Let’s make a dealer! The pros and cons of being a contractor/dealer

To better understand the pros and cons of being a dealer for a national building supply company, consider an analogy.

You have probably filled up your car at a gas station that has a convenience store. Though it sells a nationally known brand of gasoline, the station is not owned by a major oil company. The station’s independent owner has decided, rather than buying fuel from a variety of oil terminals, to sign a supply agreement with a single oil company.

While the station owner loses the freedom to shop around and perhaps save a penny or two per gallon, he gains the advantage of offering customers a nationally recognized gasoline brand. The oil company does its own national advertising and, further, provides subsidies and other support services to help station owners with local marketing efforts.

Wick Buildings, Anderson Statewide Buildings

A Wick building by Anderson Statewide Buildings

Yet the independent station owner works hard to establish his own brand identity. He needs customers not just to fill up and go, but to come inside and shop at the convenience store. That is most likely to happen if the station is well known by locals — under its own name — as a good place to stop. The owner cannot succeed if customers bring their business only because the station sells a major gasoline brand.

These same truths apply to the building business, says owner Rick Andersen of Andersen Statewide Buildings LLC in Sterling, Ill. For nearly 40 years he has seen the business from many angles — crew member, sales rep, general contractor, and currently a dealer for Wick Buildings, a manufacturer of post-frame building packages based in Mazomanie, Wis.

“The analogy to the gasoline business is a good one,” affirms Andersen. “I have a friend who owns a local chain of stations and who sells a major oil brand. But he works hard to keep his own store name in front of the public. I do the same thing by constantly marketing under my own company name and logo.”

Andersen spent several years as an independent general contractor and admits, “Now as a dealer, I have less control over my supply costs.” But he believes this is “offset by the support we get from Wick in pricing, design, engineering, and marketing. Also, Wick provides excellent warranties on their building packages.”

At BM Builders of Madelia, Minn., owner Bill McMullen agrees that being a dealer is a net positive for his company. “To deal with the snow and wind loads in our area, we need more engineering support and better warranties than we can get from local lumberyards,” he explains. For that reason, BM Builders is a dealer for Energy Panel Structures of Graettinger, Iowa, a maker of post-frame building packages that employ structural insulated panels.

Similarly, co-owner Keith Pinkelman of Lynnman Construction in Morrice, Mich., cites the supports he enjoys as a Wick Buildings dealer. “While it’s true that we’re bound to Wick’s pricing and delivery schedules,” he relates, “we receive engineering support and warranties that I couldn’t get by shopping around on my own. Also, as a national company Wick works hard to be competitive with its pricing and they have the clout to get the best lumber from the mills.”

Nevertheless, Pinkelman and partner Tom Flynn make their own company name the focal point of their advertising. “It’s important that people say, ‘Lynnman Construction built that building,’” continues Pinkelman. “In the end, customers call us not because we’re a dealer for a certain manufacturer. Customers call us because they’re looking for a superior local contractor. They know us personally and know we can do a great job on their projects.”

 

Flexibility to Adapt

Rick Andersen has not only held a number of roles in the post-frame building business, but has seen his company through good times and bad. In the 1970s and 80s his work focused on the agricultural market, and then in the 1990s diversified into light commercial construction and suburban projects such as garages and workshops. Since the 2008 recession, however, the commercial and suburban markets in his north central Illinois territory have dried up and Andersen Statewide Buildings is again capitalizing on its experience in agricultural buildings.

These changing fortunes illustrate one advantage of being a dealer. Because Wick can supply packages for a variety of buildings, Andersen could diversify when his markets afforded the opportunity — and may do so again as the economy improves. Just as important, his supplier provided engineering support as Andersen branched into commercial and suburban projects with which his own company was less experienced.

Yet even today, as Andersen has concentrated more on his core agricultural market, being a dealer has continued to afford welcome flexibility. “Because I work with a supplier,” he states, “I can offer my customers different levels of service to fit the needs of their projects. I can sell a building package and have Wick crews do the rest. Or I can act as the general contractor and arrange everything for the customer.”

With this flexibility, Andersen Statewide Buildings can take on more jobs than might otherwise be possible. Andersen does not perform work with his own forces but subcontracts the labor to erect about 20-25 projects per year. Yet he doubles that output by arranging another 20-25 projects per year in which he sells the building package and then turns the erection over to a Wick Buildings crew.

Andersen began his relationship with Wick Buildings some 20 years ago. At the time he was a dealer for another building supply company, but continued as a matter of sound business practice to keep an eye on other possibilities. “I was recruited by Wick for several years and ultimately decided to go with them,” he recalls.

Upon signing the agreement, Andersen attended a Wick training school. “That was a good thing for us,” he says, “because the early 1990s was just when builders were starting to use computers. Wick had computerized estimating and, since my own company didn’t at the time, becoming a dealer was a great way to learn about the latest practices.” Twenty years later, access to new technology remains an advantage. “Just this year, we benefited after Wick went to CAD [computer-assisted design],” he notes.

Though Wick provides much support, Andersen believes local dealers are an important end of the bargain. “I’m the one who, as the local dealer, is coordinating the local advertising in my sales territory,” he explains. “I’m always promoting through ads in the state farm journal and in local yellow pages, through occasional radio, and displays at fairs and farm shows.”

Building supply companies such as Wick Buildings often provide “co-op” or cooperative advertising support, perhaps by matching what a local dealer spends or subsidizing those outlays at a given percentage of annual sales. Andersen says these co-op dollars are always welcome, “but were really helpful during the recession so that I could keep on advertising, while other contractors had to cut back.” More recently, Wick has helped with Andersen’s website and, he adds, “They’re constantly supplying us with new brochures to use in sales calls.”

Marketing, however, has always focused on Andersen Statewide Buildings first and Wick Buildings second. The strategy has paid off; by building direct relationships with his customers, Andersen each year reaps about 75 percent of his sales through repeat business and referrals.

For builders who are thinking about becoming dealers, Andersen advises, “Do your homework on a supplier and be sure to talk with some of their dealers.” Even as a longtime dealer who is happy with his supplier, Andersen follows his own advice and periodically checks on other possibilities.

“Even if you’re a dealer, you’ve got to run your own business,” Andersen counsels. For example, he takes advantage of training opportunities available through Wick Buildings and has served two terms on its dealer advisory board. Yet he also takes professional development into his own hands through involvement in the National Frame Building Association. “Ultimately,” he states, “the success of your company isn’t up to your supplier; it’s up to you.”

 

Freedom to Diversify

In its south central Minnesota territory, BM Builders provides a variety of construction services. The 20-25 projects the company performs each year range from post-frame agricultural, commercial and municipal construction, to residential and remodeling jobs. About half its total volume, reports Bill McMullen, are projects built with structural insulated panels supplied by Energy Panel Structures — for whom BM Builders has been a dealer since the late 1990s.

CS-EPS-607-Connie-J-Reinert

Photo by Connie J. Reinert for Energy Pane Structures

“I was in business for several years before becoming an EPS dealer,” McMullen explains, “but I decided to go into a dealership as a way to diversify the types of projects we could do.” The opportunity arose when BM Builders was bidding on a townhouse project and he contacted EPS for information on SIPs. “They came for a visit and asked if I’d be interested in being their dealer in my area.”

No upfront investment was required so McMullen signed a dealer agreement and attended an EPS training seminar at the supplier’s Iowa headquarters. Since then, he has capitalized on the benefits that SIPs construction provides in a region with heavy snow and wind. “The engineering support we get from EPS, as opposed to the limited support we’d get at the local lumberyards, helps make a lot of project possible,” he says.

Then, too, SIPs construction is less familiar to the public than traditional stick-built methods or even post-frame building. “The key to making a sale is educating the customer,” McMullen continues, “but the literature and marketing support we get from EPS helps. People must spend about 10 percent more for a SIPs project than for stick-built, but the building they get is more energy efficient, sturdy, and has no mold.”

Although BM Builders is bound to its supplier’s prices and delivery schedules, McMullen believes that being a dealer compensates with flexibility in other ways. “Since we sell the customer a complete building package,” he notes, “we have the freedom to do as much as the customer wants. We can just erect the building, or we can act as the general contractor to subcontract the various trades and provide a turnkey project.”

McMullen’s advice to other builders who may be exploring the prospect of becoming dealers boils down to two simple points. “First, the choice of supplier is all about service,” he states. “Second, suppliers don’t do everything for you. Their support mainly has to do with construction issues. When it comes to the business side of your business, that part is yours.”

From time to time, relates McMullen, “I check on prices and talk with others about alternatives to EPS. I’ve always found my supplier is the best, but due diligence is still good business.”

He also appreciates the marketing support his company receives from its supplier, but says the main effort must come from BM Builders. “We’ve been in business for 22 years,” he notes, “and at the end of the day, the good local reputation we enjoy is because we earned it.”

Variety for Growth

Keith Pinkelman and Tom Flynn met as students in the Michigan State University construction management program. Soon after graduation they ended up working for the same builder, who happened to be a Wick Buildings dealer. About five years later, in 2002, the two college chums started their own company. Since they had both attended Wick training with their former employer — who likewise vouched for the young men — Pinkelman and Flynn decided to become Wick dealers themselves.

Wick Building, Lynnman Construction

A Wick building by Lynnman Construction

“To take on a dealer,” Pinkelman says, “Wick Buildings wants to make sure you have the experience, capacity, and insurance to perform the construction, plus the ability to understand the aspects of pricing, estimating, and marketing.”

Today, Lynnman Construction has turned into a $3.5 million-a-year business. Working across central and southeast Michigan, the company primarily serves the agricultural and equine markets, plus occasional commercial and residential projects. About 85 percent of its volume comes from dealing Wick building packages, and the remainder from small residential projects performed on referral.

“Being a dealer gives us a lot of flexibility,” says Pinkelman. “The post-frame construction market actually encompasses a wide variety of building types. Since Wick has packages for most of these types — plus the estimating, CAD, and engineering support to go with them — that gives us the ability to take on a variety of projects. The variety also means that we don’t have all our eggs in one basket. That helps to even out the peaks and valleys in the business cycle. So we’re able to maintain a steady volume of about 30-40 projects per year.”

Pinkelman also cites flexibility in project methods. In its early years, Lynnman Construction acted as general contractor for all its projects. But the option to delegate parts of the work has helped the company take on more jobs. “We can have a Wick factory crew do the erection, or we can subcontract the labor to crews that we work with,” he explains. “We can be the general contractor for the whole project, or we erect the building and let the owner handle the rest and be the GC.”

Opportunities to reach a wider audience and thus pursue a variety of projects are aided by the marketing support that Lynnman Construction gets from its supplier. The company receives co-op advertising dollars from Wick Buildings based on a percentage of its sales. In addition, Wick provides brochures, literature, sales CDs, and web design services.“Yet Tom and I decided, from the day we started our business in 2002, that our marketing strategy will always focus on building our own company name,” reports Pinkelman. “We want people to think, ‘You’re Lynnman Construction — and you also happen to be a Wick dealer.’”

Though Pinkelman knows contractors who market themselves the other way around — that is, primarily as dealers for a given building supplier — he counters, “You can’t take the attitude that your supplier does everything for you. Wick is a great asset to us — but ultimately, it’s our own responsibility to learn how to make sound business decisions.” Toward that end, Pinkelman and Flynn take their own professional development in hand through memberships in the National Frame Building Association, National Federation of Independent Business, and their local chamber of commerce.

Periodically, Pinkelman and Flynn investigate other building suppliers to compare prices and services. They also get a feel for other suppliers as Lynnman Construction competes for projects against other dealers. “We continue to believe in what our supplier is doing,” states Pinkelman, “and any contractor who becomes a dealer must feel the same. Spend significant time investigating a prospective supplier. What are its ethics? How does it treat dealers? You’ve got to really know who you’re representing and what you’re dealing with.”

Lynnman Construction has prospered as a dealer and benefited from the relationship with its supplier. “But neither,” concludes Pinkelman, “can you ever forget that, ultimately, you’re in business for yourself and not for anyone else.”

 

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