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February, 2007

How to Sell to Remodelers

Remodeling Is A $280 Billion Business. Are You Getting Your Share?

By Patrick L. O’Toole

Last fall, Mike Nagel, who has been a remodeler for more than 20 years, stopped to purchase lumber at a building-materials dealer near his Roselle, Ill. office. The dealer was part of well-known chain in the Chicago area that had been recently sold to a larger national firm, and according to Nagel, the change in attitude and personnel could not have been more evident.

That day, Nagel came to the dealer with a long list of lumber items. He presented the list to a man at the counter. It was then, says Nagel, that he got the following response: "OK, go ahead and pull your order.”

This was the dealer’s way of telling Nagel that an employee would not help gather the supplies, and that Nagel would be left to navigate a busy yard—rife with beeping forklifts—on his own.

"I had become accustomed to having someone do it for me,” says Nagel, who is the incoming chairman of the 7,000-member Remodelors Council of the National Association of Home Builders. "Typically, I would walk with someone as they pulled my order.”

Surprised, Nagel took his business elsewhere.

Remodelers value their relationships with their primary LBM dealers as much, or more than, any other business partner. The reason? After years of effort and lots of trial and error, the remodelers have managed to find the right business partner, and they don’t want to start the process all over again. Many of the more established remodeling firms stick with who and what they know because they value convenience, responsiveness, and information well above price. (Fair prices do always matter.) Dealers who respond to remodelers get repaid with years of loyalty.

"Remodelers are all about relationships,” says Nagel. "Price is always a factor, but [it] is not the most important part. The relationship is achieved over time as a combination of trust, performance, communication, and mutual respect. The most important requirement is meeting my needs with the right product in a timely fashion.”

For remodelers, the challenge becomes how to forge those relationships with suppliers. Many remodelers buy less than $500,000 in materials each year. Typically those numbers don’t merit an instant callback from a lumberyard in the same way that a local production homebuilder does, who may purchase many times that amount each year. In recent years, however, this dynamic has been changing.

As remodeling activity nationwide has grown as a percentage of the overall housing market, LBM dealers of all types and sizes have been looking for ways to attract remodelers. Some have done so better than others.

"There are a lot of suppliers who say they are focused on remodelers,” says Nagel. "But in many cases, it ends up being a lot of talk.”

A Successful Relationship

Remodeler Bill Asdal, a past chairman of the NAHB Remodelors Council and owner of Chester, N.J.-based Asdal Builders Inc., says he spends about $400,000 annually on building materials. Over the past five years, he’s forged a very positive relationship with sales rep Terry Call at a mid-sized local supplier, Blue Ridge Lumber of Hackettstown, N.J.

Asdal’s approach to developing a better supplier relationship was proactive. Five years ago, he entered his local Blue Ridge location and asked to speak with an available outside sales rep. He was introduced to Call. He then asked if Call had time for lunch to talk about his supply needs.

From Asdal’s perspective, that lunch was a job interview. He was looking for someone with a helpful personality, with integrity, initiative, and an inclination to find creative solutions to construction supply issues.

"If I were sitting with eight salesmen from lumberyards and telling them how to attract remodeler clients,” says Asdal, "I would tell them that they should embrace remodelers, not through an individual marketing program or marketing thread, but rather through demeanor and intonation. The bigger picture is that [sales reps] need to get to know them and their hot buttons.”

Remodelers, Asdal says, are typically one or two-person operations, so a dealer’s pledge to complete additional tasks, such as measuring for job takeoffs, can have an important impact on the bottom line. For instance, Asdal recently asked Call if he could find out if there were any co-op advertising dollars for apparel available from Andersen Windows. Asdal was hoping to defray the cost of purchasing logo-wear for his subcontractors.

"I thought there might be something out there to support us like this, and I didn’t have the time to check into it,” Asdal says. "Terry found a way to get it done. I got $3,200 for shirts, Carhartt jackets, and fleeces. His efforts were a real time- and money-saver,” he says. "To me, that $3,200 in after-tax money is equivalent to a $20,000 remodeling project.”

These days, Call stops at Asdal’s office every four to six weeks, and is in contact twice a week to keep on top of building projects. During a visit just after the New Year, Call stopped in and picked up a $12,000 order for trim and doors. Five days later, Call was on site measuring in order to complete the order.

Call points out that because Blue Ridge is part of a national buying group, LMC, they are able to offer fair pricing despite a markup that is probably a little higher than other local dealers. This in turn allows for a margin that will offset the extra service Asdal receives. From Asdal’s perspective, the extra services are well worth any aggregate price difference since the most productive use of his time is selling to new clients and managing construction projects.

"I have, for decades, looked at the supply channel as my partner,” says Asdal. "I will have my lumber guy do my trim takeoffs. My siding guy will go out and take photos of a couple of products so he can create computer-animated vignettes that I can present to my clients. Our insulators offer air testing. I use all of these professional services to help build my team, to build my footprint in the client’s eyes,” he notes. "Suppliers need to infiltrate and create value for each of these remodelers by joining their team. You don’t do it by giving them more faxes. I like them in my office telling me about price trends, code issues, treated lumber, etc.”

Asdal is passionate about supply relationships in the remodeling industry for a reason: He believes that suppliers hold the key to improving the level of professionalism across a universe of about 100,000 professional contractors who do residential and light commercial construction work.

Several years ago Asdal worked with Wickes Lumber on a Business Improvement Series that involved 25 contractors. By providing online and in-person business education to the remodelers, Asdal, on behalf of Wickes, was able to show a marked improvement in gross sales (up 19%); average number of supplier transactions per month (from 7 to 11); a significant decrease in the average monthly number of returns to the supplier, and to significantly reduce the number days it took remodelers to pay their bills (from 37 days from invoice to 7).

"Despite our size, remodelers are good clients. We are an annuity as opposed to a short-term CD,” says Asdal. "The way to grow the annuity in our industry is to create value by offering service and education to build [our business] and to make [us] better customers.”

Long Relationships

Remodeler Terry Streich, president and co-founder of Silver Bullet Remodeling Inc. in Minneapolis, agrees that it all comes down to personal relationships.

Silver Bullet is a 20-plus-year-old design and remodeling firm, and throughout most of that time, it worked directly with one very seasoned employee at a supply house in Minneapolis. However, a new management team at the business encountered financial difficulties, and the business was sold.

"Our guy was there for many years—20 or more, and we were one of his very first accounts,” explains Streich. "He had a great system for keeping on top of orders and he dealt with stuff right away, so we learned that once something was on his list, it was going to be taken care of, no worries. The [company’s] dispatcher, yard guys, general manager, and the bookkeeper all got to know us, too. It was a very nice setup for both companies. As time went by, the lumberyard grew and got busier, and sometimes we got handed off to some new guy. This was a rough patch because they weren’t nearly as good as [our contact]. So we got an understanding with the yard that [he] was our guy, and as long as he was, things were done the way we were used to.”

After the business changed hands, Streich’s contact moved to a firm that was too far away for Silver Bullet to use regularly. And the new sales person on the account wasn’t working out, Streich says. He says he decided to try a new supplier with an eager young rep. "It was a shame that we had to move our business, but we needed a certain comfort level,” says Streich.

"For us, service is the No. 1 concern. It’s really important to have materials suppliers who get to know us, have an interest in helping solve our sourcing needs, and who care about doing what it takes to keep up a long-term business relationship. Price is certainly important, but [it] takes a back seat to service.”

Patrick O’Toole is editor-in-chief of Qualified Remodeler Magazine, a publication that covers best practices, products, and design ideas for the remodeling industry.

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