Bigger Projects, More Savings: How to Strengthen Your Bonding Relationships

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ℹ ABOUT THIS EPISODE

What if your relationship with your bonding company could open as many doors as having the right tools on your job site? Just like a well-built foundation supports everything above it, a solid bonding relationship can transform your building's growth potential.

Join Wade and Stephen as they discuss practical strategies to improve your bonding connections, secure bigger projects, and reduce costs. Learn about the impact of a solid bond relationship on your growth potential and how to build trust with your bond agents and underwriters. Whether you're new to surety bonding or looking to enhance your current relationships, this episode offers valuable advice to help you succeed in the construction industry.

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⌚️ In this episode:

• 00:37 Real-Life Impact of Strong Bonding
• 01:35 Building a Strong Bonding Relationship
• 02:55 Understanding the Underwriter's Perspective
• 04:04 Effective Communication Strategies
• 05:27 Long-Term Benefits of Bonding Relationships
• 06:30 Practical Steps to Improve Bonding
• 07:48 The Importance of Transparency
• 10:10 Starting and Maintaining Bonding Relationships

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Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | SuretyAnswers.com

Transcript

[00:00:00] 

Wade: What if your relationship with your bonding company could open as many doors as having the right tools on your job site? Just like a well-built foundation supports everything above it, a solid bonding relationship can transform your building's growth potential.

Today we're sharing simple but powerful ways to strengthen your bonding connections that could help you win bigger projects and save thousands in premium costs. You'll learn practical communication hacks that work as efficiently as your favorite time saving construction tricks. This is the Contractor Success Forum.

I'm Wade Carpenter with Carbon Company CPAs, along with Stephen Brown, with McDaniel Whitley Bonding and Insurance. Stephen, what's the most dramatic turnaround you've seen when a contractor finally fixes their bonding relationship after years of struggling to work with them?

Stephen: It's about profit Wade. It's all about profit. It's about being in the position to take advantage of certain jobs and situations that are absolutely perfect for you. 

When you talk about the perfect storm, it's when you need a [00:01:00] bond that you can't get, and the opposite of a perfect storm would be what, in your mind? The complete opposite of the perfect storm relationship-- what is it? What would be the complete opposite that you would see?

Wade: I guess you have the blissful marriage, and it's the surety marriage analogy. You're basically, your relationship with your bonding company is sort of like a marriage and you don't want it to be a one night stand, I guess I would say.

Stephen: Yeah. No, no, that's, that's a great analogy. And that's not exactly where I was going, but that is exactly the topic of the podcast, is that marriage, that relationship. \

But I just wanted to talk about our contractor listeners thinking of the perfect job. It's coming down the road. All the stars just line up perfectly. Everything from the subs you need to the materials that you have stockpiled for this project, to the timeframe, to the location, to the profit margins that you can make with your understanding of what your competitors are doing. This is [00:02:00] your job.

You want it, you can taste it, you can smell it. It is yours. And ah, it requires a bond, What a headache, what a nightmare. well, it certainly is if you're new to surety bonding. But it doesn't have to be. And that is the whole point of this podcast.

Right. Well, I guess I would say, just thinking about like the one night stand, I've seen some contractors treat it like speed dating. It's like, who's gonna get me the bond? it's just really sad to see. And when people really will put a little bit of effort into the relationship, I think what you want to go into today is, is talking about how you can improve that relationship, and if they will spend a little bit of time working on that relationship, it can go a long way to getting more bonds and bonding capacity.

 Absolutely, Wade. And we, we've talked so many times about the process of getting bonds. I think it's more important right now to think about what do the bond underwriters think about when they're approving bonds for [00:03:00] you? What do they wanna know? 

There's a tried and true financial analysis that affects it. And there's also the character and the capacity of you as a contractor to do the work. And how they understand your ability to do this project that you wanna bond, is they don't know. Okay? Bond underwriters are not contractors. You have to tell us exactly what you're doing and how you're gonna do it. I think any bond agent or underwriter that pretends to do what you do for a living is not a good one. 

Our job is to get your bonds approved and our job is to make sure that everything that we're doing to sell you to that bond underwriterin a positive way, is gonna get those bonds approved. 

And here's the thing, Wade. So many folks, wait until the last minute to portray their excitement over a certain project. And then if you have been speed dating, you don't have a relationship with someone that's just gonna jump through hoops to [00:04:00] help you get your project approved. 

So, as always, communication is the key. Communicate. Just think for a second. Bond underwriters don't know what I'm thinking. They may not even know how this job fits perfectly within the scheme of things. But here's the thing, if you invite your underwriter and your agent into your world and you say, hey, I want you to come by the office, I want to talk to you about this, and I wanna know what you think about it. Kind of excited about it and I want to talk to you about it. that's worth its weight in gold, because here you are able to get your team on board. And a lot of times, Wade, I see, contractors thinking of the surety is not a team, but a necessary evil. And that's just not the right way to look at it.

Wade: Yeah, that sort of goes to where I was actually gonna go with this. Too many people, a lot of times they think their bond agent is in their corner, but their underwriter, you know, that's sort of like a contentious relationship. And you think about your underwriter as somebody that has like financial [00:05:00] x-ray vision. 

You know, you wouldn't lie to your doctor about a pain in your chest, because they're gonna find it in examination anyway. But if you're hiding your financial problems it only postpones the inevitable. And it just sometimes makes the treatment more painful.

Stephen: Right. And if your attitude is just not to be transparent in a surety relationship, then expect to bounce around. Expect to haveless than the kind of partnership that you need. Just expect that. You got to be transparent and just like analyzing and understanding your financial information and what it means to the health of your company, it's equally important for a surety company to understand who's running the projects. Exactly when will it start? How long will it take? What kind of liquidated damages are involved? Are you worried about materials in the pricing? Are you worried about the weather? All these things that generally you worry about and you say, well, this [00:06:00] is not something my surety company needs to know. They just need to know that I know. 

Take a few minutes. I've been begging our listeners to stop what you're doing and plan job site visits with your agent and your underwriter. They love it, and you've got a project that you're proud of, it is worth its weight and gold to establish those relationships.

Wade: Absolutely. And I guess I would say too, you think about it like having GPS on the job site. Your project management system, your costing system, that kind of stuff. And if you can show them that you're on top of that and you know that, you know where you are, you can demonstrate like on the job site, like you were talking about, these surety companies hate surprises. Just the way you hate the GPS saying, okay, well turn around now. You don't want to go 10 miles outta your way. And then it says, okay, all of a sudden, let's turn around. 

Stephen: Right. 

Wade: Navigating where you're going with your relationship and giving them a clear path to understanding how your job's [00:07:00] gonna get done, I think that can go a long way to getting your bonds approved. Right?

Stephen: It does. Wade, you're so right about that. It's everything to getting your bonds approved. But it is also to keep things going smoothly and to be able to jump on things quickly that need to be handled. I think all the time about,how we as people do business with people that we like. We do business with people that we trust. And it's the same in the surety industry. 

But here's the thing I think a lot of our listeners don't seem to understand. The right bonding company and underwriters and home office support system and their legal department are worth their weight in gold to you as a resource of information, of advice. And if you don't ask for it, you don't get it. It's the same thing I tell our contractors about loss control and safety. You want an insurance company with a great safety loss control support section. That's what keeps your claims down and there's [00:08:00] so many resources they are desperate to give you if you just ask for it. Same with bonding.

Wade: Yeah. Along those same lines, the GPS that I was talking about. We don't wanna say we've been driving in the wrong direction for hours. What I would say is, yeah, if you need the help, they're there to help you.

And I think communicating regular updates like a GPS system, okay, well you made your wrong turn, or here you need to turn here. Regularly updating the surety, the same kind of way. It's hey, if we can really get in there and let them know what's going on, they're gonna have a lot better level of trust.

Do you think that's right?

Stephen: I think that's just dead on. I heard someone say the other day that when Tesla upgrades their software for their ability for their vehicles to be self-driving when they update their software, it's not 10% better. It's 10 times better than it was before. And you need to upgrade your relationship with your surety company.

 And it takes a little bit of work, but it's so [00:09:00] rewarding. And it's lifetime friendships. how many times are you as a construction company owner feeling like a lone wolf out there? And then you have partners. You have partners that care about how you're doing, and have good advice for you to keep you from making crazy mistakes.

It's why we do the podcast. We do it because it's so important from your standpoint for contractors to understand that you can engineer profit backwards. And I do it from my standpoint as a surety bond agent to make sure that these frustrations over bonding can go away. You don't have to live with them, you don't have to hate the situation.

If you embrace it, it's amazing what good things will happen.

Wade: I know you're the one dealing with contractors every day, but I've sort of also deal with the bond agents and I've seen some of these things that are happening. And from my perspective, I think those that, want to have a good relationship that, it's a long-term thing.

[00:10:00] So say you're trying to go on a diet or, whatever, you're trying to all of a sudden dress up your financial statements so that you can get a huge bond. You got a big job out there. So you go on this crash diet. And it's unhealthy and it never lasts, and thingscan go wrong very quickly when you do these crash diets.

But when you start changing your habits, your daily habits, maybe build some strength, or, eating well or whatever, it's the same kind of thing. These contractors, if they will start putting these things in place and get a very disciplined structure, get your financial house in order, is one thing I say all the time. Making sure you have that relationship with the agent as well as the underwriters, and getting to know them. It doesn't happen overnight, but when, we build it over long term, that's when they will come through for you.

That's what I see, is that they will come through for you when you got a proven track record and you're not [00:11:00] swapping bond agents every other year.

Stephen: Yeah. People that hate bankers and they hate surety relationships they just don't seem to get that, Wade. They say, I just hate the whole relationship. They don't see what powers involved with trust and friendships in the financial world. And in the surety bonding and in a banking business. When your back's against the wall and you've got a temporary setback and you're doing everything that you can do to run your business, and manage your business prudently, then these relationships come in handy when you have problems.

And when I talk about problems, I could tell stories about problems occurring with the best contractors. That are doing everything they need to have a good relationship in place and to run their company properly. Things that come up and it's literally why we do this podcast, Wade, to make our listeners aware of these things that come up.

In my business, it happens all the time. We do not [00:12:00] want it to happen to any of our customers. We want it to be smooth, we want it to be open, and we want you to enjoy and appreciate what relationships can do for your surety bonding program.

Wade: Well, I guess I think about it more like, okay, well you're running a three-legged three-legged race, and you're tied to your, surety company, your bond agent.

You can't really get where you want to go if only one of you is pulling one side and the other and you go off going in a different direction. So clearly you're gonna trip up if you're not working with these people in lockstep with them. So that's where I see that, you know, really need to focus on how you're building this relationship and what it takes.

What would you say that, a contractor should do? If they don't have a relationship now, what would you recommend they do?

Stephen: Start having a relationship. Are you doing enough bonding activity that you consider your business important to the surety company that are approving your bonds? [00:13:00] And if so, have you met them? Have you developed a relationship with that particular company, not just your bond agent? That's worth its weight in gold.

You were talking about speed dating versus a long term marriage that works. That's happy, that's successful. That's what we're all shooting for here. And a good marriage doesn't come through magic. It's hard work, and it's, it's, building up a strong foundation and, and trust. Ooh, trust is the key thing, in a good, strong, marriage.

And it's always something you can work on. And it's the same with surety bonding. The key relationships are everything. And I can just tell you stories of contractors meeting the highest of the echelon and their surety companies, the presidents of the company, the key underwriting officers, the key decision makers, and the largest surety companies out there. And those folks love the relationship with their contractors. They can't stand sitting up in their offices and [00:14:00] crunching numbers all day. They wanna be out there being part of the project. Andthat's what makes their job fun and interesting and exciting, is to be valued and to be part of a team.

Wade: It makes a lot of sense to me. But,I do, like I was speaking with a young man yesterday that, he is really in his first year on his own. And he didn't have a relationship. I asked him like, are you gonna be doing bonding work? And he is like,well, I, I'd like to, but I don't know where to start. I don't have a relationship with somebody right now. 

It's something that happens over time, just like the teenagers try to get credit. You've gotta work on it, and it doesn't happen overnight. But you know, the thing is, people wait, and I know you complain about this all the time. It's like, I gotta have a bond. I'm bidding something tomorrow. Well, if you haven't already figured that relationship out, what would you tell that person that I spoke to yesterday?

Stephen: Gotta start somewhere. Find a good bond agent that specializes in construction. And [00:15:00] there's , a difference I would say between,any entity, either online or predominantly property and casualty driven insurance agency that doesn't specialize in contractors. You wanna find that person and you wanna at least reach out to 'em and start talking. And getting advice on how to get what you need. And also what situations might come up. We've had so many podcasts that we talk about, in the economic climate of the day we're doing the podcast, either one of us are excited about opportunities that we're seeing out there. We're seeing opportunities that our listeners need to consider to grow their business and make more profit. 

If you don't know what the possibilities are, you can't understand why these relationships are important. So it's real simple. If you're building municipal work or federal construction work, surety bonds are required on all of that.

You're gonna need a bid bond to bid the project, and if you're selected to [00:16:00] bid low bidder, if you're awarded the project, you're gonna need performance and payment bonds. So it's real simple. I gotta turn in a bid. Oh gosh. It requires a bid bond. When's the bid due? It's due on Thursday. well, what's today? It's Tuesday.

So that old expression, if you have to look in the yellow pages for a good attorney, it's too late. It's the same with the bonding relationship. You can speed date your way online and see if a credit scoring bond might be approved for you if the project's not too big. but isn't that frustrating? Because the project is just over $750,000 in size and now all this information is required. And the job bids. Okay so you just have to pass on that job, right? Or bid it with a cashier's check and try to work out the details later. Is that what you want? If you've gone through that once or twice, you don't ever go through it again.

So I guess that's a learning curve. 

Wade: Absolutely. And. I guess I would say, can't use names or whatever, but if you go to try to find a bond at the local, insurance [00:17:00] shop where you got your homeowner's insurance, or your personal auto insurance, that's probably the wrong place to go.

Stephen, are you willing to talk to people that, like our listeners, if they've got questions or? 

Stephen: Of course. 

Wade: if they're in different states, do you have the ability to work with them, whether they're, in Memphis or not?

Stephen: Well, we operate in every state, and I'm happy to talk to anybody anytime. That's my job. That's my passion, that's what I do. And I love it. So, if I can help you in any way, I most certainly will. And if I'm not the best person to help you in your particular situation, I'd be happy to give you advice on how to find the right person and help you along the way.

That's why we do this, Wade.

Wade: Yeah. Well, I've seen you giving so much good advice over the years in doing this, and it's hard to believe we're in our fifth year of doing this now, but, how can they reach you? I mean, we could put your contact information in the show notes, but.

Stephen: Well, it's, McDaniel Whitley Insurance and Bonding. We have multiple locations, our main office is [00:18:00] in Memphis, Tennessee. And you can,reach me by my email stephen@mcwins.com. Or call me. My cell phone number is (901) 340-8085. Just give me a ring. Leave me a message because, you call my cell phone and it shows up as spam and I don't, answer. Please try again. It's my fault, not yours. Just give it another shot. I'm happy to talk to you. But thank you Wade, for those kind words. And I wanted to really have our listeners know wherever you are and whoever you're working with on your bonding, you need to ask more questions about how to make that relationship better. Your bond agent is gonna appreciate it, and if your bond agent's too busy to help with that sort of thing, you need another bond agent. Okay? Maybe they're too busy, or think they're too important to deal with your needs, and that's not gonna help your relationship.

You want a bond agent that really, really wants to connect you with the [00:19:00] surety that you're doing business with, and develop a relationship. And, believe me, when those two things come together, great things happen.

Wade: Absolutely, and I've seen it. When somebody finally gets with the right bond agent, it's gold, like you say.

Stephen: Sure. And Zoom meetings are great if you already know the individuals involved. If you're already friends, you already have a relationship. Zoom meetings are a great way to communicate quickly. Because you know how much you can tell on a Zoom meeting by being able to look at someone.

Right. 

You don't get that over the phone. So schedule some Zoom meetings. Have your bond agent set them up, discuss projects. And,, if you're working on a project that you know is gonna be extremely large and bonding might be an issue, don't wait. Start talking to your bond agent now about it. 

Stephen: If it is so much more than a project that you've done before andeverything is in place that bond agent said, I understand the elements. I think I can sell it without a meeting with the [00:20:00] underwriters, let me see what we can do, then you're so, so much ahead of the game. You don't have to have all the facts on a job to start talking to your bond agent about it. If it shows up on your radar, we wanna know about it. Because timing is everything. 

And one of the most rude things that you can do to a bond underwriter is to, rush them to make a decision. I never forget my old boss,was being absolutely beat up by an agent for a decision that was not warranted. The elements weren't in place to approve that, but he was being pushed, pushed, pushed. And he said to the agent, he goes, you want a decision? You want a decision now? Okay, I understand. The decision's no. And That's not what you want.

What do you do in that kind of situation? As an agent, you don't want it to happen as an underwriter, you expect people, you're doing, business with to respect you and your time.

Okay? So when you wait till the last minute on the job, you're not respecting a key [00:21:00] player in the decision making process. It's just like you remember Wade? I think I told you many of 'em. I was raised by my dad. He was a a World War II vet, and if you're not 15 minutes early to an appointment, you're late. that just blows people's mind.  

My son who's 25 is just, he's man, you're old, God. Nobody can be 15 minutes early to an appointment. It's not about the 15 minutes being early. It's about the thoughtfulness behind it. I value you and I value your time.

Wade: Absolutely. Well, it goes a long way. I think there's a lot of good thoughts in this episode and I really appreciate you sharing all this with us. Any final thoughts for our listeners?

Stephen: Yeah, just if you hadn't started this process, go ahead and start. Go ahead and start. If things are sideways, if communication isn't flowing and you can't understand what to do about it, then reach out to people that know what they're doing.Feel free to reach out to me. I'll give you my free advice, which is [00:22:00] exactly what you pay for it. Free advice. But I'd be happy to tell you what I think. 

And,I just appreciate our listeners, trying to understand the process and, and getting through it. That's what we're here for.

Wade: Well, again, we appreciate you bringing this to us, and if our listeners do have any questions, feel free to reach out to Stephen, or put it in the comments below and I'm sure we'd love to ,answer it there. You know, If it's something confidential, you probably wanna pick up the phone or just reach out one way or another.

Butwe appreciate you listening to this and if you have any other thoughts on this or any other topics we'd love to hear it. If you would consider like, share, subscribe, do all that fun stuff that helps us out, we always appreciate that. We do this every single week and we will look forward to seeing you on the next show.