Area Business Leaders Counsel Austerity, Flexibility in Dealing with Rough Economic Times
Whether revamping a business plan, cutting staff or swallowing hard and drawing down even further on an existing line of credit, the economy these days is not for the faint of heart. By John Kennedy
‘You Have to Get Real’Area Business Leaders Counsel Austerity, Flexibility in Dealing with Rough Economic TimesBy John Kennedy
Legendary football coach Vince Lombardi wasn’t known for his corporate skills. But his way with words could help many Northwest Florida businesses navigate the rough waters of today’s economy.
“When the going gets tough, you get tougher. And you win,” Lombardi frequently urged his Green Bay Packer teams during their five NFL championship runs in the 1960s.
Talk to industry experts these days and you hear the same no-nonsense advice when it comes to balancing the books amid a threatening tide of red ink.
Whether revamping a business plan, cutting staff or swallowing hard and drawing down even further on an existing line of credit, the economy these days – like the Packers’ frozen Lambeau Field home – is not for the faint of heart.
“When things are going really well, it’s easy to look good,” says Chip Webster, president of TEC Florida, which offers business counseling and peer-group roundtables for CEOs around the state. “But remember, when things are in their darkest days, that’s often when the greatest fortunes are made.”
But to survive – and maybe even thrive – when all around you are failing demands a tenacity and steely-eyed attention to the bottom line, Webster and other experts say.
“There’s fear out there in the business community,” Webster says. “But fear or hope are not good strategies. You have to get real.”
Trey Head agrees.
Head, general manager of Tallahassee’s Prestige Motor Cars Collection, says his company has managed to maintain even with the nation’s credit crunch after quickly shifting its inventory away from gas-guzzling trucks and SUVs into cars packing more fuel economy.
It sounds simple. But dealers who failed to move away swiftly from big vehicles that had been their bread-and-butter for years are now paying a price – with needed cash tied up in idle behemoths gathering dust on showroom floors.
“You can cut expenses, you can reduce your advertising and marketing a bit,” Head says. “But it’s a delicate balance. You can’t put your head in the sand if you’re going to sell your product.”
Head also has been reaching out to longtime customers personally. Business experts say that trying to fan the cinders of a repeat-customer base is vital to companies struggling to keep sales alive and cash flowing – even as worried consumers are inclined to cut back.
Jerry Osteryoung, the director of outreach for Florida State University’s Jim Moran Institute for Global Entrepreneurship, says companies large and small need to maintain a safe margin of reserves, putting added emphasis on managing inventory.
Whether you’re selling cars or cupcakes, it makes no difference, Osteryoung says. It’s important to cast unprofitable business lines aside, keep high-performing staff, communicate with your creditors and landlords, and keep an eye on the future.
“When credit markets tighten like we’ve seen, you’ve got to watch your cash like a hawk,” Osteryoung says. “The company with cash is going to be king, able to expand when the time comes or absorb losses and keep going when things go sour.”
In previous economic downturns, Northwest Florida was somewhat shielded from high unemployment and a drop in investment capital because so much of the region is government-fueled. Federal defense dollars flowing into the Pensacola-Fort Walton Beach area helped maintain that economy, while state government kept greater Tallahassee percolating.
But as Northwest Florida’s economy evolved, pivoting on its tourist credentials and luxury housing stock, the nationwide slump has had a more profound effect.
Second-home buyers vanished amid the credit squeeze. Builders and contractors laid off workers or just closed shop. And retailers who filled many of these new residences with flat-screen televisions and refrigerators are tightening their belts.
With layoffs coursing through many Northwest Florida communities even as gas prices climb skyward, restaurants and other cornerstones of the region’s service economy are watching their dollars carefully.
“The old adage ‘You’ve got to eat’ doesn’t mean you don’t stay at home and open a can of beans,” says Webster, the business consultant.
Ben Harrison, president of PR Companies, an employee-leasing and personnel recruiter with offices in Panama City and Dothan, Ala., summarized the region’s economy simply: “It’s a big circle where everyone’s hurting.”
Harrison says he began seeing companies put the brakes on their employee rolls two years ago. Thousands of jobs have since been lost in the region. But companies now must wrestle daily with whether further cuts actually hurt their bottom line.
“Your employees are important to the success of your product,” Harrison says. “You don’t want to reduce your staff too much, or your sales and service are going to suffer.”
Professor Martin “Bud” Fennema, chairman of FSU’s Department of Accounting, says personnel costs are always an enormous – yet adjustable – part of any business. But even without considering the human toll of reducing staff, layoffs are an imprecise art for most managers, he says.
“If your sales are down a bit, you can’t eliminate half a person,” Fennema says. “And if you cut too much, that can hurt your ability to rebound when times get better.”
Tallahassee, once viewed as virtually recession-proof, has been rocked as Florida’s state budget has been cut by a staggering $7 billion in just over a year. Even usually stable colleges and universities have been shedding hundreds of jobs – from custodians to instructors.
“It seems like all the fat has been drained out of the system,” FSU’s Osteryoung says. “With banks, housing and almost every industry down, we are seeing a lot of structural problems with our economy.”
Some, however, say there still are opportunities out there on the economy’s rocky seas.
Buddy Faulkner, 58, who leads one of Webster’s Tec Florida business groups in the Pensacola-Fort Walton Beach area, says some construction general contractors are staying plenty busy by doing more of the work they used to distribute to subcontractors during boom times.
But the first step, Faulkner says, is for companies to “get lean and mean.”
“Convert everything you can into cash, draw on your credit line and put that money in the bank to earn interest,” he says. “That way, you’ll have the money you need if there’s a chance to expand your market and sell more products.”
Faulkner also cautions that businesses should enter 2009 ready for anything.
“If you’re putting together a budget, I’d advise you put together two of them,” Faulkner says. “Have one that says this is what your monthly revenues and expenses will be if all goes well. Then put together another one that’s based on about 66 percent of that, if the economy declines.
“Either way, have a business plan for whatever is ahead.”
Tips to Help You Sail Through Turbulent Times
Chip Webster remembers getting out for the day recently on a rented, 41-foot sailboat, enjoying his off-duty passion when a dense fog rolled in.
“It was scary,” Webster recalled. “You couldn’t see in front of you. You have to just keep checking your radar. But if there’s a blob on it, you don’t know if it’s nothing, or something that’s going to take you down.”
Webster says the current economy holds similar risks for many Northwest Florida companies. But whether you’re on the water or just spending another day at work, there are some buoys to watch.
To avoid hidden dangers, Webster said businesses must:
• Get daily reports on bank balances and weekly cash flow projections, going forward 90 days;
• Work with vendors and customers to increase your available cash. Visit big customers who are slow payers and nudge them along with payment plans. Ask suppliers for better pricing, since they may be ready to deal, too;
• Maintain relationships with your banker, creditors and landlord. Communicate often, and tell the truth;
• Create a team culture within your company with your high-performing people. You need them more than ever now;
• Personally call lost customers and do what you can to lure them back; and
• Shed unprofitable product lines. Don’t be sentimental – it can cost you.
“Look, you’ve got to have courage these days,” Webster said. “But you’ve also got to be smart.”