Owners and managers who work day-in and day-out in their own businesses are almost always guilty of breathing too much of their own exhaust. They often find themselves in a rut. Their primary source of new ideas comes from each other. Creativity is diminished. Profitability is almost never optimized.
Several years ago, our firm received an assignment from a highly respected LBM business in the Northwest. When I first met the owner, he told me something about his management philosophy I had never heard before.
“Our community is not exactly the Mecca of innovation in retail marketing and merchandising. We have a travel budget of over $50,000 annually to take our management team around North America to visit other retailers who can teach us something new. Long ago we learned everything that each other knows. To stay on the leading edge, we must travel to other markets to expand our horizons.”
As a consultant, about all I have to offer my clients is what I have learned from my exposure to successful LBM businesses. I have visited well over a thousand LBM businesses in my 50 years in this industry. On consulting assignments, I delve into the depths of my clients’ businesses. While I can bring new ideas to my clients that help them improve profitability, I am also in a position to explore what I believe each of these businesses is doing better than anyone else.
How many LBM businesses have you visited recently? If you’re not earning 6% to 8% before taxes, you’re missing out on a big opportunity to get away from your business several times a year to breathe in some fresh, new, and innovative ideas you can take back home with you.
Years ago, I was asked to moderate an industry roundtable group. If you’re not a member of one, I encourage you to find one to join or start one of your own.
In the roundtables our company has facilitated, we have seen pretax margins soar, some as high as 10% before taxes. The reason is simple: Non-competing owners and managers sit around a table and compare their financial results in virtually all categories. If one dealer is spending, say, 52% of gross profit dollars on people-related expenses and another is spending only 45%, you’re looking at a significant effect on the bottom line. The managers who are performing the poorest are in a position to ask enough questions to find out why.
Every business is doing something better than every other business. If I can uncover what that something is, I become a much smarter consultant. If you can find out what other non-competing dealers are doing more effectively than you are, and you are willing to implement these disciplines in your business, your productivity will generally improve.
Managing a construction supply business is not rocket science, but neither is it a “no-brainer.” Just maybe the way you’re doing things is not as efficient as the way others are doing them.
If you learned that another operations man- ager is achieving 22% more in unit sales per truck than your business is, wouldn’t you want to quiz him about it? Think about this difference in terms of the number of drivers and delivery vehicles he needs versus the number you need to deliver the same volume of merchandise.
To improve your profitability, make a commitment each year to visit businesses that are more profitable than yours.
Bill Lee is a respected sales and business consultant in the LBM industry. For more information, contact Bill at leeresourcesinc@gmail.com
