Episode 2: The Dos & Don’ts of Owning a Business
with Greg Carter
INTRO: Welcome to the Quit Getting Screwed podcast, where we talk about everything related to contractors, construction, and information to help you run better businesses. The transcript of Episode 2 follows.
Karalynn: Hi, this is Karalynn Cromeens, and welcome to the Quit Getting Screwed podcast. And today, I have an old-time friend and expert in the industry joining me to talk about some lessons he’s learned in the construction industry, Mr. Greg Carter of ICE Residential. Morning Greg, how are you?
Greg: Doing well. Hi, Karalynn. How are you this morning?
Karalynn: Oh, I’m great. Enjoying the nice, cold weather.
Karalynn: So, Greg, tell us a little bit about yourself. Where are you from? How’d you get to Texas, kind of your background stuff?
Greg: Originally from Baltimore, Maryland. I have a significant fire department background, spent 25 years fighting fires and saving lives, and got into construction about 1996 or 1997 when I was a contract administrator for a stucco company on the east coast. That then led me to be headhunted by a Stucco company out of Chicago, which then led me to be placed in Texas. And in 2003, I jumped ship and decided to open my own stucco business and have been doing that ever since.
Karalynn: So, what was your first experience with stucco? How did you learn about it?
Greg: Well, I was a contract administrator for a very large firm on the east coast, and there was another firm out of Chicago that was a very large nationwide stucco company that wanted an east coast vice-president, so they headhunted me away to run operations. And at that point, I had never put any stucco on the wall. I just knew paper, so it was a learning experience to take over their operation and not only run the administrative side but also to learn and run the field side. And that’s how I came to have my own business.
Karalynn: Really. So, you’ll have to excuse me. What is a contract administrator?
Greg: I pored over contracts and handled the certificate of insurance and made sure that, I guess for lack of better terminology, my boss didn’t get screwed by taking out all of those little hidden gems the general contractors like to put in their contracts to make sure that they’re well protected, but the sub is never protected.
Karalynn: Oh, so you’ve been doing this “Don’t Get Screwed” stuff for a long, long time.
Greg: I’ve been doing it, and I’ve been getting screwed for a very long time, a hundred percent.
Karalynn: I’m curious since you’ve looked at contracts from way back then; what do you think about contracts from the nineties compared to contracts now, having seen both?
Greg: Well, you know, the AIA contract has been standard for quite a long time, and I don’t know in which version they are at, at this point. But I do know that the AIA contract is primarily what most everybody bases their contracts off of, if they don’t actually use the AIA. And what I see, is that general contractors are protected 100%, and subcontractors are left on their own. I see a lot of general contractors that don’t like changes made to the contracts, period. They certainly don’t like their AIA contracts messed with. But, if you don’t pour through them line for line and start to pick up where you have an opportunity to get screwed, um, then you’re not protected. So, I don’t think there’s a general contractor’s contract out there that is friendly to all parties. I think it’s solely centered on their own protection.
Karalynn: Do you think there’s room for change? I mean, based on your experience. You’ve been in the industry for a long time.
Greg: Well, I mean, there’s some good general contractors to work for, and then there are some not-so-good general contractors to work for, but I don’t ever see a way that a general contractor is going to want to give up a little bit.
Karalynn: While there’s somebody that’ll sign what’s out there. Right?
Greg: Well, let’s put it this way. I mean, if you, in the competitive commercial market, you know, when everything is hard to bid, and 10 stucco companies are bidding on a hotel, first off, they’re going to go with the lowest number. There’s no loyalty. They’re going to go with the lowest number. And then once you get that job, you have no choice but to sign the contract; if you don’t sign the contract, they’ll just go to the next guy. So, you’re kind of in a bad position where if you don’t sign it, you’re out. I’ve made changes to general contractor’s contracts for years. I had exhibits that I would submit along with it that had standard items that I wanted to have in there, and I don’t recall anybody ever just accepting my changes without huge problems attached to them.
Karalynn: Once you made changes, would they hire you after that on another project?
Greg: They may. They may accept some of the changes, but in most cases, um, after I sent the contract back with my markups, I was informed, “Do not mark up the next contract.” So, I just never really saw where there was any give and take at all. I think it went from reviewing the contract line by line word for word to realizing that I should just sign the thing because they’re not going to agree to any changes. So why waste three hours going over a contract? Just sign it and get it back. And I think you learn this, you know. Your relationships, if you build a relationship like what we had with one or two GCs in Houston, you know, I didn’t like the contract, but I didn’t really have any major problems getting paid from them. And ultimately, that’s what you care about at the end of the day, is just getting paid.
Karalynn: So, tell me a little bit about ICE Residential.
Greg: Well, primarily, we focus on strictly residential stucco repairs. Back in 2014, my wife lost her job as a researcher, and I thought that I needed to find a different way or an additional way for some more income. So, I decided to open up repairs, and it was a halfway decent year, and I continued to build on that. Six years later, I managed to convince my partner, Paul Ivory, to get away from the commercial. No more hotels and shopping centers, and let’s just focus on repairs. So, we have 6 to 8 crews working 12 months out of the year, non-stop. I like repairs. I get my money, half my money upfront, and half on completion. There’s no retention, there are no problems getting paid. We do about a hundred jobs a year, and the stress level compared to working with a general contractor is zero.
Karalynn: Really? And you write your own contracts too, right?
Greg: Well, I wrote the basis for the contract. Then I had an attorney tighten it up, and over the last, maybe three or four years, I’ve used your office to tighten up the contract even more. Every time I get kicked in the ass, I learn. And then I go back, and I contact my lawyer in your office, and I have Courtney draft a clause that we can put in our contract to protect us from getting kicked in the ass again. So, our contract is reviewed at least twice annually, and we probably add something in there every single year, just to continue to protect us. I have an eight-page contract, which is maybe a little bit much for a residential repair guy, but I have an eight-page contract followed by A, B, C, D.... five exhibits that are attached to it. So, I think that we probably are protected better than just about anybody in the entire city.
Karalynn: So why do you think the residential market is less stressful than the commercial market?
Greg: Well, let’s see. I can start a job on Monday, and I’m usually finished 7 to 10 days later. I get a deposit upfront, which covers my expenses. So, the worst thing that can happen to me if I don’t get paid on the back end is losing my profit. I think that dealing with people as a whole, you know, homeowners that need to have their own fixed, they’re happy to see, you know, you can adjust your schedule as needed to suit them. I don’t have to work around other trades. I don’t have to deal with the general contractor in meetings and being pushed. I’m my own general contractor. So, we’re the expert on the job site, and I don’t have to listen to an architect. I don’t have to listen to an engineer. It’s just, it really is stress-free compared to having to deal with a commercial job.
Karalynn: I’ve always heard that nobody wants to deal with homeowners because they’re so difficult, and that’s why a lot of people end up in the commercial market. They can’t make a homeowner happy. Have you ever had that experience?
Greg: Well, listen, every single year, there’s going to be some homeowner that no matter what we do, we just can’t make happy, you know. At least one time per year. And I think that one of the things that people have to realize is you can decide whether or not you let that bother you or not. You know, when I go to sleep at night, I go to sleep conflict-free. And that’s the most important thing, you know. Sometimes, you know, we get screwed because we have to paint a door that isn’t in the contract, we have to repair something that wasn’t in the contract, or the homeowner didn’t understand something and thought it was included. And you have to take a look at it and say to yourself is an hour’s worth of work, worth fighting for days on end. So, our philosophy is we just simply do it. You know, not to the point of being abused. I’m not going to paint 2000 square feet at no charge. We don’t get abused, but it doesn’t hurt to put a smile on your face and say my pleasure and do a little extra. And at the end of the day, you know, we get paid on time. Everybody’s happy, and we get a good review on Google instead of a bad review. And I think being conflict-free makes life a lot easier.
Karalynn: So, having been in the construction industry for so long, and just like what you mentioned, fixing things that you not necessarily should have, but I have a lot of young, new contractors out there that pride is a big issue when they’re starting out. And you’ve been both commercial and residential. How much should you let your pride control your decisions?
Greg: Ha ha, well, I think as a young man, I definitely let my pride control my decision, and as I’m getting closer to retirement, I realize, you know, what’s more important. You know, like I said, going to sleep conflict-free is huge. I don’t want to lay in bed at eight o’clock at night, worrying that I have to fight somebody over, you know, painting a door. What does it cost me at the end of the day? A little bit of material, a little bit of time. But the peace of mind is worth 10 times more than that. Now dealing with commercial, you know, you can’t give away the store in commercial. If you require a change order because it wasn’t on the blueprint, you absolutely, positively have to stand up for yourself because you’re not talking about $200. You’re talking about thousands of dollars. You’re talking about an extra week. You’re talking about having to pay your sub labor. They’re not going to just do it for you for free. So, you know, you have to draw the line between commercial and residential. If this were a residential new construction, then I certainly wouldn’t be giving away anything for free because everybody understands upfront what your contract states based on blueprints. However, when you’re dealing with a repair, sometimes people don’t quite understand. I know that they don’t read their eight-page contract. I know that they don’t read their stucco proposal word for word like they should. So, you know, I just have to say to myself, what does it cost me to have a little peace of mind to make sure my customers are happy. You know referrals in my business are everything. 90% of everything that I do is real estate agent-based; you know, homes are being sold, there are problems, and they have to be fixed. So, do I really want to piss off a real estate agent that’s going to provide me with 15 jobs throughout the course of the year? Absolutely not. So, I’ve learned as I’ve gotten older, don’t let pride drive my decisions. Make my decisions based on how I feel, what is it going to cost me, can I sleep at night, and what is this going to do to my referral base?
Karalynn: Yeah. I mean, I think then I was the same way when I started out. No, you’re going to pay me everything, you know, you’re paying now, or we’re going to go down the road together and fight this out. And then I lost a couple of times. And then I realized, you know, sometimes it’s not worth getting everything you want just because you want it now, or just because you said so.
Greg: Well, listen, you know very well, the last time we let our pride get in the way was over a $3,000 bill. And we were right. 100%. We were right. So, a year and a half later, $40,000 in legal fees over a $3,000 bill sitting down with the judge; walking away from that... It was a hobby because we were making a lot of money, so we could afford to spend a little bit of money to chase it. But at the end of the day, it got the best of us, and it was a hard lesson to learn. Now, will I let everybody get away with not paying me a $3,000 bill? I mean, don’t think that we’re a pushover, but I may not drive the ship as hard as we drove that one to try to collect it. You know, a simple lien and maybe a foreclosure, but, um, that’s a hard lesson to learn. So sometimes you got to put your tail between your legs, eat a little crow, and walk away. Right?
Karalynn: And I think it happens to all of us, right? All of us at some point in time. And the whole point of this is to try to stop people from getting those ass beatings upfront or at least make them a little less common. Now kind of changing topics here. I want your opinion because I know stucco is getting a bad rap out there. What do you think of stucco as a system, as a whole, and is it something people should feel safe putting on their home?
Greg: Well, I live in a stucco house. You know, four years ago I built, I built my home up on lake Conroe. It is stucco and stone on all four sides. I’ve had it caulked and sealed twice, so I keep with my maintenance schedule. I believe that stucco is one of the most beautiful finishes. It’s one of the most universal finishes to do things with. In a brick home, you can’t have the architectural details that you can with stucco. A HardiePlank house: I mean, you’re not going to build a million-dollar home and put HardiePlank on it. Let’s face it. That’s going to look cheap. It’s going to look like you took the easy way out at the end, and your home is not going to look like a million dollars. The most important thing was stucco was you’ve got to have the crew do it right the first time. You know, it needs to be waterproofed. You need to maintain the integrity of the waterproofing as you’re installing the additional components. You need to make sure that the customer understands that every two years, the caulking needs to be replaced in order to maintain waterproofing around the windows. So, if you could keep with your maintenance schedule, you can monitor your cracking. Cracking is normal. I don’t think there’s a better system out there as far as the look and what you can do with it.
Karalynn: It’s probably the oldest system known to man, right? One of the oldest systems.
Greg: Brick might beat that, you know, way back to the settler’s days. But it’s certainly been around for a long time, and if it’s done properly, I don’t think there’s anything as beautiful as stucco.
Karalynn: So, is ICE residential only in Houston? Do you go throughout the state? I’m just curious.
Greg: Well, for our repairs, we are Houston and surrounding areas. So, we’ll work as far north as, as Willis. We’ve done work as far Southeast as Galveston, but it seems that most of our work is centered around and inside the loop. That seems to be where we get 90% of our work.
Karalynn: Yeah, I think there’s going to be a lot of it because I think, in my opinion, from what I’m seeing is that some of these townhome builders don’t spend the money to have the right crew.
Greg: Well, it’s funny because a couple of weeks ago, I was in a newer development, south of NRG, and we were repairing the terrace. And while we were on the terrace, we were watching townhomes being built a block over. And I looked at my guys and said, “In 12 months, there’s your next job.”
Karalynn: Exactly. And that’s such a bad thing. I’m watching around here, and all these townhomes are now going up. I’ve had that experience with a particular home builder that, you know, I had several clients that had issues with that builder.
Greg: I know that home builder.
Karalynn: Exactly. And so, what he did instead of paying more money to get the right guys to install because it is a great finish, he just took it off, and he’s putting up metal siding or HardiePlank, and it’s not nearly as pretty or aesthetically pleasing to the eye.
Greg: Well, I think that builders miss out on the proper way to do this. Spend the extra dollar or $2 a square foot upfront while you’re building to make sure that it’s waterproof and it’s done right. Spend the money upfront. I know that it’s hard to pass that cost off to your homeowners, but you should because five years down the road, you’re not spending legal fees to defend yourself because you built it wrong. You know, 12 months down the road, you’re not having to repair something because water got inside. So, I think that, um, and I say this for commercial GCs when they’re building hotels and residential home builders, I say to everybody, spend the money upfront to have it done right, and it’s going to save you a ton of money on the backend. But they just don’t seem to think they can pass the cost off, and I know that they can.
Karalynn: Well, yeah. And they think they’re going to sell it, and it’s not going to be their problem. The problem is that a lawsuit is viable for a long time, especially if you have delayed defects like the water leaks in from the stucco being bad and rots boards. And then they have up to 10 years to find that. So, you know, you’re way better off doing it better on the front end than having to deal with us on the backend.
Greg: How do you sell that?
Karalynn: You know, the best way I can sell it is, with this particular home builder, because I’d have some clients that have moved forward with litigation, I sent him some very detailed stucco questions about that I consulted my expert on. But if he answers these things negatively, which he doesn’t know, it’ll be clear that he didn’t do any diligence when he hired these guys. And then it’s not just fixed the house and attorney’s fees; It’s fixing the house, paying attorney’s fees, and dealing with triple damages if I could prove that you didn’t even do a scintilla of work, make sure that it’s moving properly.
Greg: Well, the one thing that everybody, every builder that’s listening to this podcast should understand is that when a repair company’s involved such as ours and I start taking off the stucco, one of the things that I do is I photograph every single thing that we find. So, if it was installed incorrectly, I’m going to have a picture of it. We’re going to have pictures to correlate all the damages due to the incorrect installation, so you’re not going to be able to get away from the photographs. So, again, spend the money upfront to do it right, and then you don’t have to face the problems on the back end.
Karalynn: I wanted to jump back to something you said earlier. You said when you were in commercial, you read the contracts line by line. Did you feel better knowing what you signed, or did it didn’t matter either way?
Greg: Well, when I started reading contracts, when I was a contract administrator, I had 17 typical changes to every contract. Of course, when you put an interlineation in the contract and initial it, you’ve got to put a line for the GC to initial above. So, 90% of the contracts would come back signed, but none of my changes were ever initialed. So, it tells me that they weren’t going to change any of them. Did I feel better about changing them?
Karalynn: Or about knowing what you were agreeing to? Did you feel like you don’t read it, you just sign it and send it back, and you have no idea what it says, or you read it, they still don’t accept your changes, but you know what you signed? Is there a difference between those two, I guess, is what I’m asking?
Greg: Well, I mean, it’s kind of a tricky question to answer because there were a lot of GCs that we had done multiple jobs with. So, if I’ve got GC “A” that I do 10 jobs a year with, and I know that he’s not going to accept my changes, I’m not going to read the second, third and fourth contract. The only thing that I’m going to look for is to make sure that the money is right. Because I know he’s not going to change it. The typical AIA document used to come with a cover letter that stated do not mark up this document. So, you know what’s in the AIA from reading it time and time again. But if you want the job, you really have no choice but to sign it. So, I mean, no, I didn’t feel good about the contracts. I thought that the contracts were one-sided.
In the lifetime of us doing commercial work, and we did a lot of it, we did a couple of million every single year; I think that you may have filed maybe three or four liens for us. And I believe, eventually, we got paid on all but one. We had a church that simply stiffed us on the retention, and there was nothing to go after, you know. We had the lien in place, but there was nothing to go after. No foreclosure. They didn’t have any money. The building was a metal building with a stucco facade over top of it. So, it wasn’t like they built this beautiful church. And then, of course, the big one that we had was not being paid on a hotel in the Woodlands because stones were falling off.
You know, we went through the contract word for word, and we picked out everything, and it was proven that, when the GC changed their scope of work from doing an all EIFS hotel to having to put stone on, they forgot to change the steel stud framing, so there was a higher tensile strength, and the weight of the stone couldn’t be handled by the wall. Now, you would think that that was an easy thing to prove and that we would be able to collect our retention, but we had the GC going against us because their client was the hotel owner, and they wanted their retainage. So, when I say that the GCs aren’t looking out for you, I mean that they expect you to be part of their team when you’re bidding, you know. So come on, pal, give us the best price you can. We’ll be a great team together. But when the chips fall, they only care about one thing, and that’s their client so that they get their money. So, you’re on your own. And at the end of the day, the insurance companies step in and state, we’ll pay X because it’s going to cost us X to litigate, whether you’re right or you’re wrong. So, um, no, I don’t feel that there’s a reasonable contract out there for any subcontractor to sign unless it’s his contract. And there’s no way a GC is going to sign your contract. I can assure you of that.
Karalynn: I agree. So, having been both residential and commercial, what do you have to say to somebody like you, 20 years ago, 25 years ago, starting out, or whenever you decided to start your own thing- what would you tell you then?
Greg: Well, let’s see, you know, my advice first off; you’ve got to find a good attorney, you’ve got to get your charter set up the proper way, and you’ve got to get your operating documents created, so you’re protected upfront. The second thing is to spend the money for good general liability insurance and get an insurance policy that will pay to defend you if you’re sued. Most people starting out don’t have deep pockets, and if you mess up and you get sued, you’ve got to be able to have an outlet to go to. Otherwise, you’ll wipe yourself out. Have a year’s worth of operating expenses. Make sure that you’ve got that in the market. This is a flooded market, and if you come to start to work tomorrow in my industry, and you think that you’re going to get business and be a force, I can tell you you’re 100% wrong.
You know, Paul and I were in business together for 14 years. We survived longer than most partnerships. Most partnerships, they say, are good for three to five years. We survived 14 years. The last five to six is when we really started making money. And I’m talking serious money, not just comfort, you know, we pay the bills. But it took us a long time to get to that point. I will also tell you: don’t ever talk bad about a competitor. I believe that there are three people in the Houston market that provide quality repair service, and I will tell you precisely who those three people are. I speak to my competitors, you know, they call me, you know, we are always on top of who’s busiest or who’s not. We refer work to each other.
So, if I’m talking to a homeowner that says my bid is being compared to two of my competitors, and they tell me who they are, I have no problem with saying, “You know what? They’re two of the greatest competitors I have.” Without good competition, you can’t stay in business. If you’re working for a general contractor, don’t lie. You know, if it’s Monday morning and half of the crew can’t show up because Sunday was a party day, don’t lie to them. I promise you when you’ve got 300 subs on a job site, and there have already been 15 flat tires on a Monday morning, don’t be the 16th. You know, if you’re working on residential repairs or residential buildings, don’t lie to your customer. If you make a mistake, own it, fix it, move on, learn from it. And by all means, don’t fight with a customer. You’ll never win the fight. You know, you may get paid, you may get off the job, but then a Google review pops up, and it says what an asshole you were. And when that happens, you don’t get rid of that Google review. So, I would say that. And then I would say, if you have an attorney, make sure you understand what you’re going to spend on a case. Go in and figure it out ahead of time because you don’t want to end up $40,000 out two years later when you could have walked away a lot earlier. So, those are the things that I would say, and this is all from experience, you know.
Karalynn: The hard-earned kind.
Greg: The hard-earned kind. When you get your gray hair, you know, you finally stepped into that position of being a lot wiser. So, I think that Paul and I have learned a lot over the years and, I believe that if you just stick to some general principles, you can have a really good business.
Karalynn: I agree. I agree. And thank you for all that great advice. Thank you for being on the podcast. I appreciate it.
Greg: Well, I appreciate you guys. I use your firm for a lot of stuff and, as a matter of fact, I was your very first client. If you recall, when we filed a lien for not being paid back in, was it 2003, when you had first passed the bar; You filed a lien for me when I used to have River Oaks Stucco Services, and there was a guy in the Woodlands that you filed a lien on for me. So, we’ve been together for a long, long time.
Karalynn: We have. We’ve learned a lot of the same lessons. Well, I’m glad to see that you’re happy, have a beautiful house, and are enjoying life because that’s what it’s all about at the end of the day.
Greg: That’s what it’s all about. Enjoy life.
Karalynn: Yes, it is.
OUTRO: Thank you for listening to this episode of the Quit Getting Screwed podcast. I hope you found it helpful, and if you like what you hear, please like us and follow our podcast. Do you want further information? If so, you can find us at subcontractorinstitute.com. We’re also on Facebook, LinkedIn, and Instagram, and the book is available on Amazon. Tune in two weeks from now for a new episode. Thank you.