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Flooring dealers weigh pros, cons of pending tax reform

November 27-December 11, 2017: Volume 32, Issue 13

By Ken Ryan

 

Flooring retailers are cautiously optimistic that a tax reform bill currently working its way through Congress will ultimately benefit their businesses by providing much-welcomed tax relief. Of course, the devil is in the details, and there are many issues still unresolved as House and Senate members hammer out a final measure that could be signed into law by year’s end. (See Editorial on page 4 of this issue for more analysis.)

Some flooring dealers appear well versed on the potential tax implications. Among them is Nick Freadreacea, owner of The Flooring Gallery in Louisville, Ky. “While this is a moving target and certainly has a lot to be resolved before it passes, anything that can help small-to-medium-size businesses is a big help for the flooring industry. If this actually puts money back into consumers’ pockets—and stimulates the economy—then we will all benefit from that. From a business owners’ standpoint, if this can reduce taxes and add to a businesses’ cash flow, then that will help strengthen the business itself and allow business to grow again.”

Reaction to the bill among small business advocates has been mixed. Some groups praised the measure, arguing that it’s the first meaningful tax reform in more than 30 years. Others feel the bill doesn’t go far enough to help small businesses, with the more meaningful reform efforts focused on large corporations.

For their part, most flooring dealers put a positive spin on the tax plan. “My thought is if the Senate version passes, then the small business S corporations and LLCs will get to deduct 23% of the income before tax,” noted Bill Zeigler, co-owner of Charles F. Zeigler & Sons, Hanover, Pa. “Since this income typically went straight to their personal income and taxed as much as 39.6% I see a large benefit for owners. The results of these tax cuts are hard to predict, but I hope in the end the working middle class benefits.”

A lower corporate rate was also top of mind for Bobby Merideth, owner of Flooring America OKC, Oklahoma City. “A reduction in the corporate rate could add as much as 15% of taxable income to the bottom line. The additional money can be used to remodel stores, add employees or simply be placed in an interest-bearing account [if the interest rates increase].”

As presently crafted, people in high-tax, high-income states would pay more. That concerns retailers like Adam Joss, co-owner of the Vertical Connection Carpet One, Columbia, Md. “Based on headlines, I have mixed emotions and some of that stems from living in a high state tax state. Obviously, it’s tough to say because nothing has been finalized yet.”

Nonetheless, Joss said he is excited about the potential for a lower S-Corp rate. “That would put meaningful dollars back in our hands to invest in our staff/business or take home. My concerns center on two things: 1) the elimination of the state deduction; and 2) the elimination of the mortgage deduction. Both could negatively impact our customers, and that could impact our business. Only time will tell.”

Most dealers hesitated to give a full-throated endorsement of the plan because they don’t have all the details yet. As Flooring America OKC’s Meredith noted: “I would love to see simplification in the tax code. Unfortunately, it may never happen because ignorance of the tax code adds revenue to the treasury.”

Freadreacea of The Flooring Gallery sees the upside. “We have seen very little growth since the last [downturn] and this could really help the industry.”

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RiteRug donates $350,000 of carpet to hurricane victims

image001 3Columbus, Ohio—In the aftermath of Hurricane Harvey and Irma, RiteRug Flooring has teamed up with Habitat for Humanity to donate over 4,000 carpet remnants, totaling nearly $350,000, to provide comfort to hurricane victims in Texas and Florida. Carpet remnants are brand-new, first-quality pieces of carpet that are left over after cutting a roll of carpet in preparation for an installation job. The donated products can act as either temporary flooring while homeowners wait for their homes to be rebuilt or can be installed permanently.

After hearing about the damage left in Harvey and Irma’s path, Mickey Goldberg, RiteRug’s COO and president, knew something had to be done. “Our hearts go out to those affected by the devastation of Hurricane Harvey and Irma,” he said. “Our hope is that the carpet can provide those affected by the hurricane with some comfort and relief during this difficult time.”

RiteRug Flooring employees in nine markets—Cincinnati, Cleveland, Dayton, Ohio, Charlotte, N.C., Columbia, S.C., Greenville, S.C., Nashville, Tenn., Indianapolis and Lexington, Ky.—will be working hard over the next few weeks loading hundreds of carpet remnants on trucks heading to Houston and Florida Habitat for Humanity facilities.

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WFCA University adds to destination training, online offering

WFCA logoDalton, Ga.–In response to a recent membership drive and member demand, World Floor Covering Association (WFCA) has expanded its University course offerings with extended online training modules and destination camps across the country, according to Freida Staten, vice president marketing and communications. WFCA University is the association’s own professional training program geared exclusively to the needs and interests of members.

The professional development tool, which is available as a subscriber service for WFCA members, consists of primers, research, online training and seminars as well as on-site regional training programs to help retailers reach the top of their game. Just a few months after its launch, WFCA University has expanded training programs by nearly 20%, with 46 training modules available online through the subscription program and 11 new destination camps planned in seven locations across the U.S.

The extensive training program offers educational courses for professionals in a wide variety of functions including sales, merchandising and human resources. The coursework is broken down based on the career path and professional stage. “Upon initial launch of the WFCA University program we saw many middle, senior and owner-level executives tapping into the training program,” Staten said. “Since that time, the adoption rate of our program has broadened to include many professionals in the early and middle stages of their careers.”

For more information visit wfca.org, email Tom Jennings, vice president, professional development, WFCA, or call 816-231-4646.

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WFCA revamps online presence to streamline communications, expand member benefits

WFCADalton, Ga.—The World Floor Covering Association (WFCA) has unveiled its new website, which is part of the association’s overall initiative to expand benefits for members and enhance communications. Along with an extensive line-up of carefully curated content presented in an easy-to-navigate user interface, the site incorporates many of the features previously available at the association’s separate retailer- and consumer-oriented sites. The new consolidated web address is wfca.org.

The website offers a suite of tools and resources specifically tailored to meet the needs of the WFCA’s primary member base, the independent flooring retailer. It has marketing insights, growth and expansion guidance, and thoughtful advice for addressing key issues affecting the flooring industry. The site also provides answers and links retailers need to ensure they are running their companies at full capacity.

In addition, the site offers links to online learning through WFCA University, proprietary research, scholarship forms, an industry calendar, legislative updates from the WFCA’s own public affairs team in Washington, DC, staffing and consulting services, insurance options, extensive savings programs for members and other references and tools.

To facilitate and streamline access to member forms and documents, an extensive library of association materials is available through the site. Members can also access primers and handbooks, renew membership online, learn about the Floor Covering Industry Foundation as well as obtain details and access points to the Certified Floorcovering Installation Association.

The consumer component of wfca.org provides all the resources and information necessary for consumers to make informed flooring decisions. Wfca.org provides practical tips, pros and cons and other details on every flooring category available. An overview of each category provides varieties and styles available, manufacturing details, things to consider before buying and how to prepare for installation. When consumers are ready to buy floors, wfca.org offers a searchable database of WFCA retail members across the country. All users need to do is enter their zip code and they will receive a list of dedicated and knowledgeable suppliers in their area. This tool allows WFCA retailer members access to consumer leads that are generated through the WFCA website each month.

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Dear David: Should RSAs generate their own leads?

March 27/April 3, 2017: Volume 31, Issue 21

By David Romano

 

Dear David:
Is it just me or do sales associates seem less motivated these days? It is like pulling teeth to get them to go out and get their own leads. Am I wrong in expecting them to generate their own business? Do you have some techniques that have worked to incentivize them to get out of the store and shake the trees?

Dear Owner,
What you are facing is most likely attributed to generational differences and a flaw in your philosophy. Workers today are much different than those of your generation. Some of the differences are amazing and some can be frustrating. Expecting employees to be “just like you” is not only an unfair request due to these generational differences, but it is also unfair because you are a business owner with different aspirations and priorities.

The bigger concern is your overall philosophy on generating new business. There are two types of people in this world: hunters and skinners. Very rarely do you find a person with both qualities. Most RSAs fall under the category of skinners, people who do a great job with product selection, measuring, quoting, etc. They are content to work with customers to solve a need and be an advisor throughout every step of the process.

A hunter, on the other hand, is someone with a thirst for the thrill of the kill. They want to prospect, close the deal and then go back for more business later. They don’t want to do any of the “mundane” tasks of a skinner. In fact, they are rather bad at that part. These highly specialized individuals make up less than 10% of the population.

You should have your skinners focus on doing the best they can with the customers in front of them. Don’t push them out the door to fumble the ball and ruin any real chance you have of securing new business. However, you are looking for marginal gains and want to feel better about your team driving more business. Here is what I recommend:

  • Have your team ask for referrals. Have them send an email to all closed customers with an attachment explaining your Friends and Family Program, which provides special accommodations to anyone who closed customer refers. All the referred customer needs to do is mention or print out the email to get the accommodation. For the person who provided the referral, they get a store credit for future purchases they can either use or transfer to anyone else.
  • Have them send cards with handwritten envelopes to previous customers inviting them to a special event. Include all customers who have received a quote in the last six months but haven’t yet purchased. Also, include customers who have bought flooring from the store seven-plus years ago.
  • Send a birthday card to the flooring. (Yes, I did just say send a card to the carpet, wood or tile.) Include tips to making sure it is cleaned and properly maintained. This simple, two-minute process will keep the RSA top of mind when there is a flooring need.
  • Have each RSA join local referral groups. A ton of business can be generated over a glass of wine with the girlfriends or having lunch with other businesspeople.
  • Make sure they are active with their online network of friends and colleagues on Facebook, LinkedIn, Instagram and Pinterest. They need to let everyone know where they work and keep them informed of any special events or latest trends.
  • Lastly, make sure they always have business cards to distribute to potential clients.

 

Screen Shot 2017-03-06 at 10.37.51 AMDavid Romano is the founder of Romano Consulting Group and Benchmarkinc, a group that provides consulting, benchmarking, recruiting and software solutions to the flooring, home improvement and restoration industries.

 

 

 

 

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FlorStar: Building a business based on service

February 13/20, 2017: Volume 31, Number 18

The following feature is the second installment in a series highlighting the 14 distributors that constitute Bravo Services, a group comprising many of the top flooring wholesalers in the country. Here we focus on FlorStar Sales, whose origins are rooted in the 19th century.

Screen Shot 2017-02-20 at 9.26.29 AMFlorStar’s modern history began in May 1988 when Wade Cassidy, current owner and chairman, led a management buyout of the flooring division from Carson Pirie Scott & Co. The highly leveraged transaction was not lacking in risk—Cassidy and other managers put up their homes and provided personal guarantees to secure necessary financing. Fortunately, their entrepreneurial spirit, work ethic and support from vendors and customers allowed FlorStar to persevere.

FlorStar reflects its chairman’s humble origins. Cassidy grew up living over a chicken coop in rural Maryland and, as the oldest among his siblings, worked multiple jobs while attending school to help support his family.

In February 2005, the company moved to its current headquarters and main stocking warehouse located in Romeoville, Ill. In 2008, FlorStar entered the hardwood sundries and supplies business via acquisition and has continued building its presence in that space. Ownership consistently has embraced technology and reinvested in systems and its people. FlorStar was among the first in the industry to configure its warehouses with space-saving, narrow aisle racking and wire-guided turret vehicles. The firm’s long-tenured management team, averaging more than 20 years of FlorStar experience, is also relatively youthful with employees in their mid-40s on average.

“Wade’s fair and ethical treatment of customers, vendors and employees, as well as his constant reinvestment in the business, motivates folks to do business here, come here and stay here,” said Scott Rozmus, who was named CEO on Feb. 1.

Among the more significant challenges the flooring industry faces is the decline in the number of independent floor covering retailers and qualified installers. FlorStar addresses these challenges by, among other things, adopting policies and programs to support independent retail. Whether through flexible credit, just-in-time inventory services, technical support, training, participation in organizations or otherwise, FlorStar promotes and encourages the growth of healthy, independent retailers and highly qualified installers.

Going above & beyond
FlorStar has had sales professionals drive six hours to obtain and drop off additional material a dealer needed to complete a job… After the terrorist attacks on 9/11, when all the airports were shut down and no rental cars were available, the company gave someone who had been stranded a lift in one of its trucks (in the cab, not the van) so he could get to his home six hours away.

Nuts & bolts
Geographic coverage: All or part of 10 states: Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.
Brands: Armstrong, BASF, Bella Cera, Bruce, FlorStar Glass Mosaics, FlorStar Porcelain Naturals, From the Forest, Healthier Choice, Homerwood, Inhaus, Lauzon, Milliken, Mullican Flooring, Next Floor Carpet Tile, Qu-Cork, Sika, Sound Seal and VPI.

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Compensation conundrum

Dealers debate salary vs. commission for RSAs

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

By Ken Ryan

Screen Shot 2017-01-16 at 12.08.06 PMFlooring is an unusual retail species. Unlike mass merchants or other high-traffic venues, the typical flooring store may only see five or 10 customers in a day. Further research shows that for nearly 25% of dealers, between one and five people will buy flooring from them in a given week—which translates to less than one transaction per day on average.

The way flooring dealers compensate their RSAs is often different as well. Many successful dealers employ a commission-only structure, a model that seems to work for the largest dealers that have the traffic and transactions to satisfy their staff. Other retailers choose a straight hourly salary. Then there are those that combine salary plus commission, with higher amounts depending on the gross profit of the sale.

Deb DeGraaf, co-owner of DeGraaf Interiors, Grand Rapids, Mich., avoids a one-size-fits-all salary approach when it comes to compensating her salespeople. Rather, she takes a more customized approach, which allows her to work with the individuals and determine what suits them best. “Overall the majority of our sales staff operates on a commission basis. For those who appreciate the predictability of a salary we offer that as well; in those cases we monitor the amount of commission they would have earned. It is our goal to have a system whereby a salesperson can sell under the compensation plan that allows her to do so without worry or trepidation.”

Steve Weisberg, owner of Crest Flooring in Allentown, Pa., uses what he calls a “bucket system.” In his store, the majority of his staff works on salary plus model, which means they receive a weekly salary for which they have to write a certain percentage of business. “Once they write that specific amount in the month, any more sales beyond that earn them commission,” he explained, noting the commission is a floating scale. “Fill up the bucket and you’ve earned your salary. When the bucket is filled up, the fallout earns at different levels—2%, 4% and 6%. Once an RSA earns his salary he should be able to make more at no additional cost to the business.”

Bobby Meredith, who runs Flooring America OKC in Oklahoma City, provides a base salary that helps promote comfort and financial security for sales associates. “In addition to the salary, we pay a commission per sale that is calculated as a percentage of the sale based upon the gross profit,” he explained. “The commission reminds the sales associate of the value of each and every customer who walks through the door.”

Some flooring dealers refrain from a commission-only approach because they do not want their RSAs to become overzealous in their approach. However, some of the most successful flooring retailers in the industry are all-in for a commission structure. Avalon Flooring, with 14 locations in New Jersey, Pennsylvania and Delaware, is one of the largest such dealers. “We believe a commissioned sales force will produce a far better result for both the company and the salesperson,” said Brian Witkin, executive vice president of sales. “This gives the salesperson more opportunity to increase his or her earnings, and if the company is making more money I want my salespeople to make more money. Also, paying on gross profit rather than the total sale of the job will have a greater bottom line impact for everyone.”

The challenge Avalon and other dealers are starting to face is the younger generation wants more security and are somewhat afraid of a commissioned-based job, according to Witkin. In addition, some dealers believe many young salespeople do not like the pressure of their performance being responsible for their income. As such, a salary can give them the security they desire.

For retailers like Carlton Billingsley, owner of Floors and More, Benton, Ark., their job is to persuade millennials that a commissioned structure will pay dividends in the end. “We believe in earning what you work for, and your compensation is a reflection of your book of business by reaching goals/benchmarks through a commissioned sale,” he said. “Our commissioned [salespeople] will be focused on getting the sale, keeping the sale and expect referrals/additional business from their relationships built from the first transaction with a client. Our commissioned sales professionals write more business to grow their individual wealth and expect our business to grow so that we can grow together.”

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What a car dealership can teach floor covering retailers about selling

What a car dealership can teach floor covering retailers about selling

By Lisbeth Calandrino

I have a friend who works for a high-volume auto dealership that sells new and used cars. While he realizes car dealers have bad reputations, he said it doesn’t stop people from buying cars. Yes, customers are often nasty and say unkind things but my friend doesn’t pay any attention. In fact, he outsells everyone at his dealership and makes a six-figure income.

Following are a few of his selling tips:

  1. Treat the customer with respect. No matter what the customer says when they come into the dealership, my friend spends time building rapport. He says customers need to see him as a friend, not as a salesperson. Even if a customer comes in and asks for a particular car, my friend stops the process and stays within his sales presentation. He has memorized a script from which he rarely deviates. He says his job is to get the customer exactly what they want. He says most problems start when the customer takes the lead in the sales process. Remember: The salesperson must stay in control but always include the customer in the conversation and decision-making process.
  2. Learn how to overcome objections. The most common objection from most customers is, “I’m not here to buy, or “I’m just looking.” Does this sound familiar? He explains to the customer his job is to sell cars and will be explaining why his cars and dealership are better than anyone else in town. You may think this sounds pushy, but this approach gets the customer to understand his job and what he does. People don’t really know how to buy a car, he says, so they start with the assumption that the salesperson is dishonest and can’t be trusted.
  3. Stand firm on your price. My friend has an interesting way of dealing with customers who haggle. He reiterates the value of the car and asks them what price would they be comfortable with. Usually, the customer tells them what a great trade they have, how much it’s worth and how little they expect to pay for the new car, etc. He ignores all of these responses and goes back to his original question. Negotiating on price, he said, leaves a bad taste in the customer’s mouth and could destroy their relationship. It also decreases his credibility. Rather than risking damage to the salesperson/customer relationship, my friend simply shows the customer a different car if the price is out of reach and they still continue to haggle. In these cases, he says, the customer is not necessarily looking for the best price on a deal but rather the best value for their dollar.

That’s where a skilled salesperson can seal the deal.

Lisbeth Calandrino has been promoting retail strategies for the last 20 years. She writes frequently on shopper trends and improving the retail experience for the customer.