"If you're going to diversify, buy a lot of brooms," Ken Kuester says with a laugh. "I'm the debris maker here, I try a lot of things, throw a lot of things at the wall, and some actually stick."
Kuester is owner of Jacksonville, Fla.'s, Lumber Unlimited, but selling sticks isn't his only occupation. Two years ago, he and two partners created Property Solutions Alliance, a real estate services company that manages foreclosed properties. It's one of numerous ventures across the United States launched by dealers who have diversified beyond construction materials. Often, they've found the result provides a valuable cushion of financial support while the housing market remains weak.
Like many dealer ventures, Kuester launched Property Solutions Alliance to take advantage of a market opportunity. But he's also doing it to get people back to work. He operates in a state that has the fifth-highest unemployment rate and sixth-highest foreclosure rate in the nation. "As a pro dealer, I knew somebody was going to have to fix this stuff up," he says. Both of Kuester's partners are contractors, with great contacts in the building industry.
"The thing about Property Solutions is that it involves every trade that used to be employed in the building industry," Kuester adds. "People who have presently left the state of Florida, they can come home and work. You have a responsibility for your people to help them."
Currently, most of the work the Alliance is involved in is maintaining foreclosed properties for the banks. "We are making good money working for the bank," Kuester says, "but we feel that when private equity becomes involved, that's the big play, and we are positioning ourselves for that."
Kuester has always been a fan of diversifying his interests. Twenty-five years ago, the dealer heard Kentucky Fried Chicken vice president Frank Maguire tell a tech group that if their companies didn't diversify, they would be out of business in five years. He says it was an admonition he never forgot.
While he has learned to narrow his options to construction-related projects–"sometimes I've had my rear end handed to me," he says of opportunities where he strayed outside the confines of lumber and building materials–he says the recession has only spurred his interest in seeking other ways to bolster his business.
"Competition is so fierce in selling sticks [that] you try to get into a business where competition is limited," Kuester advises. "You have to look three or four years down the road." He says that's why Lumber Unlimited got into the custom kitchen remodeling business, because this veteran of four economic downturns figures it will take several years before the foreclosure situation really eases up.
At one point, Kuester considered adding garage doors to his product mix, but decided that the installed doors didn't fit his company's business model. "There are too many people still working out of the backs of their trucks," he says. "They will pick up the doors, install them for $80, do two a day and they've made their truck payment."
However, he did jump on the opportunity to add some exterior products from Norandex–as well as Norandex's leading salesman–to Lumber Unlimited's product mix when the distributor moved out of his region. Kuester also was quick to add cultured stone to his lines of bricks and pavers when a national stone distributor pulled out of Florida, again hiring that company's top saleswoman.
"I don't think I have any magic formula," he says. "You have to look at it as a calculated risk. If you don't change, the probability is high you won't be here. You need to look at every option."