Commercial Floor Maintenance Business: Businesses are growing their maintenance divisions - Apr 2019
By Beth Miller
Commercial flooring contractors are finding ways to successfully grow their product and installation (P/I) business through the addition of maintenance services. The two biggest threats that keep commercial flooring businesses working to innovate and evolve their services come from in-house janitorial services (think corporate offices, education and healthcare) and large maintenance management firms.
Two Starnet and two Fuse members spoke with Floor Focus concerning the benefits of offering floorcare in addition to P/I, the latest technologies that are helping them save time and money, and the differences in maintaining hard and soft surfaces. The interviewees are Mike Patton, CEO of DSB+, headquartered in Livermore, California (Starnet); Jesse Castro, maintenance manager for Texan Floor Service in Houston, Texas (Fuse); John Hodgson, vice president maintenance of DFS Flooring, headquartered in Van Nuys, California (Starnet); and Abby Reinhard, owner and president of GP Flooring Solutions in Brockport, New York (Fuse).
Q: What motivated you to enter the maintenance business? Did you start with a particular flooring category?
Patton: Our original motivation was a strategic decision to help grow our P/I business, dealing more directly with end-users and less with bidding on the open market.
We started with carpet; however, the very first service item we added was high-tech coatings, and an example of that is NeverStrip. That has become 50% of our business, and it has an even higher gross profit margin and is in greater demand than carpet care. We’ve worked with [NeverStrip] for seven or eight years now, and we are very good at laying down their products.
Hodgson: We were purchased by DuPont. They were the biggest fiber manufacturer in the world, and they supplied all the carpet mills with their fiber. Their business theory was-and I don’t know how successful it was for them-if we control the outlets (the dealers) and have them sell only carpet that contains DuPont fiber, we’ll sell more fiber. So, they went around the country back in the early ’90s buying up somewhere in the ballpark of 170 flooring dealers, and we were one of them. One of their policies was that every branch had to provide maintenance like a car dealership. They sold the product, maintained the product, and kept the customer [close at hand] so that when they wanted more product they’d come back to the same place.
Castro: We needed to provide a full-service program for our customers from the beginning of the installation and continue throughout the lifecycle of the products.
Our first program started with carpet maintenance, which required a lower startup cost. We were able to provide monthly and quarterly programs and generate quick revenue to expand the maintenance business.
Reinhard: We entered the maintenance business because it complements our product and installation business and helps us create more value for our customers. We rolled out maintenance for hard surface and soft surface at the same time. We got into stone, terrazzo and concrete polishing and sealing a little bit later.
Q: Is your floor maintenance business completely separate from your P/I business?
Patton: Floor maintenance is separate simply because the P/I business has a different ownership structure. Our labor is union, and our maintenance company has an additional business partner and is non-union. We are in the same building, and our strategy is that with every large P/I project, we introduce the sales team from the maintenance business to establish a relationship through floorcare so that when that end-user has a need for future P/I, we’re able to take it off the street and do business with them directly without a general contractor involved. That results in higher gross profit margins in the P/I business.
Castro: Our maintenance department depends on the P/I business. The sales department generates leads and contacts during and after their sales. Leads are followed through, and they generate more revenue for us.
Hodgson: It’s one entity in that we are in the same building; however, maintenance is a totally separate profit center from P/I. All the revenues and growth profits are kept separate.
We encourage all of our employees to be involved in maintenance, even if they’ve been selling just flooring and installation all of their life. We want that to be part of their offering to the customers. Many times, it does not work because the sales professionals work directly for GCs, and they don’t even know who the end-user is going to be. If the salesperson can’t make it a part of their offering, they at least inform us of where the [product installation] is. If they know who it is, we can contact them after. It’s an easy move. You call them three months later and offer an after-sales service. Nobody says no to that. It’s a foot in the door, and then you can start talking about maintenance.
Reinhard: Our floorcare business is not completely separate from our P/I business in that we have salespeople/project managers who work on both. The labor is separate.
Q: When you approach a company about using your service, and they say no, what is the most common objection? Of those that say yes to hiring you, what convinces them?
Patton: They already have janitorial in place. We try not to pursue existing installed flooring; however, oftentimes we will simply follow up. Every month we develop a booking report in our P/I business, and we share that with the sales team on the maintenance side. This allows them to see every major project so that they then know what to pursue.
Those who typically say “yes” are end-users who have a facilities department that understands lifecycle cost of flooring, and that the life of flooring is extended with proper floorcare. Across America and certainly here in the San Francisco Bay Area, there is a competition for talent and so the better their work environment is, the better chance they have of attracting and retaining talent. We tend to talk about floorcare in a bigger context, not just, “Hey, we’ll keep your floors clean.” The second layer of that is we’ll extend the time on flooring replacement. Third, we will positively impact your employees.
Castro: The most common objection is cost. We provide healthcare, employee stock options, training and certifications on all the floor services we provide, which certainly drives up the cost, but it ensures a higher quality of employee and service.
We convince them with our commitment to quality-using the correct products on the different surfaces and referrals from customers that we have serviced for many years. We have customers with 20-plus years of service.
Hodgson: Oftentimes if they object, it is because the cleaning and maintenance are included in their lease agreement. Another objection is price. They can get it done much cheaper by the janitors because the janitors and their equipment are already on site, whereas they have to wait for us to show up.
We stress that we are professionally trained. All of our salespeople have the same background in that they know all about the fibers and the construction of the carpet, what’s best for them, and how they should be maintained. Apart from our expertise, we also sell quality and service.
Reinhard: Objections range based on the market. The education and healthcare markets will generally let us know that they have their own unionized people that do the work for them. We let them know that we are not looking to take work away from their staff but want to help them so they can reallocate their labor to other areas that may be more pressing. On the other hand, the corporate market tends to have the floorcare work included in their janitorial contracts. In these cases, we emphasize that we are floorcare experts, who can offer many more solutions for their floorcare needs.
Q: What services do you offer?
Hodgson: Carpet cleaning is still our biggest. We are moving more into grout and ceramic tile cleaning, and high-performance coatings play a role in this area. One of the worst problems are the bathrooms on a multi-tenant floor because they are the responsibility of the building. The building’s team goes in and runs a mop over it once a night, and they don’t really clean it. The grout gets dirty and turns black. It starts to smell, and it looks dingy. We offer a service where we go in and totally restore it, and we can even recolor the grout if needed. Then, we put on a high-performance coating so that the mopping the janitors do actually becomes effective because nothing can soak into the grout or stick to the tile. We can do small stone and concrete jobs. It’s difficult to get into because you need specialized equipment. Terrazzo is another one we do. If we get a big stone or concrete job, we farm that out to a subcontractor.
Castro: We offer carpet maintenance, concrete polishing, dyeing and maintenance, stripping and re-finishing of all resilient floors, Micron coatings, urethane coatings, tile and grout restoration, grout sealing (with color sealer if needed), and upholstery service, which includes chairs, modular furniture panels and sound barrier wall panels.
Reinhard: Our maintenance services include carpet cleaning; ceramic tile and grout cleaning and sealing; traditional hard-surface care; urethane coatings; and stone, terrazzo and concrete polishing and sealing.
Patton: We have a wide range of services through DSB+ and our Premier Maintenance Group, including carpet cleaning; ceramic, stone, marble, travertine and granite restoration; concrete polishing and sealing; epoxy coatings; moisture testing; recycling programs; and the list goes on.
Q: What sets your business apart from competitors when it comes to the maintenance services you offer?
Hodgson: One of the things we market strongly in our area is XL North’s ResisTech encapsulation cleaner. We’ve tested others, but it’s still the best. It has things that other encapsulation cleaners don’t have, like soil retardants.
Starnet is a big thing for us when we are competing against other professional carpet cleaning companies. We can offer Starnet coverage around the country if they have other locations. We are the biggest flooring contractor in California, and we’re the fifth biggest in the country, so we can enhance the warranties. If we supply, install and maintain a flooring product, we can enhance that warranty. Most installation warranties last for one year, and after one year if you have any repairs done, you have to pay for them. We will extend that installation warranty for the length of the maintenance contract. If we are maintaining it for ten years, we’ll do repairs free of charge.
Patton: What sets us apart from our competitors is that we actually remove soil from carpet. One of our favorite demos when we are invited into an existing facility is our carpet demo. We like to perform the demo right after their current service provider has done their most recent carpet cleaning. We show them, using white towels, what has been left behind in their carpet. I think it’s important as a maintenance company to be able to demonstrate our services, and so we do demos on almost everything, whether we are laying down epoxy or NeverStrip in a restroom. Too often the client doesn’t really understand how poorly their floors are being maintained, and once you do a 4’x4’ area, they see a dramatic difference.
Reinhard: The mix of our expertise and service offerings is not common in our geographical area, and our team members care passionately about doing their best and exceeding our customers’ expectations.
Castro: Our customers want a one-stop full-service company. We believe that the quality of service combined with the variety of maintenance services provided sets us apart.
Q: How has the technology used in commercial flooring maintenance evolved to help you offer the best service?
Castro: We have been in the maintenance business for 26 years. Joining a great organization like Fuse Alliance that has great vendors to provide the best and correct chemistries and equipment helps evolve our maintenance department above our competitors. Vendors must provide the best and latest equipment and chemistries.
Hodgson: Hot water extraction, up until 1990, was the best way to maintain carpet. It was the most efficient way of removing soil from carpet, but it’s labor intensive. If you can do 600 feet per hour of hot water extraction, you are going at a good pace. When you get into office spaces and congested areas, you can drop down to 200 feet per hour. When you use encapsulation, you can do 1,000 feet per hour easily and up to 2,000 feet per hour. So, you have increased your production rate three to four times.
We were off to the races when we got encapsulation because that was a great selling point for us, since janitors were still using bonnet cleaning, which is frowned upon by the carpet manufacturers. Some manufacturers would void the warranty if they knew you were bonnet cleaning your carpet. The selling point for encapsulation is that the encapsulation product remains on the carpet fibers and continues to keep the carpet clean. Ten years later or more, the janitors finally caught on and now they offer encapsulation. So it’s no longer a selling point. “Our janitors can perform the same services as you for a third of the cost. Why should we use you?” It’s a harder sell now.
We just took another step forward with the introduction of the Fast Foam machines. A Fast Foam machine is a piece of equipment that you put your encapsulation cleaner into, and it turns it into a foam. It spreads the foam across the fibers. The foam cleans-I don’t know which number to believe-four to ten times as good as a spray. It cleans more evenly, and it’s more efficient.
Patton: We’ve developed a carpet care system that uses 75% less water than traditional hot water extraction, and, being in California where water is at a premium, that resonates. It’s less equipment dense. We can do our carpet cleaning with advanced chemistry and advanced machinery that is easier on our technicians, and technicians are hard to come by. We use the latest technology from all of the [Starnet] vendors, from Jon-Don and on down the list. That enables us to do more with the same number of technicians. As a result, we achieved 50% more volume in dollars in maintenance work in 2018 than we did in 2017 with only 15% more technicians. The suppliers to the maintenance industry are doing such a great job, whether it’s chemistry or machinery, that we are able to get more out of our existing team. So, to double our sales, we do not need to double the number of technicians. We are able to get more out of our manpower, which enables us to pay them better.
Reinhard: Technological improvements in equipment have helped to increase productivity, while improving quality and improvements in floor coatings have helped us impress customers with the end result.
Q: Does offering this service help you grow your P/I business? How do the margins from floor care compare to P/I?
Hodgson: That’s a big yes. First of all, the P/I side of the business helped maintenance get going. Once we established ourselves-and I’ve now had the same customers for ten to 15 years or more in some cases-when a maintenance customer needs flooring products, they call me, saying, “You are our flooring guy. We need some of this. Can you do that?”
One of my accounts was Toyota. We had their headquarters here in southern California, and there were approximately 25 buildings, which we maintained for several years. It was a struggle to get in, but once we were in and they saw our work, they were happy to let us do all of their buildings in that campus. One day I met their national real estate manager, and he asked me if we also offered P/I. I said yes, and he said, “The next time you stop by, we’ll talk to one of our head buyers, and we’ll see if we can get you into supplying our products.” That took off, and I now supply Toyota’s buildings with flooring products nationwide.
Patton: Sixty-seven percent of our business comes from our P/I accounts. Two-thirds of our maintenance business, on-going scheduled maintenance, comes directly from what we install. Only a third of our maintenance business comes from people introducing us to an existing facility with carpet that we did not install or concrete that we did not polish.
Our goal on the P/I side is 28% gross profit, and in 2018, we hit 64% gross profit in maintenance. Now, that’s on much smaller dollars, but remember that the strategy for maintenance is to feed more end-user relationships back to P/I.
Castro: Our maintenance department is able to offer services that the P/I business cannot offer. This, in turn, generates more revenue for both the P/I and maintenance departments.
Depending on the service that is offered, the P/I business would need to generate $2 million to $3 million for every million the maintenance business makes.
Reinhard: Maintenance and P/I are symbiotic, and doing both allows us to be a one-stop shop for our customers. We can offer a cradle-to-grave product/service. Revenue per project is not particularly high with maintenance, but the profit margins are higher than with P/I.
Q: Of the surfaces you are hired to maintain, what is the ratio of soft to hard, and where is the greater margin? Which requires the most/least investment in equipment and training?
Castro: We are currently doing about 75% hard surface and 25% soft goods. The current economy is moving more towards hard surface due to the more durable coatings available during the manufacturing process and the lower amount of maintenance that is required to maintain the hard surface, following installation.
The greater margins are in hard surfaces, but soft goods generate more frequent revenue due to the maintenance required. Soft goods require a lower startup cost. Hard surface requires more specialized and different types of equipment for the different surfaces.
Hodgson: We are about 65% carpet and 35% hard surface, which includes resilient, wood, stone and terrazzo. Carpet is the easiest thing to set up for and equip, except in the case of the Fast Foam machine. They’re expensive, but the rewards are so great on productivity that it’s worth it. Setting up for stone is expensive, even if you don’t go after it in a big way; you still have to buy more expensive floor machines with gearing and weights and the ability to install different stones and pads. It takes a lot longer to do, and it takes longer to train someone. And it is something that can easily go awry, whereas with carpet, not so much. If you don’t get it right the first time, you just go back and do it again.
High-performance coatings, which are quickly becoming a large slice of our business, require a fair amount of training. We like it because it keeps our biggest rival out of the industry, which are the janitors, because they don’t have the expertise. Plus, the cost of high-performance coating can be quite high. You’re talking $300 to $400 per gallon for it compared to $20 for a gallon of wax.
Reinhard: Of the surfaces we are hired to maintain, the ratio of hard surfaces to soft surfaces are running about five to one respectively. Soft surface maintenance requires the least in terms of equipment, training and chemicals as compared with hard surface maintenance.
Patton: I would say it’s 60% soft and 40% hard surface. The greater margin is hard surface. Carpet is going to be from 50% to 60% gross margin, and high-tech coatings are going to be 60% to 80% gross margin. The hard surface side is much more complicated. High-performance coatings require more training and additional equipment.
Q: What is the most important business decision that has led to your success in floor maintenance?
Hodgson: Our decision when we started this was to put quality first. That word has gotten around. I have customers of 12 to 14 years who have their interim maintenance done by their in-house people or janitors, but when they want a really good cleaning done, they call us. We guarantee 100% satisfaction, and we put that in writing. When we talk to people and show them the guarantee, it gives them some degree of comfort, knowing they are getting quality work.
Reinhard: The most important decisions we’ve made that have led to our success in the floor maintenance business, by far, have to do with hiring for the right fit and not keeping team members who were not the right fit.
Patton: Our very first hire was a pivotal decision. We decided that we would not partner with someone in maintenance, but we would bring it in-house and self-perform so that we maintained the relationship with the end-user and didn’t have another company in between us and our P/I client. We located a very experienced commercial carpet care professional, and that very first hire was critical-expensive but critical.
Castro: The most important thing is having an owner that is willing to invest and allow the maintenance department to purchase the correct chemistries and equipment.
Q: What is it going to take to convince more commercial flooring contractors to incorporate floorcare into their businesses?
Hodgson: The problem is a high percentage [of commercial flooring contractors] are small guys, like $3 to $8 million per year. They started off as installers and were good and got bigger and hired more installers. They’re happy with what they’ve got. They don’t want to start a whole new division they know nothing about.
The big guys who are doing $10 to $50 million-I have no idea why they are not doing it. The margins are more than double what you get in P/I.
I work on the advisory committee with Eric Boender, who is the director of floorcare for Starnet, and our goal is to get these people into the floorcare business. If you install a product improperly, you’ve got a big expensive problem on your hands. If you clean a carpet and you don’t clean it properly, you go back and clean it again.
Reinhard: Getting into maintenance is an investment, and it can take some time to get it right. If flooring contractors have the right mix of business and the right people, as well as the ambition, maintenance can be a great supplemental line of business.
Castro: We need to educate other flooring contractors on the high margins a maintenance department can generate.
Patton: It will be the next generation of ownership who identifies how important it will be to continue the growth of their commercial flooring contracting business. This generation is not going to raise the money, invest it and spend the five years that it takes to mature a maintenance business. They don’t plan on being in the business in five years-many of them. So, the commitment is not there, but it will be-by a visionary next gen.
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