David and Nathan McWhorter on Scaling a Steel Business

0:03 Our next interview on stage here is going to be with a steel family, uh David and Nathan. They've been able to build a multi-generational business in the steel construction business. It was originally founded uh as D&D Welding in 1992 by David in his garage, and it's grown out to 75 employees. It's a steel company operated by the McQuarter family. Uh it was renamed in 2010 to reflect its broader capabilities, and I think it's a good example um of the benefits of being inside the club. We like to focus on stories of structuring deals, scaling companies, growing platforms, navigating exits, investing, due diligence, originating deals. Um so, let's welcome David and Nathan up here to the stage. What would you like to add to your backgrounds and bios and kind of background of the company before we jump into the questions?

0:51 You go first, Dad. Okay. My background was started at early age. I um I was exposed to entrepreneurship I by my grandfather. Uh he was in the manufacturing uh business. Uh manufactured woodwork and woodworking machinery Sure. >> cabinet shop, so um I guess that's not really my background, but that's how I got exposed to entrepreneurship, and yeah, it led me to wanting to do my own thing. Sure. >> started the company early. Sure. Uh what was it like when you first started the business? Like your very first client, the very first month you were in business. How did How did that start? Oh man, it was I was I started the business on my 22nd birthday.

1:43 Um I just had a lot of ambition, so I was going to job sites looking for opportunities. Um I met some great people that brought on some great opportunities, but uh I worked for a small fabrication shop before that, so I gained some experience there in ornamental iron and just custom fabrication. Right. Right. Go ahead, Ethan. The part of that story that's super impressive, too, is um he went to the Navy and was going to join the aviation industry after the Navy. What's more typical like Northrop or Lockheed and actually went through the background screening process at Northrop. I love this story, so I'll tell it for him, but um and he has they had my brother at 17, so he has a family. He's out of the Navy.

2:40 He gets a job offer from Northrop and after the lengthy background processing, he decides to not accept the job offer and on his 22nd birthday start the business and you know, Northrop don't like that, so he doesn't have any backup plan to go go back They're not happy that he they he led them down the background process, but decided to do his own thing. >> I had a very similar experience. I was 26 when I started Family Office Club and I had a job offer to join a private equity capital raising firm that raised billions of dollars. Would have learned a ton by joining and it was a safe route. Everyone around me told me do that safe route, take the job and then one of my friends said, "What have you got to lose? Just start the business and you can always take the job later or something." So, I guess um why do you think you made it and where it was able to build a business worth tens of millions of dollars while other 22-year-olds probably fell on their face and went groveling back to uh the big company to get a job?

3:33 Uh well, I had a few things going for me. I You know, I did go in the military, so I was pretty disciplined. Um and I had a massive work ethic. I loved to work with my hands and I was really excited about any opportunity that came my way and I think it uh, you know, it shined through to my the the people I was working for so they wanted to introduce me to people and it just it really grew and I think that um, that's really I contribute all the progress we made in the success from just building some great relationships and I and um, you know, it was hard work and I put in the work, yeah. Yeah, we had a Michael Michael Scott built and bought his first company after joining here in the club and then sold it for a hundred million dollars and he had a similar answer to you. He said his advantage is that he had a PhD. Uh, he was poor, hungry, and driven, you know. Exactly.

4:31 >> that made that made the difference. What are three things that maybe are not obvious from what you've said already? Obviously you're a hard worker and you have the guts to take a chance on yourself but like besides that, what are three things that help you grow the business to tens of millions of dollars cuz there's tons of mom and pop little steel fabrication companies that are still ran out of the garage or a 500 square foot little mini flex warehouse or you know, what what are three things that really drove you to be able to scale the platform? I would I would say that my wife and I were extremely committed to reinvesting back into the company way more than we were committed to having nice cars and and all that stuff. I mean it it was we got way more joy out of seeing this company grow, uh, being able to hire people, and have a place for them to work. So, I I thought that was the biggest thing. I loved the facilities and the equipment part of it and strategizing uh, how to bring out efficiencies in fabrication and stuff. So, it was an easy investment for me. I I put, you know, I bought a lot of equipment and um, my my grandfather taught me that the man who needs a tool is already paying for it so I used that because I knew if I bought this tool I was going to be able to make a living with it and you know, that's that's how that really

5:49 helped us scale. Um and I and I this would never happen with all the amazing people that we hired and that helped this company grow. So Got it. And uh Nathan, from your perspective, what do you think he's he's leaving out there that you see as like key to either like your family's culture or company culture or or something we haven't mentioned yet? That helped us to scale, I think um all of the things you typically hear about like one, working backwards from the goal. So we as a family have revenue goals or goals for the business and then we work backwards from those. So if you like an easy example is revenue. Like if you want to grow revenue to 70 million and and you bid a certain amount of work and of that work you bid, you win 10%.

6:37 Okay, I either need to increase my win rate or I need to bid 700 million dollars worth of work. But that that applies to every aspect of business. So we think about things like that. Um who not how, we talk about that all the time. But one one step further than just like hiring people is hiring the right people, especially when you're a family company that needs to be profitable every month. We don't have a whole whole bunch of investor money in the company. So it's hiring the right person at the right time that solves the problem that you're trying to solve. Got it. And then um there's some people here in the room they're looking for like a a joint venture partner or they have some idea related to industrial manufacturing and they may want to reach out to people that are living parallel lives to you, right? They run a business that's doing 10, 20, 30 million plus year in revenue, but you're very busy and and strangers reaching out to get a hold of the CEO of a busy company, you know, I can't probably reply to too much there. So any advice to those looking to work with family office types, decamillionaire types in terms of um how to get your attention uh when so much so much is coming at you every day.

7:44 Do you have anything on that? Good question, Richard. I think I I mean, we both get tons of emails and you're super It has There has to be alignment there on on what you're focused on and what our next objectives are. Um there has been opportunities that have got presented to us over the just the past 3 years that made a lot of sense. Um luckily, we already knew these people. So, that went a long way. We already had a relationship, so when they send us an opportunity, we jump on it right away. If we don't know you, if it's cold, it's going to be very hard. Got it. And then um for you, Nathan, what's the hardest part about earning authority in a business where everyone knew you maybe when you were in a when you were a kid in the business? Um like how do you handle long-time employees that maybe didn't used to take you seriously, but maybe now they do? Or like how much of a challenge is that and how are you navigating that? Yeah, I try to get rid of that chip on your shoulder. I mean, just approach everything with humility. Um and when when you have humility, you know you're going to learn from the people that you're {quote} managing or or they know you're going to be one day managing. So, um step one, have humility. Step two, actually produce results. So, in the company, like when I started in the

9:01 company, if if people have been complaining about something for 2 years and you solve that problem, they're going to begin to take you seriously. Or if or if they've had a goal for the past 5 years that they talked about and no one's got close to achieving it and you lead the way to achieve it, they start to take you seriously. Got it. Yeah, we have people live streaming this event and then we have people here in the room that are going to be grooming the next generation in their family business. So, what would be a tip for either kids that are learning their parents' business, whether they're a young kid or older kid, or for parents in a family business, like anything that either of you would suggest that you've kind of learned as the the right or wrong thing to do in most cases? Uh for us, we we really want both of our boys are involved in the business, and we really wanted them to um make be able to make some decisions, make mistakes. I mean, that's the best way to learn.

9:56 Uh we're there to we still make mistakes, so we're there to give as much guidance as we can, but we really want them to um go through some of these struggles that all small businesses have. Structural steel is a tough business, and um we're confident that they're going to be capable. Sure. By going through that. So How do you instill they have uh a good percentage of the work ethic that you had when maybe they're not in the same like really resource-constrained, like kind of backed into a corner, have to make it work? >> be super hard on us. Never give us compliments, and put an immense amount of workload on us, I think. But go ahead. Go ahead. That's great. I think that's a big challenge for for families, right? It's kind of like, you know, when you grew up in a like middle-class or lower-middle-class or lower-class house, and then you grow up and maybe go to a private school, and like I don't know your personal lives where they went to private school or not, but if you grow up private school with organization houses, then now it's like it's a little bit harder to uh show them how hard it is to actually make that become a reality, right? It's a big challenge for a lot of families here, I know. Steel is a a cyclical a cyclical business, you know, it's capital intensive, right? And um

11:13 brutally competitive, uh global players involved, right? Big scaled-up publicly traded players involved. So, what's the strategic decision you made that your competitors thought was kind of insane, but it turned out to be your biggest advantage, or what is your edge? How do you thrive in that type of a space? Yeah, I don't I don't know if our competitors think we were crazy or anything, but uh you know, we we continue to look for opportunity to be better than the large companies by adding a massive amount of value. We look for opportunities as to uh scale our business. So, we recently well, not recently, but a few years ago, we started our own detailing company um in Thailand, actually, and it's been a game-changer for our business and to doing it in-house to support our clients. Most of our competitors outsource it. We've always outsourced it. Um so, we brought that in-house. We um we really lean into automation.

12:15 Our shop is very automated, automated fitting and welding, and high kilowatt laser, fully automated beam line rib a lot of automation, so we can compete with those bigger companies. And a and a lot of them don't have the equipment they have. It's just old it's just a different mindset, but um we have to be efficient. And you know, one of the other things is we've um we got back into the erection business because we are competing with the the big companies out there, SME, Herrick, Schuff, um and they're and they're erecting. We got out of the erection business back in 2010 and recently got back in it, so we can do a better job uh taking care of our clients and serving our clients. And and that's really our our main focus is how we show up. And we want these projects to be extremely successful and and it shows in our from our team.

13:13 So. I think I think that set separates us from the large companies, too. As something we've heard and and what I think as well is we're not just in it for meeting our outcomes on the project. We We to make sure that our clients meet their outcomes and it's a successful project, not just successful for us, but an actual successful construction project. Got it. Was there any time along the way where once you acquired a certain strategic asset, everything started growing a lot faster or once you thinking differently, everything just started taking off? Like I don't know if at some point you were stuck at 3 to 5 million in revenue or just flat 10 million and then and then things took off after you changed? Yeah, I Well, I think we've, you know, we achieved about 10 million within or the in about 8 years from '92 to 2000, a little bit before that.

14:05 Um we started when there was a recession. We 2000, you know, there was you know, like you said, steel is very cyclical as far as it it can be very challenging. There was a a huge disruption in the steel industry in the early 2000s, um which you know, so we saw revenue go up and down quite a bit. 2008, obviously, uh 2000.com and then the material increases, but I think um what allowed us to get much further along than that was a a mindset shift um in the business and and what my role was. Uh I got coaching.

14:56 Uh I joined Strategic Coach. I know you mentioned Dan Sullivan earlier. Um so those were some things that helped and um yeah, and just we get better. We we still strive to get better every every year, so. Yeah, awesome. Yeah, early on I like I studied Brian Tracy and I read every book he wrote. I studied Eben Pagan, then went super deep in Dan Sullivan, listened to every episode of every podcast he put out, read every book he wrote, and lately that's what I'm doing with the the Billionaire Off Third books with billionaires.com, but big believer in that. Um what's a founder mistake that you made early that you think lots of people here in the room could be making or maybe are about to make and they could easily avoid that um and once you fix that mistake, you know, everything everything scaled up. Maybe something that Sullivan shined a light on for you or some other type of mistake?

15:45 Yeah, uh definitely felt like I had to be involved in everything and I had to solve all the problems or um come have the solutions and just acknowledging that our people really needed to feel like I trusted them in order for them to excel. So I was hurting myself by just being involved in everything, then I was hurting them by not showing that I trusted them to make decisions. And it was and that you know, once I once I learned that lesson and allowed people to be successful, the business started doing much better. I I I couldn't do it all and there was no longevity in that. And I think that's what keeps a lot of entrepreneurs in business uh small is because they feel like they got to be involved in everything. Right. Yeah, completely. Um anything else you want to add um for this interview here today? Maybe something I didn't ask you that you, you know, wanted to share with the room about either being in a multi-generational business or about scaling a business, you know, to eight figures, etc. that you want to share before we wrap things up? Sure. One One thing I think there's uh there's a company that sells beer and we were on a trip with our family and around it it

17:02 says family owned and argued over. And that's I think that's true for family businesses, but I have so many people I know that are second generation, their parents have businesses and for some reason us uh a lot of people I know that are second generation just have a chip on their shoulder and so badly want to prove that they could do it on their own and um just realize how grateful you are to be born into a family business and and don't take it like take it advantage of it but work really hard. Um that's what I would say and I it took me a while to figure that out but yeah. Yeah, I think being having the ability to be involved in the family business is like a gift in itself and even if there is like debates over what to do or how much responsibility you want at a certain age it's much better than just being completely checked out cuz you feel like well, my family is wealthy enough. I can just sit on the beach all day and not have any fulfillment in doing anything, right? Like that's that's kind of like the worst case that I think a lot of parents they worry about.

18:03 Do you want to add anything else before we wrap up? I think that was I think that was good. Yeah. Great. All right, let's give him a big round of applause. Thank you very much. Thank you.