How one family turned a trade deal into a 45-year business: Best Practices - June 2017

By Jessica Chevalier

It was 1972, and Lee Smith was a Maryland-based homebuilder facing a dilemma: the man for whom he’d recently built a home could not afford to pay for it. Smith offered the man a deal: he’d give him the home in exchange for his floorcovering business and inventory. The man accepted, and Lee took ownership of The Carpet Wheel, a business today run by Smith’s children and grandchildren under the name Value Carpet One.

While suddenly taking ownership of a wholly new business in a new industry seems potentially fraught with peril, to say the least, Smith was geared for that sort of gamble. “My grandfather was a wheeler and dealer, an entrepreneur in every sense of the word, a risk taker,” says Chris Adams, current president of the business.

At the time Smith acquired The Carpet Wheel, it largely served the homebuilder market, which was suited to Smith’s other business interest, but in the 1980s, the second generation began focusing more on retail. “The home construction market in the early 1980s was tough,” Adams explains, “so the company increasingly tried to drive income from the floorcovering business.” Today, while the company still has holdings in real estate, floorcovering is its primary focus, and Value Carpet One’s business is divided almost evenly between residential and commercial work. “For the past ten years, commercial has been the more important profit driver. Retail has been tough in this market since the recession.”

The Salisbury, Maryland-area-situated on a peninsula with the Chesapeake bay to the west and the Atlantic coast to the east-that Value Carpet One has long served is both a resort and agricultural community, situated at the crossroads of Routes 13 and 50. And while it is also a university town, home to Salisbury University, Adams considers it very much “blue collar, small town America.”

For that reason, the customer’s decision to spend their discretionary income on floorcovering generally, and with Value Carpet One specifically, is one that Adams doesn’t take lightly. “Our company has always viewed ‘the competition’ as beyond direct competitors,” he says. “It is important to realize that when people are making home improvements, that can mean electronics or furniture or a kitchen remodel. As a competitor seeking business, we recognize that we’re competing for scarce discretionary dollars as consumers come out of the recession. More than explaining why we’re the best floorcovering store in which they should spend their money, we have to explain why their investment in flooring is the best decision-the best long-term investment. Oftentimes, customers are deciding between redoing their kitchen or changing up the flooring throughout their home, and we have to be ready to explain why flooring provides something of the greatest value for the dollar spent.”

Once Value Carpet One has the sale, Adams believes that the company truly has an opportunity to differentiate itself by providing experience. He explains, “Any number of companies could sell floorcovering. I believe being able to deliver a finished product is the differentiator. People are willing to spend more to have the quality that goes beyond product. Some of the larger companies tend to miss the personal touch that comes with a complete install-being part of the process from the day the customer walks in the store to the day the installer leaves the customer’s home. We invest time in making sure that we finish what we start-making sure we sell a quality floorcovering package.”

In a fashion similar to other top retailers, Adams also believes that a mistake is sometimes the best opportunity to impact a customer. “We’re not perfect and when things go wrong sometimes that’s the best chance to show the customer what a good company we are,” says Adams. “We do right by the customer. We take care of them, even if it means that the business, ultimately, loses a little. When you are in a customer’s home, even if the job goes perfectly, it is still an inconvenience. They want you in and out quickly. They don’t want things to linger, and they don’t have a lot of patience for companies that don’t make things right in a timely manner.”

Value Carpet One sells all the flooring categories and estimates that carpet accounts for 60% to 70% of total sales. In soft surface, Lees and Karastan are particularly important brands for the retailer.

Women in their 30s and 40s drive Value Carpet One’s business-often shopping on behalf of their upwardly mobile, young families. They are often trading up entry-level carpet products for quality products that will survive their kids and pets.

On the hard surface side, Adams notes a strong demand for LVT and LVP. “Customers like the appearance of hardwood,” says Adams,” but they don’t like the maintenance. It’s the same with ceramic: they like the look but not the cold feel or the maintenance of the grout.” Adams believes that this is representative of an important trend today: customers want to spend more time living in a space and less time maintaining it.

There is no question that labor is a persistent challenge for many floorcovering retailers and commercial contractors. Says Adams, “In hiring, we are looking for basics-respect for the boss, arriving at work on time; we can train them on the rest. On the sales side, we have been fortunate to have a stable team, but on the labor side, we have the same general challenges as the rest of the construction industry. It can be very lucrative to be in construction trades, but young people have a hard time understanding the opportunity. Part of the problem is that, for a number of years, our country has spoken to how important four-year college is, and most people coming out of high school see that as the only path forward. I don’t believe that’s true. For people who like to work with their hands and have a good work ethic, there is a high demand in trades. When you find someone who has the right skills and a willingness to work, the sky is the limit.”

But finding laborers isn’t the only challenge floorcovering and construction trades face with regard to labor. Both federal and state governments’ recent efforts to redefine “employee” and “contract laborer” has added a great deal of stress for those who use contact laborers as part or all of their labor forces.

In 2013, a Maryland law in this vein, the Workplace Fraud Act, threatened to impact both Value Carpet One and other Maryland floorcovering businesses, not just philosophically but financially. “Maryland created a law targeting independent contractors and the companies using them,” explains Adams. “It was a flawed law because the state had a tremendous amount of power to commission investigations, and once the state came to an administrative decision, it was undebatable. They were coming after my business for $500,000, along with the independent contractors we were doing business with. Several friends from the Mid-Atlantic Floorcovering Association-Chuck Bode of CB Floors and Kurt Zanelotti of Contract Carpet Systems- helped me in that fight. We fought on the basis of unconstitutionality and the lack of due process. The bill was impossible for flooring businesses to comply with the way it was written.”

Amid that fight, Adams grew tired of watching representatives with no experience running a business making decisions that impacted businesses greatly, “What I found through that experience was that there were many career politicians who lacked a business owner’s perspective. It upset me. I felt that if business owners were politicians, these laws wouldn’t exist.”

So Adams decided to throw his hat into the political ring. In January 2015, he was elected state representative of Maryland District 37B, which encompasses the counties of Caroline, Dorchester, Talbot and Wicomico. He serves as a member of the Economic Matters Committee.

Just this March, when two Maryland state senators introduced state bill 1192, which addressed the difference between an employee and a contract laborer, Adams was able to activate the membership of the Mid-Atlantic Floorcovering Association to work against it. Ultimately, the bill was withdrawn from consideration.

Adams assumed that he would head to an East Coast city and climb the corporate ladder after completing his master’s degree in business administration in 1996, but meeting his future wife challenged that notion. Adams’ priorities became more about stability and predictability-opportunities he realized the family business would provide him. Two decades later, it’s clear that he believes he made the right decision. “There is nothing better than working with family,” he explains. “It isn’t always easy, but there’s no one you can trust more. When things are going right, they really go right. I’m very fortunate to be in a family business where we are all going in the same direction.”

Today, Adams and his brother Buddy, who runs the operations side of Value Carpet One, both have children in or entering their teens. None of the kids work in the family business yet, largely because the elder generations feel it is important for them to go out and learn the value of labor elsewhere before stepping in, but succession is the long-range goal for the family.

“I think our most important goal is to see the family business extend beyond my generation,” says Adams. “With most family businesses, it’s hard to get through the third generation. We’ve done all the right things to organize a succession plan in a way that maintains integrity and ensures that a stable transition happens, but it’s very challenging. Under current federal and state law, it’s hard to figure out how to do this.”

Value Carpet One is a member of both Carpet One for its residential business, and Starnet for its commercial operations.

The affiliation with Carpet One extends back to 1995, and Adams considers it the single best decision that the family ever made with regard to the business. He explains, “At the time, consolidation was happening with manufacturers and distributors, and retailers were increasingly facing competition from the home centers. We had to find a way to compete with brand building, marketing and buying.” Value Carpet One leans heavily on the co-op’s advertising programs and utilizes its micro-website option.

Value Carpet One joined Starnet just last year, in October, and Chris explains why he and his family felt it was the right time to take that leap, “We know our limitations and don’t get overextended. We’re a well-respected company, but the challenge is how we maintain and grow the commercial side of the business, so we joined Starnet. We are building a brand new relationship there and hoping that, in much the same way that Carpet One helped professionalize and formalize our residential business, Starnet will help us do the same on the commercial side. We don’t want to take anything for granted. We see consolidation in the marketplace, both the residential and commercial sides; we want to stay competitive and relevant to suppliers.”

Thus far, Adams believes the relationship is highly beneficial, as it has provided him the opportunity to see differences in how larger commercial floorcovering businesses operate, “It seems like large commercial businesses typically run on different rails-they have different sales teams and installation practices. We are starting to appreciate that to grow our commercial operation, it will require just as much attention to our operating model as we have on the residential side. Most Starnet dealers operate differently than we are accustomed to.”

When the family chose the moniker “Value” for their business, they weren’t referring to the lowest price, but to offering the customer true worth, in both product and service, for the dollar they spend. That’s the same philosophy that the leadership carries today. “We’re not the least expensive, but when the job is all said and done, you get what you pay for,” says Adams.

As for the rest of the store name, Adams explains, “Joining Carpet One was acknowledgement that we are part of something larger,” and leveraging the Carpet One name communicates that to the customer.

Copyright 2017 Floor Focus 

Related Topics:Mohawk Industries, Karastan, Starnet, Carpet One