Best Practices - January 2011

By Brian Hamilton

DeGraaf Interiors knows that it doesn’t pay to sit still and hope for the best. A few years ago when the builder market started going downhill, threatening to take DeGraaf Interiors with it, Dean and Deb DeGraaf, brother-and-sister owners of the western Michigan firm, decided rather than hunker down and make cuts they would instead take a leap of faith and diversify the business.

The company, which did about 80% of its business in the builder market, veered into multi-family housing, specifically condominium work, and took on a project involving 183 condos under one roof in downtown Grand Rapids. “Without having done that, we wouldn’t be here today,” says Deb DeGraaf. “My brother was instrumental in changing our focus.”

But it didn’t come easy. For example, installation took a brand new skill set. Sound deadening, which the company had virtually no experience with, became a priority. “The architects knew they wanted sound deadening but they didn’t know how to do it,” DeGraaf says. “We worked with the manufacturers and distributors to gain that knowledge.” DeGraaf Interiors went so far as to install a test unit to gain first-hand experience.

The company also had to learn how to bid on commercial projects, and its meticulous approach resulted in establishing a strong connection with area general contractors, which has led to much more commercial work. “We had to learn how to ask the right questions during the bid process and not just throw out a number,” DeGraaf says.

While there’s less condo work today, DeGraaf Interiors has become the local condo expert. Through its work on helping convert an old high school to condominiums, DeGraaf Interiors began to gain a reputation as an urban development expert. That has helped DeGraaf expand its commercial business, which now accounts for about 40% of sales. Today its commercial work ranges from doctors’ offices to schools to country clubs. The latter has provided a significant bit of business lately, which DeGraaf says has come as a bit of a surprise.

The 17-year-old company based in Hudsonville, Michigan has begun to see its revenues climb again, after falling from a high of $7.5 million to a low of about $4 million. Sales in 2010 were about $5 million.

Late last fall, the company took another calculated risk and opened a third location in Cascade, forming a triangle around the greater Grand Rapids area. After a year of research, the DeGraafs found an ideal location near several popular dining spots and a busy sports retail business, and opened a 2,200 square foot boutique that serves an upper end clientele through a Shaw Design Center. It’s also in an area that has no specialty flooring retailers. DeGraaf believes a store with an emphasis on flooring as fashion should prosper.

“We worked closely with Shaw to tailor the boutique concept and we’ve got a little bit of everything,” DeGraaf says. “We cater more to the higher price points. We’re also looking to expand with Masland as well.”

The new store continues DeGraaf’s strategy of treating flooring as fashion, as its flagship store in Hudsonville is a Mohawk ColorCenter (DeGraaf Interiors was recently named one of Mohawk’s regional dealers of the year). The firm offers free interior design services for its flooring customers, and can help customers with paint and cabinet selection (which the firm does not offer) as well as countertops and window treatments, which it does sell, accounting for about 5% of overall revenues. The retailer also offers a lifetime installation warranty, even though all its installers are contractors.

In addition to its relationships with Mohawk and Shaw, its Grand Rapids store (originally Kemp Floor Covering), which it purchased in 2003, is a Stainmaster specialist. DeGraaf Interiors, says Deb DeGraaf, might be the only retail business in the country to be aligned with Shaw, Mohawk and Stainmaster.

“Our stores maintain a selling system and we can transfer samples very easily and can offer everything to the customer,” DeGraaf says. Because of the volume she buys from these companies, she says she has a good handle on fair prices and fair value and the perks each manufacturer offers. She’s also conscientious about taking invoice discounts for on-time payments, even though she maintains more inventory than some of her competitors. “I cringe when I hear about retailers who aren’t taking these discounts, because it can be a significant portion of bottom line dollars.”

The comprehensive product line of hard and soft products has been a big plus, partly because it has allowed the company to take advantage of trends. For example, while Stainmaster is still the premier fiber, Mohawk’s SmartStrand and Shaw’s ClearTouch are gaining marketshare. “We’re not selling as much Stainmaster as we once did, but it’s still very important to our product mix. The other fibers are stealing its thunder,” DeGraaf says.

The affiliations with both Mohawk and Shaw have provided many other benefits as well, and DeGraaf makes sure to attend their conventions. There she’s picked up advice from fellow retailers on everything from how to deal with commissions to advertising. “We will plagiarize and steal their ideas with their permission,” DeGraaf says. And she’s also learned about issues like small business tax legislation that can have a major impact on her bottom line, especially this year with the new store renovations. And equally important, she gets a heads-up on new products and can stay one step ahead of her competition.

She also takes full advantage of programs like Mohawk University and the Shaw Learning Academy for training.

While DeGraaf Interiors has been good at choosing products, locations and market segments, Deb DeGraaf believes the business is largely about building relationships with staff, reps, customers, and the community at large. “We wouldn’t have been able to open a third store without the people who work for us,” she says. She believes in trying to make employees feel part of a family, through everything from employee events like Christmas parties and birthday acknowledgements to health benefits, very flexible scheduling, and unlimited commissions for sales personnel. “If people feel cared about, they’re going to give more.” Although her installers are contractors, DeGraaf also includes them in company events. Some of them have approached her about becoming employees, but it’s a step DeGraaf isn’t quite prepared to make.

Manufacturers’ and distributors’ reps have, in fact, become some of the DeGraafs best friends, often getting together socially outside business. When the DeGraafs decided to try their hand at condo work, as well as the new store, those relationships helped that transition go much more smoothly, and she continues to seek their advice.

The company has also worked hard to make a difference in the community. Recently, in conjunction with Mohawk’s SmartStrand promotion at the Dallas Zoo, DeGraaf Interiors held a fundraiser for the local zoo, and it featured a traveling zoo, along with live radio coverage and an appearance by Mohawk spokesman Chip Wade. The company has also held benefits for Relay for Life and other community causes. “People like to see community involvement,” DeGraaf says.

In general, though, DeGraaf says it’s the passion for the business that gives DeGraaf Interiors an edge. It’s a quality her father, Daryll, had when he opened the business in 1993, and it apparently rubbed off on his kids. Their attitude affects everything they do in the business and has a big impact on the employees. DeGraaf says it’s not unusual for a customer to comment on the upbeat atmosphere in her stores.

“My brother and I are younger than some of the owners of other stores, who I think are just worn out,” DeGraaf says. “We’re going to be in this for a while.”

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