Crown Tile & Marble Realizes Its Worth with Help from BGC Case Studies
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It's hard to believe in this land of plenty, but pediatricians are finding that more American children, even middle-class kids atop the growth chart, are undernourished these days. The reason? Too many empty calories and not enough vitamins and minerals to prevent high cholesterol or brittle bones. Despite celebrating its 50th year in business in 2003, Crown Tile & Marble of Akron, Ohio was the equivalent of a big unhealthy kid. The company had enjoyed a two-year growth spurt, but the rise in orders had not led to increased prosperity. Owner Jim Cropley, who purchased the business from its founding family in 1993, felt confident in the value of the work he provided for his customers. The company was taking in a lot of business … so why didn't it feel more successful?
Crown Tile & Marble is a premier custom fabricator of stone and flooring materials located in Akron, Ohio. Serving the high-end residential and commercial markets, Crown Tile supplies custom-cut stone products, including floor tile, fireplace surrounds, sculptured surfaces, and countertops for kitchen and bath, using materials quarried here in the U.S. as well as imports from around the world. The company's showroom features more than 800 samples of marble, granite, limestone, porcelain and ceramic tiles, representing countries from Canada to Zimbabwe, Italy, France, Spain, Guatemala and more. Because the company uses only fine quality stone, much of it imported, and employs master craftsmen, costs run high. And, since each piece is customized, the company must target a narrow segment of the marketplace. As Cropley noted, "Eighty percent of consumers are not our customers."
Still, by 2003 Jim Cropley was having a lot of success selling to that affluent 20 percent. The company was taking in all the orders it could handle but it could not maintain strong, focused growth. Employees were working too hard and long to fulfill sales promises that paid too little. There was little tracking of or communication about financial controls and record keeping. Decisions were made reactively rather than proactively. Cropley and his wife, Mary Beth, were concerned that the company was unhealthy beneath the surface, but they didn't know exactly what was wrong. Seeking answers, they attended a conference sponsored by the Akron Chamber of Commerce. There they met Andy Birol.
THE BGC SOLUTION:
After sharing their concerns with Andy, Jim and Mary Beth hired him to figure out how to refocus their company. Several issues quickly came to light. The books were in such disarray that the company risked being out of compliance with IRS regulations. "Our accountant wasn't proactive," said Jim Cropley, "which we didn't realize at the time. But we were not getting data we should have been getting." Once Andy crunched the numbers, he identified two major obstacles to profitability: high costs, particularly in terms of payroll, and confused pricing. Ironically, Jim's prowess as a salesperson worked against the company in that he was so committed to delivering quality to customers he had fallen into the habit of over-promising, with the result that the company could not make enough profit despite healthy sales. Andy pointed out that 20 percent of the firm's business came from a single customer, who was getting so much value for such little price that it was dragging Crown's profit margins into dangerously low territory. "Andy made us take a look at what is the value of everybody," said Cropley. "Who are our best customers? Do we have the personnel we really need? Who do we keep, and who has to go?"
The changes Andy recommended were so "traumatic" that Cropley initially balked. "It was like hitting bottom," he recalled. "I started to question the value of his advice … What do I get from Andy that's worth my money?" Finally, after extending what was to be a three-month contract, Andy told Cropley and his wife to fish or cut bait. "We looked at our monthly expenses, our margins, all that, and we knew we had to make changes," Cropley said. "We decided to listen to him, and pretty soon we started seeing the savings he predicted and uncovering the places our profits can be."
"[Andy] stimulated us to look at the business with a holistic view," Cropley remarked. "We questioned everything: What do we spend money on? Who do we keep? Who don't we keep? Who are our best customers? His guidelines have been essential."
Focused and committed to improving their business, Jim and Mary Beth implemented Andy's recommendations in four key areas:
- Evaluate personnel. One of the more painful actions Cropley had to take was the termination of employees who were unsupportive of the company's new direction. Once done, however, he has been able to trim the payroll and improve productivity with a few "prudent" new hires.
- Organize financial controls. Cropley hired a new accountant and bookkeeper to get and keep the company in compliance with government requirements. With new staff in place, the company is benefiting from diligent financial record keeping and organization, as well as the guidance of competent financial advisors.
- Establish a pricing structure. Andy stressed the importance of selling only what the firm can profitably produce. Toward this end, he helped Cropley establish a job costing structure, ensuring that the company is well compensated for the value it provides. Customers are now priced according to a tripartite system of "bronze, silver, and gold."
- Evaluate customers. Although Crown continues to sell in both the commercial and consumer markets, Andy identified the company's Best and Highest Use as the design, production, and sale of customized kitchens to homeowners with more money than time. These customers provide the company with better margins than developer customers, and by going after them, Crown Tile is enhancing its reputation in an expanding and affluent market. Cropley summed it up succinctly: "The remodel market's been fantastic for us!"
"We knew we were doing great things for our customers," Cropley said. "Andy got us to look at how good our customers are to us." Understandably, some customers haven't been delighted with the new pricing, particularly that customer who accounts for one-fifth of the firm's business. "They have resisted," said Cropley, "but they haven't gone away!" Concentrating on desirable profit margins has reaped genuine rewards. "Adopting [the BGC] system has saved our company and made money for us to prosper," said Cropley. "We have focused on better customers, higher profits, and better employees … and now we're organized enough to know what's going right, and why." As for working with Andy, Cropley reported that his initial reluctance was a sign of just how much his company needed to change. "Andy won't pull punches," he said with a laugh. "He can be brutal, but it's helpful because you need to hear it. We were going down a path that wasn't working, and he turned us around … The great thing is that he is genuinely concerned with our success."
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