Westcoast Dealers Lean on Financial Strength to Gain Markets

February 27th, 2020 by Drew Vass, Executive Editor

According to year-end housing data, on a regional and year-to-date basis, combined single-family and multifamily housing starts were lower in the Midwest and West regions. While the West was hit the hardest, at -4.7%, data collected by [DWM] shows that some door and window dealers have landed strategies that more than make up for those losses. Top dealers in California, for instance, saw anywhere from $1 to $3 million increases in revenues for 2019—averaging an 8% increase. One company, American Home Renewal, in South San Francisco, increased by a whopping 25%—all without making acquisitions or adding locations. Others found more modest increases by leaning on financial reserves to accommodate difficult, but lucrative segments.

“Much of our growth in 2019 was attributed to a maturing salesforce choosing to sell more ultra-high-end products, complimented by some unique corporate strategies,” says Scott Thurber, vice president of Associated Building Supply Inc. (ABSI) in Auburn, Calif.

That strategy led to $3 million worth of growth—a figure that Thurber says his company plans to stretch even further this year, aiming for $50 million in revenue. It’s also a strategy that he says doesn’t come easy.

“Selling ultra-high-end products is not for every company,” he says. “Due to the extensive sales cycle and lead times, selling high-end window and door products requires ample cash-flow and reserves.”

As a result, many of his smaller competitors rely heavily on products that present short lead times for the sake of snappier payment, he says. Those same commodity-oriented products are also easier to sell, he suggests. By adapting to higher skill sets, ABSI’s veteran salespeople have learned to work through what he says are the more complicated issues accompany high-end projects, he says. Challenges include, “an onslaught of business tasks and personalities; exchange rates; international shipping and logistics; and metric to imperial conversions,” he says, as well as complications to installation, project management and architectural specifications.

Duncan Newman, owner of Newman Windows and Doors in Carlsbad, Calif., says he’s found a similar angle in government work.

“Due to the size of our company, I have very few competitors here in California that are capable of doing these large-scale jobs,” he says, about retrofitting military barracks. “They don’t have the infrastructure, the number of employees necessary or the financial backing.”

And while his company’s revenues have remained flat, with the single- and multi-family markets lagging, that in and of itself can be considered an accomplishment. But those numbers also may be skewed by the complications of government work—and government pay—Newman explains, along with an accrual-based accounting system. His company doesn’t collect a paycheck often for as much as 90 days past completion of projects—a model that doesn’t sit well with some of his competitors, he suggests. Thurber says he’s found the same advantage in the high-end market by carrying cash.

“Many smaller companies rely heavily on short lead time products for cash flow,” Thurber explains, adding that, “ABSI is a selling organization that hunts game that most don’t.”

Among its key targets, the company saw a 34% gain in products made of steel and thermally broken aluminum, which he says are derivatives of high-end, contemporary designs. The company also saw a 17% gain in specialty door products in 2019, including oversized pivot doors, lift and slides, multi-slides and bi-folds. But customers are easy to lose in those segments, he warns, especially when confronted with a lack of expertise.

“The biggest mistake most dealers make when breaking into this segment is going in at too low a margin and not having enough product knowledge,” he says.

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