Northern California real estate is so hot that a dealer recently was offered $21 million for his postage stamp of a yard. Fifteen months ago, the owner of a 162-year-old yard in Maine got all his employees jobs at a nearby dealer and then sold to developers his 2.5 acre waterfront property at a price that was surely much higher than its tax value of $2.3 million.
These stories come to mind in part because, more than at any time in recent memory, 2018 will likely be the year dealers take definitive action concerning their future. Economists at ProSales’ sister company Metrostudy figure we’re in the top of the seventh inning of the current housing cycle, so valuations are likely to be about as good as they’ll ever get this round. Owners in the baby boom generation who can hand over the reins of authority increasingly are doing so, while those who haven’t made transition plans are getting frantic as they see their options dwindle. Meanwhile, consultants who tout metrics like return on invested capital are asking their clients whether running a building supply store is the best way they can invest their money.
Before you answer that one, however, tackle this one first: Why are you in this business?
LBM distribution isn’t for sissies. Commodity prices may be up now, but that’s just giving other dealers—even the bottom-feeders—a better financial base to buy technology, win market share, and ultimately outrun you if you let them. We’ve all heard how internet companies will disrupt the market, and the combination of 3D printing and factory-built components could lead to the day in which lumberyards will carry a lot less lumber.
So why bother? My best reply involves Mathew Hall Lumber in St. Cloud, Minn., where years ago I visited to give an Excellence Award. When I asked the company’s president, Loran Hall, what his biggest concern was, he said it was whether Mathew Hall would go from its fourth generation of family ownership to a fifth. Later that day, I drove to the company’s truss plant with one of Loran’s brothers, Dan. Along the way we saw a ProBuild yard and an ABC Supply outlet.
“It looks to me as if you could shut down and nobody would be lacking for building supplies,” I said.
“Yeah,” Dan replied, “But they don’t care about this town as much as we do.”
I think that’s the key. Being an LBM dealer means you’re among the best sources in your community for helping assure your fellow townspeople live in quality, affordable homes. You know how to build, what products work best for your climate, and what the local building inspectors are like. Above all, no one cares about the community the same way you do. Being in LBM is your mission.
Oh, and that guy who was offered $21 million to sell out? He’s staying put.
