In 1970, Ray Peters and his son Michael wanted to open a Carpetland USA franchise store in Madison, Wis. Ray met Rick Meyer, CEO of Carpetland USA, who recommended they work for Carpetland before opening their own franchise. So, Ray and Mike began working for Rick at Carpetland USA corporate. In 1971, Ray and Michael opened their franchise store on the east side of Madison. (If you're an "old hand," you may recognize their Grand Opening ad. It featured nylon, sculptured carpet installed for under $5 per yard, along with Herculon and Kodel Polyester.)

Just 15 years later (1986), the Peters opened their second Madison store. That produced a major growth spurt. This second location, on Madison's

south and far west side, grew fast. (Their original location - on Madison's far northeast side - while excellent, was anything but central.)

From Day 1 at Store 1, theirs has been truly a family business. Mike's mother Frances, wife Regan and sister Coleen were joined in 1998 by the third-generation - Mike's daughter Kate Scott and niece Heather Kirch.

Since 1986, they've opened three other stores: Plover, Wis., (about 100 miles north of Madison) in 1989, Janesville, Wis. (35 miles south) in 1997, and Wausau, Wis., (about 165 miles north) in 2000. (See their website at www.carpetspluswi.com.) That's three generations and five stores in 34 years!

In 1998, they became Charter Members of the Carpets Plus of America Group, which has proved to be a mutually beneficial association. In 2002, they lengthened the store's name to Carpets Plus of Wisconsin/Color Tile to reflect Carpets Plus' acquisition of Color Tile, and the Peters' expansion of their product offering. That's their history to date.

Typically, before I interview the storeowner for an installment of this "best practices" series, I don't know which of the owner's best practices to highlight. However, for this story, I knew one even before the interview. In fact, I recognized three best practices that I believe you could apply for your profit. They are: 1. assure that the family hangs together; 2. apply Kaizen, a Japanese term for continuous, never-ending improvement; and 3. lead a learning organization.

Mike Peters told me that the company's greatest strength is that they hang tough and hang together - as a family first and shareholders second. When Carpets Plus of America awarded them the Retailer of the Year Award in 2000, Mike returned the trophy, asking them to remove his name and replace it with "The Peters Family." He knew that would accurately reflect their business leadership and philosophy of success.

Their second best practice is Kaizen, continuous improvement. Already, before opening their first store, Ray and Mike had learned much from Rick Meyers about how to create a first-class business. Then, when they opened, Frances (Mike's mother) systemized the critical business task of managing and collecting Accounts Receivable. They'd seen how a respected competitor, Coyle Carpet, had emphasized this system. The Peters' bankers couldn't have agreed more with their initiative. In addition, they learned to pay sales commissions on "sales delivered," rather than "sales written." That greatly improved their cash flow.

Carpet-industry leader Mel Kemp in the mid-1970s encouraged them to treat their term-discounts as income. "While unthinkable today," Mike says, "in our early days, we'd treated cash discounts as reductions in cost of goods before calculating selling price." Another strategy was to add freight cost to their cost of goods, rather than treating it as an operating expense. That enabled them to price their goods accurately.

Early on, the Peters recognized that business cycles are inevitable. But more importantly, they prepared. When a recession hit Madison and newly built homes were sitting empty, the cash-strapped builders, as you'd expect, couldn't pay for the floor coverings. (A few builders didn't pay, even when they did sell a house.) The Peters used their cash reserve to pay vendors.

While many floor covering stores failed, the Peters survived. Moreover, their careful husbanding of cash keeps them solvent during their annual slow seasons. Mel taught them to forecast cash flow, and budget less cash outflow during high-sales months.

"Save cash for our slow season - Christmas and the Midwest winter." Mike says. "Today, this practice still keeps us modest in the strong months. Plus, during the recent years of mild winters, when business didn't slow down, we got a profit bonus."

When they opened the second store, the Peters lowered both their overhead and advertising costs as a percentage of sales. "We doubled our annual sales, yet restrained our fixed costs," Mike explains. "We increased the efficient use of company vehicles and inventory. We used our staff more efficiently, too. Thus, we became more attractive to our suppliers."

The Peters' third best practice covers the broad area of valuing employees. "Our most proud accomplishment is that we've nurtured and facilitated the growth and achievements of our staff," Mike says. "We encourage them to extend their knowledge and skills. They are upwardly mobile and growth minded, so they take advantage."

The company benefits, too. "In turn, our employees contribute in areas where their individual strengths overcome the shareholders' individual weaknesses," he adds. "Also, because we value our employees, we've consistently had - and still do have - employee tenure that's much longer than average for floor covering stores. Our employees' loyalty helps us during times of labor shortages."

By implementing such far-sighted policies, they don't lose employees in good times (the worst time to lose a productive employee).

"Madison is typically among the two or three U.S. markets with the lowest unemployment rates," Mike reports. "So early on, we recognized that we had to treat our employees well. In the 1970s, one consultant believed we were running a ‘country club' for our help. We didn't listen. We didn't know...and didn't want to learn any other approach to employee relations." Valuing employees has helped them expand to five stores.

For years, I've known that the Peters family runs a learning organization. Several times a year, I've seen Mike in Dalton, Ga., at Mohawk University seminars - the same ones he has attended before, but he always brings four or five associates with him. As a company, they are alert for new knowledge and business practices. They want to improve.

Did you notice their greatest strength was "family first" - that people count more than tasks? Did you notice they applied Kaizen, and didn't stop with fixing broken processes? Sure, they fixed what broke, but also worked to upgrade, year after year. Finally, did you notice the way they value employees? Good leaders act more than practical and smart. They care that each employee grows beyond what she or he was on the first day of work.

At Peters' Carpets Plus/Colortile of Wisconsin, continuous improvement and learning is a way of life and a way of success. How's your learning going? Are you leading a learning organization?