Contractor’s Corner: When commercial trends change – November 2024

By Dave Stafford

Just when you’re feeling comfortable and your marketing engine is firing on all cylinders, it seems inevitable that along comes a change that forces you to make expensive course corrections. Diversity comes in client tastes, mill offerings and specs from architects that require you to adapt or lose sales. Rather than miss out, make adjustments that keep you competitive and viable by adding a source of supply, a new market niche or personnel upgrades. Take a deep breath and welcome the opportunity to excel, rather than gnash your teeth at yet another expense.

PREPARING FOR CHANGE
Examine your marketing niche allocation, product focus and supply lines. What is selling? Where are you not competitive? What is causing problems in deliveries and installation? Listen closely, and you’ll hear from your field supervisors when certain products are taking an inordinate amount of time to install or pass inspection. Which mills are keeping up to date with new and exciting products. Where is technical support lagging or deficient, or, worse yet, where has the claims process become a nightmare?

Sales personnel tend to cover up their failures to close sales, but when prompted, they’ll reluctantly discuss their “reasons for losing sales.” A productive sales meeting can be one where the focus is on new products, better pricing and key dealer advantages. This may be part of a quarterly or annual review: “Jeff, where do you see the market going? Where do you feel we could improve? Are you seeing specific problems with the client or particular interest in new areas? What products do you wish you had in your arsenal? How might this new product fit in, and do you see yourself with sales opportunities?”

An idea came up during one meeting about a new type of contract that was for a fixed price and term rather than the typical “single bid/single award” type, a specific category of federal government term contract. Its pursuit began with conversations with a willing senior mill rep and a mill vice president, as well as a commitment to their top commercial carpet lineup. Then, two frustrating years of product testing, submissions, protests, finally, an award of our own GSA contract. This resulted in millions of dollars in sales and an enduring relationship that opened doors that would have been impossible otherwise; our gateway to a 40,000-yard carpet project. And the contract was for a five-year period and a 20-year term.

We were not so fortunate in other areas, though. We exited one niche because we had to stock too much inventory to meet delivery times and were unable to upgrade pricing levels. It was just too competitive, always a battle to get change orders and collect accounts receivables. Another was dropped when government regulations changed, forcing a level of training and compliance impossible for us to meet. In one area, we were quite successful and profitable; however, the hidden cost of after-hours work and the toll on our available installation teams affected other profitable areas of our business, so we found it better to exit. One cannot be all things to all people.

PUTTING IT INTO PRACTICE
When the strong introduction of carpet tile in lieu of broadloom began, led by companies like Milliken and Interface, it ushered in a wave of new products; first proudly showing off the seams, then often competing to see how closely the finished product installation could mimic broadloom. This quickly progressed to where one could not tell if the new carpet was squares with patterning to disguise seams or 6’ or 12’ broadloom. We became an advocate of carpet tile and invested in equipment and training that allowed us to install in the occupied workplace, especially those with systems furniture. We had something new to sell that could be easily demonstrated.

To capitalize on new opportunities, you may need to update your installation prowess. “Vertical lift” installation is an example. It became the new buzzword and kicked off a new, profitable area that allowed us to land corporate and government term contracts for years. Whenever you add a new or unusual line of products, there is always a learning curve to proper installation. Certain installation teams are prone to accepting status quo, while others are eager to accept new ideas. Here is where publicity, promotion and contests will create the sense of excitement you need to kick things off. The mill will often help with this by offering spiffs or trips and onsite training.

How does your installation manager and his team feel about this new direction? In the case of our transition to carpet tile, my installation manager told me, “We have a couple of teams that have the right mindset to do this type of installation; however, they would have to focus on this exclusively. It is not just training in the use of the equipment but focus on getting it right the first time, no exceptions.” He was right. Training and individual instruction in professional conduct was frequent and ongoing. We jokingly referred to some of this as “charm school,” and no one was exempt. You attended, learned and passed tests, or you didn’t make the team.

Oftentimes, you are forced into these new products due to mills’ influence with notable architects and designers for interior space planning. Or it may be a competitor capitalizing on the dilemma of how to replace old, worn broadloom underneath “acres of systems furniture.” One facility manager said to me, “I have the budget for new carpet or carpet tile, but I cannot afford to shut down our office and pay for breakdown of office cubicles while installation is done.” One county government manager stated privately, “You figure a way to get this recarpeting done with minimal disruption, and I’ll figure a way to get you the job.”

A mill leader in cushion-backed carpet tile helped us land one of our first renewable county government contracts for carpet tile and vertical lift installation. This resulted in projects for numerous large library facilities and government offices, and several million dollars in profitable sales. The contract we won also allowed other local facilities to “ride a local contract” even in nearby states without the need or expense for bidding out projects! With the right marketing, it wasn’t a question of winning a bid but identifying those who had a need and the budget. This is just one example of installation expertise driving a complete line of products. Look for those unique opportunities any time you’re presented with new product introductions.

Advertising and financial requirements are all part of a new program. How will the mill be part of your rollout of the new line of products? Will they participate by underwriting some of the expense; will they actively be part of your sponsored trade show format by exhibiting? Will they go so far as funding an advertising budget and help with your print media and website design updates? A lot of this will depend on your clout within the geographic area and the volume you may have done with them in other products. Are you going to be their main conduit for sales within the area, one of a few or many? If you are buying into the new line and are convinced of its viability, it’s best to see upfront how far the partnership will extend and for what length of time.

This leads into your financial requirements for certain purchase levels. Can you afford this new venture’s entry? You must have a credit line that will accommodate the expected level of new purchases and not squeeze other areas of your business. Is their offering commensurate with the volume they expect? Terms, shipping methods, priority handling-all factor into the package, including rebates as your volume builds. Try to get these details in writing rather than vague assurances.

REVIEWING VIABILITY
Even with the best laid plans, not all forays meet with success. What volume level, profit picture and overall acceptance must be met to continue? Pick an initial review term that is reasonable. We once ditched a promising line after 18 months due to its installation complexity, risk and lower-than-expected profit.

Most significant product introductions land at your door by way of your mill rep. First, they present an abbreviated pitch to you, hoping you’ll allow them to present to your sales team in a more formal setting. As you review, you’ll be asking yourself and the rep, how will this fit with the company’s marketing direction, and will this be a major change or disruption?

Frequently, I was faced with making those decisions and posed the following questions to both myself and the mill rep: Is there any interest in this type of product? Have we been down this road before? Do we have the right personnel and client base for this newest line; what about an in-house or adaptable skill set for installation? Will this be an add-on or a completely new product range? What will be the probable return on investment? How will the mill manage their introduction and key dealer selection in our geographic area? How will pricing be managed among dealers? How will this be promoted to the design community? What commitment is the mill looking for from us? How will training be accomplished with our sales and installation personnel? How complex is installation and what technical resources are available for field assistance? What spiffs and mill credit line will be offered?

After a review of the answers, in probably more than 50% of the cases I declined to proceed. Key reasons included single-tier pricing for all dealers, high investment in training for personnel, lack of field technical support, incompatible fit with our current client base, lengthy payback and risky or dubious financial return. When I had doubts, we scheduled a mini-presentation among our most adept sales personnel, and perhaps our installation manager. After we got a consensus, I still made the decision, but it was usually a better one.

Should we hire dedicated personnel to focus exclusively on this line, perhaps a sales and specifier team, rather than depend on the mill’s efforts or the general efforts of our current crew? There had better be a big payoff if you are starting down this path; it may be several years before you see a financial return. Factor this into your cost of doing business-does it still make sense? Do you have a large enough geographic area with client potential to warrant this effort? Will you be better off setting up a satellite company to limit your risk and reputation? If you are considering new personnel, see if you can hire someone with successful experience in that area. While you may have to pay a premium, if you are astute, you’ll reduce the learning curve and your frustration.

Copyright 2024 Floor Focus

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