Entrepreneur of the Year 2013

Your Building Centers was born from a leveraged buyout that resulted in employee ownership of what today, 24 years later, has become a 14-location chain. Employee ownership of the Altoona, Pa.-based business has been critical to success, says President and CEO Phil Skarada. “Our success factor is that our people are not just owners, they are day-to-day participants in running the business and making decisions that help our customers. Our philosophy is, ‘We care because we own it.’”That approach has led to innovative services for customers that include 24-hour access to showrooms, a massive special-order business, customized customer web designs, a myriad of incentive trips and a full-day trade show. “With everyone owning the business, we all learn what it takes to run a business and be successful,” he says. “And we believe that our success is intertwined with our customers’ success.”The company’s roots trace back to the 1920s, before the original stores became part of the Lloyd’s Lumber chain based in Connecticut. In 1989, Skarada saw an opportunity to acquire nine of the stores in central Pennsylvania and used a leveraged buyout and employee stock ownership plan (ESOP) to spin them off. He sold two to raise capital to run the remaining seven. In 1998, the company purchased seven Claster’s Building Supply stores.Today, there are 14 locations and a manufacturing location. “The purchase made a good fit because there was only one overlap, which we could combine. And the new employees embraced our culture very quickly once they understood how differently we approached business.” Marketing Targets Contractors The company’s focus is entirely on making customers’ lives easier, says Dean Conrad, vice president of purchasing and marketing. “We want to help our customers be more successful, because that means we’ll be more successful.We’re always looking for new ideas and services, and we look to other industries to see if something there will work for us. Some ideas work, some don’t, but we keep looking.” Revenues come almost entirely from professional customers, allowing the company to focus on key services.One of the more unusual services provides 24-hour access to the company’s home-décor and building products showrooms, featuring vignettes of kitchens, baths and home-décor products, windows, doors, sidings, roofing and many other building products. Builders request a key fob that unlocks the door and turns on the lights. “Many of our customers can’t compete with big builders who have model homes and big showrooms,” Skarada explains. “They bring their customers here or they can send them to us, and we can lead them through.” Some builders come in after hours and browse to familiarize themselves with products.“What most surprised us was how surprised and grateful our homebuilder customers were by this,” he says. “But it helps them grow their business and margins by being able to show off highend products in a setting. Some of them use it a lot.”

Another service added last year provides customized websites for customers as part of a larger site (www.my PAbuilder.com). The company runs the site and creates individual home pages with four to six pages for each customer requesting one. It also buys Google Adwords to keep the site prominent. More than 50 customers use the site, and many link to their key product vendors (and to the Your Building Centers home site). The company also created a webinar so its sales people can explain the site to additional customers.

It also creates customized TV commercials for customers, using stock footage overlaid with a voice-over and final shot for the individual contractor. Key subjects include new homes, decks, siding, windows and roofs. The company currently is producing new spots with updated construction scenes, Conrad says. There also is a Contractor Locator function on the website that gives browsers access to local contractors by the types of projects and geographic range.

“We want to create a comprehensive program that helps them reach their markets through us,” says Conrad. “We’re very big on the capabilities of the Internet and its potential for exposure, for us and our customers.”

Special Order Emphasis

Customers also are aided by a massive special-order program, which brings in as much as 50% of volume at some locations, Skarada says. “We’ve been high on this area forever,” he says. “It gives us an advantage if our customers are looking for something unusual. It also reinforces that we’re all in the same boat and need each other to be successful.” Most of the company’s stock items are purchased through their association with Do it Best Corp.

In some cases, employees and customers are literally in the same boat, through volume-driven incentive trips. Five to seven trips to the Caribbean and other exotic locations are available each year, with as many as 95 customers going at once. Over the past few years, at customer request, family trips have been added going to destinations such as Florida, the Caribbean, Mexico and island cruises. This year’s family trip starts in Phoenix and hits the Grand Canyon and Las Vegas before returning home.

“Those work extremely well in building relationships, because staff members go along to facilitate everything.” They’re also great for receivables, as customers must be current to participate. “Our write-offs are almost nonexistent.” As many as 220 customers participate each year. YBC also invites contractor customers on mill trips and vendor visits that are held throughout the year as well.

The company also holds an annual full-day trade show in State College, Pa., that includes five hours of seminars, vendor booths, demonstrations and other activities. More than 1,000 customers attend this event. Additional get-togethers include quarterly contractor breakfasts, summer lunch-and-learn events and cookouts and vendor-appreciation days at locations.

Employee Owners

Many of the ideas are suggested by the staff, which is kept apprised of the profit and loss status at regular meetings held at each location and an annual meeting directed by Skarada. “So much of our philosophy has been teaching about business and ensuring everyone understands how decisions impact each department.”
That is emphasized at a program held every few years called “The Great Game of Business.” Groups of eight employees sit together and are given positions and situations to resolve during a full-day session, with the intent to grow their ‘business.’ “It’s both a learning and brainstorming session to create new ideas and help them understand how departments interact. It helps them look at the total picture.”

The company continues to expand revenue-generating services as well, growing its installed-sales services as opportunities arise. A former Sears installed- sales manager, Skarada keeps an eye on possibilities. He recently added shelving to a list of products that includes insulation, garage doors, entry doors, windows, flooring and cabinetry.

YBC also does framing installations for contractors. “I know the potential for that market, and an opportunity is there,” he says. “Some builders’ biggest nightmare is controlling subs and managing the job site. We can help them do that.” That effort is supplemented by the company’s manufacturing site, which builds panelization projects plus roof and floor trusses along with countertops, pre-hung doors and other products. “By providing most of the framing, we solve a lot of problems.” That has led to new business with motels and lightcommercial buildings in the area.

The company’s plans for 2013 include finishing updates for some of its showrooms and revamping one of its stores, while staying alert to new ideas. “We have accessible capital that we can spend on good opportunities as they arise.” Employees stay alert to opportunities through contact with customers and staying abreast of product requests and other input. “In our industry, too many people become complacent and don’t look at opportunities,” Skarada says. “There’s a risk in anything you do, but there’s a risk in standing still and not confronting change, too. You have to try things and see how they develop.”