|CWB November 2000
Don't Bring Me Down
Okay, so maybe this great economy will last forever. But just in case...
By Anthony G. Noel
A request was recently received from a reader who asked that we offer some thoughts on what to do if this wonderful economy we are all enjoying turns south.
It could happen. In fact, some say we are overdue for a downturn. I once felt that way myself and offered some ideas on preparing for bad times a couple of years ago, when it seemed that circumstances which might have encouraged such a decline were in place.
You may remember those circumstances: The collapse of the Indonesian economy, the huge ripples of which eventually affected all Asian (read: electronics-dependent) markets; greater-than-usual instability of lumber prices in this country; and of course, that monumental distraction to real business, the impeachment of our president.
Two years later, here we woodworkers are, like just about everybody else, enjoying an economy which has proved itself resilient enough to weather difficult circumstances - and which is apparently destined to continue doing so, if its response to more recent challenges is any indication.
Still, realism has to win out (doesn't it?). It can't go on forever (can it??). So herewith, a couple of additional ideas about preparing your business for an economic downturn.
Two years ago, I wrote about the power of a good workforce. (Ahh, two years ago...when hiring good people was easy. Sure, it may have seemed difficult at the time. But have you tried finding good help lately?)
A talented, dedicated workforce remains your greatest asset, and no amount of time you devote to building one is time poorly spent. But long-term, economy-be-damned success in business requires a somewhat cold, certainly calculated approach to assessing your people's strengths and abilities.
Do you know who on your payroll would be the first to go if circumstances left you no other option? Who would be second? Third?
Are your people sufficiently cross-trained on various aspects of production? If not, do you (or does your plant manager) know exactly who knows what when it comes to performing critical operations? (Which operations are critical? All together now: "All of them!" Very good.)
By all means, expend effort on seeing that everybody in your shop can do everything. That's the goal, the ideal. But don't fool yourself into believing you have attained it. Be concerned enough about your company's and your employees' welfare to have a plan for trimming your payroll when (or if) the time comes.
Lest we sound too hard-hearted, realize that planning this way is even good for those you will let go, particularly if you have put in the time to build a competent team. The reason? Well, just as the quality of the labor pool has dwindled as the economy has grown, the opposite will occur when there's a downturn. And regardless of economic factors, the people with the best training and ability always have the best chances of finding work. So, if your standards are high enough, the least-retainable guy in your shop may well be a valued employee somewhere else.
Start assessing your people's strongest abilities, and earmark some of the added profits you are now enjoying for training to strengthen them in the areas where they are lacking. It will pay handsome dividends, elevating the quality of work you produce and making your business as resilient as this economy has proved to be.
The other important consideration in preparing for a downturn, and which serves as a touchstone for all the non-personnel actions you will need to consider if times demand it, is debt.
Are you as tooled up as you want to be? If not, it may already be too late. Interest rates have inched up as the Federal Reserve has acted to discourage inflation. A major capital investment was thousands cheaper to undertake a few years ago than it is today. Until it's clear that rates have stabilized again, now may not be the time to make a major purchase.
Of course, that decision should not be weighed purely in terms of interest rates. If you are confident you have the work to support it, capital investment is always smart. It's that confidence in your mid-range picture that's crucial.
I mentioned that debt is a touchstone for all non-personnel actions you might need to take if the economy sours. That's because if you can begin to think of debt as encompassing all your operating costs, you will be able to consistently keep costs under control in a manner that parallels economic reality.
It's a drum I've beaten in this space before, but it bears further pounding: Purchase everything - from capital improvement loans to lumber - carefully. Shop around, and let your vendors compete. Get the best price you can, and be sure to judge that price in terms of product and/or service quality. The better you buy at all times, the better you will weather tough times.
Times have been good for so long now that it's difficult to imagine them getting bad again. It's easy to get waylaid into thinking that everything will be fine, indefinitely. But if you can train yourself to think critically, to objectively assess every aspect of your operation and to act on constantly improving it with both the immediate and distant future in mind, you will be well-positioned to weather any economic storm.
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