Strategies for surviving during tough economic times.

These are tough times for the wood products industry. The furniture and cabinet industries are hard hit with the slowdown in new housing starts, as well as the reduced sales of existing homes and remodeling. I have found times like these to be when many companies get caught up in the struggle to survive.

This month’s column is about how you view your challenges and the strategy you choose to meet them.

Hard Times Bring Predators

In down cycles, there are always those who cannot get their focus off of the negative. By likening the current housing industry plight to the African wild, we can set a stage for an intriguing metaphor.

In various African regions there is a cycle of rain and drought — of life and death itself. There are those animals that are more seasoned and experienced, and know exactly what to do and where to go. But then there are those that are slow to leave the drying watering holes, or panic and wander aimlessly, looking for water and greener pastures. Unfortunately, those are the ones that are overwhelmed and lose their way, becoming vulnerable to smart predators.

In a down cycle like the residential wood products industry is experiencing today, there are always those who know how to survive, just like the animals in Africa. However, there also are those that cannot shift their focus. These are the ones who moan and groan and tend to stay right where they are — beside the same old watering hole. By the time it dries up, predators have moved in and taken advantage of a dire situation.

Your smart competitors become those predators and they will not hesitate to take your customers, even if that means taking you down in the process. In business, like in the wild, it is the survival of the fittest.

Survival of the Fittest

In normal times, most remain strong and healthy. However, during the dry season, the weak become weaker and are the ones predators look for.

With business down 20 to 30 percent or so, there are many cabinet and furniture companies that are experiencing really tough times. Many of these have become weak financially and have a defeatist attitude of thinking they are caught in catastrophic drought, heading for the worst. These are the weak companies that are vulnerable to competition.

Right now is the best time to make up your mind to fight back and do everything you can to strengthen your position in the marketplace — choose to be one of the survivors in hard times. A recent discussion I had with a custom kitchen cabinet manufacturer centered not on how bad things were in the marketplace, but on how the company could service the demand it was creating. Is this the attitude you have?

Like this company, you need to decide that you are not going to wait for the economy to turn around. You need to decide that you are not going to participate in this slowdown or recession any longer — and furthermore, you are going to make your company stronger, starting today!

 A Tragic Example

The following story has a powerful message that demonstrates the control you have in your circumstances. Read it carefully:

On a spring morning, a young artist was sitting at a small sidewalk café having a glass of wine, relaxing and celebrating a commission for a portrait he had just received. He happened to notice a newspaper lying in the seat of a chair in the corner. The front page headline stood out in 3-inch bold print: “Hard Times Are Coming.” His eyes kept going back to those words and the more he saw it, the more depressed he became. He got up and went to his studio and called his wife. “Honey, you know that new dress you have wanted and we decided yesterday to have made? Well, I have just learned that hard times are coming and I don’t think this is the right time to be frivolously spending our money. I think you should cancel that order.”

The young artist’s wife reluctantly called the dress shop. The owner answered the phone and she said: “You remember that dress I ordered yesterday? Well, my husband said that he had learned that hard times are coming and we agree we do not need to spend money on an expensive dress right now. I would like you to please cancel that order.”

Needless to say the shop owner was upset with the loss of the sale and the more he thought about it, the more depressed he became. He went to the phone and called a building contractor. “Bill, I have been thinking about the addition that we talked about the other day. I have learned that hard times are coming and this is not a time that I need to be spending thousands of dollars on this building. I want to cancel that contract.”

Well, Bill began worrying about what the dress shop owner had said about hard times coming. The more he thought about it, the more depressed he became. Finally, he picked up the phone and made a call. “Hello Randy. You know that portrait my wife and I wanted you to do for us right away? Well, we have it on good authority that hard times are coming and we have decided that we do not need to be foolishly spending our money on such luxuries at this time. We want to cancel that order.” Yes, you are right, this was the same young artist mentioned above. So, dejected he went to that same corner café and ordered a glass of wine to wash down his sorrows. In the corner he noticed that same newspaper with the big headline, “Hard Times Are Coming.” He went over and immediately noticed that the dateline was eight years before — the café owner had just unpacked some glasses that had been in storage for years.

 Your Choice

At this point, you and your company have three options from which to form a strategy as you move forward during these current hard times:

1. The first is to bemoan the current state of the housing industry and the economy in general. You can worry and sulk and watch your company become weaker. You will become stuck in the mud and become prey for the competitors looking for new customers. Randy (the artist) accepted this posture as soon as he read that hard times were coming. Unfortunately, there are some companies that also risk this strategy.

2. The second choice is to struggle to survive — you are willing to do what is necessary to survive. By doing this, the odds of falling prey to predators is greatly reduced. You may choose to give your customers better attention and offer them some incentives. You also may begin doing the things you should have done all along, like calling customers to see how you can best serve their needs. This strategy will work for most because they know the risks of the first option.

3. The third choice is to become a predator in the market. You will do everything you can to make your company stronger than the competition and will actively go after a greater piece of the pie. You determine that you will not participate in any recession; in fact, you draft a strategy of rapid continuous improvement to grow the company during 2008 and beyond.

The big question is, “How?” For a start, see the sidebar on this page.

Tom Dossenbach is the president of Dossenbach Associates Inc., a Sanford, NC-based international consulting and research firm. Contact him at (919) 775-5017 or e-mail [email protected]. Visit his Web site at www.dossenbach.com. Read past Management Matters columns here..