The Thursday Show: The fight for tech-free homes. Plus: A 17-year client lawsuit

25:50So let's talk about the early days because what you just outlined was dramatic growth as a result of, you tell me, your expert leadership over the last 20 years. It seemed early on that you were going off in a financial direction and you were working for Donaldson Lufkin Gen Red, if I recall, for a time and Wall Street was calling. Was that a desire on your part or was that part of the long term just preparing you for what you were about to do with the family business? Great question. So obviously, you know, and a lot of the audience will connect. When you're growing up in a small business, I wanted to do anything but join the family business.

26:34And not that I didn't love the industry. It's just like I saw how much work it goes. I mean, especially smaller businesses, right? I mean, hanging rugs, setting it up. I mean, unloading containers. I mean, I have done it all, right? They never forced me to join the business. They said, hey, the business is here. You do. So I feel like, you know, that was there. So I just wanted to see the world. So I graduated Northwestern in 2000. You know, I went to DLJ, then CSFB. Now, I wanted to go into private equity or venture capital, right? However, a lot of these, you know, top-notch venture firms, they said you have to have an MBA, MBA, or you have to have an operating experience.

27:15I didn't have$150 ,000 lying around to go in MBA. I didn't want to be in debt. My parents paid for my college, which I'm fully, you know, in a big debt to them forever. So I just felt like, you know, I don't want to go into debt. I don't want to ask them for more money. So it just dawned on me that why not join the business, repay the debt of college tuition that the family business paid for, that my dad paid for, and my uncle paid for through the business. And then if nothing else, that will be my operating experience. And my first week was, coincidentally, was in High Point, North Carolina. My uncle picked me up from Atlanta.

27:54And we were in Calhoun, Georgia, which is middle of nowhere. I mean, and I'm like, I came from New York City to Calhoun and I'm like scratching my head. What am I doing here? Then when I went to High Point, I just saw that I'm not in the rug business. I'm in the home business. I just happened to sell rugs today. And very quickly, I mean, so I went to Catholic school all my life. So everything I try to do in the concept of Trinity, although I'm a Hindu by faith. So Trinity concept was embedded in my Catholic school. So I realized the industry was accessories, case goods, and upholstery. So I realized that, hey, let me get the rugs right.

28:30That my first moment of epiphany was people don't care if I make the rugs. They want great variety of rugs, great quality at the right price and a great service. And then obviously, you know, the biggest piece of, you know, it's no brainer to know the biggest pie of the home is furniture, not accessory. And by the way, I didn't have any biases, right? Because I was in the business, but not in the business. I was helping from the side. So when I came in, I really saw the business in a very unique perspective. Now, the reason I saw it, because I was coming fresh. So when I hire new employees, I always tell them, first 90 days, you're going to have a lot of great ideas.

29:10Write them down. Because on the 91 days, it's going to become one of us. Then you're not going to question everything. because we kind of start, we drink our own Kool-Aid after a while. So I start like, I saw, and I try to keep that today as well, right? So our goal is how do we make sure that if we don't disrupt ourself, someone else would. So how do we not fall in love with, you know, something that is going out of style? If it's my idea, so I'm going to love it more. So I feel like, you know, having a new perspective helped me tremendously. And then I never thought about leaving the business, right?

29:41So very early on, And I felt like this is an industry that we can make an impact and we can create a great B2B brand and service different segments of the business. So you're drawn in, and I love that High Point helps to clarify the whole business for you and you see it. And it's such a great point. You walk High Point Market and you really see the big picture and all of the different components and the point that you always make about the good, better, best, and you see all the different levels that people are offering. But tell me how you so dramatically grow. What were the levers that you pulled?

30:24And when did that start to really happen for you? When did this incredible growth happen? Yeah, I think every year we grew high double digit in the first 10 years, right? So obviously, and the bigger you go, the percentage growth gets harder. So we started growing. Well, yeah, we started growing from day one, right? And I'll tell you the biggest reason, we were the first one to start listening to our customers. Like, you know, when I joined the rug business, the way business worked was, hey, how much can I sell you when I see you in my showroom, even if you're making the wrong purchase? I kind of pivoted.

30:57I said, hey, if you make a wrong purchase, you're stuck with inventory and your money is blocked. And how do I give value to my customer, right? So I start, hey, don't buy a lot from me. So why don't you just take swatches from me? Give your customers more options. So very early on, we start giving swatches to our businesses. So I would say that we started listening to the customer's pain point. And at that time, and it seems like yesterday, but it's almost 20 years ago, the biggest pain point was, hey, when I buy a rug at Atlanta or High Point, by the time I get it and I resell, the rug is already discontinued.

31:31Then I made a simple philosophy, we'll never drop a product for a year and a half, no matter what. The other pain point was, hey, I buy with the best intention, but I get stuck. My best seller, which is 10 % gets sold. The other 90 % just takes my capital and I can't rebuy. And if it's a small owner, I'm talking to the owner. If it's a buyer saying, hey, I don't have open to buy. Then I said, hey, don't buy big purchases. Do small ones. Try swatches. So we were the first one to say, hey, you know, we came up with swatch program. I started listening to our customers. What are their pain points?

32:05What are other industry within home are doing better? I always was gravitated towards an upholstery company, had a brand. Anyone you walk in, accessories didn't have a brand presence. But upholstery, you'll see a brand. You'll see a few furnitures, vignettes, and then you see this custom fabric options. If you want to buy this gray or back then the gray was not that popular, mostly brown shades of brown, which has come back to fashion now, the warm neutrals. So then I realized how do I make my business a special order business versus buying twice a year? So I would say that we were always, we were a sponge.

32:41So I feel like just listening to our customers' challenges and following through has been a biggest reason for our growth. There's no magic here. Yeah, no, no, no. Understood. Let's talk about acquisitions. So you were quoted last year that you wanted to become the Warren Buffett of the home industry and that you wanted to make a great many acquisitions. And last year, as we've talked about a little bit, you made three fairly sizable acquisitions. Now that you tell me your revenue, I'm gathering you must have some pretty good cash flow that allows you the leeway to make some of these acquisitions.

33:26But let's talk about how you think about it. And is that an accurate portrait? Do you want to be Warren Buffett-like in your approach to all of this? I think every American should want to be desired to be because the values that they, you know, I mean, I remember Charlie or Warren, they've been living in a house that they moved in 40 years ago. And they're pretty rich, you know. So to me is that if my kids say, who should you want to emulate? I'll say it'd be like Charlie and Warren, right? Yeah. The American values that they embodied, I mean, hard work, long term thinking. So I would say that everyone should embody what they want.

34:02Now, my quotation was more about, I don't know, the point must have been, hey, are you just doing a bunch of crazy acquisition? I said, no, we're doing thoughtful acquisition. Unfortunately, sometimes opportunities don't time to your own timetable, right? So you got to, you know, things came to us. But we are being thoughtful about it. We want to be long term. So we're not going to do a decision. If someone came to me with an acquisition idea where it will make me good money, but short term, I'll not even entertain it. And so the point was that we understand this industry better than any private equity.

34:38And when I say we, I'm talking about anyone in this industry, right? So, I mean, Alex Shuford understands this business better than any private equity that wants to go into that business, right? Because multi-generation, it's in our blood. There's a saying in India, rug is in our blood, right? Right. You know, we can tell the pantone of a rug with our closed eyes, right? So it's in our blood. So the idea was we want to acquire or build brands that follow our mantra, design obsession and design industry obsession. Now, when I keep saying design industry retailers, we sell to a lot of retailers that are very design driven.

35:14Now, so we feel like we want to buy a brand and build the right way for long term. So the goal was we're not going to buy these brands and create Surya into this multibillion dollar entity and sell out. That was not the goal. And quite frankly, this will help others. There are a lot of leaders like me in the industry who are thinking about, do I double down in my business? Everyone has to make a decision. Do I double down in my business? Or hey, let me take some chip off the table and diversify. I always say you invest where you know. You make money in your business, you lose money in other people's business.

35:47Home is our business. So that was the idea. Now, will we do more acquisition? Right now we have three that we're trying to, in lack of a better word, digest. So we're not actively looking for something today. Now, with that said, opportunity waits for no one, right? So if a great brand comes in tomorrow that we feel it's a right to our long-term success, I'll definitely review it. But our thinking is how do we acquire or build? Acquire or build, right? We could build a brand. If, you know, it's now obviously acquiring a brand, you know, younger I was, I wanted to build. A, I didn't have the money to buy.

36:27B, we had a lot of time and energy to do it. Now we have, we are more interested in buying versus building because it leaf frogs us. But it has to be the right long-term brand. Well, it's interesting because last time you and I spoke, you talked about the many, many brands that you had an opportunity to look at last year as possible acquisitions, right? And I mean, I think you told me you looked at 100 different companies and ended up pulling the trigger on two of them. And then ultimately, Mitchell Gold III, as you say. But it sounded as though there were an awful lot of companies that were available for sale.

37:11And it seems that this year that number may increase. Yes? Yeah. So one of the things that I do think that I wish we were further along with this acquisition, I would say that next two years, there'll be more opportunities for companies to be bought. I mean, it's no secret where the business is going, the industry is going, and not everyone has the balance sheet. So if you are a banker today lending to a wholesale business that is selling to the home world when the interest rate is at 7%, 8 % mortgage, no one wants to renew the line of credit unless the business is rock solid. Now, right now, you know, the bankers, what's the definition?

37:53The bankers give money to an entity if they don't need it and when they don't need it. If and when. Now they're going to apply the exact, you know, so they're going to be looking at it. So obviously, a lot of good businesses with good people with no fault of their own that may survive long term. But the banker may say that, hey, do I really want to take a risk on my career? There's another line I love, you know, I read somewhere, you know, in the corporate world and banking is a corporate job. You want to stay as far away from the blame and as close to the credit. So no one is going to take a risk.

38:27And so to your point, I do think in the next one to two years, there'll be plenty of opportunity. Now, with that said, we can't do every deal out there. We got to be very selective, timing. And every deal is unique, right? So last year, we looked at 100 plus, and you were right. Now, some we looked at the teaser. Some we looked at a step below. Some we did a lot of work. And then we said it's not it. And these three hit the... And sometimes a deal at one point doesn't make sense, but we feel a month later, dynamics changes. I mean, as you pointed out in one of your, not podcasts, I heard something that outdoor was a very attractive category for us.

39:04And it came up there, we prioritized. So there is a global views as an iconic design leader. Very easy decision, right? So there's a lot of criteria. So to your biggest point, I think next year we've got to be more disciplined because we've got to run our own businesses. Now we will be open to opportunities. I will never say I will not be. Someone walks in today and said, hey, I want you to look at it. I'll definitely, you know, will look at it. But the bar has been raised. So in the context of all of this, obviously, we talked about a lot of companies that were taken over by private equity. What's your take on the growing role that private equity has played in the home furnishings business, you know, over the last 10 years?

39:48Yeah. And I think, again, that's what I misquoted. I think not all private equity are not good custodian of our brand, right? I mean, it's a, but the biggest, I was, I'm in YPO, which is a business group I joined many, many years ago. So I went to, they have a program somewhere in Europe, I went there. So they had this exercise. They said, hey, we all played. And the winner was who can maximize the value of a company. I obviously didn't win it, right? Now, the guys who won it, they cut R &D three years before they had to sell. So private equity, the minute they buy, they got to sell in five to seven years.

40:23Now, they're a unique private company, private equity they want to hold forever. So I'm not talking about those. So any business, so the private equity, the problem is that they have no problem cutting something that will maximize their EBITDA. So if you think about it, they buy, here's the EBITDA X multiple. I want to make the EBITDA grow and multiple grow. Now, sometimes they feel like we may not be able to get the multiple grow because you're at the mercy of the market at that point, but let me grow. So they are willing to cut costs. They're willing to lower. I have seen it in the rug world.

40:55I've seen companies that were bought by private equity. The first thing they have done, they despect the quality by 30%. Because in their mind, they're doing financial engineering. Now, they have been successful. I mean, so I feel like it's just our industry is long-term. So I would say that private equity by definition is not the right custodian. Now, I was joking with private, I mean, I have a lot of private equity friends. I'm like, you guys do all this, but you know, you're also on the other side of the trade. Someone else is doing it to you. Why don't you as an industry agree on not to kill the magic sauce, right?

41:32I mean, so I always tell them, hey, you know, you get a business that on the other side, someone is doing the same thing that you are doing. But they just don't care. I mean, for them, I mean, they make more money by raising more funds. 1 billion guys raising 10 billion, 10 billion guys raising 20 billion. There's some industries where it is mixed, but in our industry, I don't think it's the right now. There may be some that are, you know, there's, you know, there are few that are doing good. So I do think there's some good private equity companies. Sure, no, no, no, no question. That are doing some great stuff, right?

42:02I mean, they're doing great to us. No, no, no, absolutely. And there are many big companies that we could name that are owned by private equity and that they seem to flip it over every five to seven years, to your point, but the business keeps rolling right along. And truthfully, the private equity deal with Mitchell Gold had happened years before all of these troubles started. And people just didn't know. But I mean, yeah. But I'll say one thing on the Mitchell Gold thing, right? If I was the person, let's say if I was, I forget the private equity company name, I will give everything that I have to protect the business.

42:36A private equity doesn't think like that. They want to cut their losses. You know, they want to, you know, they're not as emotional. So the reason the private equity company didn't want to write another check, because for them, it was a mathematical financial discipline exercise. Hey, we did our best. Doesn't make sense. Now, if I owned it or many leaders like ours in the industry, they would have said, hey, I'm going to put my house on mortgage. I'm going to put this. So I think there's an emotional attachment. Our industry needs long-term thinking, because it is cycle-driven. Private equity doesn't, they don't have the same thing.

43:11So it's just like any industry where you need, it's fragmented, long-term, cycle-driven. Private equity just not in tune to that, right? I mean, for them, it's different. So yeah, I can guarantee you that if some entrepreneur that had access to wealth, which private equity have a lot of, if some entrepreneur owned that business or they started it, they would have found a way to save that business. It just, that's to me the emotional, because I mean, my family name is in our business, right? You know, so I'll do, you know, I'll do whatever to save it. Now, private equity doesn't think like that.

43:46It's just another investment thesis gone wrong. We cut our losses. We, you know, we do 10 deals. We're going to lose some, win some, and it's an average. Well, it's interesting the point that you were making earlier, though. And you mentioned Alex Shuford from Rockhouse Farm, who we have a great deal of respect and admiration for and is, I think, one of the smartest people in our industry. I agree. Right. So I'm always sort of keen to hear what he said. But the point that you made that I think is so interesting and how I've been thinking about what's going on for you, a lot of people have known Syria for a long time.

44:20A lot of people have known you for a long time, but there's something about you acquiring Mitchell Gold, Bob Williams, and suddenly you becoming, to the point you were making earlier, a North Carolina furniture manufacturer. Something has changed now. You're on a lot more people's radar screen than you were before. And to your point, you've made three big acquisitions in the past year, and you've woken a lot of people up to your company, and you've got a lot of people wondering more about who you are, what your intention is, what is all of this, and are you going to be able to pull this off? As you pointed out earlier, you can't mess this up because then that brand's forever done, right, if you don't execute this well.

45:10So I'm just wondering how you're thinking about the fact that suddenly you're in a whole different league now that you've gotten into this world and how you're thinking about that. Yeah, a very, very interesting point. I'll tell you, going back to the rug world, right? So one thing I realized early, and I'll come back to the question on the Carolina furniture industry. Our industry just was very reactive and very, what's the right word? They didn't want to take risk. And I realized that, you know, you got to make bold moves. And one of the things that I learned from my family, you know, my dad and my uncle, I mean, you got to take risk.

45:48And one of my sons, I mean, he loves soccer. And he keeps reminding me, you only score if you take a shot. You don't take a score on every shot. So I feel like, I mean, from day one, I always thought about no calculated risk. Now, I'm not going crazy here. Yes, I may come across as competitor to more people. But I would say that this is such a fragmented industry. I mean, other than one or two players, no one is north of 500 million. And very few are. I mean, I'll say handful. No, no, no. You're so right. And it's why so many people think that our industry is so easy to come in and disrupt because it is so fragmented, right?

46:24Yeah. And to me is that it's a different way to disrupt, right? You can't do a roll-up strategy for Jim. And so this is where private equity feel like, hey, I've rolled up 10 other industry. see why is this any different. They don't realize this is very different. So I feel like, you know, I would say that is all my furniture friends. I mean, I never saw them as a competitor. I don't know. And I will never see them as a competitor because it's a several hundred billion global market. Let's work together. I rather have a sane competitor than an insane competitor. And I think I'll always be a sane competitor.

46:59And quite frankly, I'm a peer. And I will, you know, it's such a friend with Alex, right? I mean, although, I mean, like you said, it's one of the smartest guys. I mean, from Todd, I've talked to all these guys. I mean, we, but before Mitchell Gold, we started doing furniture. We were just buying from Asia and we're not manufacturing. So I've always said that. I mean, it's, you know, four hands is a great neighbor of ours. I mean, I've always said, Hey, our goal is to be complete home, but not, we don't want to go out and take someone else's business. We just want to make the pie bigger and get our share of the pie.

47:31I mean, I would say that this is a little different, but I feel confident with all the right things. Now, success is never guaranteed. And I can be unlucky and fail miserably. And by the way, we may have to pivot a few times, right? It may not be we have the courage to acknowledge our mistakes and have the balance sheet to correct it. And our customers, like I said earlier, one thing I'm blessed with and our industry is blessed with, We got a lot of vocal customers who'll tell me where I'm screwing up and where I'm doing great. Yeah, yeah. No, I'm sure that they will. And they're all very eager to see what you do next.

48:10And can you imagine, to your earlier point about six months, can you imagine introducing Mitchell Gold, Bob Williams furniture at fall High Point Market? Does that seem reasonable to you? That seems very reasonable. I mean, that seems very reasonable. Okay. Along those same lines in sort of wrapping all of this up, how are you thinking about 2024? So we come into this year, there's this perception that the Federal Reserve is going to lower rates, although honestly, they're making it very clear not anytime soon. But the market seems to be excited that this is going to happen. The housing market's going to unfreeze perhaps.

48:51perhaps, but is 2024 really more a year of finding our sea legs again a bit? And do we focus more on 25? Or how are you seeing it? I think that, yes, there's a lot of, if interest rate, if Fed lowers, there'll be a lot of activity in our market. If they make it higher, there'll be a lot of different types of negative activity. The way I see it is such a, you know, this year we are growing, you know, so we will have double digit growth this year. And I'm not talking about, I'm just like just adding business to show, you know, the Fed grow. So, a story of business is growing. So, I think the way I think about it, 20 to 24 a year will be turbulent year.

49:32It could be positive turbulent or negative turbulent. It all depends what Fed does. And no one can. I've seen from it's transitory to I read an article the other day. It's transitory, but it's a delayed transitory, right? So, you're going to see L curve, V curve, C curve, N curve, every alphabet. But at the end of the day, I will tell, you know, everyone that's listening, retail, design. Let's do better. I mean, going back to stealing from Warren Buffett. I mean, do better what you do. Find opportunities in your business. Find a way to cut costs where you can. Challenge everything, cost and opportunity, right?

50:06I mean, I feel like, to me, I think I'll be surprised if Surya doesn't, and all its portfolio collectively, some, you know, Mitchell Gold, obviously, is going to take a lot longer to ramp up. Some other businesses need some time. but I'll be highly surprised if we don't have a positive growth in 2024. So I feel like our job is take calculated risk, find opportunities. I mean, I think I've always in a great recession, we outgrew because we overinvested. Now I would challenge, I mean, we overinvesting because we have the balance sheet because we may not be able to get through. So you want every business has to take its own stock of balance sheet.

50:47And if you have a line of credit coming up, don't overinvest, right? I mean, we always think of long term. So I feel like it's going to be a turbulent. But this is another reason we want our salespeople to be company employee. When things are tough, if you have to pay gas and you are commissioned, you're not going to be as hustling. Now, if you are, now we pay every, you know, quite frankly, it's better for them to travel not because they're going to get mileage, 58 cents, whatever. So they actually make more money because there's a little bit of premium to that. Right. So we've taken all that because we want our salespeople to say, hey, this is the time.

51:21If you show up, you're going to get more market share and mind share. Customers may be less busy so they can talk openly about when things are busy, when things are busy, when you go to a customer. Hey, they will shake your hand. Hey, I'm really busy. Hey, go talk to this new person. Thank you very much. when things are not as busy, then your customers will truly open up. So we are encouraging. So I feel like this is going to be, it should be a good year for Syria. Now we got to keep hustling and keep doing all the right things. And we have gone through many recessions, right? So it's not new to us.

51:56And will we be surprised if we see another acquisition for you in this coming year? Or do or do you think that that's likely? I mean, I would say it's more unlikely than likely. I would say that with that said, if we get a clean acquisition where it's a long-term play, it's a great brand, it fits in. So the bar is higher, but I don't think you should never say never because of all the opportunity that we're going to see, but our bar is going to be higher of what we do. And Dennis, can I say one more thing? I mean, this is, it didn't come up. I mean, I just thought of it. One of the things from day one, you know, we always believed in impact.

52:32So Surya does a lot of things on nonprofit, right? So, you know, we have done a lot of, you know, we have partnered with Project Mala in India for, you know, education for mostly girls, nutrition with food for education. And then also obviously, you know, we launched a foundation, our family foundation for brain tumor, Yuvan Tivari Foundation. So I feel like one of the things I always tell our customers from day one, if all things equal, when you're going to give us your business, part of your profit is going to be invested in something that you're going to be proud of. You know, that's something that we also believe in.

53:06It's not just about business. It's holistic. I feel very blessed that I was born. If I was born in the one home left or right, I may be weaving rugs. I was fortunate to be born in the household in my family and I'm here. So we always believe in impact as well. And we take great pride that this is our customer's money that we are investing in very wisely. Well, I look forward to seeing everything that happens in the coming months. And we'll certainly have to have you back when you roll out that new Mitchell Gold product, whenever that is later in the year. But in the meantime, thank you so much for making the time to talk with us.

53:42All right, thank you. Thanks for listening. If you'd like to keep up with the latest design industry news, visit us online at businessofhome.com, where you can sign up for our newsletter, browse job listings, and join our BOH Insider community for access to online workshops, a free print subscription, and much more. If you have a note for the podcast, drop us a line at podcast at businessofhome.com. If you're enjoying these conversations, please leave us a review on Apple Podcasts. It helps others to discover the show. This show was produced by Fred Nikolaos and edited by Michael Castaneda. I'm Dennis Scully thanks again for listening and I'll see you next week