January 2023 saw the passing of one of the construction industries iconic entrepreneurs, Joseph A. Hardy III, the founder of 84 Lumber (https://www.roofingcontractor.com/articles/97813-joseph-hardy-iii-founder-of-84-lumber-passes-away-at-100). 84 Lumber, named after its location, Eighty Four, Pennsylvania, at its founding employed a cash-and-carry business model catering to the construction industry featuring strong customer service and competitive pricing. An early ad for the business offered first time visitors to a location a free box of nails. The company grew to over 500 locations prior to the housing market recession that started in 2007, often competing with Home Depot & Lowe’s for do-it-yourself customers. The recession resulted in the company struggling to pay its creditors and contemplating bankruptcy. Mr. Hardy was on board for seeking bankruptcy protection status at the time to navigate the situation, however his daughter, Maggie, who was in executive control of the company resisted the easy out and elected to make the hard choices necessary to avoid going to creditors “hat in hand” asking for consideration and closed about half of the stores, today there are 234 84 Lumber stores in 34 states, sold real estate, and pivoted the business model to create new revenue streams. Her leadership demonstrated vision, execution, and the legendary will & work ethic that made this country’s economy and businesses domestic legends and frequently world leaders.
Unfortunately, America started down the path to the looming probability of a 2023 recession in 2021 through poor government policy choices as the nation was coming back from economic turbulence of the COVID-19 pandemic. The recession on the horizon is likely to be hard on the construction industry, an industry IBA has served as a business brokerage firm for almost fifty years in the Pacific Northwest. We recognize and empathize with the likely hard choices on the horizon for many business models in this sector ranging from letting valued employees go to downsizing equipment to bidding work at tighter margins to keep people working and cover overhead until the sector returns like it always has with vigor and plentiful opportunity.
As a M&A intermediary who has been through multiple recessions in my almost thirty years facilitating transactions, including many in the construction industry, I encourage business owners to be proactive and not passive in their management decisions over the next couple of years. Unfortunately, I previously witnessed companies like Solid Visions, an excellent millwork manufacturer whose work can be found at the Seattle University Law School, being forced to close their doors because big hearted ownership was slow to reduce their labor force and took on drowning debt in a previous recession. I have also seen companies employ strategic business initiatives acquiring talent, real estate, and market share through acquisitions and marketing programs while others battened down their hatches during recessionary periods to position themselves for strong economic years when the storm clouds dissipated, and the sun returned to the construction industry.
An important business concept to remember is that increased market share in a reduced pie of opportunity will be the platform for significant revenues & profits when economic conditions expand the size of the marketplace in the future. The advantage of acquiring competitors and staging resources for growth during a recessionary period is that when the economy starts to grow for a period of time there will be no new competitors entering the market creating a halcyon period for entrepreneurs when demand exceeds supply of products and services resulting in good margins for those able to satisfy the needs of the community. Opportunity will knock in the future, the question is as a business owner will you be able to open the door and invite the line of customers standing outside inside to complete a transaction.
IBA features the largest, most knowledgeable, experienced, highly skilled team of M&A intermediaries serving the construction industry in the Pacific Northwest. We are active members of the Master Builders in numerous counties and sponsors of CCIM in both Washington & Oregon. We welcome the ability to be a resource to any business owner in the construction industry. All conversations with IBA are held in strict confidence. 100% of our fees are performance based and only payable upon completion of an assigned project.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, real estate, legal, and accounting communities on subjects relevant to the purchase & sale of privately held companies and family-owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.