Local Ownership
One key principle undergirding U.S. LBM is the belief that a company’s associates work harder and better when they’re in regular contact with a person who not only runs the company but has a stake in it. “There’s a huge difference when someone can see the owner every day,” vice president of finance Brian Hein says. And each operating unit president, in fact, has a small stake in the company.
Take Imig. His operation spans seven facilities and 250 people. “In the past,” he says–meaning the days under Stock–”most employees never saw anybody much above a district manager in the state. It was hard to build relations. But I have an open line with my employees.” That focus on the associate goes back to U.S. LBM’s mission statement, which declares: “To truly be successful and treat our customers the way we want them to be treated, we must first treat our associates in a way that lets them know we value and appreciate them.” This includes coming up with company names; an inside sales manager in Appleton got $250 for winning the contest that produced the Wisconsin Building Supply name.
Imig also manages about four meetings with customers every week, another example of a local approach that U.S. LBM believes offers the best opportunity for success. “The markets we’re in are still very regional and customer-driven,” Gibson says. “They’re the people we see in the T-ball games. We deal with small businesses every day, and we take pride in those partnerships.”
That personal touch extends to Gibson, who spends virtually all of his time on the road visiting the operating units and in fact still lives in southwestern Ohio. (Of U.S. LBM’s three key central officers–Gibson, human resources director Karen Charielle, and Hein–only Hein lives in Green Bay, the company’s headquarters.) “I get to see people and look ’em in the eye and ask them how they’re doing, and how we can do more or better for them and our customers,” Gibson says.
Seizing the Opportunity
U.S. LBM might have been born out of necessity, but it also came along at a time when some have questioned whether ProBuild, Building Materials Holding Corp. (now BMC Select), Builders FirstSource, 84 and Stock were smart to promote national brands and pursue national builders. Among those skeptics were Jason Fraler,
Matt Ogden, and Lonnie Schield of Building Industry Partners. Schield also has a Stock connection: He was president of the Terry Lumber yards in the Los Angeles area that Stock bought and kept.
BIP was organized in late 2008 as the housing market’s decline accelerated, operating on the notion that it would invest in good companies once it felt the market had bottomed out. At about the same time, a mutual acquaintance–Tony Misura, who heads an executive search firm–introduced Gibson and BIP to each other, Ogden says. Thus, when Stock started reorganizing and Gibson saw an opportunity to create a company, an investment lifeline already was being put in place.
“Matt called me and said, ‘Have you heard of L.T.?'” Schield says. “I said that in the four years at Stock I had always heard his name come up. I knew him by reputation as being a real good operator.”
“There was a real alignment of vision,” Ogden says of BIP and Gibson. “We felt there was a particular segment–the regional builder/custom builder segment–that we thought was strong. We felt it offered more ability to serve the supplier, with more margin, and was a more sustainable segment.
“We believe that the pro dealer space, if you serve those markets, is a local business,” he adds. “Anything that touches the customer needs to happen at a local level. We wanted to buy local businesses and keep them local.”
Ogden concedes that an operating company system may not be as cost-efficient as a more centralized business. “Our bet,” he says, “is that the local relationship focus is hungrier, more focused, and has service and price tailored to the local market.”
But while the willingness was there, there wasn’t as much cash as was needed. BIP fixed that by bringing in BlackEagle Partners, a Bloomfield Hills, Mich.-based operation with a $200 million investment fund dedicated to companies in what it calls “out-of-favor industries.” BlackEagle invested most of U.S. LBM’s capital and holds three seats on its nine-member board.
BlackEagle’s principals say they buy into the notion that U.S. LBM can succeed by taking a local approach and focusing on small and custom builders. “Our investment doesn’t hinge on the success of the Builder 100 companies,” associate Bryan Tolles says.
Where Next?
While U.S. LBM’s leaders organize the current company, efforts already are under way to grow. They’re on the hunt for market-leading operations with good management teams that want to remain in place and have shown they can turn a profit in this market. As Gibson puts it: “We’re building a company out of great companies.”
The long familiarity that the ex-Stock folk have with each other has greased the launch, as has a remarkably consistent mindset. Just about all of the dozen U.S. LBM people interviewed for this story stressed the same good points about the new company: its local independence, its freedom to be agile, its focus on staff and customers, its desire to share but not impose best practices, and the passion of its leaders–particularly Gibson. Asked to name his initial yardsticks to measure the company’s progress, Gibson’s first reply was “how well did we build excitement about what we’re doing.”
But this won’t be any kind of new-wave lumberyard; the old laws of profit and loss still apply, say Gibson and the executives at BIP and BlackEagle.
“At the end of the day, the way you’re going to be measured is by EBITDA,” Universal Supply president Jeff Umosella says.
Still, East Haven president Antonio Rossano says just the act of breaking away from Stock has helped business. “The change of image in a market as small as Connecticut is tremendous,” he says. “The reception has been really incredible. Although I was left alone in the old regime, [customers] welcome the fact that we’re independent.”
Allan Breidenbach, general manager of Wisconsin Building Supply’s Green Bay and Appleton yards, is excited but also daunted by the change. “The amount of freedom we have is really overwhelming,” he says. “To be told what to do is easy. It’s hard to decide what to do.”
That’s a challenge faced by dealers of all types in every part of the country, particularly given the wrenching changes that have taken place in homebuilding. If Gibson is scared, he’s not showing it.
“The downturn is making all of us better,” he says. “We’re reshaping ourselves to fit the market. … Innovation will be the driver in the next few years, and our current structure allows us to be that local innovator and move at a faster speed.”
