Editor's Note: This story differs slightly from the magazine version to clarify some points that arose after we went to press. Those changes are listed at the end of the story.
If you want to play golf Ganahl style, bring your wallet.
You needn't carry much cash, but when you tee up like Peter, John, Mark, or Pete Ganahl do, you can expect a wager on the next hole or the entire round. The drive to not just do well but to compete is an integral part of their character. And with their single-digit handicaps, they'll give you quite a test.
"When me, Mark and dad play golf together, nobody gives an inch," says Pete, one of Peter's sons. "Peter has the best swing," says Mark, another of Peter's sons, while Pete "does the big, humongous shots. I just get the ball in the hole." And though uncle John doesn't play as often, his memory is so sharp he can recall every shot of a round he played years before.
Risk. Reward. Putters. Plywood. It's all the same for the Ganahl family and, for that matter, just about everyone who ends up thriving at Ganahl Lumber, the Orange County, Calif.-based construction supply juggernaut that is ProSales' newest Dealer of the Year.
"I don't have a corner on being successful," CEO Peter Ganahl says. "I'm just competitive enough to think that in three years I'll beat you."
Peter smiles when he tells you that, not in a cocky way but because he's by nature upbeat. But there's steel behind the smile. Here in supposedly laid-back Southern California, amid the palm trees and sunshine, Ganahl has built a culture that emphasizes individual freedom, discipline, and self-motivation to an extent unseen at most other lumberyards, particularly during this downturn.
Elsewhere, as housing tanked, many dealers protected their sales reps by boosting their base salaries. At Ganahl, the pay structure was skewed even more to favor top producers. Elsewhere, dealers pruned staff slowly and based on seniority rather than talent. At Ganahl, the cuts came far quicker and were based on merit. Elsewhere, other big dealers closed yards. Ganahl, in contrast, bought land in Pasadena and plans to open a new facility this year.
There's one other big difference: While many dealers are awash in red ink, Ganahl has posted an operating profit during every year of this recession–just as it has done for nearly three decades' worth of housing booms and busts. Today it's among the 20 biggest LBM operations on the ProSales 100, with 2009 revenues of $166 million from nine facilities. It should finish 2010 with roughly the same revenue. Since 2000, its annual operating margins have ranged from 7.2% to 12.5%.
Perhaps one reason why Ganahl has churned out profits during both boom and bust years is that Peter doesn't view them as fat and lean times, but rather as the "The Go-Go Zone" and "The Opportunity Zone," respectively. From Ganahl's corporate headquarters a mile east of Disneyland, The Happiest Place on Earth, this cheerful warrior believes there's never a bad time to make money.
And like Disneyland, the best stories about why Ganahl succeeds often are behind the scenes, starting with a decades-old backstory that in many ways has shaped the present operation.
Young and Oblivious
John Ganahl Jr. still gets misty-eyed when he recalls an event and a conversation with Peter in 1973 that changed his life's path.
In those days, Ganahl was a two-yard, 40-person operation run by John Ganahl Sr., the type of executive who kept all his pencils neatly sharpened in a row and who made all the decisions. Cash was so tight there were times John Sr. had to collect on a debt before the company could make payroll.
Peter, the second son, had been working in Anaheim for five years after getting a degree in forestry. John Jr., the elder son and captain of his high school's championship football team, was away enjoying seasonal jobs as a ski patrolman and river rafter.
Then John Sr. collapsed and died. Peter, just 28 at the time, suddenly found himself in charge. Peter called John Jr. home, and together with another brother, Andrew, they discussed the lumberyard's future. John Jr. quit his other jobs and joined the Ganahl staff.
The Ganahl brothers found themselves struggling to survive at a time when more than 120 other lumberyards were competing with them in Southern California. At one point, Andrew decided to leave the business. At another, Ganahl took what became one of its most far-sighted moves–creating an employee stock ownership plan, or ESOP–not only to give employees a stake in the company but also to reduce its tax bill.
In 1978, Ganahl rolled the dice again when it went deep into debt by entering into a sale/leaseback agreement with a private lender–after failing to get a bank loan–so it could acquire what is now its 17-acre Anaheim property. The price amounted to roughly 40% of its annual revenue at the time. It took until 2005 to pay off the 30-year agreement.
"We had a sense of manifest destiny" regarding the Anaheim expansion, explains John, the company's chief financial officer. "There were others who said 'You're effing nuts.' But we were in our 30s. I never had a sense of betting the farm, though in hindsight it was."
Outsiders say Ganahl succeeds in part because its two leaders view things differently. "John's the detail guy, incredibly organized," says Bill Hayward, president of Hayward Lumber in Monterey, Calif., and a longtime colleague–and competitor–of the Ganahls. "Peter has the bigger picture, the broader vision. Together, that's true synergy."
And as the company expanded, it continued to embrace a multiplicity of backgrounds and viewpoints. Buena Park store manager Chad Kidder is a Nebraskan with a college degree in philosophy, while Luis Rojas, the new Laguna Beach store manager, is a local who joined Ganahl out of high school.
By the late 1990s, the Ganahls were much wiser but no less audacious. That's when they acquired the four-location Barr Lumber chain, doubling the company's revenue in just two years. Staffers had to convert Barr's four yards to Ganahl's computer system in just 30 days, a challenge that has hobbled many similar takeovers. The company met the deadline, and in turn found itself transformed.