Seven steps to commercial success: Contractor's Corner

By Dave Stafford

At 3:00 a.m., a flooring dealer—we’ll call him Joe—didn’t have his usual panic attack, but rather an idea that would end up generating millions of dollars for him over the next 20 years: expanding his multi-store retail strategy with a commercial flooring business.

Our fictitious contractor, Joe, had already proven that he could sell and manage several retail stores and, most importantly, make a profit. With a willing banker, a lawyer he trusted and the zest for hard work, Joe was ready for something different. He wanted to build a bigger business and had a great foundation from which to expand. And he had even done a few light commercial jobs that came from satisfied retail clients. Joe was willing to take more risk and did not expect overnight success. He understood this business shift was a long-term proposition. So how did he do it?

WHAT’S IN A NAME?
Create a brand that offers a clear identity and will work long term.

Joe knew that his retail identity, JS RugMart, would not work for his commercial business. After consulting his attorney and a records search in his state, he came up with a new name and incorporated as a separate entity from his retail operation.

His research ensured that there were no other companies in operation, especially in the flooring industry, with the same or a similar name, which would likely cause confusion for clients. Likewise, he avoided names with a regional connotation, choosing something descriptive but not overly restrictive that would allow him to expand within the general commercial flooring area without having to come up with another new name.

Joe contacted a graphic designer to help him with brand development, a logo, brochures, business cards and stationary. He also asked for a search to make sure his visual identity was as unique as possible in terms of design, color blend and placement. After several weeks and multiple submissions, he selected the brand logo that would be with him for years.

And that’s the goal: pick a visual identity that says who you are that has longevity. It is expensive and time consuming to change brochures, business cards, stationary and signage—not to mention the confusion created among clients.

And don’t forget that company website. Designing it and keeping it current may be a huge expense, but doing so is critical to your commercial identity.

WHO ARE MY CLIENTS?
Specialize in at least two or three areas within your geographic location.

Joe had already done business with several property management companies and had sold carpet to several remodeling contractors and general contractors as well as the local school system and hospital, so that was a place to start. In addition, he was already a member of the local Chamber of Commerce and the Rotary, so he had some good local contacts.

He landed a job with a general contractor who was after a quick turn carpet and resilient job for a small tenant build-out, although he found out he hadn’t charged enough to compensate for night and weekend work. A fellow Rotary member suggested he “provide a number” for the upcoming clubhouse renovation at the country club. The local school system already had a contract for flooring work, but Joe did a couple of last minute, emergency jobs, and the facility manager was pleased.

Of special interest was a developer getting bids for some high-rise apartment work: carpet for the living areas and sheet goods for the kitchen, bathrooms and ancillary areas. This was Joe’s area of expertise in his retail business. Since it could be a lot of volume, Joe’s bid was tight, and he got the work.

And so began the “high-rise saga from hell,” as Joe would later describe it. Scheduling was a nightmare with little advance notice on which areas were to be done. Worse, the site manager was inept, and so other trades were always in the way, which slowed production. Joe also learned a good lesson on change orders: “I’ll take care of you” spoken in haste does not constitute a change order approval, so Joe ate a lot of work that should have been at extra charge. Detailed paperwork was required to get paid, and payment was slow. The developer seemed to lose information on a regular basis and took at least 60 days on most invoices. When Joe really looked at the gross profit dollars being generated, it was barely 15%. Without those change orders, he figured that he was barely breaking even. The worst part was that scheduling conflicts were playing havoc with Joe’s other profitable business—an important lesson learned.

DO I HAVE THE RIGHT PEOPLE?
A great retail salesperson may not exhibit the same skills in the commercial sector.

Initially, Joe was the person who developed prospects for his fledging commercial business, but soon he needed help in selling commercial business, as well as an experienced manager. He found out quickly that some of his retail stars were unable or unwilling to muster the effort to deliver a profitable commercial job, and there are major differences between retail and commercial work with regard to job complexity and duration before the close.

In his own experience, Joe found that while selling skills translated generally, the process of closing a sale was markedly different. With commercial work there were different layers of approval, budgets, bids, proposals and other legalisms, meaning that an emotional appeal, such as “Buy today while I can give you this price,” frequently landed with a resounding thud. The delay of the gratification of the close was a frustration to some of Joe’s retail performers.

Field project management was also important in commercial work and had to be done by either a salesperson or someone in service operations.

So Joe began the painful process of hiring and developing a dedicated commercial team. Over a period of years, though, his decision allowed him to pursue diverse avenues of business, including hospitals, government work, educational work, and specialty flooring with property management.

WHAT WILL I SELL THEM?
Both your cutting-edge and staple products must fit your market—and you must get key dealer price advantage.

A terrific opportunity landed in Joe’s lap from a chance conversation with one of his suppliers, “Have you heard about the new telemarketing center that’s going to be remodeled? If you’re interested, I can hook you up with the facility manager looking to take some bids.”

Joe made the phone call and set an appointment for a visit. As sometimes happens, Joe really clicked with the facility manager, who related some of his frustrations in finding “adequate competition” for the project, “It sounds like you don’t have much experience in commercial, Joe, but I’m willing to give you a shot at the job. However, I need a specific type of carpet tile to satisfy corporate requirements.”

With some dismay, Joe realized he had no products that would meet those specs. It was no coincidence, though, that his friendly supplier had just the right product for the bid—and was looking for a local dealer. This event showed Joe how much he was lacking in his commercial offering and paved the way for him to incorporate that company’s line into his burgeoning commercial business. With key dealer pricing and a commercial credit line from the mill, Joe was able to get the job and specialized training for his crew. He delivered on time, got paid, and received an excellent reference from the facility manager. This was a great beginning for him in the corporate office replacement market.

HOW IS IT POSSIBLE TO DELIVER AND SERVICE A HYBRID BUSINESS?
Diversification is great as long as you can provide consistent delivery and competent installation.

One of Joe’s concerns, and a source of constant frustration, was having the right personnel to deliver the jobs that were being sold. Installing 100 square feet of broadloom in an empty townhouse was entirely different from the process of installing 600 yards of carpet tile in an occupied office space. And it was not just the technical skill and personnel to handle furniture movement, but rather the mindset for after-hours work with minimal supervision—and the demanding customers.

Over a period of years, with the right installation manager as his coach, Joe was able to assemble a cadre of talented, certified installers for almost any residential or commercial job. From woven carpet to ceramic, commercial broadloom to carpet tile, they could do it all. The key to the delivery of hybrid business is proper matching of mental aptitude with technical skills combined with prompt customer service.

WHAT EXCEPTIONAL SERVICE CAN WE PROVIDE?
Service will set you apart from our competition and ensure long-term success.

What Joe and his team learned from studying competition and listening to comments from clients and suppliers was that there was little difference in the overall pricing or quality of work performed in the market. Rather, customers care most about how people did business. One customer even said, “Yeah, XYZ got the job done, and it looks okay, but what a pain in the neck they were to deal with when there was a problem.” Others in Joe’s team had heard similar stories, and it all came down to the Golden Rule.

The team came up with some suggestions: rather than using a service warranty date as a hard and fast rule, use it as a guideline to be flexible; leave a good impression with the client; allow service personnel to make immediate decisions on solving a problem, rather than forcing a delay to talk with the boss; treat a complaint as a priority rather than another irritation; set a time limit to fix problems; focus on one-person solutions rather than having myriad people speak with the customer about the same issue; say “How may I help you?” and really mean it.

AM I MAKING A PROFIT?
A new business segment must turn a profit once the honeymoon is over.

Over the years, Joe and the company have refined their commercial business and found the best fit for them. There were some areas—such as apartment work and certain types of condo replacement—that were just not profitable enough given the strain on their installation department. In addition, asbestos removal and some types of specialty flooring were simply too much risk for the profit made.

Joe’s business evolved over the years and ended up mainly in government, healthcare, property management and retail residential. And Joe’s business, which started as 100% residential, ended up 80% commercial, which is just where he wanted to be.

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