Sitting down for a chat with podcast host Taylor White of Ken White Construction today is none other than Bret Barnhart, President of Barnhart Excavating in Tulsa, Oklahoma. Bret shares his incredible journey, from humble beginnings working with his father and grandfather to growing his company into a thriving business that handles both municipal and commercial projects. Together, he and Taylor discuss Bret’s family legacy, his hands-on experience digging storm shelters, and the unique challenges of working in Tornado Alley.
Throughout the episode, Bret dives deeper into the realities of running a multi-generational business in the construction industry. He talks about his struggle to find the right people, the importance of understanding financials, and how he transformed his company’s trajectory by investing in the right tools and systems. Bret also shares his personal experiences with balancing work and family life, and the lessons he's learned about leadership, resilience, and growth in a highly competitive market. His insights on navigating cash flow challenges, leveraging opportunities, and maintaining strong relationships with clients and partners will resonate with any business owner in the construction field. Join in today and experience Bret’s story - a compelling tale of grit, hard work, and dedication to keeping his business alive through changing times.
Topics:
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The origins of Barnhart Excavating: A family business dating back to the 1930s
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Bret's transition from hourly work to running a company with a broader scope of services
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Challenges of operating in Tornado Alley and how it shaped their approach to storm shelters
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The importance of financial discipline and investing in estimating software
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Navigating cash flow challenges in the construction industry, especially with fluctuating costs
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Family dynamics in a multi-generational business and the balance between work and personal life
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Building a strong team: Hiring the right people and avoiding excuses in business operations
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The significance of no-regrets leadership and setting clear core values for the company
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Episode transcript:
Taylor White: Growing and pushing like that was the best lesson I've ever learned in my life. People that I thought were completely irreplaceable and running operations or running finances that aren't here anymore, and now our business is far more profitable, we're running more efficiently. You just learned so many valuable lessons over those years, which I'm curious to know, where do you think most business owners in our industry, specifically, fall? Where would be their weaknesses? Or where do you see other business owners and you go, “I think that's what you're doing wrong”? For me, it was putting too much trust into the wrong people. And that's my fault, not theirs, that's mine.
Bret Barnhart: I would say two primary things. The first one would be people. I fought it and fought it to get people for cheap. And finally I just gave up and said, “I'm going to have to spend more money if you want good people and you want to win.” And we recently implemented traction in our business and we went through and evaluated every team member from the greatest to the worst. It's a hard conversation. And then you take your greatest and you say, “Okay. Well, what's the attribute of the greatest from the office to the field, all the foreman's, everybody.” And you take those, say five, and you say, “Okay. Well what's their attributes?” Because if you could multiply those five, you could take on anything in this world and it really comes down to a whole list. But when we look at every person, their number one attribute of why they're so great is they never make excuses. So then that becomes a core value and a filter for how we hire people. And if we hire people and you're in an interview and you start making excuses about what happened at the last place, times out we ain't messing with you because you're going to come here and make excuses. We don't want excuses. So it doesn't matter if we fail, it doesn't matter if the GC sucks because most of them do nowadays. And you use that as an excuse like it's just an excuse. It doesn't matter.
Taylor White: Welcome back everybody, to the CONEXPO-CON/AGG Podcast. I am your host, Taylor White. This podcast is brought to you by our amazing friends over at Komatsu. As always with me today, I have somebody that we were actually just talking about the weather and the differences going on. Luke has a popular song called Oklahoma. This guy's from Tulsa, Oklahoma. Thank you, Bret Barnhart, for coming on today, man.
Bret Barnhart: Yeah, glad to be here.
Taylor White: You like that Luke Holmes plug? Have you ever listened to that song?
Bret Barnhart: Oh, yeah.
Taylor White: Does it fire you up?
Bret Barnhart: Oh, yeah. You need to go watch the new movie about tornadoes, too.
Taylor White: Yeah. So your business, you guys are in Tulsa, Oklahoma, correct?
Bret Barnhart: Yep.
Taylor White: So twisters and stuff. Are you in that alley? Do you get crazy storms where you are?
Bret Barnhart: Yeah. So Turner Turnpike, which goes from Oklahoma City to Tulsa, pretty much is like Tornado alley. I don't know why. A Stroud Mall got hit when I was a kid. , if there's a tornado, it typically is coming from Oklahoma City to Tulsa.
Taylor White: So is it common for people to have tornado bunkers in their house and stuff like that? Like a place to go?
Bret Barnhart: Yep. Yeah, we got a safe room. Actually, we're building a new office. And the safe rooms come in today for the office.
Taylor White: Oh, like your office. You have to have one, too.
Bret Barnhart: We don't have to, but I’m doing it.
Taylor White: Something to do.
Bret Barnhart: Yeah.
Taylor White: Wow.
Bret Barnhart: So kind of interesting. When I first started, I had to go back hoe and I would go around and dig storm shelter holes. And you literally pour concrete, set a still shelter in it and encase it in concrete. It's got a set of stairs to go down into it–
Taylor White: No way.
Bret Barnhart: –for a company called Tornado King. So, my dad did it. He quit doing it. And then I called the customer and picked him up and started traveling all over Oklahoma doing it. And then today, what you see a lot is the one coming off a 6 x 8 steel structure and hilt it into the concrete. And it's rated for an F5.
Taylor White: Oh, that is wild. Okay. I guess we're getting off topic, talking about tornadoes, but I like that so Barnhart Excavating. From what I can gather, a pretty interesting story. And I actually was kind of diving into your, about us on your website. It was started in the 1930 by your great grandfather and started with mules and stuff. Congratulations, by the way, on having a business that has succeeded that long. It's not easy. You get family, you get economy, and you get a bunch of different stuff going on there. So big ups to you guys and your family for making it this far. Give us a bit of the background information on Barnhart Excavating.
Bret Barnhart: Yeah, so a little more to that. Even with my great grandfather. So the area that we're in has a big oil and gas production. So everything up until the ‘80s, when the oil crunched, was mainly oilfield work. So first generation, he started that mules and slips and the story goes from my grandpa that the guy come in town with some dozers and, of course, he still had mules and slips and there's a local town drum right where this guy come from, and he went home, told my grandma, he said, “I got to buy him out. If I don't buy him out, I'm going to go out of business with these mules.”Anyways, we've kind of talked to– Of course, my grandpa's passed now, but they couldn't keep undercarriage on those old machines. He'd continually run off of them. They'd use floats and winch trucks and their trucks weren't even stout enough to pull them up a hill. So if they hit a big hill, they would drop, unload, drive the truck in the trailer, drive the dozer up the hill, reload it and go back. So anyways, carried on. My great grandpa was a county commissioner here too, as well, with the business. And then my grandpa took over his business, bought him out, and then his brother started a business as well. So there were two brothers, same town, same type of work, separate businesses.
Taylor White: I'm sure that was interesting.
Bret Barnhart: Yeah. So my family, they won't give you anything. You buy them out or start your own. And then my dad started right out of high school, and him and his brother were partners that lasted about 10 years, that split. So then, now I have my uncle, my dad, my grandpa, all in business, and my grandpa's brother in business, pretty much in the same town, all Barnhart. And everybody names it with your last name because everybody knows us. So it gets really confusing. So anyways, my dad just pretty much slowed down to doing very little. Him and my mom's doing some other stuff. My uncle still does a little bit of work. He's basically in a septic business, him and one guy. And then, of course, my grandpa passed and he sold his business to a developer in Tulsa. And then for me, going back, I worked for the family. I either worked in the hayfield on the ranch of my grandpa's, or with my dad. Got out of school, knew I didn't want to go to college, and worked for him for $10 an hour, saved up $1500 and basically had the conversation of you can't survive working for me, so you probably need to figure out what you're going to do. RPO'd a 580 Super M backhoe, bought 83 49000 and a trailer from him for $14,000. His little single axle dump bed truck and an old bell shoe trailer, fennel hitch, and went to work. And that RPO was saving up money for my down payment because I didn't have any money. So he co-signed with me on that backhoe and then carried the note on the truck and trailer. And I went to work.
I dug for a lot of plumbers, electricians, and then of course, the storm shelter. I picked that back up because my dad had quit doing that. And I knew that guy from working with him as a kid, picked that up and just started doing that. I pretty much had my own client base within about a year. I helped him kind of subbed under him. I had my own client base. And then, I don't know, I just got to a point where I was trading time for dollars. I was no different than an hourly employee. And nobody did utility. So going back, oil and gas is what they did. And then when that dropped, my dad got into residential and then he dug for plumbers and electricians, would send backhoes all over town. And I just didn't want to do that because, like I said, I was $55 an hour at that point. And basically I could tell you how much money I could make in a year working seven days a week, hours days. And it's like, I gotta do something different. So I started getting into utilities. I didn't know anything about it. None of my family had done it. And I just started asking people questions. And it's kind of funny, I laugh about it now. A guy hired me to fix a fire hydrant and I didn't know what I was doing. And I went out there and dug the entire fire hydrant up. And I called the water supply store and I told him what was happening. He said, “Well, just take the bonnet cap off and pull it out. That plunger is probably just filthy.” I said, “Are you kidding me?” I said, “I dug the whole thing up. I'm ready to tear the hydrant out.” And he said, you don't need to do that. So I ended up getting it fixed and just started picking up utilities, learning. Didn't know how to estimate because my family didn't do estimating or anything. They didn't have any software. It was a lot of hourly work. So did that, got into some municipal work and then picked up a nine year federal contract. So we did a lot of negotiated federal work for about nine years. And then today, rolling out of that contract, we do a lot of commercial, bigger residential, some municipal work, and then obviously we'll do federal work. But if it works out, that's a whole different animal.
Taylor White: That's a good array of when I hear that. I hear that's good cash flow because for us obviously, cash flow construction sometimes sucks, especially with us in the wintertime. But what I really like, and people are like we've grown in the past three or four years. And much like yourself obviously the bigger jobs are a lot of the commercial municipal projects. But it's nice hearing that like, you'll do larger residential. We do residential as well, too. And it's nice because those clients are paying quicker. And sometimes that residential helps cash flow, the commercial side, just because you're not you're not getting teenages and this and that. But I find it interesting, is it because of the long, long family history of entrepreneurs and successful business owners that– Because you didn't get any post secondary education. Where did you kind of gather the drive? I guess an entrepreneurial spirit to be like, “Okay. I'm going to start my own thing and I want to grow it, and I want to do this.”
Bret Barnhart: Well, I didn't have a choice once I signed that note. I still remember my dad in that six month RPO. He said, “Every morning you wake up, you better know that you want to do this because when I sign that paper, I ain't bailing you out. It's all you.” And I figured it out, I'd make $70,000, $75,000 that year if I worked those hours because it was hourly. And I was going to have $60,000 in the bank. I started with $1500. I think I did $79,000 that first year. I had about $1500 in the bank. But, honestly, I didn't know. And I didn't know any finance. I didn't know anything about the finance side of things, so I didn't calculate the cost. And you don't realize what the cost is and then that lag time of that cash flow and all those things that you got to work through. I didn't. I didn't do that, but I didn't really have a choice. I grew up working. We worked all the time. Daylight to dark, if we weren't working on jobs or working at home– My dad didn't have mechanics, so we were working on equipment.
So I think back to that, and a lot of people talk about trying to balance their lifestyle and having a work life balance. And if my dad would have been a 40-hour week dad, and that's what I grew up seeing, I probably would have struggled to build my business. But what it took to get the business on its feet was nothing that I wasn't used to working six, seven days a week, daylight to dark. It was just our life. And if I wouldn't have done that, if I expected to work 40 hours a week, I probably would have never made it. Because you're always on the verge of bankruptcy, I would say, for the first eight years. One big hiccup when you're trying to grow– And renal, you guys may experience this, but I had to rent. After he co-signed once, that was it. So then I'm giving Hertz Rental $100,000 a year in rental when I could have went and bought a machine, but I had no credit, you know? And then my first loan, people grab about the interest rates nowadays, I paid 14% for my first loan.
Taylor White: Wow.
Bret Barnhart: And it was just because I was a high risk.So today we're at 6%, 7%. That's half of what I paid on day 1. But I didn't have a choice. You got to figure out how to make it work.
Taylor White: I like that. And a lot of the people listening to right now that is just what it takes, you know? And it's funny because a lot of the conversations that I have with guys that come on the podcast is that we always end up talking about families and work life balance. And I struggle heavily with that, mainly because I generally am just like a workaholic. And I grew up with a dad that was gone working all the time. I love what I do, don't get me wrong, we have family time and we enjoy that, but I like what you say, it's like this is what I needed to do in order to get it done. And taking a high interest– But you made it work and it's not easy, but that's what it takes. I have a couple people that I know that are just starting businesses, and you just look at them and you're like, “Dude, you are not going to last because you're the first guy that wants to leave the office at 4:59 so that your wife's not mad that you're not home by 10 after 5:00.” Dude, that's not the mentality. “Oh, it's a nice, nice weekend. Saturday, we should go to the lake.” No, I'm in the pit screening dirt because it's dry. That's what it takes and I love hearing that.
Bret Barnhart: Yeah, it was. I will say it was hard on my marriage early on because my wife comes from a family where her dad was home every day at 4:30 on the same level. We had to work through that. And I'm like, I'm just working like how is this a bad thing? But I understand her side of it. And then obviously I'm telling her I'm heading home towards the shop and I got to stop the shop and I'll be home hours later. Yeah, so anyways–
Taylor White: That is classic though. I deal with that, too. Even now though. We've been around for 58 years but we just did a massive explosion in the past three, four years during COVID. We leveraged the 0% interest rates in machinery. We did a lot of buying and purchasing. We bought a new office property. So these past three or four years, I've actually been the busiest out of my life. I first started coming into the business when I was 20, seriously coming into the business not just working on site, I've been doing that my whole life. But these past three or four years have been so incredibly hard on my marriage and stuff because like you said my wife is the same. Her dad worked in kind of financial industry stock market. Stock market’s 9:00 to 5:00. And then after that it's shut down. There's nothing that you can do. And it's interesting because with me I always said to her and I get it from her point of view too because what you said resonated, “How could you be mad? I'm working.” I say that, too. I'm like, “Well, honey, look at this guy. We went and hung out there with them on the weekend. He was complaining about how much he hates his job or how much he hates his life. You'd rather listen to that?” It's interesting but you have to have the right support, I think, in order to run a business. Would you agree with that?
Bret Barnhart: Oh, yeah. And she appreciates it and she always did, but also needed that time. You say you’re 29?
Taylor White: Yeah.
Bret Barnhart: I had some financial goals that I wanted to hit, and I always told her about it. And I think I was 27, 29 and she texted me one day and said, “You hit that goal that you talked about forever.” And I had never texted her back. And I got home that night, and she said, “You never messaged me back. I figured you'd be excited.” I said, “Honestly, I looked at all the time that I missed with you for that. And then tomorrow, bills are coming in, and that big goal that you wanted will be gone.” And one of our core values in the business is no regrets. So trying to live out of that, to say, you know what? Money is good and money's fun. And I don't think money is a bad thing, but it can be a bad thing. It can tear a lot of families apart if you're not careful. So you have to balance that.
Taylor White: Yeah, 100%. And sometimes, unfortunately, your business kind of just takes precedence over family, and you’ve got to make that decision and make that call. And kind of what I was saying before where it's like- This winter we booked Disney with the kids. That's the purpose of this type of stuff. I have two young kids, 3 and 1 so they get to see that. It's like, “Okay. Well, dad works quite a bit, but we also get to go on our family time as well, too.” But I am interested to know, from when you started your business and you and you started the $1500 first year, you're some odd $70,000. If you could sum up some of your best experiences since you started in business, what would it be?
Bret Barnhart: Best experiences?
Taylor White: When I say best experiences, in my mind, that could be even something really bad that happened. But you're like, I just learned the most valuable lesson from this experience.
Bret Barnhart: Well, I would say, first off, right off the bat through the struggle, I thought if my family would pass this down and this sounds bad as a person, when I hear myself say this. It’s like if they would just pass this down, it would be so much easier because you've already got your feet under you, you're running. But to look back and say, well, they instilled a value in me in a work ethic and then to have to go through building it is probably the best thing that you can do and the pain and the suffering that you have to go through. Because you say you understand the value of a dollar, but until you have to stretch every dollar, you don't understand the value of a dollar. So, I don't know. Sometimes my wife and I talk about it, and I got some guys that I kind of help that they're building some businesses with, and we talk back and forth and work through things, and I see where they're at. And there's a point between where you start for me and where I'm at today because you kind of get it where it's really rolling, and it's rolling good, and everything's just happening. Iit can fall apart tomorrow, but there was a point where it was good, but it wasn't where it is today. And it continues to keep a drive inside of you to keep pushing. And if you're not careful, you can pull back and get on cruise control. But there's something about that area right in the middle where you just stay hungry, and it's like, “Okay. I'm good. I'm safe, but I got to keep the throttle down,” and you got to keep pressing hard and not get complacent, I guess, would be the right word, where you're just sitting back and letting it cruise and creating that drive. Because then once you get it there, so last couple of years, you get it to a good point, you remember how hard it was, and then you got to ask yourself, “Well, if I have explosive growth and growth cost and I make a bad decision and it's not successful, I do not want to go back to where I was in the first eight years.” So then you can easily fall into a fear based mindset of, “Okay. Well, it's going good. Let me just leave it right here.” But for me, not growing and pushing is not a good thing. So to set back, I'm not going to be satisfied with that. Does that make sense?
Taylor White: 100%. Honestly, it's crazy listening to you, because I can relate a lot with what you're saying. And one thing, though, I will correct you on and say, you mentioned the first eight years, but construction takes so much capital to grow, and you know that. Not even just to grow, just stay alive month to month. It takes so much at your overheads and say in construction machinery, the people that fuel everything. But we have a business, Bret, that's 58 years, and in its 54th year, we decided, I decided to be like, “Okay. Now, I'm third generation. Now, it's time to push.” We had three people working for us. I was one of those three. My dad was in the office and we had three people. And then last year, we were 22, 23 people. And you can have a business that has been around for so long and still put yourself back in that position that you talk about within the first eight years, because it takes so much. So when I sit down with a lot of people or have people on the podcast with you, it's generational so there was already a foundation there. And 100% there was a foundation of the name, but we had three people. And in the matter of three or four years, we ramped up to 22. We bought dump trucks, we bought excavators, we bought dozers, we bought screening equipment, we bought property. Millions and millions of dollars leveraging ourself, and there was no honeypot of cash sitting there that we use. We leveraged ourselves like crazy. So I love what you're saying.
And all I would say to people, too, is you could have a generational business, and you can feel that feeling of we have to keep our foot on the gas right now, because if we do not, there's nothing standing here. And I think what actually drove me even more to push through those hard times, last year was our hardest year in business ever, in years. And my dad even can attest to that. That feeling that we had last year, the feeling of me, third generation, being the face of, well, my grandfather started this, and now it's gone. That scared me most. I don't care if I had to go back to the dealership and hand in my excavators or hand in my vehicles. I don't really care about that, because that's just what will people think. I don't really care. For me, it was a succession in the legacy of being like, I this up for my grandfather, so that I think can relate to some generational businesses as well. You you get that?
Bret Barnhart: Yeah, I do. That's that name. And everybody knows us, and we've always been successful. 22 years never been in a lawsuit, and I don't recall of one that my family has been in. They never told me anyway. You're taking it to a new level, and I'm taking it to a new level. We're still standing on this mountain that our family built, and you got to protect that, And that's the thing. You don't want to let it go, but then you want to grow and you want to continue to push because it's fine.
Taylor White: Yeah. 100% It's a fine balance of doing it where it makes sense. And I tell you growing and pushing like, that was the best lesson I've ever learned in my life. People that I thought were completely irreplaceable and running operations or running finances that aren't here anymore. And now our business is far more profitable. We're running more efficient. You just learned so many valuable lessons over those years, which kind of, I'm curious to know where do you think most business owners in our industry specifically fall? Where would be their weaknesses? Or where do you see other business owners and you go, “I think that's what you're doing wrong”? For me, it was putting too much trust into the wrong people, and that's my fault, not theirs. That's mine.
Bret Barnhart: I would say two primary things. First, one would be people. I fought it and fought it to get people for cheap. And finally, I just gave up and said, “I'm going to have to spend more money if you want good people and you want to win.” And we recently implemented traction in our business, and we went through and evaluated every team member, to the greatest, to the worst. It's a hard conversation. And then you take your greatest and you say, “Okay. Well, what's the attribute of the greatest from the office to the field, all the foreman's, everybody?” And you take those, say, five, and you say, “Okay. Well, what's their attributes?” Because if you could multiply those five, you could take on anything in this world, and it really comes down to a whole list. But when we look at every person, their number one attribute of why they're so great is they never make excuses. So then that becomes a core value and a filter for how we hire people. And if we hire people and you're in an interview and you start making excuses about what happened at the last place, 9 times out of 10, we ain't messing with you because you're going to come here and make excuses. We don't want excuses. So it doesn't matter if we fail. It doesn't matter if the GC sucks because most of them do nowadays. And you use that as an excuse, it's just an excuse. It doesn't matter. We're in a contract and we got to continue to push through.
The other thing I would say is I went back after I got going, I was trying to bid jobs and I didn't know how to estimate. So my first job, I took a set of drawings and I gridded the drawing out and I did cuts and fills in each quadrant and then averaged. That took me like six, eight hours. I was like, “Screw this.” So I called Insight and bought Insight and started takeoffs. That was right after they come off of the– Can't remember what those things are called, where you lay them out and draw on the drawings. It was all through PDF. So I started doing my takeoffs there, and I'm like, “Okay. Well, now I have my takeoffs done. I know my quantities, I know everything from my bid, but I don't know the numbers on my business. I don't know what it cost.” So I started digging into that, and I bought my first estimating software. Probably two, three years after that. I had to space it out because I didn't have money. When I bought my first takeoff software, I think Insight was $7000 then. And then now to go to heavy bid like Ford, and we run Agtech, and it's outrageous. Yeah, triple that. So, yeah. Anyways, then I went in and started working through estimating and building my numbers. Well, I didn't know the numbers on my equipment cost, so I'm flying by the seat of my pants. Hourly rates that we used wouldn't work. We're never going to get a job. So then I was coming in high on everything. I'm like, “Okay. Now I got to figure out my cost.” So I got rid of QuickBooks, switched to a construction accounting software, and started building up my equipment costs. And every piece of equipment is built out. Every mechanic, labor hour, every part goes to that piece of equipment. And then we can go back in and take our hours, and we can divide by our service, labor time, our parts cost, everything to get a real number. And then also that helps me drive the decision of when I need to replace this equipment.
Taylor White: What's that software ?
Bret Barnhart: Foundations. They have equipment. They have an equipment module. So everything goes to every piece of equipment. So I know the costs all the time. So then every year, we turn around and we take those numbers and we say what our equipment costs. So if you're a contractor in the last three years, you didn't change your numbers and your estimating program with the new cost today, you're probably losing a lot of money, or are not around. So we have a very extensive spreadsheet, and it's grown over the years. It started with equipment cost, salvage cost, interest, all your costs. How many hours do I estimate per year that I'm going to use it? Here's my hourly cost, plug, my fuel, plug, my labor, and let's go. So now it's transitioned into this huge spreadsheet of okay, here's our rental rate for that machine. Here's our purchase rate for that machine. And then is it cheaper to rent or is it cheaper to own based off the hours per year that we're using it?
Taylor White: Yeah, the utilization.
Bret Barnhart: Utilization. So then this last year, I added our payment amount based on the amount of hours it works each month and then that determines, is that asset even covering the basis of that? I wouldn't rent my office and not get enough money to cover my basis unless I'm just looking for a long term investment, but I've got to cover my basis cost. So then you say, “Okay. Well, if I work at hours a month and this payment is this much and I'm bidding at this rate, it's never going to pay for itself. It can't even cover its own cost.” So it's hard enough to wait four months for your paycheck, come in and pay all these people. So I would say the financial, if you're not good at it as a business owner, you need to find somebody that is, you need to find a part time CFO that will dig into the numbers and we'll give you the real numbers because that build of confidence in me going in on these bids that I call playing the game, when I think about estimating, it's playing a game to me. And I have confidence in my numbers. I know my break even point. I know how low I can go and then how much I can buy out after I get the job. But without that confidence in those numbers and that accounting, it would be a whole different world for me.
Taylor White: Well, you're just shooting from the hip at that point. And we were in that same boat, too. We were estimating blind. All right, we really want this job. Put our margins down to 12% on this one. Okay. But then come to figure it out and look at it, okay, well, we just bought an office. We bought this. We’re office heavy. Were employee heavy. Well, my overheads kind of like around 11% right now, this year. Okay. So now I'm doing the job for 1%. If everything goes perfect, which, when does that happen? So now it's like, okay, I got 1%. Well, no wonder we're in the position that we're in. So I love what you did. I actually did the same thing. I dove down because I couldn't find that person. And when I hone in on something, I get addicted to it. And I just honestly watched so many YouTube videos on, okay what's in overhead and construction? How do you calculate your overhead? For us, for me, it was figuring out my overhead was so important because if you're pricing a job, gross margin is 20% and if your overhead's 11%, well, now you got 9% left of net profit. And trying to figure out that overhead was so hard. Well, I'm on site sometimes, so how much of my pay gets split up to being on site or this? Where's the estimators pay go into? The coordinator? That stuff is all super interesting, and I feel like it's actually for the construction niche. I don't know if you could share with somebody where you learned or something, but mine was just through conversations like this and talking to guys and be like, “Oh, you put your administrator and you classified her as operational overhead versus variable overhead? Oh, okay. That’s interesting.”
Bret Barnhart: Yeah. I didn't have anybody. In fact, the contractors around here wouldn't even talk to me. I still remember when I first got my utility job. I actually told a kid that I'm helping right now build his business. This week I went to buy some materials at a lumber store. I saw this other contractor, I've known him for years, and I walked up to him and I said, “Hey, man, I got some questions for you.” And I was doing a subdivision. We were putting in a sewer line, and I run over to grab some concrete or something, and I asked some questions. He said, “Are you laying pipe now?” I said, “Yeah, I am.” And he said, that's all we need is another freaking pipe layer in town. And I said, “Well, can you do every job in Tulsa?” He said, “No.” And I said, “When you can do every job in Tulsa, I'll quit. But until then, there's enough work for both of us, and we could probably work together.” And when I say this, I don't mean this spitefully, but 2008 hit, he was strictly residential and I was doing a lot of commercials. 2008 hit, his world got rock. Well, guess what? We ended up working together and basically that helped me to bring in him to help get some of these commercial jobs going so we were able to work together anyways. I just don't like that. And I had a mentor for 10 years and I always think of being the mentor you wished you had when you were in that place. I'm not sitting here saying that I'm going to come in and just share everything with people, but for the most part I will because my business is going to be different. And I believe that even if I do show it to you and you figure out how I do it, two things are going to happen. You're either going to quit bidding so freaking cheap and we can all make more money or I'm going to beat you at the game. So either way it's a win-win because we can all win together, but none of us want to help each other. We don't want to talk about it, we don't want to share anything. And it's like we're all in the same freaking industry and we're just racing to the freaking bottom so that one of us can go bankrupt. Great plan. Let's go. I'm super excited about this guy.
Taylor White: Yeah, I hate that. That's how it is. Even right now, it's super competitive and tight. And you're right, it's like it's a race to the bottom. What are we doing? During COVID our dump truck rates actually finally got up to around $125 an hour for a tri axle dump truck go down the road, which still is ridiculously cheap because they're $325,000 to buy and I can get an hour from a skid steer that cost $125. So regardless, they were finally going up and then things started getting slow again. I'm renting dump trucks at $125 an hour. And I'm like, “Lads, what are we doing? It doesn't make sense.” You blow a tire, you just lost all your money for the next two days, three days. Makes no freaking sense. That's why I said in conversations like this, people need to be more open. And like you said, I don't care about telling people what I figured out this year as far as what really worked for us to be more profitable and efficient. Because at the end of the day, the secret sauce is me. The secret sauce is my mind and our team and everybody involved and how we all work in our workflow. So you can share all the info you want, but I'm not worried about somebody coming up on us because they are not us.
Bret Barnhart: Yeah. Well, my equipment, if we were in the same town, you and I would have the same. We're pretty much all buying the same equipment. Unless you buy used and I buy new. So our rates shouldnt be that big a difference. Were all paying the guys the same because we're all competing for people. Your overhead could be a little bit different, but for the most part, pricing should be pretty close. We did a job yesterday that has a million dollar spread on a $4 million job from top to bottom. And in my head, here's where I go. Today is, okay, it's a $4 million job, two year project, 5% retainage. They're going to hold $200,000 for two years. So if you were low bid on that at 4.1% now you've got 3.9% that you're probably not going to see, and it ain't going to matter when you do get it. Okay. And then you got to be done in about six, eight months. So you're going to be running a line of credit, at least a quarter of a million a month line of credit to keep trucks running and everything. We had 14 trucks figured in it. Okay. So now I'm paying 8%, 9% on a line of credit right now. So let's just call it 10% for an easy number. That's $25,000 a month for the next six months. So $25,000 times six, and interest charges to cash flow that job to keep it going, pull that out of your profit. Now, what's left? Now, that's my basis. There's a lot like, you better have some freaking money in that.
And to be honest with you, I really don't think people think about that, and I don't think they understand their equipment cost. And that is so important in your business because it's hard enough to cash flow it, and then if you're not making any profit– It's just like some of these guys I talked to, and they get material quotes, and I said, “Well, material quotes come with no tax.” “Well, tax here is 9%.” I said, “How much do you mark up your materials? 10%. So you're making 1% off your materials.” “Oh, I'm making 10%.” “No, you're making 1%.” “Well, you're not adding tax. You don't have an estimating program that automatically figures tax on materials.” And they just don't understand it, which I don't mean that bad, but you've got to dig in, and you got to figure it out, and you got to understand it. Years ago, and it's probably still out. I don't really need it anymore. But I bought this software. It was like a $100 for a lifetime membership. And it's called accountingcoach.com, and really, really drilled into understanding accounting. And when we built out foundations, when we bought that accounting system, we built our general ledger, built everything out. So now I can see trends. So if I go in there and I look and I see that insurance is 4%, I know on average it should be 2% to 3% of revenue. Then that triggers something for me to dig in and be like, Okay. What's going on here?” Nice. Why is our insurance more?
So to find the trends because your business should be trending. Oil pressure on a dozer runs the same oil pressure, oil temp. When it red flags, then it's either sending you a notification nowadays. but back in the day, you stop and you figure it out. Well, I believe that's how our finances should be. They should be running consistently, the same. And when we start trending off of that percentage of revenue, then dig in, figure it out. Maybe it is what it is, but maybe it ain't right. Get run to it before it becomes a problem.
Taylor White:
Yeah. I like that because you're right.Because we still use QuickBooks, and I spend a lot of my time in my P&L and actually comparing comparative year to year from last year to this year. And you're right with the trends, because if something shifts here, it should shift here. So if you're full percent ahead of revenue, then theoretically, your cost of goods sold and your payroll is going to be a little bit higher, too. But if your revenue is down and your payroll is up, those are two things. It's like, Okay. Well, why is there a trend of this going down, but that going up?” Because those two should go up together. Ideally, you could keep them the same and go up on one on revenue, but that's really important. Do you spend your free time? Is there any books or videos or a person kind of, because you know a lot about what you're talking about, and I understand that you talk with a lot of other people. Maybe you had a mentor, but is there somewhere that you could direct people to be, like ask questions or Google this or read this book or something? Just figure out what you're talking about?
Bret Barnhart: I had a drive to understand it because I knew if I could figure that out, that I could do it. I will say I did not like reading books through school. I didn't like school. But now I've found an interest in reading books, listening to podcasts, and audiobooks. Profit First is a really good book. We do that now, so we name our dollars before they come in.
Taylor White: I started reading that. What's your thought on that?
Bret Barnhart: I've been doing it for about six, seven years.
Taylor White: Did you ever listen to it the first time and go, “I can't do that. This guy doesn't understand. This is–”
Bret Barnhart: Yes, but I don't do it the way he says he do it. I do it the way it works for me. And to be honest with you, I'm grateful for it because we picked up a very large job about a year and a half ago when fuel just went crazy. I don't know if it went crazy for you guys. We picked a job up. We won it in December. We didn't get the contract till May. I think for numbers sake, I think we had like $85 an hour in trucking. By the time we started the job, we had, I think it was $110 an hour for trucking. We had 46,000 yards to export. Forget those numbers. Every week we were rerunning our bid. And honestly, I was at the point where my pride is not too much to pay my bid bond and go on because I need a business, because I have a core value of generational excellence, and that means sometimes I got to make the hard decision for the sake of the business. And I'm not above my pride to take a bid bond. Never have, but I will if I have to. Ended up, it worked out. And I kept fighting through that job and ended up, another contractor, competitor. I just started calling them all. And he needed a bunch of dirt, so he ended up putting 12 trucks on us for almost a month. And I said, “I'll tell you what, if you bring the trucks, I'll load you. Let's work together.” So he got the dirt, he paid for the trucks, and it turned out to be a great job.
So anyways, back to your question. I do read a lot of books. I found accountingcoach.com. I spent time with Mike Houten. I have a part time CFO now. He retired from Caterpillar. He puts a different spin on numbers for me so we can go back and forth but honestly, I've always asked other people questions. I don't care if contractors don't want to talk to me or not. I'm not above asking a dumb question. I've been in a mastermind group for about seven years now with some other business guys. So you learn from them. I've had a mentor for about 10 years, and he's really pushed me to always be growing, always be learning, always be understanding. I would say at the end of the day, you have to have a passion for it or you don't have a passion for it. And the funny thing is, a lot of business owners, I think you talk to that, I know they don't even want to know all that. So I think for me, it's a little bit different. But if you don't like it and you're not going to be consistent with it, go find somebody that can do it right, that they can, they can help you walk through it. So I tell a lot of guys I used to have QuickBooks, so I understand QuickBooks, and they say, “Well, should I go buy foundations?” No, don't buy foundations. Just set up a project for every piece of equipment you have and have your guys clock into that. Put all your parts towards that. You're getting the same thing I'm getting in my system. You're just doing it on a project level and QuickBooks, so then you can track your cost, so you can do a profit and loss on that specific job, which is that piece of equipment. It's going to be at a loss, but it tells you. And then you do cost codes in there for parts, for preventative maintenance, and then for mechanic time. And there you go. Take that total cost, divide it by your yearly hours, and now you got your number for what it costs you based on these hours per year, and now you got a number to run with.
Taylor White: I feel like I should have had a notepad written down for this podcast. This is good, man. It's crazy because I kind of feel like they were the same. I didn't have a choice. We tried to find somebody to do financials and a controller/CFO and just couldn't find a person that worked. And I had no choice last winter, to then just dedicate my time. The winter time, we're slow to just learn it, figure it out, get in QuickBooks, figure out our true costs. Do exactly everything that you're saying. Start reading books prop first, how to buy back your time, a bunch of these, really good reads. And it's really important. But I love everything that you're saying. It's crazy that I feel like if somebody talked to me that I didn't know, I'd be like, “Okay. I could share with you a lot of info that I learned that's valuable.” But then you talk to somebody like yourself, and what you just said at the end, it's like, “Yeah, I don't even know I could utilize QuickBooks like that.” I'm just using it as a look at my profit or loss after the numbers are already all plugged in. I don't look at it. I don't set up a project and do that. I look at that from our project management software, and then the hours, and then we look at what we estimated and go, “All right. Well, did we make money on this?” But you can dive even further into it, which is so cool.
Bret Barnhart: Which, to be honest with you, I didn't do that when I had QuickBooks, and I didn't really think about it that way until I bought Foundations. And then after I bought Foundations and I saw what Foundations did, and I started building all these cost classes for all these different pieces of equipment, then I said, “You know what? I could have done this.” Quickbook or switching to Foundations kind of expanded my knowledge. And to say, “You know what? It doesn't always have to be in a new program. Can I build it within what I have now?” And like I said, I believe you can and you just go with it. It won't be that I can click and run my report right now, and you'd have to run a specific report, but you can be selective in QuickBooks and pick all those jobs and now I have a total equipment cost.
For a while, I did what's called equipment contra account. So equipment contra takes your estimated rate of all your equipment. So if I have piece equipment and they're $100 an hour, take all that cost, put it into that contra account, and then it deducts it out of that contract count. So you can go in and you can say, “Okay. I'm estimating that all my equipment per year cost me $400,000. And then you go over and you look at your equipment cost, actual equipment cost and say, “Okay. Is my estimating numbers overall lined up with my actual numbers? And if it lines up, I would say you're probably going to get within 20%, 30% because there's just so many variables for us, then I'm good.” But if my numbers are 50% to 80% off, then either I'm too low or I'm way too high and I got opportunity cost I'm missing. So then I can start working back through those numbers.
This is just years and years of really like having a desire to dig into the numbers. And honestly, I can't find a lot of people that really go that deep with it. And to be honest with you, sometimes I think I go too deep. Too much information can honestly kind of deflect you from being more risky. So my mentor always says, “What do you know that you're acting like you don't know?” And once you see it, you can't unsee it. So then you go and you start building these jobs and you know your cost. And I'm not kind of countercultural, but if I didn't know it, I could wing it more and I'm okay with that. But now that I know it and I know what I'm going to get into, if I get a $4 or $5 million job like we bid yesterday, then I can't unsee it and then I can't lie to myself just to go by that job to be not profitable at the end of it. So it can be challenging as well.
Taylor White: Oh yeah, 100%. And it's interesting because we always run. I always say for me, we have different dynamics in the office. Lke my dad he had three, four employees, his entire 40-year span of running the business and he did very well. We had a great childhood and everything, but he never had that growth mindset of he never wanted to expand or he never wanted to grow because he's like, “Man, I don't need to. I'm good.” Whatever. And I always like to say what you were saying, at the end is scared money don't make money. And that's why sometimes maybe knowing exactly everything isn't always the best because then you might be a little more conservative with how you're going to spend that dollar
Bret Barnhart: Yeah. 100%. My dad's the same way. He thought I was crazy when I started buying all the software and all that. The other thing I'd say, back to your question is, in my 20s, I had a high blood pressure. I was always pissed. Fired people for nothing. You show up five minutes late, fire you, make an example in front of everybody, which is not right. And to be honest with you, I really, really hated my life in my 20s. And I just thought, I got to change this because this is not what I thought business would be. And that's when I went out to enter leadership. And then I don't necessarily agree with their financial side of things. They say debt free, and that's really hard in our business, but their leadership is very good. And I have to say that I changed who I am and wanting people to be like me and letting people's gifts in this business be their gift, and identifying where I suck and let them win at it, because I can manage everything. I can bid, I can project manage, I can run all the equipment, I can do all that. But if I'm touching everything on a scale from 1 to 10, 10 being great, it's all at a 4 or 5. But if I bring in an estimator and he's killing it, now it's at an 8. I bring in a PM, now it's at an 8. And then accounting, which I love the numbers and I love everything we talked about, but I hate accounting. I want to run a report and I want to play with the numbers and play the game, So I don't like that. And to be honest with you, if I had to do the bookkeeping, we'd probably go bankrupt. It's leukemia to my soul.
So identifying people and then leaning into their gifts instead of expecting them to work the way I do things. I don't need a list. I don't want to sit down and make a list. I don't want all these details. They make fun of me here because when I bid jobs, I do lump sums. I take a material quote and put it as a lump sum, would win the job. I'd hand off the job to the foreman, be like, “Here it is. Here's your material list, here's the numbers. Get after it.” Now it's all detailed. They know exactly what they got on the job, so they kind of make fun of me here about all my lump sums that I put in bids.
Taylor White: What was it in your twenties that why were you the way you were? And then, I guess, what made you realize you wanted to change? Is it because you're like, “Man, I hate who I am right now.” You woke up one day and you're like, “This sucks for myself and everybody around me.”
Bret Barnhart: I mean I was an ass.
Taylor White: Was it money though? Was it fun? Was it because you were struggling and you were getting started and you're like, I just can't get ahead and that just bore on you.
Bret Barnhart: Well, my dad's hard, poor and I had a saying, “You didn't make me and you won't break me.” I didn't care. Fire customers? I don't know. I was chasing money. I had run for years and years and years broke just trying to survive. So I'm sure of the stress, but I never one to say I'm stressed. I don't know how to know when I'm stressed. It’s life. And then when I went to that conference I met my mentor there and I said, “Will you mentor me?” Because I'd read some books about leaders that always have mentors in their life. And he said, “No, it's a long distance.” He's from Nashville. And I think that was in May when I went, November I hired him and he's been my mentor for 11 years now.
Taylor White: Wow.
Bret Barnhart: We talk every Tuesday. It changed to Thursday for a while, but every Tuesday from 7:00 to 8:00. He knows my wife, he knows my kids, he knows most of the people in my business. And I had to fill out a progress report every week. And it's what did you achieve since we last talked? What did you intend to do but didn't do? What business or personal opportunities are in front of you? What do I need to know and what else do I need to know? So if you think about this, I've got 11 years of weekly progress reports. I go back to some of them sometime and here's what I found. I constantly bitched about employees and what they're not doing. Here's what he did. He put a mirror in my face and said, “What are you doing?” The truth of the matter is I wasnt equipping them with the tools to be successful. And what I had to realize is this all falls back on me. And the image I have in my head of it is you got this battery, and it's got volts coming out of it and I'm the battery. And how am I? Am I charged well enough to push out through this circuit system, this wiring harness to all these different things and there was no voltage coming out of me. I wasn't pushing things where they needed to go and I wasn't doing what I needed to do. And then honestly, getting past arrogance, pride, admitting the fact that I'm wrong, admitting the fact that I can't do these things well and to bring the right people in that can help me do it well. So that's been ongoing. It's a new world today talking to him. But almost every time he would turn that back to be my fault.
And then there again, asking the questions, what do you know that you're acting like you don't know? Asking a question to really make a statement. You go out and you ask one of your guys in the field, you're going to move that topsoil. So the truth is you know they're going to move it, but you're just asking the question to make a statement. Just make the fricking statement, because the great people in our business want to be told straight up. And if you don't tell them straight up, I don't think they're going to respect you. Respectfully set them straight. So he helped me through that and I had some difficulties with my dad I would say for the first five years. I don't know. Even though I had my own business, he still wanted to have a lot of say in the things I was doing. And as a young man, I always build my own way, and I'll be honest with you, it made a very, very difficult situation. We have a great relationship now, and to be honest with you, I wanted nothing to do with him. And Aaron kept telling me, he said, “One day you're going to bury your dad and you can't go back and replace it. You need to learn how to deal with this.” And we’ve restored that. I think there was some anger in that, too, because we're all men. We all want that attaboy from our dad. We want our dad to be proud of us And when you don't get that, I think it becomes an internal issue.
Taylor White: I was the same as, well. It's funny because if my dad ever says proud of you or good job, my response is, “How much have you had to drink today?” He doesn't have a drinking problem or anything, but generally, if my father ever gave me a pat on the back, he's a hard guy, assuming kind of the same temperament as your old man. He doesn't say that sort of stuff unless he's got maybe a scotch or two in him, “I'm proud of you.” But I was the same thing, man. And I think that's the thing with family business as well, too. I remember when I first came into it and I told him, I said, “I'm either going to work with you and grow this business, or I'm going to work against you and take work from you.” And I remember parking the dump truck on the side of the road and calling my wife and saying, “Come pick me up at the office. I just gave my dad an ultimatum.” And that was the day. The next day he came over, we fought about it, and the very next day is when I started in the office and I got off the site, because I'm like, “Dad, I can't build the business from sitting in a machine all day. I need to go out and talk to people, and we need to hire estimators.” And that was kind of the turning point.
So it's kind of interesting because you kind of went through and kind of did the same thing, and family and business, those two things, definitely, they can be the biggest blessing, but they also can be the most painstaking, crazy thing of your life ever.
Bret Barnhart: Yeah. And we do the same thing. So we were always respectful to each other because people would call me, trying to call him, and I'm like, “No, you need to call him.” There was always respect there. On certain jobs, it got to the point where I was doing different stuff, so it didn't really matter. So we knew if somebody was trying to get ahold of him and they were trying to get ahold of me. But now, he's kind of shut down and he still has people calling. So I said, “Well, if you get a job, we'll just give you a percentage of it. Roll on.” So now he's actually selling jobs, and then we can turn around and give him a percentage for the sales and go on. And he gets to enjoy it. He's got cattle and does some ranching and things like that, so it works out good. I would say put your family over business because you can do it the other way and I think that's a bad thing. Because when all the business is gone, any one of us can go out of business today and all that, all this left's our family. So you and your dad are doing good now?
Taylor White: 100%. I think the best thing for me– I was the same early 20s, hothead. Nothing was going to stop me. Had a different temperament and finding my wife, we've been together for eight years, married for two, having kids, buying a house, growing up, being a man, that kind of brought me closer to my father. And especially, even just in the past three years, having grandkids. My dad's a better grandfather than he was dad. He's the best grandparent to my kids. So it's good now. But I would agree with what you said. It took me a while to sit back and realize hey, if everything's all left, I still need my family. And you can't turn your back on something that is super important. And I tell everybody, I used to hide the fact that my dad was in the business because I was embarrassed when I was younger. Because you're the boss's son, you're the silver spoon, you're third generation.
Bret Barnhart: Same here.
Taylor White: And I hated that. And I actually used to call him Dave because I didn't want to say dad. So then I went through a part where I'd say old man. And then he's like, Call me old man? Call me dad. I'm your dad.” And then finally I was like, “You know what? I was trying to hide the fact that my dad was in business with me and that he had a big role in the business.” And now I'm like, it is such a blessing that I get to go to work every single day. I get to see my father sitting in his office. When he's dead and gone, I'm going to be wishing that I had more time like that. And I think of that stuff now that I have kids.
Bret Barnhart: I always ask myself, “Will, I remember this in 10 years,” if he says something, because he'll still make comments, piss me off. And I'm like,”Will, I remember this in 10 years, and if I won't let it freaking go.” You know what I mean? And I respect him. It doesn't matter how old I am, all that. So it's a good place now, but I'm grateful that I'm not in that role with him and that we can have that relationship. So it's awesome to you that you're protecting that because it can get the other way in a hurry.
Taylor White: Yeah, man. 100%. It definitely can be crazy. But I also don't want to take up too much of your time. I know that we've been on here a bunch and you're busy and you got a lot going on. And I want to thank you, man, for coming on the podcast today and talking and saying everything that you said. I love how easy the conversation was with you. And I definitely think so many people are going to pull a lot of value out of this.
Bret Barnhart: Yeah, I appreciate it. I appreciate being on with you guys. Yeah, I was excited. I took the month off in July, and I got back and got the invitation. I was like, “Man, I hope I didn't miss that because this will be fun.” I love CON/AGG.
Taylor White: Yeah. Hopefully, you're there in 2026.
Bret Barnhart: We will be. I've been to every one of them for the last, I don't know how many years I was there in COVID, so I got to watch the showdown. Nice.
Taylor White: Well, stay in touch then. And I'd love to have a beer or come see you in 2026 when you're at the show.
Bret Barnhart: Yeah. Well, thanks for the time.
Taylor White: Appreciate it, man. This podcast is brought to you by our good friends over at Komatsu. Thank you, Brett, for coming on. Have a good one.
