In today's LBM business, the relationship between the vendor and supplier can't be taken for granted. A strong vendor-supplier relationship can not only outflank the competition but also ensure profits. Below you will find my account of a partnership between a vendor and a dealer that has existed for more than 10 years. You will also find nine ideas regarding how to find the best vendors. This is the story of how two guys have built their business by supporting each other. To protect their identities against competitors, I will call them Victor the vendor and Larry the LBM dealer.
Larry had earned a biology degree from a local university not long before he landed a job at the local independent lumberyard. Over 10 years, Larry worked in all positions at the dealer and ended up in sales.
Larry was constantly looking to increase his margins. His competitors had stocked similar grades of lumber and the same brand of windows. Every job at that time was all about price. Larry realized that, in order to make a profit, he had to differentiate his company from his competitors.
One spring day, Victor popped into Larry's office and began asking questions. Note that I did not say Victor began selling. This was the key to the relationship.
Some of the questions were the basics, like what brand of windows do you stock, is this working for you, are your margins where they need to be, how long does it take for you to receive shipments, how much do you stock, and are you happy with the existing vendor. Victor was open to the idea of supporting Larry if Larry supported Victor. They agreed to do business together.
A few weeks later, Larry traveled to the window manufacturer and learned everything there was to know about Victor's windows. He met the people assembling the products, the accounting staff, shipping crewmen, and even order entry people. After three days he knew most of them by name.
Victor began traveling with Larry, meeting all of Larry's customers and playing a tag-team role. Victor helped Larry sell windows to almost every job. Victor had a pseudo office in Larry's company. He had a desk and a phone.
After a few years, sales began to increase substantially and so did margins. Larry began making suggestions for window changes and new lines. Victor not only listened, he implemented the changes.
When Larry was on vacation, Victor would quote jobs and service Larry's customers. Victor knew Larry's builder customers as well as Larry knew them, while Victor enjoyed a strong relationship with the window manufacturer's employees.
The most valuable result of the relationship is that windows sales for the dealer and supplier are both off of the chart. So are the margins.
It is interesting to hang out with Larry and Victor and hear their stories of how they have fun together fishing, hunting, selling, or even doing warranty work. "Victor and I were called by a customer to adjust a window," Larry once told me. "We drove about 30 minutes from the yard and entered a smoke-filled, greasy-smelling house, where the wife was cooking and the husband was sitting on the couch. The lady had asked us to adjust the window because it was not opening and closing properly. Victor and I adjusted the window in a minute or two. We were ready to leave and the nice lady asked us if we would fix an entrance door that was not closing properly. I took out my screwdriver and adjusted the hinge while Victor hung out with the husband on the couch. By this time, Victor and I smelled like we were cooking. The lady's husband continued to sit on the couch and provide no help. The lady then asked if we fixed dishwashers." That's where the two reached their limit.
It is almost impossible to determine the number of referrals from that one 15-minute engagement with the customer. And it is even tougher to recreate the profits. Today, this dealer is producing profits that put it in the top 1% of dealers. Sure, it has made cost adjustments like everybody. But this store is the king of window sales in its market, and the Larry-Victor relationship is a big reason why.
If you are looking to make profits in the upcoming year, I challenge you to strengthen your vendor relationship. Here are nine things to look for in a vendor and a vendor representative.
- Find a vendor that is responsive to your needs. If you need truckloads of materials, find a vendor that can deliver. If you need partial trucks or single item shipments, find a vendor that can deliver.
- Find a vendor that has minimal sales staff turnover. Having to deal with a place where the staff keeps leaving makes the relationship with that vendor tougher. People buy from people. Companies are used only for service.
- Find a vendor that gives you a unique advantage in your market. If you are selling the same exact product line as your competitor, it will be harder to differentiate yourself.
- Find a vendor that is concerned about your sales and your margins. A one-sided sales relationship is short-lived.
- Find a vendor that you trust. I can't imagine being in an unhealthy vendor relationship where there is little trust. This is bad for the vendor, dealers, and end user of the products. Your customers will immediately identify a vendor that you do not trust.
- Find a vendor that keeps information confidential. Sure. we are supposed to know this, but do we think about it: If you present your game plan for next year to your vendor, does he or she keep that information confidential?
- Find a vendor that your customers like. This is touchy. In the sales process or with any warranty work, the vendor must get involved. Does your vendor represent your company in the way that you would represent your company?
- Does your vendor give you favorable terms? Terms are not always just stretching the payment days beyond 30. Terms can be vendor-managed inventory, shipping within 24 hours, guaranteed pickup of products within seven days, and discounts on certain jobs, products, or times of the year. Terms can also include being onsite at the dealer when needed. The terms have to be favorable for the vendor and the dealer.
- Does your vendor work with you and provide leisure trips for your customers, like hunting or fishing, and does your vendor work with you to provide factory sponsored trips? I call this the casino tour. There is no doubt that if you spend more than one day with your customers away from the office, you will sell more products to them. If you put the customers in a car, plane, or bus and travel, you find out interesting things about your customers that can help you sell more products and services.
In order to succeed next year you have to know more about your customers than your competitors do. You have to know more about your vendors and their products. You have to be an expert. Stop investing in non-value added activities and begin investing in your vendors. This will require you to also invest in your customers.
When your customers say great things about you to their peers, you will have prospects calling you. It is a great way to sell. This does not happen overnight, so you better get started today. It is like growth in the forest; every day that you do not plant a tree is just one more day that you will not see that tree grow or the forest expand.
If you are a dealer like Larry, find a vendor like Victor. If you are a vendor like Victor, find a dealer like Larry. In the end, sell more products through relationships. If you have similar stories, please write me.
Chris Rader is a consultant based in Lafayette, La. Contact him at firstname.lastname@example.org.