Like many dealers its size, Carhart Lumber Co., a 12-location, $20 million operation based in Wayne, Neb., manufactures roof trusses and offers installed sales (in its case, insulation) to its contractor customers.
In addition, most of its locations feature showrooms for kitchens, baths, windows, and doors, and Carhart Lumber is a member of the Do it Best network—all of which parallels industry-wide trends. “We're a market-driven, customer service–driven company,” says John Carhart, vice president of marketing, echoing his counterparts across the country in the belief that such ancillary businesses are a near-necessity in today's competitive landscape.
But less trendy, if no less important to Carhart Lumber's bottom line and local reputation, are the company's window repair business, its tool and equipment rental centers, and its Western Buildings division, a separately branded pole-barn operation. With contractor sales ranging from 40 to 90 percent of revenue depending on the location, says Carhart, “we have to be ready and responsive to what the market needs.”
Services like this, though niche, are becoming more attractive to LBM dealers. Even as panel plants, pre-hung door shops, and installed sales programs have surged in popularity and frequency, less common profit centers, including concrete supply, distribution, modular housing, contractor financing, and even grain-and-feed divisions, have thrived as well.
Managing these niche businesses takes different forms, whether as separate profit centers or under centralized control (or a hybrid of both), but their common thread is seizing, and succeeding with, a local market opportunity.
“There's nothing like it in this market,” says Pam Leier, vice president of marketing for Lampert Yards, a 37-location, $245 million operation in St. Paul, Minn., referring to the company's new Builder's Surplus division that supplies a limited amount of low-cost building materials for Twin Cities bargain hunters. “We saw an untapped market and decided to supply it.”
Indeed, like many dealers nationwide, Lampert, Carhart, and Perkasie, Pa.–based Shelly Enterprises each are finding new revenue streams and enhanced customer loyalty by branching out beyond the traditional value-added opportunities. Listening to customers' needs, learning and accommodating new business practices, and taking small, sometimes risky steps into new service territories are helping dealers like these and others carve out profit-generating niches in new markets. Here's how each of these companies has made unique opportunities work to their advantage.
Shared Responsibility At Shelly Enterprises, a $120 million operation, the company's mix of 10 locations includes seven selling divisions (or traditional contractor-focused yards), two truss plants, and a pre-hung door shop. Within that, there's also an installed insulation service, a window and door shop and showroom, kitchen and bath design centers, custom millwork, and engineered lumber.
Each of the 10 main locations operates as a separate profit center, which allows them to be more responsive to their specific market conditions and demands in terms of inventory and even price. But in addition to being responsible for their own P&L statements, location managers are also accountable for the overall profitability of the corporation. “We want our managers to be entrepreneurs, running their own businesses and making decisions,” says co-owner Greg Shelly. “But we also want them working together so that at the end of the day Shelly Enterprises is profitable.”
Under that scenario, Shelly's location managers leverage the company's ancillary businesses, such as kitchen cabinets, at their discretion, but also share best practices and experiences, serve as test markets for new business ventures (most recently, installed insulation), and work together to make sure customers—regardless of which location's territory they fall under—get the best possible service. “We get the location and product managers together twice a month to make decisions regarding the future of the company,” says Shelly, such as what products or services to get into—or get out of.