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Construction companies win when their insurance broker is construction-centric! Building PA Podcast
Jon O’Brien: Hello and welcome to the Building PA Podcast. I am your co-host, Jon O’Brien, from the Keystone Contractors Association, coming to you from Central Pennsylvania, joined as always by fellow co-host and all-around good guy, Chris Martin. Chris, how are we doing today, sir?
Chris Martin: Hey, Jon. How are you doing today? It’s good to see you. Thank you for calling me an all-around good guy. My mother would be proud, I think. We’ll take that for what it’s worth. But hey, everyone. I am Chris Martin, and I am with Atlas Marketing, where we tell stories for companies that build things. We’ve got another good one today, Jon.
Jon O’Brien: You too. We do.
Chris Martin: We’ve got some great stuff to talk about. Joining us today is a gentleman by the name of Justin Escajeda of Escajeda Companies. You will be shocked at how many companies this guy owns. It’s amazing. Companies, plural.
Jon O’Brien: Yes, plural. It’s ‘and then some.’
Chris Martin: Many, many plurals, if you will. But hey, Justin, it’s great to see you. Welcome to the show.
Jon O’Brien: Yes, welcome.
Justin Escajeda: Thank you very much for having me. I love this show. I love the discussions. I always put your podcast on when I’m on the treadmill. It makes the time go fast. Really interesting stuff. So I appreciate what you guys do.
Chris Martin: That’s good.
Jon O’Brien: Yeah, I bet. It definitely makes the day go fast, too. It’s a fun break during the day to record these episodes. I love it. Best part of my day.
Chris Martin: Yeah, and that also means now that we have to use the treadmills too, Jon.
Jon O’Brien: Looking forward to it, Justin. Yes, I hear you.
Chris Martin: We’ve got to get up there, right? Well, Justin, tell us a little bit about the plurality of your companies and how you got here. Tell us about you.
Justin Escajeda: Right. So, like I said, I got into construction right out of high school and worked for a union masonry contractor for a number of years. After about 10 years or so, I broke off and started my own masonry company. It took off and did really well for a few years. Then, in a nutshell, I was offered the opportunity to buy a roofing company. That went really well, too, and I got intrigued by the acquisition process. I knew I was beaten down by starting something from scratch, as we talked about before, and I’m sure a lot of your listeners know that starting something new in the market poses a lot of obstacles, sleepless nights, and ups and downs. I found that identifying great businesses that someone has spent their life building, essentially their legacy, and trying to buy them properly and correctly from a financial sense can really work out.
Justin Escajeda: Honestly, it may sound corny, but I like being able to carry that name for another generation. A lot of these guys I bought companies from are my dad’s age, and it means a lot to them, too. Both parties get something out of it.
Chris Martin: Yeah, that’s cool. That’s really cool. The interesting thing is that you just said you were a mason, and then you bought a roofing company. That seems like a big jump. The business models are the same, right? But the aspect of the actual work, was that a challenge?
Justin Escajeda: Yeah, same business model, and technically it’s the same because it was a residential roofing company. So it was the same market, too. My customer was the exact same person I was selling residential masonry to, right? So it wasn’t a big jump there. And to be perfectly honest with you, masonry is pretty synonymous with roofing. The reason I was offered that company was because that guy had asked us to do chimneys a multitude of times over the years. So we already had a relationship. And I thought to myself, all right, well, I’ll do the chimneys and the roofs now.
Chris Martin: I didn’t see it that way. That’s smart.
Justin Escajeda: Yeah, and you know what? It works. It works in the commercial sense too. When we’re on our commercial buildings, if a giant flat roof has problems and damage, a lot of times that brick parapet wall needs fixed too. So it’s easier for the customer. They only have to deal with one contractor. I’ve realized that’s what they love.
Jon O’Brien: Good. But among the 12 companies, it goes beyond just masonry and roofing. I think I saw insurance on there, and I saw some remodeling and residential remodeling. Are you bringing in expertise within those fields, or how does that process work?
Justin Escajeda: Oh, absolutely. Expertise comes with the companies, for sure. You guys were asking me a little bit ahead of time about running all those companies. I put a very small part into running all those companies. If there’s anything that I’m good at, it’s hiring the geniuses and the experts to do it, to tell you the truth. Without them, this ship’s going to sink.
Jon O’Brien: Is that step one? Is it getting the genius?
Justin Escajeda: Well, it depends, because you’ve got to remember something. A lot of these guys that started smaller construction companies were the key man, right? They were the estimator, they were this, they were that, or they had their hand in everything and all the relationships too.
Justin Escajeda: For those instances, we do have to bring a new manager in, and that’s costly and hard to identify. It’s very hard to identify that person who is not only going to take on a new job, but essentially a new lifestyle by making this his or hers, for that matter.
Justin Escajeda: Then there are other deals we’ve done that had management in place. To tell you the truth, that’s what I prefer. They’ve already worked in the company for years. They already know how it’s going, and you learn from them. My role, after we buy them, is to add as much support as we can to them.
Justin Escajeda: You have that initial meeting with the new employee after the acquisition is closed, and then they can start spilling the dirt: ‘Hey, here’s what sucked before. This is what I’d like to get fixed.’ Obviously, sometimes you can’t do it, but a lot of times you can. If you’re willing to put a little bit more money or time into it, it helps out for sure.
Chris Martin: Yeah, that’s really intriguing because I know in my business now, we’re growing and we’ve continued to grow. Trying to find the right people, the right people in the right seat, is the biggest challenge. I can imagine that’s even harder with multiple companies within the construction industry, because you might have expertise in roofing, but you need that person in masonry or some other element. Do you shift somebody from one company to the other, or is it not that easy?
Justin Escajeda: No, I’m not saying it’s that easy. But one thing I’ve come to find out is, okay, one of my good friends was a floor coverer. That’s what he did his whole life up until about six years ago. But I knew him. I knew his work ethic. I knew how intelligent he was. Plus, he and I had previously bought an apartment building together, so I kind of knew him in a business sense.
Justin Escajeda: I asked him to run this general contracting, general remodeling company we bought. It’s pretty big. It has about 80 employees now, and at the time I think it had about 50 employees. He didn’t know the remodeling business. But at the same time, that work ethic, that creativity, he knew that this isn’t a nine-to-five where you just turn off the phone. This is all day, at night if need be, on the weekends, on the holidays if need be. Those are the people who are terribly difficult to identify and find.
Justin Escajeda: I’ve found a couple of them, but I’ve met a lot of people in my life, and there aren’t many.
Jon O’Brien: Speaking of it not being nine to five, it’s all day. Multiply that by 12 companies. So you sleep what, like seven minutes a night? Is that how it works out?
Justin Escajeda: Yeah, no, I still work a lot, and mostly I work in the masonry company that I started with. My CFO says it all the time: best use of time, right? That’s the business I know best. I’ve gotten half decent at analyzing businesses and the ones we should buy, and I spend the rest of my time on that.
Justin Escajeda: I meet with the head of each company and their controller once a week. I talk to them more than once a week, obviously. But as far as day-to-day stuff, I can’t get involved. I’ll jam up their systems. You know what it’s like. If the owner comes in while the manager is running the company and there are people underneath the manager, they’re always going to jump over the manager if they know I’m around and easily accessed.
Justin Escajeda: I would be doing the manager and the whole system a disservice if I started doing that. I have done that accidentally, and it’s caused a lot of problems. So I keep my hands out of it.
Jon O’Brien: If you could go back to your mason days when you were an employee, what’s the biggest surprise now that you’re on the company side of one company, and then what’s the biggest surprise when there are multiple companies? What didn’t you really expect?
Justin Escajeda: Oh, man. I would have to say true labor costs. True labor costs annually, monthly, weekly, and the actual production rates of things.
Justin Escajeda: Here’s something else, too. In the construction industry, you have producing employees and non-producing employees, right? If a bricklayer wants a job, a carpenter wants a job, a roofer wants a job, a painter wants a job, or a glazier wants a job, I don’t care. Hire them. We know they’re going to produce. You can put a numerical value on what they’re going to produce over a day, an hour, a week, a month, and so on.
Justin Escajeda: Then you hire a project manager. You hire a new lead estimator. You hire a marketing person. You hire a secretary.
Chris Martin: Those guys will suck you down. The marketing guys, I’ll tell you what.
Justin Escajeda: Oh, I know. Especially the reports. I don’t even know what I’m looking at. Like, ‘Oh, you’ve had 105 engagements today.’ What does that mean?
Justin Escajeda: It’s difficult. That would be one thing as far as labor costs and analyzing the labor costs to see what you’re actually getting a return from and what you’re not. Even all of the controllers, the CFO, everything, they’re non-producing. You can’t put a numerical value on what they produce like you can with a field person. At the same time, I know they’re necessary, but they’re harder to analyze.
Jon O’Brien: Yeah.
Chris Martin: I give you credit, Justin. I think the smartest person knows when he or she needs to get out of the way. That’s what I’ve heard so far from you: ‘I know when the heck to get out of the way.’ That is a really smart way to run multiple businesses, any business, but especially multiple businesses. Hats off to you for that. That’s a really smart way to do things.
Justin Escajeda: I appreciate that. I think I stole the idea from Andrew Carnegie. I think he had a quote saying something like, ‘I hired everyone smarter than me. I don’t know anything about steelmaking.’ Well, Andrew Carnegie was pretty successful, so he might be onto something.
Chris Martin: He’s onto something here, right?
Justin Escajeda: Yeah, I think I’ll follow this one. But I appreciate it. Thank you.
Chris Martin: Across all the companies that you touch and that you’re involved with, and within the industry as a whole, what are some of the trends and challenges that you’re seeing from your side of the desk right now?
Justin Escajeda: I’ll stay with the construction industry because that’s where I really see the trends. We have insurance brokers, but I really don’t know a great deal about that industry. Construction is what I know. I’m heavily involved in both factions of construction, residential and commercial, depending on the company.
Justin Escajeda: What I’m seeing, and this is not just one trade, this is multiple trades, is a lot of people branching off and trying to do their own thing as basically a one-crew company: the owner and maybe a laborer and whoever else. It’s happening a lot. I don’t know if it’s from this influx of social media and entrepreneurship getting into everybody’s head. I don’t know what it is, but I see it a lot.
Justin Escajeda: Obviously, there’s a huge demand for residential construction, whether it be remodeling, new construction, whatever it is. But those employees, in my opinion, are really starting to come out of the commercial space from the bigger companies. The problem is these commercial jobs still need to get done. There may not be as abundant an amount of jobs as there are in residential, but they still need to get done. So my question is, where is this labor going to come from?
Justin Escajeda: You need organization of labor for massive projects like that. A general contractor can’t hire 15 different one-person crew companies to build a new hospital. So what’s the answer? I talk to big general contractors a lot, and almost across the board, their number-one concern is finding competent subcontractors. Because that’s their business. Subcontractors are their finished product. They’re managing contractors.
Justin Escajeda: Obviously, the bigger general contractors have good bonding, insurance, and preconstruction management. But I think what was the status quo in commercial construction before is going to have to change with the times. We still have to get the job done, so we’re going to have to allow this.
Justin Escajeda: On a couple of jobs, let’s say I have a million dollars in pointing, caulking, and cleaning on a building. I may subcontract a portion of that to a smaller subcontractor. It’s allowed most of the time in your agreement with the general contractor. It helps get the work done, and I think you’re going to start seeing more and more of that in all trades. This work has to get done, and people just aren’t coming into the trades like they were.
Jon O’Brien: It’s definitely a challenge. It’s across the board, like you’re saying, commercial and residential, for sure.
Chris Martin: So, to your point, Justin, and I think you’re right. I really do. I agree with what you’re saying. But is the issue more of the actual contractual elements, or is it the general contractor saying, ‘Hey, Sub A, I need you. It’s okay if you get multiple subcontractors underneath you as well’? I’m curious about that.
Justin Escajeda: Yes, that is correct too. To be perfectly honest with you, I think the public sector is going to have to start being more lenient. Anybody can bid on a public job, but just because you’re low doesn’t mean you’re going to get the job. If the bid spreads too much, you’re not going to get your bonding. The architect could deem you a non-competent contractor that doesn’t have the history and the resume, essentially, to do the job. So you get thrown out just from that.
Justin Escajeda: Why do we do public work? At least in both of our masonry companies, we’re very heavily involved and always bidding public work. Why? Because it’s a mountain of paperwork. You’ve got to get your bonding. Early on, I remember putting my house up to the surety company to do certain jobs. The barrier to entry is super hard. I like that because there are fewer competitors.
Justin Escajeda: How many times have I done a $25,000 little masonry job for a municipality, but the spec book is this big? What could you be talking about? Filling out the paperwork properly is harder than the job. That office staff and all that stuff is why people don’t do it. I think general contractors would probably make that deal faster than the bureaucrats who created these big books of nonsense. That’s my opinion, at least.
Jon O’Brien: With all this influx of work, there’s all this talk of data centers and highway projects, infrastructure funding, and everyone is stretched thin, commercial and residential. So there’s a lot more subcontracting and breaking down the subcontractor packages. How long do you see that lasting?
Justin Escajeda: Well, I don’t know. How long did it take? That’s a good question, because I think of it like this. I wasn’t alive back then, but in the early 1900s, it seemed like everybody was in the trades in some form or fashion, right?
Justin Escajeda: Then the college education movement of ‘you need to do this’ came through. How many years did that take to get all those people out of the trades and get everybody into school? I assume it would probably take the same amount of time, maybe 50 years. I’m just spitballing. It’s not going to be quick.
Justin Escajeda: Think about how long it takes to train a tradesperson, depending on the trade. I don’t even do that much bricklaying anymore because a good bricklayer has to lay brick every day for five or six years to be a good bricklayer.
Justin Escajeda: Pointing, caulking, and cleaning, that’s what I like, because you can train somebody a lot faster. In my opinion, they’re probably going to start engineering brick and block work out of jobs, and I think they really have, to be perfectly honest with you.
Chris Martin: More prefab work?
Justin Escajeda: Yes. Think about this. Look at all these new neighborhoods going up everywhere. I remember in my 20s, every basement was a block basement. You will not see a block basement anymore. It’s prefab walls, poured-in-place concrete walls.
Jon O’Brien: That’s a good point. I didn’t think of that, but you’re right.
Justin Escajeda: We’re still doing block work. We’re still doing block on McDonald’s buildings and little banks and things like that. But how long will that last, too? That might be gone soon. To tell you the truth, Hardie siding has already replaced a lot of our brickwork, even on commercial projects. That’s why I’m happy to be in restoration. There’s no shortage of old buildings.
Chris Martin: You definitely have your hands in a variety of different things within the industry. Again, I’m not trying to blow smoke, but it’s impressive. The ability to see where there’s opportunity, but also being smart enough to say, ‘I hired somebody else to do that. I’m going to let them do that.’ For me, that’s a big takeaway. Not a lot of people are wise enough to say, ‘I’m going to get the hell out of the way.’
Jon O’Brien: And for me, I think my big takeaway is coming right now. Let’s say, for example, I’m a small business owner. I own a masonry company. I’m thinking of buying or acquiring a roofing company in Central Pennsylvania, in Dillsburg. What advice would you give me? It’s a different trade. What would you say to me if I came to you and said, ‘Hey, you did this’?
Justin Escajeda: Well, I suppose I’ve kind of already said it. Are you content with multiplying yourself, letting somebody else hold the reins, and backing up their decisions even when they’re wrong? Because that will happen.
Justin Escajeda: Here’s the thing, too. People have asked me about this and claimed it to be passive. It’s not passive when you have to be able to jump in and get involved at any moment’s notice. A lot of people ask me about buying businesses, and after talking to them and gauging how much time they want to put into it, I tell them to just put their money in the market. The S&P. You don’t even have to research anything. Just throw it all in the S&P.
Chris Martin: Save yourself a lot of headache and effort and failure, right?
Justin Escajeda: Right. Just let it sit for 30 years. You’ll be happy.
Chris Martin: That’s true. Well, hey, Justin, this has been a great conversation, and I really have enjoyed it. You bring such a different perspective to the industry. Instead of just one, there are so many different angles. Thank you for joining us. This has been fantastic. I really enjoyed it.
Justin Escajeda: Thank you very much. I really enjoyed the conversation. Thank you.
Jon O’Brien: Thanks, Justin.
Transcript Jon O’Brien 0:05 Hello and welcome to the Building PA podcast. I am your co-host John O’Brien from the Keystone Contractors Association and joined as always by fellow co-host Chris […]
