President
We’ve just concluded roundtable season at CSA, and I’m left with a few nuggets I’d like to share with the full membership.
- While 2008 was a horribly bad year for many people, there are a handful of folks who actually showed a profit.
- Cash is king.
- The more leveraged your business, the greater the likelihood that you will not be around to see the housing recovery.
- People who maintained a heavy retail presence even when Lowes and Home Depot entered their marketplaces bucked conventional wisdom, and some people mocked them. Of course, Noah was mocked by his townspeople when he started building the ark, too. Now who’s laughing? It’s pretty clear that those who have a good retail presence are the winners in this economy.
- Receivables continue to be a problem for a majority of dealers. Many people, however, seem to have come through their own credit crisis and are now seeing improvement. They’ve written off the debt that is uncollectable and tightened up their policies to ensure they don’t get in the same situation again. I know of at least one dealer who cuts off credit for any customer who hits the 30-day mark. Your head is in the sand if you think this will go away on its own. If you have a growing receivables problem, your business has a terminal illness. I’ve heard people say that tightening credit will run off what little business you have, but if you are delivering material and not being paid, you don’t really have any business to begin with.
- I don’t think I ran across any dealer who hadn’t reduced their employee count, but I did run across several who had eye-opening experiences at their roundtables. They thought they had cut all the fat out of their employee ranks until they looked at the numbers from their peers and realized they could indeed cut more. If your employment cost is more than 60% of your total expenses, that’s a red flag that you need to consider making further reductions.
The staffing issue makes a good transition to another item I’d like to mention. I get a newsletter from Ruth Kellick-Grubbs. Ruth is a consultant in the industry and a good friend of CSA. She made a point recently that I thought was really important.
Many dealers are “holding on” during the storm, just waiting for the recovery. But none of us really know when the storm will abate. Yes, it does appear that the general economy is in the midst of turning around, but all of us understand that new home construction will lag the rest of the economy. Further, we don’t really know just how much boom there will be on the other side of the recession. Ruth suggests that you consider today’s market the new normal. You have to find a way to be profitable in today’s economy.
That’s easier said than done, but cutting payroll is a good place to start. It seems to me that for many dealers, there is still room to cut.
And that leads me to my final item this week. Since this column was such a downer, I thought I’d end on a humorous note, even though it does deal with staff reductions. I found this in Donald Cooper’s newsletter (http://www.donaldcooper.com/). Here, he relates a story about how NOT to lay people off:
"At 4 p.m. one day last week, the fire alarm rang at a large office building in Singapore. All 5,000 employees rushed out of the building onto the street. A
loud speaker made the following announcement….
Dear Employees, with melting heart I am making this announcement that for many of you this will be your last evacuation drill. Due to the recession, we are laying off almost 50% of employees.
While moving back into the building, if your ID card does not work, then you are among those laid off and all your belongings will be couriered to you tomorrow. We followed this approach as we didn’t want to fill e-mail boxes with layoff mails and good-bye mails in thousands… and also to avoid any fight inside the office.
Hope you have a nice career ahead. Now, please move in and try your luck.”
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