I'm getting calls from dealers around the country struggling to adjust to the market changes--and in several cases even survive.
Markets slow down and then fall off a cliff. Drops of 15% to more than 40% have been seen in markets around the country, big and small, urban and rural. It's so sudden that conventional wisdom initially says it was just a bad month, it will get better.
By the time companies grasp the new market reality, they're behind the curve. Time's lost as management develops a plan to restructure and then implements it. At some dealers, this planning process lasted a year and more.
The result? After spending so much time planning, they never caught up. They couldn't reduce staff, consolidate locations and sell real estate fast enough to keep the doors open. Others are weathering the storm but eroding the value of their assets at a staggering pace. They're keeping excess employees, are still offering overtime and running a full fleet despite significantly lower sales.
Most markets haven't hit bottom yet. We're used to cyclicality; we're not used to the speed of this market change. Far too frequently we hear of LBM companies liquidating or filing bankruptcy. What can you do to ensure your company doesn't merely survive but thrives in the next few years?
Be a Boy Scout: Be prepared. Know what you'll specifically do if your market drops again--or takes longer to rebound. Understand the impact if you choose to carry excess personnel and know when you can no longer do so. We're benefiting from the calendar right now as it's peak time for construction and home improvement. The seasonal drop in business may be bigger than usual this year. Be prepared to stay profitable with less sales.
Tighten up your operations ASAP. Maintain and improve productivity levels. Don't allow six hours of work to stretch to eight. If orders can be delivered with fewer trucks, do so. I often see dispatchers put one order on each truck even though all orders would all fit on one. They're spreading out orders to "keep drivers busy." Be certain all associates are implementing operating decisions aligned with management goals.
Get creative. Can you re-organize tasks or activities to create greater accuracy and efficiency and improve service? Absolutely. We've been streamlining work processes at many LBM businesses. Look to your special order and distribution processes to start. You have significant opportunities here. Execute on them today.
Act big. When they do act, dealers' steps are often much too small. Think ahead six, nine and 12 months. Look at your competition and market data. Implement changes to maintain profitability. Small changes are not sufficient. Don't simply pull one lever a little bit; pull all levers a lot. Aggressively pursue sales opportunities, exploit every opportunity to maximize margins and relentlessly lower your operating costs simultaneously. You've got a narrow window to preserve a safety margin for your company. Don't squander it with baby steps.
Act fast. Speed is the defining characteristic of this market. It's also key to successfully weathering the storm. Most organizations are slow to recognize when they need to make changes. By the time it's apparent, you'll already be behind. Move fast. That's not to say be hasty. Execute your contingency plan swiftly. That's altogether different.
Fundamentally, good management is about stewardship or leaving the business better than you found it. That requires making hard choices to protect the core. Delaying action doesn't help. It's often harmful and even fatal to LBM businesses. Do what you know you need to do--today!
Ruth Kellick-Grubbs is an international speaker, management consultant and author of award-winning training programs. For more than 14 years she has worked exclusively in the building supply industry. Contact her at firstname.lastname@example.org.