Episode Transcript
[00:00:00] Speaker A: Foreign.
Welcome to the Victory Show.
Hey victors. Welcome to this episode of the Victory Show. If this is the first time you're joining us, I'm Travis Cody, bestselling author of 16 books and the creator of bestseller By Design. I've had the privilege of helping hundreds of business owners, founders and entrepreneurs write and publish their own best selling books. And through that journey, I discovered a really fascinating pattern. Most businesses really struggle to break past that elusive seven figure per year in revenue mark. So on this show, I sit down with some of the world's Most successful founders, CEOs, leaders, business owners to uncover the strategies they use to scale way past that mark so that you can do the same. So get ready for some deep insights and actionable takeaways that you can implement in your life and business. Starting now for my guest today, he's the strategic force behind one of the most iconic names in American design. Joseph Furey is the president and CEO of Michael Graves Architecture, where he leads not just one firm, but a growing family of companies rooted in purpose, creativity and collaboration. With over 30 years of experience in the AEC and professional services industry, Joe has led everything from mergers and acquisitions to financial strategy and succession planning. Since joining the firm in 2008 as CFO. And stepping back into the president role in 2018 helped drive a new era of growth anchored in teamwork, vision and smart business design. When he's not building companies, he's thinking like a coach. Because for Joe, leadership isn't just about metrics, it's about motivation. He loves his love of football, shows up in how he leads. Clear game plans, strong culture and always playing to win. So welcome to the show, Joe. Thank you so much.
[00:01:50] Speaker B: Well, thank you Travis for having me here.
Big, big, big introduction there.
[00:01:56] Speaker A: So. So you started off as a, as a numbers guy Originally, yes.
[00:02:01] Speaker B: I worked for God knows how many years in accounting and finance, roles up including through in 2008 when I was hired here at Michael Graves to be the cfo.
[00:02:16] Speaker A: So, so I'd love to talk to you a little bit about that before we get into what you've done as CEO and the scaling and all that sort of stuff. Because from my own personal experience working with a lot, especially solopreneurs, numbers, really, they're not really great with their numbers.
So what advice can you give to somebody that's maybe got a half a million to a million dollar a year? Like what, what are, what are some of the core metrics and especially in the finance that they should actually be keeping their eye on?
[00:02:45] Speaker B: Well, Each business is different. So you know, what are you, what are you selling and what do you, what are your costs to deliver that service or product?
And so we're a professional services firm. So, you know, you could apply this across, you know, many different sectors. But for us, we look at a number of things, including the traditional P and L and margin and, and all those things, but days, sales, outstanding. So how quickly you collect your cash is absolutely critical because 80 to 85% of our costs are payroll related costs which we're paying short, sort of upfront. Then we do the work, then we do the invoice to the client, and then we wait for the money.
That's really critical. And then we do two different KPIs out of our 10 or 12 that are on our monthly KPI reviews. And one is utilization, and the other, which is very correlated to it, is what we refer to as our effective bill rate.
Maybe some would call it a realization rate, but it's basically the actual value of an hourly rate that is earned on projects. And while we don't bill for most of our work on an hourly basis, it's rooted in an hour of work, you know, equals an hour of revenue. And then how did you perform? So if we priced an hour for a task and we took two hours to do it, well, our rates diluted, cut in half. And you know, the utilization can be, can give you a false positive. You can, you could have a high utilization rate on projects that have nothing left to bill or not enough revenue left to bill. So if you looked at your utilization, said, great, we're at 90%, awesome. But then you wait for your P. L and you see that you don't have any revenue because there was nothing left to bill. You had that false positive. So they really need to be looked at in tandem.
[00:04:38] Speaker A: Wow. All right, so let's talk about this specifically too, and the challenges of like a company that's scaling. What are some of the challenges again, coming from a finance standpoint that you've seen companies that like, you know, somebody hits a million now maybe they've got a couple of new team members and they're like now, now their time is freeing up and things are starting to grow.
Where do the numbers sometimes go off the rails for people in that.
[00:05:02] Speaker B: Yeah, so I guess a couple of things there, you know, when you think of scaling. And if it's you, and I own a, or if it's me alone, I own a business, I have to communicate with myself. I'm the one person now you know, we, we have two people, we got to communicate four. Well, there's four of us, then eight and you know, and 16. And it keeps doubling and the communication then becomes very complicated. So process, procedure, structure, accountability, the obvious things are critical for our business. We've at the size we were before we started doing acquisitions, we were calling about 40 people, 10 million in revenue. And that was like the, the spot where, you know, we, we need more money and we could be really, you know, efficient, but it was just tough to continue to get the, the backlog and work. And then when you got a little, you needed more people and then the work slowed down and your costs were out of line. So it was a real tough spot to be in. And so we, for a number of reasons in our strategic planning, you know, which is maybe a deeper conversation, you can look at it as one way or the other. Do we organically grow or do we strategically grow? And what I've always said, for us to organically grow beyond that was an absolute fool's mission. We would just simply be working hard to get tired.
And so by strategic growth, obviously I mean acquisition.
And in bolting on another highly functioning, well run business unit through acquisition that counters, they bring strengths that offset our weaknesses. We have strengths that offset their weaknesses. And you put the two together, you get, you know, infrastructure lined up, squared away and built to scale. And, and then you go, and then for us, that's the, really the secret to our growth. Because, you know, while if we, if we did the first acquisition, let's just say we doubled in revenue, we didn't double in revenue with an existing team, we added a team that was already delivering revenue at that level. So then we, we strategically choose to integrate and implement the things that are important to become one company, but absolutely not to disrupt the revenue of that acquired company.
So we don't want to be doing all kinds of administrative tasks just to say we did them and you know, now we're operating a certain way. And while that happens, their revenue goes from, you know, whatever drops by 30, 40%.
[00:07:44] Speaker A: I was gonna say. Now I know we're talking about business, but you see this in Hollywood all the time. They go in and there's a intellectual property is performing really, really well. They buy it and then you change everything and then it stops performing. And they're like, what happened? And all the fans are like, I'll leave it alone.
[00:07:57] Speaker B: And, and I think that's, you know, there's probably plenty of cases where people want to be smart and they want to you know, make things the change so sophisticated. And when you take a step back, it's. We're in a simple. Not the doing of architecture. That's a complicated thing. But the business of architecture is a relatively simple business.
So don't overthink it. Stick to the basics. Like there's Those couple of KPIs we need to focus on, keep people billable, have the appropriate amount of work as we have people and then do your job as an architect. And if you did all of that, you' be a couple things you'd have to tweak. But that's the bulk of the, of the, of the operations.
[00:08:43] Speaker A: I love it. So let's talk a little bit about. So you come on board at 2008 CFO and you've got a decade in the CFO row kind of, kind of watching during, during that, that 10 years. What, what was the growth trajectory for, for the company?
[00:08:57] Speaker B: Also we, when I, when I joined that the year before, no, the year I joined and then the following year was, were our two highest revenue amounts that I believe in the history of the firm is probably accurate.
The product side of the business had grown as well in addition to the architecture. And I was overseeing each, each side.
And then about two years in give or take, the mortgage crisis happened.
And it hit us like a year after the year or more after it really happened. And we had worked, thank God we had work internationally, so we were able to, you know, keep relatively busy. But we cut in size drastically.
I forget the exact year. I'm gonna say like 2011, something like that.
And you know, it was because of. That was like the, the straw that broke the camel's back. There were, there were a few other, you know, contributing factors to the business in that Michael was a world famous architect who was getting older. And he had been paralyzed back in 2003, I believe.
So, you know, his ability to go out and be the guy who he was in the 80s and 90s mean that was beginning to be the past. And, and, and then that the transition while, while Michael was recovering in the hospital for a couple of years, in and out of hospitals, the team underneath him delivered projects.
But getting more work, transitioning from Michael the guy to Michael Graves the brand was not something that was really focused on. And then you, then you had the mortgage meltdown. And it was just the one thing that just crushed the business at that point. And we had to make very tough decisions with staffing and, and really shrunk the size of the company in order to keep the company going forward. And it ran that way for a couple years and then then started to build back up over a few years later.
[00:11:14] Speaker A: So when. When did it become. When did the discussion start happening for you to transition from CFO to CEO?
[00:11:23] Speaker B: So Michael passed away in early 2015.
I was offered a job to go someplace else, and I took the job. But I stayed until the end of January 2016, so 10 months or so so that I could enable my controller to step into the role and get the company through year end and everything before I had moved on.
So call that January 20, 2016.
By early 2017, there we begun the conversations of me coming back. Wow. And it took, you know, months of negotiations and things like that. And so I was really gone for it because once those conversations started happening, I was paying attention to things and I was really only gone, gone for like a year with very limited conversations. So it almost feels like a blip that I never really loved.
[00:12:29] Speaker A: So what were some of the big challenges then for you, stepping out from CFO into CEO like that first year?
What was the learning curve like?
[00:12:38] Speaker B: Well, in a lot of ways, I've said this as somewhat of a joke.
Like when I joined and I went reviewed some stuff with Michael early on, his comment was, well, why are you bringing this to me? I hired you to run the company.
So like, that sort of was his mindset. Architects, some of them are good business people, but a lot of them are known for wanting to focus on the practice side of the business. Yeah, the art and. And aren't business people. So he would. He was perfectly fine with that. So in. In a lot of ways, I was.
For those years prior to his death, I was stepping into those type of. That. That type of role.
But for me, when I came back, it was the one biggest thing is how are we going to sell in an architecture, you know, you. Most are seller doers. Michael was in his. At the top of his game. The phone simply rang. So the biggest challenge for me was bridging that gap and how we did that. And we, you know, we did a decent job of transitioning that internally before we had done acquisitions. But again, that's what I said before. That would be a fool's mission to continue. We just work and work and work, and we'd never really. We'd be working really hard to stay at that 8, $10 million number. And, you know, I wasn't particularly interested in that. But if you go way back to. And I really want to find one of the original ones just because I Did the graphics. And it was horrendous compared to our strategic plan. Now where our marketing and graphics team had done the graph have done the graphics.
But early in those very, very early strategic plans, 2012, 2013 maybe was when I first did those the issues, you know, in the SWOT analysis, the answer was like would stare you in the face. It's like do acquisitions. You know, we're good at this, but we're not good at this. They're good at, you know, and like put the two together and, and you get the best of both and so on. In addition, our industry was extremely ripe at the time and still is now for, for consolidation. Like tens of thousands of firms with, you know, the lion's share, you know, 90 plus percent being 20 people or less, 10 people or less, right? So you get these, these firms, these really talented people that can do amazing work. They don't really have any business infrastructure. Most of them much knowledge. And you know, and then our team, you know, we, we not only do we bring the Michael Graves brand, we bring the talented people we have in legacy Michael Graves and we get these other talented people and let put them together and let the designers do what they do. And I've surrounded it then with business people, you know, to keep it on track and grow and.
[00:15:39] Speaker A: Well, I mean to, to Michael's credit, the fact that he recognized he wasn't super great at business and he found people who could do that for him. I mean that, that is something, right? So I used to do direct marketing and direct response marketing for online marketing guys. And after four or five years, that was one of the things that I realized there's some, some, some in, in that industry guys. They're, you know, the A list, the super famous guys. But as I would work with them and get behind the scene, they were the business, right? Like they would never be able to sell because they were the brand and what they delivered was all from them.
So that, you know, like talking about taking Michael Graves and how do you transition from Michael being the guy to Michael's ideas being the thing that, you know, drives the, the company, right? That, that, that, that is most of the guys online could never do that. So the fact that you were able to, to figure out a way to transition that is, is, is quite, quite something.
[00:16:37] Speaker B: And it's a, it's a. I just honestly, like I look at it and I say all these pieces were right there for me to just nurture. Right. So Michael and I may mix the quote up. I believe it was fast Company.
There was a quote where he said it was something to the effect of Michael's greatest design may very well have been the talented people he surrounded himself with and, you know, his companies and the talented people he surrounded himself with. And by companies then meant architecture and the product design company. And I really take that to 2.0, which today companies means legacy. Michael Graves and all of the firms we acquire. Right. And that's his DNA. That's the genius of Michael on the business side, and that's how we carry that on. But that, you know, the, the putting the stir in the pot with putting all these talented people together and letting them do what they do within certain boundaries. From a business standpoint, it's the credit goes to, to all of them.
[00:17:45] Speaker A: Yeah. So let's take a step back and talk about the acquisition side. So at 2012, you started doing the strategic planning, realizing, oh, even, even with Michael still around, you realized like, okay, we, this is the next step for us. So was there, was there anything during the, you know, 2012 to 2017 that prevented you guys from going out and acquiring, or was it just something that was kind of a back burner? We'll get to that someday.
[00:18:11] Speaker B: No, it was, it was, it would have been. Money was really the, you know, because we, you know, we survived the mortgage crisis, but it took years to really get out of that. And when I left after Michael died, 2016, the company was in its best financial position for my whole time there. So I felt like I left something in better shape. It was smaller revenue, less people, but financially sound. And it was just coming to the point of being in decent shape from what we had to work through debt through those years. I mean, many firms did, some still in that same debt, unfortunately, and many didn't survive.
So that was the biggest constraint. And then when I came back, you know, I, I, I retooled the strategic plan and began talking to private equity and reg banks and, you know, friends of mine who are in the industry. And the best advice I got from one of my friends was like, you're too small and you're, you know, you're, the brand is great, you, the strategy is great, but, you know, you're too small of a company to get any kind of meaningful money. And if you did get the money, they'd take 50 plus 70%. And, you know, I'd never, and my partners would never experience the, the upside that we're really working hard for it. And so the best advice he gave was go talk to every single bank you Possibly can and see if anyone will understand what you're trying to do. Most didn't.
Well, all but one didn't.
And, and, and see if they'll finance you and get one under your belt. You know, integrated now you got proven track records. So, so we, we ended up with, with a new bank, Columbia bank, and Michael Fisher was the banker at the time, and he understood what I was trying to do, and he was able to communicate in the bank and explain what we were doing and how we were doing it and why our structure was great for accelerating growth. But there was a lot of downside protection for all of us. So the bank got their head around it. They did the first deal and the next and the next and the next. And we've got, we're about to close our eighth now in like three and a half years. Wow. Worth of time. And, and so now we've got, you know, private equity calling and are interested.
[00:20:40] Speaker A: Because now you're big enough.
[00:20:42] Speaker B: Now we're big enough. We're just on the, on the cusp. And then it's. So it's a question of, you know, when's the optimal point to do that first transaction.
[00:20:51] Speaker A: Wow. So what, like, from a strategy standpoint, how did you go about identifying, like, what would make sense for your first acquisition?
[00:21:00] Speaker B: Oh, well, so there was, there's a, there's a few good firms that represent seller, buyers and sellers. And there was one I'd always talked to Stone Mill Partners, Patrick Neal, and I've been talking to him for years and just got to know him through the industry.
And, and there's others that we've, we've worked with as well. But I mentioned him because he's brought us several deals and he brought us the first deal. And so there's a number of factors we look at, like the country's large and we're, you know, we were like doing these projects all over the world out of Princeton. So there's just pick the next city. Right. I mean, the, the choice you make won't be the wrong city. Right. Now the other thing in our, in our business, you know, we work in virtually every building type. Right.
And in the SWOT analysis strength, we can design any kind of building weakness. We design every building. What does that mean? It means we're not deep in. Anyone to be thought of as the expert in building, you know, in doing corporate workplaces.
[00:22:06] Speaker A: Not like Frank Geary, where they're like museums. Go to him.
[00:22:10] Speaker B: Yeah, but. And he's, you know, it's like high unique design and so on. And that's what we were thought of is, you know, design firm. So the other thing was we, as we do the acquisitions we need to everyone will start to build up the depth in all these different sectors. So sector didn't like if we picked multi family versus schools.
What's the, you know, we got to do them both. So like start finding good firms. So I started thinking of it as like, you know, the, the NFL draft, right. It's like you have a need. Well, we have a lot of needs, right. So what are you going to do? You're going to pick the best available athlete, right. That's going to help move the needle. And so it really got us to that people focus and in due diligence, we obviously we, you know, we look at their design, right. If, if it's good and we can make a great home run, if it's great, and we can make everything great, great if it's, if it's horrible, like we're going to take a pass.
So that's like the first. Then we look at the financials. Are they great or are they so. So. And if it's so so, well, we might be able to bring the business acumen to help on that side. Like that's a, an expectation.
But the most important part of diligence is the people. So I always say is, you know, if we do a deal with someone, we're doing a deal with you. I'd say that something's going to go wrong. Don know what it is, and I don't know when it's going to be, but something will go wrong. And the big question that I got to get comfortable with, and you should too, is how are we going to behave when something goes wrong? And if we're comfortable that we will solve that problem together, whatever it is, whenever it is, then that's to me the most important part of diligence. And as you can imagine, as we're talking to firms, they're going to want to talk to not only original Michael Graves people, but more importantly, they're going to want to talk to the people who did the deal with us last year, the year before. How did it go for you? You know, give me a challenge ad and you know, and, and I let them have unfettered access to our team so that they can ask those questions. And, and, and that's important for them. And some, some of the deals we've done, they didn't have like the broker advisor, but I steer them through that same process so that they can do their diligence on us, and I want them to, because they need to know what they're getting into, as do we.
[00:24:41] Speaker A: So what for you as a leader, what have been the challenges with the acquisition strategy? Because, you know, you're in eight now, like, and you're bringing in eight separate teams of separate cultures.
[00:24:51] Speaker B: How. What, what, what.
[00:24:53] Speaker A: What have been the challenges and what have been some of the surprising, I guess, benefits that you've come across?
[00:25:00] Speaker B: Surprise. So I'm going to write that down.
All right.
And then. So the challenge is the first acquisition.
Okay. We had a game plan.
My past experience prior to Michael Graves was not exactly the same, but it was similar enough that I had the roadmap and the game plan to do the deal and then integrate the deal. Mission critical to integrate the deal properly. And in the first deal, we.
We had. We were just. At that point, we were updating the strategic plan anyway. We would like to do it every couple years. So, like, I brought everybody into that conversation because while we had the plan, there were still a few tweaks we had to do. And I think if I had to do that all over again.
Well, I'm not. We're not. We fixed this problem. We were. We spent too much time being too collaborative on things that weren't going to move the needle. It felt good because they. It was very inclusive. But then I quickly realized, like, we can't do this every single time. So, you know, we. But. But they were the first one, and we did have to iron out a few kinks in the first deal, so that was fair.
So that was probably the biggest challenge.
You know, I had our IT firm and their IT firm, and I. I said, listen, there's you. Because we wanted to focus on revenue. There's enough work for everybody. Just work together. Didn't happen. So I had to, you know, go to bid on it and make one decision. So, like, we won't do that again. And that just helped clean up the process from the second one on. It's like, here's the script. Here's what happens Every day through this whole process. We have it nailed down. So that was the biggest problem. I mean, the challenge. And I would say, before I tell you the positive surprises, I also, if you looked at our company today, we. You'd say, well, your revenue size, your overhead is big, and you got, you know, big resumes. So I'm the CEO, former CFO.
We have our COO, who was the CFO. I brought him in back in 2022. I think right after we did the first deal and then moved him over to coo, and that's Sean Camo. And then we, we brought in Mark Pizariello as our CFO last year, little over a year ago.
And so if you look at like, so that end of 2024, we were roughly 40 million in revenue. And he said, well, yeah, you got a lot of over. And then we have other people too. There's other functions that we filled, but it was because we filled those spots, created those roles to be a $400 million company, not a $40 million company. But we're not going to wait until we get to 400 million or even 100 million to make those hires because we'll be constantly behind the eight ball. So that's the most important.
You know, you gotta, this is like the CEO and the CFO brain all working together. It's like we have to make fiscal, fiscally smart decisions, but with the business and the growth in mind. And, and I was not looking at it as a decision like spending money on these. These were investments in the right people to do all the right things necessary to grow the valuation, which we've. In through 2024, we've 4x4 to 4 and a halfx the revenue, but the valuations up 25x. Wow. So that, and that's, you know, that's just, we're in this early stage so the, the, the whole thesis is playing itself out for people. I mean, that's, that's part of our promise in our deal with the acquisitions we do is that they get to share in that upside and you know, and it's playing itself out so that the valuation. There's one pleasant surprise. I knew it would go up. I just, you know, I'm happy where it is right now and I know that we can do so much better even, even at the same revenue size if we optimize, you know, financial performance, I mean, and maybe the revenue would go up. It's. If you leave the staff at that size, we can get more revenue and deliver it then that, that profit's going to move the valuation.
So that was a huge one. But I, I think from a design standpoint, there are two things that jump out. One is when we do diligence and you look at the website and the quals that the seller gives us, it's like, wow, it's amazing stuff. But then when I go look, go to the offices and I look at the images on the walls, like you see behind me, it's like well, that's not on the website and that's on the website. You got all these.
And it's a, it's a typical thing with architects where they've, they've, their body of work is, is far greater than what at times is expressed on the website or in other materials. So that was a surprise. And then the biggest one, really the biggest one is we immediately the, the first and you know, and then the second and third acquired firms, those partners of mine immediately started networking and working together with each other. So not just a hub and a spoke, where it was, you know, Michael Graves, Princeton and Acquisition 1, Acqu 2 and 3. But when Acquisition 1 and Acquisition 3 collaborate on their own without asking for permission, they don't have to ask for permission. Go do it right. That entrepreneurial spirit. We want to live, you know, in this company as big as it gets. We want to maintain that boutique entrepreneurial feel.
Those, those people just working together without any prodding. Ahead of my thinking. I mean that was the one time I think that where the machine got ahead of me in a good way, which is just, it's, it creates instant synergy and, and value and that's, that's probably the, the most exciting.
[00:30:47] Speaker A: Okay, so shifting away from business stuff for a minute and the, the years you've been with, with Michael Graves, what, what has been the biggest project you guys have ever undertaken?
And then, and, and then the other one is from, for you personally, what's been the favorite project you've worked on?
[00:31:06] Speaker B: Oh, okay.
[00:31:07] Speaker A: As a company, obviously.
[00:31:08] Speaker B: Yeah. So the biggest, I mean the St. Regis in Cairo, which opened three years ago, is up there. It was like 2.2 million square feet.
Resorts World in Sentosa, Sentosa in Singapore.
That's one of the bigger ones.
We are on the cusp of potentially blowing past those types of projects for a few things that we're working on in Saudi Arabia right now. So they're early works, concept type projects that are what if, if they go forward and get built and others that we're competing like in a paid competition on, if they go forward and get built, will be off the charts.
Another one, this, this falls into the proud one, and I would still say a big one is we are, we have two term contracts with the architect of the Capitol, which is the agency that oversees the whole capital complex with the exception of the White House.
So we are with, you know, we're, we're one of, I don't know, eight or 10 different AE teams. Architect led that on the one contract that does all kinds of work in all the buildings. And then the other one, we were the one winner, the only winner. One firm selected to be the master planner for the capital complex for the next. The view of like the next hundred years.
So that's still, that's a very big program with far reaching impact.
Maybe not the revenue, but definitely the impact. And it's really cool to be the one single master planner for that. Some of the other ones like you see behind me is my high school, Don Bosco Prep in North Jersey. The fourth building on campus we designed and turned the parking lot into a quad. Really changed the whole complexion of the school for the better.
That's probably one of my favorites.
[00:33:14] Speaker A: All right, well, final question is we got, we got, you know, four and a half years this decade left.
So 20, 30. Where do you see Michael Graves architecture being at? What's your strategy?
[00:33:28] Speaker B: Yeah, I mean we, the continued growth. I mean I could go to the strategic plan and say, all right, 2030, we said the number was going to be X, you know, gut feel now. I mean I would be very disappointed if we weren't well over 150 million in revenue. Like I said, we started the acquisition at 8 to 10 million. We're finished at 40 million last year.
That's a reasonable number for us to get to.
And at some point in that time frame would be when we anticipate that we would have our first round of private equity investors, partners. They got to be the right, the right people to continue to grow this, you know, with respect for the brand and, and what we mean in the industry and service to clients and, and not just squeezing out every nickel out of every project.
[00:34:28] Speaker A: I love it. All right, so if somebody's listening to this and they're either, maybe they're going, hey, we, we might be, we might be ripe to be acquired by, by Michael Graves or somebody's got a project and they, they need an architecture for. How do they, how do they connect with you? How do they connect with the company? I guess. How do they find you?
[00:34:47] Speaker B: Oh, it's well, Michael Graves.com and in the leadership, the people section. I'm there and my email is there or info michael graves.com and that comes to a number of us.
That's the easiest way. And I think my phone number is up on there too. Wow.
[00:35:05] Speaker A: All right, Joe, thanks so much. It's been a fantastic conversation. I really appreciate you taking time out of your day.
[00:35:11] Speaker B: Thank you, Travis. It was fun.
