On June 11, a group of fabricators from across New England gathered at Cosentino’s facility in Northborough, MA, for the Massachusetts Stone Summit — the latest edition of the Marble Institute of America/Stone World industry education series. The morning portion of the event included discussions on pricing and business management, while the afternoon featured a warehouse tour and a fabricator forum that allowed attendees to discuss a wide variety of issues and solutions with a panel of industry veterans.
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The morning session was led by Tony Malisani of Malisani, Inc. in Great Falls, MT, and Vice President of the Marble Institute of America. “When you’re thinking about where your stone business is going, think about what you are trying to do,” he said. “What does the word ‘success’ mean to you? Set a definable goal. It could be doing 20 kitchens per week; it could be achieving a profit level of 20%. Take the time to think about what you want to do. Do you want to be a high-volume shop? A high-profit shop? Both?”
The audience members present at the event brought up a wide variety of topics for discussion:
Are you charging your customers by the slab, especially when you have to cut into a third slab to complete a job?
For the most part, the fabricators agreed that they need to be compensated when cutting into a third — or any “extra” slab. However, this philosophy can be difficult to execute in conjunction with a square-foot pricing structure. Many of the fabricators present said that when confined to a square-foot pricing quote, they will simply raise the per-foot price to account for the extra slab.
Clear communication with the client can be extremely helpful in cases like this. “Maintain your profits, but make it easy to buy from you,” Malisani said. “Buying is a lot more than price. Explain the necessities of the job, and tell them why you have to do what you’re doing. This is why it is more important to build relationships than just make sales.”
How are you finding good installers?
The fabricators seemed to feel that their best installers were developed in-house, as opposed to hiring experienced installers. In general, they were hired by word of mouth or referred by existing employees.
“Some shops look to people who studied auto body at a vo-tech school,” Malisani said. “It is basically the same skill set. No matter where you get your employees, though, make sure you have a training system in place. Make sure they understand what type of company you have, and give them respect. Money is not at the top of the list for most employees; respect is. When you get a compliment from a customer, make sure the employee knows about it.”
Are you tracking your costs?
The majority of the fabricators present said they are tracking costs in one way or another. “We track our costs by the job, and also by individual activities on the job,” explained one fabricator. “We do gross profit analysis, and that allows us to move our pricing around as we need to.”
Is anyone having commercial stonework processed in China?
While a number of attendees present said they occasionally brought in finished stonework from China, they stressed that it required the proper research. “You must know your sources,” said James Gerrity III of GerrityStone, Inc. in Woburn, MA. “It’s all about building relationships and knowing who you are buying from.”
David Castellucci of Kenneth Castellucci & Associates, Inc. in Lincoln, RI, echoed this sentiment. “You need to find people in China who understand the quality standards of the U.S. client base,” he said.
How much thin veneer are you seeing out there today, as compared to traditional veneer?
The consensus among the stone industry professionals on hand was that thin veneer was primarily being used for residential applications, including interiors and do-it-yourself work. They felt that commercial work still called for full-bed veneer stone.
Malisani pointed out that the advent of thin-veneer stone has actually served to introduce stone cladding to homeowners. “It is similar to when stone tile came out 20 years ago,” he said. “It comes with its own maintenance issues — cracking due to improper use and other failures — but it introduced stone to consumers.”
What kinds of changes have you made to your facility?
“We added a SawJet, CNC and laser templater,” said Vincent Trento of Rumford Stone in Pembroke, NH. “The manufacturers recommended shops where we could see the machinery running, and we visited shops around the country. It was a long year of integrating the technology, but we have less reworks, and we took the ‘human’ out of human error. We are using four fabricators during our busy season, down from seven or eight, and a skeleton crew keeps the machinery running. We run the CNC for 16 hours per day, and the SawJet for eight to 10 hours per day.”
Other fabricators also reported investing in new technology, particularly CNC and digital templating equipment. One point the attendees agreed upon was to make sure the shop workers are included in the evaluation of these investments. “They need to be on board if you want them to embrace the equipment,” stated one attendee.
Following a tour of Cosentino’s slab warehouse, the fabricators gathered for an open “Town Hall” forum, which allowed attendees to raise issues they are currently facing in their operations. The forum was moderated by Malisani, and it featured the following panelists:
• David Castellucci of Kenneth Castellucci & Associates, Inc., Lincoln, RI
• Kimberly Homs, Great In Counters, Smithfield, RI
• Tom Kilfoyle, United Marble Fabricators, Watertown, MA
How much commission are you paying your salespeople?
Homs: We use a rep firm for the entire residential end of our business, and they get a straight 5%. We’ve been doing this for three and a half years, and it is working well. There are advantages and disadvantages, though. You are one of many products that they represent, so you have to make sure that you don’t get lost.
I do all of the commercial sales myself. I have the knowledge and backing to know what we can do. When dealing with the owners’ representatives, I know what to say about our abilities.
Castellucci: I do our sales exclusively — mostly commercial and major projects. There are few people that can speak to it correctly. As business development becomes less of where I spend my time, I am devoting myself to tasks like project management, purchasing, material inspection, project inspection.
Dick Laliberti, Ripano Stoneworks, Nashua, NH (Audience Member): We tried the rep route a few years ago, but it didn’t work for us. Who does the actual quotes in that case?
Homs:We do the quotes ourselves. The reps get us in the door, and they give us a presence, but we do the quotes and scheduling. It is really a science working with reps, because you have to protect your margins.
Kilfoyle: It is science with the salespeople, too. One thing we do is offer a higher commission on the upsell. So if our salesperson has them upgrade from an eased edge to a Dupont, the commission [rate] on that will be higher than the commission on the job.
Laliberti: We offer different bonuses for our salespeople — for a new long-term account, for reaching certain monthly levels, etc.
Vincent Trento, Rumford Stone, Pembroke, NH (Audience Member): We offer a base plus commission. There are bonuses for new accounts as they grow. Finding motivated salespeople is key. Tanya [Clark] has been with our company for eight years in different roles, and now she is doing a great job in sales. She has a lot of experience in the field.
Tanya Clark, Rumford Stone, Pembroke, NH (Audience Member): Going on commission can be scary, because for years you knew exactly what you would be making, but my plan was incentivized to bring in new business, and it is a really good plan.
Marci Benoit, KB Surfaces, Johnston, RI (Audience Member):Working for a family company is an adventure. I’m paid straight commission, so I live and die by what I sell. I work the commercial and residential markets, and I always want to be growing. I don’t want to chase the cheapest price, though.
Clark: I agree. You need to be confident in your company and your quality, and charge a price that goes along with that.
Castellucci: There is a general fear among salespeople to ask for what they want. You need to be willing to hold your number and walk away. You can’t win every job.
Kilfoyle: The challenge is when people are seeing ads offering granite for $35 per square foot, and they’re asking you why you charge $85. Then you have to sell yourself. But you have to consider who you want to be competing with. You want to have good competitors who own a house and own a car, and they actually have something that can be taken away from them when they get sued.
How are you able to get paid promptly?
Castellucci: There is a prompt payment law in Massachusetts. There is no teeth behind it, but it is coming. For commercial work, you are guaranteed payment within 45 days, but that’s a dream. We work on a requisition basis. We bill at the third week of every month based on the amount of work that has been done. We submit the bill to the general contractor, who in turn sends it to the owner. The reality, though, is you’re not going to get paid until 120 or 140 days. Even with the prompt payment law, nothing has really changed.
For condo and apartment work, we request a 50% deposit, and when we do that, people burst out laughing. But we are getting 30% up front now.
Why isn’t the prompt payment law working?
Castellucci: Peopleare hesitant to go to the attorney general because a lawyer will charge you $10,000 to $15,000 just to get started.
Homs: When you’re asking for a deposit, it may be easy to get $30,000 on a $100,000 job, but you’re not going to get $300,000 on a $1 million job. We bring the material in, and bill on that. If they specify it, then it is easier to get them to pay.
Documentation is the key to getting paid. Have someone of authority sign off as extras happen.
I can tell you that commercial work is not for the faint of heart. You have to have cash flow.
Malisani: My grandfather used to say, “If you can’t get 50% when you start a job, how can you expect to get 100% when you’re done.”
Our contracts state that there will be a 2% interest charge after 90 days. When we send them the invoice with that 2% on there, they will send us a check without the interest, but that’s still a win because we got paid.
Homs: For residential jobs, they raised the limit that can go to small claims court to $6,000. So you can go after your money without paying attorney fees.
Trento: Small claims court has worked great for us. Nine out of 10 times, they end up paying. They’re testing the grass of your claim.
Kilfoyle: We had a problem with a customer who paid with their American Express card, and then contested the charge. We proved that the client owed money and refused to pay. American Express agreed with us, but they will not go against the cardholder. They suggested that we go and sue them.
Castellucci: The problem here is that we’re talking about natural stone, and you can always find something that you can call a defect.
How about filing a lien against a customer that won’t pay? (Editor’s note: Multiple fabricators present at the forum stated that filing a lien— or even threatening to file a lien — resulted in payment for the job.)
Buddy Ontra, Ontra Stone Concepts, Bridgeport, CT (Audience Member): A lien is good for one year in Connecticut, and it can be applied within 90 days after you have walked off the job. It has worked for us.
Malisani: On a commercial job, there is a punch list, but what about on residential jobs? You need to have a conflict resolution structure in place. Mail them a document to fill out, explaining why they didn’t pay. It gives you documentation that says, “The client stated that these were the specific issues on this specific date.”
What do you do when you miss your scheduled window for an install?
Clark: You need to be proactive. We call the customer when something goes wrong. It is so much better than if they call us wondering where we are.
How are you handling customer expectations?
Kilfoyle: When people come to me, it is because a designer or a builder told them to come to me. They know our reputation, and we explain to them why things cost what they cost. We pick their slabs with them, and it becomes a collaborative process.
Homs: We train our kitchen and bath dealers about what the expectations are — when to do layout and when not to do layouts.
When you’re doing commercial work, you need to make sure you set the proper color range — not from one piece or even from one slab. They need to know exactly what they’re going to get.
Castellucci: We usually have an architect involved, and during the submittal process, they know what to expect. It all goes back to relationships and reputation.
Benoit: We were doing a job where the kitchen and bath dealer dictated where the seam went, and there was some discussion on it. After the install, the end user didn’t like it. They wanted it moved 10 inches, and to them, they said that would make all of the difference. We ended up doing it and splitting the cost with the dealer.
Audience Member:We try to bring the worst case scenario to the client. We did a 90- x 40-inch L-shaped kitchen, and they were upset that there was a seam there. It was a five-story building in Cambridge, MA, with no elevator, and they wanted us to do it with no seam. It would have absolutely been impossible.
Malisani: In cases like that, you need to have a trail of paperwork. Then you can look back at it and see exactly where the communication breakdown was.
Are you doing follow-up repairs after the install?
Homs: We do what we need to do. If we have someone in the area, and they can do what is needed, then they will do it. If it more elevated, and we have to send someone out, then it depends on the situation. This is why you need someone representing the customer on site to sign off on when a job is done.
Kilfoyle: When a job goes in, it should be perfect. But if there is some complaint on the backsplash or something, just fix it quickly and get yourself paid.
The Massachusetts Stone Summit was just one session in a year-long Stone Industry Education Series from the Marble Institute of America and Stone World. Future events include:
• July 18 - Seattle, WA
• September 19 - Dallas, TX
• October 17 - Atlanta, GA
• November 7- Pompano Beach, FL
For more information regarding future Marble Institute of America and Stone Worldeducational seminars, visit www.stoneindustryeducation.com.