It seems to be the desire of every flooring contractor that is out there installing, sanding and finishing hardwood floors to have a showroom and warehouse for selling and managing their flooring products. It might look good from the outside looking in, but the success rate of this being a profitable venture is very low. Retail is a tough business, and all flooring stores have basically the same products to display and sell, so the only way you can compete is either by being the cheapest or having the best reputation. From my 36 years of experience in this business, including falling on my face a few times, here are some things I suggest you consider carefully before jumping into the retail part of the business:
Staffing is a huge expense. Renting the warehouse space to build your showroom is the smallest part of the expense. Staffing and maintaining it to keep it open every day is a huge expense and a big commitment. In my experience, to keep a showroom profitable, you need a minimum of two sales employees, each person taking turns in the showroom and on the road doing estimates, calling on designers, builders, contractors and customers. This all comes with a huge monthly expense. We alway say that it costs a minimum of $20,000 per month to maintain this. And to make a profit of $20,000 per month, you need to have monthly sales of $70,000 to $80,000 per month—close to one million a year in sales—if you can get a 30% margin on your sales. This is just to break even each month; you haven’t even paid yourself yet or made the payment on that brand new vehicle you bought yourself because you thought you deserved it (after all, you have a big showroom now).
It seems to be the desire of every flooring contractor that is out there installing, sanding and finishing hardwood floors to have a showroom and warehouse for selling and managing their flooring products. It might look good from the outside looking in, but the success rate of this being a profitable venture is very low. Retail is a tough business, and all flooring stores have basically the same products to display and sell, so the only way you can compete is either by being the cheapest or having the best reputation. From my 36 years of experience in this business, including falling on my face a few times, here are some things I suggest you consider carefully before jumping into the retail part of the business:
Staffing is a huge expense. Renting the warehouse space to build your showroom is the smallest part of the expense. Staffing and maintaining it to keep it open every day is a huge expense and a big commitment. In my experience, to keep a showroom profitable, you need a minimum of two sales employees, each person taking turns in the showroom and on the road doing estimates, calling on designers, builders, contractors and customers. This all comes with a huge monthly expense. We alway say that it costs a minimum of $20,000 per month to maintain this. And to make a profit of $20,000 per month, you need to have monthly sales of $70,000 to $80,000 per month—close to one million a year in sales—if you can get a 30% margin on your sales. This is just to break even each month; you haven’t even paid yourself yet or made the payment on that brand new vehicle you bought yourself because you thought you deserved it (after all, you have a big showroom now).
Changing mentality is important. I think the biggest reason showrooms fail for flooring contractors is because the contractors still think they are a contractor, not a retailer. When you decide to do a showroom, you have just made a career change from being a contractor on the tools to a business person who spends much more time working with numbers—like it or not, that is the only way you will succeed. I always said the best thing that can happen to a guy that wants to open a showroom is to hurt his back, because that way he can’t pick up the tools again! It is a huge commitment putting in a showroom/warehouse, and you need to know where you are at financially every single day. If you are going to commit to this, you need to have a business plan drawn up, and you have to be honest to yourself with the numbers you are entering. I’m not saying the business plan doesn’t change a little as you’re going along, but you need to write down the plan for your business and the numbers you need to make everything work. Remember the saying, “If you fail to plan, you plan to fail.”
Remember there are other options. There are other ways of doing hardwood sales without a showroom and the overhead involved, and I encourage contractors to consider them before making the huge leap into having their own showroom. One is to stay small and work off samples you have collected from your local manufacturers or wholesalers, and do all your sales and consulting at the customers’ homes. The closing rate when doing this is very high, and it’s very hard for other flooring stores to compete with. Also, customers are lazy, and they love it when you show up at their house and you take an interest in their home and pat their dog.
The other thing to do is make a deal with another flooring store that you have a trusted relationship with to use their showroom for your customers. All flooring stores want to make sales, so let them take care of the monthly overhead, and you buy your flooring through them at a reduced percentage. We do this with flooring contractors all the time in our showrooms; they will call and say they are bringing a customer in, and we let them show all our samples. Then we sell the contractor the floor at a reduced cost because we don’t have to deal with the job or the customer. It’s good for the contractor because he has no overhead to deal with but still gets a margin on what he is selling. You could also do this with your local wholesaler who usually has samples on display for the contractors to see; they are usually happy to do so because it means a sale for them.
I’m not trying to say that no contractor should ever go into the retail business or open a showroom, but I am saying that it’s an expensive, time-consuming step, and you need to think carefully about what your goals are. At the end of the day, all most of us want is to make a percentage of what we sell and live a comfortable lifestyle, and many times you can maximize your profits by thinking a little more creatively about how you run your current business instead of taking on the huge commitment of your own retail location.
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