Times Are Good, But Keep Your Eye on the Ball

By Jim Moody, CAE
CSA President

I’ve run into a lot of dealers recently who are talking about how great sales are right now. Some are from the metro Atlanta area, which everyone knows is very hot. But many are from more rural areas. I’ve talked to dealers in all of our states who are experiencing extraordinary times.

A dealer in a very rural area told me that March was his company’s best month ever. Another in a market that is a bit driven by second homes told me that 2017 was likely going to be their best year ever.

I know that everyone is not experiencing pre-2006 levels just yet, but I don’t think I’ve run across anyone who wasn’t experiencing strong growth.

But with that growth come some challenges. It’s so easy to take your eye off the ball when things are going well. Over time, we forget some of the practices we put in place during the downturn to help us keep every penny we possible could. Many of those practices are difficult to keep up, and they make business less fun. Yet we need to continue them.

Here are some things you might want to keep in the back of your mind as you manage the growth.

  • Don’t ease up on credit and collections. This is the easiest place to lose traction. Most people got a good handle on this during the downturn, mostly because everyone got burned and had no choice. It’s very easy to get soft on credit and to let collections slowly get further out, in the same way a lobster gets comfortable in a pot that starts out cold. But eventually the pot boils and lobster is cooked. And so will you be if you don’t maintain a close focus on your credit and collections.
  • Hire carefully. By that, I mean two things: Don’t hire unless you absolutely have to, and when you do, pay attention to who you are hiring. Everyone learned how to do more with less during the downturn. Many of you told me you were amazed what a smaller (but motivated) workforce could get done. I understand there’s a fine line between managing well and breaking the back of your workforce, but it’s important not to get crazy hiring folks to meet the workload. Making sure that you have just enough people to get the job done safely is good management. It’s also a great way to ensure that your growth in sales falls to the bottom line. You don’t want to get to the end of the month and realize you sold a ton but made no more profit than you did in a lesser month. Meanwhile, when you do hire, be thoughtful and deliberate about it. Hiring willy nilly without checking background or doing a meaningful interview can (and does) lead to problems later on. We’ve seen more than one dealer taken by a bad hire who quickly turns into a work comp claim or a claim with a federal agency. Do enough diligence to ensure that the people you hire really fit on your team and want to work.
  • Watch your inventory. It’s human nature to stock up during times like these, but we also know that lumber dealers are notoriously over-stocked. Ruth Kellick-Grubbs preaches this to most every dealer in our roundtables she moderates. For point of reference, our benchmark with our roundtables is 8-12 turns per year. Obviously those who are more retail oriented are going to be on the higher end of that. We do have a number of dealers who exceed the benchmark, but most don’t. Having more inventory on hand ties up your dollars in things that could get damaged or go missing. Be judicious about the inventory you order. Otherwise, you are just putting money under the mattress when it could be working for you.
  • Don’t lose track of efficiency goals. When times are good, we are all focused on sales. We want more, more, more. But if you only look at sales without maintaining a focus on efficiency, some of that sales money is going to evaporate before it hits your bottom line. Pick two or three areas in your yard that could be more efficient. Set goals. Get everyone who has a stake involved. Inspect what you expect (thanks to Chuck Bankston for that catchy phrase). Celebrate success. If it doesn’t improve, figure out why – and that could involve personnel change.
  • Use the good times to make up for lost time on your equipment. Most everyone I know has equipment that is held together with duct tape and a prayer. While it’s not a good idea to replace everything at once, it might be time to accelerate replacing the worst of the worst. You will become more efficient, and you will reduce risk at the same time.