January, 2007

Make a List, Check it Twice

To head off potential problems in a softening market, review your customers’ needs—and make sure you’re fulfilling them.

By Gary Katz

No matter where your company is located, the ebb and flow of business forces prudent managers to prepare for downturns. Downturns are not all bad; sometimes we need a breather, and other times we need something to get our attention and remind us of some of the bad habits we’ve developed.

A manager’s failure to grow market share has perhaps been the biggest pitfall for our robust economy over the past 15 years. But it is not too late. There’s plenty of business out there; you just have to take it away from the competition.

Major metro areas provide so much sales opportunity that a relatively small lumberyard often can find enough crumbs to sustain their sales, even during a downturn. However, if you already enjoy more than, say, 10% of the total potential of your trade area, you will be wise to spend some time engaging in further research.

The last two decades have been especially good to our industry. But this year, I have been retained on multiple occasions to assist dealers in producing satisfactory profit as both the lumber market and the downturn in housing activity take their toll on sales.

To grow sales in this kind of market, managers and sales people must become more aggressive in their marketing. Virtually all managers know this; it’s just that many of them get distracted spending so much time putting out fires.

To find out if increasing sales is realistic, you may find the following market research helpful:

1. Make a list of every contractor in your trade area whose building material purchases you consider significant. Prune the ones with poor credit and maintain them on a separate list.

2. Estimate each of these contractors’ annual purchases. If you have trouble arriving at this estimate, try to determine how many houses each one builds, and estimate purchases based on the size and style of their average house.

3. Estimate which competitors share what segments of each contractor’s business.

4. Ask your sales people to select six to eight qualified prospects to begin calling. Once your sales people have earned the right, ask each prospect specifically what your company must do to earn all or a portion of their business. This homework should provide enough facts to begin preparing a marketing plan.

5. Now, execute.

In our industry, we operate at “level II” of the selling process. This means that we typically must build trust with a prospect before we earn the right to our first order. Therefore, it’s the manager’s job to see to it that the sales force is calling on every target account consistently and executing the agreed-upon marketing plan. The most effective way I’ve found to monitor sales people’s progress is to discuss each prospect call with each sales person to make sure the prospect’s listed obstacles are being overcome. In the meantime, good selling in 2007!