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Al’s column: How to get your team psyched

October 28/November 4, 2019: Volume 35, Issue 9

By Lou Morano

 

Everyone in every organization has a job description, whether written out or not, that includes their regular duties and tasks. (This includes owners such as myself.) If we are operating efficiently, everyone should be pretty much busy with little downtime.

Then we have additional projects that need to get completed. These projects are usually isolated tasks—some are recurring; many are not. Here are some examples: Your showroom may need to get new updated flooring; a new system is needed in your installation department to better handle communication with service calls; creating a better sample checkout system, etc.

As owners, we ask our people to take ownership in a project but they usually don’t get around to doing it. They will give reasons such as, “I will get to it,” “I have been super busy,” “I’ll get on it as soon as I can.”

Well, how would you like to have your people not only take ownership but contribute ideas on what projects should be addressed and have all the projects completed on an agreed date?

Here’s how it can be done: First, you make a list of the projects you would like completed. Then, tell your key people you are going to meet every quarter, and set a date for the first meeting. Explain to them that you would like input from them on what projects/tasks they think your organization needs—whether it is in their department or another department—and bring those ideas to the meeting.

When you all meet, put all the ideas (including yours) at the bottom of an Excel spreadsheet. Then, you explain the goal, which is to assign ownership of the tasks that can get completed within 90 days. Discuss who should get ownership of each task/project. Some people may only have one project assigned to them while others will have several. Next, discuss which projects are a priority. Then, discuss with each person each task/project and a date they feel they can commit to for completion.

Note: It is very important to give plenty of time and even add time liberally so they do not feel pressured. However, the completion date must be within 90 days. It is equally important not to give the team too many projects; you want to set them up for success, not failure. Do this together with your team and address each person individually.

At the end of the meeting, you should have several projects on the Excel spreadsheet with the project name, expected completion date and who is taking ownership of the project at the top of the sheet. You most likely will have projects at the bottom of the list that were not able to make it on the list. Distribute that Excel spreadsheet so everyone knows who is doing what and when their project is expected to be completed.

You will then meet in 90 days to go over all projects that were to be completed. Once you have gone through those projects, you can add some more projects/tasks to the bottom of the list, prioritize and repeat the process. In the unlikely event that one of the expected completed projects was not completed, you have a discussion as to why it did not get completed and get the commitment from the person responsible that it will be done in the next 90 days. When your people understand this process is ongoing and that you are committed to it, you most likely will see almost every project completed by the promised expected completion date and without you bugging them all the time.

Imagine that.

 

Lou Morano started selling carpet for a major retailer at the age of 19 in 1981. In 1985 he and his father incorporated Capitol Carpet, Inc., and opened their first full-service retail store in 1986. Today Morano operates five retail stores, including a commercial division, under the name Capitol Carpet & Tile and Window Fashions.

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Al’s Column: Weighing the impact of the ‘Wayfair’ case

October 14/21, 2019: Volume 35/Issue 8

By Roman Basi

 

The recent Supreme Court decision (South Dakota v. Wayfair, Inc.) has dramatically impacted online retailers and increased possible successor liability risks in terms of merger and acquisition transactions.

Prior to the Wayfair ruling, the “physical presence” standard set out in Bellas Hess and Quill controlled online retailers’ necessity to pay South Dakota sales tax. The physical presence rule allowed out-of-state retailers who sell their products or services online to avoid the state’s sales and use taxes due to a lack of a brick-and-mortar business in the state. However, under the South Dakota Statute affirmed by the Supreme Court, online retailers are now required to pay South Dakota sales tax if their business has a “substantial nexus" with the state. This is reached when the retailer has sold more than $100,000 in in-state sales or completed 200-plus transactions in the state on an annual basis.

Following the Wayfair decision, over half of the states have developed and are implementing very similar requirements for out-of-state retailers. The Supreme Court found the physical presence standard not only incentivized the avoidance of state sales tax, but cost states an average of $8 billion-$33 billion per year in taxes. The physical presence standard is being phased out due to modern technological advances providing online retailers with the ability to reach virtually any U.S. consumer, and avoidance of states’ sales tax has become a multibillion-dollar issue.

It’s important to understand the sales and use tax liabilities in the context of buying or selling a business involved in online retail. This increasing development of case law has led to more exceptions to the rule of buyer non-liability. The ABA published a memorandum in January 2018 on successor liabilities in an asset transaction that has greatly increased its relevance in light of the Wayfair decision. In the memorandum, there are four exceptions of successor liabilities mentioned: (1) the buyer (successor) assumes the seller's liabilities expressly or impliedly; (2) the transaction in substance constitutes a merger or consolidation of the buyer and seller (de facto merger); (3) the buyer is "a mere continuation" of the seller; and (4) the intent of the transaction is to defraud seller's creditors. The most common of the four exceptions is the de facto merger. This exception is particularly influential if the transaction involves a continuity of management, general business operation and equity ownership, assumption of seller’s ordinary course business liabilities, physical location and seller’s dissolution following the sale.

The question becomes: how do the successor liability standards affect the buyer of a business that has online retail sales? If an online retailer does not follow the varying state-by-state requirements, it could result in a failure of sales and use tax payments or payments of the incorrect amount. This may result in unforeseen liabilities when a creditor comes seeking repayment. The best way to avoid any potential successor liability issues is with vigilant due diligence and strategic pre-transactional planning focused on the above-mentioned risk factors.

A strong M&A team will greatly help limit any potential stress during a transaction that may result in a buyer withdrawing their interest due to successor liability. Due diligence focusing on specific state requirements regarding payment of sales taxes and the elimination of state tax liabilities prior to closing is key.

 

Roman Basi is an attorney and CPA with the firm Basi, Basi & Associates at the Center for Financial, Legal & Tax Planning. He writes frequently on issues facing business owners. For more information, please visit taxplanning.com.

 

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Al’s column: Creating a great brand experience

September 16/23, 2019: Volume 35, Issue 7

By Chris Wallace

 

If you asked most people to tell you their favorite flooring brand, they’d struggle. In fact, they probably wouldn’t have one at all—and with reason. Brand recognition is incredibly low in the flooring industry, research shows.

It isn’t easy to be a brand in the flooring sector. The product goes from the manufacturer that makes it to the retailers that sell it, and somewhere along the way the brand story sometimes gets lost. Need proof? Just think about the last brand that made an impression on you. Chances are it offered more than just a good logo and a clever ad campaign. You probably had a stand-out experience with it.

The customer experience can be difficult to master, especially when you don’t control it. Because flooring purchases generally take place in the retail space, the store selling the product is in control of how customers perceive the brand. Essentially, once the product leaves the warehouse manufacturers have little say in the experience consumers have with the brand.

Salespeople often immediately tell customers about whatever special they’re running without having any real discussion about those customers’ needs or preferences. They’re selling the stock product at stock price to make the best mark-up.

Even though this secures some sales for the brand in the stocking slot, it doesn’t build awareness. As a result, the interaction between sales and the customer ends up being almost entirely about price and not about quality, value or how certain brands can best meet customer needs.

More than that, if the experience leaves customers knowing nothing about the brand they purchased, their impressions are primarily shaped by the rep who made the sale.

All this begs the question: In this complicated multi-player industry, how do flooring brands and retailers work together to make a name for themselves and create a solid customer experience? Following are three steps to make this happen:

1. Shift from product to brand conversations. Instead of talking with your suppliers about whether their products are better than they were last year, come to the table ready to press them for a distinct, clear message that will help you best meet your customers’ needs. Don’t settle for the answer that a product is more durable or more stain resistant, etc. Ask for differentiated brand stories and experiences that go beyond features and benefits.

2. Change the focus of the sale. You aren’t just a customer to your supplier—that line of thinking is limiting. Supplier support shouldn’t end as soon as the customer interaction begins. Ask suppliers to provide the necessary tools for you to drive a great branded in-store experience for the end customer. They can give you customized sales conversation guides, tips on how to make the brand promise part of the product installation promise and peer-to-peer best practice sessions. Telling great brand stories enhances interactions and creates a connection between the customer and the brand. Don’t go it alone—make sure you work with your supplier to set the experience apart.

3. Set expectations for the experience. When manufacturers help you sell to consumers in a way that builds their brand and stays aligned with their messaging, you can together set standards for how to execute the experience. Start with a dialogue by sharing with your suppliers what’s working and what isn’t. The more you can marry your daily reality with manufacturers’ brand visions, the better the customer experience will be.

 

 

Chris Wallace is the president and co-founder of InnerView, a marketing consulting firm that helps companies transfer their brand messages to their customer- facing employees and partners.

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Al’s column: Make sure your vendors are true partners

September 2/9, 2019: Volume 35, Issue 6

By Lou Morano

 

(Editor’s note: This is the fourth installment in a multi-part series.)

For many years most flooring retailers shopped vendors according to the best value—just like many of our customers—and we often purchased from those vendors. Over time, however, we noticed that some of those vendors were not up to our standards as it pertained to the level of customer service they provided. We also experienced a much higher rate of claims from some of those vendors.

It is of the utmost importance that we set proper standards for the vendors we deal with. Some of our standards include quality with minimal claims, even on commodity items. The vendor must have competitive pricing, and their claims department must deal with any issues in a reasonable and timely manner. In addition, the culture of the vendor and their representatives, from the top down, must match ours. We chose to eliminate vendors that were good partners, but unfortunately their quality control was terrible and caused too many problems. We also severed ties with vendors that made quality products and were priced competitively, but their culture was all about them and not about us nor the consumer.

When we deal with vendors that are aligned with our values, not only is it a pleasure to do business with them but it is also a mutually beneficial relationship. When you must jump through hoops or have to constantly contest and argue about scenarios that are obvious or are “just the right thing to do” to properly service the end user, then that vendor needs to be eliminated. On the flip side, the vendors sometimes have to contend with unscrupulous retailers who try to take advantage of them in claims situations and make it difficult for the vendor to determine the real truth. Therefore, it is paramount to create long-standing relationship with your vendors, building trust along the way so on those occasions when you are in a “gray area” the vendor can make the right decision based on the trust in your relationship.

We carry this thought process vertically with the vendors we choose to deal with, the people we hire all the way to the installers we employ. We strive to only work with people who have a similar value system, ethics and standards as our own. What that looks like after many years of weeding out the “undesirables,” for lack of a better word, are mutually beneficial relationships with our vendors, installers and employees—something our customers notice through our high service levels. Before we hire anyone or deal with any new vendor, we ask ourselves: “Do they hold up to these standards?” If not, we move on. If they do, we move forward. If they prove to not live up to those standards, then they will be replaced.

We also hold ourselves to those same standards. In many instances we make decisions that cost our company money because we defer to our customer in all gray areas. This means that unless we can know with absolute certainty that a situation is not our fault or the manufacturer’s fault, we usually defer to our customer. There have been many times where we have replaced floors we believed were the consumer’s responsibility. But we replaced it anyway, because when we are not 100% sure—and when we do not have irrefutable evidence—then we do the right thing and take care of the customer.

 

Lou Morano started selling carpet for a major retailer at the age of 19 in 1981. In 1985 he and his father incorporated Capitol Carpet and opened their first full-service retail store in 1986. Today Morano operates five retail stores, including a commercial division, under the name Capitol Carpet & Tile and Window Fashions.

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Al’s column: Mulling an acquisition? Move slowly

August 19/26, 2019: Volume 35, Issue 5

By Roman Basi

 

When buying or selling a company, it is important to understand the intricacies within a merger or acquisition (M&A) in order to circumvent potential issues prior to closing. Those familiar with M&As understand the importance of key transactional aspects associated with these deals, such as the letter of intent, due diligence, purchase price allocations, working capital and purchase agreements.

However, there are intricacies within those aspects that play a major role in a timely closing. This article aims to highlight some potentially overlooked or unnoticed issues that occur in typical M&A transactions. The issues include matters of employee vacation and benefits packages and indemnification through baskets and caps.

In a typical asset sale, the seller would terminate all of its employees, and the buyer would immediately rehire the employees of his or her choice. A challenge may arise when the employees to be terminated have accrued vacation or paid time off (PTO). Depending on a number of aspects, including the state the transaction takes place, the employment agreement between the seller and employee, or the Employee Handbook, the vacation or PTO is either a liability to be paid at closing by the seller or liability to be assumed by the buyer.

Moreover, depending on the number of employees, types of benefits and accrual period, the vacation and PTO can be a large liability that must be addressed prior to closing. It’s vital to understand the type of calculation necessary to adjust for a mid-year transaction in order to best protect your client from overpaying on a liability. Issues specifically regarding employee vacation and PTO can be a point of contention and negotiation between the buyer and seller—hence the importance of recognizing and remedying an understanding between both parties is vital for a timely closing.

Another important consideration that arises in a typical M&A transaction are indemnification provisions, most commonly referred to as “baskets” and “caps.” Indemnification from an M&A standpoint means that one party (generally the seller) will defend, hold harmless and indemnify the other party (generally the buyer) from specifiedclaims or damages. A basket and cap pertains to the indemnification provisions within a purchase agreement that generally serves as the sole source of recovery from the seller for any loss or damages suffered by the buyer as a result of the transaction. Baskets and caps are typically included with the representations and warranties made by the seller in the purchase agreement.

When the seller makes such representation or warranty, indemnification protects the buyer from the seller’s representations and warranties being inaccurate.

A cap is the upper dollar limit of the seller’s indemnification obligations to the buyer. The cap represents the total amount of losses and damages the buyer is entitled to recover from the seller. Naturally, the seller will seek the lowest cap possible while the buyer will attempt to seek no cap at all. This point of potential contention and negotiation must be on the radar of your M&A team. A basket (sometimes called a “deductible”) is a threshold amount of losses and damages the buyer must incur before it is entitled to any indemnification from the seller.

Once the buyer has incurred losses equal to the agreed amount, the buyer is entitled to full recovery of all losses beginning from the first dollar of loss, this is known generally as the “first-dollar method.”

 

Roman Basi is an attorney and CPA with the firm Basi, Basi & Associates at The Center for Financial, Legal & Tax Planning. He writes frequently on issues facing small business owners.

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Al’s column: Ins and outs of concrete subfloor prep

August 5/12, 2019: Volume 35, Issue 4

By Lauren Picard

 

(Editor’s note: This is the first of two parts.)

We have all been there. You show up to a job, ready to perform a quick walk-through with the general contractor or property owner when you realize you’re standing on a dirty, neglected concrete floor that desperately needs your help. Now what?

How you handle the concrete at this stage will directly affect the finished floor. Oftentimes, surface preparation is subbed out to a contractor that specializes in this type of work. But, what if you didn’t have to sub out this work? You could turn this job into a profitable opportunity for your team and business. There are a couple of things that should always be considered on a jobsite when dealing with a concrete subfloor: concrete hardness, moisture emissions and the desired concrete surface profile.

The very first step when performing a jobsite walk-through is to test your concrete slab for its hardness and moisture readings. Concrete hardness should be tested before a job starts to ensure you have the correct tooling to get your job done effectively. The most common test to perform during your walk-through is called the “Mohs Hardness Test.” It’s a scratch test kit with eight points to help determine the strength of your substrate and help you choose the correct abrasive for the job.

It’s also important to consider moisture readings before beginning a job to prevent future flooring failures caused by moisture in an existing slab. A relative humidity (RH) test will measure moisture readings below the surface for the most accurate readings deep in a slab. Another popular way to evaluate moisture is the calcium chloride test, which is used to test vapor emissions rates (MVER) coming through the surface of the slab. Hardness and moisture test results are critical to successfully winning bids and understanding the condition of a floor.

Once your tests are complete and your tools chosen, you’re ready to prep your concrete slab. One of the most underrated steps to installing a floor system is achieving the correct surface profile or “CSP” (the current condition of the concrete substrate, including its texture and roughness) for the job at hand. Note: When you profile a concrete sur- face, you are removing impurities from that surface to achieve a cleaner floor. There are multiple ways to profile a concrete floor—the most popular method being shot blasting. Often specified in bids as a CSP 3, the shot blaster offers the cleanest profile of all tooling options and does a wide range of profile finishes by adjusting the shot size. Another option for profiling concrete surfaces is diamond grinding. The planetary grinder is a great multi-use tool with the ability to remove mastic, prep concrete and polish a concrete floor. These grinders come with a wide variety of tooling options ranging from extremely aggressive abrasives meant to cut through the cap of a slab to incredibly fine resins for refining and finishing a polished floor.

Both surface prep options come in various sizes. Smaller equipment is best suited for residential and small commercial use due to the weight of the units and the limited electrical availability on these jobs. Larger units offer higher production rates for commercial and industrial jobs where heavier units and more power are required.

In the next installment, I will discuss the steps required to fully polish a concrete floor and provide various options to consider for your newly prepped surface.

 

Lauren Picard is national concrete outbound sales manager for Jon Don, which manufactures concrete shavers, scarifiers, shotblasters and grinders. She has nearly 10 years’ experience working alongside contractors and distributors implementing proper profiling and floor leveling throughout the industry.

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Al’s column: Covering all the bases with sign-off sheets

July 8/15, 2019: Volume 35, Issue 2

By Lou Morano

 

(Editor's note: This is the third installment in a multi-part series.)

Many retailers have had to deal with customer complaints over the course of doing business. Perhaps you had a client who though her carpet was defective because there are pulls in it. Or she’s looking for monetary compensation because of the mess your installers made when you ripped out her old ceramic tile flooring to make way for the new materials. “No one told me this was going to happen” is the common response from the consumer.

We all could come up with dozens of other complaints from customers on things that are just normal and customary for the products and services we provide as flooring retailers. Over the years, my sales associates have been diligent in trying to manage our customers’ expectations by letting them know what could—and probably will—happen, yet we still receive complaints. The customer will often claim the salesperson never told her, which could be the case because it would be very difficult to cover all the scenarios verbally.

So how do you address this issue? Over the years we have utilized “sign-off sheets,” documents that aim to cover normal and customary expectations of product performance as well as scenarios that are inherent with the product they purchased. For instance, when we’re on a job that entails a hard surface removal we have a specific document that states the items we normally cover with plastic, and we advise customers on what they need to remove from the area to limit exposure to dust. We also inform the homeowner that the area will likely need to be cleaned after the job is done.

Every product category has its own sheet that must be signed. The sheets are self-explanatory and cover almost all bases. We’ve found this process has drastically reduced customer complaints. First, we educate the customer at the time of purchase to manage her expectations. Second, when a customer states, “I was never told…” we refer to the sheet she signed showing she was indeed properly informed.

Of course, as a retailer who is customer-service oriented, we always do what it takes to satisfy the customer. In the past this has cost us money and eaten into the profits for the job. But now that we’ve implemented sign-off sheets, when there is a situation that is clearly no fault of our own—or the manufacturer—we’ll still take care of it, but at the consumer’s expense.

A perfect example is our sign-off sheet for carpet installations, which states that “seam placement will be at Capitol Carpet’s discretion unless specifically indicated on the signed contract.” During a recent job, we installed a patterned carpet on steps and in a hallway. The consumer wanted the carpet to run in a different direction than we laid it, and she insisted that we change it at our expense. We explained that we did it the correct way and showed her the signed sign-off sheet. She argued she wasn’t home when we measured, and that her husband signed the contract and sign-off sheet. We explained that we are not responsible for lack of communication between her and her husband, but we would replace the carpet at her expense. She agreed.

Bottom line: Our salespeople can’t realistically come up with every possible scenario for product performance/expectations, nor can they come up with all possible installation scenarios. With these sign-off sheets customers are educated, they have realistic expectations of the project and/or products and they have proper maintenance guidelines.

 

Lou Morano started selling carpet for a major retailer at the age of 19 in 1981. In 1985 he and his father incorporated Capitol Carpet and opened their first full-service retail store in 1986. Today Morano operates five retail stores, including a commercial division, under the name Capitol Carpet & Tile and Window Fashions.

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Al’s column: How much is your business really worth?

June 24/July 1, 2019: Volume 35, Issue 1

By Roman Basi

 

You’ve invested your life, money, time and effort into your business. Countless hours have been spent operating, maintaining and adjusting the business to stay competitive and profitable.

All this begs the question: How much is my business actually worth? Plenty of owners could arbitrarily claim a value based on their income and assets, but how many have sat down and had an independent business valuation?

Knowing the value of your business is necessary for a number of reasons. Whether buying or selling your business (M&A), succession planning, estate planning or looking into employee stock options, business loans or divorce, a valuation is critical to proper planning, execution and structure of the transaction.

A business valuation is more than just a number arrived at through various methods used to calculate value. In many cases, the value number is of secondary importance to the actual methodology used in the calculation. Consider this scenario: Two shareholders enter into a buy/sell agreement and a shareholder looks to exit the business or passes away unexpectedly. What value of the business is the shareholder or the shareholder’s estate owed? Moreover, how do we calculate a number that is ever changing as business values increase or decrease on a weekly, monthly and yearly basis? The answer is the valuation methodology proposed and agreed upon by the shareholders in the executed buy/sell agreement, which will provide a valuation methodology that will be calculated at the time of the shareholder’s exit, thus avoiding a battle of various methodologies leading to different values more beneficial to one party over the other.

How do we know what methodology determines the true value? (The IRS describes this as “the fair market price at which the property would change hands between a willing buyer and a willing seller, when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, with both parties having reasonable knowledge of the relevant facts.”)

To properly obtain a valuation, the business will need to employ an unbiased, qualified appraiser with experience and training in both the area of valuations and the industry in question. Moreover, the appraiser must understand and employ the various valuation methods, the discount and premium variables while weighing the result accordingly. Finally the appraiser must be able to communicate and ultimately defend the value calculation. Remember: The calculated value is only as strong as the appraiser’s ability to defend it.

From an M&A standpoint, the value put forth to potential purchasers will undoubtedly be reviewed, scrutinized and potentially challenged to reduce the buyer’s purchase price. The buyer’s due diligence team will comb through the business’s internal financials to substantiate the numbers in the seller’s most recent financial statements. The buyer’s due diligence team will then use their own valuation methodology calculation to arrive at their proscribed value. If the seller’s value cannot be substantiated, a purchase price reduction may be sought and the transaction may be jeopardized.

From a succession planning standpoint, the valuation methodology should be tailored to best meet the needs of the successor—whether the needs be tax minimization, payout terms or level of value. However, the valuation method and transfer of assets or stock must be valid under IRS rules pertaining to related party transfers.

If you have questions regarding valuations, call 618.997.3436 for a free consultation.

 

Roman Basi is an attorney and CPA with the firm Basi, Basi & Associates at The Center for Financial, Legal & Tax Planning. He writes frequently on issues facing business owners.

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Al’s column: Sometimes disagreement is healthy

June 10/17, 2019: Volume 34, Issue 26

By Lou Morano

 

(Editor’s note: This is the second installment in a multi-part series.)

If you want to be truly successful, make minimal mistakes and make more “right” choices, then this point is of colossal importance: Surround yourself with people who are not afraid to challenge you.

I never understood why owners of companies surround them- selves with “yes” men or with people who think exactly like them. Don’t get me wrong: It is very important to align yourself with people who have the same vision, ethics and goals for your company. But you must do it with people who have strengths in areas you are not strong in and think differently.

Case in point: Steve Cosentino, the vice president of my company, and Rodney DiFranco, my general manager, have been working with me for more than 32 years; we all think differently but have the same goals. When it comes to making decisions, the three of us usually make them together. We look at situations from different viewpoints, but we have the same goal in mind.

For example, Steve is very detail oriented and meticulous. When we implement a new system or process, he thinks of every single step, creating fail-safes along the way. Meanwhile, Rodney knows the installation end of our business and the sales process extremely well. His greatest strength is in the mechanics of things and how to physically get things done and in what order. My strengths lie in leadership. I am also very good at creating, maintaining and nurturing relationships. I know how to get things done and how to keep people on task and motivated.

When we address serious projects, problems, situations, etc., we discuss it together. We don’t always agree on everything, and we all have good points.

When we encounter situations where we are all not in agreement, the majority rules—even when I am not in the majority. Do we make the right decision 100% of the time? Of course not. However, over the years we made the right decision by an overwhelmingly large majority of the time than if we had just gone with my decisions when I was not in the majority. You need to trust and respect the people around you. More importantly, you have to trust the process. In my case, three heads are better than one.

As an example, many years ago, when we became a Mohawk Floorscapes dealer, we went to all five of our showrooms and made some very hard decisions on completely renovating and remerchandising our showrooms. There were five of us making the decisions, and I valued everyone’s opinion as much as mine. And more than once I strongly disagreed with the majority. I remember the Mohawk representative telling me, “Lou, you’re the owner, so if you want it your way it is your decision.” My reply was, “No, I am not so arrogant that I think I know better than all of you put together, and I truly respect all your opinions. If I can’t convince the majority to agree with me, then I know by going with the majority we will make the right decision more times than not.”

After all the stores were completely renovated, we could see that statement was very true. We made almost no mistakes, and for sure my decision to stick with the “majority rules” vote was the right decision. I can count on one hand how many times over 33 years owning my company that I went against the majority. In those few instances I have been right and wrong. However, we have made more right decisions because I trust and value the opinions of those around me, and our company is more successful because of it.

 

Lou Morano started selling carpet for a major retailer at the age of 19 in 1981. In 1985 he and his father incorporated Capitol Carpet, Inc., and opened their first full-service retail store in 1986. Today Morano operates five retail stores, including a commercial division, under the name Capitol Carpet & Tile and Window Fashions

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Al’s column: Best practices for retailers to live by

May 27/June 3, 2019: Volume 34, Issue 25

By Lou Morano


(Editor’s note: This is the first installment in a multi-part series.)

I’ve learned things from smarter people than myself, even after being in this industry for 38 years.

When our company first opened, I learned from my father that paying our bills early was going to be very critical if we wanted to be important to our vendors. He managed the books in the beginning, and he paid every invoice in full every week. Back in the ’80s, invoices were very similar to today. They were either net 30 days or you would get a discount on some invoices of 5% 30 days. Yet my father paid every invoice in full every week. I asked him why. He explained that if you pay your bills as quickly as possible, the vendors will look to sell you as much as possible at more attractive prices because they know they will get their money quickly and with no hassle.

More importantly, paying your bills on time—all the time—makes you a very valuable partner with the vendors. Suppliers will bring programs to you first. They will want to help you be as successful as possible so you can continue to buy more of their goods.

As we have grown over the years, we don’t pay all our bills in full every week, but we have paid all our bills on time or early every time without exception since 1985, when we incorporated. We have never been late—not once. Over the last several decades we have been told time and time again by various vendors that we are a much more valuable client than some others because of how fast we pay our invoices. If you are late with payments and/or are a hassle to do business with because they must chase you for their money, then they are less apt to do any of these things for you.

The flooring business—much like many businesses—is all about relationships, which is why it’s critical to view every vendor as a partner. When we treat them like a vendor, they will treat us like a customer. However, when we view and treat our vendors like partners, they view us and treat us like partners. This is a whole different level of doing business with tremendous advantages for everyone when we think this way.

One of the main benefits of paying your bills early or on time is the access to discounts. I strongly encourage retailers to take advantage of every discount possible, as this directly affects your bottom line. Let’s say, for example, you have a $3,000 invoice and the terms are 5% 10 days, net 30 days. If you pay after the 10 days, you have given up $150. Now, let’s say you have a line of credit that costs you to borrow money at 8% annually. You are much better off borrowing from your line of credit as it will only cost you 0.67% in 30 days, which on $3,000 is only $20. If you add up all the invoices in a year you can only imagine how much money that totals over time. Even if you must borrow the money on a credit card at 18% interest annually, that would be 1.5% in a month, which is still only $45.

Paying your bills on time not only makes good financial sense. It also ensures you have product exclusivity, the best pricing and optimal service from your vendor partners.

 

Lou Morano started selling carpet for a major retailer at the age of 19 in 1981. In 1985 he and his father incorporated Capitol Carpet, Inc., and opened their first full-service retail store in 1986. Today Morano operates five retail stores, including a commercial division, under the name Capitol Carpet & Tile and Window Fashions.