One of my favorite British sayings describes a company as “going from strength to strength.” This line, borrowed from the Bible, deserves to be quoted by you when you do business this year. That’s because we haven’t seen such favorable conditions for LBM in more than a decade, and as a result most dealers I meet are feeling pretty strong. But, rather than celebrating and just accepting the good times, I believe you must use this opportunity to become even stronger.
For instance, consider your net profit margins. I’m hearing the average independent dealer has improved from 3% to 3.5% a couple years back to maybe 4% to 4.5% now. But you can, and should, do better. A two-point profit gain at a $5 million yard puts an extra $100,000 on the bottom line.
Economic tailwinds will help you get there. Lumber prices in mid-February were 25% to 30% higher than they were a year before, Random Lengths indicates, and many factors point to prices staying elevated throughout most of 2018. One such driver is new-home construction. Our sister company Metrostudy figures we have several more years of growth in housing starts before we peak. Meanwhile, the remodeling market has never been more robust.
Those three points suggest your revenues have a good chance to keep rising, even if your margins don’t. But if you make efficiency a key objective this year, you stand to gain on the bottom line as well.
There’s a human element involved in going from strength to strength, too. Everybody needs workers and complains about a lack of skilled ones. It’s time you shift your expectations away from posting want ads and hoping great people will show up. Instead, start recruiting potentially great workers based on their attitudes and aptitudes and then launch programs to train and mentor them.
And while you’re focusing on staff, think about how much health care costs. Investing today in wellness programs could limit the increase in your medical insurance premiums in the future.
Sloppiness seeps in when you get busy. Missed deliveries, rising staff turnover, and lost sales might seem like necessary offshoots of a go-go economy. But don’t accept them as such. These miscues are symptoms of bigger problems. Sweat the details, and learn about lean manufacturing and Six Sigma.
Several years ago, a ProSales columnist said it’s your duty as a company owner to make as much money as you can. It’s not a matter of greed, he stressed. Rather, you want to pile up the profits so you have money to survive hard times and, equally important, invest in measures that will make yours an even better company in the future. That’s going from strength to strength.
