In the Old West–or at least in the movie version–cattle barons would hire rustlers to steal stock from other ranchers as well as expand into prime new grazing lands. And if those hired guns found a better offer across the fence, they were just as likely to take aim at their former employer.
It's not much different in today's LBM market. Yard closures and downsizings have left plenty of solid sales professionals looking for work–pros with a long list of good customers in their holster. Dealers across the country are hiring these guns to rustle up some business for them or at least improve their existing position in the market.
For the moment, it's a buyer's market. But talk to dealers about sales reps and you can still detect that age-old sense of unease, a feeling that the fellow rustling up business for you today could well be cutting into your herd tomorrow. Luckily, customers aren't as docile as cattle, and so even as dealers build up their sales team in an attempt to expand business, they also are taking steps to ensure their customers are loyal to the dealer's brand, not to the salesman. As one dealer exec put it recently: "Outside sales reps are needed, but what a pain to deal with!"
Given the upheaval in the market and the stampede of recent closings, some dealers are finding now is the time to improve their ranks with new hires. A ProSales survey in August found that 48% of the dealers and distributors responding said they had recruited and/or hired sales reps this year. Finding them wasn't hard; 77.1% said they had been approached by sales reps who were laid off by other companies and were looking for work.
Asked by ProSales if he was hiring any additional sales reps, Steve Patterson, the president of Central Valley Builders Supply in St. Helena, Calif., gave a shrewd but honest answer: "We're upgrading."
In the last year, Lummus Supply Co. of Atlanta has hired four new sales reps from competitors and former competitors, including Ply Mart, Wheeler's Building Materials, and 84 Lumber. According to company president Bill Lummus, the new hires have been good additions to the staff and, in some cases, allowed Lummus Supply to tap into new markets that the dealer was missing out on.
For example, Lummus is now racking up sales in the north Georgia resort areas of Big Canoe and Bent Tree thanks to a new sales rep. Another rep has ratcheted up Lummus' remodeling presence: The company's sales to remodelers have grown from about 10% of total sales five years ago to as much as 40% of overall sales now.
"I knew that if there was a certain niche I wasn't in, if I was going to survive I had to get some of that business," Lummus says.
Although an erratic Atlanta market has translated into more gunslingers out of work and the opportunity to pick up good people, that's not always the case in other parts of the nation.
"Yeah, we've approached sales reps from other companies," says Dan Illian. "But it's pretty tough in Nebraska to find good quality people."
Illian, the controller at S.A. Foster Lumber Co., a six-yard dealer based in Lincoln, Neb., explains that when a small mom-and-pop yard goes out of business, some of the big boys are the first to gobble up top prospects. In one situation, S.A. Foster was trying to hire a rep who was a competitor at Foster's best yard. But a rival yard grabbed him and set him up with his own office.
"We got beat to the punch on that one," Illian says.
In other cases, it's tough to attract a rep willing to work in some of Nebraska's rural areas. "It's tough to get people to go out west in Nebraska," Illian says. "You have to appreciate the quietness."
A few years ago, S.A. Foster lost a solid manager who had been working at the dealer's Sidney, Neb., yard. "I don't think his wife was too happy out there anyway," Illian says.
On the Run. But what happens when a sales rep defects to the competition? ProSales' survey asked yard managers and owners what percentage of revenue they expect to lose when a typical outside sales rep leaves for a competitor. Among the 296 dealers who responded to the question, 11.5% said they would expect to lose, at least temporarily, 25% or better of the rep's accounts.
When it came to losing the No. 1 sales rep to a rival, of the 217 dealer bosses and yard managers who answered the question, 20.7% predicted a loss of 25% or more while 20.3% estimated a loss of 20% to 24%.
For some, the estimate is much higher. "Typically, when a sales guy leaves, he can take 80% of his business with him," says Tim Kircher, vice president of sales at Rum River Lumber in Coon Rapids, Minn. Chris Cole, owner of Associated Building Supply in Oxnard, Calif., believes a good salesman could "ideally take all of their business with them." In fact, he argues, "If you can't take business with you, you're not doing your job." Cole believes so strongly in the importance of sales that 11 of Associated Building Supply's 15-member staff are sales reps and Cole is thinking of hiring more. (For more on Cole, click here.)
Sales reps and sales managers responding to the ProSales survey shared Cole's and Kircher's views about their worth. Roughly 42% of the salespeople responding believe they could take at least a quarter of their accounts with them when they left. That's 36 points higher than their bosses figure an average rep would take, and 21 points more than the best salesman would do. (See tables below.)
More dealers are making it a point to combat that possibility by getting to know their customers better than ever. Kircher tries to meet his sales reps' customers regularly and pays close attention throughout the credit application process. His goal is to size up the customer, consider his wants and needs, and figure out if the customer is a good fit for Rum River Lumber.
Lummus, who estimates a top salesperson could take as much as 50% of his accounts with him, says he goes out as often as possible with his salespeople. "I want to know my customers," he says.
Many yards extend that idea well beyond the president's office. "A lot of our outside salespeople will bring in new business, but we want our manager to be involved too," Illian of S.A. Foster says. "We want our managers to get to know the customer and schmooze them, so to speak."
At Foster, this philosophy extends to the sales counter and yard personnel. It's everyone's job to take good care of the customer, according to Illian.
Dean Lumber & Supply Co. in Hollywood, Md., has made it a priority for each department manager to get acquainted with the customer. "We see installed sales being a vital part of our future," company general manager Mike Derby points out. "It's very important that everyone get involved."
In the meantime, Derby tries to gauge the feelings of his customers during general conversations. "It doesn't take someone very long to complain," he explains. "You can really tell if someone likes someone or not; the salesman is either taking care of their account or not."
Happier Trails? Some dealers try to limit potential losses of sales reps by requiring them to sign non-compete clauses typically lasting 12 or 24 months after the salesman departs. In fact, of those dealers that require anybody in the company to sign a non-compete clause, sales reps are two-and-a-half to three times more likely to get a non-compete than a branch manager or company president.
But three-quarters of the dealers surveyed said they don't have non-competes. Even among those who do, there's skepticism about whether the document would withstand a legal challenge.
Keeping salesman happy is also a big part of the game. Roughly 40% of the dealers surveyed said they pay their sales reps a percentage commission on gross margin. And despite a housing market that continues to sag, nearly 75% haven't changed their pay scheme at all this year. Essentially, they said, dealers need to pay them and pay them well.
On top of a base salary, Lummus Supply pays its sales team a commission based on gross margin. "It's unlimited," Bill Lummus says.
Asked if he feared losing a member of his staff, primarily sales people, Cole of Associated Building Supply says he had not lost anyone to a competitor, in part because he thinks no one is going to pay his reps as well as he does. "I just need people who want to be here," Cole says. "If they are treated as well as they should, why would they ever leave?"
"You have to keep them happy," adds Kircher, noting that Rum River Lumber pays a base pay, benefits, and medical coverage along with a commission based on collected revenue.
Toasting a Sale. There are other incentives aside from money. If Lummus sees a big sale he likes, he will personally congratulate the sales rep and take him out to lunch.
In Charlotte, Mich., L.L. Johnson Lumber Manufacturing Co. hosts three retail locations but also maintains a wholesale business and specialty hardwood woodworking shop. However, all of its sales are inside and there is no commission pay.
"Our sales people are phone-based, so they have a big gorilla on their back," says president and co-owner Mark Johnson. "They have to get a feel for the customer's desires and then communicate them to our staff so we can get the order right."
That means the sales staff at L.L. Johnson can find themselves taking the heat from multiple angles, including the customer and the production staff. "You have to stay on top of them and encourage them," Johnson says. "At other places you might not have to stroke them so much because they are stroking themselves financially."
Restless Drovers. Perhaps one New England-based dealer who wished to remain anonymous put it best. "Everyone, employees and employers alike, spends a lot of energy admiring the greener-looking grass on the other side of the fence rather than maintaining their own. We've seen sales people leave one company, go to another, and then six months later get re-hired at their former company."
At the same time, the dealer said he saw resumes still in circulation as reps looked for even greener pastures. "It must be exhausting having to re-invent oneself every six months," he says.