The Building Code Takeover: A conversation on mission with Dan Houghton and Bill Smithers

Dan Houghton:

Hey everybody. Welcome to “The Building Code.” This is Dan Houghton, co-founder and CEO at Buildertrend. I’m here with Bill Smithers of CBUSA. We’re here today for the final episode of “The Building Code” takeover series. Happy to be here. Hey, Bill. What’s going on?

Bill Smithers:

Hey, how are you, Dan?

Dan Houghton:

I am amazing. I’m super stoked for our conversation today. We’re going to talk about a few different topics, but our core of what we’re going to be speaking about today is mission, how you build a mission for your company, how you live through your mission, how you operate through a mission, as well as core values, something from my perspective at Buildertrend, clearly it’s evolved over a long time, but I’m excited now that we’ve got CBUSA a part of the Buildertrend family, not only to learn more about the history of how you have developed a mission for your organization, but more about just the history of CBUSA and how that’s evolved.

So, let’s jump into it. I’ve got a few questions for you today, and we can take left turns and right turns as we have this conversation. But as you think about how your business has evolved over the last 15 plus years, describe in any way possible how you’ve thought about a mission for your business. And why I think this is really important, if you think about our listeners, is a lot of them are small to medium-sized businesses. And in some ways a lot of those folks don’t have a mission for their business. And so. I’d love to think about how it’s evolved from when you went from a few employees to your team today. So, how have you thought about mission for your organization over the last 15 years?

Bill Smithers:

Great, thanks. Thanks, Dan. And I think, as you know, and you all have seen, I mean, businesses, their missions evolve over time, but kind of the core elements of any mission really tend to stay the same. So, for us, it’s always been about who we are and what we value when we think about what our role is in the marketplace and in serving the companies that we serve. Because we work with builders, vendors and manufacturers, as well as working with our team. But for us, creating a mission is about trying to find something that’s really simple, really easy to understand and epitomizes why we exist in the marketplace.

Dan Houghton:

Got it. So, have you actually created a mission statement or do you live off kind of a cloud of words, in some ways, that it’s kind of an elevator pitch that evolves.

Bill Smithers:

Yeah, that’s a good question. We have had numerous mission statements, but as I was saying earlier, it’s the same thing that we’re going after, the same thing that we believe drives our company. But our current mission statement is that, ‘We empower independent builders to maximize their business success.’ And that covers the waterfront and a lot of different areas, because people look at us and say, ‘We’re a buying group. So, is that different than being good in business? And our belief is that good businesses buy better in the marketplace. So, when we are focused on the things that we work with our team on and others in the marketplace, it’s really driving after these elements of how we do what we do better, more efficiently, being more effective. And that positions us for being the customers of choice in the marketplace. And ultimately, when we’re using the tools that we have for our group, that allows us to buy better.

Dan Houghton:

Makes sense. Makes sense. So, when you developed that mission, was it something that you asked your team about? Was it something you brought in a third party? Who was responsible in your organization for coming up with … I mean, for the statement. And I ask this question because I’ve been there with a company with just a handful of employees, and I’ve been there with a company with 800 plus employees. And I have always struggled, like the first move, right? The first step to develop something is usually the hardest. How did you guys take the first step in developing the mission?

Bill Smithers:

As I said, it’s something that’s evolved over time. I see with y’all’s mission statement, ‘to change the way the world builds,’ sounds grandiose, but in many respects, that’s exactly what we do. We’ve always been of the belief that the companies that we work with, they are builders, but they are business owners. They run their own profit centers, they run their own companies. It serves their business interests, their family’s interests, their community’s interests. So, they’re really powerful businesses, just happen to be in the building industry. So, as we’ve worked to develop the mission statement … And to answer your question, I mean, a lot of people have contributed to this, but when we are talking with builders for the first time, and they want to know who we are and what we do, and why there’s an opportunity for them, when we can really zero in to the fact that yes, we do help you buy better, but more importantly, we believe that we help you through our community, through the tools that we provide. We give you the opportunity to really run your business better.

And that’s a key for us because business owners, particularly small business owners, can just get siloed within their own list of priorities. And having the ability to look outside of your business and in effect to be able to work on your business, not just in your business, provides all kinds of value for folks. So, many of the things that we provide to them, we say, ‘Look, we’ve got predictable results with the tools that we provide you, but we want you to be able to see that the big value in CBUSA is it helps your whole business, and it helps you do what you do better,’ which is such an awesome tie-in to what we believe we will be doing with Buildertrend.

Dan Houghton:

Yep, yep. I 100% agree. It’s interesting, you mentioned our mission as this kind of dramatic statement about changing the way the world builds. And I remember when we went through the process, and we hired a marketing firm, and we had lots of conversations internally. We did this self-identification on who we are internally to our team, who are we to our customers. And I had that similar gut reaction that you said is, ‘This just seems maybe too big,’ but if you really take a step back and you think about what you’re trying to accomplish as an organization, for us, we do big things. We have over 24,000 customers globally, that’s a lot of people. That’s a lot of people. And when you’re touching that many businesses, I think you have to, in some ways, stand on your soap box and not be afraid to say who you are and what you are.

And I think a lot of our leaders and a lot of the people, a lot of our customers that I speak with, and even folks that I’ve met on your team, most people are pretty humble about who they are. And the last thing that really comes natural to them is to stand up tall and make a big statement about who they are. But I do think it’s really important, even if your businesses is three people or again, 800, that you do make that statement. And for us, we didn’t do it at our organization for 12 years. We never had a mission for 12 years. We had a mission, we just didn’t state it, and we didn’t put it on our website. We didn’t own it. And that was a big mistake on our part and something that I regret.

And if there was any advice I could give to anybody out there, even if your business is less than a year old, or you’re a startup, really try to figure out who you are and what kind of changes you make. Outside of the mission, Bill, does your team talk about core values, how you do certain things, how you handle certain situations? And I know every business that I’ve ever met’s a little different on this. Do you guys have any wording or language around core values?

Bill Smithers:

We have a set of core values. I mean, our belief is, and we think this is reflected in our team and in our culture, is that there are a lot of methods that you can use in the business world to do what you do. We want it to be the way, from an ethical standpoint, that we approach our business. We realize that you can’t have a program where truly everyone is a winner, like the soccer kids that everyone gets a trophy. But we’ve made our business so that in many respects, it’s rules-based. We don’t play favorites. We make sure that we’re communicating as well as we possibly can about what the objectives of any individual initiative that we have in place might be. But we believe that in doing that, we’ve developed the trust of the companies that we work with.

And this is on the builder side and the vendor and manufacturer side. They may not like the decision that we reach or who we may choose for a particular buy, but they don’t argue about the process. They really think that we’re professional in the way that we do what we do. Because our role in the market, and we tell our team all the time that, ‘Look, we are pushing a rock uphill every day,’ because we are working to get really good companies to be even better companies. And to get them to maybe do something a little bit differently tomorrow than they did yesterday, even when those companies, many times, don’t believe that that’s possible.

So once we start that rock uphill, we know we’ll never get to the point where it’s going to be rolling down the other side, but that’s the mentality that we take with our team that they know it’s hard work, but the wins that we get along the way, when a builder in our group or a manufacturer that’s part of our network comes back to us and says, ‘Wow, that really did what y’all said it was going to. That made a difference in my business. That made things better.’ That’s the validation that our team gets over and over, and it gets them to turn right back around and say, ‘Yep, let’s keep pushing this rock uphill.’ Because it matters, and it helps them to do what we believe our mission is to do, which is to help them make their business better.

Dan Houghton:

Got it, got it. And one thing that stuck out to me in what you just said there, which is, I loved this comment: rules-based. You’re a rules-based organization. Can you dive a little deeper on what that actually means for your partners, for your customers, for your internal team?

Bill Smithers:

For us … And this is part of the value system that we work to have our builders understand and embrace as well. What you do as an individual company, you’re going to get a certain set of results. We work together with multiple companies. And the way that you conduct yourself in the marketplace, everyone sees it. And when you are kind of going hither and yon, and making one decision for one set of reasons and another decision for another set of reasons, you become somewhat erratic in the marketplace. And we have found that the greatest success comes from us being able to tell the partners that we’re working with, ‘Look, this is how we’re going to go about making our decision in a certain category or determining what products we’re going to buy. And here’s how that procurement process is going to happen.’

There’s no misunderstanding. There’s no claim that there was favoritism or something along those lines. We keep telling people that we work with, ‘We want you to help us be more competitive in marketplace so we can continue to be really good customers for you.’ So, when we put rules and programs in place for the contracts that we have, whether it’s with a manufacturer or a vendor, it makes it really clear to all the stakeholders how we’re going to go about doing what we’re doing. It’s not an issue of, ‘Hey, if we take you out to dinner, we’re going to cut a deal with you.’ It’s harder to do than you might think in the market, but our team, that’s how we roll. That’s how we look at things. It’s got to be all transparent and understandable for all the key stakeholders.

Dan Houghton:

Well, and you’re working with a wide variety of organizations. We’re talking about, to simplify it, three kind of sets of groups. You’ve got your local vendors in a marketplace, you’ve got your national manufacturers, as well as then your local market builders. Obviously, there’s rules-based, what you just talked about is it’s a consistent message to pretty much everybody across the board, but it has to be a different kind of value proposition. It’s like if you’re a builder and remodeler, your value proposition potentially on a new home is different than a kitchen remodel. When you talk about value proposition to a builder in Columbus, Ohio, what is that value proposition?

Bill Smithers:

Well, if you think, I mean, you’re mentioning … because we do have remodelers that are part of the group. We have more builders that are part of the group. But ultimately we’re selling our services as builders or remodelers to someone in the general population. Someone that is going to trust us to take care of them through the process, not just in terms of how we communicate, but how well we can buy for them. And for small companies that are basically the makeup of CBUSA, and I think in many respects, the makeup of Buildertrend, we get pummeled in the marketplace if we’re working on our own. So, when we can turn around and say to our customers, ‘Look, here’s what I do within my business to help me be a better builder or remodeler for you,’ it’s a huge value proposition.

And we find that even companies within our network that do cost plus, where they may not get the direct benefit of a lower price, when they can turn around and tell their prospective customer, ‘Here’s how I buy for you. I’m part of a group of elite builders that we’re really focused on buying in a better way,’ in many cases that gets them the job that they may not have gotten otherwise. So, there are a lot of layers to it, but it really goes back to the core beliefs that we look at and say, ‘The best customers get the best pricing in the marketplace.’ So, when we can look at ourselves and say, ‘It’s not just about dollar volume and leverage in the marketplace.’ That gets us to a certain level. What we’ve found over time is that when we become better companies, in addition to having the leverage and footprint we have, our deliverables and the value that we can generate for our network goes up significantly.

Dan Houghton:

Yep. So, you have a deep background. You’ve been in residential construction for decades.

Bill Smithers:

Yes.

Dan Houghton:

I don’t want to age you by any means, but for a long time. You were a division president of one of the largest production homes in the United States at an early age in your career. And I don’t think, if you’re newer to this industry or you never worked for a production builder, I’m not quite sure a lot of the smaller to medium-sized contractors out there understand the difference between the buying power of, call it the top 50 home builders in the United States versus everyone else. And I’ll double down on this. What a lot of people also don’t understand is the top 50 builders in the United States build about 35% of the market share as well. So, their buying power is pretty impressive. Can you just touch on that? So, if I was new to the industry, if I just walk into my local vendor, what the difference is between me versus maybe someone that’s building a thousand homes a year.

Bill Smithers:

Sure. And this kind of goes back to why CBUSA was founded. As you said, I was with a top five national builder. I was a division president. The operation that I ran did 500, 600 houses a year, but nationally we were huge. So, the way that we were able to buy in the marketplace was there was a lot of buying power there. When I left that operation to go start my own custom building company, certainly I had legacy deals that would spill over for a little while. But very quickly I realized how poorly I was able to buy in the marketplace as a builder that was doing 15 houses a year. And that was why we, with our local group, our HBA, had created … and we called it our buying co-op.

Dan Houghton:

Got it. Makes sense.

Bill Smithers:

To say that we can leverage that volume effectively in the marketplace. But we have this all the time when we’re dealing with prospective members that, maybe it’s somebody that’s doing 100 a year that does buy well in the marketplace, and they really focus a lot of energy and effort on that part of their business. And they’ll tell us, ‘Look, you don’t know how well we buy. We’re really good at what we do.’ I mean, we love that opportunity because we can explain to them, ‘Look, yes, with 100 houses a year, you’re going to buy at a certain level and it’s going to be a really good level.’ But add that to the 1,000 or 1,500 others that might be in your market from a start standpoint, or with builders across the country, where you have a seat at the table with national manufacturers to structure programs.

And we’ll do comparisons for them and be able to say, ‘Yes, you’re buying well, but you aren’t buying as well as you could be.’ And we always tell ourselves and our customers, when we get over ourselves as builders and kind of put our ego off to the side a little bit, then we can really perform at a higher level. And we see that over and over again, as we work to grow our network and make sure that we’ve got alignment with the people that are part of our program.

Dan Houghton:

I have to imagine when you’re talking to a local vendor or a national manufacturer on the other side of this, there has to be some resistance at first, but then their eyes probably kind of … they see the opportunity of working with some of the best contractors in the United States, that are paying on time, that are reputable, and it’s better to have those relationships than not have those relationships. What do you find … I’m just curious, as your business partner and someone that works with you, what is harder? Is it getting the attention of the builder to say, ‘Hey, take a step out of your business, realize what the opportunity is for you with a program like this,’ or is it more challenging to talk to a local vendor or a national manufacturer about what this opportunity is?

Bill Smithers:

Yes. But when we’re talking with folks on either side, we do use data, and I know Buildertrend uses data quite well, which is one of the great things we’re excited about is all your use of data. But when we can demonstrate to a manufacturer, we’ll say, their first look is, for us, how many starts do you have as a group? And we’ll give them what our number is. And we tell them, ‘Look, it’s not just about the start.’ That’s how they would kind of categorize a national builder because there’s typically a pretty narrow range in where they play from a pricing standpoint. When we can tell them that members of our group might do a 2,500 square foot house, they might do a 25,000 square foot house and everything in between, so a start is not a start.

We need to quantify for them how much the opportunity is. And we can paint that picture for them about … they know we’re a difficult group to get to because most of us are smaller companies. And when they have one consolidated means of getting to builders that really are the best in the marketplace and do pay their bills on time, it’s a very strong value proposition. And probably the best thing for us now, with our 15 year history, is we have a track record and we lean heavily on that track record. And they say, ‘I’d like to talk to some other vendors or manufacturers that have worked with your program.’ We’ve got a long list we can send to them. It really helps us.

Dan Houghton:

Okay. I’ve gone off a little track here, but it’s asking someone what their mission is, what the business mission is for an organization, but then following up, you’re making businesses better.

Bill Smithers:

Yes.

Dan Houghton:

Simple as that. Right? And you’re saving them time. You’re giving them more opportunity. You’re giving them more buying power. And then on the flip side of that, you’re giving opportunity to the national manufacturers and local vendors to work with some of the best contractors in the world. So, that mission seems to work across the board. Right?

Bill Smithers:

Yeah. A consolidated manner. So, as I said, we can’t say that it’s win-win all times for all transactions we do, but it’s a clean way of doing business and we bring a lot of transparency to that process. For the folks that we work with, that’s really powerful. We do develop long-term relationships, but all of those companies, at least on the sell side, the vendors and manufacturers, understand that our focus is to help make our builders more competitive. We’re going to return really, really solid results to them if they support us in that effort. And when you got the track record to show that that’s actually what happens, they start believing that it’s business in a better way, which goes back to our mission, that we’re all about making sure that we can maximize the business success of the companies that we work for.

Dan Houghton:

Well, it’s fun to hear this. Through our acquisition of CoConstruct, you guys joined the CoConstruct team late last year, and I’ve said this a handful of times privately, but never really publicly. We’ve been so excited about this acquisition with CoConstruct and CBUSA in many ways was this cherry on top of the acquisition. And as we think about your mission of maximizing their business and their opportunity, their buying power, you combine that with the Buildertrend mission of changing the way the world builds. I think we’ve got a unique opportunity to do both and in a spectacular fashion, which is super exciting. And so, I think it’s going to be interesting for our organizations to see how we can serve a broader customer base, and to see how our mission will evolve and our core values will evolve.

And as you think about core values, one of the things we talk about, we simplify them pretty quickly, it’s about team, which is our internal staff, making sure we give them the best opportunity possible. If you don’t treat your people with great respect, and you don’t make them a high priority, you’re not going to have a great team. It’s about your widget. So, we build software, which is our product. Many of our customers are building homes, remodeling kitchens, doing amazing projects, outdoor living projects. So, it’s about the quality of your work. Without your quality of your work, you don’t get paid. And at the end of the day, that’s your customers. Right? And so, it’s unique how they all work together, whether you’re a software company, a group purchasing organization, or if you’re one of our customers. I tend to believe those three things kind of fall in line for everybody, for all businesses out there.

Bill Smithers:

Yeah, and if you look at the alignment that we have, I mean, we’ve been together for what, two months now?

Dan Houghton:

Yeah.

Bill Smithers:

And the work groups that we have had. I mean, it’s unbelievable how well aligned what we’re thinking about and working on is in alignment with what your team is working on. And our biggest challenge at this point is figuring out which of these awesome opportunities we think we have together we want to focus on first, which we’re starting to do. But superior market intelligence, speed to market, the ability to have true integration, which has been just this elusive target for so many people in the building industry for so many years, and I think we are positioned to actually deliver that at scale to a lot of companies across the country and ultimately around the world.

Dan Houghton:

Yeah, I think our feeling is the exact same as you think about the mission of what we want to accomplish, how we’re going to make our customers stronger, give them more opportunity using data insights for both our customers, as well as the national manufacturers and local vendors, it’s going to be an incredible opportunity. And it’s literally, changing the way the world builds is right in front of us. And we couldn’t be more excited about the CBUSA team being part of the Buildertrend family. And so, more than anything else, we are thankful for this conversation. We’re thankful for Bill’s leadership, not only at CBUSA, but really in the industry. He’s been driving change in the industry for the last couple of decades and that means a lot. So, thank you again, Bill, for joining us. Any last remarks you want to share with all the listeners out there?

Bill Smithers:

Now, Dan, we’re very excited about the opportunities we have together. Our entire network is excited about that. Our team is super excited. So, I think the things that we’re going to be able to do together over the next couple of years are really going to be a complete game changer. So, we’re excited to be on that track and starting to get that work done.

Dan Houghton:

Fantastic, good stuff. Okay, everyone. That’s all the time we have for this episode. And want to thank Bill Smithers so much for his time and the feedback he gave us on today’s topic of mission and building a great company. Hope you enjoyed our discussion about mission and are leaving with some great takeaways. Thank you so much for being here, Bill. I appreciate it.

Bill Smithers:

Thank you, Dan.

Dan Houghton:

Great. That’s it for this episode of “The Building Code.” Be sure to tune in next week for more great content and don’t forget to subscribe on iTunes or wherever you listen to podcasts. Thanks, everybody.