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Component Manufacturing dverti$er
Adverti$er
Don’t Forget! You Saw it in the
September 2018 #10230 Page #23
Banner Sales Year Should Help the CM Division Make Mid-Teens or More for EBITDA
Todd Drummond
Copyrights © 2018 Todd Drummond Consulting LLC.
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ew building sales across the US are way up, which shows in the long lead times of the wood truss and wall panel manufacturing companies for new orders. However, too many of these manufacturers are not showing healthy profits despite the long lead times. Lead times greater than four weeks are a significant indicator that your company should be garnering strong net profits. If, on the other hand, your company is still in the single-digit net profits with these long lead times, you need to ask yourself: when do you expect to make stronger net profits? At what point do you tell yourself that you need to make some changes and do better?
What I found striking is that the lumberyard-owned component manufacturers (CMs) consistently make far less money than the independently owned and operated CMs. Far too many lumberyards own unsuccessful CMs. These operations usually have a single-digit net profit and are often considered a problem area for their companies. However, the CM division should be a huge cash cow. When it comes to CM net profit averages, it is common to make 15%+ EBITDA in normal markets in which sales exceed a two-week lead time. Many independents garner 20+ EBITDA in the good years, which should be now!
The first question you should ask following the same practices and expecting hell are you fooling yourself? At what the very practices you have implemented, giving you the very results you are getting? said, “Every system is perfectly designed Therefore, you should admit that what you doing it is not enough, so these practices have to change.
yourself is: if you keep different results, why the point do you realize that intentionally or not, are As Edward Deming once to get the results it gets.” are doing and how you are
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