LBM Journal’s Dealer of the Year awards recognize four LBM companies of different sizes that epitomize the entrepreneurial spirit. By our definition, a Dealer Of The Year describes a company in which leadership excels at identifying underserved— or emerging—markets, satisfying customers, and constantly working to grow and improve business. This year marks the first time we have a tie. The 2021 winners in the category of $100 million + annual sales are Ganahl Lumber of Los Angeles, and Keim of Ohio. While these companies represent vastly different operations, the common thread is their fierce commitment to finding ever-better ways to serve their customers and their communities. Thanks to Epicor for sponsoring this year’s Dealer of the Year program.
Laser-focused in L.A.
Growing in place is a solid strategy for any business with a corner on its local market. It certainly doesn’t hurt if that market is the nation’s second largest metropolitan area.
Since 1884, Ganahl Lumber has served the greater Los Angeles metro. Now in its fourth generation of family ownership, the company is led by Peter Ganahl, who last year oversaw $500 million in sales across 10 locations.
Clearly, a company doesn’t get to a half a billion in sales without knowing what it’s doing, and for CEO Peter Ganahl, it really comes down to three things: taking care of your employees, knowing your market, and focusing on your customer.
Since taking over the company in 1973 at the age of 27 after the sudden death of his father, Peter Ganahl says an early decision to form an employee stock ownership plan has made a big difference. As a young president of the family business, the ESOP helped Ganahl attract and retain what he considers the best staff in the business.
“(The company was) small enough, so I couldn’t screw it up too bad,” he laughs. “There’s no possible way I could have done what we have today at that age. We may not have been top 10 in size in our own county back then.” In the early 1970s, when Ganahl was getting into the business, the company tallied $2 million in sales annually.
Now more than 44 years into the ESOP, Ganahl has seen the value of an individual share from an initial valuation of $88 to today’s $17,000. “Getting everybody with skin in the game has been crucial to our success,” Ganahl says. “Their ownership has given them more than a voice, they have been given a chance to contribute to their own, and their fellow owners’, personal net worth.”
The ESOP has helped shape the business into what it is today and has changed lives along the way. Ganahl shares the example of a driver who started with the company in 1980 and made between $4 and $5 an hour starting wages. Today, the driver’s wages may be four or five times that, but he also accumulated wealth in ownership shares.
“Our driver, did he make more in wealth from owning shares or in money from his wages?” Ganahl asks. “Money is vital to their career, but the biggest percentage of that is spent along the way. People at our company have stayed here long because of this. If you compare the growth in the value of Ganahl shares to S&P 500 over this same period of time, our shares have performed well. We can have a really productive salesman at 30 or one in his 60s who are both making the same in paychecks, but the one who has been here 40 years is making a lot more wealth in shares.”
While the ESOP is an incentive for longevity, Ganahl still faces a major metro area labor market that isn’t necessarily stocked with LBM industry experience, especially in the younger generations.
Ganahl has learned to look beyond industry-specific experience. “If the right person walks in the door, chances are we’d hire them. Most often we find ourselves training them, but we just want to get good people. We want that ‘gene’ for hospitality. A lot of times they’re in the hospitality trade. Here in Anaheim, they even come from Disneyland.”
With a stock ownership plan in place that has reduced a lot of turnover stress, Ganahl’s management team has more time to focus on customers and the market it serves. For the latter, a firm commitment to serving only the Los Angeles area drives continuous improvement and allows for experimentation and growth.
The size and sales volumes of the 10 Ganahl locations in the area vary from two that are $105 to $110 million a year producers to the smaller end where stores are in the $10 to $20 million range.
Serving Orange, Los Angeles, and Riverside counties means a 16 million population area with plenty of housing activity. As Ganahl says, “We have a big enough field to plow.” With a distribution center serving 10 pro builder lumberyards, Ganahl is laser-focused on optimizing service in his home territory.
“We don’t have to think about going into other markets,” he says. “This is our little laboratory in this market. We get to try things and see if they work. We get a lot of synergy by applying a laser-like focus in only one market. We’re happy with good growth, but we don’t think we could add anything by being in multiple communities spread across the landscape.”
Builder-based at Ganahl Lumber
Along with knowing its market area, Ganahl has a firm grasp on its customer base as well. “Simply put, our customer is a professional who makes his living using our products and services and that allows us to focus on a simple mission; we are here to help our customers be more profitable and successful.”
With a 16 million population potential customer base, no one at Ganahl is looking to make headway into the retail or DIY markets. Those customers have a place to shop, Peter Ganahl says, at the roughly 160 big box stores in the area. Ganahl’s mix is a 95/5 split between pros and homeowners. A bigger focus for Ganahl is the mix between will-call -vs- delivery. Each facility is closely monitored and designed to optimize for both. Yard design is critical, Ganahl says. With 1,400-1,500 deliveries a week, “that’s a heck of a lot of logistics,” he adds.
“We’re constantly evaluating the design of our facilities and layout. We know that will-call is important because we know that our customers are very aware of how long it takes them to get in and out with their orders.”
That means Ganahl is measuring the same thing. “We measure that and our lead times and make them as short as we can for delivery,” Ganahl says. “We’re 55% delivery, 45% will-call. We’re working on both of those all the time. Those are key logistics we’re looking at constantly. Amazon changed the world with timing. Next day deliveries have become the norm.”
Ganahl’s system is designed to handle deliveries from all 10 facilities. Algorithms select the best shipping location using variables like store closest to the job site, available inventory, trucking capacity, and load building capacity to make the delivery.
The roughly 925 employees throughout Ganahl Lumber are also focused on these numbers, though maybe not directly. Instead, they’re focused on the customer experience, which oftentimes turns out to be the same thing.
“We don’t plan our business based on numbers. We plan based on what we can do to improve the business,” Ganahl says. “Of course, we want to increase our efficiencies for our customers and to increase our profit dollars.”
“We’re tinkerers,” Ganahl says. “Our successes have come from tinkering, from trial and error. There was no grand plan to get from $2 million to $500 million.” That plan, it turns out, was a matter of taking care of employees by giving them skin in the game, focusing only on one market, and helping customers be successful and more profitable.