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Strength in Numbers

“Strength in Numbers”

In 1998 business was good for manufactured-housing retailers, but it brought increased competition for independent dealers like Doug Gorman.

In 1998 business was good for manufactured-housing retailers like Doug Gorman. In fact, business was so good that manufacturers began buying and establishing retail dealerships, which meant increased competition for independent dealers like Gorman, owner of Home-Mart Inc. in Tulsa, Okla.

In response, Gorman banded together with 13 other independent dealers to form the Lone Star Purchasing Group. "This alliance allowed us to approach manufacturers as a single entity so we could negotiate better deals," says Gorman, a 1997 FastTrac graduate. The buying group also commands discounts from insurance companies and component suppliers.

"Lone Star gives us the best of two worlds — although we have the purchasing power of a larger corporation, we remain entrepreneurs," says Gorman, noting that members aren’t locked into buying from a supplier if they don’t want to. Lone Star members also collaborate on advertising and promotional campaigns and share best practices.

The group’s synergy has become even more important in recent months as the manufactured-housing industry suffers a 40-year sales slump. (Nationwide shipments will total about 130,000 units in 2003, compared to 375,000 units in 1998.)

Looking ahead, Gorman would like to create a process for determining financial best practices. If Lone Star members convert to a unified accounting system, they could put individual financial reports on a spreadsheet to see who’s doing better in certain areas and find out why. "Right now, we could share financial information, but because we chart things differently, we can’t really compare apples to apples," he says.

Advice: Lone Star follows one major rule: No one makes money off the group. "That means if one member brings a deal to the group, everyone is participating or benefiting at the same level," Gorman explains.

For entrepreneurs who wish to form a similar alliance, Gorman suggests participating in state or national trade associations. "The contacts made at trade-association events allow you to get to know potential group members prior to formally organizing the group," he explains.

Proximity was one consideration for Lone Star. "Although there may be slight overlaps in our markets, we’re all far enough away from each other that we don’t compete head-to-head," Gorman says.

Yet the single greatest factor responsible for Lone Star’s success is shared corporate values, Gorman adds: "You’ve got to make sure a member’s reputation and level of integrity are consistent with the rest of the group. Remember, if you bring someone unethical on board, you’re going to be painted with the same brush."