Gompetitors ioi n forces

f oorrNc FoR rHE silver bullet to l'success? Heck, to survival? Here's a key: right-sizing.

For several operations I've brought to your attention lately, that's meant seizing a golden opportunity to expand in order to outwit a queasy economy. For the outfit we'11 talk about this month, the opposite direction was the savvy one. Consolidation-right-sizing-proved the right decision.

It's working perfectly for Ken Grause, of Bellevue, Ky., who took over Pilot Lumber in the late '70s from his dad. And it's working out equally well for Bruce Moore, owner of Moore's Home Improvement in nearby Fort Thomas. The once archrivals are now business partners in the blended operation renamed Pilot Lumber and Moore! (Yes, that exclamation point is part of the new logomore on that later.)

Right-sizing seems to be the takeaway lesson throughout the Grauses' business run. In 1971, Fred Grause, Ken's dad, who owned a tile comPanY here in Bellevue, took over Peters Coal-built as a railroad depot in 1919, later slammed by first, a devastating flood, and then, a series of fires that knocked the wind from its aging owners. Fred planned it as depository for distributing the sand, cement and what-all needed for his tile business, but soon a fellow walked in from the town's recently shuttered hardware store, suggesting Fred add that line of merchandise-and, ahem, him. Which he did.

Fred loved the business-but lumber, not so much. So it became his young son Ken's domain (never mind that the kid was still in high school.) He worked full-time while devoting his evenings to earning the college degree that would be his passport to another. better life. (For back then, Ken, too, professed "no interest" in the lumberyard.)

But that was in the scary finale to the '70s, a recession called "the big one"-until now. "I was worriedl times were really tough," recalls Ken, who not only remained on the job, but bought his dad out before the end of that dismal decade. By 1982, Ken's new addition doubled retail space. Not long after, he completely overhauled the lumberyard. adding a new main shed, cantilevered outside racking, and concrete pavement. Fast forward to 1998, when Ken bought a second store-the former Hess & Racke in Alexandria, Ky.-as a second location.

Sounds slick and painless. But that's the Hollywood version, not the real-life story. Ken is the first to admit he had his share of learning bumPs, starting back in 1974,"a terrible time for the construction industry," as he remembers all too clearly. An oldtimer in the yard, convinced of his moral duty, lectured the young man: "If you haven't money in the bank, you can't buy anything."

But Ken saw bigger reasons to worry by standing still. "When your A line gets cleaned out and you're left with only the Cs and Ds, who wants to shop there? So, we had a difficult discussion, which ended with (the old- timer) saying, 'Okay, smart college kid: YOU do itl"'

And Ken did. But still, there was the occasional stumble. "I was hard-nosed, made everybody pay-didn't extend credit, just when banks were pushing builders out of business. So I lost a lot of contractors' business. Instead of thinking, 'What can I do to help?' I was thinking, 'I can't believe they cannot pay their debts!"' Welcome to reality, and a kinder, gentler way of doing business.

"Then, the whole d-i-y thing was just getting started." And this time, Ken was in the vanguard. "I doubled the square footage of the store and moved product from the back room, where sales staff had pulled contractors' orders, and set up shelves, supermarket-style, so customers could wander, pick things off the shelves themselves. It was very consumer-friendly, and business grew steadily." In fact, "It was a blast! We had fun."

But he overlooked one thing: Those d-i-yers generally were away at work each weekday. "So, Saturdays, we got slammed. We learned to adjust our hours," he says with a laugh.

Buying the Alexandria store was a boon, but also presented another learning curve. "The stores were only 20 miles apart, but the customers were completely different," Ken quickly discovered. "Unbelievable! Retail and remodel-oriented vs. new construction. And serving farmers, who provide steady business, good times or bad."

Pilot's Design Center, launched in 2OO4 to overcome the perception that it was solely a lumber operation (although it already carried the usual K&B inventory), also presented unforeseen obstacles. It had been planned as a boon for Pilot's many pros, who could now have card-key access 2417 in order to assist their own customers-which, turns out, was not what these contractors wanted, after all. "They never used it! Instead, they wanted us to be there."

The builders made it clear they expected Pilot's own people to be front-and-center at all times, to do the comparisons and explaining to homeowners. And that took staff Pilot couldn't supply. The project ended up with a part-time staffer arranged on demand, called away from other duties. Not ideal. For the past five years, its business was up and down.

So was business as a whole, as it's been for every one of us. Looking for a solution, Ken cast his eye way outside the box, gritted his teeth, and picked up the phone. He telephoned his longtime arch rival, Bruce Moore in Fort Thomas, saying, "There's not room for both of us. Let's talk."

Bruce Moore, his "fierce competitor," agreed that their combined three locations now represented one too many. The wisest solution was to shutter Moore's, in the middle, and join forces in Bellevue and Alexandria as Pilot Lumber and Moore's! That exclamation point deliberately signified the excitement of growing stronger, better, by the move, which incorporated all five of Bruce's staff, as well as his unique product lines and discrete customer base, where the two discovered very little duplication.

"Only two builders overlapped," says Ken. "And one of them, for 25 years, had been shopping both of us for price. He bought his lumber from Moore, then the fill-in from us. That way, the builder was the real winner. It used to drive us crazy! And Bruce's outside salesman loves the new arrangement-no more competing with us. Now, it's scary, it's so good. This merger is the most exciting thing we've done in five years," Ken declares.

Pilot, with hardware, electrical, and plumbing, had more retail business, while Moore had concentrated on selline decks and rails to pro builders, developing an enviable loyl alty-"and this business is strongly based on loyalty," Ken reminds us. "Bruce is definitely a 'people person' and enjoys chatting, giving help, while I'm more of an IT guy. He's just the opposite-has trouble getting his email up," his new partner laughs.

While both operations were strong on composite decking, incorporating Moore's line with the three that pilot carries, creating an even stronger showing. Result: "Business has been so good, it's absolutely crazy! It's really a help in this economy: a good problem to have," Ken agrees, noting that builders who wouldn't deign to touch a deck addition in the past are now more than eager to take on that bit of business. "We've added two phone lines," Ken notes.

And brought in-house such facets as HVAC, insurance, and property maintenance. Other savings: "Our two yards are doing as much business as the three used to, and we can operate with the same trucks, no additional racking, etc. We made sure we have all the products our customers expected to see at Moore, adding 'their' brand of caulking or whatever. And because we have more room, there's the Wowl factor."

The potentially problematical aspect of merging employees was not difficult at all, thanks to careful advance planning. "We were very sensitive and did a nice job integrating, by announcing the merger to both at the very same time," Ken stresses. "My people were pumped up-a chance to expand." And adding that exclamation point to the logo-Pilot Lumber and Moore!-shows the folks from Fort Thomas how much they're valued, too.

Now, back to that flagging, on again, off again, design center. "We opened it up full-steam again when we merged with Moore and brought in their displays, and we're very pleased. Sales are up, even with no advertising nor a grand opening yet. It's such a positive change, and our customers really love it."

In other words, call the merger a win-win. Best of both.

The biggest obstacle was integrating two computer systems. "We worked hard on that," Ken acknowledges. "Also, to blend customers, we made the credit application much easier," he adds.

"It's working out perfectly," Ken declares once again. In fact, the outfit is growing even stronger in serving outlying areas such as Dayton, Louisville, Lexington, even Cincinnati. "Our builders are branching out there now. We have the products, the knowledge, and super selection of composite decks. We can explain the various differences and features between the lines, and we've added displays, not only little color patches, so folks can see the real deal, not just a sample. "

What's next? "Our advisors are telling us, 'You really need to duplicate this move. How can you do it again?' But," Ken insists, "after the last five years, being together since August has been really enjoyable, but I don't wish to grow. I'd really enjoyed working with a staff of 18, not 45. But," he ponders, "now we're 23. And that's okay, too! It's been a very interesting challenge."

Carla Waldemar cwaldemar@ comcast.net