At a time when the industry can’t seem to find anything to talk about other than supply issues, it’s kind of nice to know that some things don’t change.

Rob is one of them. Every dealer says their builders are conservative, but the owner of Cro-Magnon Construction is truly a throwback to a bygone era. First of all, Rob is a spec builder, a niche that is practically an oxymoron in the Northeast.

Moreover, he does business the old-fashioned way. Rob designs his own houses, employs his own crews, and stick-frames everything – yeah, even the roof – on site. He’s so far behind the times, he still insists on using Douglas Fir plywood sheathing, which is practically unheard of in our area. Conventional wisdom says that he’s a blueprint for financial suicide, but Rob is doing fine. One of the reasons he’s doing fine is that he makes money the old-fashioned way, too. He takes it out of his supplier’s hide.

Don’t get me wrong, Rob’s a good customer. In fact, he’s a high-volume customer, who buys multiple product categories from us and pays his bills on time. Which makes him a magnet for loss-leader quotes from our competitors. The good news is Rob doesn’t make us match every low-ball price he sees. The bad news is we have to be within 2-3%.

But Sam, Rob’s outside salesperson, was determined to bring the margins up on the commodities. He covered Rob’s jobsites like a cheap suit, hounded our operations staff to make sure his service was impeccable, and hammered Rob with efficiency ideas and presented new products. Rob loved all of it, but it didn’t motivate him to pay us an extra dime on the commodities he bought.

One day Sam came to me and proposed that we offer Rob roof trusses and pre-cut I-joists at “introductory prices” that was in the ballpark of what he was paying for sticks. “Once Rob sees the labor savings, we’ll be able to raise our margins going forward. I guarantee it.”

“Let me get this straight,” I said. “You’re talking about selling these products below our costs. What makes you think Rob will pay more later?”

“He’s cheap, but he’s not stupid,” replied Sam. “Trust me on this one.”

I hate it when salespeople say that! But nothing else worked, so I agreed to go along. On Rob’s next job, Sam proposed roof trusses and pre-cut I-joist floor system. Sam admitted – actually, emphasized is more accurate – that we were willing to lose money on the first project to prove that he’d save money overall.

Reluctantly, Rob agreed. As it turned out, he was delighted with the results. So were we. Our margins are no better on the sticks with Rob, but we were able to get our normal margins on the roof trusses and I-joists, which increased the overall margin on Rob’s account.

From then on out, Rob used roof trusses, pre-cut I-joist floor systems, insulated headers (made in our plant) and even started to get his installed insulation from us. Not only did Rob’s volume go up, but so did his gross margin dollars. As a result, Sam’s commission increased also.

Anyone who says builders are conservative is right – but only when it comes to the bottom line.

 Mike McDole has 40+ years’ experience on the firing-line for Pro-Dealers of the LBM Industry and is the principal of Firing-Line LBM Advisors. He’s also partners with Greg Brooks of Executive Council on Construction Supply and his Learning Management System. Mike can be reached at (774) 372-1367 or Mike@FiringLineLBM.com.