The $80,000 Engine: What Equipment Dealers Know About Contractor Operations — Brandon Keyes

Today our guest is Brandon Keyes. Brandon, welcome. Thank you, Rishi. First section is the career map. Framer, solar, dealer. Give us the quick career map. You studied construction management, started as a framer, spent seven years in solar, then thirteen at RDO running divisions up to four hundred million dollars. Walk us through how those three worlds connect in your head. Brandon: Yeah, absolutely. Yeah. To your point, right? Started in, uh, started as a framer when I was fifteen. Uh, graduated from Cal Poly with a degree in construction management, um, you know, mid-2000s, which was an interesting time to be in the solar industry.

Uh, uh, did that for seven years. Um, a-and I think really, you know, my, my time in construction and my time in solar gave me kind of a unique customer perspective and, and contractor perspective that became very helpful when I later started my career at RDO. Um, you know, 'cause, uh, uh, really what it comes down to is when you look across those industries, common thread is, is understanding the customer, building strong relationships, and, and helping businesses to be able to scale by creating a, a, a unique and valuable customer experience Rishi: What is RDO?

Brandon: So RDO Equipment is, uh, one of the, uh, largest John Deere dealers, um, and I would say Vermeer dealers as well, um, in the US a- and in the world. Um, seventy-plus locations across the US, um, so quite a large footprint. Rishi: Yeah, and solar, uh, I don't think it's a economically viable industry. Am I thinking about it right or no? Brandon: You know, it, it, it depends. It was very heavily subsidized, um, in the past by, uh, different government programs. Um, I think that at scale, um, pricing has gotten to a point that it's more viable today than it's been in the past.

Um, but again, you kind of get to that grid parity discussion and, um, you know, it's, it- it's, it's a good discussion to have, right? And when you talk about any energy production and government subsidies, that's always, uh, uh, it's always an interesting topic. Rishi: Yeah. You told me on our call that coming from the contractor side is one reason you were so successful on the dealer side. You knew what the customer actually needed. What do most dealers still miss about what contractors want? Brandon: Yeah. I think what contractors want is Brandon: pretty simple in theory, right?

They want communication, they want accurate dates and times, and they want the work to be done right the first time. Uh, a down machine or a delayed repair can cost a, a, a contractor tens of thousands of dollars, um, when you start factoring in labor, material waste, liquidated damages and, and just some of that lost productivity. So, um, if you tell a customer their machine's gonna be ready on Wednesday, they schedule around that. Um, crews are lined up, jobs are planned out, um, and then, you know, Wednesday comes and, and, and nobody from the dealership has proactively called.

When the contractor finally reaches out, they find out, hey, a part was delayed or another issue came up, and machine's not gonna be ready for another week. That's not just an inconvenience, it can materially impact the, the business, right? And I think what dealers sometimes miss is that the customer isn't just buying a repair, uh, they're, they're buying predictability, they're buying trust. If you can communicate early, set realistic expectations, and do what you say you're gonna do, uh, you can create a huge amount of value. Rishi: All right. There's so much chaos on a construction site.

The last thing they want is, uh, the chaos coming from the Brandon: dealer. Absolutely. Rishi: Absolutely. After leaving RDO, you started spending more time with contractors, dealers, and growing businesses. What operating problems are you seeing repeatedly that leaders aren't addressing well enough? Yeah. I think one of the biggest things that we see in companies is that they're growing faster than their operating systems. And I don't necessarily mean the technology, I mean how work actually moves through the business. So you have a salesperson who gets a call from a customer, and the customer's having a service issue.

They need it to service, but they don't really trust the handoff, Brandon: so they stay involved. They track down the technician, they check on the part, they call the customer back and, and it works. And, and that's part of what makes it so dangerous 'cause you've got leadership that sees a customer who's getting taken care of, uh, but what they don't see is the workaround that made it happen. Mm. And I think if you do that long enough, and you build an organization that depends on good people compensating for gaps in the way that a business operates, that, that creates a real cost.

That there's, there's more labor, there's slower response times, um, and it requires more management involvement. So, that's where I think clear ownership, expectations, and accountability really matter. Brandon: um, you need to have enough structure that good people don't need to reinvent the process every time something goes wrong. Um, and, and ultimately, right, if you auto– if you automate a, a bad operating model, sometimes all you've really done is automate the confusion. Rishi: Inside a $400 million dealership, economics and people. A $400 million equipment dealer is a different animal than most of our listeners run.

Whole goods, rental, parts, service, technology. Walk us through that P&L at a high level and tell us which line actually carries the weight. Brandon: Yeah, I'd say broadly speaking, the, the biggest revenue drivers usually have the lowest margins. So- Mm-hmm … whole goods sales generate a lot of revenue, but the margins on that side can be relatively thin, um, especially like in really saturated markets. The real value of those machine sales is that they help to drive the aftermarket business. They create the future parts demand and the service labor. And, and service is where you're usually seeing some of the strongest margin contribution if a de- if a department in a dealership is really run well.

Um, so, you know, the challenge in a dealership model is, is that there, there's a lot of things you can't control financially. You can't set your, your machine prices a lot of the time. That comes from the OEM. So you need to be clear on what you can influence. Uh, and, and, and personnel is really a, a big part of that, especially non-revenue, non, non-revenue generating personnel. So, um, technician produces revenue. A service manager, a service advisor, they don't directly produce revenue. So on paper, increasing the number of technicians reporting to a service manager lowers your overhead.

But there's, there's always gonna be a trade-off to that. If you have one service manager trying to manage ten techs and fifty active work orders, that person might be so consumed by the operation that their ability to proactively communicate with customers drops significantly. So- Mm-hmm … you can improve a P&L on paper but actually make the customer experience a lot worse. Uh, and that's why I think you have to really look at the financial model and the operating model together. The question isn't just how, how lean can we make the department? It's what structure gives us the right margin while still kinda delivering the experience that keeps the customer coming back.

Rishi: Yeah. Structures matter, uh, and incentives too From the dealer seat, who's the best customer? Mm-hmm. Not the biggest, the best. And what do they do differently that makes them that? Brandon: Uh, you know, I'd say that what makes a good customer for a dealer is probably very similar to what makes, uh, what makes a good customer for your listeners, right? Best customer is a partner. They, they understand and the dealer understands that both sides need to be successful, and they need to be profitable. Brandon: so- Mm-hmm … contractors constantly beating you up on price, constantly trying to negotiate, uh, parts pricing, and debating work orders, and asking for dis- discounts, there's gonna be a, there's gonna be a downstream effect of that, right?

At some point, you start diminishing the quality of service that the dealer is able to provide. Um, 2% margin erosion, or parts margin erosion on a $2 million a month parts department can be the difference between hiring two or three additional parts specialists. Brandon: And those parts specialists improve communication, responsiveness, um, and, and the overall customer experience. So, um, not being able to make those hires because you're fi- constantly fi- fighting over margins is, is definitely impactful. Um, so I'd say, you know, the best customers aren't necessarily the ones who spend the most.

They're, they're the ones who understand the economics of the relationship and the partnership and, and work with you in a way that allows both businesses, um, the contractor and the dealer to perform well. Rishi: Yeah. Like, you know, in, in our business, uh, we found that our best customers are our best partners and our best friends actually. Brandon: Yeah. Rishi: You know, they understand that we are running a business here. You are running a business here. We need to have at least some margin. Yeah. Brandon: Yep, absolutely. Rishi: You've said turnover and retention are eating institutional knowledge, and the tools to rebuild that knowledge base exist today but aren't being used.

What's the first move a contractor or dealer should make this quarter to start capturing what's walking out the door? Brandon: Yeah. I, I think it's a problem across the entire construction industry. Um, you know, how do your thirty-year technicians think? How do they troubleshoot? What do they notice that a newer technician, uh, uh, isn't seeing? And, and how are you capturing that, that information and that data today? I, I've heard some version of this throughout my career, right? When Joe or Jim retires, we're never gonna be able to replace him. Well, okay.

But Jim's still here today, so what are we doing to capture what he knows before he walks out the door? Um, I, I think this is one area where, where AI could actually be very useful, right? 'Cause it can help capture the knowledge, capture the thought process, um, the reoccurring issues and, and how experienced people work through those problems. Um, but you know, if you've got contractors and dealers and, and, and AI feels like too big of a lift, one thing they can start doing today is, is just start documenting, right? Every problem they encounter and solve, what did they do, and why did they do it that way, uh, and, and, and what have they learned from it?

And, and I think that's, that's the important thing, is to make sure that you're capturing that knowledge before it leaves the building. Rishi: Yeah. In the AI era, actually, um, one things that is getting very popular is skill. So there is a concept in A-AI now, skills whereby it's like, uh, SOP from, uh, uh, a technician, let's say. Uh, they are– As they are doing their things, they talk, they do their work, and AI slowly figures those skills out. Yeah. And then it can get transferred easily. So institutional memory, uh, it is– it's very useful in that context if, if contractors just start seeing that.

What do you think? Brandon: Absolutely. I, I think the, the agents and, you know, AI agents in, in, in, in building that knowledge and that framework to think like your technicians think is, is hugely valuable and is something that's coming sooner rather than later. Um, there's so much money that even just gets dumped into diagnostic time, whether it's a contractor's technician or a dealer's technician. Um, any work that can be done to reduce that diagnostic time is gonna save the company tens of thousands, if not millions, of dollars. Rishi: Yeah. Next section, Brandon, is the eighty thousand dollar engine.

When the data was there, tell us the eighty thousand dollar engine story. Telematics flagged the issue. The dealer called the customer. The customer said, quote-unquote, "We can't shut it down." And a week later, it was catastrophic. Take us through it. Yeah, you know, OEMs have gotten very good at using telematics and predictive analytics to identify potential failures. in this case that we're talking about, the OEM flagged repeated engine oil temperature spikes, And the dealer called the customer, but the customer was in the middle of a job and didn't wanna shut down the machine.

Brandon: a week later, engine failed, and it turned into about an eighty thousand dollar plus repair and replacement of that engine. Customer felt like the dealer should have done more and been more forceful in, in getting him to shut down. Uh, whereas the dealer felt like they identified the issue, they communed it, they, excuse me, communicated it, and, and the customer chose just to keep running, and, and, you know, that's, that's the story. I think the more interesting question here is, is the breakdown, um, behind kind of what actually happened and, and, and, and what should happen.

Rishi: Yeah. You know, when a machine is running, uh, it's tough to diagnose at that time. What do you think? Brandon: Yeah, it's, it, it can be difficult to diagnose, but, but when you look at where, where predictive analytics have gotten to, where you've got OEMs monitoring thousands of machines across the globe, the accuracy that they can predict these failures is pretty impressive. Hmm. Is it a hundred percent accurate? Um, no. It, it, I, I, I wouldn't say that it is, but, um, I'd say, you know, nine times out of ten if, if, if you're getting contacted saying, "We're seeing something that indicates there's a, there's a failure coming-" Mm-hmm.

"… you, you, you should heed that advice, and you, you should really listen to, to, to, to what is being seen." And, and, and, you know, I, I think that… I, I think that's a very important piece. Rishi: Yeah. Where was the real breakdown? The contractor not trusting the signal, the dealer not pushing hard enough, or something further upstream about how predictive data gets communicated? Yeah, I think it's kind of a combination of the three. first, the dealer needs to communicate the issue quickly and clearly, and the customer needs to understand what was identified and why it matters, right?

Brandon: And, and, and, and, and I would say what the potential consequence is if they keep running the machine. Um, second piece of it is, is the contractor needs to also understand that th-this isn't just someone guessing, right? The, the prediction is based on data, like I said, and it's coming from thousands of machines operating around the world and, and, and, and the technology and the AI has gotten very good at identifying the patterns that tend to precede the failures. Um, and then I think the, maybe the last piece of it is, is, is the documentation piece and the decision ownership.

Dealers are getting better about following phone calls with emails and, you know, accept or decline notifications and, and, and that makes it, it makes it very clear that like, "Hey, here's what we're seeing. Here's what we're recommending." And at that point, if the, if the contractor's declining, the contractor's assuming a lot of the risk. Um, and so con- the contractor really needs to understand the potential impact, uh, monetary or schedule-wise or whatever that making that decision i-it could potentially have. Rishi: The contractor is also under pressure from his customer, um, and the schedule, uh, the liquidity damages may be coming if he shuts down the equipment.

Brandon: Mm-hmm. Yeah, a-absolutely. And, um, you know, there's, there's, there's trade-offs on both sides of it, right? And, and, and deciding is it worth the risk, um, to continue to run it. Is it, you know, maybe does it make more sense for us to rent a machine and, and let the, let the dealer look at this one? Um, y-you gotta take all those things into consideration. It's– I wouldn't say it's necessarily a, uh, a black-and-white decision. It's a, it-it's a, it's a risk decision, right? And, and, and what's the, what's the greater risk? Rishi: Yeah. You've also seen hydraulic failures on maxi rigs run into seven figures.

If a contractor listening has telematics capable equipment today and isn't acting on the alerts, what changes on Monday morning? Brandon: Yeah, I, I think the first thing that you would want to change on Monday is, is ownership, right? Most contractors already have a lot of the technology. The, the bigger question is whether anyone, um, is owning the response or who owns the response, right? So who's getting the alerts? Who's deciding whether the machine is coming out of service? Who's talking to the dealer? And, and how's all that being documented? Um, maintenance discipline, it obviously matters, right?

You've got your daily and your weekly scheduled maintenance. But I think the bigger opportunity today is actually using the information that the machine is already giving you. Um, and, and, and if an OEM is telling you that there's a problem developing, you know, s- somebody inside the organization needs to have responsibility for turning that information into a decision. Um, the technology really is only valuable if someone's owning that response. So if a dealer is contacting an operator, maybe that operator is making a different decision than if they're contacting the fleet manager or the project manager articulating the issue.

Um, so making sure internally that you have the communication tree set up and the dealer understands who you want to have notified, I, I think is a really important part of, of that risk mitigation. Rishi: You know, uh, I run some agents and they send me a bunch of messages, and a lot of those messages are noise. How do we pick up signal from the noise? Yeah, I mean, that's it. That's a really good point. Um, and I think that that's where what is being communicated from the dealer is important Brandon: too, right? So, um, who's calling you and what are they telling you and, and, and how critical is it?

Um, that's where y- again, that trust piece and that partnership piece with, with the dealer to make sure that, that, that you guys are aligned on what are the important things that I really need to know and what's the noise. Rishi: Yeah. Mm. The next section, Brandon, is Sungevity, AI, and the pace of change. You posted about this recently. Two thousand nine solar door-to-door sales, and then Sungevity shows up selling entire systems off Google Maps aerials with no face-to-face meeting. You said, quote-unquote, "Nobody thought it would work, myself included." What changed your mind and how quickly?

Brandon: Yeah. The, the, the Sungevity experience was definitely eye-opening for me. We were literally in the middle of building out a door-to-door, uh, sales effort when they came into the market selling solar systems remotely using aerial imagery and phone calls. Um, my first reaction and the reaction of my peers was it, it wouldn't work. We thought solar was too complicated, it was too expensive, and it was too trust-dependent to sell that way. Um, but Sungevity started growing, and they grew really quickly in the markets that we were serving. Um, a- and I think at that point, the argument was, was pretty much over, right?

The customers were telling us that their model worked, and that was probably the first time in my career that I watched a real disruptor enter a market and change customer behavior that quickly. Um, and, and what stuck with me wasn't just the technology, it was the fact that we were all operating from assumptions about how customers had to buy. Um, Sungevity really challenged that assumption and, and proved us all wrong. A-and I think there's a parallel today in construction and equipment. A lot of companies are, are still operating very similar to how they did fifteen or twenty years ago, and, and the risk is that assuming customers or employees and workflows are, are behaving in the same way today just because that's how they've behaved in the past.

Rishi: Yeah. Yeah. Actually, in business there is, uh, this concept, if you wanna make a big business and everyone's liking your idea, then idea– that idea is a piece of shit. You need a, like a, a non-consensus idea, which is right. Brandon: Yeah. Absolutely. Rishi: Right? Brandon: Absolutely. Rishi: So one more example on this, like, uh, I was an AI engineer from twenty nineteen to twenty twenty-two at Bank of America, and twenty twenty-three early on, ChatGPT comes out. I'm like, "This is, this is garbage. I mean, just this thing just talks," right? You ask a question, it's gonna s-send you a reply.

By like twenty twenty-five, twenty twenty-six, things change big time. Now this thing's very good at coding too. Brandon: Yeah. Rishi: So when you com-combine the human language and the computer language together, now this thing is enormously powerful right now, the agents, you know. The language plus the coding. Brandon: Yes, absolutely. Rishi: What do you think? Brandon: A-absolutely, and, and, and I think the, the opportunities in, in construction with contractors as well as on the dealers– dealership side are, are tremendous right now. And, um, the industry is, is definitely, I would say, ripe for, um, innovation and, and, and I think there's a lot of people that are, are trying to figure out where to start with that.

Rishi: Yeah. Yeah. One thing actually I've also observed in construction, uh, specifically, it's like such a sales-driven, uh, uh, culture here in this industry, and I personally dislike that. Like, I don't like to have too many salespeople trying to convince customer to buy stuff. Brandon: Yeah. Rishi: What do you think? I mean, I think it is all a part of the business. I'd rather show you what I can do than tell Brandon: You what I can do. Mm-hmm. So, uh, most of my career has been building the back end support to show customers how we can operate differently and how we can di– h-how we can, how we can be a better partner than going in and, and trying to, you know, sell them on the next, the next bell and whistle.

And, and I think that very much like what you just said, Rishi, very much aligns with, with my own personal philosophy around, you know, prioritizing taking care of the customer that will drive more sales. Rishi: Yeah. Yeah. Actually, there's a competitor of ours, and they've raised a hundred times more money than us. Brandon: Yeah. Rishi: And they can't satisfy the same customer that we, that we can satisfy. Brandon: Yep. Exactly. Rishi: Uh, construction leaders increasingly know AI is going to matter, but adoption is still uneven. What's, what's actually holding companies back?

Budget, talent, leadership, unclear use cases, or something more cultural? To, to me, it's less about budget and more about just not knowing where to start. Bringing AI into a company is not really by itself a useful operating objective. Brandon: um, I think you've got to start with where the business is already feeling pain today, right? Where are people wasting time? Where are handoffs breaking down? Uh, where are you adding people just because a process itself is, is inefficient? Um, and then you look at whether AI can improve the economics of that process, right?

Can it reduce diagnostic time? Can it shorten response time, improve utilization, um, preserve the knowledge of a, of a thirty-year employee before they retire like we were talking about earlier? Mm-hmm. Um, I, I don't think the goal in construction and equipment should be automatically replacing people. Um, skilled labor is already difficult enough to find. The, the, the bigger opportunity is helping the people that you already have today become more productive. I think that's where the ROI is, is gonna come from first, is productivity, controllable costs, knowledge retention, and, and just creating a better customer experience.

Right. Rishi: The John Deere CTO line you shared has stuck with me. Technology is moving faster today than it's ever moved, and slower today than it ever will again. If a construction CFO takes that seriously, what's one investment they should stop making and one they should start? Yeah, I think I'd stop making big technology investments without being crystal clear on the operating problem that you're trying to solve. Brandon: Um, you know, I think we've all seen companies spend millions on ERPs and CRMs and, other platforms and then struggle because Brandon: the process underneath it was never really clear.

Um, and, and I think what, what we've all kind of seen, right, is the technology doesn't necessarily fix a bad workflow. Um- Rishi: Mm-hmm. Brandon: What I'd start investing in is the infrastructure that makes technology useful, right? So clean data, better integration between systems, practical automation around a lot of that repetitive work. Um, if you can reduce rekeying, shorten diagnostic time, um, you know, help, help your team have better visibility, I think that's where you're gonna get the most, the most real value. Uh, you know, the, the, the pace of change I think is too fast to keep making five-year technology bets on what looked good eighteen months ago.

Um, I'd rather build a more flexible operating foundation that, that lets the business adapt to the tools as they change. Rishi: Yeah. And like software world is changing so fast, man. Like twenty twenty-five versus twenty twenty-six, such a different game, like- Brandon: Absolutely. Rishi: Uh, yeah. I mean- The next section here, Brandon, and this is last section too, ERP, culture, and what's next. Brandon: Mm-hmm. Rishi: You are seeing two to three ERP rollouts that are going to look entirely different by the time they finish. For a contractor who's mid-implementation right now, what's your advice?

Pow-power through, pause and replan, or blow it up and start over? Brandon: Yeah. You know, I, I probably wouldn't blow it up and start over, but I, I don't know that I would blindly power through on a multi-year implementation either just because it was the original plan. Um, I, I think I'd try to simplify the criteria around what the business actually needs now, where it's going and, and what's gonna be required to get there. Um, you know, technology is, is kind of moving too fast for analysis paralysis and- Rishi: Yeah. Brandon: Um, if it were my company and I had, you know, 12 months left on an implementation, I'd get the team together and ask, "Okay, how do we cut that in half?" Right?

What are the, what are the non-negotiables? What are the nice-to-haves? What can wait? Um, what are we building just because we need it versus, you know, it was just part of the original scope. And I, I'd rather get the core system working well, create value faster and, and keep flexibility for, for what comes next than spend another year or two years perfecting something that may already be outdated by the time you finish it anyways. Rishi: Right. One big thing that has happened is, uh, these ERP migrations, they are now an agent task. We build ERP agents.

So what they can do, take a contractor from Sage 300, let's say to Vista. That transition is a push of button and then human eval maybe for, for a few weeks. But a lot of these migrations are run by, I feel like these older consulting company who have not realized how much the world has changed, and they've done a lot of disservice to contractors. They're sitting in software from '90s. Brandon: Yep. Rishi: Kind of. Brandon: Yeah, absolutely. It- it's, it, it, it's still very, uh… It- it's, it's too slow for where the technology is today in a lot of cases and, and I think you're exactly right with even with, with what, what you guys are building, right?

Is, um, the, the, the landscape is changing very quickly. Rishi: Yeah. Yeah. And I mean, we're there, we are doing our hard work and I mean, we want the industry to actually just evolve too, right? It's like we are like… Construction actually is so far behind. I think only agriculture is further behind than construction and technology. Brandon: It, it depends on the part of agriculture. I think if you look at, you know, agriculture equipment and say- to crop growth and utilization and maximization. And, but yeah, I mean, the labor issues that we deal with in the construction side of the business are also very prevalent on the agriculture side of the Brandon: business.

So how do you do more with less over there is a big question as well. Rishi: Yeah. Yeah. I see your point, actually. I was, uh, referring to more, more mainly construction software. Brandon: Oh, yeah. Okay. Got Rishi: it. Yeah. Brandon: Yeah. Rishi: That's, that's really far behind. Brandon: Yeah. Rishi: For a controller or CFO at fifty million to two hundred and fifty million contractor who wants to push the company forward but keeps running into quote-unquote, "This is how we've done it for forty years," what actually works to move that culture? Yeah. That's easy, especially The first thing is not to dis-disrespect what got the company to where it is. if they've been doing something for forty years, there's probably a reason why it worked.

Brandon: I think the question is whether it still works today. Um, and what is the current way that we're doing it actually costing us? Is it creating rework? Is it slowing response times, adding headcount, um, hurting customer retention, right? The– Once you can put a cost around what the status quo is, I think the conversation becomes easier. Um, because then it's not so much we need to change because technology's cool. It's more of a conversation that, you know, here's what doing nothing is costing us. Here's the return that we think we can create if we make this change, and I think that becomes a much easier conversation, uh, for a leadership team to get behind.

Rishi: Yeah, ROI and, um, uh, yeah, and other metrics matter, right? I mean, that's how leadership thinks about capital investment. Brandon: Yep. Rishi: Yeah. Last question here, Vander, is as you think about your next chapter, what kinds of businesses and operating problems are you most interested in helping solve? Brandon: Yeah. I'd say the, the businesses I'm most interested in are construction, industrial, um, equipment, and, and really any service-heavy companies that, uh, have a strong core business but are, are kind of starting to either outgrow the way they operate or, you know, maybe there's– you got your sales department that's growing faster than your operations team, um, or the, or the business is just adding overhead faster than, you know, the, the, the capability, right?

And, and that's where I tend to be the most useful is the, you know, the work I'm doing now is really focused on identifying where there's operating friction, how is it hurting financial performance, and then fixing it, I'd say, in a very practical way. And, and for me, it's always, you know, like we just said, right? I think it, it always has to connect back to ROI. Um, but can we improve margins? Can we grow without, you know, adding the same amount of overhead? Can we free up working capital, um, get more productivity out of the people and the assets that we have today?

Um, and so that's– I'd say that's really the kind of work that I'm interested in. Rishi: Brandon, thank you for coming onto the show. Brandon: Yeah. Thank you, Rishi. I enjoyed the conversation.