Building Supply is alive and well! Well, to be more precise, many are still doing quite well – because they serve a niche market. There is no question that the Big Box stores, like Home Depot and Lowe’s Building Supply have put some out of business. The first thing I would do as YOUR Building Supply Business Acquisition Consultant is to help you determine in advance of any initial approach to the owner or broker, ‘Is it viable?’

If it has survived this long, especially with Covid-19 and the lock downs, chances are, it serves a niche and is worth pursuing. But that is not always the case.  Some owners are stubbornly hanging on, some are bleeding red ink and some are on the brink of insolvency.

The best way to determine this without showing your cards, is to talk to some contacts in the construction or building business who would be their (and your future) customers.

Find a Niche

For instance, there is a ‘Lumber Yard’ in Raleigh that has been here since before Big Box Stores were invented. You might wonder how it survives with mass lumber buyers like Home Depot. The first thing I learned from a Remodeling Builder is that Home Depot and Lowe’s sell lumber cheaper, but it is “green’ or “wet.” Normally, that doesn’t mean much for the retail consumer or local contractor working out of the back of his pickup truck. But this Old Time Lumber Co has its own Kiln. They are the only ones that do. Ah Ha! A Niche!

Suppose your customer is replacing a porch or deck. Treated Lumber is required. Everyone sells that. However, unless the wood you buy Kiln-dried, you can’t paint it or stain it until it dries up, perhaps six months. Most consumers do not know this, but Custom Builders do. Loyal customers will come back again and again when they know that their supplier has the best product and know-how to meet their needs.

Importance of Buyer Representation

Just as their customers rely trust the lumber supplier’s experience when buying products, it is essential to work with an experienced business acquisition consultant when preparing to buy the company itself.

Keep this important fact in mind: if a business is up for sale, there is a broker. The Selling Broker works for the Seller, the Owner.  He does not work for you. His fiduciary interest is his Client, not you. You want to be on equal ground because this is going to be a substantial transaction. You want someone on your team who can talk ‘Broker to Broker.’

Let Your Lawyer be Your Lawyer

This is not the job of your attorney or accountant. The attorney’s job is to do all the legal work, read, write, interrupt contracts, dot ‘i’s and cross ‘t’s.  The accountant’s job is to crunch numbers, but it is not to do a Certified Business Valuation. Nor is permitted to do so, although he may offer an opinion that may kill a deal. The Building Supply Business Acquisition Consultant can talk to the broker, obtain documents and information your attorney and accountant needs from the broker and so much more. And a Certified Business Valuation is permitted and encouraged.

Level the Playing Field

To be clear, you are the Buyer and you should be in control, in the driver’s seat. But often that is made more difficult by the Seller, his Broker and other Advisers.  Everyone wants to be in control and has an agenda to push. When you team up with a knowledgeable Consultant, also called a Buyer’s Rep. or Buyer’s Representative, you make the playing field much more level. For you.

The ProBiz Process

Here is what we suggest: Engage Pro Biz. Explain what you have in mind, whether you have a specific target or need help doing a search. Most often you will have found your target on line and it is listed with a broker. Have Pro Biz make the initial approach and help you navigate the buying process.

One of our most valuable services, and least noticed is that we help you sort through the hype. There is a lot of that and it’s easy to get caught up in it. 

ProBiz has done this many times and keeps the process orderly and flowing smoothly. For instance, jumping immediately into due diligence. Before you ‘dive deep’ and order a Quality of Earnings Report, called a QE by Accountants and similar to an Audit), you need to meet the Owner, do a site visit and see if this Building Supply Company feels like a good fit.

Is Lumber the Profit Center of a Building Supply Store?

Margins on Lumber are very tight, but it is a major draw card. Hardware and other ‘Inside Sales’ goods add tremendously to the total picture.  As a customer, you are more likely to get individualized attention and advice on lumber and building projects. Customers may prefer this over a Big Box Store.

Is there a difference between a Lumber Yard and a Building Supply Company?

The terms often overlap but a Lumber Yard will tend to be real estate heavy, perhaps requiring 5 acres of land. Milling activities and huge stacks being weathered outside would be a big difference.  The Building Supply may be tied to Vendors who supply the lumber that they sell, as well as other goods.

I hope these answers have helped to show the benefit of a knowledgeable Consultant and Buyer’s Rep. on your side as you explore the acquisition of a Building Supply, Lumber Yard, or Hardware store.