Contractor’s Corner: The next gamble in the contract flooring sector – July 2024

By Rob Hailey

Years ago, I returned home from the Las Vegas Surfaces convention, and my lovely wife Kathy looked at me as I walked in the door and asked, “How much did you lose?” Amazing how a woman needs less than 30 seconds to read her husband! I immediately went on the offense, reminding her that our flooring and tile business was, essentially, gambling in the commercial construction sector.

I elaborated: We estimate quantities from plans that are often incomplete or lacking in clarification. Our estimators or support teams make mistakes occasionally. We bid to clients who do not always intend to pay for services and products supplied (certainly not on time). We purchase materials from manufacturers and distributors that frequently deliver products that are not first quality. We hire laborers, who might be having a difficult day, to do the installation.

After listening, she informed me of how the $800 I lost at the tables could have better been used, then suggested I take out the trash. Our marriage survived the $800 loss, and since then, our business, Howard’s Rug Company, has prospered. It has created a secure and comfortable financial life for us, and we feel truly fortunate. However, the business, as it was then, continues to be a controlled gamble.

WHAT GOES AROUND COMES AROUND
With the vertical integration of the commercial carpet business beginning in 1995, it was a new game. The basic concept behind vertical integration held that a manufacturer like Shaw Industries (Spectra), DuPont (DFS) or Interface (Re:Source) could control their destiny by owning the three parts of the business that contributed to the sale. These suppliers could make the yarn, produce and manufacture the product, and own the flooring contractor that sold and installed the final product. It looked like the ivory tower guys had an innovative idea.

The “Big Three” bought many of the best flooring contractors in the largest markets. Back then, an Interface representative told us outright in a luncheon review that if we did not sell, Howard’s Rug Company would not be in business much longer.

We had a couple of opportunities to talk about selling, but we decided to sit tight, continue grinding and keep servicing our customers. It was a tough decision to continue to work and not take the buyout, but Howard’s grew during that time, as customers did not like the restrictions this new system tried to place upon them. Thus, staying independent turned out to be a successful gamble.

Today, national third-party roll-ups are again in vogue. Lots of Baby Boomer-era entrepreneurs are cashing in. I do not blame them. The future is murky; the world is in chaos. The Covid experience changed how commercial building space is used. If the market doesn’t need as many buildings and as much square footage, does that equate to less work on the horizon? Fortune teller economists say, “Watch out for 2030.”

In truth, it’s always been like this-nobody can read the Tarot cards. Every generation attempts to make business less risky and more profitable through procedure, protocol, systems and technology. While these can certainly streamline tasks effectively, there is, potentially, overconfidence in technology’s efficacy at eliminating risk. But technology does not remove the core truth of business, which is that business has always been and always will be a gamble. Historically, the flooring and tile business has been better than most industries because, due to the immutable laws of gravity, people must always walk on something that eventually will wear out. But this only ensures some amount of demand and does not mitigate the essential hazards of doing business.

FAVORABLE ODDS
In a December 2014 Floor Focus article, I had a chance to talk about the future of our family business. Quoting that article, “With both a son and son-in-law working in the business, we are not interested in selling to a third party. I am confident that we want to keep the business in the family.” That was ten years ago.

Since then, the world has changed and, with it, Howard’s Rug Company. But the business continues to take care of the next generation of our family and our long-term associates. Despite continued risk, we are prepared to meet the future and remain a viable family business. It’s done with hard work, expansion of services and products delivered by professionals, maintaining real relationships, talking to people in person and rewarding our great associates with opportunity. We are not planning to go anywhere.

The question being asked by many is, “Can an independent, family-owned flooring and tile business survive and compete with the larger multi-location corporate companies?”

The answer lies in our history. We were able to do exactly that-and thrive-when DuPont, Interface and Shaw purchased many of our worthy competitors. Our business grew dramatically starting in 1995 when the vertical integration concept was conceived and implemented. Nowadays, we have more history to fall back on, more customers, more opportunity, a better reputation. We have learned more about what our customers want and need.

Unlike contractors run by roll-ups, we don’t need to work out of town unless we want to; we don’t live and die on growth incentives or spend countless hours calculating marketshare; we aren’t bogged down by levels of management; and we aren’t too burdened by meetings and initiatives to get the actual work done.

As independent operators, we can focus on our local market and thrive based on the relationships we build. Everyone here at Howard’s Rug is a responsible entrepreneur. We have a culture of learning, sharing and performance. Our staff, from the warehouse to the accounting department, understands that we are a service business. We like the odds of this ongoing gamble.

Copyright 2024 Floor Focus

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