The rewards of flooring beat the risks for Craft Croswell: Best Practices - Apr 2017

By Jessica Chevalier

Jason McNeel bought Mississippi-based commercial contractor Craft Croswell in January 2015. At the time, he was 35 years old and had spent his early career in construction management. Why leave a successful vocation and enter a field relatively unknown? McNeel had the entrepreneurial bug and believed that his experience working in a parallel field would translate.

Two years in, McNeel has expanded Craft Croswell into the residential flooring business and is actively increasing its commercial reach as well. With his insight into the larger construction industry, of which flooring is a part, McNeel has a unique perspective on the business of flooring: “Flooring is one of the lower risk trades. It’s tamer than other trades.”

THE RIGHT FIT
McNeel, who holds a construction management degree from Mississippi State, had a clear idea of what he was looking for when he set out to make a business acquisition. He was seeking a specialty business related to construction where the owners were at or near retirement age and did not have a succession plan in place. Prior to honing in on Craft Croswell, McNeel reports that he spent three or four years chasing leads and kicking tires, adding “Everyone was just coming out of recession then, and their numbers may not have been where they wanted them to be at the point of sale.”

Craft Croswell was not only local to McNeel but also a business he had worked with frequently on construction jobs. From his experience, he knew that the business had a solid reputation as a contract dealer with four decades of experience, and a friend told McNeel that the owners, brothers Bobby and Bill Croswell-both nearing age 70-were ready to retire.

McNeel didn’t know the brothers personally. In spite of that, he called Bobby and asked him to lunch, where he broached the subject of buying Craft Croswell. The lunch went well. Shortly thereafter, he, Bobby and Bill went to dinner. After that, says McNeel, “We were off to the races. It was a good fit.”
When the sale was finalized, McNeel took over leadership of Craft Croswell immediately, though Bobby and Bill are both still involved today.

RISK VS. REWARD
Why does McNeel judge flooring to be a low-risk venture compared to other construction trades? With the bulk of his experience in heavy construction, McNeel saw first-hand how much those sorts of businesses have to invest before they can make a single dollar. “It is capital intensive with all the big machinery,” he says. “Just to move one yard of dirt, a contractor has to have thousands of dollars in equipment. Flooring is a lot less capital intensive.”

Also, with all that heavy equipment come breakdowns and delays, and, in addition, McNeel points to the fact that many trades are beholden to Mother Nature’s whims, which can both reduce productivity and increase cost. These factors come into play in the flooring business as well, though not to the same extent, as flooring installation relies more on human labor than large, complicated machinery and takes place largely indoors.

McNeel also considers it a significant advantage that the flooring business is primarily material sales. “Because the majority of what we do is material sales, that means the labor-the risk on any job-is reduced as compared to other trades. In the heavy machinery world, there are so many factors outside your control; material is 10% to 15% of what we did there. In flooring, material is 65% to 75% of the sale.”

THE COMMERCIAL BUSINESS
Commercial work is the bread-and-butter of Craft Croswell. The company focuses on servicing the healthcare, education, corporate, religious and hospitality sectors across the Southeast. “We recently completed several million-dollar-plus jobs in Mississippi, Tennessee, Florida and Louisiana, and we are also doing several $100,000-plus projects in Georgia and Texas,” says McNeel. “In the past six months, we have truly worked in every state in the Southeast.” Though Craft Croswell’s territory is already expansive, McNeel has his sights set on even more expansion.

For commercial work, the company offers hardwood, laminate, vinyl, carpet, carpet tile and ceramic. Craft Croswell’s installation teams are divided into soft surface, hard surface and sheet vinyl, which is a growth area for the business. “We are really encouraged about how sheet vinyl crews are maturing,” says McNeel. “That has been a growing segment because there are a lot of healthcare facilities being built right now.”

Craft Croswell, a Starnet member, also has a cleaning division called ProClean. “The cleaning business allows us to be in contact with the client over time,” says McNeal. “We also find that, though a client may not be up for a major renovation, they might want to update an office or boardroom or lobby, and we are more likely to get that work because of our continued interaction through cleaning. It’s no different than a Nissan dealership offering oil changes with a car purchase. It increases interaction, and it’s a good added value for our clients.”

RELAUNCHING RESIDENTIAL
Under Bobby and Bill’s leadership, Craft Croswell started out primarily as a residential business but eventually grew its commercial side and, ultimately, shut down the residential business.

When McNeel bought Craft Croswell, the old showroom-which is about 7,000 square feet-was sitting unused, so he made the decision to re-launch the residential venture. He hired his first residential designer in May 2015, and today has three full-time staff in the showroom. These individuals also act as project managers, following a job from design to completion. “They don’t design and walk away,” McNeel says.

In addition to selling all types of flooring, including area rugs (both pre-made and bound and serged), Craft Croswell’s residential business offers countertops, sinks and hardware. The company’s progression into these other product offerings happened gradually. “One of our designers said, ‘If we don’t offer granite, it’s hard [for customers] to choose a floor and backsplash,’ so we started offering countertops in June 2016. It has been neat to see how that new product offering drives sales on the residential side. Revenue has grown significantly because the countertops drive an increase in same-ticket sales. Sinks go hand in hand with granite.” Craft Croswell then added knobs and pulls, which McNeel reports has also helped increase same-ticket sales.

Interestingly, though residential sales account for only 5% to 8% of Craft Croswell’s total business, McNeel focuses nearly all the company’s advertising on the residential offering. “Our advertising, on the website and Facebook, is all residential. Consumers go online to check us out, and we can sell jobs based on our sites having a residential look. Commercial work is either low-bid or relationship-based. Online advertising doesn’t get us much commercial work. We worried at first that commercial folks would think we were only a residential business, but when we looked at Facebook, we had lots of clicks for residential and nothing for commercial. In a week now, we’re seeing almost 3,000 people clicking through our Facebook pictures of residential projects. Residential drives traffic. Residential is profitable marketing. It keeps us relevant in the community.”

Craft Croswell launched a new website last July. The site is attractive and clean, and contains albums of both residential and commercial projects. The site is directly linked to Facebook, so when the Craft Croswell team adds photos to its Facebook page, the website albums are automatically updated, which enables the team to keep the site fresh with no added effort.

LEVERAGING LABOR
Because of his experience working within a labor-intensive business, McNeel believes labor is an area where Craft Croswell can excel. “We see labor as an opportunity.”

Of course, finding good help is always a challenge. “Good people are always on the lookout for good help,” says McNeel, “and an established business always seems to have better depth [into the labor pool] than a non-established one. People know to come here and ask for work. Businesses starting out don’t have that advantage. At Craft Croswell, we recruit and retain better than most.”

In the heavy equipment world, from which McNeel came, labor is comprised almost fully of payroll employees, so the idea of subs is somewhat new to McNeel. “I would prefer to have everyone in-house,” the entrepreneur explains. “But we have a mix of payroll installers and subs.” Craft Croswell staffs the number of employees it can keep busy 100% of the time and hires subs for overages and work that its in-house teams can’t perform.

Often, McNeel reaches back into his former industry when looking for new employees. “I have a good relationship in the construction community and have lifted out individuals to hire. Pretty much all my new hires have not come from flooring but from construction project management.”

Why is this an advantage? “They have all dealt with flooring,” McNeel says. “Plus, on a job site, units are units; production is production. Flooring may be a different product, but it’s still units and material and labor. These individuals are already trained with purchase orders and contacts. They know how to interface with clients, and they have relationships with the end user. They have a book of business. They bring their clients with them.”