How to Carve Out a $220M Niche in the Flooring Market

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[00:00:00] Colin Keeley: All right. Hello and welcome back. This is Colin Keeley here, and I'm Brent Sanders. And we are two guysbuying and building wonderful internet companies. And, today is a wellnesscheck on Brent. Brent, are you still alive? After last week's episode,

[00:00:14] Brent Sanders: we're good. This, it wasn'tlast week. That was like three weeks ago.

And it was funny, there were like, multiple people who, whoreached out and were like, are you okay man? I heard, I listened to thatepisode and. let me know if you need any support. Let me know if you want totalk. I'm like, oh, no, no, no. I'm good. It was, it was stressful, but youknow, it's like, These things happen and you know, it reminds you of what'sreally important, which is, you know, regular server monitoring and, databaseconnections.

Those is the most important thing. No, your family, like, it'sa bigger picture. We're, we're not writing or managing software for like,Cancer patients. These are, we're allowed to have a little bit of a downtimeand, and all in the spirit of making things better. But yeah, I guess maybe,did we not talk since then?

Have we not recorded an episode since?

[00:01:00] Colin Keeley: No, it was very concerning. Wehad this alarming episode and then nothing for a couple weeks from Brent. youknow, no updates on Twitter. Yeah, just completely arc.

[00:01:08] Brent Sanders: Why don't we, why don't westart? Yeah. Why don't we start there and let's complete that arc. So sincethen we migrated our database.

which ever since that finished it, it's been, the performanceof the application's been awesome. Everything's been working really well. Imean, we still have issues that are, you know, have come up. Even it, it'sfunny, we, we got an issue yesterday that's like same issues that we've hadsince we purchased the company, that we're finally squashing getting to, but alot of issues have gone away.

And the main one performance is, is just, you know, we, we gota, a, the right size database. We found a great. Database host that, you know,our database is a little weird. It has some dependencies that you can't just goto rds, which is a popular, you know, it's Amazon's database solution. So wefound, an awesome hosting partner and migrated and, and the migration wastough.

It was, there was a lot to do because we have a lot ofservices, but we did that on a, what, 4:00 AM on a Sunday and. ever since then,things have been really smooth on scout. Things like response times are down,tickets are down. You know, there's been no, no outages, no issues. In fact,there was a big AWS outage, thankfully not in our region, like a week after wemigrated.

So, things are definitely on the up and up. So, and I'm fine. Igot some rest.

[00:02:25] Colin Keeley: You're sleeping. You're sleepingnow.

[00:02:28] Brent Sanders: Yeah, I was sleeping. Iactually, you know, it was just Father's Day. I dunno. What did, did you doanything special for, for Father's Day? Did you get pampered and treated like a

[00:02:36] Colin Keeley: king? no. We went to my parents'house.

just had people over the family got a see fin, which is cool.he's more, he's bigger and more interactive now, which is, you know, good.

[00:02:47] Brent Sanders: That's great. Yeah, I went downto Florida visit my cousin, who I, you know, I just, my wife and I werecalculating and it wasn't really intended to be over Father's Day, which was alittle sad.

But, you know, I, I just got away. I haven't been away from mykids. My wife travels a lot for work. She's back and forth to Chicago. She's backand forth to doing installs on projects. So, she was like, why don't you take aweekend, go somewhere, just get away. I was gonna get an Airbnb and like, Justrelax and do some work.

I just thought it'd be a little sad and depressing to be kindof by yourself, especially on Father's Day. so went down, visited my cousin wholives in Florida. He's got a pool at the house, you know, just hung out,watched terrible, you know, eighties movies. Like, we watched I think almostall the Schwarzenegger movies from the, the eighties, the from Commando toPredator and, and onwards and just napped.

It was great. I just caught up in my sleep and. Eight. And it,it's funny as you get older, like what passes as a a vacation seemed like, youknow, really, really boring. But it was just great. I took like two naps a day,slept eight to 10 hours at night. It was, I came back feeling like human again.So it was great.

I'm good. I'm rejuvenated. Glad to hear it.

[00:04:01] Colin Keeley: you look like you've been up tosome interesting stuff. Again, you telling more stories on, on Twitter and, andwherever else of, some vertical interesting vertical software in the flooringindustry.

Yeah. I hadn't written any, written anything in like two weeks,maybe a little more, and I felt bad. Like I, I felt like I was just, you know,fell off the rocker or something. So it's good to get another one out. feellike you're productive again. But, so this one, I've been following this guy onTwitter for a while, and he is, he's like no followers.

He's like 3000 followers. but I find it to be one of the mostinteresting stories in like a crazy pivot situation. So, he builds software forvertical markets. So like, retailers. so it's an all-in-one marketing andmanagement platform for flooring retailers.

Today they have 3,500 retailers on the platform. but it startedout as a very different business. So the founder's name is Todd Saunders, andhe had a co-founder at Google as well. And so they were working on helpingbusinesses grow with ads. They became really good at optimizing these ads andthen spun out to start ad hoc, which is a, you know, it was a company to dothat.

They raised in venture capital, they grew nicely. So they grewto 50 employees over three years. You know, low single digit, millions inrevenue. but their retention wasn't great. So it was a generic ad tech company.Wasn't anything special. Their biggest cup customer was in flooring. And sotheir retention in flooring was 95%, while it was 80% with everyone else.

and so Todd went to a flooring conference to learn more andthey told him to stand on a stool and the corner and to talk. And he like kindof discovered that this is a huge industry, a 90 billion market. you know,floors are everywhere. And it hadn't really been touched in tech by technologyin any real sense.

so they thought there was an opportunity to become the verticalsoftware company for the flooring industry and they ended up buying floorforce, which was their biggest customer, which offered ads, but also like a varietyof other digital services. And that was back in 2018. So they had no backgroundin the industry and, you know, when Floor Force sold, the founder jumped at apool and there's a good photo of it on Twitter that I added.

so. But yeah, during 2019, they set out to become theall-in-one flooring platform. They fired all their non flooring customers.Revenue dropped from 6 million down to 3 million. it was tough. They had let goof a bunch of people and the full pivot took a year. And then in 2020 and 2021,They grew their product offerings through acquisition, so kind of anunconventional approach.

And each purchase kind of leveled up their product suite thatthey're able to offer to these end customers. So they did acquisitions, crm,building a websites, product visualization and e r p and payment processing.another website purchase, and then another e r p. So kind of rolling up theindustry, taking a private equity approach to this kind of, you know, venturecapital back company.

And, the other kind of crazy things they did here, they had avery unconventional go-to market. So they started the premier flooringconference to gather the industry in one's place. so a fancy conference wasunheard of in such a like, boring industry. Normally it's just these like kindof crappy trade shows, and they did the first one digitally.

They got 3000 attendees, and now the majority of their salescome from this conference. And like the day they do it is their biggest salesday of the year. And it outpaces like the. Every other sale, you know, thathappened up to that point in the year. Their other big thing is they have aFacebook group.

So they built a 4,000 plus member Facebook group for flooringcalled The Beat the Big Box Stores. And Todd used his personal Facebook accountto friend all the members. He unfriended all his friends, and then he respondedto every single post and comment to kind of get it off the ground. And today,20% of all their inbound needs come from that.

, Facebook group. And one of the big things they do is theywent through the industry and kind of digitized all the products. And so theyhave this huge product catalog that no one else has. and they use that as awebsite like Wedge. So, They, , demo the website to potential customers andthey show that it's super easy to make it so they could show like what productsthey have for sale.

And then most of these customers either don't have a website orit's horrible and the value kind of clicks right away. And that demo, and theyuse that kind of wedge to get people in the door. They do it for very cheap.and then they, These customers get so many new leads that they realize theyneed, , proper software to manage everything, and then they upgrade to the restof the, the broad loom portfolio of products.

and as far as results, revenue dropped from 6 million to 3million with a pivot, and then it grew to 22 million in just a , two yearperiod with this kind of roll up approach and this unconventional grow tomarket. And then they raised a 60 million series B at a 220 million valuationin 2022. so the takeaways, so niche down to grow, examine what your bestcustomers have in common.

gather your industry together digitally with groups, and thenphysically within in-person conferences, and then find your wedge product. So asuite can be overwhelming, but a simple website is like a great stepping stoneinto your larger product offering.

[00:09:19] Brent Sanders: Which is funny. We, we are, youknow, have been having a lot of discussions around these sort of wedgeproducts.

Like Scout is a great example of, you know, you have acustomer, they have clear need by using your software, but then there's like ahuge set of opportunities because they're running a local business. They want,there's all sorts of add-ons that you can throw in there that either you chargefor or. In this case, you kind of offer something on the sheep that's like, oh,this makes the value proposition even better.

you know, we've talked about things like reputation management,you know, whether it's just requesting more reviews or local seo or paidadvertising research and, you know, operations like the people are, they're,they're. Our customers are largely dog walkers, right? They're, they're out onthe street that some of 'em have an office person that does something that, butthey're, they're busy all day.

They don't have time. And plus they don't know it, but theyknow they need new customers. And so it's a great way to, I think put this downis, is like, that to me is a great takeaway of like, hey, the more you can kindof offer less to just for cash, right? Like of, hey, we, we want to add, youknow, 500 bucks a month to your membership or your, your.

Your plan, but more so like, Hey, you should use us becauseyou'll get this for cheap or, or something along those lines.

[00:10:40] Colin Keeley: Yeah, I love this concept oflike, what is the no-brainer offer? Like what can we do that immediatelyclicks, gets people a door, it's, you know, free or very cheap. And then onceyou get kind of them locked in, there's a million things you could do to, youknow, with existing customers, they have a million needs.

You could do reputation management, you could do SEO marketing,you know, you could sell additional services into them, but it's like, what'sthat first thing that gets people going?

[00:11:07] Brent Sanders: But the, I did have a question,right? So, Like Broadloom, it was started by you.

You mentioned that an ex Googler, so this guy Todd Saunders,like, it seemed like the only thing that helped him do this, you know, hisGoogle experience was, was mainly the AdWords thing. Was it, is that right? Oris it, were there other parts of this that, you know, whether hey, there was aclear technology and influence or something along those lines?

[00:11:34] Colin Keeley: No, it was, I think theyrealized retention wasn't great. And they built a solid business, but it felt alittle shaky. it was just like, you know, there was a growing market there.Everyone wanted ads. Ads were like kind of a newish thing. but yeah, there'speople chiming in now like that were investors and like, yeah, it sounds justas crazy as it does in the thread.

Like we all thought it was nuts when he did it, but you know,clearly it was very successful now. but yeah, they had no background in theindustry. They just kind of stumbled on industry they thought was good. Andlike we've talked about lifeboats, a little bit on companies of like, you know,this is going fine, but like, is this other thing like what we should actuallybe doing and we should pivot the whole thing?

that was definitely the situation for them. Yeah. But the onething that I left outta the story a little bit is they were venture backed andthey had, you know, capital. Yeah. It's like how did they, out of nowhere by upthe industry and kind of roll it up. It's because they had some capital, to doso.

[00:12:25] Brent Sanders: Makes sense. Yeah. Cool. Well,it's a great, you know, great breakdown, want, those are always interesting.Always good to see, always, you know, good to look at those as a takeaway. Doyou have anything that you kinda look at that story as like a key takeaway?

[00:12:38] Colin Keeley: so I love the idea of kind ofaggregating your industry or becoming like the meeting place for it.

setting up a conference sounds like a tremendous amount ofwork, but setting up a Facebook group is not as bad. So I would think ofstarting there in like, you know, building Facebook groups. we have dog walker,Facebook groups, or I'm a part of some, we didn't start them. it would besomething like that.

I think that's an easy playbook kind of across industries todo. yeah. The other thing he did is he gave his personal cell phone to everycustomer, his the first 3000 customers. which is a pretty wild thing.

[00:13:11] Brent Sanders: I, I know a lot of customersthat have my phone number. I get text messages and it, honestly, it works, youknow, it helps diffuse a lot of situations that otherwise, you know, our sportpeople are great, but on certain situations you kind of have to.

Have a little delicacy. Delicacy is probably not the word. Yougotta be a little more delicate. You have to kind of understand the context.and no one's abused it. You know, everyone's been super respectful and no, Ihave a family and other things going on. But, yeah, it makes sense. I mean,especially if you want feedback and you want it regularly and you're building anew product or you're changing a product, it's, it's good to have a shorter

[00:13:50] Colin Keeley: loop.

Yeah. My other just kind of big takeaway is like, thisplaybook, I think works in basically every industry and you can copy, you know,most of it and apply it to just whatever boring industry you kind of haveexposure to. I think that big question is like, business management for X, likethat software becomes very large and kind of overwhelming.

Mm-hmm. so it's always back to like, find that wedge product oflike, what's the simplest version of this that provides value for people Then,you know, kind of grow from there.

[00:14:20] Brent Sanders: Yeah. Cool. And then, switchingtopics a little bit. You are, when are you, you're moving to Austin soon. Iknow you're kinda undergoing the, the house hunt or you've, you've secured ahouse or you found a house and kinda offer accepted.

When do you expect to, make the big move?

[00:14:36] Colin Keeley: it's an open question. I feel alittle afraid of jinxing it, but yeah, in theory, oh, right. We, yeah. areclosing mid July. but it's 200 degrees in Austin and I don't have any intentionof really being there until, like, probably September. My wife starts inOctober.

Nice. but yeah, it's a crazy process having done, you know,multiple business acquisitions and never bought a house before. in, so theAustin market has maybe a little different. I have friends in Chicago, but Iguess across the board supplies is very, very low. So the prediction is thatthe people with these, you know, like yourself have really nice mortgages withlow interest rates.

They're just gonna stay put. And they're not gonna move becauseany movement would be like, oh, my mortgage is twice as expensive now for likea, you know, half a nice as house. so the theory is that no one's gonna moveuntil they have to. And supply is just gonna be severely constrained as long asinterest rates remain high.

so that creates like this kind of buyer frenzy, which wouldn'tmake sense with mortgage rates being high and it's more expensive. But, there'sjust so little supply that like, In Chicago and in Chicago suburbs where myfriends are looking at buying homes. Everything is a bidding war. so some of itis maybe pricing.

You're pricing a little under, but like no home is selling forunder the list price. Everything's going for above. Everything's multiplebidders. And then people are like f basically bullied into waving allcontingencies. You're buying the house as is, like no inspections or anything.But that's, you know, Chicago and it seems like good chunks of the us Austin isa little different.

so we have been, I've been studying the market for kind ofmonths. It's down probably like 20% in the centrally located neighborhoods,which some people would say, you know, the peak was kind of not real. It waslike overly high. but what mm-hmm sellers are being coached to do is keep thehome on the market for 30 days at list price.

And most of the comparable companies we, business. Comparablehomes we've seen, I keep wanting, say companies are buying it. right. Went forwith. like a single offer. There weren't multiple offers and like 80% went forabout list and only like some went below list. but then you do a normalinspection.

And in Texas they have this thing called an option period. Sowe, saw the home online. Our realtor realtor went out there like, you know,within a couple days of it being listed, and she sent it to us and then we gotit under offer. in, in Texas you have this option, period. So you put down like$500 in earnest money and then you basically have the option to buy the homefor like seven to 10 days.

And so we were able to fly down there. Okay, check it out,thumbs up, thumbs down, do the inspection, do the negotiation and everything.and then you close, you know, 30 to 45 days later in theory. But yeah,everything checks out. Fingers crossed.

[00:17:13] Brent Sanders: I hope it works out. Yeah, buyinghomes. Always weird. I mean, it, we sold and bought a home and during Covid dand it was, felt really crazy then.

I can't imagine now. I mean, and we, we really, had a hard timefinding a new place and we relocated our family to Ohio. It was like a, it wasa whole thing. It felt really strange. and before that we moved almost everyyear like rental. We, we've owned homes before, but mainly just renting withoutkids and.

I think we're, we're gonna stay put for at least another 10years. I think. I, I say that now. My wife will probably impose another move.Who knows? But, I think we're, this is our, this is our, we're staying put fora while. I just, the fact, forget the financial part, but then the, the movingitself, I don't think I can, I don't think I can do it again.

[00:18:01] Colin Keeley: Yeah, I'm not looking forward toit. it's coming up here, so like, we're not moving out of Chicago until likelater in July at least. And I'll probably spend Okay. Most of August, like inWisconsin of sorts. and then September we're traveling for a bit, so kind ofbouncing around all summer. very cool.

It'd be good to be, you know, landed and settled by the fall atleast. Yeah.

[00:18:25] Brent Sanders: Yeah. I'm glad to hear. I thinkthat's all I got. Anything else you wanted to

[00:18:27] Colin Keeley: cover? no out of time this week.I'll get back for more next week. Cool. Sounds

[00:18:35] Brent Sanders: good. Well, thanks forlistening everybody.

[00:18:36] Colin Keeley: Yeah. Take care. Bye-Bye.

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