When Atlanta-based roofing distributor Heely-Brown Co. made plans to expand into Florida a few years ago, Pensacola wasn't its first choice. The state's Panhandle, where that city is located, had been battered by storms so often "it was pretty much re-roofed out," recalls Mike Armour, who manages three Heely-Brown regions. And the recession was taking its toll on homeowners.
But something happened–or rather, someone came along–to turn the tide in Pensacola's favor. Woody Ray, who was managing a competitor's branch in that market, had a falling out with his employer and suddenly became available. "Our philosophy has always been finding the right person for the right place," says Armour.
Heely-Brown persuaded Ray to come on board, and in January 2010 the company opened a 30,000-square-foot facility in Pensacola that sits on more than three acres. While economic conditions in the region still aren't ideal, Armour expects this branch, Heely-Brown's eighth, to eventually generate between $4 million and $5 million in annual revenue.
The primacy that Heely Brown places on finding experienced people before moving into a new market is shared by other specialty dealers, often called "one-steppers" because they receive the majority of their goods directly from manufacturers rather than via distributors.
"Statistics like [housing] permits and starts aren't as important as the quality of people we hire, especially the manager and salesperson," observes Ron Ross, CEO of McKinney, Texas-based SRS Acquisition. Since its launch in February 2008, SRS has grown from eight branches to 45 (as of press time) across 16 states, and most of the managers it hired were known by Ross from one of SRS' predecessors: Cameron Ashley Building Products or Shelter Distribution.
In nearby Dallas, Roofing Supply Group (RSG), verging on 60 branches in 23 states, lures the best managers with partnerships "so they have a personal stake in the financial success of their branches," says Jeff Willis, RSG's vice president of sales and marketing. Those managers retained their ownership positions even after The Sterling Group acquired RSG in 2006.
In interview after interview with ProSales, it was expertise and experience–in management, in product knowledge, in salesmanship–that one-steppers claimed separated their operations from full-service, pro-oriented two-step dealers that often carry the same building materials. Some leading one-steppers–particularly those running Beloit, Wis.-based ABC Supply, the industry's largest roofing distributor and the No. 1 company on the ProSales 100–regard full-service lumberyards as a different species.
But are they? Aside from the breadth and depth of their respective inventories, aren't what they do, how they do it, and who they do it for pretty similar to a lumberyard?
That claim is still being argued. But one thing's for certain: At a time when LBM observers question the idea of national lumberyard chains, one-step distributors are going coast to coast and moving quickly up the ProSales 100 charts. When we spoke with Ross in March, SRS was coming off of a quarter during which its revenue went up 20% and its earnings rose 25%, with new locations driving those gains.
If one-step distribution and pro-oriented retailing seem alike, why does one business model look to be performing better today than the other? Why are its executives less averse to expansion and, often, more confident about the future?