Perhaps no segment of an industry has its finger on the pulse of the market quite like its distributors. With strong connections to both their manufacturing partners and the contractors they serve, distributors have a firsthand look at both the local and national level.
Bob Feury Jr., CEO of Allied Building Products, was pleased with last year’s results. “On the residential side, this was due to a high level of storm activity, as well as the effect of inflation,” he said. “The commercial sector was stronger than most anticipated. All in all, 2008 turned out better than expected.”
There’s no way of predicting exactly how the market will react this year, said Feury, so it is wise to brace for the worst. “Housing starts are expected to be lower,” he said. “Without storm activity, residential business could be down - I believe ARMA predicts it will be down 15 percent. We could also have deflation, which would cut into the gains made in 2008. Commercial business is expected to be off 7 to 10 percent. The industry is in for a challenging year in 2009.”
Asked if any events besides storm activity might improve business conditions in 2009, Feury replied, “The big question is whether any of this federal money will help construction in the next 12 months. With lag time, and permits, the answer might be no. If it’s yes, the back half of the year we could see a turnaround in the economy if the money is there and credit loosens up.”
He advised contractors to concentrate on business fundamentals, including managing their finances. “Number one, contractors have to watch their overhead and their costs,” he said. “Be diligent about watching your costs and managing your cash flow. It could be tougher to collect money, and contractors’ lines of credit could have more restrictions in 2009.”
Allied has business training programs designed to give contractors the business tools they need to succeed, as well as an array of product and application training options. “Helping contractors run their business has been our focus,” Feury said. “Our contractor training in the last six to nine months has stressed business training over product training. The last seven years have been pretty good. Managing a business in a down economy takes experience and business training.”
He had these words of advice for contractors who haven’t been through tough economic times before: “Plan for the worst. You can always gear your business up. You have to anticipate that it can be worse than you think and plan that way.”
Feury pointed to increased awareness of green products on both the commercial and residential side as hopeful trends, especially in states that subsidize them. “In 2008, we saw two trends continue,” he said. “TPO continued to gain market share, and the move towards environmentally friendly products continued to gain momentum. We’re just on the cusp of some technology changes. We could see a lot of innovation in the next year or two. Hopefully the recent drop in oil and energy prices will not derail that, and people will still do the right thing by the environment.”