A tried-and-true way to enter the flooring biz

Home Column A tried-and-true way to enter the flooring biz

stocking dealerDuring a recent podcast on my Flooring Business Facebook group, I interviewed Dean Paulson of The Floor Trader about being a stocking dealer.

I always like to ask the veteran flooring pros about the advice they would give to the new flooring dealers who are just getting started—especially those who are transitioning from installer to full-fledged flooring retailer. Following are some observations from our discussion.

One of the biggest challenges newer dealers face is getting suppliers to open up accounts for them. They have to jump through many hoops and still may not be able to get an account. In my experience it takes a couple years to build a good foundation. That means your website is up and running and getting some Google love. You start establishing yourself in the community and building relationships with realtors and builders along with the general public.

Another way to make an entrance into the retail flooring business is to acquire an existing business. There are many seasoned flooring veterans who are ready to retire. Some owners might wish to hand their business down to a relative or employee, but don’t have kids or an employee they feel confident about—or one who is interested. Some owners might not be in good health and can no longer run the business full time.

There are several advantages to working with an existing dealer as opposed to starting a retail business from the ground up. If the new flooring dealer teams up with the retiring dealer, he can get: displays that are already paid for; accounts that are already established; possibly some salespeople and experienced installers; software to help them run the business; and other intangibles.

In some cases, a longtime dealer and owner might not want to retire outright. That doesn’t have to be a deal breaker. For one, the outgoing owner could work for you, even if it’s only on a part-time basis. After all, he loves his business and he has relationships that he would like to maintain. Keeping an owner on board will help you pay him for the business, depending on the deal you’ve structured. In many cases like this, I’ve found most suppliers and reps will be excited about a potential change in ownership because you, the young guy or gal, are coming in with enthusiasm and energy.

But taking over a business is not without its challenges. What happens if you decide to change the name of the business? You could be losing out on brand-name equity built up by the previous owner. Perhaps a change could be for the better? So much depends on the reputation of the previous owner.

Another potential concern is how you handle existing warranties. Warranties aren’t a huge problem and that might help you make a deal when they know you are going to take care of the previous customers. It can also lead to more business.

What if the former owner owes his suppliers money? Paying that bill will help you make a deal and help you with the supplier relationship. I would ask that supplier for a note so you don’t have to pay out of pocket. Also, there’s a chance you might need an attorney to sort through the legalese and other contract details. I would probably start a new LLC or business entity.

At the end of the day, deals like this are never easy. However, if you have two willing parties, both in need of each other, this will be a winning deal for everyone involved—the retiring dealer, the new dealer, the suppliers, the installers and especially your customers. (Full disclosure: This is exactly how I started Carpets of Arizona; I purchased the assets of a flooring dealer who was looking to retire.)

Jerry Levinson is the former owner of Carpets of Arizona. He now focuses full time on training and education. He runs Jerry’s Flooring Business Master Class and is the author of “Profit Now.”

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May 9/16, 2022

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