Posted on

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.

Posted on

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.

Posted on

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.

Posted on

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.

Posted on

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.

Posted on

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

Posted on

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.

Posted on

Al’s column: Attracting the installers of tomorrow

May 13/20, 2019: Volume 34, Issue 25

By Kaye Whitener

The CFI division of the World Floor Covering Association (WFCA) recently partnered with Informa, owners of Surfaces, to host the first Build My Future—Flooring Edition. The interactive, hands-on educational event allows local high school juniors and seniors to experience employment opportunities in the floor covering industry.

The idea behind the event came from attending the Build My Future program in Springfield, Mo. This event is created through the local home builder’s association with a focus on the construction industry trades. Its purpose is to introduce trades to local high school students looking for career opportunities.

Their most recent event attracted more than 2,500 students and featured virtually every aspect of construction. Students had the opportunity to operate heavy dirt-moving equipment, hang drywall, nail shingles on dog houses, seam carpet and design tile backsplashes. At the end of the event, the kids voted on the vendor trade they enjoyed the most. The overwhelming majority said the flooring portion was their favorite!

The construction group decided to branch out and let other organizations such as CFI and WFCA hold their own recruitment event. CFI presented more than 40 hands-on installation modules for the teens to work on, including tile designs, seaming carpet, gluing hardwood, LVP and laminate. The excitement was most prevalent at the Magnetic Flooring platform, which introduced students to next-generation floor coverings.

Some of the industry’s major manufacturers also contributed to the cause. Mohawk sent a team of professional instructors to demonstrate carpet seaming, hardwood and laminate installation, etc. They were such a huge support for us. In addition, we also asked some of our local retail members to participate and be available for any summer work opportunities for the students. With such a large number of students in attendance, I don't think we could have asked for a better event.

In their prime
It was interesting to learn many of these kids are planning career paths, whether it’s college or becoming a tradesman. Even the teachers who brought them were amazed. “We never think about flooring as a trade,” one told me. And when we started talking about the income that can be made, they were very excited.

What was even more amazing to me was the presence of all the female students in attendance; I’d say it was probably 50-50 male and female. I was able to speak to both groups, and what I learned was kids who might not be looking to go to college directly after high school aren’t necessarily unambitious. Many of these kids are extremely smart; they just like to work with their hands. It’s our job to let them know there are alternatives available outside of college.

In a perfect world, we would like to develop this platform in different regions of the country. We realize we will not be able to create this type of regional event without the support of the floor covering industry. We would love to expand the modules to include design, estimating, sales and other employment opportunities currently in demand in our industry.

As we look to replicate the success of the program, we are also working on developing a tracking mechanism to evaluate the true success of this program and the impact it might have on our industry. When it comes to attracting the installers of tomorrow, we have decided it’s time to stop talking and start doing something about it today.


Kaye Whitener is the national manager of member relations for the WFCA, a nonprofit trade group supporting independent specialty retailers. Send an email to kwhitener@wfca.org to learn more about membership or the Build My Future: Flooring Edition program.

Posted on

Al’s column: Clarity on real estate deductions

April 29/May 6, 2019: Volume 34, Issue 24

By Roman Basi

 

It’s been over a year since the Tax Cuts and Jobs Act (TCJA) passed, and the IRS is providing the final pieces of clarity for the infamous section 199A deduction, which allows owners to avoid paying tax on 20% of the qualified business income. This article addresses another component of the 199A deduction—rental real estate enterprises.

The IRS in Notice 2019-7 states a rental real estate enterprise—whose primary form of income based on rental properties—will be treated as a trade or business solely for purposes of section 199A. The courts have often found there is a simple test whether a taxpayer’s activity qualifies to meet the level that constitutes a trade or business, the test being: regular and continuous conduct of the activity, which depends on the extent of the taxpayer’s activities; and a primary purpose to earn profit, which depends on the taxpayer’s state of mind and good faith intention to make a profit from the activity. By meeting these requirements with your rental property, you should be in line for the 20% qualified business deduction.

Additionally, it will be imperative the taxpayer meet the IRS’s definition of rental real estate enterprise in order to qualify for the safe harbor. Per the IRS, the definition is, “an interest in real property held for the production of rents and may consist of an interest in multiple properties.” For consistency sake, the IRS has decreed taxpayers must either treat each individual rental property as a separate enterprise, or treat all of them as a single enterprise. However, commercial and residential real estate may not be part of the same enterprise. Finally, taxpayers may not pick and choose enterprise variations year by year unless there is a drastic change in facts surrounding the properties.

For the sole purpose of section 199A, a rental real estate enterprise will qualify for the 20% qualified business deduction if the following are met within that taxable year:

1. Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise;

2. For taxable years beginning prior to January 1, 2023, 250 or more hours of rental services are performed per year with respect to the rental enterprise. For taxable years beginning after December 31, 2022, in any three of the five consecutive taxable years that end with the taxable year (or in each year for an enterprise held for less than five years), 250 or more hours of rental services are performed per year with respect to the rental real estate enterprise;

3. The taxpayer maintains contemporaneous records, including time reports, logs or similar documents, regarding the following: hours of all services performed; description of all services performed; dates on which such services were performed; and who performed the services. Such records are to be made available for inspection at the request of the IRS. The contemporaneous records requirement will not apply to taxable years beginning prior to January 2019.

If you have questions about what qualifies as a rental service, following is a list of services the IRS has deemed as rental services: advertising to rent or lease the real estate; negotiation and executing leases; verifying information contained in prospective tenant applications; collection of rent; daily operation, maintenance and repair of the property; management of the real estate; purchase of materials; and supervision of employees and independent contractors.

But there are some exclusions. Real estate used by the taxpayer (including owner or beneficiary) as a residence is not eligible for the 199A deduction. Neither is real estate rented or leased under a triple net lease.

 

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.

Posted on

Al’s column: Creating a culture of winners

April 15/22, 2019: Volume 34, Issue 23

By Irene Ross

 

Motivated employees are not just good to have; they are good for business. A showroom work environment is even more important, because those employees create the consumer’s first impression of your company.

This is particularly critical for people who operate flooring stores. After all, flooring can be a big investment, and motivated salespeople can make all the difference. “That means you’ll want your showroom employees to be enthusiastic, motivated, knowledgeable and well trained,” said Sean O’Rourke, director of merchandising, Art Van Furniture, with several stores in Chicago and Michigan.

Why is employee morale so important? Research shows just one bad experience can change the mind of someone planning to make a purchase. The firm Gladly recently surveyed 1,000 consumers, of which 92% said they would change their mind about buying after three or four bad encounters. However, 26% said they would also consider stopping after just one unpleasant visit.

“You can have a lot of leads and potential customers, but it doesn’t mean a thing if your employees are unmotivated, uninterested and untrained,” said Lyle Sapp, general manager of the retail division of Carpets N More, Las Vegas. “If they only come into work for the paycheck, they might make a sale or two but they won’t get referrals, and those are the lifeblood of any business.”

Ensuring employees remain motivated is a top priority for dealers such as Jeff Perez, general manager, TF Andrew, with showrooms in New Rochelle and Elmsford, N.Y. That’s why he makes it part of the hiring and ongoing training process. “We’ve found it easier for an employee to align with our company goals if we’re very clear about them from the beginning,” he said. “It also works in their favor because we can spot opportunities in the company for them.”

Employee motivation isn’t just about working hard or completing assignments. It comes from multiple sources, including the ability to make more money, the possibility of promotion, the desire to meet personal/professional goals or just plain satisfaction from the work. Sometimes a group outing, a bonus or even a simple “thank you” will do the trick.

Following are key strategies to keep in mind:

Maintain transparency.“It’s important for employees to know about the company,” Perez said. “Although the sales team sees figures every month, we also show them to the entire staff on a quarterly basis. We want people to know they are working for a financially sound business.”

Focus on education. Chris Quattlebaum, a manager at Bradenton, Fla.-based Manasota Flooring, believes an emphasis on training helps develop and retain employees. It also conveys confidence to the consumer. “Our employees are charged with gaining PK,” he said. “We qualify them on carpeting so they know all the different fibers and styles.”

Quattlebaum isn’t alone. Contract Furnishings Mart, with stores in Portland and Seattle, conducts weekly training sessions and PK classes to improve RSA morale. “Once or twice a year we also send our reps to facilities to learn how a product is made,” said Garrett Anderson, director of marketing. “It’s not just about PK; it solidifies relationships between our sources and employees.”

Make it fun. At Contract Furnishings Mart, managers try to foster a fun workplace to keep employees happy. “We are a family-owned business and we promote that type of environment,” Anderson said. “Balance is important. We don’t want our employees to think about work 24/7 or stay up all night sending emails.

 

Irene Ross is a marketing and public relations specialist/copywriter at IFR Communications. She writes frequently on issues impacting floor covering retailers.