Dare We Think 40…

Friday, July 8, 2016

One thing I've always believed is that if you originally committed your "Human and Monetary Capitol" to be in business, you weren't entering into it "just for fun." The ultimate goal should be that you always get "To keep some of what you Kill!" So, with that in mind, even going back as far as my other life with the big Wickes Corporation--I had some "revelations" about this early on. First, I talked to my "contractor" base quite a bit. My main questions oriented around, "What do you want, need and expect in the way of services and products?" What I got in honest dialog was a pretty extensive grocery list of "things." Lots of things!!...Hey! They wanted everything including the kitchen sink!! Then, just for fun, I plugged all this into an imaginary P&L statement. It turned out, even back then, giving the contractors all they desired was going to cost a quite a bit. But I put together that P&L regardless, adding the employees, resources, and products to support that model. And to "make it work," this P&L dictated that I had to be at the very least in the low to mid-thirties in maintained margin.

Who says is your maintained margin goal is too high? I thought "What the heck" and I built that model from imaginary to real…with the appropriate margin to support the ambitious plan. Of course I was told by my "brothers" plus the company "suits" that I could never get margins that high!! Surprisingly though, it did work. I consistently held margins that ran six to eight or nine points ahead of the company "average." And we made money year in year out, in spite of our model not fitting the norm, nor being anywhere near the company "average."

So, my first comment is, "Very good margins are certainly attainable and doable." You just have to make sure that you back it all up with absolutely superior service, products, personnel, et-al. Also, to understand something very basic in our unique industry: Anything up to "wildly varying" cycles are just the norm. In my fifty-five years in the industry, I can pretty easily count at least eight real cycles. Some only last six months, but as we've learned recently, some can go six years or more, which points out more than ever, riding a real "sustained" cycle is pretty much a pipe dream. So when it's really "Good," you better be planning already for the "Bad"...and vice-versa. You better be making enough (Profit!) in the "Good" to always put a little back--protecting your "Seed Corn" if you will. As I look at what happened during the past cycles and look now at "Past, Present and Future"...this is what I see. The need (more than ever) to have the very talented folks who work for us learn the products, to the point of really knowing what they're talking about. Nothing is simple, be it windows, doors, trusses...you name it. Got to be really good to convince that customer that you're always worth more than a competitor, and if you tell your "story" correctly, the message should always be, they get from you the absolute best "value for the money they're spending."

I still believe in, and follow, the "Seventy Percent" rule...that approximately seventy percent of your customer base will pay you more, if you've built that relationship correctly. (I always also knew that about twenty percent would only look at the bottom line. Period!) So, coming full circle. Looking into the future, I believe the new "Model," if you're a "Full-Service" building material operation, shows at least a forty percent (40%) maintained margin. I truly believe it's doable...Those that think it's not, will eventually, sadly, be relegated to...You get the picture. Good Selling!

Al E. Bavry, CEO, Kimal Lumber & Hardware 7/8/2016

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