Q&A with CCA Global co-founder Howard Brodsky



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Howard Brodsky, chief executive and co-founder of CCA Global, is a bit like Henry Ford. Ford didn't invent the automobile, but found a way to streamline its production, therefore making it attainable for just about anyone. Brodsky did the same with business cooperatives; he didn't start the first co-op, but made them better, streamlining back-office procedures and processes, and included more businesses in co-ops than anyone before.

In fact, although he began his business selling carpet right on Elm Street in Manchester, he recognized the power of scale and quickly expanded, creating the first floor covering co-op, Carpet One. Not only did his own business grow, but his co-op concept helped thousands of other business owners do the same.

Today he has the distinction of being at the head of the largest privately owned company in the country, with more than $10 billion in annual sales.

Now Brodsky is bringing that power of numbers to nonprofits through CCA for Social Good and is taking a lead role in creating a vast resource platform with the New Hampshire Center for Nonprofits and the New Hampshire Charitable Foundation.

Q. Take me back to the beginning. How did you get your start in carpeting?

A. I was born in Lawrence, Mass. My father originally worked at Sears in the floor covering department. We moved here [to Manchester] when I was 5 years old, and he opened up a small floor covering store on Elm Street, called Dean's Carpets. It was a small business; it only had two employees.

I would go in on the weekends and summertime, and I just knew from a very young age that's what I wanted to do.

He passed away when I was very young; I was 13. My mother, who was a pharmacist, was actually going to sell it.

I told her, "Don't sell it. I think that's what I want to do."

So my mother didn't sell it, and stepped in and ran it part time. After college, I came back and went into the business, and it grew.

Q. Tell us the story of how your first co-op came about.

A. There was no national trade association at the time, so a group of us started the National Floor Covering Association; this was about 1980. I became president and chairman of that.

At the same time, the industry came to me and my very close friend, who was also in the American Floor Covering Association -- Alan Greenberg -- and suggested we do a national promotion like the milk promotion or the orange growers or the Cotton Council. They made us co-chairs of a national promotion called the "Billion Dollar Sale." The goal was to do a billion dollars in 10 days.

Alan and I met with a big ad agency in New York, and they said it was going to cost about $48 million a year in advertising.

We devised this whole way we were going to raise the money. Well, after five months, we raised like $300,000 instead of $48 million -- we were a little bit short.

We decided to still go on anyway. We contacted every major newspaper in the country and asked them if they would run an insert if we ran advertising during this 10-day period. They said, "Yes." We ended up running 15 pages of editorial with 15 pages of advertising.

We signed up 11,000 retailers across the country. Everyone advertised during the same 10-day period. And we did a billion dollars in 10 days.

What I saw was, not only with my mother and pharmacies but with the floor covering business, independents everywhere were starting to become challenged by big-box stores.

The independent couldn't compete. They didn't have the right buying power, they didn't have the right marketing, they didn't have the right training.

It wasn't that they weren't smart, they just didn't have the scale or resources.

Alan and I kicked around some ideas about what we wanted to do to deal with losing market share. Maybe we could bring everybody together. We looked at franchises, we looked at different things.

That whole billion-dollar campaign taught us that the power was local. It wasn't having some huge, fantastic budget. If you could leverage local, the power was there.

Another close friend, who was CEO of Servistar Hardware (now True Value), a very large hardware cooperative, we met with him in Pennsylvania and saw that was what we were going to do.

We started the first floor covering cooperative in the United States with 13 of our closest friends, and a few years later in 1985, we started Carpet One.

Lots of people said it couldn't be done, and wouldn't sell us, and we had lots of issues. There so much power there, if you can just get people together.

But it went on to become very large, Carpet One went on to become 1,000 stores.

Soon we developed other flooring companies, adding Flooring America in 2000.

Then lighting people asked us if it would work for the lighting industry; we said we thought it would, and came up with Lighting One. Then the bicycle industry, the skiing industry, formalwear.

We realized it didn't matter what the industry or the product was, the co-op model would work.

Q. Why did you decide to choose a co-op model instead of franchise or just a purchasers group model?

A. The co-op model has everyone being a part of it and everyone's an owner of it. It's the ultimate in democracy.

Independent businesses we know still want to be independent. They need services, scale and buying power, but they want to maintain their independence. This model really helps them maintain that; it gives them a voice, a vote.

We don't tell people what to do, we make it easier for them on how to do it. That's the difference. Franchises tell people what to do. We try to give people the necessary tools to succeed in business.

For example, last year, our training group did over 350,000 classes online for training.

Marketing - print, Internet, radio, TV - every type of marketing that someone would need, we make available to our members.

We have an entire insurance group that does nothing but buy insurance - health, liability, business, casualty, workers' comp.

We have a meeting and service group that does nothing but negotiate hotel rooms and meeting facilities and airfare for groups that travel.

We have a group that does the buying of services, like credit card processing, payroll processing, pest control, security systems.

We've really broken it down so we can become specialists, and we have the scale that only multibillion-dollar companies have.

So an independent business is really buying at the same scale as a Walmart. But the local service is given by the business owners, given by people who really care about the community.

In today's world, I think people really do want to buy local, they just don't want to pay more. During this recession, I think people have less trust in "big-ness." But they also don't want to overpay for anything. We provide that beautiful middle ground of having local at a scale that somebody doesn't have to pay any more for.

Independent entrepreneur doesn't have to take the time to search out the best insurance deal, the best credit card processing deal, the best product. We have all the scale and resources, it really puts them in the same competitive position as the large companies they're competing against.

Independent business owners are trying to wear so many hats. They have, say, eight employees, and they want to be head of HR, the head of marketing, the head of real estate, head of insurance, the head product person, you can't do them all well.

We let people do what they do well, which is take care of the customers and run their business. But they don't have to research all those things, they don't have to negotiate all those things. We just bring that to the table for them.

Q. When did you know you were really on to something with co-ops?

A. When we started, our original goal was to get 330 stores. Then after two years we were up to 180, we thought, why 330?

We really knew it was really successful when we started to look at other product categories. The model was so transferable.

We also found that we really made people very successful. I've always thought that if you can make others very successful, you become successful. Our success is based on the success of thousands of other independent businesses.

During the last three years, which have probably been the toughest three years that most people can remember, we had a net loss of just one business in our system.

Q. Was it hard getting people to trust what you had to offer? That you actually found the best insurance deal or the best card processing deal, that they couldn't do better on their own?

A. For the first year and a half, I think it was tough. People are a little skeptical by nature. Once we made a lot of other people very successful and they saw how other people were doing, it really picked up steam very quickly. It was word of mouth.

Q. You've pulled a lot of co-op resources out of specific industries to fall under a more generic back-end business umbrella.

A. It's called BizUnite, our newest division. We've taken our backroom services and packaged them, so our buying capacity is greater - credit card processing, insurance, payroll processing, freight, phone systems - anything to run a business.

We are now making those available to other groups that exist - other co-ops, other franchises, other associations. We have now more than 400,000 businesses running on that now.

Q. Now you're applying the co-op model to nonprofit organizations through CCA for Social Good.

A. That really happened when The Aspen Institute came to us, about four years ago. They wanted to know how to bring scale to nonprofits, could our model work.

We first tried a co-op with those involved in the Earned Income Tax Credit. We increased their efficiency like 65 percent.

Then we did another one, called Living Cities (collaborative of 22 of the world's largest foundations and financial institutions), with The Aspen Institute.

Recently, we've launched one with the child-care industry, ECE Shared Resources. It does everything from program administration to marketing, buying, training. It's a total program for child-care businesses. We're now in seven or eight states, more than 600 child-care centers across the country.

We realized that nonprofits are like little cottage businesses. What makes them thrive is the passion of the executive director or whomever is leading that nonprofit. Their passion is that mission, but you can't consolidate passion, you can't really put scale to that mission.

We realized, however, that we could provide tools to help them run their nonprofit a little better, more efficiently, save money and hopefully give them more time to concentrate on their mission and more money to deliver to their mission.

They have the same issues as small, independent businesses: they have HR issues, credit card processing, training, marketing and fundraising issues.

Our most recent endeavor is with the Center for Nonprofits, building the nonprofit resource platform (See NHBR Feb. 25-March 10). http://www.nhbr.com/businessentrepreneurs/910126-274/co-op-model-could-transform-nonprofit-sector.html

With the platform, I knew Lew [Feldstein of the New Hampshire Charitable Foundation]. We had talked about what we were doing with The Aspen Institute and saw our model with child care. He asked if it could be brought out to the broad spectrum of nonprofits.

I said yes, and we then got involved with Mary Ellen Jackson at the Center for Nonprofits. They wanted to enlarge what they were doing.

The difference is we had the infrastructure in place already, and the scale.

Nonprofits' demands are greater than ever, and their financial ability is less than ever because of the economy. It's enlightening to help them create more resources for their own mission.

Q. I'm struck by the theme of commoditizing back-office functions, streamlining them and making them more efficient. Would the co-op model work with the health-care industry as a way to cut the enormous costs?

A. It absolutely would work in health care.

In the state of Washington, there's a large health-care cooperative and it's one of the most successful health-care organizations in the whole country. They have the lowest cost but the highest quality health care in the country, and it's a cooperative.

You're giving people control, the ability to get together in scale, and yet the ability to share resources together. There's not some third party taking resources out of the system.

Nobody's figured out how to take cost out of the system. And physicians are unhappy; they can't seem to service their patients better. People are telling them what to do, so they have less control over their own destiny. They're telling them what medicine to prescribe, you must do this, you must do that.

So we have a system that has more cost and less control.

I would say the cooperative model has the reverse - lower cost and more control, more self-control.

Q. Do you think the time has come for co-ops because of the advent of social media and that inclination for people, even strangers, to come together?

A. That's a great point. It is so social; and geographic barriers don't matter anymore with technology and things.

There's a new insurgence for the model just like there was back during the Depression. People don't want to go back to work for a big company anymore. They were laid off, they want to have more independence, they want to have more control over their own destiny. Co-ops give that.

The government is even looking into Fannie Mae and Freddie Mac cooperatives after they failed.

Q. Personally you're involved with a number of nonprofits and other community endeavors. What are some you are closest to?

A. I personally have a great affinity for the arts. I'm involved with the Palace Theatre. I think Peter Ramsey [executive director] has just done an amazing job. They offer great diversity and they're solid financially.

I'm involved with Southern New Hampshire University; I'm on the board of trustees. I'm also on the board of the New Hampshire Institute of Art.

I'm also chairman of the Better Business Bureau in New Hampshire. Last year, they delivered services to almost 200,000 people, people who inquired whether businesses were ethical to do business with.

Q. I've also read that you are a justice of the peace.

A. I got my justice of the peace license years ago back in the ‘70s when I was younger.

One day, an employee came up to me and asked if I knew a justice of the peace.

I said, "Yeah, actually. I am. Why?" He said, "I'm looking to get married. Could you marry me?" I said, "Sure."

So I performed my first wedding about 30 years ago.

I do one a year. I make it very personal; I spend hours with them. It's not your typical justice of the peace wedding.

I've done weddings in front of 15 people and in front of 300 people. I have a record now of 28 weddings and no divorces. I'm still going strong.

The reason I love doing it is because you're at the height of people's emotions. You're such a part of the happiness in their life. I find it very rewarding.

Q. If you weren't doing what you are doing now, what would you be doing?

A. I love what I'm doing. I'm lucky every day I wake up. My mother gave me a great sense of optimism. To be in a world where I can still be very creative and helping others. It's amazing to be part of a company that is still so exciting.

I have lots of dreams of other things I would love to do, but right now I'm doing exactly what I want to do.

Cindy Kibbe can be reached at ckibbe@nhbr.com.


 

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