Nailing Your Numbers: David Gerstel on The Career Toolbox Podcast

Welcome to ProTradeCraft’s Career Toolbox. I’m Fernando Pages, and I’m here to help you turn your day job into a career.

Today’s guest is David Gerstel, a former general contractor and author of numerous books and magazine articles on running construction businesses.

In my early 20s, I was working for a contractor and doing side jobs. I liked the side jobs because I made more money and enjoyed taking charge of the project. Eventually, my side jobs became the main job, and I found myself becoming a contractor. Whereupon, I began to learn a new trade–the business trade.

I made many mistakes.

Then an article came out in a popular magazine, and it changed my life: “Running the Company,” by David Gerstel, my guest today. The article encouraged me to make one powerful move and a change in mindset. It advised trading the toolbox for a briefcase. The hammer for a calculator and the saw for a spreadsheet.

The concept of the briefcase as a new toolbox and business as a new set of trade skills launched me into a stage in life. I took these skills and the new toolbox that I had and began to learn and enjoy them, the way I learned to enjoy hanging a door, learning to nail trim without leaving a mark, how to frame. Essentially, I took it on with that same love of craft with which I had done with the actual construction.

David – whom you will hear from in a minute – is not much older than I am, but I have always regarded him as a mentor. His book by the same name, “How To Run A Successful Construction Company” remains a best-seller. It’s a little outdated (it’s been thirty years or more), but it contains all the essentials needed to go from tradesperson to businessperson. You’ll have to add some computer skills and social media marketing, but that’s about it.

Since his first book, he’s written a few, including most recently “Nailing Your Numbers,” a brilliant guide to developing a reliable method to price out your jobs and make a profit.

Good mentors give direction

So, here’s David Gerstel, a sage of success and advisor to the construction industry telling me how he got into the construction industry:

It wasn’t as if I were struck by inspiration, I was stumbling along in a direction that I’d chosen, and I happened to get lucky and turn a corner and find construction. I finished college and resisted some professors who wanted to send me along in academic careers.

I told them, you know, I didn’t want to continue doing this for now, at least. I wanted to learn to work with my hands. I had no idea what that meant. I had never worked with my hands beyond delivering newspapers.

I think I had the idea I wanted to do physical work because I was an athlete in college—not very high level, small division III—and I wanted a work-life that somehow incorporated physical activity.

I somehow had that romantic notion that working with my hands would fulfill that desire.
So I headed off to work with my hands and I got a little lucky as I encountered the trades, I was trying a bit of this one and that one, electrical, sheet metal, and then I got really lucky. I became friends with two guys who were incredible carpenters, brilliant artists as well as fantastic craftsmen, and at one point one of them said,

“Look, Dave, stop tinkering around. Stick with carpentry, and here’s why. You’re going to eventually become a lead carpenter, you’re going to have to work hard to get there, because you’re not super talented, but you will get there, and you’re going to like that role. The lead carpenter runs the job, and I know you, Dave, you’re not going to be happy unless you’re running things.”

He was right, and I stuck with carpentry. It was a pretty hard path, I had to work through a couple of really hard recessions where there was almost no work available. 
Eventually, I got to the point of being a pretty good carpenter and that led to my being a general contractor, really, as a way to find work. And here we are today.

Ain’t that the truth. Many of us get into general contracting just as a way to find work. We are hiring ourselves to create a pipeline of steady income. But hiring ourselves may not always be hiring the most qualified person for the job because we typically know nothing about starting or running a business when we set out.

The hardest part of becoming a businessperson is believing you can do it

As you went from carpenter to business PERSON, what were some of the hardest or most surprising transitional steps from wearing nailbags to running a business?

There was really only one.

I’ll preface by saying, once I got going, probably everything was hard, in a sense, but I like HARD. If I didn’t like it, I wouldn’t be where I am today. In a way it’s a good habit, in a way it’s a liability, but that’s the way I’m built.

The hard thing was realizing, “Hey, you could give this a try, you can do it.” and I thank my wife for delivering that understanding.

Basically I was unemployed. I was a union carpenter. Unemployment down at the union hall was in the high nineties. I wasn’t going to be one of the ones who was working, that’s for sure, I wasn’t far enough along, my skills weren’t enough developed to be in that small group who would continue to enjoy employment.

And I really didn’t know what to do, when my wife said to me, “Why don’t you get your license and become a general contractor?”

I resisted the idea. I had no inclination to become a business person. It just seemed to be a world that I couldn’t even begin to approach. And she said, “Look there’s probably about five million contractors in the United States, and you’ve probably got enough moxie to be five million and one, so why don’t you give it a shot?”

And I did. And again, I got lucky.

I chanced into some fabulous mentor, particularly a pair of books by a guy who was reality good at bidding and estimating. He worked in the commercial world, not the world I was in, but from his books, I got a really good framework for bidding and estimating which I think is the real heart of any construction business, they’re skills you must have.

It got me going in the direction of developing my own systems, and that is my way from the beginning. I learned how to stay out of bad jobs, steer toward good ones, and get the numbers right on the jobs that I did take on.

Bidding and estimating are the most important skills you can develop

That’s an interesting aspect of construction and remodeling as a profession because most other products or services are priced after the fact. 

You know what it costs to build an iPhone because you’ve already built a prototype and you know you have a profit built in because you’ve added it to the cost and you know what your costs are.

But you’re kind of always living in the future in construction, aren’t you? Always trying to figure out what your costs are going to be and then giving a price based on something that you haven’t constructed yet.

What you’re saying is true. I think the goal for developing bidding and estimating skills is and should be to be moving as far as you can toward the kind of conditions you enjoy when trying to price manufactured products. And there war ways to do that. 
Basically, you need to get complete and accurate subcontractor costs. That can be done, I have a whole chapter on that, there are forms for doing that.

You must get particularly good at nailing the numbers for your own crew and employees. You can get to that also, using what I call a labor productivity records.

Unfortunately, very few to none guys in our industry do that, at least at our level, at the residential level.

I interviewed about a hundred guys for my book, Fernando, one of them had actually gone to the trouble of systematically nailing down productivity numbers for these crew members, guess who that was? It was you. You were the only one! I was astonished by that.

Finally, you have to be able to accurately allocate overhead, and that’s a somewhat controversial subject, but I think there’s a way to do that very reliably, and I’ve outlined that in the book.

So my elevator pitch is figure out how to calculate sub costs, crew costs, overhead, relying on the past as you say, relying on records of the past. Or relying on people to produce the numbers for you hopefully on the basis of their past experience (that would be the subcontractors), but regardless, set it up so they have to stick to the numbers that they gave you. There’s no way out. They can’t tell you “Hey, I left that out of my estimate, so you have to pay for it.”

So, there you are. that’s kind of the nub of it for me, and I like your point about the difference between guessing the future and estimating based on the past.

The goal of construction estimating must be producing accurate numbers based on past experience.

Start tracking your production now and you'll save a lot of estimating mistakes later

Should carpenters on jobsites right now develop new skills toward becoming a GC or learning estimating?

Absolutely. If you were to advise a young person to do that, you’d be giving them fantastic advice.

This is not self-serving, I’m not selling my book, I love it when people buy it and make use of it, I don’t make much money on it, but that’s not important to me anymore.

My advice is to buy the book, read the chapter on labor productivity records, start making records of your own productivity—how long it took to set three doors of a certain height, or how long it took to frame up 46 feet of wall. Start building those records for your own productivity right now. That will give you an incredible leg up when you go on your own.

I actually advised one of my former apprentices to do that, and he did it, and it benefitted him enormously in his own contracting career, he’s come out of the chutes like a Kentucky Derby Winner.

One estimating pitfall I’ve had is using what I think it SHOULD take me rather than what it actually WILL take.

That’s akin to what I call the ‘Best Day’ trap.

You’re estimating a project, you feel really good about the project, you just had a fresh shot of caffeine, your spirits are up. You need to estimate how long it’ll take to form and pour 186 feet of stem wall foundation, and you inevitably go back to your best day.

Of course, you only get to have your best day once.

Kobe only scored 85 points once.

You don’t want to use your memory of your best day in forecasting what your crew is going to do on a regular day. That’s a pitfall.

Take advantage of downtime now by reading

Is there something that carpenters who are looking to turn their day jobs into careers should be doing every day?

Read. Read everything you can get your hands on.

Read Fine Homebuilding. Read the Journal of Light Construction. Cover to cover every month. Make use of the Journal of Light Construction archives, which is an incredible resource.

Particularly pay attention, by the way, to articles by a guy named Paul Eldrenkamp. He hasn’t written for them, for a while, but his articles are wondrous. You might find my articles are helpful, they’re more recently published, there’s about a dozen of them

But, READ.

And read beyond the industry literature.

Read Harvard Business Review.

Read Atlantic Monthly.

Read the really smart people who are trying to understand the world we’re in and where we’re headed.

Read about macroeconomics, read about how the economy is operating globally, where it is heading what kind of shifts are taking place.

Read, read, read.

And if you can find some smart people who read, have coffee with them, and talk. Test your ideas on one another.

Great advice. I might also throw in there that reading—or listening to—ProTradeCraft and Professional Remodeler are worthwhile endeavors.

So I was saving one question about job interviews that I like to ask. Because hiring is really an art and I like to peek inside the minds of people whom I respect to see how they go about things.

What is your favorite interview question to ask?

I really scratched my head about that, and then I thought, I’m, going to have to work backward on that. I can’t remember the question, but I can remember my favorite interview answer.

My favorite ever interview answer is “Integrity is not like being tall or blonde. It is a job you try to do every day. Nail by nail, relationship by relationship.”

That answer came from an interview you did with me and you gave me credit for stating that answer. If I did, it’s the only poetic thing I’ve ever said in my life.

Haha, I remember now, the question was how do you turn your work into your life’s career?

And the answer is "minute by minute, nail, by nail, relationship by relationship," and book by book. Or podcast by podcast as the case may be.

Homework assignment:

Today’s homework is to begin tracking your productivity for various general tasks, like framing walls, setting doors, or installing vanities.

And read like crazy.

—Career Toolbox is a production of the SGC Horizon Media Network. I am your host, Fernando Pages, and the show is produced by Dan Morrison.