Unfortunately, in the LBM industry, too many companies chase sales volume while quietly bleeding margin and subsequently net profit. Everyone loves talking about record sales numbers, truckloads going out the gate, and landing large projects. But when you peel back the numbers, profitability often tells a different story. As I’ve always stated…“top-line sales are for egos—it’s the bottom line that counts.”
Improving gross margins isn’t about squeezing customers or suddenly becoming expensive. It’s about discipline, professionalism, and changing habits.
Do all your salespeople understand gross margin? If not, they certainly should. Gross margin (GM) dollars are simply the difference between your selling price and your cost of goods sold. Gross margin percentage is a key financial metric and represents the GM$ as a percentage of the sell price.
Gross margin is one of the most important indicators of business health, yet many salespeople still struggle to fully understand how it works. When people think in terms of “mark-up,” they sometimes feel like they’re overcharging customers. It’s psychological. For example, in order to get a 33% GM, you must mark up the cost by 50%, and too many people think they can’t get 50%. But they’re not getting 50% GM. They’re marking it up 50%, which only equals 33% GM. They think this way because they either confuse markup with GM% or they just don’t understand it.
My advice is to eliminate “mark-up” in your company’s vernacular and teach everyone to calculate “gross margin.” The GM% calculation is simple. For example, if you want a 33% GM, then divide the cost by .67; if you want a 28% GM, then divide the cost by .72; and so on.
When they understand gross margin and why it’s so important, they see the real picture—covering operating costs, funding service, and generating profit. If your sales team doesn’t fully understand margin math, you’re already behind.
Another strong way of increasing GM is to teach your salespeople to add some dollars to the sell price after they calculate the GM they wanted. For example: Interior pre-hung door at 28% GM comes out to $181.55. But if you add just $3 to make the sell price $184.55, it makes it a 29.6% GM. Be honest, would you lose the sale over $3? I doubt it. How about adding $1 to each decking board? There are endless possibilities if you think about it.
Builders and remodelers don’t just buy materials—they buy solutions. They want accurate quotes, fast responses, deliveries that show up on time and in full, fewer jobsite headaches, competitive prices, and knowledgeable salespeople. When salespeople compete only on price, they reduce themselves to commodity suppliers. When they sell expertise, reliability, and solutions, they become partners—and partners do not get beat up on every nickel. Strive to be “invaluable.”
Product knowledge, staying on top of lead times, and understanding construction basics isn’t optional—it’s margin protection.
The salespeople who protect margin best are often the most knowledgeable in many areas. They understand stock items, special orders, upgrades that save labor, and substitutes when needed. Most importantly, they can explain why something is better. Knowledge builds trust, and trust protects margin.
Pricing integrity…stop saying “yes” too fast. Too many LBM salespeople say yes to discounts too quickly. When a customer asks, “Can you do better?” and the salesperson immediately drops the price, the first quote loses credibility, and so do you and your company. By doing this, customers learn that every price is negotiable, and margin erosion becomes systemic. Professional responses involve asking better questions, verifying comparisons, and reinforcing value rather than immediately conceding price. Most times customers are just testing you.
Special orders should be “special,” including the GM. Special orders involve additional work—selling, quoting, ordering, monitoring, receiving, delivery, and sometimes handling complexity. Yet many companies price special orders like stock items. Special orders should have higher margins because they require much more effort.
Beware of the “margin rut.” A margin rut occurs when salespeople fall into autopilot, quoting the same GM% regardless of customer or situation. Not every customer should get the same GM%, as there are factors. Such as sales volume, do they strain the organization (what I like to call the “PITA” factor), how well do they pay their account, etc. Smart salespeople adjust pricing strategically instead of relying on habits.
Not every item is price sensitive. Certain categories naturally support stronger margins—fasteners, caulking, hardware, specialty lengths, and accessories. Strategic pricing means understanding where margin opportunities exist and taking advantage of them without jeopardizing competitiveness on high-visibility items.
Professional salespeople protect margins—because strong GM protects everyone. Strong margin performance comes down to people. Professional LBM salespeople communicate value clearly, respond quickly, own problems when they arise, and have confidence in their company’s pricing structure. They understand that protecting margin is necessary for long-term sustainability for everyone.
The bottom line…improving gross margin doesn’t require complicated formulas. It requires a mindset shift: sell value instead of price, strengthen product knowledge, protect pricing integrity, avoid margin ruts, and help customers stay on schedule.
In the LBM industry, success isn’t about how much you sell—it’s about how much remains after all the expenses are paid.
Mike McDole has 40+ years of actual LBM experience, including being SVP of a large regional pro-dealer, and is the principal of Firing Line LBM Advisors. He’s also partners with Greg Brooks of the Executive Council on Construction Supply and his LMS. Mike can be reached at 774.372.1367 or Mike@FiringLineLBM.com.
