A Safe Harbor in the Supply House Business
I don’t know if you’ve seen the video that is currently being referenced throughout the country, which foretells the imminent devaluation of the American dollar and its fall as the stable standard for international currency. I watched this program the other day and I see some causes for alarm.
Yes, I’ve been told that the motivation there is ulterior – to drive up the prices of rare metals. But the fact that there are people on almost every major street corner trying to buy our silver and gold - and that countries such as China are divesting themselves of American dollars - indicates that there may be some actual fire behind all the smoke.
Yet, whether we see a sharp drop in the value of the dollar or not, the business of running a supply house is always a safe financial hedge in hard times. That’s because you have STUFF that other people need. And the more STUFF you have on your shelves, the more you are protected against financial losses. Forget foreign investments and purchases of precious metals, because, if you are invested in your company, you have your own little gold mine.
I am old enough to remember the things that happened in past hard times as do many of you. I know that parts and pieces are always in demand and sometimes even more so in tough times. That’s because people prefer to have things fixed rather than to buy new when money is tight.
I’ve been on other sides of the HVACR business, working for manufacturers, as a contractor and for an equipment distributor. I know how volatile the business can be, especially when it comes to new equipment sales. But the demand for parts is always a stable part of any industry and a good business to be in. Just ask the folks who’ve sold old auto parts in Cuba over the past several decades.
However, should we ever see some financial disaster, it’s important to understand that it’s better to have invested in parts than to reduce your stock, as many are inclined to do when they see the economy taking a dip. Look at what is happening to the prices of metals and refrigerants right now! Don’t you wish that you had ordered more copper fittings and pieces than you did a year ago? What about silver solder? I understand that scrap-metal yards are now paying more than $3.50 a pound for copper at the time of this column, and more than $0.50 per pound for steel.
I volunteer for a charity where we fix up old donated bicycles and give them to other charities that pass them on to homeless people (to help them get to work). What we have found is that even the worst of nasty, rusty old bikes are worth $15 at scrap yards, so they are getting hard to come by.
Understand that the point of this column isn’t to proclaim a financial Armageddon. I’ll leave that job to others. My point is for you to recognize the value of the business you are in and to urge you to put more of your investments there.