Tough Call: Decision Points

By / 3 weeks ago

Your company’s future will be shaped by strategic decisions you make today. What should you do?

Finally! It’s been a long slog since the Great Recession, but business in your market is finally hitting on all cylinders. New construction is on the rise, with both custom builders and production builders breaking ground on new projects. Your remodeler customers are so busy they have backlogs of jobs waiting for them. You’re submitting (and winning a few) bids to provide materials for multi-family projects. Plus, you’re seeing a pickup in light commercial business. In short, sales couldn’t get much stronger.

Having spent your entire career in the LBM business, you’re enough of a realist to know that this current boom won’t last forever. Each year brings fresh challenges, and the decisions you make today will determine how successfully your company weathers the next downturn. In fact, your strong sales today are a direct result of several strategic decisions you made after the crash. The decision to focus hard on decking, devoting a significant portion of your showroom to deck vignettes, has paid off in spades. Your determination to make your company the kind of place that people of all ages really want to work has resulted in you having more qualified applicants than you have open positions for—a highly unusual problem in our industry.

While you’ve made mostly good decisions to this point, your level of success in the coming years will be due to the decisions you make moving forward. You’ve seen enough former market leaders become also-rans because, in your view, they got comfortable and lazy. Determined not to let that happen to your company, you know that it’s time to make some strategic decisions that will define how your company looks in the coming years. Here are the four options you’re considering:

April 2017 Tough Call

1. Growth by acquisition. You’re doing well with your one location, and adding another location or two could help you take advantage of operational efficiencies while growing your sales and your brand. There’s one well-run lumberyard in the next town over that’s for sale right now, and there will likely be a couple more on the market.

2. Upgrade your capabilities. Your computer system is in its teens, and while it’s served its purpose, some newer systems have capabilities that could help you run your business smarter and more profitably. Plus, you have a couple of delivery trucks and forklifts that are far past their prime.

3. Sell it installed. More of your builders today are open to buying your services—not just your products. For example, if you offered to sell your framing installed, you’d likely get sales from builders who can’t find the labor to get the job done. You could do this with other products as well.

4. Diversify. Take this opportunity to expand into areas that aren’t as reliant on the sale of materials. Several options you’ve considered include home design services, handyman services, land development, or even launching a design/ build business. All four are solid options. You don’t have the resources to pursue them all right now, so you need to choose just one to focus on. What would you do?

1. ACQUIRE. Nothing would make your company stronger than expanding its footprint with a couple more well-established locations. Do this and don’t look back.

2. UPGRADE. The single best way to position your company for the future is to make sure the tools (software, vehicles, infrastructure) won’t hold you back.

3. SERVICES. When the demand for materials drops, which it will, selling services (like installed framing or other products) will help keep sales strong.

4. DIVERSIFY. As the old saying goes, don’t put all your eggs in one basket. Expand your offerings so your company isn’t as reliant on the sale of building materials.


What would you do?

SOMETHING ELSE?

If you’d take a different plan of attack, email your suggested solution to Rick@LBMJournal.com

See how your judgment compares with others in the industry at LBMJournal.com.
Final results will appear in The Buzz section of the June 2017 issue.

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