April 27, 2008

The Recession is Here

By Paul Bieber

It’s here. It doesn’t matter that Mr. Bush says it isn’t. It is. More and more people are losing jobs and many more people are cutting back spending on the fear of losing a job. It is this fear that is rippling through the economy and actually sending us further down the spiral into recession.

So, since this column’s purpose is not to spread fear, but to help people and companies in the glass industry, let’s see what we can do to help ourselves in the glass industry.

Look at your expenses. Scale back on some of the extras at work like, the new car for yourself and every non-working family member on the payroll. Sounds trite, but remember none of your perks exist without a viable company.

It is hard to reduce benefits or perks that everyone gets, but if you have some that only apply to a selected few, these should go first. If you have one or two people that get 45 hours per week, cut them back to 40 so that more people will work. You should never promise OT as a permanent part of income. It can and will fluctuate. Remind your crew of this every once and a while.

You should look at a hiring freeze. Across the board. When someone leaves, share the workload. This will force you to cross-train, to try giving people more responsibility, and will often help you to find a star in your existing work force. If your employees see you trying hard to control costs, they will pitch-in and help. If you still plan on buying a boat and storing it in the extra garage at your shop, your employees will not work hard to help you containing costs.

STOP! This column just turned negative. Let’s save that for another day.

Let’s find things that we can do to help ourselves! When people start to spend less, this affects your inventory. You won’t sell as many framed mirrors, so let your inventory dwindle down. People will fix things rather than replace with new. You will get more screen and storm door repairs than new ones being built. You will see more repair business of everything, rather than new construction sales. Be prepared to fix wheels on sliders or hinges on shower doors. You will replace more fogged IG units then putting in new windows.

You will have more time on your hands…start looking to doing things in-house rather than buying out. Maybe this is the time to look at making your own simple IG. CRL can set you up easily. You might want to polish shelves yourself. Look to doing your takeoffs in house rather than using an outside drafting service. It is a great time to get to know your vendors better. Since they are going to be looking harder for sales, meet with them to negotiate a fixed price for basic products that benefits you, and guarantees them a reliable customer. As money tightens up, talk with your vendors about cash discounts. Even though interest rates are low again, vendors are looking for quick payments to meet their cash flow. If you have the funds, a 2% discount is the best investment you will ever make.

If your vendor offers bill payment by credit card, take advantage. If your vendor offers no payment incentives, 30-45 days is OK.

Recessions also offer opportunities to hire people who have left other jobs, that ordinarily you couldn’t afford to hire. Keep your ear open to scuttlebutt in the industry about who may be available. If you are near an AGC plant, there will be plenty of talent around!

It is also a good time to make the investments you had planned. One glass shop told me the edger he had planned to buy was now 5% lower, as the manufacturer was looking to increase sales. The value of the dollar is in the cellar, increasing purchase prices from overseas. Look to American made machinery, or purchases paid in dollars, with a fixed price.

Consumers are increasing their spending in one area–energy conservation.

Present Low-e on every job you go to…show thermal break aluminum to every building owner, and talk about the special blues, greens and grays in float glass that help reduce heat gain.

It seems that the very rich will still be the very rich. Upsell the expensive shower doors all you can. Be prepared to sell medium price doors on a lot of calls. Have your brag book show many styles of doors, including these mid-priced ones.

Purchasing rules are changing with the ‘R’ word now. It used to be that you would buy enough of a product to get the large quantity price breaks. While you inventory movement is going to slow down, start buying less.

Look at your insurance costs…if your sales or payroll will be less, insurance costs may go down. Talk to your broker and see how much you can reduce monthly payments.

Look at your competitors who may be really slow, and talk about consolidation. If someone is going out of business, I’ve found the best think you can buy is their phone number. Inventory usually goes for about 10-15 cents on the dollar, and equipment often is below 10 cents on the dollar.

Remember, things will not be the same for a year or two. Be prepared for change, prepare your employees for change without scaring them, but by being honest, and work as smart and as hard as you can in tough times.