If you read my monthly articles in this fine publication, you know I’ve resisted talking about the big R (that “R” being Recession). I’m a very positive kind of guy and stay away from the negative things as much as possible. However, I’m also a realist! I know what a tough economic climate all of you have been fighting these past couple of years.
I do a lot of work for a large kitchen cabinet manufacturer. Three years ago they shared a report on the future of our economy. It was written by one of our country’s leading economic gurus. He predicted exactly what has taken place. Don’t ask me how he knew, but he said there would be a two-to-four year recession, that a couple of major banks would fail, etc. The cabinet company that contracted the report responded in kind. They made the necessary cuts - in all areas - and are currently well-positioned for the recovery. This same economic guru predicts that “things” will start getting better in the second quarter of 2010 and that there will be a long, slow recovery.
I know firsthand from many of my consulting clients how darn tough it has been. I know there are several folks in our industry that didn’t survive. I hate that - but in business, just like a number of other things, it’s “survival of the fittest”!
Having lived through several “downturns” in business (none as bad as this one), I know what a challenge it is to stay profitable, to keep morale up and to maintain quality service to the customers. I also know that each time I came out of one of these “downturns” I was smarter and a better overall business manager. So I truly believe that many of you will have discovered some very important positives that you will take forward with you into the recovery period and beyond.
With this thought in mind, I e-mailed a dozen owners and managers of both wholesale and independent showroom businesses. I asked them what positives they have learned in the past couple of years. All responded that it wasn’t fun, it wasn’t easy, but that they feel good about where they are and where they believe they can go. I want to share some of these positives with you. See how many you can identify with. Some of the responders have allowed me to share their names. Some have asked to remain anonymous.
1. PRODUCTIVITY IS UP. Virtually everyone had to make people cuts and payroll cuts. Some were pretty severe. If they were smart, they eliminated the weakest members of the team. Those that were left were not only happy to have jobs, they reached down deeper than ever before and became more productive. More work was being produced by fewer people. Everyone acknowledged that they will be a lot slower and smarter when it becomes necessary to start bringing people back.
2. THEY HAVE REVIEWED EVERY LINE ITEM OF EXPENSES ON THEIR P & L. Rick Reviglio, VP/general manager of Western Nevada Supply in Sparks, NV, said his management team established a motto of “reducing expenses without letting their customers know.” In other words, don’t let the all-important services to customers slip. One example that Rick shared: they changed the coffee cups they used for customers. The cup with the company logo went away. Annual savings was $8,000. Wow! Their customers still get the coffee and donut, but in a different cup. Rick said that they made 200-plus moves like this to save money and that customer service wasn’t affected by any of them. If you haven’t closely examined every single line item on your financial reports, I would encourage you to do it NOW!
3. NOW THAT WE’RE LEAN, WE’RE GOING TO STAY THAT WAY. One CEO said that his company is going to be much more careful when increasing fixed costs. He noted that business cycles are very real. “Government actions are hard to predict and they can hurt.”
4. RESIST THE TEMPTATION TO CUT MARGINS. With everyone competing for fewer dollars, our first reaction is to cut prices to get a piece of the pie. Joel Becker, CEO of Torrington Supply in Waterbury, CT, said something that I’ve believed to be true for a long time: “the greatest impediment to higher margins is the company’s sales force and NOT the customer.” There are plenty of exceptions to this rule. However, overall it is the sales force that has preconceived notions of what a “fair price” is and this limits the company’s profit potential. Torrington implemented a specialized pricing program for every customer and product segment of their business. They have realized real material gains in margin in every segment. Joel Becker said that pricing was “surgical” but that the greatest pushback they received was from their sales force, not the customer. I know from talking with many of my consulting clients that as soon as business started to dip, there was pressure from the sales force to cut prices to get the sale. Wrong, wrong, wrong! Congratulations to Joel Becker and his team for taking proactive steps to keep this from happening.
5. MAKE SURE EVERYONE IN THE COMPANY KNOWS THEY ARE AN IMPORTANT PART OF THE OVERALL SELLING EFFORT. Everyone on your staff - from the person who answers the phone to the truck driver - has to be constantly selling your company. Slip-ups at any level are unacceptable. Joel Becker shared that they have set higher expectations at every job.
My good friends Ralph and Jason Sevinor at Salem Plumbing in Beverly, MA, shared 10 bullet-point positives. Here they are:
1. Have monthly meetings with your accountant to eliminate surprises.
2. Re-examine people’s roles and value to the organization while maintaining the nucleus.
3. Everything is negotiable!
4. Review information from your clients to determine the most effective advertising media.
5. TRAIN, TRAIN, TRAIN! (A number of CEOs shared that they have incorporated a lot more cross training than they had ever done before. This is very smart!)
6. Remodel the showroom on a tighter budget. A little paint and redecoration goes a long way.
7. Set budgets and stick to them.
8. The recession has given younger people a lesson in the reality of the business cycle. (Many of your employees only knew the good times.)
9. Adopt a mindset of justifying every expense.
10. Establish a “fun at work” committee. (I love this one! Turn the negative into as much of a positive as possible.)
I heard from another well-run wholesaler, Lee Supply, headquartered in Indianapolis, IN. I have had a lot of fun working with these nice people and watching them develop a first-class showroom business. Here are some thoughts that Bill Lee, and his daughter, Jennifer, shared with me:
- Develop a program of cross-training
- They lowered the time that “sold” product sat in the warehouse by
50%. (That frees up a lot of cash!)
- Become stronger partners with your vendors.
- Their salespeople bid accessory items on every job. (This is
something everyone should have been doing all along and I hope will do in the
- They have increased their product offerings. For example, they offer
tankless water heaters and battery backup for sump pumps. (Very
- They have created programs for tier customers, allowing them to be more profitable.
Bill and Jennifer Lee said that these mechanisms were put in place to help them through the difficult times, but they believe they will help them to thrive as business comes back! They’re right!
The general manager of three large plumbing wholesaler showrooms shared these thoughts with me:
- They are putting a whole lot more emphasis on “selling
skills.” (This was music to my ears!) In the really good times,
salespeople really didn’t have to sell. Too many folks see their job as “helping
clients select products.” That’s part of it, but doing a first-class sales
job and writing the order is really what a salesperson’s job is all
- The folks that survived the “cuts” are happy to still have a job and
are reaching down deeper and working harder and smarter than ever before. (I
wonder why it took a recession to get people to do this. They should have been
giving 100% all along!)
- They expanded their showroom hours to include Saturdays. Hurray! Being customer-friendly is more important than ever before!
I believe there have been a lot of very good lessons learned and they won’t be forgotten very quickly. Those of you who have responded with better business practices will be very well-positioned to be the winners as you enjoy the recovery period and beyond. Thanks to all the folks who responded to my request for what they’ve done to weather the toughest economic cycle I’ve witnessed in my lifetime. If anyone else wants to share their thoughts on what they’ve done, please e-mail me. We may get enough fodder for a follow-up article.