Hey guys, welcome back to another episode of the build project. This episode's a little bit different than most of the others. I think up until this point, the ones that I've released are going to primarily be with architects, designers, um people, trade partners, uh general

contractor. This is actually with a friend of mine or I will call him a friend Reese Barnes of Adaptive which for anyone that doesn't know Adaptive is actually a financial software focusing on

and incorporating AI technology into the

financial workflows of builders and uh vendors. I'm in full transparency I've

been a client of adaptive. I don't get anything for it. Um, if anything, it's

just a really valuable tool for me as

I've uh, you know, grown the company and scaled and, you know, good financial books are the foundation of everything in this industry. But, uh,

beyond that, I found

talking initially to Ree outside of this

conversation to be really, really interesting. Number one, he he is the ultimate personality. He is made for this. He is made to be talking to people. He is made to be in the spotlight. But past that, I think take

myself on the building side of things. You know, we we all live within this microcosm and echo chamber to a certain

extent. Ree, on the other hand, he talks to a

disproportionate amount of builders, vendors, architects as part of his job. He he he

just has such a wide array of

conversations with people that have so many differing approaches, differing perspectives on things. And I was actually really really interested to hear that, especially as to what he

finds to be most successful or the common threads that are successful between different people, different uh

approaches, different industries and

things like that. Uh, but great episode.

Really enjoyed the conversation. I was also on his podcast. Be sure to give it a listen.

>> You're hot. Mics are hot as we're rolling. >> We're rolling. Um, Mr. Mulantine, I

appreciate you, dude. >> I appreciate you. >> Yeah. >> I am glad that we get to turn the tables a little bit. We'll see how different the tables actually are this time around, but uh I was just on your podcast. >> Yes. Um, and now it's my turn. >> That's right. >> So, >> that's right. This is going to be great. This will be easy. Just conversation. That's all it is. >> I know. I know. And when it's when it's casual conversations about people that

>> or from people that are deeply entrenched in it, but also care deeply about it, it's such an easy thing. It it

it doesn't require much effort and if anything, it ends up being fun, I think. >> Totally. >> So, that all being said,

>> tell us who you are. Yeah. Yeah, you do.

Go for it. >> Beautiful. Okay. So, my name is Reese

Barnes. Um, professionally, I am the

head of construction network over at Adaptive. Um, I'll explain a little bit more about that. Um, personally, I am a

husband to my beautiful wife. Um, we've

been together for about 10 years. We've been married for the last two. Just crossed our 2-year anniversary. Um, >> congratulations. >> Thank you. Thank you. Um, no kids yet.

Um, we've got a British lab. I love

British labs. I love training them. I love hunting with them. Um, our current lab, she is much more of a domesticated

house dog than she is a hunting machine.

Um, but she's still great. Um, currently

reside in Boston. U, my wife and I just moved out here. We had a lot of lot of um, travel uh, or moving rather. We um,

moved from Denver to Boston. Um, and we

can get into that if that's interesting. Um, >> I always forget that you were in Denver. I don't. >> Yeah. >> Yeah, we were in Littleton. >> Yeah, we were in Littleton, Denver, Littleton for 5 years. Um, my dad's a custom home builder up in Winter Parks. We spent a lot of time in Grant County. >> Um, that's right. >> Yeah. Yeah. Um, >> so do you know where Lions is? >> Uh, yeah. So, it's west of Boulder, isn't it? South Boulder. >> Northwest. North basically. Yeah. Yeah. Like 15 minutes north. >> Okay. So, 15 minutes north of Boulder. >> 15. >> 15. Okay. Okay. I mean, all those little towns up there, they kind of, you know, everyone just refers to Denver as Denver, but then you've got like Highlands Ranch, Lone Tree all the way

down there, and you've got Arvvada, you know, it's kind of sprawling metro. >> If I wasn't so invested into the community here, I think I would just in introduce myself to people that aren't from around here as being from Boulder, but of course, I got to be stubborn on something. >> Of course. Of course. Details matter. Details matter. >> Um, but okay. So, we can we can go a couple paths here. We can go we can go deeper on the personal side. We can go more on the professional side. I'm happy to to go deeper on either. >> Well, I always feel that they intertwine one way or another. So, >> yeah, >> you you have ties to construction >> very much so. >> And maybe talk a little bit about that and then how I'm I'm assuming Aaron,

correct me if I'm wrong, but that inevitably also led to for you to be more inclined towards certain professional uh trajectories than would be otherwise. >> Love it. Um okay, so 100%. So, um my dad

is well, he's actually wrapping up his last project. He's getting ready to retire. Um but he's been a custom home builder for the last I think what six,

seven years. Um before that he was an

education, so he was an industrial arts guy, meaning like shop. So he started out with like welding, drafting, building, construction at a rural high school. Then he moved uh we were from central Nebraska. >> So then he instead of commuting to this rural high school, he moved into the city and um started teaching industrial

arts or tech education at the middle school that my sister and I actually went to. Um, so that was cool having my dad as a teacher. Um, and then from

there he got into like like STEM education with community college systems, stuff like that. This isn't a podcast about my dad though. Point being is where did I my ties come in is he was always in education. So he was always doing like summer projects and stuff like remodels. We flipped houses. There

were just like little side projects like you know sidewalk pores and roofing projects and egress windows and stuff like that. So, I was always involved in it and I hated it. Like the plague, like

swinging a hammer, like screing

concrete, tearing. I hated it. Granted, I was built for being a laborer. Like, I'm just I'm I'm like a big guy. I can swing

a 12B sledgehammer if it's even 12 pounds or if it's something else. Like, no one's business, right? Like I'm that guy. But I just absolutely hated like >> You look like you're from Nebraska. like >> 10,000% 10,000%. A lot of beef, a lot of corn, a lot of potatoes in my upbringing. >> Um, but so anyway, so I was always a part of construction, but I just like resented it. And I don't know if it was like the like your dad does it and he loves it, so you just like resent it. I couldn't quite put a pin in it there. >> But then when I uh graduated from

college, I moved out to Boston. That's

where like my first love for Boston came from. I lasted a year and then I moved back to Omaha, started working at Builder Trend because my dad was using

Builder Trend and he was like, "Hey, we went to the Builder Trend University like we think it's a pretty cool company." It was like one of the first builder trend universities they did and

um he's like, "I think it's a pretty cool company. A lot of guys like you." I was on the sales path. Builder Trend was known for their sales program. Um, so I started working there and that was kind of that bridge into my background being

in construction and selling software to

contractors. And I found actually like a really passionate niche of mine to like

double into because a lot of the builders I was talking to reminded me of my dad and um it was just really easy

for me to like care. It was really easy for me to care and have conversations with these guys and talk solutions and problems and that's kind of where it started. >> I think that I've kind of been on both sides of it. I haven't really had to sell two builders that much or anything, but um because I was a sub for a brief period of time and I think that >> the ability for people to talk

vertically along that whole trajectory is actually not an easy thing. Um to be

able to have the high level business conversations but then also just relate with absolutely normal salt of the earth amazing people is >> it's a skill set nonetheless. But also as a side note, Mr. Barnes. I feel like it's only appropriate at this po moment to say he's probably the next guest on this podcast. Um, I would love to hear his trajectory from teacher all the way to a builder >> 100. My dad, oh my god, it' be like it'd be like an hour plus long podcast, but

yeah, I'll let him know. We can get him on >> appropriate. Yeah. >> Um, >> okay. So, the tech center, did you go to school for tech? >> Oh, no. I was

um I was I was a I was a hell of a college guy, but not from the studying standpoint. Um I was very much a social

guy. I actually So the program my dad started um with the community college system. There was a track for um like

medical, it was a dual credit program, so I could take classes at the high school and they would duel for college credits. So I actually went into college with 32 credit hours. Um so I was

technically a sophomore when I started and I wanted to be a dentist. Um, and I

was not studying the way I needed to for biology, which is a weed out course. My first semester I got like a 1.1 GPA. I

was loving the social aspect though and networking and talking to people and drinking beers and having fun. Um, so I

did not go to school for tech. I landed on an advertising degree because that's frankly the major that would uh get me

out of college the fastest considering the courses that I had. Um, but yeah, so

I did not go into tech. I just knew that's where the money was and um I wanted to sell. It was actually kind of like an introduction into tech from one of my fraternity brother's dads who was in tech. >> So >> yeah, it all worked out. I always say like going to school like specifically to learn something I'm not super bullish on. If you're going for networking and you're that type of person, I think it's invaluable if you use it right. I mean,

one of my favorite things, uh, especially because I've talked to a few younger people here in town that are like debating the trades and versus other like professional avenues is like as long as you have the forever a student mentality. Totally. >> You know, you you learned how to sell. You learned how to talk to people. That is learning. And, you know, whether or not that platform is done or measured in the form of a standardized test or not, like that's kind of irrelevant at a certain point in time because, you know, careers happen one way or another. >> Totally. Um, I it's interesting to hear

you say that too cuz maybe that's a commentary on why you and I have gotten along as we do cuz I specifically remember when I went to college. I wanted to do the opposite thing of my father and for me that was being a lawyer. I actually my first major was economics and that was just only intended so that economics people tend to test really well to go to law school. >> Lo and behold I could never imagine myself as a lawyer. Nothing against lawyers. Actually, my lawyer is a good friend of mine, but I I would not be a happy individual on a personal level if I did that. >> Um, fascinating though. Okay. So,

>> also consuming or uh assuming that

there's this is a very localized market podcast that I have here. Um, maybe they're not aware of your podcast. You host a podcast. >> Um, tell us about that. tell us the

actually I'm interested to know what was the like the thought motivation behind it um and then specifically what has your experience been in that all starting yeah for sure okay so the podcast is called builders budgets and

beers um it's a podcast like totally

focusing on builders financials and

beers has kind of trickled off it was kind of bizarre so here's the story actually good little segue so um our

co-founder CEO and I we were at the International Builder Show in Vegas, April of 2024. No, not April. It would

have been January, February, doesn't matter. Um, and we like this was that

was like our first full year of selling the product. We had just raised a series A um effectively like you raised money

in startup companies and software. Um,

and so we were like on a high, we were getting traction and it was like everything was good and we were like, "Dude, we got to get a podcast going." At this time we were working with Mark Williams and he just started his and obviously there's like you know Modern Craftsman and Brad Levit's podcast, right? But no one was really doing it well in the software space and so we

were like literally drinking beers at a at a client dinner and we were like we're going to start a podcast. Um so it

initially started as me and our CEO. Um,

and then from there we like I literally

just did an Instagram with uh Doug Dval at Motif who does all of our produ or producing. And the hardest part about a

podcast is is like being consistent and committing to it. Um, like regular

shooting regular content. It's the same like I guess cliche advice that everyone

gives when it comes to content, just being consistent with it. Um, but some of the learnings that we had along the way were is like Matt, our CEO, and I like we're very good friends. We're very like tight colleagues, but we're very

different. Like I am less structure the

better. I am off the cuff. I am a

conversationalist. I am a relationship builder. And not to say that Matt's not those things, but he's very like rigid. He wants an outcome. He wants it to be structured, right? And he wants all this stuff. So, like we were like trying to balance these personalities and it basically got to the point to where it was I think it was like April of this year. He was like Reese just like own the podcast and take it over. And that was like a breath of fresh air for me because I was like I struggle with slide decks. I struggle with structure like a list of questions. I just want to have a conversation with people. So, I started running with that and I was consistent getting volume and that's where like I started getting DMs

from people and they're like, "Love your podcast. love your content. Like, no slight to Matt, but as soon as he was gone, our numbers like exploded. It was actually like you can like go back. >> I'm sure it's what he actually wanted, right? >> Of course. Yeah. I mean, there's zero hard feelings of this. It was like frankly just like a good decision, right? Yeah. And it was just like recognizing skills. So, I mean, there was a lot that happened in between there. But that's frankly the story is like we were literally at a bar drinking beers. We need to do a podcast. I was literally in uh the Virgin Islands with my wife and some friends and Matt and I we were texting like trying to name it. We landed on builders budgets and beers.

>> Yeah, this is the tieback to the name. Started out we were going to drink beers and rank beers at the beginning of this and like our first like three guests they didn't drink. >> So like we totally took the stereotype of contractors liking to drink beers and just totally egg on our face. >> Yeah. >> Um it's a good name still. Everyone like when we're at trade shows they see the sign and they're like beers like what? >> And we're like yeah we do a podcast. So that's the story. >> That's that's great. I uh I have a

friend that's not in the industry whatsoever, but he was just like, "Man, you're doing a podcast. Like, how's that going?" And I was like just talking about, you know, some people are easier to talk to, some people, you know, you have to kind of walk them through or whatever, you know, cuz it's a podcast, you know, we're supposed to be talking about stuff. And I said, you know, I feel like it would just be so much easier if we went and had a bunch of beers the night before and then just basically wrote down what we talked about and then just sat down again and went through it cuz it would be just as if like the guard is down. So, I I

completely get it. >> Totally. >> Um, so how many episodes have you done now? >> Well, how many have you >> um I think we're I could pull up our numbers. We're We're um coming up on 50

episodes. I think we might have crossed it. I should know this. >> Um this is the stuff I'm awful with. Hang on. >> Episodes I'll try and find it. But yeah,

I think we're over 50. >> Typical sales guy is like just over 50. We crossed 7,000 downloads, so that's good. We get like a thousand downloads a month. >> Um, it's not it's not killer, but we're on the right track. People are listening to us. >> It's a small market. I think that's like another reminder to people is that it's a small market space, relatively speaking. Um, you know, you're you're niching down, which I believe in 10fold.

Um, I mean, I'm even niching down more because I'm also starting local and then trying to branch. Um, >> yeah. So most of them builders, some financial

people I think from the episodes I've listened to, some developers, right? >> Yeah. So, and this is where we can kind of get into the why. And we don't have to talk about builder special the whole time if you don't want to, but >> um when we were like when we were thinking about it, I'm really big on the why. And so like I'm a salesman by trade. Um and like I think people like kind of get the GB's when they hear like sales people. They're like you're going to try and sell me sell me something. But it's really more so about like the why in a lot of that world. So with the podcast that was a very similar approach. I was like, why would we be doing this? Like we can just like get on and like talk to builders, but like

what's the intention? And the intention was to eliminate or lessen the

intimidation that small business owners and builders have around project financials. And how we were going to do

that was was highlight the stories from builders and construction accounting professionals to just start an open dialogue. very easy to have conversation, share the wins, share the losses, tips, tricks that they've learned along the way. Um, to create a sense of community and a way for builders to identify with the same

challenges that every builder has and

just start dialogue around it. Like seriously, make it less intimidating. So, that's where it started. Go ahead.

>> No, I was going to say I I will say I think you guys have done an absolutely great job about it. Like I mean, full disclosure, I use adaptive as well. um that is obviously how we got connected.

But um even beyond that, I think that you know when you're able to consume a form of content that is repeatedly using language that I don't think is as standardized as it should be in like the average business person/builder in the industry,

you know, such as the difference like as simple as like markup versus margin.

Like those two things like need to be discussed and like openly. I think that it helps create this thing like this

connection between people and being like, "Hey, if we all align like this, we're all going to be better. We're all on the same side of the fence to begin with." And I think that by you guys really, you know, making it both an educational platform, but also something where you're telling stories about people to make everyone feel comfortable, I I do think that you've done a really good job at it because I mean, also the financial side of things is I think what most people when they get to running a business, especially when they're scaling, that's where the hardships lie. Um, it's it's on the financial side of things. >> Totally. I mean, and that's this is this

is so I when I this might just be like a sales thing, but like you kind basically like you you have conversations with enough people and you start to understand problems that are happening and you kind of get on these like tracks or these themes, right? And one of my

themes now is is like why would you try

to scale a construction company if you

don't know that you're consistently hitting the margin on the product that you're producing, right? Right. It's like it's like the most basic fundamental business practice. And frankly, like I think contractors forget that they're in business sometimes because they are so heavily involved in the trades. They're very skilled individuals. But when it comes to running a business, they they know that they're making money on what they're doing, but they don't necessarily look at as like an Apple, right? Yeah. Or just to be obnoxious, right? Or any other company, right? And Apple isn't going to scale and invest in building

more iPhones if they don't know that they're going to make X profit on each

iPhone. Right? So, it's like one of

those things where when you have those conversations with builders, it's like

you should know the basics. You should have really solid cost codes that run into an understandable and clear chart of accounts, right? You should be building practices and processes internally to categorize those costs so that you can have financial statements that tell you a story to make make more money on the projects you're doing. So, then you can start to scale. and you know that if I'm doing remodeling and I'm doing 10 units a year and I want to go to 1520 and then maybe pick up a spec, I can have a forecast of what that journey is going to look like and I could be confident that I'm making the right choice. I was just at an event um

for a window vendor of mine and a

sporting event just bunch of people talking and stuff like that and we were I was talking to the owner of the company and he was we were just talking

about like you know inevitably oh like the wins the failures like last week the week before kind of thing and he was just saying he's like it's still a amazes him the different standards for

documentation, especially on the financial side between different builders. And he's talked about like markets like Aspen, you know, Veil, places like this. And he's like, we literally get paper like back of like the notepad type things from some guys doing $20 million homes and then the other guys are using like these advanced like software systems to like project and do all this kind of stuff. And

it's interesting because like

it it's such a source of I mean it

affects the end product too for the people. And I especially as I've gotten

more and more into financials because I am a data person. I think that's one thing that like sets me apart a little bit from some others. I've wondered why do I make subjective

decisions sometimes about objective things when especially when I have all the tools about it. And hearing you recite all of that, it actually made me

think about myself and some other builders that I know too, which I think

provides a commentary on how complicated this is because I make emotional

decisions on our builds because I'm

passionate about it. If I just wanted to

just make money, it I think I would make a different set of decisions. But here's the thing is that I just want to know. I want to know the actual cost of my decisions in the end because maybe I still will make that decision. Maybe sometimes I won't make that decision. That's my brand. That doesn't have to be everyone else's brand, but I will know what the cost of my decisions are as opposed to before when it was like, well, I just want this to be more beautiful. And then next thing I know, I'm 20 grand in the hole at the end of a million-doll project, and I'm like, where'd all the money go? It's really easy to be an artist when you're making money. It's really hard to do it when you're losing money constantly. So,

>> yeah. Uh, dude, I think that's great. And I think I think that's a lot of where my passion for the space comes from is like I think construction is the

most beautiful vertical in our GDP

because it is such a low barrier to

entry to start a small business. It's extremely low margin. It's extremely risky. But the people that come into it, they are very passionate about what they do. And I think the inverse to that is

is they're going to be making decisions, but as long as you arm them with the data, to your point, to know the cost of your decisions, that's a win, right? And

and the other side of this too is like especially being on like the software side, the venture capital side, like it's a very fast-paced game. It's software is extremely competitive. Like when you talk about moes and product, it's like anyone can build anything, right? A lot of your moat, and we talked about this internally, is a lot of the moat in a software company is the team, right? It's like how fast can you execute? But when it comes and it's not that that's much different than a construction company, but you don't have the pressure to grow and scale the way

that other verticals being software do.

So you can take a very passionate group of individuals and arm them with more information and better business practices and they can do whatever they want with that. They can be a $20 million a year custom home builder building four units a year and these extremely high-end luxury products and know that they're only ever going to do four of them a year, right? But then they can look at it and they can evaluate their business and they can look at the numbers and the process and the and the equipment they use, right? And all these things and they can build whatever they want. Um, and I think that's a lot of why I'm I love the space is anyone can get into it. It's it's extremely low barrier to entry. There's a lot of risk to it and a lot of them

fail. But the side of that is is it's driven and carried by passion. So

>> do you guys deal much with commercial stuff or is that mostly staying on the residential side? cuz it's always interesting cuz like commercial is so standardized to me. I was just talking to another builder that's mostly commercial and and he was just like, you know, talking about pay apps and stuff like he was asking me if we do like I don't know anyone that does like AIA pay apps and like for the most part and like I I don't do an AIA format but I do a

pay app nonetheless. Um but what what

differences have you seen on like talking to people about those two? >> Totally. So you 100% see more standardization when it comes to commercial. Um and I think that's just like the nature of the product that they build, right? It's like we're building whether it's, you know, chain restaurant

facilities, right? You hear a lot of that for like light commercial. It's like they build, I don't know, Arby's or Aspen Dental offices or whatever, right?

That's like a very like production type

of commercial. But then you start to get into people that are doing like warehouses or asphalt, right? like more

civil commercial specialty or commercial

electricians, roofers, stuff like that. It is very standardized, but that's just because like there's a lot more at stake. I would say it's like it's not hard for them to get to be like 20, 30,

$40 million contracts and they'll be doing multiple of those. So that just by

default brings a lot more standardization to it. With that said,

I'm just going to go ahead and say it. The most successful residential construction companies that I work with

typically are led by people with commercial backgrounds and the number one thing that the leaders say is the standardization and the processes that they learned in the commercial world translate into residential and they just look at business differently. >> That is fascinating to hear and also

makes me feel better. >> Um, >> yeah. >> Who did you work for by the way? Who are you with with commercial? >> I've only ever worked for myself. Oh, I thought you said you were in commercial. >> I was. Yeah. Municipal. >> Oh, you started a commercial. Oh, sweet. I didn't know that. Yeah. Okay. Yeah. I worked for local municipalities back in

Cleveland. City of Cleveland, City of South Uklid, Mayfield. Um, bunch of different stuff. Specifically doing a lot of permeable pavers. >> Yeah. >> Um, concrete work, stuff like that. The permeable pavers was my big one though. Um, I don't know if you know what that is, but that's that's a rabbit hole all in itself. >> Yeah. Like a paver that lets water go through it. water table issue is a big thing in northeast Ohio. So therefore, you have to like manage it and you know instead of like them rebuilding all the storm water infrastructure, they came up with these like methods to like, hey, how can we force water onto like these big wide open areas and return it to the natural water table instead, federal funds came in for it. So then the cities

all started investing that and I happened to recognize that as a

opportunity and that's definitely where

we saw growth, I guess. And

>> yeah, >> those mulines, they're opportunity seekers. There that's a smart group over there. >> Yeah, don't go that far yet. Uh, we'll see. Um, no, that's um that's also just

fascinating to hear, too, because

there's another side to all this where like, you know, you're talking a lot to

builders, things like that. Um, majority

of the people I've had on my podcast have actually been architects so far. And >> I'm not one of those. I am not an AR.

>> That is for sure. I will say that. >> Yeah. >> Um but you even referenced before that

you end up talking about a lot of the same things over and over again. >> Yeah. >> For me, I've actually almost had to slow down the episodes cuz I was like, hey, I got to like, you know, break this thread almost or else these are all going to be the identical episode, which >> right >> might actually be the point. >> Um >> but it was always about establishing trust between all the parties. Mhm.

>> And I find that fascinating because the

way I established trust in the past was

by all these detailed approaches and things like that through financial recordkeeping and stuff. And I thought

that that was going to be like, hey, here's all the details of this. Why aren't you going to want to work with me? Look at these commercial processes. And I actually was not selected for a rather large project with the feedback afterwards being they

thought that I was too organized as a result of my commercial systems. And granted, if that's the reason that I'm not being uh used, I'm going to sleep just fine at night. But also >> was very interesting. And my takeaway was that I actually needed to communicate in a way that they understood at a certain level the system. >> Totally. >> I didn't take them into the weeds. >> Mh. And I actually when listening to you

talk about like standard operating procedures and stuff like that. I think that your podcast the way you guys talk

about it but also adaptive kind of as a whole. One of my appreciations for it is that it creates low barrier to entry and

also low barrier uh for the user but then also low barrier to entry for consuming the data that it produces which is something that I know I've had to work on a lot. I used to be very guilty of data overload where I'd send out these like budgets with like, you know, 375 line items to clients and

they'd be like, "What the hell am I looking at?" Or like to an architect and like, "Hey, I'm cost coding completely differently than somebody else." Like they don't know. They don't care. Like that's not what they want. They want it in a digestible format. And so what I

actually needed to do is being like, "Hey, just so you know, this is the software we use." I've actually just sent people to specific websites of the software so that they can get like the highle sales pitch because that sales pitch that they invested into is going to be better than what I could say just so you know this is what we utilize this is what we utilize and this is what we utilize and that is why you should trust me. Um that's been an interesting change

for our approach. Um and so I just

wanted to give you know credit where credit is due on all that >> for sure. Well and I think that's like a super interesting point. It's like kind of ties into the conversation in the sense that like historically and you

talked about these like builders will use like Aspen, right? Aspen is just like kind of a fun market to talk about because it's like super um what do they call it? high net or high net worth individuals I think is what is like the actual term luxury markets right insane

homes right 10 million 1520$20 million

homes right and they're sending in invoices on freaking chunks of drywall

right it's like a that happens because

it's accepted right but b when it comes

to what adaptive is doing that was the entire intention was like it wasn't like there were products out there that allowed you to track project financials there's dozens of them out there. None

of them do it in an intuitive way. Intuitive meaning simple way. We get into user interfaces, right? It's how simple the product is to learn and to accomplish what you're trying to do. And because of what we've done with artificial intelligence, which largely

reduces the friction or the tediousness

to understand cost and income, allowing

the builder, the owner to see cash flow

and financial data to make decisions that much easier. Now you start to change the industry, right? You're changing the industry in the sense that a small construction company, a sub$50 million a year business can now start

operating and running financials as if they were a 50 million$100 million plus

dollar organization that's got a huge staff and a CFO and a controller and AP

clerks and people that are in charge of billing and invoicing, but you can do that with a piece of software. And so I think >> you just Oh, go ahead. Sorry. >> No. Oh, I was going to say what you just said, that to me is what's going to differentiate the companies that make it in the next 10 years and the companies that don't. Um, especially because here in the local markets, there's a lot of companies that are transitioning, you know, maybe like uh, you know, the last generation is setting to retire and things like that. But it's um, actually

I think Nick Schiffer when he's talked about the use of AI, he's done like a really really good job in that for me personally, I have trained out GPT

models for pricing. I've trained out chat GBT models for how I want contracts

structured for each and individual trade. I've like you know learned and altered them over like as long as I can

and literally when Chad GPT like came out I forget this is like a year or two ago with like the higher models I just said I want the top one and I will learn every single thing I need to do about it. And I've noticed that some people give that like a negative connotation but instead I try to convey that now I'm

focusing on the important things. I can

produce these detailed contracts without having to have four people on staff. I can produce these detailed financials without having to have an in-house accountant and then a CPA overseeing us all and a bookkeeper and all these other things. That's a cost savings that gets passed on through my overhead. Instead, now what I'm doing is I'm doing pricing exercises for you, trying to figure out how can we maximize your dollar in the form of the design being asserted. And

whether or not people choose to adapt, that shift in attention is going to equal either success or a shortcoming in my opinion. And I think for an industry

that is been so resistant to change,

specifically residential construction, I am absolutely fascinated to see how it progresses. 1,000%, dude. And I so I

mean, okay, so I back to my story. I so

I was at Builder Trend for 5 years and

it was me and a couple others. We stood up the on-site consulting program over there, which is like it was largely like a standard operating procedure-based consulting >> uh service. And the reason I I talk

about that is because when you look at

like the jump from me at builder trend over to adaptive, it was like certainly a big risk. Like at that point, Builder Trend had taken on Bane money, right? They had gone the private equity route. They had thousand employees at the time. They had bought co- construct, right? It was kind of like this big, safe, secure company that I was selling a lot for, like in really good standing with. And then I jumped over to Adaptive, which had raised a $7 million seed round, which is great, but it's not forever, right? We actually went through the Silicon Valley banking situation like 3

months in. That was scary. Um, but we

didn't lose any of our money, which was fantastic. Um, point being is like I made the jump over into adaptive knowing that it was insanely disruptive and

there would be a big risk with selling AI into a very uh tech averse tech

resistant vertical. Now the point is and

I literally did a podcast on this this morning uh with one of our tax and audit

accounting partners and it's kind of like the idea of like the blacksmiths in

1910, right? It's like everyone had

horses, right? Cars weren't like widely used and blacksmiths, they were just cranking out horseshoes just for the example, right? And then Henry Ford came along and he industrialized mass

production of the Model T and everyone started driving a Model T and then the or the blacksmith are like, "Who's going to buy my horseshoes?" Right? First off,

they like nothing like Earth. Like you don't hear these like mass history

reports on all the blacksmiths that were

laid off because of Henry Ford, right? Like you just don't hear about it. What they do? They adapt. They overcame. They became relevant. They picked up other skills. They did whatever, right? But the other side of it is is like when you think about what AI is doing to industries, we'll talk specifically construction accounting. Like that's that's effectively what it's doing is it's reducing and it's taking over the mundane tediousness of the task to get you to the result that you're yearning to begin with on a much faster pace. It's like are there still people that wear clothes from like the 1800s at these like like museums like hammering out horseshoes because they're passionate about the trade and skill? Sure. Do I think that there are going to

be people that are like sitting in their lazy boy after a long day of work like just manually job costing receipts and

invoices because they loved it? No, I don't. So, when you think about like what AI is doing to the industries, it's taking out the work that people have just like accepted and just like bulldoged their way through that is inevitable for them to get to what they're trying to know, which is the data on their company from a financial standpoint. It's a total win-win. And people are starting to come around to it. Like we've got nearly 700 customers at this point. Light turned off. It's a

motion light. I gotta get this figured out. Yeah, whatever. >> Point being, it was probably a cue for me to stop monologuing on this. >> No, no, keep going, man. >> The point being is like AI is allowing

businesses to get the information that

they need so they can focus on the highlevel, high value critical thinking tasks that they enjoy more, likely enjoy

more. Hearing

that is also fascinating to me because

I have messed with how we build a lot.

Um >> are you building through adaptive? >> Yes. >> Go ahead. >> Yes. >> Okay. >> Um go ahead. >> Yeah. No. No. Um >> well more so how do we charge for management specifically is what I'm referring to. uh because for a long time

it was just an hourly thing and then actually just even the timekeeping of that and then trying to there would always be these inevitable uh conversations especially on smaller projects as to like well is that a billable hour is that not a billable hour and I'm like I just spent seven hours that are not billable now discussing that one billable hour this is so much fun what a waste of my time so we actually then transition to just a for sight supers a weekly charge that happens no matter what the production of the project is things like that And the

way I actually determined that number was by estimating how many hours per

week we would be allocating it. And then I was kind of cross referencing that against like salaries or you know fully loaded you know burden rates and things like that. I then had a problem. I

thought we were actually undercharging because what ended up happening I started investing into all these standard operating procedures AI things that take our time and allocated to other things. So now it could be through our standard operating procedures of inspections, oper observations, financial capture, whatever. Instead of my guy having to spend 25 hours on that job, he's only there for 15.

Should I make less money? >> No. >> Because I became more efficient at what I was doing. >> No. >> Correct. Yeah. Obviously, I do think that though there's a lot of people though that are making that mistake and that actually make it harder then for certain companies to assert that as being the value that they're bringing. But I actually then had to pivot away from it. I was like, "Hey, you know what? I'm actually going to do these all as direct costs now." And those direct costs are subject to the exact same

price factorials as would anything else that we are using in our process because

I own those things and I should be

making off money off of not just like, you know, 8% margin or whatever my profit line ends up being. I should be making, you know, 2.1 factor on my software because I own that. I carry that burden. I carry that risk associated with it and things like that. And conveying that is not an easy thing

because you inevitably have these conversations of being like, well, hey, like there's 15 hours of time. Why am I

being built for if you were to do the math like 40 hours? It's like, well, you got 40 hours of production if you wanted to measure it that way and if that makes you feel better. But in other words, the product you got, this is the cost. And so it makes hourly just not a thing in my mind anymore. >> Totally. Well, and I think um you I mean you rais a fantastic point and when

you're talking about like you basically paid for 40 hours that we got done in 15, it's like well then we should be passing that like discount off to the customer. It's like well okay wait a minute like take a step back and think about what that 40 hours actually was. And I'll use the example with like I'll I'll just make like an absolutely obnoxious stat like we'll call it like

90% of project managers that work in

residential construction companies are

part-time project managers, part-time bookkeepers, right? In the sense that

the typical flow is they get an invoice from a subcontractor or a trade or vendor. office manager is going to download that invoice. They're going to print it off or they're going to email it to the person that knows what in the hell that cost is for, what project it's for, how it needs broken out from a cost code standpoint. And now that project manager is sitting down and looking at it manually, bill by bill, and saying, "Okay, 50% of this needs to go to this job into these three costs. The other 50% needs to go to this job and these three different cost codes, and that's going to keep everything square." It's like, okay, well, that's what the original 40 hours looks like. But if I am investing in software that is

allowing my project managers to focus more on what the project management duty is, they still have the influence and the communication, the input, but it's done much more efficiently. Now I might

have a 25-hour delta between what it

originally looked like and what it looks like today. But now that gives me the room as a business owner to start getting my project managers to manage better projects, right? Yeah. >> And that is why you should not be making less money, right? because you are building a better product. If I'm going

through specs on material that's going

in and I'm installing it better and I'm taking that consideration in the design and I'm aligning with subcontractors on a much better wavelength, right? And I'm doing all these things as a project manager should and I don't have to bake in time to do all this tedious stuff. That's a better business. It's a better product. It's a better experience 110%.

And I think that that's a commentary on a a shift that needs to happen in the industry as a whole, especially referring back to >> some of the more traditional elements of the AIA um style because I've only had

this happen one time um since being in Colorado. But it was really interesting where I was kind of being compared against another builder in the early onset stages of things and like you know we were just given highle let's call them you know estimated pricing exercises or whatever and they wondered

why even though my number my end number was actually I think very close enough

to the other person that was being considered for the project they saw that my overhead line item and profit line item were different because it was called out through cost plus they then wanted to know high and I've

always kind of taken the approach that if you have to validate why those numbers are that you're kind of already behind the eightball especially in terms of consumer education marketing all those things being synonyms. >> Yep. But they were then told by the

architect to ask me to see my books and

to see the hours that we were going in.

And that was the advisement of the

architect. And

we are fully transparent. Like that in

itself I have no problem doing. The

problem is if you don't educate them to say, "Hey, that's actually not

consequential because if I still get your project there to cost X, why does

it matter if we do 5 hours, 10 hours, 50 hours, 70 hours?" At that's if we have the same standard and we get you there at the same price point. It should be a product or end product driven conversation as opposed to, you know, all the the weeds in between and stuff like that. And I so I think that there needs to be buy in and an ed through education on everyone else that participates in that process to not

like while it's the builder's job to be focusing on what we just talked about. It doesn't need to be that everyone else is steering people into those weeds that couldn't get out of them if they tried. >> Yeah, that's wild. I have never heard of that. Um and frankly, I don't know how I would have responded if I was a cost plus builder and someone asked to see my books. >> Um >> yeah, >> I would have been to be fair, the client was very nice about it. He's like, "I feel incredibly awkward about this, but this was the advice that we received, but uh we he ended up not asking." >> Yeah. Um that's bizarre. Um looking at

the books. Yeah. I don't know why that would ever I mean I was like, would you go to a sandwich shop and ask them to see their books? Like no. Like >> how much cost would it cost? >> Yeah. Exactly. But and I think that's where like the dynamic in this conversation of like cost plus fixed price is like such a huge conversation. I'm very pro cost plus. Um, but I think

I think generally what it goes back down to is again being able to explain it. And what I do think is is like if you can't justify what you're charging and what your line items are to the client,

um, then you should just rethink like how you're running business. Like I think you should be able to justify it with a clean conscious saying like,

"Yeah, yeah, for sure." Sure, like I can see where you would think that, but like at the Fern Hill experience, like this is what you're getting and why we build the way that we build and how this is going to be reflected in your product. And again, that goes back to like this tail's oldest time, like the number of episodes and YouTubetubes and, you know,

conference events that get held talking

about sales processes and construction is like recognizing those red flags. I mean, I 100% think that builders now are

emphasizing healthier business practices

primarily, maybe biased in my world because I talk about it for a living, but like construction, accounting, and financials is definitely becoming more and more important. They're viewing their business as a business. Um, but

yeah, the see look at my book saying

that's bizarre. Haven't >> Yeah, definitely. Well, uh, so the one question that I did definitely want to circle back to because I I think it's so interesting, uh, especially because like on my podcast, I knew I was going to enjoy it. The one thing I did not expect that undoubtedly has been is such a

platform for me to learn and think critically about what I'm doing on a personal level, at a professional level, and like for the community as a whole.

Obviously, we've kind of talked about like the builder side of all of that, but another question that I actually just got uh some friends of ours are having work done at their house and they wanted me to like kind of like oversee it and like I walk in and I see like, you know,

just different standard practices than we do and they're asking me all these questions and my wife knows that it's like literally my least favorite thing to be like, "Hey, do you think that they did a good job on this?" Like kind of thing. I'm like, it's a very different product and all that, but it's just like, you know, obviously I have some insight as to the industry, >> but I'm biased. >> You having spoken to all these builders,

>> you now go out or say your best friend

is going out to build a custom home, something architecturally driven, >> um, biggest investment of their life.

>> What advice would you give them?

Um, so it has to deal with the last part

of that question, which is the biggest invest in investment of their life. Um,

and I say that like the advice is like

start with clean financials.

I was having well there's just like dozens of them. I was in Minneapolis and I um I went to the housing first clay

shoot. Housing first is like the equivalent like the builders association for Minneapolis. And we went to a clay

shoot, right? like they do those things. Shooting talking to one of our customers

and they had gone through a forensic accounting process to clean up their

books used adaptive. They uncovered $130,000

in duplicative cost on their books.

Meaning that they double booked $130,000

worth of cost, which was great. Like when they found it, right? It's not like, oh, the business is folding. It's like you just effectively like deflated

your profit margin, right? So, it's like you found like we actually did better, right? >> Yeah. >> But the point is this is a $20 million a year business. Like they are a staple in

the luxury Minneapolis building community. Very good business. Been

around for 20 years and they are like

really starting to focus in on financials now. Um I was talking to a guy literally this morning, DM'd me on LinkedIn. Hey, love your podcast. This is great. What do I do? I call him, learn a story. like 15 20 years being an

executive at a luxury home building uh firm in Jacksonville and he's just

started his own business and he's 60 days in and I was talking to him. He's going to be on the podcast so it'll be a cool episode. Um not a client so it'll be totally unbiased but I told him I was like can I give you some unsolicited advice? He was like yeah go for it. I was like, make sure you have solid cost

codes tied to a solid chart of accounts

and you emphasize categorizing your

costs in your first builds so you know

that you're making money on your early products before you start to scale. And he goes, I'm way ahead of you. He was like, my wife's in construction accounting. I totally lucked out with that. He's like, you're 100% right. We are going to start on the right foot. So that's my advice to anybody where

wherever you're at in your journey. start to emphasize the financials because you have zero business scaling,

adding in more projects, taking advantage of boom opportunities like we saw a year, two years into co, right?

Any builder could, you know, as I always say, I was like Donald Trump builders, right? The art of the deal people. They could close anything, right? They could double their businesses, right? And but

then they'd wind up like 12, 18, 24

months after they 100xed their business or 100% their business and they're like, "We were making more money with less projects, so we're going to go down." It's like, yeah, because you didn't know your numbers on the work that you were doing originally. You saw an opportunity for a market demanding what you build

and you took advantage of it and you get burned. So take the opportunity to know

your numbers. Have a consistent set of costs. It doesn't need to be 200 line items. Needs to be 75 to 120. It need to be Costco. going to consistently be categorizing cost too. They're going to tell you a picture of what does the product actually cost and then be able to track that against your income so you can see what is our what is our gross and what is our net on this thing. What are we actually making on this product? That's my advice. >> I was told by somebody uh not in the

construction industry that the biggest marker of successful companies is their ability to predict estimate costs in in

addition to their ability to sell. Those two things combined are what dictates success for like the average startup. Um, okay. So, that I take as being what

you would say for builders starting off.

Next part of that though is I'm a I just

want to go build a house. Like I'm saying like I'm a client. I'm going to go hire a builder. >> I'm a consumer.

>> What would your advice be to the consumer? >> Um, this is a really good question.

I think

again like maybe biasly like I would be curious to know like what the experience

is going to be and what expectations are in place when it comes to financials because again to your comments like this is the biggest investment they're going to be making. But I think with the

amount of contractors that are in

any given market, and granted they could be different, right? If you're building in a more rural area and you're limited with options, right, and there's only so many builders, like you kind of get what you get. But I would be looking at like a what type of expectation does the

contractor outline for you unprompted of

like what you can expect when it comes to billing, invoicing, cost tracking, whatever type of contract it is. Um, and

then second, how how processoriented are

they, right? And you can tell that, like you can tell, is this just going to be like a big blue-eyed handshake going to

get you taken care of, really liked the builder, seemed to know what he talked about, or is this someone that's like sitting down and like very intentional with a process like this is what we're going to talk about here. We're going to go through selections here. We're going to talk about pre-construction. Here's what you can expect here. Are they going to invite you into the office? and is it going to be a a high-end um organized

experience, right? Um because that's

that's going to be telling of what your what your build process is going to look like. It's the same thing. What is it? It's like I don't know like maybe in restaurants, right? It's like if the bathrooms aren't clean, what do you think the kitchen is? Right. >> Or some Yeah. >> So that'd be my advice. >> No, I appreciate that. Uh we actually

have friends that are I don't know if they've started yet, but I know they selected a builder in Michigan for a big remodel. Um and they were like very

hesitant about all of it. And um what I

told them was to the first question was to ask what is your method of catching

shortcomings on the job site? And my

advice to them was that number one, if they get sensitive about you asserting

that there's going to be shortcomings, that's a red flag in itself because there is on every single project more so like the measurement of success is going to be our ability to catch them to react and those kinds of things. And then your second question needs to be what standardized procedures do you have in place for when that happens? And she

said that almost every single builder with the exception of one that they spoke to couldn't even answer the first

question. >> One person was like, "I've been doing this forever." Yeah. Can only, you know, it's like she's like that. Like I get it that you've been doing it forever. Like, >> you know, sorted. You know, there's a

lot of people that have been doing it forever that went out of business or were corrupt or whatever it might be. Like I want to know what's going to happen when those inevitably hard moments come along. I want you to make me feel confident. So, I appreciate

that. >> Totally, dude. I think that's that that is um that is such an important piece because this like I've been doing it forever logic has been uprooted like

truly like COVID and all the supply chain and the material issues and the

inflation on costs, right? All of that

forever talk has gone out the window

because the days of being able to walk into a home and run a quick cost per square foot calculation in your head and take a few

large expenditures into consideration

knowing what materials cost and whip out a number. Like that doesn't work, right?

It's like when I'm halfway through a project right now and I'm bidding the next, if I'm not looking at what my

costs were on the project that I'm 6

months in on to go into my estimate and like estimate on, I'm not using the most up-to-date information.

>> Well, hey man, >> I appreciate this immensely. Um, I will

give you the award of the easiest podcast guest I've ever had, hands down.

Um, maybe I just need to go around interviewing other podcast hosts. Um, and my, uh, role will get easier and easier. So, um, truly appreciate it.

Tell, uh, tell everyone where they can find you. >> Um, yeah. Okay. So, you can find me, um,

well, first, if you're into podcast, Builder's Budgets, and Beers, found everywhere, Apple Podcast, Spotify. Um,

you can also just go to our website, adaptive.build, and then under resources, you can click on podcasts. Um, you can find me on YouTube as well. Um, I am on Instagram. Um, you can go to

my personal which is Reese Barnes. You

can go to my work which is adaptive ree

ec. And you can also just go to adaptive.builds or excuse me adaptivebuilds on Instagram. Um, and you

can also email me. It's reeceadaptive.build.

Um, and I'd be happy to DM, email, talk.

I'm a big phone guy. I'll talk to you on the phone. Um, but uh, yeah, that's how you can find me. >> Awesome, man. Well, I love it. Truly appreciate it. >> Yes, Alex, I appreciate you as well. And um, yeah, thanks for having me on, dude. This was great.