The event’s theme—Shifting Gears—captured the mood of attendees eager to move forward with the revival of the new-home construction and remodeling markets. Comments from participants in the CEO panel provided the foundation of this month’s cover feature. Here are highlights from the rest of the three-day event.
Recruiting Beyond the Ordinary
Keynote speaker Robert Ballard was billed as the man who found the Titanic, and while he spoke about that discovery and the seabed’s potential as a source for valuable minerals, he spent much of his time on a challenge that came up regularly at the conference: Finding the next generation of workers. Ballard’s response has been to find role models—“and they’ve got to reflect the demographics of the country.” In his case, that means encouraging women to get into oceanic exploration.
The same goes for lumber and building materials, Ballard said, calling on dealers to create a career-oriented value proposition for new hires and younger employees in their industry. Ballard shared his experience recruiting youth to participate in the science, technology, engineering, and mathematics programs run by his non-profit the JASON Project as well as his work mentoring and leading teams of researchers at the University of Rhode Island and on his ship the E/V Nautilus.
Identifying Your Customers’ Most Likely Customers
Lower home prices, competitive interest rates, and the desire for change are the top reasons consumers will trade up to a new home today, Jonathan Smoke, chief economist at ProSales’ parent company Hanley Wood, told attendees. Of those homeowners, three distinct buyer segments hold the most near-term growth potential: the middle-aged elite, senior-citizen elite, and middle- and upper-middle-income families with kids.
That’s a contrast from recent years, when the recession lowered incomes, cut home prices, and put millions under water on their mortgages. As a result, what construction that did go on skewed toward lower-priced, entry-level housing that often was funded by big builders’ captive mortgage companies.
“What we’ve been through these last couple of years is not what we are about to go through,” Smoke predicted. He advised attendees to pay more attention to aging Baby Boomers rather than Generation Y (people born after 1980), even though those so-called Millennials outnumber Boomers. For various reasons,“Gen Y will not be a source of demand for the next five years,” Smoke said, while many Boomers will be buying homes or making plans to revamp their current homes for retirement.
Seeking Top Sales Reps? Look for the ‘Challenger’
Ted McKenna, director of advisory services at global consulting firm CEB, told attendees his firm’s research on sales rep personality profiles found distinct differences in selling styles—and more importantly, results. CEB concluded that the best personality to sell a complicated product like building materials was a type it calls “The Challenger.”
“A high performer sees that, in a world in which the customer has the ability to learn on their own what it is they need to do, [sales reps] have to find a way to get the customer to think differently about themselves,” McKenns said. “Until that happens, they’re never going to think differently about [the rep].
“So rather than coming in and asking what’s keeping them up at night, [a Challenger will] come in and tell them what should be keeping them up at night,” McKenna continued. “They’re offering unique perspectives, and helping to avoid potential landmines and navigate alternatives. They’re using insight to win the sales process.
“They’re teaching [customers] something new—not about your products, but new ways they should think about competing in the market. It’s a fundamentally different conversation with the customer. And, in the process, they differentiate you as a company.”
Gaining Sales by Learning To Give Up
“Businesses are lean and mean right now. You guys have gone through amazing contortions,” consultant Ruth Kellick-Grubbs said early on during a panel on finding and keeping money. The challenge now, panelists agreed, was to move from surviving to thriving, and that often requires acquiring funds. Traditionally, dealers have preferred to borrow rather than sell equity in their business. But panelist Matt Ogden argued that equity partnerships often are the better route.
Owning less of a business can unlock economic opportunities, the managing principal at Building Industry Partners said. While dealers may hesitate to give up a portion of the business, Ogden noted there’s an enormous cost associated with debt that isn’t reflected in a loan and associated fees.
“When you go to a lender, you are dividing your cash flow,” he said. “The bank is getting the first cash stream, and you get the second. In down times, that leverage causes your profits to decline. That’s the leverage you put on your business. With equity, you’re sharing the risk, the upside and the downside. I would argue that equity is a much less dangerous form of capital.”
Rick Kolaczewski, CFO of US LBM, whose company has used private equity partnerships to acquire new yards said communication and constant contact is key to working with equity partners. “We have a call every Friday with BlackEagle (US LBM’s equity partner), and it’s been good,” says Kolaczewski.
Bird Anderson, director of Wells Fargo’s homebuilder group, said the rebound in the housing industry is being followed with a rebound in banks offering credit to builders, at least in those regional markets (like Texas and the Washington, D.C., metro area for Wells Fargo) where the market shows real growth.
“Two or three years ago, we had no demand for money to buy lots,” Anderson said. “No one was knocking on our doors. Boy has that changed.”
Ready To Ride
Knowing When To Keep a Customer—and When To Kick Him to the Curb
Get to know this formula:
CP = SP – (COG + COM + PROM + CC + DC + AR + PPD + BC) + (EC + FC)
Translated, that means: Customer Productivity = Sales price – (Cost of goods + commissioned salesperson and assistant + promotions + credit card fees + delivery cost + A/R carrying costs + prompt pay discount + back charges) + (extra customer charges + finance charges)]
Leonard Safrit of Safrit’s Building Supply in Beaufort, N.C., this year’s ProSales Dealer of the Year, developed it in collaboration with consultant Jim Enter to measure accurately whether you’re turning a profit on a particular customer based on a wealth of variables, particularly delivery costs. By using this formula rather than traditional back-of-the-envelope calculations, Safrit believes he has come much closer to determining which accounts to keep and which to leave to competitors.
Check our newsletter, ProSales Business Update, regularly for details on a webinar we plan to conduct with Safrit on his formula.
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