How do I review a lumber yard’s price swings and how staff manage stock risk?

Ask for margin history by product group, over as long a period as the records go. Look at what happened in rising and falling markets. Did margins hold when costs jumped, or did the yard absorb the shock? Did it end up holding costly stock when prices dropped? Sudden spikes in profit may come from a lucky buy rather than skill.

Then ask how decisions are made. Who sets prices and how often are they reviewed? Do staff quote contractors with a time limit, or hold prices for a job bid? How much stock does the yard carry ahead of demand, and who approves large buys? Ask to see a few quotes from before and after a swing and follow the margin.

Look at the people. Do counter staff understand the risk, or do they pass every request to the owner? Ask about supplier relationships and whether the yard can buy from more than one source. Have your accountant review stock values against current prices. If much of the profit depends on one person’s timing, plan for how you would replace it. Finally, ask the owner to describe their worst stretch and what they would do differently. Candid answers show how they think about risk, and they tell you what to watch when the market turns during your first year.

Key takeaways

• Review margin history through both rising and falling markets.
• Ask who sets prices, approves large buys and holds quotes.
• Check whether stock values still match current prices.