Last month, I discussed two of my client's efforts to stay afloat during these trying times. This month, I outline some strategies that may help those of you facing the same challenges. Don't look for any Earth-shattering news here, though, this is just business 101. But sometimes we have to get back to basics to grow again. Just like Vince Lombardi's famous opening remarks during pre-season football training, "Gentlemen, this is a football."
Gross Profit Margin. Value-added selling is a term that has been tossed about–and much abused–in our industry for years. Just what is value added, and what does it have to do with gross margin?
We face rapidly rising material and operational costs every day. The price of lumber fluctuates as quickly as the tides sometimes, and who can forecast fuel and gas prices? But, in many cases, our salespeople hold to low-margin sales items and refuse to present options to their customers for fear of losing them. With this in mind, value added simply means that the salespeople understand all of the hidden costs associated with doing business and internalize those facts. This helps them present complete packages of goods to their clients. Value added means not settling for low-margin items just to maintain, but presenting the client with solutions to address the whole picture while holding respectable margins in the deal. Remember, margin and profit are neither immoral nor unethical.
Customer Service. I cannot overemphasize customer service. In my August column, I discussed a customer service survey I did for a client. When times are tough, customer service becomes your No. 1 salesperson. Customers respect and appreciate a higher level of service. However, sometimes you have to "sell" this service to them.
You may already give your customers a higher level of service than any of your competitors offer, but your job is to make them aware of the benefits associated with that component of the sale. This becomes part and parcel of the value-added concept. The customer needs to be made aware of the service issues that differentiate one LBM dealer from another–real issues that affect the builder every day. We need to sell these on each visit, not simply assume that these service issues are understood.
Your People. The client I discussed last month had aggressively trimmed staff to focus on the best players in his business. His discovery was twofold. One aspect was that he had a more positive, motivated team; the other was that the business was accomplishing just as much with fewer people. This tells that there was a bit of slack in the original staffing levels. It also suggests your best people are willing and ready to step up to the plate and perform at a much higher level if you give them the challenge. Good employees are always willing to accept a challenge; poor employees run from them. Let them keep running. You can do more with less, and be much better for it.
When your market returns–and it will–you'll be ready to capitalize on the boom in business by having a team that's been tested and proven. You will have held margins and maintained your service levels. Do these basic things, and you'll be OK. Remember, it is just business 101.
Mike Butts is president of LBM Solutions, a DeWitt, Mich.–based LBM supply consulting and training firm.