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Mistakes that can kill your business

January 16/23, 2017: Volume 31, Number 16

By Ed Fountaine

Mickey Mantle struck out so often early in his rookie year management sent him back down to the minors. Peyton Manning threw a career-high 28 interceptions in his first season with the Indianapolis Colts. George Lucas’ directorial debut, “THX 1138,” was the box-office bomb six years before he made “Star Wars.”

In short, everyone makes mistakes. But as the saying goes, “Life’s greatest lessons are usually learned at the worst times and from the worst mistakes.” FCNews spoke to several flooring retailers who, like Mantle, Manning and Lucas, stumbled a bit coming out of the gate but applied those painful lessons to get back into the race.

George McMurtry, owner
America’s Carpet Outlet, State College, Pa.
Screen Shot 2017-01-16 at 11.43.08 AMDespite having a Bachelor of Science in Economics from Penn State University, when George McMurtry opened America’s Carpet Outlet in State College, Pa., he struggled to deal with what he calls his “just-because” costs—the everyday expenses that come with running a business, over and above what each individual job might cost.

Not budgeting properly—not really understanding the impact of non-job-specific costs—is, to McMurtry, the single biggest mistake a small-business owner can make.

“The biggest mistake retailers make is not paying attention to their profit margin, not understanding what their overhead costs truly are and how that impacts their bottom line,” he said. “Just because I’m open [for business] I have certain expenses. We have rents; we have taxes; we have insurance; we have utilities.”

This was something McMurtry didn’t know in the beginning and a lesson he learned the hard way.

“We opened a little more than 20 years ago, and I thought I knew a fair amount about flooring and a fair amount about selling and about our product,” McMurtry said. “But I didn’t know nearly enough about running a business. It took me five or six years to realize that, if we’re making money on every job, how come at the end of the month I’m not seeing my bank account grow? Why am I still struggling to pay some of our bills?”

According to McMurtry, getting a handle on “just-because” expenses by taking a look at where you write checks every month is the key to correcting a common but consequential mistake.

Screen Shot 2017-01-16 at 11.43.14 AMDavid Hage, managing director
State Contract Carpet Co., Framingham, Mass.
With family in flooring for over four decades, Dave Hage and his brother Mike are looking to make their own way in the business. According to Hage, one mistake they’ve made was being too aggressive at times and over-extending themselves when it came to taking on new work.

“My brother and I were the younger generation, and we were pretty hungry to grow and get any business we possibly could,” Hage said. “I think we realized sometimes that can be a mistake, too. When you’re trying to grow you might have to turn down a job or two.”

The reason, Hage explained, is some jobs present issues with timing or moisture. “What I’ve learned is that time is also worth money. So sometimes there are opportunities that you missed because you get caught up trying to grow too fast.”

It’s not just a difficult job that should be turned down at times, Hage discovered. “Maybe it’s a difficult customer. Our philosophy is to do everything we can for our customer, but I think there comes a time where you’ve got to decide whether it’s feasible because there’s also a business side to it.”

According to Hage, another pitfall to avoid is underestimating the importance of your installers. “My dad taught me that the installers are by far your most important asset.”

Screen Shot 2017-01-16 at 11.43.22 AMLarry Lauger, managing director
Lauger’s Carpet One Floor & Home, Findlay, Ohio
Larry Lauger, an Air Force vet, was thrown into the deep end when he took over Lauger’s Carpet One after the sudden death of his father. With limited knowledge of the flooring business, he was literally starting from scratch.

“My biggest mistake was learning who to trust,” Lauger said. “You’ve got all these folks trying to sell you advertising, trying to sell you everything under the sun. You’ve got to be able to pick through what’s good, what’s bad and just be able to say, ‘No, I’m not interested.’”

Lauger started out in the Air Force, working in the VA when his father, who founded the business, got sick. “Monday they said he had pancreatic cancer, by Friday he was dead, and Saturday they said, ‘OK, you’re in charge.’”

Lack of experience wasn’t the only obstacle. Lauger took over the company at the point in time when the housing bubble burst. With very small funds to work with, Lauger attributes the company’s survival to his staff.

“You’ve got to have good people working with you, and the big thing is being able to trust your people,” he said. “I had to fire two people when I took over. They didn’t like me at all.”

Screen Shot 2017-01-16 at 11.43.30 AMFred Scharm, owner
Scharm Floor Covering Des Plaines, Ill.
In his 13 years running a business his father and mother started 46 years ago, Fred Scharm has learned to avoid a mistake common to any company—trying to manage an employee who can’t cut it.

“Employees are probably the most challenging [part of the business],” he said. “I have six employees, and we depend on each one to do the things we need them to do. Let’s say my warehouse guy is having problems at home and he comes to work with that, doesn’t feel like working, and pushes it off to the rest of the team. The team falls behind in their work, and it gets clogged up.”

Mistakes can be made in trying to train an employee who simply fails to understand what is expected of her. As an example, he cited a former employer, a showroom coordinator, who kept making the same mistakes over again. In the end, Scharm had to make the tough call.

“I’ve had to let some people go,” he said. “It’s one thing if you’re in a learning process and you make a mistake. That’s pretty common for everybody. But when you make the same mistake the second time, now you’re a little suspicious. When it goes on to be a repetitive thing and they’re making the same exact mistake over and over again, then that means they’re not learning.”

According to Scharm, employing people without experience in floor covering is a stumbling block. “What I’ve learned is you need to hire people from the industry,” he said. “With flooring, there are so many moving parts: the carpet, the tile, the laminate. There are so many different things you need to learn, and if you can’t grasp that it’s very difficult. If you’re in the flooring industry, you’ve already got that concept and know what it’s all about.”