Business

Star Lumber survives the business of building

The construction business will never be the same after a recession unlike any in Star Lumber's seven decades, the company's owners say.

And neither will the way Star approaches an industry just now beginning to crawl out of a four-year hole.

The entire building-materials business has been looking for efficiencies at a time when business is off by at least a third, said Chris Goebel, who served as the company's president for 21 years before becoming chairman earlier this year.

The conclusion: Go back to the company's roots as a materials provider to the professional builder and move further away from the growing network of large national retailers.

"It's about defining your core competencies and what you're good at," Goebel said.

"And then you do more of what you're good at and less of what you're not."

Gone are the wholesale delivery routes and the fireplace sales and installation crew.

In their place is a renewed emphasis on "face time," getting Star experts in front of customers, such as sending supply trailers to construction sites.

"It's the ice cream man selling chalk, nails, hammers and all those things," Goebel said.

And it's a symbol of the new Star, said Patrick Goebel, president and chief operating officer: "Allowing us to get in front of the customer and solve their problems."

Star's moves are what good businesses do during a recession, said Don Hackett, an entrepreneurship professor at Wichita State University.

"The smart businessmen have seemingly been able... to keep their eyes on the recovery, what positions their company when the economy gets rolling," he said.

The challenges

The commercial and residential construction industry took a huge hit in the recession.

Corey Peterson, executive vice president of the Associated General Contractors of Kansas, said "everyone in our industry better be doing" the kind of internal review that Star's conducting.

"Many in our industry are going to have to do things differently than in the past if they're going to survive," Peterson said.

"What Star's doing is thinking out of the box while going back to their roots. Every business in the construction industry better be self-evaluating. If they're not, they'll find themselves in trouble."

Star's business losses in the recession are large, Chris Goebel said: somewhere between one-third and two-thirds of business lost, depending on the customer group. Employment is down from about 490 to 360.

"I think the homebuilders are hit the worst, the upscale homebuilders especially because that market's evaporated," Chris Goebel said. "Probably in the one-third to about half of normal range."

Some remodelers, though, are prospering, he said.

"Depending on the niche they're in," Chris Goebel said. "The people specializing in window and siding replacement are doing very well. The guys doing the bigger-size remodels are pretty much hunkered down right now."

Commercial construction has cratered in the area, Chris Goebel said.

"The big additions, the commercial contractors, are always a little counter-cyclical," he said. "They start to bottom out later, so they're feeling that now. With the USD 259 projects, that hopefully will hold them over.

Star's retail business is "down the least," Chris Goebel said.

"But a lot of that is discretionary spending, and it's probably down about a third," he said.

Answering the challenges

In January, Star reshuffled its leadership, preparing for an "aggressive decade of growth."

Chris Goebel became chairman of the board and CEO, with emphasis on business development. Patrick Goebel, Chris' cousin, was named president and chief operating officer.

"My first role has been to pull together our different areas through the downturn," Patrick Goebel said.

"Each area, whether up or down, had been planning individually, and as we start seeing the bottom and thinking about the future, I felt it was important to pull together the flooring, building materials, perfection and the corporate group... to get together and talk about what we've done in the downturn and what we see as our first opportunities heading out."

In March, the balance sheet turned for Star, "the first year-over-year increase we've seen in 16 months," Patrick Goebel said.

"It's kind of nice to see the chart go up."

The company's growth focus will shift toward customers and toward expansion once the economy improves.

"It's about connecting your customers with the experts," Patrick Goebel said. "Like when we get some of the larger projects like window replacement, getting those people with some of the better (subcontractors) and seeing that project through."

"Our value equation isn't just the project," Chris Goebel said. "It's the person who goes along with it. Customer solutions is the phrase we like to use."

Expansion remains on the table, with Oklahoma City and Manhattan the company's latest. But Chris Goebel cautions that Star "doesn't want any bigger piece of this recession right now."

It's a solid plan, said Hackett, the Wichita State business professor: Companies that prosper after the recession do more than just belt-tightening during the downturn.

"I was leading a session in the Family Business Forum on managing in tough times and I had a guy who flatly wasn't going the cost-cutting route," Hackett said.

"It was more like 'We'll do what we have to do, but we think we're going to come out of this stronger than ever.' His attitude was very positive, more of a chance to retool, re-examine and in the end, do the right things.

"And let's not get foolish with the cuts. If you lay off experienced people, proven performers, you don't just recall them. They move on.... So the smart folks stay ready for better times," Hackett said.

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