Diversity training

D tll Houcs Sn. is like those oldI-ltime preachers testifying that the End is Near. But instead of "Repent!" he preaches: "Diversify or Perish!" And, sadly, that's become the fate, he notes, of many an independent dealer who didn't heed his message.

He's c.e.o.-cum-cheerleader (and, at 70, by no means emeritus) of Phillips Building Supply, with three operations in Mississippi-headquartered in Gulfport-and a new launch across the state line in Picayune, La. The outfit began life in the 1950s as a sawmill and timber company that, from the outset, saw change coming and stared it squarely in the face. "When the big boys took over logging, the company sold off land and turned to retail," says Bill.

"But you can't make a living selling lumber and plywood," he quickly learned. "There's no mark-up on them; you can't make any money."

That insight was the first clue that it was high time to diversify. But how do you begin? "You look at the bottom line. It took me awhile to struggle through it, figure out what makes money-but you evaluate and then aim at how you can." Becoming a hardware store was not the answer. he says: "Chain stores have that niche all figured out."

Well... perhaps metal? Hurricane Katrina was a pretty good convincer. "Metal roofs held up better," he says. "We started buying metal roofing, but it's difficult to order up: the time frame," which involves cooling your (or-worse-your customer's) heels with a lengthy wait, and buying pieces and patches. "If you're short, or they're defective, it's your fault."

So, Phillips decided to fabricate its own. "We rented at first, but the operation did so well that, three years ago, we built a multi-million dollar facility, invested in equipment and materials (and it took a huge investment in order to be competitive). It took us from a three-step to a two-step operation," eliminating the middle-man mark-up. About 60Vo of Phillips' business is commercial, and those clients love this new roofing option. Plus, diversification into specialty arenas, such as this, keeps Phillips in the black. Bill says, "After Katrina, people moved in with their special businesses-cabinets, rebar, sheeting-hoping to make money. So, if you didn't diversify, that would leave a dealer only with lumber and plywood"-and a room in the poorhouse.

"So," adds Bill in the understatement of the month, "we decided to sell a lot of stuff." Phillips already had been making trusses for over 15 years and continued to push that niche. ("We sell 30 to 40 a year, both residential and commercial"). The next move was to add a wood treatment plant to capture the market for outdoor lumber, either for decks or-even bigger-"huge offshore stuff, like poles."

Architectural hardware seemed a logical further diversification, and has proved a lucrative one. On its l8-acre campus. Phillips also sports a an interior door plant, exterior door plant, and commercial steel door operation, as well as a commercial hardware outlet-think fire-rated doors, washroom equipment. The company also welds metal frames and bends rebar.

The government loves it, and Phillips loves them right back: "We've got l0 people on staff involved in bidding. The government bids on specs, and the specs are huge. You've got to be compliant, label the doors. We handle all that. We saw a need, and we graduated. We'd had one guy working on specs; now, it's mushroomed. We have three," accounting for such projects as the new airport's bathrooms, a $l million account-and work for DuPont. With the Navel Construction Battalion located nearby, "There's a lot of government work-the whole gamut from wood products to architectural hardware."

But, remember: diversify! Those accounts are only part of the pie. "In our other locations, 50Vo of our customers are residential, including walk-ins. People love the way we do special stuff, like millwork"-yes, Phillips has its own custom plant-"and hardware. We've got a showroom with cabinet and kitchen & bath designers on staff, and we can answer questions. We serve good, old-time contractors, too; we've got 4000 to 5 900 accounts."

Why is that? "They come here for the best service at the best prices. And, they get answers. We've got a lot of gray on our staff; many have been here over 30 years, so they know their stuff. Plus, we've invested in a huge inventory, a lot of material in stock-special SKUs, strange thingsso they don't have to wait around for special orders."

Oh, and did we mention that Bill prefers diversity to rigor mortis? Then it should come as no surprise that, despite lukewarm demand at the moment, he's steering Phillips to go green. "It's coming our way from the Northeast, so we have to be able to furnish green products. We became LEED-certified for chain of custody. It's not easy to keep up with the standards," he allows, "things like special labels, keeping items separate-but the military and the government will go completely green," he's convinced. And he'll be ready for them. (He even sells Green Egg barbecues.)

The Internet wasn't his first love, either. "I'm 70," he reminds us, "and I fought (son) Bill Jr. over the computer for a long time." Acknowledging that it's the wave of the future, Phillips has hired a fulltime IT guy ("the geek") to orchestrate its website. Regrets? Ha! "We made 20 sales on it yesterday," reports Bill.

"You'd be surprised how huge it will be in years to come," he's certain, adding, "If anything puts chain stores out of business, it'll be that. We have a lot of machines onsite here, ourselves, so we shop the Net for parts. And people all over the country seek us out for special tools, hardware, and LEED products."

And, guess how he gets rid of his "dogs"? Advertises on eBay. And they fly out the door. "Sure, we lose money on them, but we'd lose more if we didn't," he states about his discontinued stock.

Same goes for culls. Well, that isn't quite true. On these, he makes a tidy profit. Rather than toss the scraps that cherry-pickers have left unsold, Bill cuts them into stakes, on which "I make more money than if someone drives in for a piece. I have no loss on dimension lumber; in fact, I can hardly keep up with the stake-business demand. I have to purchase #4 lumber to keep up with the call for stakes. It costs contractors time and money to make their own, and they need 'em on every job." And the added beauty of it is, "There's no waste, so it works out just right."

Leaving no niche unturned, Bill has also grown a rental business in two of his locations. "It makes some money,but the name of the game is, it brings in customers. They get to know who you are and what you do. Our customer base uses this stuff, like escalators, every day."

And they also utilize dumpsters. Therefore, so does Phillips, which has 200 on hand to rent, underscoring Bill's canny business plan: "Catch 'em on everything you can."

And you'd be a fool not to, according to the way of thinking that has kept the company solidly in the black. "It's easy for us to incorporate all these services, because we can use the same infrastructure, like billing. If these functions were stand-alone, it'd be complicated; but we can mail one bill for everything-products, rentals, what have you-meaning, true one-stop shopping. That makes it easier on the customer, too, both in time and money."

So, are we having fun yet? Apparently so. "We've been in business 50 years, but there's never been much turnover. And we have a lot of good managers; they run their own show. Sure, the downturn was honible-not only the economy, but the hurricane and the BP oil spill-a lot of adversity. But we're not leveraged. No debt.

"I'm 70," he restates with the spunk of a young pup, "and I still enjoy working. I've got a lot of good friends in the business, and many of those friends are good customers, too; we all grew up together."

Maybe the only thing Phillips doesn't sell-yet-is rocking chairs. But clearly Bill has no need for one.

Carla Waldemar cwaldemar@comcast.net

By James Olsen