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The first time Rufus Ashby rapidly grew a flooring and carpet business, in the 1990s, a corporate parent that expanded too fast for its own good stained his future.
Ashby had built up a chain of Tampa-area stores, Carpet World, from one to seven. He sold the chain to Carpet Max in 2000. But Carpet Max, publicly traded, had management and operation issues that ultimately doomed the entire business. “They bought more and more stores,” says Ashby.
“Then they bought themselves out of business.”
Ashby, in turn, was out of a job, since he ran the company's Tampa division after the acquisition. So in 2000, he started again. He stayed in the flooring and carpet industry.
That venture, Flooring America, part of a cooperative of more than 500 independently owned stores in the U.S and Canada, grew even bigger than Ashby's Carpet World. At one point in early 2008, Ashby had 15 stores, with locations in Tampa, Sarasota and Jacksonville. Annual sales company-wide reached $30 million.
Ashby, though, soon crashed into a force more powerful than a parent company that grows too fast: the recession. Indeed, the downturn decimated Ashby's Flooring America business. He closed or sold 12 of the 15 locations within three years.
“Business was great. The economy was booming,” says Ashby. “Then the recession hit and it was like overnight our retail business was cut in half. But our rent wasn't.”
Ashby spent most of 2008-2011 in pure recession survival mode — familiar territory for many Gulf Coast business owners and executives. That period was dominated by expense cuts, from shrinking the staff to negotiating rent reductions from landlords. The company dropped from 100 employees to 40. “We got rid of a lot of overhead,” Ashby says.
A series of shrewd moves have since put Ashby back on a growth track. In fact, same-store sales are up 25% in the first five months of 2012 over the same time frame last year, says Ashby. The Gulf Coast side of the company, now under the brand name G. Fried Flooring America, consists of one retail store in Brandon and a second location in Sarasota. A third facility, in Jupiter, does commercial work. The payroll is back up 10 employees.
Ashby says the survival experience — tough as it was — made him a smarter businessman. “We are much more ready for anything that comes down the pike,” says Ashby. “We learned how sometimes things can go down real fast.”
New capital
The key move in the effort, both in survival and future preparation, was a merger with Madison, Wis.-based Sergenian's Floor Covering, a fellow member of the Flooring America cooperative. The co-op is a division of St. Louis-based CCA Global Partners.
Sergenian's CEO James Garner and Ashby have been industry friends for several years. They began to talk about a deal in early 2011, and an agreement was in place by November.
Sergenian's, with $15 million a year in sales, invested more than $1 million in Ashby's Flooring America, and is now the majority stockholder. Ashby used the capital for new signs, new samples and new trucks. The Brandon showroom was overhauled, and a new air-conditioning system was installed in the Sarasota location. Ashby remains the president of the business.
Garner says while Sergenian's was certainly hit by the recession, the wallop was harder on Ashby. That put Sergenian's in a position to expand, while Ashby survived. “We were looking to grow,” says Garner, “but we just didn't know where.”
The merger has already begun to pay off for both sides, say Garner and Ashby. The combined entity has increased buying leverage with vendors, and saves money by using one advertising firm, in Madison. All of the combined company's accounts receivables are handled in Madison, too.
“There's a lot of things we can do together,” says Garner.
Adds Ashby: “My weaknesses seem to be his strengths. It's a good marriage.”
The union also works because Ashby went into it with a recalibrated company. First, of course, he shed a chunk of the business. He sold the assets from five stores in Jacksonville back to the previous owner. He closed several other stores in the Tampa region. Says Ashby: “I went to where I was bleeding the most.”
Stay diversified
Another integral step Ashby took was an effort to capture a more diversified customer base — a business adage often repeated, but not always executed. G. Fried Flooring America now does about 50% of its work in retail, where homeowners come into a showroom and buy floors and carpets for installation. The company says it offers 17,000 combinations of hardwood, laminate, ceramic tile and vinyl floors.
The other half of the business stems from a variety of commercial work. In the boom, that meant mostly homebuilders. That now means a mix of offices, insurance restoration work and, most recently, work for Fannie Mae, the government supported housing finance arm. The firm has re-floored and re-carpeted foreclosed homes the agency seeks to sell. “That business is very good right now,” says Ashby.
One aspect that Ashby didn't have to change before or after the merger was the company's devotion to civic groups, such as chambers of commerce and Rotary clubs. Ashby says more than lip service, his company spends a large chunk of its advertising and marketing budget on the organizations. That covers dues and other costs for salespeople to go to events.
“I feel like that's where we can get ahead of the Lowe's and the Home Depots,” says Ashby. “As far as I'm concerned it's the best marketing ROI. Unfortunately, you can't live on that alone.”
Ashby says he mostly wants to live, instead, on what he considers the company's top competitive advantage. That would be its commitment to installing Karastan carpets and related products, a prominent high-end brand. Ashby's company is one of the top 100 Karastan dealers in the country.
The company also has two other commitments, regardless of the brand a customer buys: All employees go through criminal background checks, and no carpet that's removed from a home will go to a landfill. Everything removed is recycled.
Those efforts are costly, but Ashby says it's a necessary expense. “Those are things we will continue,” Ashby says. “That's the cost of doing business.”
'Pretty happy'
A Jacksonville native, Ashby never expected to even be in the floor business. His father was in the industry, in wholesale. Yet Ashby was focused on an accounting career.
But he changed his mind before he got too far. “I didn't like it,” Ashby says. “I didn't like sitting behind a desk and crunching numbers.”
So in 1978 Ashby took a sales job at a friend's carpet store in Orlando, just to see if he would like it. Turns out he did. “I fell in love with the business,” says Ashby. “I found out I was a pretty good salesman.”
By 1980 Ashby had his own business. That venture eventually turned into Carpet World, the move that launched his flooring odyssey. Now, with the assistance of Sergenian's, Ashby is confident he won't have to go through another recession survival endeavor like he did from 2008-2011.
“We feel like we are able to withstand any recession,” Ashby says. “We are pretty happy with where we are now as a company.”
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