Commercial Floorcare: The Business: Interview with Starnet's Eric Boender - Apr 2018
Interview by Kemp Harr
Commercial floorcare can provide a steady and profitable additional revenue stream for commercial contractors, in addition to helping them build and maintain valuable relationships with end users. Here, Eric Boender, director of floorcare for Starnet, discusses the reasons why this is a growth segment for commercial flooring contractors, and how, once they’ve crossed the hurdle of getting established, this business can become a steady source of income.
Q: Why are more commercial flooring contractors getting into the floorcare business?
A: There are a couple of reasons. Floorcare creates an on-going relationship with the end-use customer, which helps solidify future product and installation (P/I) business. In addition, compared to five years ago, the revenue opportunity has expanded in the floorcare business with additional services, including stone and marble restoration, concrete and terrazzo polishing, and high performance coatings for ceramic, concrete, resilient and stone. High performance coatings have been in the market for a while but have been improved so that they are easier to apply and don’t yellow in the long term. In addition, marketplace acceptance of them has increased.
Q: What advantages does partnering with a commercial flooring contractor versus a janitorial service offer the end user?
A: The commercial flooring contractor has long-standing relationships with the flooring manufacturers and is much more likely to follow the specific manufacturer’s specifications for cleaning and maintenance, resulting in better flooring performance.
Another key element is the expertise of the floorcare technicians, who are dedicated to quality floorcare, as opposed to janitors who have various cleaning responsibilities. Typically, the janitorial model uses the cheapest equipment, chemistry and labor, which results in poor-performing floors. Commercial flooring contractors are dedicated to following the manufacturer’s guidelines of utilizing quality equipment and chemistry, along with technicians who follow the manufacturer’s specified processes.
Q: What advice do you have for traditional flooring contractors who are considering entry into the flooring maintenance business?
A: First, identify a go-to division manager who will represent your company well and run the division as if it were their own business. The manager needs to be customer-focused and willing to hustle to grow the business.
Second, once you’re well established with basic cleaning services, take a leap of faith into more technical work, such as application of high performance coatings; grout coloring, which is refurbishment of grout through a deep clean, recoloring and coating process; or investment in specialty pads for a standard swing machine or buffer that can be used to polish marble, terrazzo and concrete. These are a good inroad with customers and drive good revenue volume.
Q: How long does it take to get established and turn a profit?
A: With the training, equipment and chemistry recommendations from an experienced floorcare provider, a contractor is ready to perform carpet and upholstery work immediately after on-site training. Visiting a high-performance coatings provider for training, along with practicing within your own facility, creates the opportunity to start performing the less technical systems immediately.
Typically, by months ten to 12, a contractor is likely to break even, and years two and beyond are profitable. Revenue will double in the first three to four years, and nice profits are realized years three and beyond. This, of course, is dependent on the quality of the division leader and the support of the ownership and sales team.
Q: How do staffing and operations differ from the more traditional P/I business? Are there shared resources?
A: Typically, the installation staffing in the P/I business is contracted labor, and in the floorcare business, company employees perform the work. In union situations, the installers and floorcare professionals are part of two different unions, so staffing isn’t shared. In addition, shared resources from an asset perspective typically doesn’t happen, but the greatest shared resource is the P/I account managers and sales staff having discussions with existing clients to cross-sell floorcare.
Q: What are the benefits to the contractor of diversifying into floorcare, rather than just focusing on the core P/I business?
A: Stronger customer relationships and a strong bottom-line. Consistent with service business, floorcare is a higher margin business than P/I. Margins on P/I run between 10% and 22%, but in a service business, like floorcare, margins are more in the 50% range. In addition, P/I business is often catch-as-catch-can, whereas floorcare is consistent. A contractor establishes existing customers and contracts, then continues to grow on top of that.
Q: In most instances, does entering the maintenance business help contractors grow their traditional business?
A: It takes a few years to feel a noticeable impact on the P/I revenue side from the maintenance business, but it does eventually make a positive impact. Another nice impact that the maintenance business brings is higher P/I margins through negotiated business.
Q: How expensive is it to enter this business?
A: A $25,000 investment (plus transportation) is a good starting point to get the equipment, chemistry and training needed to get into business. Typically, another $25,000 to $50,000 is invested during the first eight to 12 months before profitability is realized.
Q: Among Starnet members participating in floorcare, what percentage of business is soft versus hard?
A: Carpet cleaning is very important to the business and needs to be a focal point, but as the business matures, it is typically 50% to 60% of the business.
Q: What differences are there in the cleaning routines for hard and soft surfaces?
A: The science of cleaning is consistent with carpet and hard surface-i.e. breaking down and removing debris-but the equipment, chemistry and training are often specialized for carpet versus hard surface.
Carpet, overall, is an inexpensive finish to maintain with the low cost of vacuuming and periodic cleaning. What is often forgotten with hard surface is the higher cost of daily maintenance versus carpet. Carpet is engineered to hide debris and stains through pattern, color, texture and fiber type, while hard surface has zero to minimal texture and isn’t able to hide debris as well. This results in higher cleaning frequency for hard surfaces with daily dust and debris removal.
The margin percentages are consistent with the different flooring types, but the margin dollars are much higher with hard surface, considering carpet may be cleaned at ten cents per square foot, and hard surface work ranges from $0.50 to $6.00 per square foot.
Q: Are there specific commercial sectors that are more receptive to using a floorcare specialist?
A: Among Starnet members, our greatest strength is in Class A corporate facilities. We have pockets of success, especially within high performance coatings, in healthcare, and the same holds true in the higher education and government sectors.
We have seen growth in hospitality on the carpet side for both rooms and public space. Ten to 15 years ago, most of this work was done in-house, but now it’s often contracted out. It’s a tremendous amount of square footage, so there’s nice business to be had.
Q: Some contractors brand their maintenance business with a different name. Why?
A: It gives them the opportunity to do work for other commercial flooring contractors in the marketplace to avoid “bringing in a competitor.”
Q: Who normally makes the decision on what cleaning firm to use, and what is the best approach in convincing them to make a change?
A: Consensus purchasing is a growing trend, so multiple people may be involved in the purchase decision, including individuals in the facilities, procurement and finance departments. That being said, a floorcare contractor will typically start a conversation with the facilities team.
The best timing for change is when a new floor is installed, and there are two approaches to doing this. If the floorcare contractor is working directly with the end-use customer, it’s good to talk about floorcare offerings on the front end, even at specification. If a general contractor is involved, the flooring contractor might not get a chance until the walk-through or when they are sharing information on installation warranties.
Q: Have you seen contractors enter the maintenance business and then exit? If so, why?
A: Yes, that has happened on a few occasions. The two key reasons for failure are that the division manager didn’t hustle for work, and the ownership and sales teams didn’t embrace the business and bring opportunities.
Q: Does performing maintenance work provide the contractor more insight on which floorcoverings last and which fail prematurely?
A: For sure! From the carpet perspective, those in the maintenance business see first-hand the importance of quality fiber, backing and construction. Salespeople that understand maintenance are a greater value to the end-use client. In addition, having a floorcare division also helps salespeople understand which flooring types are appropriate for different areas.
Q: Please share with us a short list of companies that make up the products that are used in this business and what they specialize in.
A: XL North-manufacturer and supplier of cleaning chemistries and finishes for carpet, upholstery, vinyl, rubber and ceramic. They have an excellent website for training on several flooring types and stain removal.
Neverstrip-high performance coatings for resilient, concrete, stone and terrazzo. Neverstrip also has an excellent grout colorant and coating system for ceramic and porcelain.
Foaminize-this is a relatively new company that has an extremely effective low-moisture foam encapsulant carpet cleaning system that is highly productive and delivers outstanding quality.
Though some Starnet members were in the floorcare business prior to the actual launch, the co-op began focusing in this area in 2012 with the mission of providing consistently clean, healthy, long-lasting floors to the commercial market.
Today, approximately 25% of Starnet members are dedicated to the floorcare business, with more joining every year. Last year, the organization saw a 15% growth in locations, and it is hoping for the same in 2018.
For Starnet, the benefits of having a floorcare division are many. It raises awareness of the organization among end users and increases its luster. It introduces the membership to a service that they probably wouldn’t have offered on their own and yields better collaboration with both end users and vendor partners.
Each year, more Starnet members choose to diversify into this profitable business. Today, the business stands as follows:
• 46 members, compared to 40 in April 2017
• 67 locations across North America
• over 300 full-time technicians
• 172 service vehicles
• 276 counter-rotating brush machines
• over 7,000 bank branch cleanings annually
• over 50,000,000 square feet of hard surface cleaned annually
• over 200,000,000 million square feet of carpet cleaned annually
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