Derived from an outside salesperson’s experience in the multifamily rental niche of the market and modeled after a similar venture by E.C. Barton & Co., a $145 million, 66-location operation in Jonesboro, Ark., Builder’s Surplus is light on service as much as prices. “It goes against our service-oriented nature to not allow returns or credit accounts,” says Leier, “but it’s an untapped market looking for a better source of low-cost items.”
In addition to the challenge of scaling back services, Leier also worries about materials damage by unsupervised customers and making sure the business correctly targets apartment and building owners as its primary customers to sustain sales. Despite obvious risk, the company’s track record with other niches gives promise to the success of its newest venture; since launching its other two separate divisions, Lampert Yards has boosted revenue by nearly $100 million with roughly the same number of locations.
Successful Sides Carhart Lumber is used to responding to the needs of its contractors, as well as protecting its own bottom line. The company pioneered component manufacturing in northeastern Nebraska 20 years ago, primarily for light commercial contractors, and made installed insulation a profitable side business within the past few years.
Both of those divisions operate as separate profit centers with dedicated staff, though closely tied to the lumber side. “We offer installed sales through each location so that the two businesses aren’t fighting for sales,” says treasurer and CFO John Carhart. “Plus, it gives the locations an added [service] benefit.” The insulation division has also begun to develop its own client list from referrals and bid opportunities, plus leads from Carhart Lumber locations.
In addition to those increasingly common divisions industry-wide, every Carhart Lumber location offers an in-house crew for basic windows and screen repair and access to a pair of regionally based, fully stocked tool and equipment rental centers. “All locations rent some tools, and all of them can get a piece of equipment or a needed tool [from a regional center] out to a jobsite within a half day,” Carhart says.
Foreseeing competition from big boxes for hardline items nearly 30 years ago, Carhart Lumber joined what is now the Do it Best network to leverage buying power and keep its prices competitive; location managers make order requests (or forecasts) to a centralized system that makes a volume purchase for the company. “What’s great is that Do it Best delivers each location’s order to that location, rather than making us warehouse and redistribute it,” says Carhart.
More recently, the affiliation has afforded Carhart Lumber the ability to offer an online sales component through the company’s Web site—a consumer benefit, complete with marketing support, that was otherwise unaffordable.
But arguably the oddball division in the Carhart Lumber mix is Western Buildings, a throwback business for supplying pole barns to rural farmers. Also a separate entity (and brand) from the lumber side, it nevertheless relies somewhat on the core business; location managers and staff are trained to quote, provide design and engineering, and supply materials and labor. “The last thing we want is to tell a customer to wait for a quote,” says Carhart, referring to the case-by-case customer handoff procedures practiced between sales locations and separate divisions.
Still going strong despite recent steel price spikes, the pole barn business represents the reason most dealers dabble in ancillary businesses to their core competence. Says Carhart, simply, “It comes down to maintaining relationships with local contractors and supplying them with what they need.”—Rich Binsacca is a contributing editor for PROSALES.
Tips for Niche Businesses: If a side business appears to be in your future, consider the following tips from dealers that have cut the path before you:
