All at Fault
Installed Sales Success
For dealers, 84 Lumber’s travails offer a couple lessons, according to LBM experts.
1. Stick with what you’re good at and only add services as you develop expertise to manage them.
2. Adhere to best practices.
3. Pay attention to details.
4. Draft a well-written Scope of Work document.
5. Hire qualified jobsite managers who know what they’re doing and can hold all parties accountable during the entire project.
6. Specifically spell out responsibilities of all parties involved in the project.
7. It’s better to turn away a project than ruin a customer relationship.
Have a good system in place, take on work you know how to do, and then, as Nike says, “Just do it.”
“I would say all parties are at fault,” says the source close to 84, who asked not to be named. “It certainly isn’t all 84 Lumber’s fault, and certainly Addie Mills is not innocent in the whole debacle, and Paschen had issues.”
Paschen stumbled, he says, by not managing the project properly and also going through a lot of management changes itself. The source says 84 was a small part of the job, but its work couldn’t be completed because “people ahead of them weren’t done.” Representatives for Paschen did not return calls seeking comment.
“There are problems at every large job. There always are,” he says. “And, 84 wasn’t getting paid by Paschen, even though they should have been.” He also suggested that Mills might not have bid high enough for the project, something Mills adamantly denies, noting that 84 ran its own cost analysis and came up with the same estimate.
In the Greg Mortimer case, the source says, “84 completely botched that deal.”
“The issues in the homes were not that significant, but they needed to be resolved in a timely fashion,” he says. “That should have been easily fixed and should have been fixed immediately.”
Boosting Margins
Mike Butts, general manager for General Materials in Lansing, Mich., and a former consultant and executive on installed sales by dealers, says LBM operations turn to installed sales to boost margins. Instead of simply selling a pre-hung exterior door, for instance, a dealer offering installation makes money off the door’s sale, and, most likely, a lockset to go with it, a threshold, perhaps some brick mold, and then the labor for the actual installation. The installation potentially triples the profit off the sale of that single door.
But in 84’s case, Butts says, “I don’t think it’s a problem with installed sales. Installed sales is incredibly simple.” A successful project revolves around a detailed Scope of Work document and a qualified project manager who’s able to hold people accountable for getting the work done correctly and on time, he says.
“We’re dealing with a culture issue—lack of competency, lack of planning, poor management overall with the company,” Butts says.
“Look at the turnover [at 84]. When you’re rolling managers as quick as they are, you can’t hope to have expertise that’s going to stick around,” he says.
“They don’t execute. They don’t have necessarily the best-qualified people managing these projects. They don’t follow sound contract management procedures,” says Butts, who for several years ran installed sales programs at Stock Building Supply. “At the end of the day, they piss people off, jobs go south, and they write big checks.”
For Mills and Mortimer, 84’s strategy seems to be to starve them out. “‘We’re a big company. We can afford to hold off,’” Butts imagines 84 execs saying. “It’ll be years before they get a penny out of them.”
Small companies such as J&A lack the resources for a prolonged legal battle. Arnold Baker of Baker Ready Mix in New Orleans, which set up a portable concrete plant at one of the projects and provided about $600,000 worth of concrete, says 84 stiffed him, but he’s large enough to withstand the blow while the legal gears grind on.
“We have thousands of delivery receipts that they signed that everything was great. And then after we shut down and walked off the project for nonpayment, they came up with all these claims,” Baker says, noting that there were about a dozen contractors waiting to get paid, including metal suppliers and finishers.
“If I didn’t have the funding to offset that, I’d be out of business— 60 employees completely out of work,” Baker says. “I’m not dead. I’m coming back, but I’ve been critically injured.”
Addie Mills, who has lost her 20-year-old business, credit, and home, wonders if she’ll ever “stop living the nightmare.”
“They don’t care who they hurt,” Mills says, her voice breaking. “It’s about them and that money, and they leave destruction behind that is just unreal.” —Steve Campbell
