For more than a decade, the National Lumber and Building Material Dealers Association's (NLBMDA) Cost of Doing Business Report has been the definitive source for lumber dealers to gauge the success of their businesses against the rest of the industry. Fresh off the presses, the 2007 Cost of Doing Business Report analyzes, in a comprehensive business model, the factors responsible for the success of dealers of all sizes. This latest edition in the long-standing series has been compiled from the critical 2006 fiscal year financial data, provided by dealers nationwide who participated in the confidential survey.

Shawn Conrad Using the report, compiled by the American Association of Roundtables, a dealer can compare how it stacks up with its competition and be abreast of the latest industry trends. In all sections, the report breaks down statistics into three classifications of dealers based on sales mix:

  • Contractor oriented (75% or more contractor sales).
  • Retail oriented (less than 50% contractor sales).
  • Mixed oriented (less than 75% but more than 50% contractor sales).

Detailed, organized charts compare the performance of the average NLBMDA dealer to the rest of the industry, showing the dealer exceeded the target level of its return on assets. Using the DuPont Model to analyze earnings before tax return on assets (EBTROA), the report looks at key performance indicators: sales, spread between cost and margin, expenses, inventory level, accounts receivable and fixed assets. After diagramming how each indicator relates to the others, the report suggests methods to increase EBTROA by making slight improvements in each key performance indicator.
The report analyzes several other factors in industry success: income statements, balance sheets, and a variety of target ratios such as financial, productivity, and growth and cash sufficiency. (An appendix is provided to explain all ratios.) By understanding and maintaining target ratios, dealers can meet the targeted EBTROA. A company can rethink how it stocks its inventory by examining the merchandising profile, which shows what the most and least profitable sales areas are for dealers around the country.

Moreover, the Customer Focus takes a detailed look at all the data compiled, and compares the average dealer in each sales mix to the high-profit dealers in its classification, enabling dealers to learn how to improve their own bottom lines with financial advice in each sales classification. Each dealer that took part in the survey received a complimentary Individual Dealer Profile, which details the same statistics for its company, making it even easier to compare its numbers to those of the rest of the industry.

Finally, to account for the differences in regional markets, the report includes an analysis of the data that details the results among regionally federated associations that had 10 or more dealers participate in the survey.

The 2007 Cost of Doing Business Report is the only industry benchmarking tool that accurately tracks the profitability of lumber and building material dealers. To improve the efficiency of your business, return the order form found inside this issue of ProSales by fax to 202.547.7640, or call 800.634.8645 for more information. The report costs $225 for NLBMDA members, $375 for non-members.

Shawn Conrad is president of NLBMDA.