The Business: A chain of home-improvement and lumber stores
Closed: January 1998
Cause of Death: Failure to implement a business strategy to contend with big-league competition
If one date sticks in Rona Nesbit's mind as her personal Fort Sumter, it's September 25, 1996. She was then the chief financial officer of and heir apparent to the family-controlled Sutersville Lumber Inc. On that day she watched anxiously as Home Depot invaded the Pittsburgh suburbs, Sutersville's territory. The mammoth home-improvement chain opened three giant stores in the area, one of them located menacingly just three miles down the road from a major Sutersville outlet.
Not that Nesbit panicked. She had been bracing for Home Depot's arrival. In her industry, the saying had it, "little boxes" like Sutersville Lumber that responded shrewdly to the onslaught of a "big box" like Home Depot could survive. "The big boxes actually enlarge the size of the pie by drawing customers to a neighborhood," explains Gary Donnelly, president of the National Lumber and Building Material Dealers Association. "If a company has good strategic planning and it goes after new business, then its owner will end up with a better business because it will become more focused." Steeled by such advice, Nesbit pursued her counterstrategy. It would prove more difficult than she had imagined.
The lumber business runs thick in 38-year-old Nesbit's blood. Her maternal grandfather, Nelson Miller, had founded the company in 1947. While Nesbit was growing up, her family lived in a house next door to the lumberyard. In 1988 she quit her job as a financial planner at a Pittsburgh hospital to become Sutersville Lumber's controller.
In its heyday, in the late 1970s, the business had prospered under the stewardship of three of Nesbit's uncles and her father. It did a bustling business as a supplier of lumber and other building materials to contractors for new construction and remodeling jobs. But by the early 1990s the company's growth had stalled. Nesbit, by then a senior manager, continued a plan to expand and revamp the business. With the family's blessings, she sought to raise profit margins by shifting from labor-intensive products like framing lumber to more lucrative specialties, including kitchen and bath fixtures.
The stockholders--the family owned 60% and the company's 100 employees held the rest--allowed Nesbit to increase the company's credit line with the bank to $1.5 million and complete the expansion to five stores. She says that the family frustrated her efforts, however, to reduce costly inventory--a crucial plank in her strategy to redirect the business away from the contractor trade on which it had long relied. It was at that point that Nesbit and her family stopped seeing eye to eye, according to one of Nesbit's uncles, Jay Miller. Miller says that his niece lost the family's confidence by what they saw as "overspending" on new stores. "Her efforts were ignored or tabled," adds Bruce Oxendale, a former manager.
Once Home Depot started siphoning business away, Sutersville Lumber's income plummeted. Sales from walk-in customers slumped by one-third in the first month. Urgently, Nesbit sought to complete her plan, but the bank declined to lend her more money.
Short of cash, the company couldn't buy the inventory it needed to fill contractors' orders, and many of its longtime customers looked elsewhere. On January 20, 1998, Nesbit filed for Chapter 7. One of her two stores in North Huntingdon was snapped up by Steve Hildenbrand, a former Sutersville Lumber manager. He quickly concentrated inventory in the high-margin niches that Nesbit had coveted. And business is booming, says Hildenbrand, who adds, "We were actually showing a profit after only three months."