In the April 2000 edition of this column we put forth the notion that while the good times were rolling, they might not roll on forever. It was suggested that it might be a good idea to begin to make strategic plans in the event a downturn should occur. Indeed, the second half of 2000 and the first half of 2001 have proven challenging.
On balance, however, our industry has faired better than many through this latest business cycle. That being the case, it seems to be a good time for strategic planning for the reverse cycle: a return to robust sales. It would be wise to seek out new markets, new systems and new business opportunities.
Making plans to ramp up new expenditures while business volume is flat may be even more difficult than planning to scale down while sales are rocking. But consider some of the opportunities, and consider some of the classic business mistakes we have seen (and some of us have made) in the past.
First, look at what you might be up against in a rising economy. Roofing manufacturers and distributors have spent much of the last year reacting to lower sales volume by curtailing production and inventory. More shingle manufacturing capacity has gone away than has been built. These things may translate into higher prices and even breaks in the supply chain such as we have not seen in this business since the early 70’s.
Next, look at the rest of the business landscape. Harder-hit industries such as the computer sector may not seem to be particularly good news for us. Consider, however, the fact that their problems may translate into a buyers market for users of computer systems (like us). Also, because of their woes, there may even be buying or leasing opportunities in your local real estate market.
From the standpoint of the cost of money, as well as a competitive market, could there be a better time to pick up a deal on capital equipment? Now is a great time to seriously consider that new folding machine or crane. Low interest rates and motivated sellers don’t converge like this very often.
Your people should be a major part of your forward planning as well. This is a good time to reconsider career paths around your firm, and not just for key people. Most contracting firms have a great story to tell recruits about how they can progress and make a life in the business. The really good ones develop these and make them part of the company culture as a way of getting and keeping the best people. Also, in spite of your business level today, this may be a good time to begin planning for promotions and additions of people to deal with an improving and expanding business. In an expanding economy, the fight for the best people intensifies, and you sure don’t want any getting away when you really need them.
We have been saying for some time now to focus on the small details to take advantage of every savings you can in your business. Having done that, let us suggest you bring the “big picture” view back into focus. Keep your ear to the ground where material supply and pricing is concerned. Don’t miss out on the chance to expand your business because business is not all that brisk now. The bottom of a business cycle can prove the optimum time to swoop down on your next major expansion.
Avoid common business mistakes of the past, like cutting the advertising budget when sales fall off. The opposite should be true. It may be difficult to deal with the future when the present is not so bright, but remember you are entrepreneurs. Risk-taking is your business.