OPERANNG OPPORTUNITIES

WALLY LYNCH Paid Associates PO. Box 741623 Dallas, Tx.75243

f Hfne are about 25.000 retail comI panies across the country primarily engaged in the sale of lumber, building materials and other miscellaneous categories. Something less than 400 of these companies, corporations and proprietorships generate over $10,000,000 each in annual sales.

This column is lor anyone who wants to be in business when the 2lst century dawns, but especially those 24,600 retailers seeking to generate profits and join the volume levels of the largest 400.

Examine under used and/or idle assets. The major offenders are unused land for development and under used buildings, land and equipment as well as excess inventory used in operations. These are all committed dollars that don't contribute to profits and, in most cases, detract or take money out.

Idle land is taxed by the government and eliminates the corporate opportunity to make 100/o pre-tax annually by giving the same dollars to Merrill Lynch, etc.

Land and buildings utilized daily in the business should come under fire. There are many examples of people doing $750,000 to $2,000,000 per month with less than 2 acres. A common denominator is turnover; six times is par, but the varsity will hit ten and twelve.

Fork lifts and trucks for most operators are the most expensive equipment investments. Doable performance for a 2-1/2 ton truck annually is $2,000,000 in deliveries. Each fork lift should handle twice that annually.

Test the profitability of what your company is doing. A typical $5,000,000 sales volume is 600/o retail and 40% con- tractor. This is really two different businesses under one roof. Typical experience shows a loss on the contractor side and a profit of up to 150/o on the consumer side.

Other profit culprits are production shops and service shops. Ifeach were an independent business, would you be in it? There are obvious alternatives to inhouse shops. Why do anything that isn't profitable?

People and their proficiency. The facilities and inventories of all but 400 retailers in our industry could and would be bought up by a financial syndicate tomorrow it and it's a big if, they were confident they had people proficient enough to protect their investment. The difference in any company is the caliber of the people and the proficiency of their skills.

In a lifetime in this business, no company that was in trouble and came to us for help has been able to show us an operations manual or a business plan. Such companies are tantamount to a football team without a play book and a game plan.

For successful companies, we've written to basics. If your company has some of the holes described above, we've written to survival and thrival. Our industry is basically averaging a pretax of 20/o on sales, so if you are average, you can generate for every dollar of misspending or mis-use of assets a benefit of $50 in sales volume growth. For you, the 1990s might be next year.

WWPA's Forecast for 1989

While crediting the Western Wood Products Association with expanding lumber volumes and helping to maintain strong lumber demand, chairman Lee C. Simpson warned "good times aren't going to last forever" at the WWPA fall meeting.

"Fortunately, our association understands these cycles and has been designed with theflexibility to deal with them," he told those attending the Sept. 10-13 session in Coeur d'Alene. Id.

Continuing the theme that lumber demand has remained reasonably strong even though housing starts are down, H.A. Roberts, WWPA president, said U.S. lumber consumption will hit 47.62 billion board feet this year. He projects 45.33 billion board feet being consumed in 1989.

"While these figures drop 6% and 100/o below the lofty consumption level of 1987," he explained, "in my estimation these reductions should not be cause for alarm. As little as eight years ago our industry was very satisfied with a domestic consumption level of 42 billion board feet."

Western lumber consumption in 1988 is expected to reach 20.3 billion feet with 19.4 billion feet in 1989. "Nineteenbillion feet is one billion more than we provided markets in 1979," Roberts said, referring to the base year in industry comparisons.

Inventories of slightly less than 2 billion board feet at the end of this year and 2.045 billion board feet by the end of 1989 are anticipated. "Levels of 2 billion board feet and less offer the prospect for broken inventories in some items," Roberts said.

WWPA, which will celebrate its 25th anniversary at its 1989 spring meeting, has seen the western lumber industry increase its productivity by 630/o since 1979. Total production of all U.S. regions is projected at 36,300 million board feet for 1988 and 34,890 million board feet for l 989.

The association's housing forecast sees mortgage rates slightly higher in 1989 with multi-family building increasing as the over supply of apart- ments diminishes. A projection of 1,400,000 new units is being made.

Single family starts are expected to fall slightly (about l0lo) to 710/o of total conventional starts with western starts projected at 355,200 units, down 4.00/o from 1988. Repair and remodeling use is expected to maintain strength with a slight drop of approximately 460 million board feet. R&R will account for 31.80/o of total softwood consumption.

Dealers Benefit From G-P Ads

Inspire homeowners and increase do-it-yourselfprojects is the aim ofa consumer ad program appearing in over 20 major publications this fall.

Dealers too will beneltt from the color advertisements featuring decorating and refurbishing projects using Georgia Pacific roofing, siding, paneling and moulding products. A coupon or a toll free number offering how-to videos and booklets with a $3 rebate coupon redeemable at any home center carrying Georgia-Pacific building products is included in each ad.