May 2001: Volume 43, Number 5
Brainstorming with Flowmatic’s Scott Brane, Part 2
by Carlos David Mogollon, WC&P Executive Editor
The following is a continuation of our interview with the president of Florida supplier and distributor Flowmatic...
WC&P: What about suppliers? Do you manufacture everything or do you get product from other companies as well that you distribute?
Brane: We manufacture what we can but we also distribute a lot of products. We distribute product from a lot of the big names, filter suppliers like Omnipure, Hydroflow, KX Industries. We distribute tanks from Amtrol, fittings from John Guest USA and Jaeco, membranes from Filmtec and Osmonics. So, we've got a lot of products that we distribute and distribute in great volume.
WC&P: Where are your strengths geographically in the United States? I noticed on your website for instance that you have a Flowmatic West office in Corona, Calif.
Brane: We're definitely stronger on the East Coast, but we try to cover the whole country. The Corona office is to try and support that effort. We definitely think the East Coast is our stronger marketplace but don't want to limit ourselves to one territory. We try to cover the whole world if we can.
WC&P: When did the Corona office open?
Brane: It's been open for several years.
WC&P: How is the West Coast looking for you?
Brane: The Western U.S. is more competitive. There's a lot more competitors out there. There's more influence from the Asian imports. But we still make an effort to supply the customers there. Like I said, we try to be competitive as we can price-wise, but if we can't we try to offer them something more in terms of service that keeps the business with us.
WC&P: What are some factors that have affected you or challenges you've faced in the growth of your company and how have you met those challenges?
Brane: Well, the transition point was at about $8 million. At that point, you have to expand pretty broadly. You have to add a lot more employees, a lot more inventory, a lot more space. So, it's definitely more challenging. We've got several more people in the office to handle the calls, new phone lines, more warehouse space. We've probably tripled our inventory since we moved from Clearwater to Dunellon. So that's difficult. It's a bigger job trying to keep up with inventory, purchases and everything. But we've got an excellent team here now and the people we've hired to an excellent job. It's actually become easier now that we've got a strong team working together rather than when we were trying to do all the tasks ourselves.
WC&P: How did you handle financing for some of the growth you've had?
Brane: We've been lucky enough to be able to self-finance almost all of our growth. The reason being is since our growth was over such a long period of 20 years, it wasn't a lot of money all at one time. We were forced to get into this industry early and be able to grow with the industry and not have to have huge capital expenditures all at one time.
WC&P: You're going this year from a 42,000-square-foot building to an 82,000-square-foot operation -- doubling your space effectively.
Brane: This building is pretty much full the way it is so we have to rotate our inventory carefully to make sure we have the things we need when we need them. But there's a few things we'd like to expand into, for instance, carry a few more things in our commercial line that we're not able to do right now because we don't have the space for it. We definitely would like to expand this year. We hope we'll be able to get started on the building and have it completed by 2002. It seems like every time we've moved to a new building, it's filled out much quicker than we planned.
WC&P: I've heard that from others as well.
Brane: Actually, when we moved into this building, we said, "This is going to be perfect. We're going to be set here for at least five years." A year later, it was full. It never works out the way you plan it. If you continue to grow, you're going to need more and more space.
WC&P: How many people does Flowmatic employ?
Brane: Probably close to 20.
WC&P: How does that compare to when you first moved to Dunellon?
Brane: When we moved up here, we basically started over. We only brought myself, my father and one person -- my international sales manager. We hired a new staff. We had probably eight or nine people when we moved up here. And now, we've got about 17. We've added eight people.
WC&P: Roughly double.
WC&P: There's a lot of issues that have been bandied about the industry in recent years and I was wondering how those may have affected your company. How did you handle those? This includes the materials safety issues, equipment efficiency issues, certification issues -- what's been the impact on you?
Brane: We haven't been really affected too much by any of them. Probably the biggest would be the trend to have products listed by NSF or another outside laboratory. Everybody's trying to differentiate their product to give it some added value because of the trend of prices going down. There's a trend to try to increase the value of your product by having it NSF listed. That's a lot of additional cost to do that per product. It's been a challenge to pick the products to be listed that will best benefit us sales-wise by having them listed.
WC&P: How many of your products do you have listed?
Brane: We've actually got about four or five products in the process right now of getting listed. They should have the listing on them in the next three to six months.
WC&P: There's also been sort of a move to expand the opportunities of places where you could get that certification done: 1) to eliminate what was becoming a bottleneck in that certification process, and 2) to lower the price by having a little more competition in there to encourage more companies to seek certification. Has that affected you at all?
Brane: It hasn't yet, but I see that coming down the line. Definitely, the bottleneck is a problem. A lot of things could get through a lot quicker, I would say, if there were more options. It's pretty difficult for one company to handle all the tests and certifications. I think competition is good. If there are some new companies that come out and offer these services, I think it can only better the industry.
WC&P: There's also been talk about different markets opening up for the industry and competition from other markets as well. By that, I'm referring to the ETV program with NSF-USEPA somewhat opening up our industry to the small systems market or vice versa for one. And two, competition from Big Box retailers. What's your take on those?
Brane: That's definitely difficult, expecially the Big Boxes. It makes it difficult for the dealers to compete. They're competing with the Home Depots, Lowes and do-it-yourself places also. That's definitely affected the way those guys market their products and the prices they're able to sell for. That's part of the reason why the prices have been driving downward. It starts at one end and works its way all the way back. The manufacturers have to drop the prices down to keep everything competitive.
WC&P: i.e., those mass retailers -- in order to get product moving or off their shelves -- press manufacturers to lower their prices.
WC&P: That in turn puts price pressure on the dealers and distributors and their products.
Brane: No question about it. Yeah.
WC&P: Do you market to Big Box or mass retailers at all?
Brane: Not really. That's not really our market. It's not a market we purposely try to stay away from but it's not one we focus on either.
WC&P: How about the small systems market, say small municipal systems or community systems? Do you approach that at all?
Brane: Yes, that's part of the market we try to reach with our commercial industrial line.
WC&P: WQA has gone more toward the same pattern as you have in terms of looking at commercial/industrial opportunities and better support it can offer to draw in affiliated members, i.e., the new Water Quality Society. Is that a good move? Does it reflect well where you're going?
Brane: I think so. I would support it. The WQA should try to gain more members from everywhere.
WC&P: Do you have a dealer base at all that contacts you and you've worked with over the years?
Brane: We have a lot of dealers that we sell to on a wholesale basis. And that's a big part of our business. Anything that affects them affects us.
WC&P: Where do you see Flowmatic going? Are you planning on becoming a "player"? Are your goals more modest? Do you plan on exploiting particular niche markets and growing from those strengths? How do you look at it?
Brane: We try to be a single-source supplier. That's our motto. We're continuing with that by expanding our line and hiring team members who have advanced expertise in particular areas. We're not just trying to stick to one line of product. We want to continue to expand and basically take us where the market leads us. Where we see demand and opportunity, we're going to go that direction. An example of that is our hiring of Greg Willis and Neal DeLettre, both with commercial backgrounds.
WC&P: How long have they been there?
Brane: Greg's been here a year and a half. Neal's been here about the same amount of time. He's our marketing director.
WC&P: Neal's got a lot of history in the industry and has served on the Water Quality Association Board. He would seem to bring some good background to you.
Brane: Yes, he does. He's a great guy. Well liked in the industry. That's important. And he has excellent marketing skills. We're happy to have him on board as part of our team.
WC&P: I recall him asking the WQA to look into alternate trade shows to attend in Mexico and Latin America a few years ago. Is he involved in the effort you mentioned there?
Brane: No, he's not involved too much in our international side. He does help a lot with our research and development of new products and how we're going to market those products -- looking at the markets before we get involved to see what potential sales could be and exploring the budgets that would be required to market a new product.
WC&P: Considering your motto as a "single-source supplier," has Flowmatics considered adding other products such as softeners, ozone or UV into your offerings?
Brane: Sure, we already handle some of those products now. Ultraviolet has been part of our line for several years.
WC&P: Who do you work with on UV?
Brane: We work with R-Can.
WC&P: Out of Canada?
Brane: Yeah. Ozone we haven't done a whole lot with, but that's something we're looking at. There hasn't been a lot of demand for that recently so it's not a big part of our business. We're pretty open-minded here. We basically leave the future kind of open and follow the way the market leads us.
WC&P: What about softening systems?
Brane: Softening we are doing on our commercial side for pretreatment to our RO systems, but we're not currently looking at the residential marketplace.
WC&P: That's kind of where the thought came from for me. If you're going to do commercial, you need to be able to put together entire systems from beginning to end.
Brane: Exactly. We found that out. We got into the commercial RO last year. We found that lead to pretreatment and post-treatment. We needed to have the post-treatment repressurization systems, the tanks, the pumps -- all of that. That's what we're getting into.
WC&P: I take it you're working with Osmonics on the softening systems?
Brane: Actually, we're working with a several different people, having those made for us. We provide part of the product. As far as the valves, yes, we're working with Osmonics. But the rest of the system, the tanks and actual assembly is with another outside source. It's several different organizations.
WC&P: Talk to me a little more in detail about some of the pressures on what you might categorize yourself as -- a mid-level OEM. What are things that come to mind when you look at the major players and some of the consolidations going on in the market, mergers here, acquisitions, affiliations of one sort or another? How does that affect you and how do you adjust?
Brane: I see a lot more opportunities open up with all the mergers.
WC&P: How so?
Brane: A lot of just unhappy people come with mergers. People aren't happy with who purchases, who they used to buy from and things of that nature, where they start looking for alternative suppliers. Or things get too corporate for them. They can't get a person to talk to about what they need. They lose that personal contact. A lot of people like that personal contact. They like to talk to somebody on the phone -- to get a human when they call, not an electronic voice mail routing system. So, we've seen a lot of opportunities there. And we've really tried to focus on keeping our service strong as we grow and maintaining personal contact with people answering a phone, not a computer. That's real important. If you lose that, you tend to lose contact with your customers and they start shopping around.
WC&P: You talked a bit about price competition or sourcing product. Are those other factors that come into play?
Brane: Sure, you always have to continue to look for good sources and keep your products low. We source product from all over the world. We get some product from Canada, the United States, Mexico, Asia -- all over. You definitely have to keep looking for the best supplier. The markets change quickly and sometimes you find a better source and have to move in that direction.
WC&P: How do you manage that? You were mentioning, for instance, the $8 million level being a big transition point for Flowmatic. There's often talk about the transition from a small or mid-sized company to a large one and growing pains not just in personnel but how you manage that personnel, how you finance everything and the business in general. How do you manage that?
Brane: That's been difficult. For five years, Doug and myself have been handling basically all the major tasks. We had people underneath us, but we had our hands in everything. That's definitely a big change. When you get used to doing everything your way and by yourself and then you've got to cut the tasks up and hand them off to people, it's difficult. That was definitely a challenge. We were fortunate enough to get great people and have a great team. That made it easy on us. The people we have doing different jobs were easy to train and, with their knowledge and background, it wasn't a difficult thing for us. That made a big difference.
WC&P: If you expand your building by 40,000 more square feet, that's probably going to mean bringing on a few more people as well.
Brane: Yes, we'll need a few more people to handle that. We'll need more people in the warehouse to handle the commercial side of the product line. But we'll see how it goes. Just because you add a lot more space doesn't mean you need to add a lot of people, necessarily. A lot of the space is just for inventory purposes. We'll just hire as we need people and try to keep the growth controlled. We want to continue to grow, but don't want to grow too fast for our own good. We try to focus on the new products that we introduce for each year and getting sales going and reinvest our revenues back into the company.
WC&P: Have you ever considered, with some of the more promising international markets, moving an office overseas for distribution?
Brane: No. We find that we're more efficient keeping our entire operation in one place. You lose your efficiency when you spread out too thin. It's more overhead, your prices go up and you're not competitive. We find that we're more competitive if we stay in one place, stay efficient, have a solid team and we're able to control everything very easily.
WC&P: What are some other products -- other than commercial -- that you've introduced more recently and how did that roll out?
Brane: We kind of got into commercial through becoming distributors for some of the stainless steel housing manufactures like Harmsco and Shelco. This kind of opened us up to new opportunities where we got to know new customers with a different marketplace.
WC&P: Neal worked for both of those companies, correct?
WC&P: When did some of those relationships start?
Brane: We've been a distributor for Harmsco for probably four years. We've known Greg. He was our contact or salesperson that called on us. We grew actually fairly rapidly with the Harmsco line. It kind of led us into some other things, just like with the commercial RO. We introduced that and then found out we needed the pretreatment and post-treatment as well. We got into the Harmsco housing, the higher flow products and it led to other products. That's basically how we expand our business. When we see something else that's an opportunity we get into that.
WC&P: If you've got 17 people on board now, how are they split up? What do they do?
Brane: We've got an accounting department. We've got purchasing people. We've got customer service and sales that take orders and calls and answer questions. Greg is our national sales manager so he oversees the sales people. We've got an international sales department headed by my international sales manager, Scotty Murch. And you've got your assembly department. We've got a warehouse foreman who oversees the rest of the people who may be receivers, shippers, order pullers, etc.
WC&P: Do you have an extruding operation there or...?
Brane: No, this facility is strictly distribution, except for assembly. We do bring in materials, pieces and assemble finished products, valves, different types of assemblies and things like that. But most of our molding is done outside and we bring it in here and distribute out of this facility.
WC&P: Do you do the molding work in other parts of the world?
Brane: Yes, we do some molding in Asia, in other parts of the United States. We import products from other countries as well.
WC&P: Flowmatic encompasses three generations of your family. When did your grandfather retire?
Brane: He's not retired. He's always working. He's always trying to develop new product. He's not active within Flowmatic, but he does help us design new products and he's always been an active person. I don't ever see him retiring.
WC&P: How old is he now?
Brane: He's 85.
WC&P: Wow, that's kind of like Thomas Alva Edison.
Brane: The first couple of shows I went to, he was there and he knew everybody -- all the old guys that had been in this industry for 20 or 30 years. Now, the industry has changed so much. A lot of those guys are retired. They're not in the industry anymore. He goes to the shows with us now and he hardly knows anyone.
WC&P: What do you think about that?
Brane: You've got to have change. You've got to have fresh faces and new people coming into the industry. It's good for it.
WC&P: What's your dad doing these days?
Brane: He still comes in every day. He's let me take over and run the company, but he's got his handful of accounts he likes to deal with directly. He handles the financial side of things. It's been fortunate to work with somebody like my dad. We have a really good relationship. Sometimes that's difficult for people to work with a brother or a father. We're like best friends. We have the same outlook on everything. I've been lucky to come into this business this way. If it wasn't for him, we definitely wouldn't be where we are. Of course, when I came on board, I was able to do some more things. But it was his effort from the zero to $4 million that got us to where we are.
WC&P: When you came in, I assume you brought a lot of new marketing ideas, etc.
Brane: Yes, our international sales effort, for instance. That was the first thing I headed. We really didn't have a department for that and you've really got to have one. You've got to have somebody that knows how to deal with each of these different markets and what they look for or how to communicate with them. I spearheaded that when I first came on and he let me run with that. I grew with different tasks and learned everything I could. He taught me a lot.
WC&P: Do you plan on getting involved in the WQA as far as serving on the board, etc.?
Brane: My dad has never been involved in it and I hadn't really until recently. I'm actually the incoming Membership Marketing Committee head. I'm trying to get a little bit more involved with that. Before we moved up here, we were doing so much on our own that there really wasn't time for anything outside of the company. It's nice to get things under control that you've got somebody you can count on for different things. And I'm looking forward to trying to help WQA get its membership up.
WC&P: Are there other associations you're involved with or other affiliations important for your business?
Brane: I'd say WQA is the No. 1 for us. We're members of a few other associations. AWWA, AWT -- those associations we joined as we got into the commercial side of the business. But WQA is probably the most important association related to our company.
Next month in this column, read about Mark Bertler, vice president of Sta-Rite Industries of Delavan, Wis., and his views on shifting allegiances within the water treatment equipment supplier base for the point-of-use/point-of-entry industry.