I’m handing this post over to an old friend, Bill Rossiter. Bill is a 35 year veteran of the industry and the CEO and Principal of Interrupt, a strategic branding and marketing agency that helps Fortune 1000 building products, home improvement, and home enjoyment companies outperform the industry.
Bill was also a client of mine before he made the switch from the client side to the agency side.
Bill is a wealth of valuable insights and he has generously agreed to share some of those insights with us. Specifically, why your company’s growth might not be the success it seems.
In the last eighteen months, almost every conversation I have had with companies in the building products and home improvement industry has been the same: “We have grown exponentially and we’re very cash rich.”
That seems great on the surface, but that growth might be masking a bigger issue.
One of those conversations stuck out to me. It was representative of some of the companies I’ve interacted with. This specific leader stated that “we’ve had one of our best years ever, double-digit growth at 11%. The company is happy, stakeholders are happy, and employees are happy with their incentives. It’s all good.”
But is it?
Positive Growth Doesn’t Necessarily Mean Success
Numbers can tell us whatever we want them to. It’s very easy to get enamored with growth percentages (especially double-digit ones) and high-five each other in the conference room to celebrate 11% YOY growth. But beware, this could be setting you up with a false sense of security and drive organizational complacency.
Complacency comes in numerous forms. Many companies over the last two years have largely curtailed any product innovation investments. This was very evident at IBS/KBIS this year, with the product innovation awards and entries area very sparsely represented.
In the same vein, some companies dramatically reduced their SG&A investments, thinking that “right now, we can sell all we can make – why do we need to keep engaging with our customers or invest in new products?”
This complacency can drive companies and their teams to feel comfortable, and being comfortable can be very dangerous to a business.
Losing, Maintaining, or Truly Growing?
Over the last year (2020 vs. 2021), the overall industry has grown from $1.47T to $1.59T, representing 8.4% YOY growth. Residential construction grew the most, recording a growth of 23.1%. R&R grew 3.3%, adding to a record year and nearly 5% growth the year prior. Commercial brought up the rear with a decline during the pandemic, coming in at -3.3%. And for perspective, the overall industry (considering all materials) saw an on average 16% building materials price increase.
Sitting with that leader celebrating their 11% growth, we delved into more details about their success. 8-10% percentage came from price (that all the competition is probably realizing as well). The other 1-3% came from incremental units sold.
But the residential segment, where 80% of their business was placed, grew 23% (as stated above) in that same time span. So, while they should feel good about their 11% growth, one way to read their situation is that they are actually underperforming the segment and potentially some of their competition.
Take a look at your growth. Ask yourself where it came from.
Was it merely price? Did you move the SKU mix dramatically? Did you gain or lose market share? Can you define the purposeful decisions your organization made to influence it?
Compare your growth versus the overall industry, and especially the segments where you play. This analysis will tell you if you are falling behind, just keeping up through price increases and market influences, or whether you are truly growing and outperforming your peers.
You can connect with Bill on LinkedIn or learn more about Interrupt here.