it's we're we're telling it what to to look at in order to interpret these other things. And so we're just our pitches basically. We think owners should have representation that spends less time in front of the computer. Basically a lot of our da our task is turning a P6 schedule and a change order log and RFI log and some stuff from the design team into something that the owner can make good decisions with. Like how do you translate that information into now the owner can make a decision faster with better information? And I think so much of that can be automated from my perspective. If I'm just trying to help the owner make these decisions better and faster, I really should create automated workflows. I shouldn't be Looking at that P6 schedule and then inputting something in some other report because then I'm gonna screw it up. Do you see what I'm saying?
Scott Kimpland: Yeah. Yeah, and and again I'm a little bit biased on the on the subcontractor side. I'm I'm I'm a little further away from the owner side in terms of understanding what works there. But you know on the contractor side, the first thing I look for is will this technology have any impact on saving labor?
Seth: Mm.
Scott Kimpland: you know, smart barrel, pretty simple. That this thing is kind of it uses biomet it's a biometric time clock. You you You sign into the job, it takes a picture of you
Seth: Yeah.
Scott Kimpland: and says, Yep, that's Seth, that's the same Seth that was here yesterday. And by the way, it's 7 06, he's clocking in. and when you leave, and so if you look at you, you know, if you've got a couple hundred people on a job site, and you know, they're nobody shows up exactly at seven and leaves at exactly 3 30 or whatever the time is, right? You've got all these fractions, but over time, there's huge labor dollars in terms of just tracking what time are you actually paying them for versus what's getting written down on a traditional time card or on a Excel spreadsheet, but there's some things like that that have impact on labor. I just I just read an interest somebody on LinkedIn within the last few days was commenting about they just read I thought he said I can't imagine this, but I thought he said 10,000 pages of construction documents. And it's like there there's nobody there there's nobody out there that's gonna read and consume and you know but the ability to kind of go through documents, you know some of the things like document crunch and just some of the things that you can kind of go through all these documents quickly and pull out risk, identify risk, identify conflict, identify problems, identify gray areas, things that somebody is reading and you're paying your attorney to do. I I again I'm I'm starting to see some real you know anything heavily administrative, I think we're gonna be able to take things out. But if we can take field labor out as well, huge opportunities there.
Seth: Thank you for bringing up those two. Episode thirty-three of Constructive has Al Albert from Smart Barrel and I've had Josh Levy and Trent Miskelly from Document Crunch on as well. So if you're interested in hearing more about those startups or tech construction tech companies, not even really
Scott Kimpland: Yeah.
Seth: startups anymore, but go listen to those episodes. love those companies. my gosh. He's the I
Scott Kimpland: I Albert's always fun to listen to, isn't he? Albert's a character. He's a character. I love that guy.
Seth: I meet so many people by doing this where I'm just like I'm i interested in having them on my podcast and then I'm like, my gosh, I wanna be your friend. He's one of those, you know, like
Scott Kimpland: Yeah, Albert is one of the most passionate guys about what he's doing and you know, it's kind kinda hard to replace passion, right? You you don't have
Seth: Yes.
Scott Kimpland: to be a great salesperson as long as you're passionate. People sense that. Another one's sightline, they're out in your part of the world, but in terms of billing, billing technology and you know, they've got some pretty strong value propositions around improving cash flow and collection time. there's certainly one that I looked at, but there's probably six or eight that I'm pretty familiar with that are getting traction and and and and I've got clients that will tell me, Hey, this has been good for our business, right? So yeah,
Seth: That's what you want, yeah.
Scott Kimpland: absolutely.
Seth: Well thanks again, Scott. Like I said, I'm gonna probably bug you in six months or a year and try to get an update and do some more because I think a lot's gonna change too, and you might be a good guy to check in with.
Scott Kimpland: Yeah. Yeah, no, I enjoyed the opportunity, Seth. I can help you in any way. I you know, I love being on these podcasts and you know, just kind of bantering around ideas, even if I don't like you know, I enjoy the conversation, just kind of thinking out loud in terms of where the industry could go or could be. I I just I think there's so much opportunity for us. you know, I don't you know, my vision is I think because we're so fragmented, we'll never all be there, but I do think the leading, you know, the leaders of this industry, you know, we're gonna be much further down the road a year from now with all this AI and technology, but I I'm seeing it, you know, almost on a daily basis now, more adoption of this stuff. So thanks for having me and I I I hope this is valuable
Seth: Well, I'm very glad yeah.
Scott Kimpland: for your listeners.
Seth: I I hope so too. I'm very glad to have you in this industry. Please stick around and thanks for coming on. We'll talk soon.
