As the worst housing downturn in history fades to black, many LBM dealers who have gotten extremely skilled at running bare-bones operations are facing a new challenge: how to effectively manage their company’s growth. While business growth is a strong positive, it does come with its own set of very real challenges. After all, it costs money to staff up, and build inventory, and carry receivables, and make necessary capital improvements, etc. With bank financing still tough to obtain for many, what’s a company to do?
For the past few years, the primary concern for most lumber/building material dealers and distributors has been generating sales with acceptable margins. Today, with housing and remodeling rebounding strongly in many markets, a growing number of dealers and distributors are wrestling with an issue that many haven’t even thought about for years.
“From famine to feast,” wrote a dealer in the Pacific Northwest. “The challenge our company is facing is how to keep our arms around our business and not let it grow too fast, too soon.” While there’s no question that this is a good problem to have (far better than the alternative), it does represent a very real issue that requires some sound, strategic thinking.
If managed correctly, this challenge becomes an opportunity that helps a company grow its revenues, its margins, and its position in the market. If mishandled, the result can be overextended credit, either too much or too little inventory, lower sales and a hit to the yard’s reputation.
As always, we distributed this month’s survey via email to those who have opted in to receive our email communications. A big thank you to the hundreds of readers who took the time to share insights on this timely topic.
If you’d like to participate in future surveys, please drop me an email at Rick@LBMJournal.com, and I’ll be sure you’re added to the list.
Before jumping into the questions, we wanted to understand the make-up of the participants. As you’ll see in the pie chart below, the majority of respondents (72.03%) are lumberyards/building material dealers, while the remaining 27.97% identify themselves as specialty dealers/distributors (i.e., windows and doors, roofing and siding, etc.).
Next, we wanted to discover how many readers are wrestling with the issue of managing growth. While overall housing starts are up nationwide, there are always regions of the country with more building/remodeling activity than others. So, we asked:
Housing and remodeling activity is picking up across the U.S., which can create very real growing pains for LBM suppliers. Please choose the statement below that best describes your company’s current situation.