Most flooring dealers in today’s market have in the back of their mind…..”how do I diversify to protect my company when the next market down-turn hits”? The market has been strong for a long time and many economist and flooring industry experts are predicting that 2020 will be the year that we see a slowdown in residential construction and possibly a recession due to the global economic crunch with the EU and Asia in trouble today.
We all remember 2008 when the market dropped like a rock and builders stopped building and many went bankrupt. Residential was the first to go, then the hotel market and commercial were not far behind. Many flooring dealers went out of business during that time because they had too many eggs in too few baskets. Most flooring dealers can sustain a few customers going under, but we all have our limits. The companies that did the best were the ones that were diversified with their customer mix, and when residential builders went down, they still had main street commercial or remodel contractors or other commercial work to focus on.
Empower Partners has developed a program for our clients to provide a business assessment to evaluate the risk of market downturn and to help with a better sales strategy around diversifying your customer mix. One of the ways we help clients is by understanding the negotiated high margin opportunities that exist with the commercial market.
There are 3 levels of commercial business for the flooring industry:
1. Large Commercial Work – This is the primary market that pure commercial flooring dealers go after and most of this is specified thru designers and end user’s facility managers and most of the sales go thru General Contractors. The is many times referred to as “Hard Bid Work” and it has benefits and risks associated with it. Typically, it is “easy work” to get access by simply getting on the GC (General Contractor) bid list and then doing estimates and bids to secure the work. Most of this is driven off price and becomes high volume work that carries the risk of low profit margins and challenging cash flow. Most GC’s require 10 percent retainage after the job is complete and most of these jobs are under 20 percent profit margin to secure the work.
2. Main Street Commercial Work – This business is what most retail flooring dealers try to secure, and it is easy to do. Most of this work is walk in customers or spin off work from your current retail clients to do doctors’ offices, retail stores and small commercial jobs that should be able to achieve a profit margin in the mid 20’s.
3. Negotiated Commercial Work – This is an area that most flooring dealers are not aware of or they do not have the training to secure. It is a slice of the commercial market that can be much more profitable with less risks and better cash flow. Selling to this market is different and requires some training and discipline to secure. Prospects like hospitals, senior living facilities, property management firms, design build contractors, large remodel contractors, manufacturers with office buildings or campus locations, retail clients and others can be great customers to develop for negotiated work.
The requirements are as follows:
a. Good quality installations
b. Quick response service
c. Professional salesperson and good follow up
d. Ability for the salesperson (and business owners) to develop relationships with the
owner or facility manager.
By securing this type of work, your business will achieve higher GP margins as the negotiated commercial business should fall in the 30-45% range and you should not have to deal with retainage and long payment cycles.
For more information about developing negotiated commercial work and how to train your sales people to develop this work, contact Empower Partners at 678-899-1290 or check out our website at: www.empowerpartners.net. We can be reached via email at: rshillis123@gmail.com.
About the author:
Steve Hillis is the CEO of Empower Partners, LLC and has 36 years’ experience as a leader in the flooring industry. Steve is the author of the upcoming book, “Listening to your customers” and a frequent speaker at flooring industry events like Neocon, Georgia Manufacturing Association and other industry events. Empower Partners is totally focused on serving the flooring industry with training, coaching, consulting and recruiting services for retail and commercial flooring dealers, flooring distributors and manufacturers. All Empower coaches and trainers have over 25 years’ experience in the flooring industry and their focus is to help flooring dealers achieve their personal and business goals.