Rick Davis, president of Davis Homes, likes having just one thing on his mind when he goes to work every day—building houses. “When I come to work every morning I don't have to worry about the lumber business anymore,” says Davis, an Indianapolis-based builder. Since the ‘70's, the lumber business had weighed heavy on the Davis family's mind.
In addition to building homes, they operated Davis Homes Wholesale, a separate business entity that manufactured wall panels and roof trusses and supplied Davis Homes with all the other building materials for the shells of its homes. Last year, Davis Homes Wholesale had sales of $19.4 million.
“For many years we operated that facility as a separate business and its only customer was Davis Homes,” says Davis. “It supplied us with 100 percent of our needs.”
“We sat down and evaluated what it was actually costing us to supply our own needs and asked ‘How does that compare with what it would cost to buy those items?'” says Davis. “With the passage of time, those numbers had started inching their way together. I'm not saying they were exactly equal, but the closer they converged the more it occurred to us, ‘Wait a minute, if we are not making a very large profit, then why bother with it?'”
Because Davis Homes Wholesale wasn't their core business, they had not been eager to invest in equipment that would make their plant more efficient.
“As we became less and less efficient operating the business, we got to the point where we said, ‘Let's let somebody whose core business this is do this.'”
They had the perfect somebody in mind. Stock Building Supply, which has been on a buying spree in some of the country's hottest home building markets. The Raleigh, N.C. –based Stock is a subsidiary of Wolseley plc of Theale, Great Britain. Stock was in the process of buying Davidson Industries, the largest home component manufacturer in Indianapolis, says Davis.
“We approached them,” says Davis. “We learned from them that our physical facility was really underutilized. Where we were producing for 800 to 1,000 [housing] units a year, [we] could actually produce 2,000 units a year.”
So Stock agreed to buy their business, keep the nearly 50 employees, and continue to supply Davis Homes with the components it needs.
Learn more about markets featured in this article: Indianapolis, IN.