Back on Nov. 14 I had the pleasure of being the guest presenter for the final Roomvo University webinar of the year. We had a record number of sign-ups and actual attendees, so I wanted to personally thank all those who showed interest. I know Roomvo is making the hour-long Q&A available on its YouTube channel, and we will send the link when it becomes available.
We covered a broad range of topics, including how I thought the election results would impact the flooring industry. In a nutshell, I know this incoming administration will be pro-business and it is hell bent on putting more dollars in consumers’ wallets via tax cuts. I also think it will wield its influence and do whatever it can to get interest rates lowered, which will drive housing activity and remodeling. This is critical to our industry because so much of the business is tied to existing home sales and new home construction.
At the same time, so many Americans have equity in their homes. A good portion finance their flooring purchases with home equity loans or home equity lines of credit. Some just put it on the credit card. But with home equity loans carrying an interest rate of around 10% depending on credit score, income and other factors, and interest rates on credit cards over 20%, consumers are not knocking down the door to borrow money right now.
One thing that is inarguable is all the pent-up demand for flooring out there. Many dealers with whom I’ve spoken recently believe things will really pick up after the first quarter and the ride will last into 2027. Economists temper that a bit saying second half of 2025 ’til the end of 2026. That’s good news for all of us. Or is it? If you’re not prepared for the comeback, you will have issues. I’ve said it before: Many businesses go out on the way up as opposed to the way down.
I brought this up during the webinar, and one dealer followed up asking me to elaborate. So I thought a good topic to discuss here is why businesses can fail during an economic recovery:
- Limited access to capital: While the economy is recovering, lenders may still be cautious, making it difficult for businesses to secure loans needed for expansion or working capital.
- Shifting consumer demand: Consumer spending patterns may change during recovery, with customers prioritizing different products or services, potentially leaving behind businesses that didn’t adapt their offerings.
- Increased competition: As the economy rebounds, new businesses may enter the market, leading to intensified competition and putting pressure on existing businesses with weak market positioning.
- Poor financial management during recession: Businesses that made drastic cost-cutting measures during the downturn may have neglected important areas like marketing, leaving them less equipped to compete in a recovering market.
- Inability to invest in growth: Some businesses may be too focused on stabilizing their finances during the recovery, missing opportunities to invest in new products, technologies or market expansion.
- Debt burden: Companies that accumulated significant debt during the recession may struggle to manage their debt repayments as the economy recovers, limiting their flexibility.
- Operational inefficiencies: Businesses that didn’t focus on improving operational efficiency during the recession may find it difficult to compete with more streamlined competitors during the recovery.
- Lack of strategic planning: Without a clear plan for navigating the recovery phase, businesses might miss crucial opportunities or make poor decisions that hinder their growth.
All these things particularly impact smaller businesses with limited financial reserves. So what can you do now? Start preparing for the recovery. Make sure your store(s) are properly staffed. Remember, if you start looking for employees after things turn around, you will be competing with more businesses for talent.
Next, make sure you have the right products on the showroom floor. Be aware that there has been a shift back to laminate and WPC at the expense of lower-end SPC. And understand that the higher-end consumer will benefit most by the incoming administration’s policies. So make sure you have an assortment of hardwood and higher-end carpet.
Finally, and I can’t state this enough: marketing, marketing, marketing. I know when it’s time to cut marketing is the low-hanging fruit, but Marketing 101 will tell you it should be the last thing to cut. I recently listened to a podcast where the guest believed marketing should be 80% of your budget.
I should send that podcast to all of FCNews’ advertisers!
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