With so many LBM dealers finishing up a very strong year, and with pent-up demand for new homes and remodeling projects, it’s only natural that companies see tremendous potential. This month’s Real Issues. Real Answers question, from a dealer in Rhode Island, acknowledges the opportunity for growth and asks, “where to start?” Thank you to all who responded to this very brief, three-question survey on…
Growing Forward
First, we asked our readers who took the survey, how many actually had a plan for growth. As you can see in the chart below, an overwhelming percentage of readers indeed have a plan for future growth, whether that is growing in place, or expanding through new opportunities.
Secondly, we relayed the question posed to LBM Journal readers directly from a dealer in Rhode Island:
“We have such an opportunity to grow our business at this point but without help we are uncertain where we should start. We will need to bring on more salespeople and trucks, and we believe our business can support this—except for the labor. We’d love to learn from other dealers…where do you start?”
Responses from lumberyards, building materials dealers, and specialty dealers/distributors
“Start by putting together a plan. It’s easy to look at next year, but what does it look like further down the road? What is your business going to look like in 2026, and what will your customer base look like? Planning for future growth now will help with problems down the road. One of our biggest hurdles in 2021 for expansion was supply chain constraints. We had a facility that we had planned to open in early spring of this year, but fast-forward to October and we are just now getting wood on the ground to start shipping. Make sure with the possibility for new hires and growth that your supply chain and vendor programs are such that you can actually supply the new business.”
“Talk it through and don’t be afraid to poach talent from other businesses!”
“Find people who will invest their time and their talents in your business and when you do, give them a proper share of your treasure. It just seems to me that everyone wants the treasure, but only want to use their time and talents if it doesn’t interrupt their personal life.”
“If you’ve decided to continue operating independently, look to the association of which you’re a member. Many members with experience are happy to share their experience with you.”
“Labor is the major issue we all are dealing with, and it will not get better in the near future. We are looking at all the ways we can be more efficient with our current workforce. We are working on reload times, drive times, and offload times. How do we do better with each of these? We’re trying to gain enough time for one more load each day off each delivery truck.”
“We are a small company but have grown our labor by targeting the young adults aged 18 to mid 20s. We offer a nice benefits package with company-provided single healthcare insurance allowance (most will stay on their parents’ policy until 26), uniforms, and boot allowance. We keep our trucks looking good and desirable to drive, we offer random gift cards, random company provided breakfasts or lunches, discretionary profit-sharing bonuses as profits allow, and a 40-hour week. Most of this generation doesn’t want to work any more than that and are more apt to leave early than stay late. Obviously, we’re committed to hiring for attitude and training for skill and often originate from our internal networking for new candidates. Older candidates are more experienced, more difficult to find and hire of course, being more expensive and too often need to break less-than-desirable habits. We set up for our growth pre-COVID with committing to the labor and equipment infrastructure first, then hired outside sales reps. We were blessed that our timing coincided with the economic explosion of our industry due to COVID, but our market has been primed for growth also due to the local housing shortage prior to 2020.”
“Consider paying above the prevailing wage for drivers, etc. Borrow money to buy trucks and equipment while rates are low. Find a bright young salesperson with a great personally. You can train that person to lumber trade, but you can’t train that person to have a great personality. Pay well.”
“You start with people and then build around them. Fixed assets are easy once you have the right team.”
“We started with the basics first. We implemented better processes and procedures throughout our entire operation. This streamlined how we were doing things and allowed us to do much more with what we already had in place. This allows your existing staff to do much more with what they already have. That process took almost two years as it was a complete overhaul. Don’t move too many things at once as it causes chaos. If you make changes at an easy pace and people see the benefits, it opens them up for more change. Culture is also a big part of this. If you can create and foster a good work environment, you will win. We have now started adding positions and equipment. Bottom line: Build your business backbone and treat people with respect and you will win.”
“We are carefully and cautiously getting into installed window sales. We see a lack of skilled labor to do this work, and our builder customers at this point are showing signs of interest in this service. This has grown out of our window service department, and we also see this as an opportunity to get windows installed properly this first time. We are also changing some of our delivery vehicles to be more flexible and get away from the need for CDL drivers. We also see this an opportunity in our market to up our service proposition versus of local competitors.”
“Recruiting employees is extremely difficult at this time. I would only expand as I was able to hire and add on the equipment needed after that. Some would say to move forward with your plans and the employees will come, but since I have such a small lumberyard, I tend to be much more cautious.”
“Find the most knowledgeable salesperson at the big box stores and feel him or her out. Secondly go to a recruiting company that specializes in building material personnel. As far as deliveries, if you can’t find drivers for your new trucks, call a delivery company and lease some drivers for the time being. If they are good, buy out their contract.”
“Banks are awash in cash and have great rates as well. If you are confident about your business plan, put company money into a new facility, inventory, equipment, etc., and make sure you have a line of credit at the bank to help you fund receivables, payables, etc. Hire great people. Go for it!”
“Take the low hanging fruit. Become efficient through better systems, grow better management, grow benefits for current employees.”
“There is no simple answer to this question. It will be different for each of us. You may have an opportunity to purchase a competitor in a nearby town while I might have the opportunity to buy some adjoining land to allow me to add a manufacturing division. The common denominator is always people. My motto is this: Hire good people and get (the hell) out of their way!”
“Do not proceed until you have the right people in the right positions in your company. Without the right people you’ll be setting yourself up to destroy your customer service, your reputation, and your ability to grow in the future. This is a relationship business; never forget that.”
“The growth plan today must include an aggressive recruiting, hiring, and retention strategy. A good business coach and staffing company may be of help also.”
“Taking your time to find the right candidates is vital. You can’t move forward successfully if you aren’t staffed right. Too much of your time is spent trying to talk the wrong people into your way of thinking.”
“First, is it a part of the business or opportunity that you have a level of expertise in? Second, engage the right people in the decision-making. Not the financial piece, but the practicality. Not just management, but the group that this growth is going to impact. Listen and consider what you need to support, especially with the labor shortage and longer time to acquire trucks. Third, do your due diligence. Segregate your current business in this new venture into a set of financials. Nothing too detailed, but track revenue, cost of goods (if applicable), expenses, labor, insurance (contact your broker/agent and find out the impact on liability rates as well as workers comp), truck expenses, and any others you feel are significant to this venture. How does this impact your bottom line? What are your additional cash needs and where is the cash coming from? Depending on significance, you should get your creditors involved. Fourth, how distracting will this new/expanded venture be for management? Does this support for your strategic plans? How does it fit in?”
“Our market is restricted by an acute labor shortage. As material costs correct to realistic levels, we believe our business will come back. To offset the labor shortage, we plan to make the shopping experience easy, and maintain strong in-stock position so customers don’t need to go elsewhere.”
“We are certainly in a market with higher demand now more than ever, with the proposals for new greenfields and other innovative approaches being applied at this time, we are growing the business by utilizing the proximity of our branches. This has helped to maintain a steady flow for the current areas we service, and even grow into areas where we have not had a presence in the past.”
“Start with account management and work it from the basics. Who is going to call on new accounts? How much revenue do you expect? How about deliveries? Use historical guidelines for margins, set a budget and then go after it and follow your steps along the way, making sure you are hitting your marks. Benchmarking is the way to go.”
“I would try looking for people four to five months before my peak season. Hire the people, go through the training process, and be ready. I would also bump my inventory levels on several things in preparation for new accounts. The last thing you want is to blow it on your first chance with a new account. Good luck.”
“Talk to your employees. They know your business also! I am sure that they could help you find new people and may even help you refine your growth plan.”
“Unfortunately, it is nearly impossible for an independent dealer to compete with the large companies when it comes to compensation for employees. We have increased our salaries and benefits, but so has everyone else. So, the opportunity to grow is on the back burner, for now. We have to take care of the customers we have.”
“Focus on service opportunities and product quality enhancements to differentiate from competitors. You cannot grow profitably by throwing more of the same at the market. What will you bring to the table that makes growth desirable in the marketplace to the customer base you are focused on?”
“Make sure you have an inventory built up to avoid out-of-stocks. Hire sales staff with experience and an existing customer base. Advertise what you do better than the competition.”
“First you need an action plan of how you will grow the business, and what customers and market sectors you feel have growth potential. Do a SWOT analysis (strengths, weaknesses, opportunities, threats) so you know which areas will give you the ability to succeed and which might be an impediment and address those items. If labor is a concern, determine if your structure attracts good people or if you can develop talent that is already part of your team. Map out a path to growth so you know where you want to go, then set measurable goals and understand how you can accomplish them.”
“Good question and good luck! Everybody in every industry seems to be operating with 2/3 of the required staff.”
“Look outside the box. How can you leverage tech to do more with the same manpower?”
“Start with a strategic planning retreat to plan your growth. Brainstorm every possible source of more employees. For example, we do college recruiting and community college recruiting. We use online sites like Indeed.com and Zip Recruiter. We have a very active social media presence where we announce openings, as well as on LinkedIn. We also pay a $2,000 referral fee when one of our associates refers us to someone we hire. We pay that out at the rate of $500 per quarter after the new person is hired. If they quit or get fired, we stop the payments.”
“Start by assessing the growth opportunities. Not all are equal. Focus on the opportunities that give you the greatest value in the long term. Create a plan and get input from your existing staff as they may have ideas that will help during the transition.”
“Take care of the drivers and warehouse personnel that you have.”
“Start with core staff—sales, support, yard help, drivers, and installers. Add to these as you need. Keep the level of product and service at a high level.”
Responses from wholesale distributors, manufacturers, and service providers
“Start by adding products and services that your company can handle with little to no additional people required. Add back-office technology that will link you and your customers closer and make you easier to do business with. Add remanufacturing capacity that will earn you greater respect by your customers as you will become more than just a truck for moving bulk building materials, but also a value-added manufacturer. Add branded specialty products with exclusive or semi-exclusive distribution that can be sold by your existing sales force while at the same time purging your system of the ‘me-too’ products that don’t provide your company with a meaningful return. Use this time to ‘clean-house’ and get ready for the next downturn, which we all know is coming. We are nearing the end of a long building cycle. My advice would be to avoid adding a lot of new capital expenditures at this stage in the cycle unless it’s technology or services that you can get paid for.”
“If your business model is such that you have a choice on when to grow the revenues, then take a pause and make sure the people are in place to support the growth. Labor shortages for us have caused a lot of stress on existing personnel keeping up with the growth to the point where turnover has dramatically increased, and quality has declined.”
“The building industry needs to work on attracting younger employees. We need to market the excitement about our ever-changing and growing industry that shows this potential. We need to work on shining the light on how building sciences are changing and expanding. In the meantime, as the above process will take many years, we have tried to recruit through our employees. If they know a good quality person, we offer our employee a cash incentive to recommend that person. If the person stays for three months our employee receives a bonus. If the person stays for another three months our employee receives another cash bonus. If the new recruit stays for a year, our employee receives a final payout, and the new recruit receives a sign-on bonus. Also make sure your benefits are strong and attractive.”
“We have had a lot of luck tapping our local community college and university for those students taking night courses. I love the millennials that are enrolled in vocational programs. Those kids are hardworking go-getters. We also offer a good starting wage even with no experience, paid holidays, and affordable insurance coverage.”
“Try job fairs and social media. It is very hard to compete with larger and more glamorous jobs, but we focus on the small family business that treats people more than a number.”
“Sales is the place to start! We are a sales company that happens to be in the wholesale lumber business, so ‘nothing happens until there is a sale.’ While it is also prudent to keep a close eye on labor availability, improving sales first and then tackling the operational challenges…that is the place to begin.”
“Growth issues will be ongoing in New England for the foreseeable future. Raw material and supply chain problems need to be addressed by every dealer that wants to create and manage business opportunities going forward. One of the key ways that this can happen is to partner with manufacturers/distributors that have strong capability to service the market and also work as an unpaid employee to help dealers work through manpower issues by pulling business to them from downstream. The better the channel is understood, the better the management of future growth.”
“I would first start with asking if you need help to grow it, can you support it after the help is given? If you find yourself in needing an undefined help you may want to first address why you don’t have the ability to grow with your current resources.”
“I usually start by asking our current employees if they have anyone who they may know that needs a job or is looking for a new start. This could be family or friends.”
“Do as the hospitals do: get your employees to help and pay them a thousand dollars if their efforts result in a hire, payable after six months.”
“Offer competitive wages and benefits, but overall create a culture that organically grows your labor pool. Places where people love working means they will bring their friends and family in to apply for opportunities. Talk to your employees, run anonymous surveys, find out what makes them enjoy working for you and build upon that.”
“Start with your current customers and feed their growth before looking for additional customers. Take care of your own right now!”
“We have found that with the right solution expert, your team can work through a plan that everyone can agree to and implement.”
“Start with this list: 1) Potential—What potential of wallet share can I get? 2) Profitability—Is this an opportunity that if we sell the right blend, we can earn a profit from? 3) Availability— Do I have the extra resources to spare and all the product that we can sell? Know your operational cost per customer, then by using this on each prospect, you should be able to put down the extra resources you will need. Once you determine this, you have a solid list of ‘buy, hire, and deploy.’ Chances are over the next couple of years it won’t be a mistake!”
“We continue to make long term investments consistent with our plan. We are not adding to short term payroll.”
“Start with your staff and look for acquisition opportunities. Also, interview some turnaround/acquisition specialists!”
Hundreds of readers share their insights for this every-issue feature. Have a Real Issue? Contact Rick@LBMJournal.com.
