Our Approach to the Multi-Family Segment
By Neal Fruman, National Lumber, Baltimore, Md.
In this fast-paced LBM world, the business climate is constantly changing. With the start of each year we need to evaluate what’s working well and strategize how we can achieve growth. It’s amazing to think back on how much things have changed just over the last few years. As business owners and managers, we need to regularly explore ways to differentiate ourselves from our competition. We need to adapt better efficiencies and service to truly add value for our customers.
Our Competitive Advantage
So, at National Lumber what is our secret sauce? What’s our competitive advantage? It’s our people of course.
However, in addition to our team, over the last 10 years we have made a concerted effort to sell products to a non-conventional segment of the LBM industry: Multi-Housing.
Adapting to Different Needs
While our primary customer remains the builder/remodeler, currently supplying materials to the multi-family category comprises over 35% of our gross revenue.
We have dedicated personnel who strictly focus in this area. National Lumber stocks a few lines of cabinetry, and we manufacture countertops on site to ensure that a complete kitchen can be delivered to an apartment community within a few working days. We also stock interior doors in various sizes and jamb widths, common mouldings needed for apartment renovations (which differ from common mouldings used in new home construction), and many other items that are required for a very quick turnaround.
The approach and mindset to selling this segment is drastically different than selling a builder or remodeler. Instead of interacting with builders, our sales team’s primary point of contact is a property manager or maintenance supervisor. The expectation and level of service needed is typically higher.
Supplying materials can be very seasonal. Typically, there is low apartment turnover in the winter and high turnover in the summer. People generally don’t move in the colder months or around the holiday season.
As renovations occur at turnover—the time between when a tenant moves out and the next tenant moves in—demand for materials arise in a short time frame. This requires our sales and operations team to move at a very fast pace to supply product quickly. If a typical apartment community is budgeted to renovate 30 apartments per year with new kitchens, countertops, interior doors, and trim, much of that work is slated over a very short time span. We also need to be open minded to sometimes deliver small dollar amounts understanding that our customers have the ability to spend significant amounts over time.
However, from our standpoint, the positives of selling the multi-family industry far outweigh the negatives. It has taken us time to understand this industry and how it differs from our conventional customer base.
Most of the products we supply to our property management customers are not commodities, meaning there is opportunity to realize strong and stable margins compared to the margins we have grown accustomed to with builders and remodelers.
We’ve found a very loyal customer base and have been fortunate to be involved in several multi-year projects. We have formed great relationships and have been able to support and participate in the yearly events for our regional multi-housing associations.
Perhaps the most intriguing aspect of this segment is the financial stability of property management companies. With monthly recurring revenue from their tenant base, the occurrence of delinquent and untimely payment to us is infrequent.
Supplying materials to the multi-family industry in Baltimore and Washington, D.C., continues to be a great opportunity. We need to evaluate our delivery and dispatch systems to maximize our routes. Our sales team needs to stay educated on product trends in apartment turnovers. We stay active in seeking great partnerships with vendors that can provide quality products within a quick time frame at competitive rates.
Evaluating our systems to address continuous improvement is a constant process:
- What is the maximum number of countertops we can fabricate daily in our mill?
- How many deliveries can each box truck make per day?
- How do we ensure that our vendor partners can supply the special-order cabinetry and millwork in the time frame needed for our customers to stay on schedule before the next tenant moves in?
These are a few of the challenges we face that help create a productive environment at National Lumber, as we continually explore new ways to improve.
See You at LBM Expo
I am excited to discuss our approach to multi-housing at the upcoming LBM Expo in Providence and hope you are able to participate in the discussion. If you’re able to attend the Expo, please consider joining us at noon on Thursday, Feb. 15.
I look forward to seeing you then!
About Neal Fruman
Neal Fruman represents the fifth generation of National Lumber, a family-owned and -operated building material supplier located in Baltimore. Neal joined National Lumber in 2001 and is currently responsible for the financial and operational oversight of the business. Neal currently serves on the board of the Eastern Building Material Dealers Association (EBMDA), as well as other local charitable organizations.