BY LISA BIANK FASIG
The Cincinnati Enquirer
Years before Erlanger Lumber began growing out of its shirt, operators of the building materials company knew that it would need a management group some day.
But they waited.
They waited as the century-old business made its first-ever acquisition of a lumber company in Indiana. And they waited as it expanded its corporate center and then added a manufacturing plant.
They waited until this month, when its teen-like growth spurt ended with the acquisition of Centerville Builders Supply Co. in Centerville. With that, the company was big enough, and the long-incubating group was dispatched.
But the growth, and growing pains, will continue, and the management group's mettle will be tested. Not only must the group, Building Material Industries, navigate an emerging company that has grown from one to three businesses in four years, it must do what years of planning prepared it for -- overseeing expected, continued growth.
"It became abundantly clear with a third location (that) we needed a holding-type structure to provide leadership for all the companies," said President Steve Steinman, whose family acquired Erlanger Lumber in 1989.
But, he added, "The single largest challenge is managing that growth."
Now, with three businesses at four locations, about 200 employees and $70 million in annual revenue, the family-owned company continues nip-and-tuck procedures and to mine for talent. The management group is a necessity, but it also represents a new type of corporate thinking.
What will new and existing customers want? Are human resource issues being met? Is there enough capital? And, is there enough business?
These are the questions any emerging business should ask, said Chuck Matthews, director of the Small Business Institute at the University of Cincinnati. A management division could represent a means to the answers.
"It's an excellent idea for a variety of reasons, not the least of which is somebody in the group has to be looking at the big picture," he said.
Building Material Industries (BMI) is answering some of these issues through operational choices. To maintain customer loyalty, it runs the three divisions as separate companies under their existing names:
- DeMotte, Ind.-based Kaper's Building Material, the first acquisition, is now Erlanger's northwestern Indiana supplier.
- The newly acquired Centerville Builders Supply has become a division of Erlanger, covering the Dayton and northwestern Cincinnati markets.
- Preferred Building Concepts, the manufacturing operation in Brown County, builds roof and floor trusses and wall panels for Erlanger, Kaper's and independent lumber yards.
(Erlanger Lumber and Kaper's have in-house facilities where wall panels, prehung doors, stairways and bookcases are built to order.)
The businesses are physically separate but administratively linked. Chief Operating Officer Ron Doering, one of the four officers who operate BMI, said the group has instituted standardized operating policies for human resources, benefits and customer service in order to maximize resources. The smaller operations benefit from deeper pockets.
"Each on its own probably could not afford some of the expertise that we have now," Mr. Doering said.
BMI's other officers are Sharon George, vice president of human resources and organizational development, and Patty Kautz, chief financial officer.
Mr. Doering, also executive vice president, said the plan is to continue acquiring companies with annual sales of no less than $15 million and situated within 300 miles of Cincinnati. In the next couple of years, BMI expects to grow to six to seven operations and generate revenue of $100 million a year.
It is a plan that is somewhat affected by the strength of area home construction, industry experts say.
"The demand is very strong, and it's usually driven by the housing starts and the repair and remodeling market," said Jeff Easterling, a spokesman for the Southern Forest Products Association in New Orleans.
Fortunately for the company, Greater Cincinnati has been a strong market of late. According to data from the Home Builders Association of Greater Cincinnati, 1,006 building permits were filed in January and February this year. That's slightly down from the same period in 1997 -- 1,057 -- which was a boom year.
"We're still building a ton of homes out there, and 1996 was a record year," Tony Condia of the association said.
Mr. Steinman said a management company isn't so unusual in the lumber industry because consolidation is becoming a widespread trend. One reason is that contractors -- the customers -- are merging. Another is that many of the family-run companies founded in a boom after World War II have approached the generational shift, and are selling as a method of transition.
BMI, and Erlanger Lumber, just happened to have good timing.
