On a recent consulting trip, I spent time with "Bob," an LBM dealer. Bob was not a large dealer by any means; his sales totaled just over $4 million annually. But he ran his operation like a powerhouse dealer doing well over $100 million.
I could not believe how well Bob all parts of his business; sales, accounting, and operations. He was efficiently measuring deliveries, and knew what it cost him to make a delivery. His showroom was crisp (Are your showrooms crisp?) and he had a very knowledgable, highly motivated talented staff. I reviewed his financials for holes and opportunities and found ratios and ROI that would be the envy of many larger dealers. In this economic climate, Bob was putting dollars on the bottom line beyond 10%.
What did Bob know that others in industry do not know? So I asked him.
"Chris, joining a roundtable nine years ago was the best investment that I ever made," he replied. "These guys [member dealers] are tough on me and they hold me accountable. When I compare my financials to others, I realized where I need improvements. In a way, we all compete to see who can get the higher numbers and it is sometimes fun. I have made friends with these noncompeting dealers and I can pick up the phone and call them for advice at any time. We meet twice a year and each dealer will host the group on a rotating basis."
For those of you whom I have worked with over the years, you will recall that I am passionate about crunching numbers and playing the "what-if" game--for instance, if we reduce inventory by X, reduces expenses by Y, and move margins by some number, the result on the bottom line will be some number. The usual result is that the dealer suddenly realizes something he hadn't thought of before.
Prior to meeting Bob, I was prepared to play the same game. But it wasn't necessary with Bob, because has been playing that game for nine years. He knew how to win that game.
Bob, if you are reading this, thanks for inspiring other dealers to join roundtables. If you are already in a roundtable, take this opportunity to call one of your fellow members and see what you can do to help them. Just pick up the phone and make the call. We only call when we need something, but don't seem to make time to call and give of our time. If you are not in a roundtable, join one now.
The roundtables I am familiar with pair noncompeting dealers up based on size, geography, or type of business. Some examples include dealers with up to $10 million in sales. Other roundtables specialize in millwork or operations, while others deal with a specific topic, such as technology or financials.
At many roundtables, participants compare financial results with each other and look for ways to enhance each other's business. Think of this as your own personal board of directors and think of you serving on the board of other roundtables.
I am convinced that if I compare the financials of a dealer that belongs to a roundtable with one who isn't in such a group, the roundtable member will show more bottom-line profits as a percentage of sales. The investments for joining vary by roundtable, but expect to invest between $5,000 and $10,000 per year total.
If you are reading this and you think you can't afford the expense, I say look at it as an investment; an investment that you can't afford not to make. Join a roundtable today and get your own board of directors. The best place to begin finding a roundtable is your local LBM association.
Chris Rader is a consultant based in Lafayette, La. Contact him at email@example.com.
For more on roundtables, read A Place for Learning, from ProSales' September 2008 issue.