Sustained Stubbornness

Sustained Stubbornness

ENTREPRENEURS by Mark Gordon | Managing Editor

A simple warehouse expansion project has turned out to not be quite so simple. But the $1 million risk one entrepreneur took could be paying off soon.

Scott Brann isn't necessarily the world's biggest risk-taker, nor is he an entrepreneurial contrarian that will regularly go out of his way to be daringly different.

Still, investing a little more than $1 million in a new warehouse for his $5 million-plus decorative artificial flower and plant business actually made a lot of sense to Brann, even coming on the cusp of what's now a painful economic downturn.

For starters, the interest rates Brann was offered on the new building were so low, he would be paying less to build and own than he had been paying to lease three separate warehouses in the Sarasota-Bradenton area. The savings, Brann estimated, could be as much as 20% a month.

And what better way to boost morale within Lux-Art Silks, the 35-employee company of which he is president, than to build a new warehouse adjacent to its headquarters and showroom, on the outskirts of an industrial park a mile east of the Sarasota Bradenton International Airport in southern Manatee County.

"Even though business isn't fabulous and we're not in a growth mode," says Brann, "this was the right time to do it."

At least that's what Brann thought in 2006, when he hired a contractor and applied for his first paperwork approvals in the process. But nearly two years later, the building isn't completed. And while Brann is still confident the risk will pay off, it's now clear that what started out as a supposedly easy expansion has become a story of sustained stubbornness. The main culprits: A contractor that went out of a business and the dreaded Manatee County government building and permitting bureaucracy.

Brann's experience is also a lesson-learning story of entrepreneurial patience, something many harried Gulf Coast business owners and executives sometimes have in short supply.

"There were many times in the last two years when I had to ask myself if maybe this wasn't meant to be," Brann says in a statement announcing the expansion. "And I've had to jump through so many hoops, I might as well have joined the circus."

Multiple issues

Brann's first hoop was a big one: The initial contractor he hired, Sarasota-based Executive Construction, went out of business a year into the job, but before any construction had begun. Besides an empty lot, the construction firm left a small army of unpaid subcontractors, including an engineer and an architect, Brann says.

Executive Construction officials couldn't be reached for comment.

That failure was costly for Lux-Art Silks, both in dollars and time. Brann says the time he lost, at least 10 months, was actually worth more than the lost money, which he says was less than $100,000.

The construction company problem kicked off a succession of small, yet significant issues threatening the warehouse's future. Says Brann: "It was one disaster after another trying to move forward."

Brann hired another contractor midway through 2007. While his experience with the new firm, Sarasota-based Tom Wessel Construction, has been excellent, he can't say the same for his experience with Manatee County building and planning officials.

Issues that confounded Brann included having to go through a traffic study for the street fronting the planned warehouse, even though the dead-end road, in his view, is relatively obscure with few other retail operations on it. And the time it took to get approval for what Brann thought were simple building permits was puzzling, too. After all, the two-story warehouse is a simple construction blueprint, including just one elevator, for instance.

To be sure, Brann isn't the first business owner on the Gulf Coast to struggle through a county or municipal government building, permitting and zoning process.

"There are always major holdups in Manatee County," says Jane Parsons, a project planner with Tom Wessel Construction who serves as the company's liaison with the county for several projects, including the Lux-Art Silks warehouse. "The permitting and site approval process is very cumbersome."

The big question Brann is left with is, why? Indeed, Brann has become especially frustrated the last few months, as he would have hoped the process could have gone even faster, as fewer and fewer projects are even being proposed due to the faltering economy. But the government-induced delays have continued, even as construction began in early March.

The warehouse is now expected to be ready by July, but satisfying answers to Brann's questions will likely linger well past any grand opening.

Manatee County Planning Director Carol Clarke says there were some specific issues with permit applications in the Lux-Art Silks case, such as potential parking problems and a change in project engineers. Even so, Clarke says she empathizes with Brann and other business owners who feel frustrated with the system, especially the ones, like Brann, who aren't experienced developers.

"We want people to be able to grow their business here," says Clarke. "That's good for them and it's good for the county."

Double-digit growth

Through the entire process, Brann's singular constant has been the need for the warehouse. That has been unwavering. "In the current setup," says Brann, "logistics has been a nightmare."

That current set up involves a few employees arriving at the main office everyday to check the day's list of products that need to be shipped out and then getting in the trucks and heading off to the specific warehouse to retrieve the specific product. So not only is Brann sending employees in as many as three directions when they could just be walking next door, he's paying high gas prices to do it.

The products stored in the warehouses are diverse, ranging from 60-plus designs of realistic looking fresh cut flowers to an eight-foot high Ficus tree. Retail prices for most of the products range from $200 to $500 for flowers and from $200 to $600 for trees.

On a retail basis, most of the company's customers have traditionally been interior designers working for high-net worth customers. But a recent growth market for the company has been Realtors and residential real estate agents seeking flowers for decorating property put up for sale. Lux-Art Silks also sells directly to high-end furniture stores and even manufactures a private label of products for furniture stores such as Havertys and Ethan Allen.

Lux-Art Silks has been operating continuously in the Sarasota market since 1966. Brann's mom bought the business in the early 1980s and Brann began working for the company in 1984 after working in the restaurant industry for a few years. Brann bought the company in the 1990s.

The company has expanded quickly since then, aided both by the Internet and the Gulf Coast housing boom. The Internet allowed Brann easy access to selling outside of Florida and the housing boom provided a growing customer base. The company now has showrooms in Dallas and High Point, N.C., in addition to its Sarasota headquarters.

While Brann declines to release specific annual revenue figures for Lux-Art Silks, he says the company is somewhere between $5 million and $8 million a year after posting double-digit percentage growth every year through 2007. Last year though, the company was off 17%, says Brann, and he expects revenues to be flat in 2008.

The drop in 2007 sales led to the 20-employee layoff, but Brann says getting smaller has helped the remaining employees learn how to do more with less. "It was easy to get fat when business was good," he says. "The layoffs helped us refocus."

Of course, a completed warehouse, not to mention a rebound in the housing market, would help the business, too. Brann is finally confident on the warehouse front and he maintains his optimism on the housing market.

"I know it will come back," he says. "I'm positive about that. Otherwise I wouldn't be investing $1 million on a new building."

REVIEW SUMMARY

Business: Lux-Art Silks, Manatee County

Industry. Interior design, retail

Key. Company has spent nearly two years on a warehouse expansion project.