Nailed It Hardware
Introduction
Dave Wilton and Peter Carayannopoulos were great friends who had talked for many years about
becoming financially independent by owning their own business. One day Peter picked up the
phone and heard Dave enthusiastically told him that Nailed It Hardware was for sale and that "the
price is right". Peter replied, "That's great. We don't have any experience in that kind of business
but at least we won't have to prepare a plan and work as hard as if we were starting a new business."
Dave and Peter combined all of their personal savings and lines of credit, and on July 30, 2017
they proudly posted a sign that read, “Come on in – the new owners want to help you make your
home project a success” on the door of Nailed It Hardware.
Dave and Peter were excited about being owners and hoped to eventually be able to give their
attention to the business full-time. They dreamed of the business becoming the community
hardware store where local do-it-yourselfers and weekend warriors could go not just for all of their
hardware needs but also for personal service and good advice. Early in 2018 they had expanded
the product offering to increase revenues in order to achieve this objective.
However, in August 2019 Dave received a phone call from the accountant informing him that
Nailed It’s profitability was not increasing as desired. She advised them that if he and Peter didn’t
develop a solution to address this it was unlikely the business would ever earn enough to allow
them to become full-time business owners.
Canadian Home Improvement industry
The Canadian home improvement industry sold a variety of products for building maintenance and
improvement. In 2019 it generated revenue of $27.0 bn. Industry revenues had grown for several
years prior to 2019 due to a strong housing construction market and a strong economy and low
interest rates that encouraged private spending on home improvements. The industry was expected
to continue to grow for the next five years, although at a slower rate. Although demand was
sensitive to the amount of housing construction and disposable income, homes would always need
repairs. Not surprisingly, key success factors in the industry were geographic proximity to
customers, customer loyalty and service quality. The latter two success factors also meant that a
wide variety of products and experienced work force were critical for success.
The Canadian industry consisted of roughly 1,800 stores of varying size. The industry had a
moderate level of concentration; in 2019 the top two companies Home Depot and Lowes accounted
for 17.0% and 13.0% of the industry revenues respectively with 400 stories between them. The
remainder of the revenues and stores were small and medium businesses that faced increasing
competition from big-box stores. Because the products sold were homogeneous this meant greater
price-based competition. This resulted in lower contribution margins for smaller stores because
they couldn’t raise prices and at the same time paid more for the goods they sold because they were
ordering smaller quantities than their larger competitors.
, Consumers were either professional contractors or individual consumers. The non-professional
consumers made up approximately 99% of the market and could be divided into do-it-yourself
(DIY) which created the greatest demand, followed by do-it-for-me1 (DIFM). Baby-boomers which
made up the largest consumer group were expected to begin switching from DIY to DIFM, creating
an opportunity for revenues from complementary services. In addition, many businesses expanded
their offerings to include products such as lawn and garden supplies that would appeal to the DIY
consumer. See Exhibit 1 for a segmentation of industry revenue.
Background Information
Dave Wilton was a dedicated body builder who worked for a local gym as a personal trainer. He
had a wife, two young children and a dog. Peter was a professional arm wrestler who competed for
titles and prize money with three kids – no dog. Neither had any business experience but they both
believed they had what it took to be entrepreneurs, and they had always dreamed of owning their
own business. They were both hard workers and comfortable with taking on calculated risks. They
had both been searching for several years for a business opportunity to combine with their existing
careers with the dream of the business eventually earning before-tax profits of at least $1 million
so that they could retire from their careers and enjoy their families full-time.
Nailed It Building Supplies was a family-owned business that had existed in the same location,
near a growing middle-income residential area. In its 25 years of operation, it had built up a
considerable number of loyal customers. This was part of the appeal to Peter and Dave – they didn’t
just want a business that was profitable and growing. They envisioned a business where the
employees knew the loyal customers by name and had a reputation for knowledgeable salespeople
that offered advice and personal attention to ensure the success of the projects their customers were
working on.
The previous owners sold the business because they wanted to retire. An examination of the records
of the business showed a small drop in net profit in each of the last two years (see Exhibit 2 for
financial statements). When questioned about this drop, the owners replied, "we can attribute this
to our lack of commitment to the business during these years."
Peter and Dave decided to retain all 15 of the existing sales people because they had been with the
business for several years and were as much a family as they were a sales team. Peter and Dave
could see that they cared about the business’ success as if it was their own and felt this loyalty
should be valued. Eleven were full-time, although four of these were individuals that were happy
to work part-time hours if the business didn’t need them. There were an additional four part-time
employees. The employees in the store often out-numbered the customers (the industry average
was about one employee for every $250,000 to $300,000 in revenue), but they had been with the
business for at least six years each, had a lot of expertise in home improvement and knew the
customers well. The customers consisted of a few builders and renovation professionals but catered
primarily to individual customers ranging from people who didn’t know which end of the hammer
1 DIFM customers purchase materials and hire others to complete the projects
Introduction
Dave Wilton and Peter Carayannopoulos were great friends who had talked for many years about
becoming financially independent by owning their own business. One day Peter picked up the
phone and heard Dave enthusiastically told him that Nailed It Hardware was for sale and that "the
price is right". Peter replied, "That's great. We don't have any experience in that kind of business
but at least we won't have to prepare a plan and work as hard as if we were starting a new business."
Dave and Peter combined all of their personal savings and lines of credit, and on July 30, 2017
they proudly posted a sign that read, “Come on in – the new owners want to help you make your
home project a success” on the door of Nailed It Hardware.
Dave and Peter were excited about being owners and hoped to eventually be able to give their
attention to the business full-time. They dreamed of the business becoming the community
hardware store where local do-it-yourselfers and weekend warriors could go not just for all of their
hardware needs but also for personal service and good advice. Early in 2018 they had expanded
the product offering to increase revenues in order to achieve this objective.
However, in August 2019 Dave received a phone call from the accountant informing him that
Nailed It’s profitability was not increasing as desired. She advised them that if he and Peter didn’t
develop a solution to address this it was unlikely the business would ever earn enough to allow
them to become full-time business owners.
Canadian Home Improvement industry
The Canadian home improvement industry sold a variety of products for building maintenance and
improvement. In 2019 it generated revenue of $27.0 bn. Industry revenues had grown for several
years prior to 2019 due to a strong housing construction market and a strong economy and low
interest rates that encouraged private spending on home improvements. The industry was expected
to continue to grow for the next five years, although at a slower rate. Although demand was
sensitive to the amount of housing construction and disposable income, homes would always need
repairs. Not surprisingly, key success factors in the industry were geographic proximity to
customers, customer loyalty and service quality. The latter two success factors also meant that a
wide variety of products and experienced work force were critical for success.
The Canadian industry consisted of roughly 1,800 stores of varying size. The industry had a
moderate level of concentration; in 2019 the top two companies Home Depot and Lowes accounted
for 17.0% and 13.0% of the industry revenues respectively with 400 stories between them. The
remainder of the revenues and stores were small and medium businesses that faced increasing
competition from big-box stores. Because the products sold were homogeneous this meant greater
price-based competition. This resulted in lower contribution margins for smaller stores because
they couldn’t raise prices and at the same time paid more for the goods they sold because they were
ordering smaller quantities than their larger competitors.
, Consumers were either professional contractors or individual consumers. The non-professional
consumers made up approximately 99% of the market and could be divided into do-it-yourself
(DIY) which created the greatest demand, followed by do-it-for-me1 (DIFM). Baby-boomers which
made up the largest consumer group were expected to begin switching from DIY to DIFM, creating
an opportunity for revenues from complementary services. In addition, many businesses expanded
their offerings to include products such as lawn and garden supplies that would appeal to the DIY
consumer. See Exhibit 1 for a segmentation of industry revenue.
Background Information
Dave Wilton was a dedicated body builder who worked for a local gym as a personal trainer. He
had a wife, two young children and a dog. Peter was a professional arm wrestler who competed for
titles and prize money with three kids – no dog. Neither had any business experience but they both
believed they had what it took to be entrepreneurs, and they had always dreamed of owning their
own business. They were both hard workers and comfortable with taking on calculated risks. They
had both been searching for several years for a business opportunity to combine with their existing
careers with the dream of the business eventually earning before-tax profits of at least $1 million
so that they could retire from their careers and enjoy their families full-time.
Nailed It Building Supplies was a family-owned business that had existed in the same location,
near a growing middle-income residential area. In its 25 years of operation, it had built up a
considerable number of loyal customers. This was part of the appeal to Peter and Dave – they didn’t
just want a business that was profitable and growing. They envisioned a business where the
employees knew the loyal customers by name and had a reputation for knowledgeable salespeople
that offered advice and personal attention to ensure the success of the projects their customers were
working on.
The previous owners sold the business because they wanted to retire. An examination of the records
of the business showed a small drop in net profit in each of the last two years (see Exhibit 2 for
financial statements). When questioned about this drop, the owners replied, "we can attribute this
to our lack of commitment to the business during these years."
Peter and Dave decided to retain all 15 of the existing sales people because they had been with the
business for several years and were as much a family as they were a sales team. Peter and Dave
could see that they cared about the business’ success as if it was their own and felt this loyalty
should be valued. Eleven were full-time, although four of these were individuals that were happy
to work part-time hours if the business didn’t need them. There were an additional four part-time
employees. The employees in the store often out-numbered the customers (the industry average
was about one employee for every $250,000 to $300,000 in revenue), but they had been with the
business for at least six years each, had a lot of expertise in home improvement and knew the
customers well. The customers consisted of a few builders and renovation professionals but catered
primarily to individual customers ranging from people who didn’t know which end of the hammer
1 DIFM customers purchase materials and hire others to complete the projects
