Rallying around the business

San Antonio — The layoffs, bankruptcies, pay cuts and long hours that have cast a pall over the industry for the last several years were pushed aside for three days last month as LBM executives gathered here to greet old friends, catch up on gossip, and maybe learn a thing or two about how to run a better business. The 2011 ProDealer Industry Summit, co-sponsored by the National Lumber and Building Material Dealers Association (NLBMDA) and Home Channel News, hosted 100-plus pro dealers and LBM distributors from more than 65 companies Oct. 26 to 28.

ProBuild alumni were there (Paul Hylbert and Bill Myrick) and current top executives from the nation’s largest pro dealer (Michael Mahre and Paul Dodge). Other large LBM chains, such as Builders FirstSource and BMC, also sent their C-list representatives. Distributors included Lumbermen’s (LMC), Do it Best, Orgill, Empire, ENAP and BlueLinx. But the backbone of the industry, independent dealers from across the nation, filled up the seminar rooms of the Grand Hyatt hotel in downtown San Antonio.

The agenda was jammed this year with presentations that covered everything from the latest U.S. census data and its impact on residential construction to succession planning for family-owned businesses. The keynote address, by Guy Blissett of the National Association of Wholesaler-Distributors, focused on the services being offered — and in many cases expected — by distributors today.

“Services are pushing the distribution business in directions it’s never been before,” Blissett said. Financing, Web hosting, managing rebates, lighting retrofits — the list keeps evolving, he said. Smart operators will look at these extra duties as opportunities, he pointed out.

“The whole negotiating dynamic changes when you’re offering services instead of responding to requests,” he said. Just make sure you have the right people in your organization who know what questions to ask to uncover a customer’s needs, he suggested.

Texas dealers turned out in full to welcome one of their own, Cally Coleman Fromme, executive VP of Zarsky Lumber, as the NLBMDA’s first female chair in its 94-year history. Fromme replaced outgoing chair Joe Collings of Ferguson Lumber. At a banquet where he passed the torch, Collings noted some of the progress the association has made lobbying on legislative and regulatory matters. And, he joked, “We’ve had some very short meetings, which in the past was not the case.”

Connie Podesta, a motivational speaker and executive coach, gave a well-received talk that helped audience participants identify their strengths and weaknesses by determining their geometric shapes. There were plenty of circles in the audience, but not too many squiggles. (You had to be there.)

David Vandenbroucke, a senior economist with the U.S. Department of Housing and Urban Development, analyzed the 2010 census in terms of its impact on residential construction. He delivered a dark short-term forecast but a brighter long-term outlook.

“I don’t have much comfort to give right now,” Vandenbroucke said. “We’re going to be seeing what we’re seeing for at least a couple of years.” He cited the shadow inventory of foreclosed houses, plus the geopolitical upheaval in Europe, as factors that helped put his odds of a double-dip recession at 40%.

According to the economist, housing is still too expensive for a large percentage of the population, creating an unhealthy imbalance in the economy. “More and more people are finding it more and more difficult to pay for housing in the past few years,” he said.

And the good news? Demographic trends will ultimately require the construction of new housing units.

“There is a long-term tide that is moving in that’s going to require building more houses,” Vandenbroucke said.

Foreclosed homes came up again in a presentation by Greg Brooks, president of The Building Supply Channel, who cited a study that pegged January 2022 as the year when all foreclosed housing inventory will finally be cleared. In the meantime, 30% to 40% of those homes will become uninhabitable in the next four to five years because of mold problems.

Brooks’ chief concern, however, seemed to be finding ways to further lower home-building production costs. A recent study by Arizona State University found that the construction of the average single-family home still incurs $1,800 in callbacks, $4,000 in wasted materials and $6,750 in labor costs for idle days. “There is going to be tremendous pressure for builders to keep prices down, and you know what happens then,” Brooks warned.

Not all the educational sessions were about new housing; Joe Emison, founder and VP research and development at BuildFax, showed through building permit data that consumers are focused on “comfort” remodels and repair work as opposed to renovations that increase the value of a home. Based in Austin, Texas, BuildFax aggregates building permits from MSAs across the country.

Not surprisingly, consumers are often acting as their own general contractors, mostly to keep control over expenses. “Homeowners are pulling a third of the remodeling projects,” Emison said. “So they’re getting involved in these projects.” He recommended that pro dealers make their websites more consumer-friendly with a tab that says “homeowner.”

For family-owned lumberyards addressing succession issues, Gary Pittsford of Castle Wealth Advisors outlined some of the steps each company must take to ensure a smooth transition between generations. While some of the issues and decisions can be painful, the alternatives, Pittsford stressed, can be disastrous. One piece of advice: Never split a business evenly between two heirs.

“It’s better for one child to be 51% owner and the other 49%. Otherwise they’re at loggerheads,” he said.

Jim Schaffer, a former LBM executive (Diamond Lumber, Erb Lumber and Builders Square) who now does consulting work for the industry, addressed the issue of employee compensation. Schaffer cited a Deloitte survey finding that 75% of the U.S. employment work force is either discontented, disengaged or discouraged. He warned the PDIS attendees that once the economy recovers, “It’s going to be your top performers that are visible in the [job] marketplace.” Among Schaffer’s suggestions were to avoid across-the-board salary cuts and hold managers accountable for employee retention. Also, don’t underestimate the value of health benefits. “We’ve seen people leave dollars on the table in favor of better benefits,” Schaffer said.

Their heads crammed with the contents of six seminars, PDIS attendees were more than ready for a cocktail reception with the event’s 29 sponsors and a dinner honoring TW Perry, chosen by Home Channel News as the 2011 Pro Dealer of the Year. 

The conference ended on Oct. 28 with a yard tour of McCoy’s Building Supply in San Antonio. But the early risers got to hear an informal panel discussion with Michael Cassidy, president and CEO of TW Perry, and Meagan McCoy Jones, director of field support, McCoy’s Building Supply.

In a free-flowing exchange of ideas, both executives talked about the consolidation they’ve seen and how they’ve picked up market share as a result.

“Our yards can probably handle double what we’re doing now, and I think that’s because we’ve had to run so lean,” Cassidy said. Another benefit of the recession, he said, is a widening of the available talent pool.

“Young people are now coming to us,” he said. “We’re hiring college grads who might not have looked at us before.”

For McCoy Jones, working for a family-owned business “allows us to make decisions that we want to make regardless of market forces.” One example: closing on Sundays.

McCoy Jones and her father, Brian Jones, graciously led a tour of 22 conference attendees around their San Antonio yard, one of 83 units they own in five states. LBM executives from around the country marveled at the spotless store and jotted down notes of ideas they wanted to try back home. For Diana Perenza of Florence Corp. in Huntington, N.Y., it was a simple wire cable strung across a vertical stack of 2x20 boards. On either end, the cable was secured with a hook-and-eye closure. Such a simple safety measure, Perenza marveled, to keep the boards from falling on someone. And it’s one that she intends to implement as soon as she gets back home, even if she has to do it herself.