Portions of the following interview with Floor Covering News were featured in the July 9/16 2007 Issue…
The Market gets Tough; FloorExpo gets Going
A Conversation with FloorExpo CEO, David Gheesling
Q. So, the once red-hot builder business has cooled off significantly. What has caused the slowdown?
A. The builder segment has, indeed, slowed significantly. It started in 2006 and continues today. A combination of factors has brought us to this place: housing prices outpacing household income, overbuilding, aggressive lending practices, problems with sub-prime lending market, and high inventory levels. These factors and others, which vary dramatically from market to market, are working in concert to create challenging market conditions.
Dave Gheesling shares a laugh with Home Solutions Members Larry Barr of Floors, Inc. Texas and Jeff Clark of SuperFloors/ISI.
Q. You say it is challenging. What does that mean, in terms of the numbers?
A. Nationally, it looks like we’ll be off on around 20% on starts. It’s important to note that the builder business is really a regional business. In some of the hardest hit markets, such as Southern California and Florida, you see pullbacks which exceed that number; while in other markets, such as Texas and the Mid-Atlantic, we can already see signs of recovery. Controlling price erosion and selling off existing inventory are what the major builders are focused on right now.
Q. What is your long-term outlook?
A. Our mid and long-term outlook is very positive. We believe the American dream is, and will continue to be, to own your own home. According to the Harvard Center for Joint Housing Studies, there will be more households put in place in the coming decade than the decade past. At FloorExpo, we believe we’re in a momentary trough in the business cycle and the long-term outlook for the building segment, based on demographics, is extremely positive. With our MultiFamily Solutions division, we also have a strong presence in the multifamily business. That segment is also positioned for long-term growth.
Q. So, what are FloorExpo and its Members doing to continue to succeed in the market place?
A. As the old saying goes, when the going gets tough, the tough get going; that is what FloorExpo is doing. The activity levels on our exclusive Member Programs are at an all time high right now. FloorExpo Members are focused on improving their business during this decline and they’re doing that by implementing our tools and programs. We are conducting regional idea sharing sessions where Members talk about how to best position for growth. We just completed meetings like this in Chicago and Atlanta.
Dave Gheesling addresses FloorExpo Members
Q. Tell me about FloorExpo, the company, today.
A. FloorExpo is not one company, but two. We have Home Solutions, which is made up of the nation’s largest and finest residential contractors in the builder market. We also have the MultiFamily Solutions business, which is a group of the nation’s largest and finest contractors who focus on REITs, property management, and apartments.
Q. Tell me more about each group. Let’s start with Home Solutions.
A. Today, Home Solutions installs one out of every four new, single-family homes built in this country. Seven of the top ten largest independent flooring contractors are a part of our organization, so Home Solutions is truly the place to be if you’re a contractor focused on the building industry. Our Members include top companies like Interior Specialists, Coleman Floor Company, Floors, Inc., Georgia Floors, and Home Valu, just to name a few.
We tend to be thought of as a place for only the largest contractors. However, we don’t just focus on the size of the company; instead, we look at the people and their commitment to the builder market. We have some Members who are not as large as the biggest, but are truly the key players in their market places. Most, of course, also have a significant commitment to the design center business.
Q. Speaking of design centers, I understand that is a big part of your Members’ business. What tools do you offer to support the design center?
A. We are on the leading edge here. One tool is Home Solutions Interactive, our online software system for supporting the marketing and management of a design center. We have more Members utilizing the system than ever before. Our Vice President of Member Programs and Services, Kathy Van Pelt, is completely slammed with our Members wanting to get on board with this program. Greg Kenith, owner of Flooring Design Group, a Member in Atlanta, is having terrific success with the tool. He tells me that they are experiencing higher upgrades and lower claims as a result of running all their home buyers through the software. That is what we like to hear.
MultiFamily Solutions Members get into the ‘All For One, One For All’ spirit at the NAA trade show. The National Apartment Association event is the most important show in the apartment segment.
In addition to Home Solutions Interactive (HSi), we also have our Homeowner Education DVD product. This product accomplishes the critical goal of setting realistic expectations about the products for the homebuyer. We explain, for example, that hardwood can be scratched, and that ceramic tile can be cold to the touch… that carpet seams can be visible. By communicating this disclosure information in a fun, attractive way, with high production values, we positively impact overall homebuyer satisfaction rates. Setting the right expectation is the key to a happy customer. That is what our DVD does for Members.
We also have a new best practices program specifically for design centers.
Q. What about MultiFamily Solutions:
A. These Members are the Who’s Who of the multifamily segment. For instance, Redi Carpet, Inc., Solar Contract Carpet, Sitton Flooring, Mike’s Carpet, and Contract Carpet Corporation are some of the more prominent Members of this group. Our goal is to add value to our Members’ business and, with MultiFamily Solutions, we are doing this in many ways. For me, one of the most exciting is the MFS National Relationship program. Through this program, we are literally creating new, incremental business for our Members.
Q. Are you still adding new Members?
A. Yes, where it makes sense for us and the Member. We are open to adding new Members who share our values and who are strongly committed to either the home building or apartment segments. In fact, we have added several quality Members to both groups in recent weeks.
On the Home Solutions side, we welcomed two new Members in Florida: Spraggins Builder Services in Orlando and Avalon Flooring in Bradenton. In Birmingham, AL, we added Jim and Doug Street, the brothers who own and operate Bill Street’s Decorating Center. Just this week, we were pleased to announce that Tom Chamberlain at Contemporary Flooring & Design of St Louis had joined our organization.
MultiFamily Solutions has also added some large players. Contract Carpet Corp with four locations in Southern California has joined us. Sandy Shuman and Jake Manaster are great people running a business that fits very nicely with our goals for our business. Mike Schreiber, owner of Mike’s Carpet has built one the largest apartment specialist companies in the country. They have operations in five states on the East Coast… and growing. Brent Roles with BR Flooring in the Bay Area and Jason Cione with Chicago Floor Systems have also just joined MFS.
Kathy Turner, our VP of Business Development, does a great job of reaching out to Member candidates that may appreciate our groups. So, the bottom line is that we remain very exclusive while growing with the right kind of new Member.
MultiFamily Solutions Members incorporate the show’s western theme into their own attire.
Q. What do you see as the biggest challenges facing FloorExpo? In other words, what keeps you up at night?
A. My three year old daughter keeps me up some nights, but business issues usually do not. I sleep well because I firmly believe that we are doing everything we can to drive our business and to make our Members successful.
I am, however, concerned by some customer efforts to directly source products. I think that this tends to be largely a communication issue. We need to better communicate the full value that our Member contractors provide. There is no doubt in my mind that we can deliver better service and value than can be achieved through direct sourcing. We just need hammer that story home and then back it up with action.
Of course, I might be able to sleep a little long longer, if we can get this builder market back on the fast track.
Q. What is your forecast for the second half of the year?
A. We think that, nationally, the second half will continue to be soft. It is going to take some time to sell off the excess inventory that is out there. We see 2008 being a better year than 2007.
Q. How many MultiFamily Solutions Members do you have?
A. We have forty companies covering seventy markets
Q. And how many Home Solutions Members?
A. There are fifty companies with over two hundred individual locations.
Q. What is the total sales volume of FloorExpo?
A. We are over $2.5 Billion in combined Member sales.
Q. What are the goals for each group?
A. Lets start with MultiFamily Solutions. In the near term, we are striving to grow our exclusive vinyl and carpet product lines. We want to be the highest-quality installation service in the industry. We are also building our exclusive best practices workshops to allow Members to share business strategies that work. Another area we are working on is technology for this segment. We intend to be the most technologically advanced group in the areas of operations and marketing technology.
Perhaps, our biggest long term goal is to have exclusive preferred supplier relationships with the largest multifamily customers. It is a big goal, but we eventually want to do all the work for the top 50 REITS and property managers.
The Home Solutions group is constantly working on bringing the strongest contracting companies together and making them better.
I am very excited about the work we are doing to completely update our hugely successful best practices program, Project Benchmark. This is going to be a great benefit for our Members during these tough market conditions.
Home Solutions also about to launch new marketing technology systems that will compliment our existing assets, like Home Solution interactive and the Homebuyer Experience DVD. Another focus for us right now is building our new Design Community. We are getting much closer to this group and we are committed to bringing them programs that help them drive upgrade business. One such program is our new DISCover Your Home Buyer program. DISC (which stands for dominant, inspiring, supportive, cautious) is a very clever way of identifying and working with different personality types. As we look down the road, our goal is to grow our business and Members’ businesses to the point that Home Solutions is the largest and finest finishing contractor network which would include cabinets, countertops and all other interior finish products.
Training is a big focus for both groups. For instance, at this year’s national conference we will be rolling out a comprehensive performance portfolio. This program will be like an ‘extreme makeover’ for Member’s businesses. The program includes strategies and tools for winning the war for talent, maximizing the value of your business, building lasting relationships with your clients, creating high performance teams, and managing a design-focused team.
These are just a few of our many Member driven initiatives. It is important to note that all of our goals are set by the Members, themselves.