Additional Business, Not New Business

Monday, June 12, 2017

We're in one of those cycles where, how can I say is just plain good! While four or so years ago, trying to find customers became an exercise in hearing “crickets chirping.” So today, to some extent, we can pick and choose our targets. And there's quite a bit of that "Volume" business out there...Some are national, and some are large regional builders. Lots of Volume…tempting to get some of it.

The down side, as a builder friend of mine told me one time, is you have to "Get your pencil sharp....No, really sharp"! I know all of this is something we all know about...We've probably all been there done that at one time or another. So, here's what I tell our folks when we either "accidentally" or by our concerted efforts get some of that Volume. I tell them to please look at this right now as "Additional business, not new (or sustainable) business." Several things can happen after that...and sometimes quickly. For example, a competitor (dare I say whore!) decides they want that business more than we do, and for a nickel cheaper, that builder will pitch their tent with that dealer/competitor instead. So, I make sure that we haven't built additional infrastructure to support that "extra" business...If we need a truck, I'd rather go lease one that I can turn back in, rather than go out and buy a new one. I also try not to get our Inventory lop-sided just support the new customer. Where it can really get bad, is if this new customer is using some material that you don't normally stock. Years ago, one of Kimal’s "Volume" customers used a very specific "Flex-Mold"...You guessed it. We loaded up with a pallet of it to save ten percent. Five years later and four years after we lost the customer, we were still "writing off" this dead (expensive) Inventory.

With Volume builders, it's too easy to get caught up in the emotion of seeing those large frame packs, trim orders, doors, whatever, go out the door. And I'll end with a quick story...Back at the tail end of the Recession, we had one of those Volume types...buying upwards of one hundred thousand a month from us. It started subtly: They hired a Purchasing Director to "save" on their cost of goods, and everything started going out for bids...then their payments began to get a little slow. They complained about little things that were "Holding them up because we weren't performing correctly"… and there were more subtle flags as well. Then, when they'd gotten even a little slower in their pay, and wouldn't return phone calls, we took four current jobs, and immediately liened them. They screamed like Banshees, and assured us “They'd never buy from us again”...but we did get one hundred percent of our money! Eight months later this Volume builder declared bankruptcy, and was out of business.

Of course the moral of the story is “Don’t fall under the spell of high volume customers.” At one point that bankrupt builder had been the largest game around...Did it hurt us when we fired them? Sure, we felt it for a while…but the hurt would have been a lot worse if we'd have been hung out to dry! Probably, for over a hundred thousand dollars’ worth of "Hurt." But don't think I'm being all negative about "Volume" business. We've had our share of it over the years...Just had to think of it as “Extra” business at the time, and not do unsmart things that could wound us down the road. If you just put more unemotional thought into that business model, you can make it work where it can be profitable, good, SMART selling.

Al E. Bavry, CEO, Kimal Lumber & Hardware 6/12/2017

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