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TOUGH CALL: An Expensive Congratulations

Online Poll – Read the scenario below then place your vote at the bottom of the page.

As a true “PRO” LBM dealer, you owe your success to the solid relationships that you and your team have built with the builders and remodelers in your market. Of course you offer quality products, fair pricing and reasonable terms, without each of those you wouldn’t even have a seat at the table. Since you know that you’ll succeed only to the extent you help your customers succeed, your company also offers the services that help make them more efficient on the jobsite—things like a truck-mounted crane for roofing and drywall, and truck-mounted forklifts for pinpoint delivery of materials on the ground at the jobsite.

For the past few years, you’ve even worked out a program with your top builder customers where you help defray the cost of their marketing—both online and in print. While that one took some selling on your part with your partners in the company, it makes sense. After a lot of back and forth, you all agreed that you’re investing in your customer—with the understanding that they’re going to buy the vast majority of their materials from you. Considering your slim operating margins, you and your partners agreed that the services you provide (at no extra charge) combined with the investment in your customers’ marketing and relatively generous purchase rebates, have you stretched to the limit.

Fortunately, your customers are fully aware of your investment in their success. “None of the other suppliers do as much as you do to help us,” said one of your market’s leading builders the last time she was in your store. “In fact, I can’t imagine you doing any more for us—and still earning a profit! We do appreciate it, and you can count on us to keep sending our business your way.”

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Today’s valuations couldn’t be better, averaging 7X EBITDA for strategic buyers. But is a downturn coming that could drive down that multiple of earnings?...

You recently learned the great news that this very builder was being profiled in a national publication serving the builder/remodeler market. Your excitement was tempered a bit when you got a phone call from someone at the magazine. “We’re calling to let you know that our editors have decided to profile one of your very good customers in our magazine. This is quite an honor, so we’d like to offer you the opportunity to congratulate your customer with an ad in that issue of our publication! Imagine their delight when they see an ad from you, one of their primary suppliers, honoring them in a national magazine. The best part,” the ad rep continued, “is that you can do this for the special low price of $5,000. Several of their other key suppliers are already onboard.”

While you couldn’t be more proud of this customer of yours, this is $5,000 that you simply do not have in your very tight budget. If you hadn’t already allocated a generous amount of funds to their marketing and purchase rebates, then maybe you could do this. Then again, how will it look if that magazine comes out with a nice big ad from your competitor congratulating your builder customer?

What should you do?

1. BITE THE BULLET… and write the check. While your budget is already stretched, this is a one-time expense that you can’t imagine not doing.

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2. JUST SAY NO. When it comes to supporting your customer with items that they’ve requested, you’ve nothing to be ashamed of. They’ll understand.

3. GO LOCAL. Instead of a congratulatory ad in a national magazine, how about a much-less expensive ad that’ll be seen by their friends and family—in your local paper?

4. BRAINSTORM. Tell your customer about your dilemma — that you’re proud of them but can’t afford to do this, but would like to do something. Brainstorm something fun and meaningful together.

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What should you do?

Something else?
If you’d take a different plan of attack, email your suggested solution to

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