Countertops Magazine Archive

Make It Your Renaissance Year: Success through discipline, diversification, outreach and strategy

For those “lucky” enough to have persevered within this dynamic, mutating, eclectic world of kitchens and baths since the early 90s, I assert we can finally take a little breath and realize this deep violent cleansing storm of an economic downturn, has passed. Knock on stone (or exotic wood)? Perhaps, but the Golden Rule of economics, and a necessary by-product of capitalism, is that neither the worst nor the best of times cannot last forever.

As the past year or so unfurled, the macro view of our surfacing universe appeared to be heavy with opportunity. Indicators streaming from leading cabinet companies, chemical manufacturers, national builders and general economic futures, to name a few, point toward growth, spending, improving, expansion and renovation. It’s quite evident that the quartz surfacing manufacturers are investing hundreds of millions of dollars into plant expansions, domestic manufacturing, differentiated aesthetics, incremental market capture and even “new and improved” categories of surfacing options – of which porcelain-based products appear a leading innovation.

Most agree there is safety in numbers, yet we don’t want all those numbers in one basket, do we? The past two decades have seen countless fabricating specialists unable to weather the economic downturn because they did not have the diversified girth. For the most part, those who focused too much of their business in any one selling channel, such as builders, commercial or home centers, for example, became highly susceptible to the ever fragile nature of positive cash-flow. Basically, sales plummeted in their channel and they had few connections in periphery routes to market and/or surfacing options and fell victim to business portfolios not adequately diversified. What was once their greatest asset – specialization, became their very coup de grâce.

That was then, this is now. In many ways, 2015 represents an economic renaissance – at least as it pertains to the surfacing world. Those who survived have become leaner and meaner, those who did not have either moved on or, if the phoenix has risen, are now armed with the best lesson there is – experience. There are definitely lessons that can be learned from both financial and business strategy perspectives.

Tightening the Fiscal Belt

Call them slush funds, emergency cash, retained earnings or your “mattress” account, fiscal prudence is second to none. Is there any wonder why there is such a huge secondary market for CNC machines? In many instances, the cart was put before the horse, meaning the automation (overhead) was purchased based on a projection to be efficient as the business operated and grew. Yet, these fixed payments were the death trap to many when business got lean or growth was not realized. General Rule: Buy it when you realize an return on investment (ROI) with the business you already have and can use this to gain operational leverage and increase your profits by increasing throughput and decreasing your variable costs. The subject gets significantly more complex when considering buying or leasing, internal rate of return and net present value calculations, etc.

Consider this; is there ever a shortage of good ideas? When was the last time you said “No” to an idea that made total sense and instead took the conservative route to not invest simply to remain liquid and flexible – spreading out investments over time and in a logical planned orderly consequential manner? Cash is king: Pin it on your computer screen, make it your mantra, have it be your screen saver. However, it takes discipline. And yet, when the opportunities present themselves, which they surely will, you can use the cash that you have so feverishly squirreled away to capitalize on a new piece of real-estate, a machine being dumped way below fair market value or expand into new markets, etc. Frankly, the options will always be numerous. Delay your gratification and the gratification you can receive is much sweeter.

Product Diversification

Different products prosper and decline at different rates – so expand your offering to mitigate category risk. If you cut stone, try cutting quartz and vice versa. I will go on a limb here and say that although the quartz industry is maturing quickly, there is enormous/untold growth in this category – in both aesthetic and application. Although not completely parallel, the fabrication processes are quite similar and the tooling is 98 percent the same. Yield utilization can be higher by 10 percent and product failure because of inherent tensile strength is significantly less, both of which translate into higher operating margins. On the flip side, natural stone is earthy and will forever be in demand. Find your color palette and seek out those who must have their meals with Mother Earth.

If you are predominantly a laminate fabricator, get some carbide and try your hands at solid surface. The finesse it takes to fabricate a tight bevel edge or wood edge countertop is the very skill needed to seam solid surface – arguably one of its top attributes. Solid surface’s direction from the beginning was to nip away at the laminate market.

If you don’t already, I would suggest acquiring a sink line. It is a good idea whether your strategy is to include one as part of your offering or to have it be an additional à la carte sale. Consider venturing into the land of margin with a higher-end stainless steel sink line that allows you to offer something most consumers would typically not otherwise get. This can increase both your differentiation and value proposition.

Fabricators who are buying in to the advancing fabrication automation, including the wondrous world of waterjet technology that is the preferred method of cutting slabs of the emerging porcelain-based products, can expand into a variety of surfacing options. By doing so, they increase their value proposition to their customers and mitigate their overall business risk simply by having more options and at various price points.

Market Diversification

In addition to product portfolio, consider market diversification. Even if you have the greatest of all CNC equipment, lean processes and pride yourself on being a low-cost producer whose conversion labor is single-digit dollars per square foot, consider if this is sustainable and does this automation require an insatiable appetite for volume? Additionally, if your business is geared toward the retail consumer and has the greatest reputation in Katmandu, I urge you to consider branching out for when the economy turns and luxury spending severely hastens.

Home centers, the commercial arena, kitchen & bath dealers and national and regional builders are four distinct routes to market that tend to see a unique pricing model that considers risk, economies to scale, yield and required infrastructure. I have been significantly exposed to and operated within each, but am careful not to recommend one over the other. I ask you to consider branching out beyond just commercial or residential or builder, but perform your due diligence first; as the saying goes, “you don’t know what you don’t know.” Think of your business as a pie and cut it into as many segments as you can reasonably afford to. Take it incrementally, as the nuances of each are formidable.

Interior designers, plumbers and your local contractors may not be high-volume business individually; HOWEVER, your renaissance sees these professionals as huge opportunity. Think of them each as mini specifiers. They will typically be COD business and will generally not require enormous markups. They can be priced in your higher tiers because they are generally a low-overhead – one stop away from the end user. They typically secure the surfacing as a convenience to their customer, so it’s a win all around. There’s power in numbers here.

Alas, there is the countertop replacement business. Seemingly gone are the days where a customer just comes in wanting to change their laminate for something else. I am bearing witness to acrylic solid surface tops and granite tops being changed out in lieu of newer aesthetics, crazy! This is great business for a fabricator, but generally requires site inspection, perhaps some form of in-home selling tools and fabricators who can bundle in rip-out and discard, plumbing, electric and tiling will see a huge potential business with high value proposition to the consumer. Are fabricators becoming general contractors? In a way, yes. By securing local relationships with these trades and offering them repeat business for doing an impeccable job can be an incredible strategy for the fabricator.

Marketing Diversification

You may wonder how to secure countertop replacement business? Put on your marketing hat and stimulate that demand! Before and after photos are incredibly persuasive tools for a consumer to visualize the makeover. Whether it’s the local paper, Val-Paks, small ads/vignettes at your local hardware store, fliers in mailboxes of “aging” subdivisions where you are sure the homes were built with laminate countertops, or getting leads from your local plumbing wholesaler, there are a few simple and low-cost ways. The least expensive way is simply a job well done and word of mouth. If you spend an extra few hundred dollars to get the job done when they want or throw in a little extra or whatever it may be to get that customer serenely happy, those dollars are not an expense. They are an investment in a happy satisfied, chatty, customer who will tell their friends and their friends’ friends, etc.

If you are website creation handy, you can always solicit online. However, watch the costs and evaluate the ROI carefully to decide if, when and to what extent it is appropriate.  Internet shopping is at an all time high with no slowing down coming any time soon. It’s a powerful tool if you use it wisely.

This year is a chance to grow and to really put your best business foot forward. It’s your chance to investigate new selling channels, new product categories and align with the brands that offer you the best overall value proposition. Only you can decide that. ISFA has its share of very fine members whose business matrixes include what I have expounded on here. Being one who persevered almost 20 years in this industry, I can personally attest to the success of a fabrication business who exhibits fiscal discipline and who diversifies both their product mix and routes to market. Make it your renaissance year.

About the Author

P. Max Le Pera is a surfacing business and marketing strategy expert. He can be reached at [email protected].