Instant office? Yes, please! This week we talk to Studio Shed founder, Mike Koenig, about his journey building up a prefabrication business that ships backyard structures all over the United States.
Tyler: Welcome to the Construction Brothers Podcast. I'm your host, Tyler Campbell, and with me like he is every week. my brother, Eddie Campbell.
Eddie: Hello over there, Tyler.
Tyler: Hello over there, Eddie. Well, we got an awesome show for you today. We are going to be talking to Mike Koenig from Studio Shed about prefab. But first things first, I would like to bring something to your attention.
Tyler: Well, Mike, thanks for joining us today, man. Can you tell us who you are and what you do?
Mike Koenig: Yeah, thanks for having me, guys. My name is Mike Koenig. I am a serial entrepreneur and I am the President and Cofounder of Studio Shed. We prefabricate backyard structures, ship them all over the country and beyond. We have a range of products that go from small 8x10 structures all the way through— we've got a 3000 square foot home going up in New York. We call those sort of more one-off commercial projects, but our core product is really, you know, your smaller backyard home office or gym. Just a little bit of extra flex space. I have been in small business, have grown small businesses from nothing up to, you know, 30 to 50, 100 employees. That's kind of what I've been doing my whole life. And that actually goes back several generations.My grandfather was an architect and builder back in the—I grew up in Virginia, Northern Virginia—and he was quite a man. He grew up on a very poor farm in Virginia. He loved building things and designing things and had that just creative spirit. He found this niche back there in rural Virginia, designing and building these unique chicken coops and being able to sell them at a good price. He started doing that in seventh grade and that was actually earning some money for the family. He ended up not— He stopped school, and so he ended up coming back to school later, you know, in his late teens, and ended up becoming a pretty well-known architect in that area. Then my father ended up running his business mostly on the construction management side of things. So my siblings and I were always around that, just that small business, that entrepreneurship. The three of us actually were— We were janitors at one point to one of the buildings and, you know, always starting with the broom. You know, just starting with the broom, I like to call it starting with the broom. You start with something simple, you learn how to clean well, you get efficient with that and find ways to do it faster and better. You know, cut corners. So that was ingrained for us at a pretty young age. So for college I attended University of Denver in ‘93 and the day I—actually, the quarter before I graduated—myself and a few other buddies started a business called The Student Plan. That was literally right before school ended. Just real quick on that: at the time— You all probably use them, these daytimers, these custom agenda books in school, you have school rules and regulations, write down your homework assignments and stuff. So we saw this as an opportunity. We actually would give them away for free and we'd sell ad space in them to offset the cost for the school and to support our production and operations. Now, I think it's worth mentioning that that business, and another business, all the manufacturing was all outsourced. So we were really, you know, just on the operation side, just office folks and salespeople and that kind of thing. We actually grew that business pretty quick and well. We got through 9/11. We had to do a little restructuring and I actually was on 52nd and 3rd in Manhattan—we had an office because we were selling ads. By the way, we had no idea what we were doing. You’re trying to sell a couple of hundred thousand dollars ad spot to, you name the company that's targeting teenagers. I remember sitting in a meeting and somebody asked me what our CPM was. I was like, “What's CPM?” And he just started laughing so hard. He's like, “You guys have such a great idea, but you have no idea what you're doing.” I'm like, “Well, we're learning.” So we forged on and grew that business and learned so much just by doing, persisting, and really bringing together a super strong group of employees. Right after we started Studio Shed in 2008 and sold, we were already in the due diligence process and we sold it to one of our competitors, a great company out of Indiana. A lot of our employees are actually still there today. They still have their offices in Denver. So of course, that gave some capital to help fund Studio Shed, so that story is very close. A friend of mine, his name is Jeremy Nova. He and I met through cycling, we both have a passion for cycling. I did a little professional mountain bike racing, he was the Michael Jordan of mountain biking. He was a 12 time national champion. He went to the Olympics. We were all very good friends for a number of years, really since about ‘98. And so, he and his wife were racing for track at the time, they had more bikes than you can possibly imagine. They were living in a small ranch style home in Boulder, they had about 1100 square feet there, plus the garage was packed. So he's like, “Man, I need some storage and I don't want your typical backyard shed. I don't want a barn style looking thing.” And so he designed and built the very first studio shed. I helped him finish it up and he quickly had, you know, 12 bikes in there as a 10x12. Actually, you can see it on our website. The Signature Series, which is the smaller backyard structures, you go up to about 240 square feet on those. That design really hasn't changed. It's just— It's almost timeless when you look at it. Of course, the quality and the ease of it going together certainly has greatly improved. But anyway, I saw that thing and I was like, man, I need one in my backyard, too, because it's too cool and I need storage. We had basically the same style house. So I put one in my backyard. That was 2004. Then we happen to hear, you know, people would comment, “Man that is so cool.” I was naturally starting to think about the next thing, and I had already started doing some research in about 2006/7 on the shed industry, and seeing that it was a little antiquated in its designs. If you've got a small yard, like a quarter acre—typical in Boulder and really a lot of Metro areas—you want to just be proud of your space. Nothing against your traditional barn style stuff, there's a lot of awesome companies and all that, but we just wanted something different. I remember we went on a long mountain bike ride one day and we ended up back at his place. We were sipping on a tasty beverage, a few people were up there, and I remember looking over and looking at the shed and I said, “There's a business here. If we can make these things so easy to go together, like Legos for adults, I think we've got something.” So we started super small. We started with a really modest website. It's more like a gallery. There was no e-commerce to it whatsoever. We started with two sizes: an 8x10 and a 10 by— So, 80 square feet and 120 square feet, with the same design we have today. It started to get some traction very quick. And so, what we saw immediately was folks who were like, well, I'm not going to use this as a shed. I'm going to finish it out and use it as an office, or a gym, or a contemplative space, or a playroom for their kids. Because there are a lot of people like us, right, that were just needing a little bit of extra space at the time. And remember, that was during the recession. So it's not unlike what's going on now, where you've got a lot of people pulling their dollars back, but yet getting creative at home. Right? So midway through 2008–so we had just launched—my wife and I, we needed some extra space, too. So I built another Studio Shed in my yard, turned that into storage, and then I finished out the other unit in my yard. That was our headquarters for two years. We were just operating out of my Studio Shed and we got some great photos. That's when things really started taking off. First thing I noticed, as soon as I stepped out and walked through my yard to my little sanctuary of a space, was that psychological separation that is so critical. So I think that that is what every single one of our customers is seeing with what we're doing, and it's immediate. They're like, oh my gosh. They’re taking some part of their yard that had some old bushes or something and they're repurposing it. So as time went on, we started getting more requests for different sizes, and we launched the online 3D configurator, which was a huge, huge hit. It really puts the design tools in the customers’ hands. We got our first factory space in 2010, so we were two years just working out of my backyard. In fact, first few units we built, we built in Jeremy's backyard. We started with a showroom, a modest little showroom, and built out some offices and just slowly grew over time. But the demand was high. We got a lot of press right away, and “Wow, this is really neat.” The customers and just the general feedback from our users has really helped us, and we listen and evolve the line over the years and even refine it. So today we got— Here in Colorado, we've got 30 employees. And let me tell you a huge win—this happened about six, five, six years ago—we were able to offer healthcare for all of our employees. I get really excited about that, a little emotional. Cause we— Look, we've got some employees that, it's just, they love working here and they're really grateful for the work, you know, and when we say we're doing healthcare, they were just ecstatic, right? I had one guy who never had healthcare before, and he'd been with us since day one. He came up to me and he said, “Hey man, I appreciate that so much. I'm making my first doctor's appointment. I haven’t had one for a while, I’m getting a physical.” And I said, “Well, there's good news and there's bad news because, you know, you're close to 50 and it's the old man kind of physical now.” So yeah, we had a good chuckle about that. But yeah, I go out to the shop every day, say hi to everybody. We've got, you know, maternity leave and paid maternity leave and all that. I know them by their first name. Family's super important around here. I think one of the defining moments for us on the production side of things, when after a few years we still really had no idea what we're doing, we did bring in some manufacturing consultants—a great team out of Colorado called Manufacturer’s Edge. They were just awesome to work with. They trained us up on all things lean 5S and you know, stuff I had never heard of, like tack time. And what was also important was morale, right? In that, it's established metrics.
Eddie: So many cool directions to go on this. You guys are tapping into this modular market that everybody is so curious about in commercial construction right now. But you've been doing this a while. I mean, you've been doing this before it was a buzz.
Mike Koenig: We really had. That's exactly where we started on day one, was just this panelized system—and not 3D, right, not like fully built units. And we have done that, we've done that for special events and we've done a lot of commercial stuff you do not see on our website, where they're fully built units in there. They're forklifted or craned into site. We did a super cool project at the Super Bowl a few years ago. They needed a bunch of checking stations or something and we put them on a Conestoga Truck, you know, we fully built them and they just forklifted them right into place. The panelized has worked well for us. It doesn't work well for everybody, but it's really allowed us to remain nimble—do what makes sense in the factory, in the factory, and do things that make sense in the field, in the field. And I think we are starting to see, and you guys are probably seeing it, too, more of that 2D style panelized. I mean it's, look, it's nothing new. I mean, you look at a new, a scrape or somebody putting on a second story in my neighborhood, you know, the framers, they typically will build a whole wall section just up on that second story and then, you know, wench that whole thing up into place. But what we liked about the 2D is it just allows us to be more nimble and get anywhere. It also is just, it's our modular process. So we have a Kanban style inventory of panels that are just in stock and ready to go. So we get an order, whether it's this, that, or the other, whatever the customer built, most of it's just pick and pack. And then some of it's just in time, right? So you know, whether you know your door color or if you want a different window color. Are there often times where a customer's like, you know, I think this might make sense for me to just go stick-built? Sure. Sometimes that does make sense, and this doesn't always work for everybody. But so far it's been helpful. It's taken a tremendous amount of resources to get to this point, a tremendous amount of time. It's the resource materials that are needed to train a homeowner, any old homeowner, on how to do this and have fun with it, and really put that power in the hands of a customer. It’s huge. And I'll tell you, there's a couple, you can see it on our blog story, It's called Team Jones Adventure. It's a retired couple in, I believe, North Carolina. They wanted a, I think it was a backyard, like, guest space. Yeah. It was probably 10x12 or 10x14. Just for when they had guests come into town, they’d have their own little space. They wanted a project, they wanted to do this themselves. At that time, they were in their mid-sixties, didn't really have much construction experience. My team coached them up on how the building goes, how to offload it, right? Hey, you know, some of the panels were pretty heavy so you might just have some help like, you know, some younger folks to help you move the panels into place. But once you have that, we're going to coach you up on how to do this. We can do it FaceTime, whatever you need, but be sure and read all the resource materials, look at the videos, and let's also train you on tools. Like, what's an impact, what's the difference between the impact driver and a drill? I mean, little things like that. It's just been so much fun. And so really coaching and shep— I like to call it shepherd. You give a little bit to the flock and let them learn, right? You just give them the basics and then if they have questions, let them come back to you.
Tyler: So, kind of clarify, too. I want to clarify your process here. Are you putting all of this— You're putting a package together based off of the, you know, client, the buyer's specifications, you're sending that to their home. Are they the ones to then put it up, or are you providing a service that they would, you know, you'd send somebody out to put it up?
Mike Koenig: Yeah, so we have a network of 50 GC’s all over the country. Some of them have multiple crews. Customers can choose certified installation on our site or they can go the DIY. So if they don't, you know, if they're busy and they don't want to deal with it and they want an easy button, then they do that. Let me just mention, too, that if it requires a permit, we do all that, too. So we will do the entire planned set from ILC, site survey, everything. But it's really for the Summit Series, is where we see most permits. But what that does is, it gets rid of the architects, you know, the engineer and all these costs that are associated if somebody wanted to just do something on their own. And it's super confusing for your average homeowner. You mention permit, and people are scared. You don't know what that— Trenching, sewer? Hey, like, we do it all for you and we turn it super fast, and we've got great relationships all over the country and various municipalities, they know our product. Some is pre-approved, you know, so they were able to get to the munies really fast and ultimately, you know, get the customer in and using the product.
Eddie: You're knocking down and panelizing things. I've heard kind of a distinction drawn between modularization and kitting. So you are modularizing, you're panelizing things, you're kitting this, so that it can be put together by just about anybody under your instruction and with your help. And that is, that's really cool. You're kind of democratizing this whole thing, kind of driving it down to where people have the power to do that. So that's all a lot of cool buzz. So why don't we hit all the buzz words? What about sustainability?
Mike Koenig: Yeah, let's talk about that for a minute. So, you know, the majority of our building is wood, right, or wood material. It's all sustainably harvested and, I mean, look, OSB is great, it’s byproduct, right? I mean, that alone is a great use for mills to repurpose product. Yeah, so I mean, SFI, FSC lumber, it just depends on what the supply looks like. We try to mostly do FSC. But I think the biggest thing about, you know, aside from recycled metals and all these things— There’s definitely, you know, people feel good, some people feel good about buying, say organic milk or whatever it might be. Recycled bicycle shorts or whatever. But as you guys know, hands down, the biggest thing in building is energy efficiency. I don't care where the materials came from. But I will say that using wood is a great carbon sequester versus, say, metal studs or something like that. The buildings are so well-insulated. I mean, we meet or beat code. And some of these codes are very strict. You’ve got ZNE out in California now, which we’ve navigated very well, you know, being able to source and supply solar panels so the building is zero net energy. But ultimately at the end of the day, it's how efficient is the building? And most of our buildings are outperforming the house, right? And so, over time— That is the biggest thing in construction, is you want, ultimately, as close to zero net energy and passivity of the building as possible. So things like, you know, we try to encourage customers, hey, you know, face your building South and in the winter the sun will heat it up through our cloud light, through our clerestory windows. Right? So little things like that really add up. The second big thing for us, and we've done some massive surveys over the years, is the energy that people save not having to drive to work. Right? So a lot of them— Look, a lot of them still, they'll have a backyard home office or maybe they were something as far out as they were renting some space to do their pottery or artwork or something like that, but they'd have to drive. We ran some calculations and since inception we've saved folks about over 9 million gallons of gas. It really comes back all the way back around to the lifestyle choice. How do I want to work? How do I want to live? And of course now, we've seen a surge in need and we're actually hiring right now because people are— Maybe they've been looking at us for a while and wanting some backyard space, but they're like, well, I really need to work from home now and I don't know how long it's going to be. I think things are going to change a little or a lot on how people work, where they work. At least what we're seeing is, we had immediate trust in my employees working from home and getting set up on Zoom and Microsoft teams or whatever it is. But you know, for us that's part of the story, right? Encouraging people to change their behavior. And that's not always easy and it can be scary, right? Is my employer going to allow me working from home?
Tyler: Definitely. What are some of the some of the biggest challenges that you faced building this company? ‘Cause I mean, I'm hearing all of the different things that you offer in logistics and, you know, prefab, all of this. There’ve gotta be some pretty monumental challenges that you've faced over the years.
Mike Koenig: Historically, some of the challenges are pretty much the same for any small business: things like navigating taxes and, you know, all of a sudden you're providing a product all over the country, but yet you're e-commerce. And so how does all that work? That can give you some heartburn, right? But you stick with it and you work through it. Figuring out the factory, right? I mean that's— I'm so naive in the early days, thinking this is just going to be so easy, but oh, we got them, now we're going to run an analysis on what kind of panel saw do we need, and where is it going to come from? And you're pulling your hair out trying to figure out the best use of, ultimately, your capital. Today, for me personally, and I think you guys will appreciate this: one of my personal challenges and one of my bags—I'm a big Jim Collins fan by the way, big, hairy audacious goals—is when you first start out in business. Of course, I've got plenty of plenty of battle scars from years. So starting out with Studio Shed, I would say a lot easier than the first two businesses. I think what is so critical is not reacting, right? So I call it, you've got to reflect and act. That is not easy. That is not easy. You can create some serious pain, especially when you're in high growth or high demand like construction has been, and you gotta just find the right pace, right?
Tyler: What do you mean by that?
Mike Koenig: So let's say you're doing an analysis on the next piece of machinery, right? You really have to step and say, it's a $50,000 piece of machinery, or whatever it is. You gotta put the brakes on, you gotta step back, don't go whole hog. Then step back even further, and wait and wait and wait. So that once you do make that decision, you say, that was a great decision and I should've done it 12 months ago.
Mike Koenig: It's a heck of a lot harder than it sounds. Especially when there's demands, right? Like, you've got goals and you want to do this, that, and the other, and you put together, we call it the “idea generator.” We've got the spreadsheet and we collaborate on it once a week and, dang, there are a hundred different things on there as far as how to improve our cogs or a new marketing idea or whatever. We have a formula and it puts them in these little boxes and says, oh, you should be focused on this right now and go deeper into that. Really a project management tool. But we have so much fun spitballing and throwing this stuff up on the board and healthy debates—not arguments. They get heated. But debates. You guys have a family business.
Eddie: (laughs) I was going to say, yeah. Family business, yeah.
Mike Koenig: You know, double checking numbers and cost analysis. I'm wild about quant analysis and statistics and I have a real passion for that and always have. You gotta always check your numbers. It's the last thing you— The last thing you want to have happen is not being able to hit payroll.
Eddie: Oh yeah. Well, I think this is about the quickest 30 minute interview that I can think of. We have arrived at the megaphone question here. So, if you had a megaphone that you could speak to the whole construction industry with, Mike, what would you tell them?
Mike Koenig: For the construction industry? For just narrowing it down to just the construction industry? I would say—gah, this is so, this is so cliche: there is always a better way. There's always a better and more efficient way to do something. I guess there's two parts. I think the second is the management. If you have employees, or even subs. The management of your team, your tribe—I like to call it the tribe here—is so critical and always trying to base your decisions on what is the right thing to do right now. Ethics and morals. To me, that's been super helpful over the years. And it doesn't always feel good, but most times it feels really good.
Tyler: Hey guys, Tyler here. Thanks for joining us today. I just wanted to take a second and point you at a couple of things. First things first, leave a review on Apple Podcasts. Be transparent. Tell us what you think. If you want to write a small review, that would be awesome. Go check out our new website! We're really excited about it. We've got a couple of cool lists on there for guys to check out as well, to show you some of our favorite things. Also, take a second, go like us on social media. We are on Facebook, Instagram, Twitter, and LinkedIn. You can find us at Construction Brothers Podcast. You can find links to any of our guests and any other things we discussed in the show notes. I really appreciate you listening. Thank you so much. Have a great day.