Derek Isaac

This transcript has been lightly edited from the original recording for clarity and readability. The conversation and its meaning remain unchanged.

Henry Harrison: Welcome to the Henry Harrison Podcast: Entrepreneurs, Business, and Finance. Today we're very fortunate to have Derek Isaac with us. He's an expert in construction, a repeat entrepreneur, and he's now, among other things, helping other entrepreneurs in the construction space build their businesses. Hello, Derek.

Derek Isaac: Hi, Henry. Great to be here.

Henry Harrison: Derek hails from Vancouver. Tell us what you're doing now, if you would.

Derek Isaac: In simple terms, I'm a coach and consultant for general contractors. Our area of expertise is systems, operations, processes, and software, helping general contractors run efficiently. As far as the journey of the entrepreneur, it's about helping the owner level up beyond being a really good manager to being a business owner who has a management team. That's usually a pretty big step, and there's a lot of turbulence in a company as the owner tries to implement better systems and bring in people to run them. We help them through that process.

Henry Harrison: Talk a little about what that means personally, because systems and processes might seem a bit dry. But Friday night calls, Saturday afternoon emergencies, working late into the night, those things don't seem dry. What's the end result you're hoping to help people get to?

Derek Isaac: The biggest takeaway is peace of mind. Knowing that the business will operate. You still have inputs and you need to be leading your team, but you can step away. You know what your margins are, so you're not worried about the ups and downs. The economy comes and goes, and there are always cycles in business, but you have the controls, the people, and the processes in place. You essentially have a self-functioning business that doesn't fully rely on you.

You don't have to work 70 or 80 hours a week, which a lot of contractors fall into. I call it the owner trap, where you're pushing growth, taking on bigger jobs, hiring more people, and it just becomes a nightmare for the owner. I've been there. We tripled our revenue in one year as a general contractor, and I made less money that year than I did the year before.

Henry Harrison: Let me step back on that. First of all, I was a custom home builder, so we have a lot in common. My first business was when I was 26. I managed to partner with a more experienced professional builder 20 years my senior, and we built for 10 years. By the end, we were building about 10 houses a year in the over-a-million range. That was 20 years ago, so it would be more now. In Texas, that's a lot of house, typically 5,000 to 8,000 square feet. We also built some small townhouses inner city, did some rehab, and a few other types of construction.

We did well not having the longest hours, but we didn't do as well on the exit. There were six of us, and I couldn't sell the business, because it was too tied to us. So when I stopped, I just stopped. My business partner went on and built for a few more years, then he retired. Are some of these people able to grow the business to where they can actually sell it?

Derek Isaac: Yes, that's the goal. We're usually working with them much earlier than the selling stage, but everything we do is geared toward it. We call our coaching program the Asset Builder Program, because we want your company to be an asset that generates profit for you and is also sellable, something you could hand to family or sell on the open market to someone coming into the industry or a competitor. There's an exit strategy.

As you mentioned, nobody wants to buy a company where the owner is still working 50 or 60 hours a week, at least not for any decent amount of money. Usually that's just the client list, pennies on the dollar. So it's always a future goal: you have options. If you want to exit, you can sell or pass it on. There's value there, and it doesn't have single points of failure, which is typically the owner. Remove the owner, and the business either has a lot of issues or needs some kind of Superman to come in and run the operations.

Henry Harrison: It's hard to explain the chaos that can happen if you haven't lived it. My first job was with a big national home builder, and my boss told me, "It sounds easy. Everybody builds the house." Until everything goes wrong. People don't show up, something isn't done right for the next trade, there's a warranty call, a new customer you want to meet, a spec house someone's calling about, and then it starts raining when it wasn't supposed to, and an inspector needs you on site, and you can't do it all at once. Your head wants to explode.

We did very well. We had a house featured nationally on the front page of Builder Magazine, and another in Home Magazine back when those big magazines existed. Those are two things I'm proud of, and we had a lot of happy customers. But even though I don't think we worked 70-hour weeks, it was a lot of work. Early mornings, the phone starts ringing, and people don't hesitate to call in the evenings because they've been working all day themselves. Now they're straightening out invoices, and then they want to talk to you about something else. So you've been through that, because you had your own company.

Derek Isaac: Yes, definitely. The construction industry has so many variables. It's very challenging for a number of reasons. There are so many people and things to contend with: employees, subcontractors. It's not just your business, it's all these other businesses you have to manage, and often they aren't well managed either, because it's the owner-operator working during the day and doing the books at night, if it gets done at all.

That's why, when I started coaching, I felt the industry really needed better systems and processes. My background is that I was a framing carpenter. I learned the trade, started a subcontracting company, and then moved into general contracting. That's a very common trajectory for builders. A lot of them don't have an educational background in management or business. They start from the ground up and grow a business because they're great at what they do. But you reach a stage where one person can only handle so much. The business was built off hard work, sweat, and tears, and that's just not going to carry it into the future, because you can only work so hard.

That's where we come in. Let's get good software in place, or use the software you already have. Let's build processes. Let's get an organizational structure and communication in place, so subs and clients know they shouldn't be calling you after five or six, unless there's literally fire or water damage. And in that case, they should probably be calling the plumber or the fire department.

My own problem was that I wasn't watching my numbers enough. I was a young entrepreneur with dollar signs in my eyes, looking to grow a multimillion-dollar business, thinking the path to success was more projects, bigger homes, and more revenue. But it's really about what you keep at the end of the day, whether that's your sanity, your profit, or both.

Henry Harrison: So when you say general contractor, was that specifically custom homes, or other things as well?

Derek Isaac: We did remodels and homes.

Henry Harrison: Okay.

Derek Isaac: It wasn't a massive business. We had a couple of projects going, a project manager, a small labor team, and a lot of subs. The business was doing well; we had a good trajectory. As I mentioned, we tripled revenue in one year. Then I started getting into real estate investing.

Even though I had the construction background and knew homes, I didn't know real estate investing in the sense of flips and our own projects. I'd had rental properties before that. I bought my first home at 19, fixed it up over two years while I lived there, and sold it for a good profit. I was also able to subdivide the land. There was a tiny old house on a big lot, which looked perfect to me, and I turned it into a duplex, another rental.

But when we got into real estate investing, I was running two businesses. I brought on a new partner to help with the investing side, and I put a lot of trust in them, but they were fairly new to it too. It became a house of cards. We took on far too much debt, and with cash flow being what it was, we had a really tough time. We had to sell houses for whatever we could get, rent some of them out, and eventually I had to close the business and walk away, because it wasn't viable. We'd accumulated more debt than we wanted, mostly in taxes, which is not a good thing to do. Growing too fast without the acumen or leadership to manage everything can wreck a business.

Henry Harrison: When did you decide to wind it down and go a different direction? You had a small labor crew, so you knew more than I did. I didn't have the ability to swing a hammer or do framing. I learned what to look for and how to find the right people, but having that hands-on knowledge is a good asset for a home builder. So when did you decide you needed to do something else?

Derek Isaac: What ended up happening is that I had a solid construction business, then we got into real estate investing and had homes that didn't work out. The construction business was essentially financing the repairs and renovations of the real estate company, which we eventually had to close. My partner and I went our separate ways, and that left me in a really bad spot with the construction company.

We'd grown fast, so on paper it looked great. But cash flow was mismanaged, and my pricing was off. That's a common mistake I see contractors and other businesses make: you price competitively when you're young, because you want to land the big jobs and it looks like good money. But you need to price in a way that funds growth, because as you grow you hire managers, take on more equipment, and carry more overhead. Your money is made in the estimating. If you've underestimated, you can only be so efficient on a project; you can't earn that money back unless you're on cost-plus.

Eventually I sat down with my family. My uncle is a business consultant, and we went through my numbers and added everything up. It pulled the wool from my eyes. We were in a deep hole, and there wasn't a clear way out. We had to pull the plug and file for bankruptcy.

Luckily, I had a good reputation with my clients, trades, and workers, so I gave them notice and let them know where things were going. The hard conversations were as few as possible, and afterward people understood. Then came the difficult time of going through bankruptcy: no credit, almost no money. My wife and I had to move out of our house, which got foreclosed. I had to sell my dirt bike, which brought a tear to my eye, because I really liked my toys. We had to start fresh.

Looking back, it was a blessing in disguise. I had space to think and figure out more intentionally what I wanted to do with my life. For eight years that company was everything. But it put me in a position to move on to what I'm doing now.

I'd actually been coaching and consulting before I closed the business, helping some local owners with my experience. I realized how much you don't know when you start out in entrepreneurship and how much there is to learn. Unless you're constantly learning, you're going to have a tough time, and people who've been doing it for decades can steer you through paths that would otherwise take you years of difficulty.

After closing the company, I worked for another large home builder doing about 200 homes a year and well over $100 million in revenue. Then I moved to Vancouver with my wife and worked for a remodeler here for a while. Over those two or three years, I grew my coaching practice. I'd already started it, but that's where I fine-tuned a full system that could be plug-and-play for general contractors. We developed a business in a box: documentation, software, systems, and then coaching to implement it all.

Henry Harrison: I've known a lot of contractors and home builders in Texas who've gone bankrupt. Market cycles, personal guarantees on loans, all sorts of problems. So you've built a business where people pay you because they find what you teach valuable. You went through the school of hard knocks, with one gap in your core knowledge, which was keeping an eye on the numbers. You clearly knew a lot about everything else, and I'm sure you filled that gap. What are some stories with your current clients? How do you normally work with them?

Derek Isaac: My clients are typically in the one-to-five-million revenue range. First, they want to get control of their business and put systems and processes in place, and then usually scale up to seven to ten million. We've worked with contractors above that, but that's the normal range for us.

We have all the documentation, we've worked with many different software platforms, done the integrations, and trained teams. We've done this countless times. When someone comes in, we run a big assessment of their company: their numbers, their financials, anything that doesn't make sense, their estimating, their software, their current processes. Every company has processes; they're just usually undefined or not very good. We get a clear picture of where the business is, then figure out where we want to go, the long-term goals, and the steps. We lay that out within the first one or two calls.

We also do a full marketing assessment, because there's often a lot of low-hanging fruit there that the contractor isn't doing, and we want to ensure consistent lead flow and a full pipeline. From there we can pinpoint priorities, whether it's improving estimating or building out the marketing, lead generation, and sales process. The pre-construction process is another early focus, because it's such a pivotal point that many contractors either don't define well or aren't doing at all, and it has a huge impact on project management and the client experience later.

Then we concierge the implementation. We build out their software, customize the documentation, and meet with their team to train them. One thing that separates us from other coaches is that we do the implementation, depending on the package. A lot of owners don't have the time or the knowledge, so they'd much rather hire us to implement it. We still need their input; they have to lead their team. But we're very hands-on building it out.

Henry Harrison: They appreciate that. And most of the problems aren't ones you haven't seen before in your own business. Now you have the advantage of seeing so many other businesses, so you're learning from them as they learn from you, and things are always evolving.

Derek Isaac: Yes. You mentioned client stories, so I'll do a few in rapid fire. We had a client in Hawaii doing maybe two million, a little under. Now they're probably at seven plus. They secured a very large government contract. The owner was doing everything except admin. He had a great admin person who handled the back office, but he was doing the estimating and project management on multiple millions in revenue, working crazy hours. We helped hire a project manager and defined their estimating process. Even though the admin was excellent, she didn't have the structure or tools to do her job as well as she could. We really helped them professionalize the business and improve the client experience.

Another client in Arizona was in a tough spot, similar to me, with a fair amount of debt that was scary to look at. He had a spec home on the market and was barely getting by. He was a home builder with no projects lined up, just keeping busy with remodels and earth moving and random work. It had been a hard two years. But this year he's already secured three new homes; two are underway and he has more in the pipeline. He's really turned things around. Without guided help and a lot of hard work, I'm not sure the business would have survived.

Another client in Georgia I've worked with for about two and a half years went through a big slump, which happens in business and which we're often not prepared for. He had a good year, hired me, and then had a real trudge for about a year. He was paying for a marketing agency that wasn't effective; they were doing the right things, but the results weren't there. Because of cash flow, he had to let them go. We implemented our CRM, helped set up his branding, and now he's building multiple new homes. It looks like a breakout year compared to the last two or three.

That's the growth side. On the back end is where the real magic is. He's got people in place now, an admin person he didn't have before, and a site superintendent. He's building his team, and the consistency is coming, which gives the owner room to breathe. When you have that consistency, you know your margins are good, you know what you'll make on projects, you have leads in the pipeline and work scheduled six months to a year out. That's a far better place to manage from than feast or famine.

Henry Harrison: It must be very satisfying to help people that way.

Derek Isaac: Definitely. I'm very proud of my clients, and it's fulfilling to see them succeed, especially when we've worked together for a while and I know their goals and how hard they work. There's a point where it clicks, usually around six to nine months, where the systems start turning and their eyes open up. "I don't have to do this anymore. I don't have to figure this out every single time. We've got a process, the software takes care of it, there's an automation." They slowly get things off their plate and start to enjoy running their business again instead of being stuck in the nitty-gritty.

Henry Harrison: There are so many things to love about this business. We love building people their dream homes, or in smaller towns, their first home. It's a neat thing, and it stays there; you get to see it. I interned at Coopers & Lybrand in college, and that was fine, but it was government contracts and less interesting to me. Then I got to a home building company, and right away I was helping someone build a house they'd move into. I grew up loving having a home, and I still do. To me, the subcontractors and home builders are salt-of-the-earth people doing real work. You can't fake putting up a frame; either it's done right and on time, or you have problems.

Derek Isaac: Exactly. I'm grateful to help the builders we work with and to show them there's a better, easier way. It's stuff they know they need but don't know how to approach or don't have time for. A lot of it is one-percent improvements, small changes done in an ordered way, though some are big. They help their clients move into beautiful, quality homes built by people who care, with a good client experience. It's one thing to build a nice home, but it's another for the client to be happy and not stressed out, because building is stressful for them too when things are disorganized or communication is poor.

Henry Harrison: You have a podcast as well, talking about some of these issues. Give us a brief bit on that before we wrap up.

Derek Isaac: It's the Contractor Business Builder Podcast. We're on all the major channels, and it's specifically for contractors. We have a lot of guests with backgrounds in construction. You can search through the different speakers. They're very qualified, and we try to have interesting, niche people on, along with the core topics like marketing, estimating, and general business building. We have other coaches on too. We're a very niched coaching company, and I love getting to know other people in the industry. We're all trying to help builders at the end of the day. There's a lot of good information there if you want to improve your building business and learn more about the contracting world.

Henry Harrison: What's the name of the podcast again?

Derek Isaac: The Contractor Business Builder Podcast.

Henry Harrison: Contractor Business Builder Podcast. Okay. When you were a kid, Derek, did you think you'd start a business? Was that a family thing?

Derek Isaac: It wasn't a clear indication in my mind when I was younger. I thought I'd probably be a daredevil. I always liked riding dirt bikes, quads, and BMX. But my dad's a beekeeper, my parents worked and grew that on the farm, so self-employment runs in my family. My grandpa was a farmer and beekeeper too, so I always had that in me. As I went through high school, it became more evident. Looking back, I was always industrious, thinking beyond just getting a good job.

After high school, I started reading personal development and self-help books. I've always been a big reader. It opened up the world of business to me, and it captivated me, because I've always been a big learner and a bigger thinker. It aligned with me, and I knew early on that I wanted to start a business and invest in real estate. I always knew I'd be self-employed and run a business, even if I didn't know exactly what it would be.

Henry Harrison: Tell us what it was like being raised by a beekeeper, and what that business is like.

Derek Isaac: It's a very interesting business. Like agriculture and farming, it's very seasonal. You work like crazy in the summer. By July and August you're harvesting honey, wearing the beekeeping suit and veil, bees flying around, getting stung maybe ten times a day. Where I'm from, near Winnipeg, the summers get really hot, 30 to 35 degrees Celsius, and you're sweating buckets working hard. Then winter comes, and you're mostly fixing equipment and preparing for the next year. There's not a lot to do, because the bees are in a cold room and there's a couple feet of snow outside. But there's always something to prepare, and a lot of traveling, because you go to all the fields to pick up the bees, feed them, and take care of them.

I think that's one thing that drew me to construction, because I always loved driving around to different sites. Construction is similar to beekeeping in that way; you're always going from one project or hive to the next, cruising around. That runs in me.

Henry Harrison: For people who don't know, what does that look like? How many bees, how much room?

Derek Isaac: We ran around 700 to 800 hives. Normally you have a field of 20 to 30 in one place. In spring you put them out in the forest to grow and strengthen. Then you move them to the fields, which for us were canola and alfalfa. I don't know exactly how many bees are in a hive, but a whole lot. You make sure the queen is healthy and replace queens as needed, because they populate the hive. The bees bring in honey over a couple of months while the flowers are in bloom. Come late summer and fall, you take the honey from the hives and bring them back to what we call the honey house, essentially a warehouse. Then you extract the honey, which is satisfying but laborious. You end up with barrels and barrels of honey every year.

With agriculture, there are a lot of ups and downs. Some years you get bumper crops and you're doing well. Other years you get mites in the bees, and you always have to treat for them. You could have 30 percent of your bees wiped out in a year, so you grow new hives with new queens. We call them nuc hives. They start small and grow up. The first year they don't produce much honey, but by the second year you have a full producing hive. So you always have new hives coming up. Some years were really rough. As a kid I'm sure I didn't see everything, but I know things were tight sometimes. One year a lot of our bees died. If you lose 50 or 60 percent of your production in a year, that's pretty devastating.

Henry Harrison: Was there farming as well, or just beekeeping?

Derek Isaac: For us it was strictly beekeeping. My grandpa was a farmer, and actually both my grandpas were farmers, so I had a lot of cousins and farms around. I got to ride in the combine and see what was going on, and they had some hog barns too. I was surrounded by farming, but my dad just did the beekeeping. He'd take the odd job in the winter if he needed extra money, but for us it was the beekeeping.

Henry Harrison: For those who don't know, where is Winnipeg, and how big is it?

Derek Isaac: Winnipeg is in Manitoba, central Canada, close to the border. It's a prairie town and probably the flattest place I've ever seen, at least to the south. When you go north you get into the Shield, which is rockier and more hilly, with lots of forests. It's nice in summer and very cold in winter. One reason we moved to Vancouver is that it's a little nicer here, with the mountains, the ocean, and the forests. But I was born and raised in Winnipeg. It's probably pushing a million people now, so a decent-sized city, but with small-town community values.

Henry Harrison: We could have used you back in the day. We went to seminars from Lee Evans, a big home building consultant. He was probably more suited for mid-size volume builders, but I got a lot out of it. It would have been helpful to have you come into our company. I'm glad you're helping other people. I see you still like to mountain bike and snowboard, and you've been married not that long ago. What have you got planned going forward, unless there's anything else you want to say?

Derek Isaac: Definitely growing the business and helping more clients; that's always the goal. We're always working on having the best systems around. Personally, my wife and I like traveling. We usually stay put for a year or two and then go. We traveled for a year in 2023 and into 2024. She's from Spain, so we spent time in Europe, and we also went to New Zealand. We'll probably plan another significant trip in the next year or two. We'd also love to tour the States in a camper van or trailer, go down the West Coast and make our way around the country, and see how far we get. That's on our list.

Henry Harrison: Judging by where your clients are, you must do this virtually in many cases.

Derek Isaac: Yes. I'm based in Vancouver, and about 90 percent of our clients are in the United States, all over. Some regions tend to be heavier for construction. It's all virtual. We have some Canadian clients and one client in the UK right now, so we take the odd overseas client, but we're focused on North America and mostly the US.

Henry Harrison: Do you continue with your clients while traveling?

Derek Isaac: Yes. It's a working holiday, really, which is why we call it traveling rather than vacation. It's remote, and we're a systems company, so we have good systems ourselves. Besides the implementation and face-to-face coaching, a lot of the back-end work is automated, structured, or handled by our team.

Henry Harrison: I saw you've developed a team working with you.

Derek Isaac: We have an assistant operations manager, and then a marketing manager, who's more of a third-party freelancer. They're not helping our clients directly; they help us with our own marketing and content.

Henry Harrison: Perfect. That sounds like an exciting future. I really appreciate you sharing all this, and I think people are going to benefit from it. They should give you a call or check out your podcast, or both. Thanks a lot.

Derek Isaac: Thanks, Henry. It's been great.