Ask anyone who faced our industry’s crisis in 2008-09 what they would have done differently, and they will probably tell you that they wish they had made the tough decisions sooner. For the past two and a half years, our industry has had the privilege of being extremely busy (and profitable), while the rest of the world has been at a standstill or shut down. Unfortunately, all good things must come to an end. No one is sure what 2023 will look like, but most of us agree that it will not be the place we were in 2020 to 2022.
There is an old axiom that says a rising tide lifts all ships. That means that whether the boat is going too fast and going up in the water or going too fast and is in the water to the point of sinking, the high tide will go over the false rocks. Well, we are looking at falling tides, and this means that all the rocks will be very close to the surface and will sink some ships that have been sailing well.
We’re sure you’ve used the last two years to improve your business, but if you’re just getting started, it’s not too late to start preparing for when things go wrong. The obvious place to start is your website. Take a look at your finances and start paying off your debt with the money that is being released as your income and expenses decrease with lower rates. Look at your long-term finances. Make sure you have enough cash to get rid of things if things go wrong. Also, check your credit history and policies. Start a process of calling customers who are about to find out why they missed their payment. It will give you an early warning of when a customer is facing financial problems, and will make you the tire that gets the oil in the first place.
Something less obvious – but very smart – is to look at different aspects of your business now before things happen. Choose anything. Start with your employees. Don’t look at salary or presence but rather how you can get along without them if they quit versus who you can’t replace. Think about who can handle multiple jobs or tasks within your job. Do all of this before you are under the gun of trying to keep someone from leaving or making difficult decisions to cut employees. Sort your customers, not by sales or revenue, but by those who are most loyal and always prioritize paying you on time. What are the minimum bindings? Who is willing to work with you when you can’t get them what they need when they need it? Also, think about customers who have an excellent business model and are serving a market segment that may be strong.
Finally, choose your equipment. If things are going slow, don’t just park your extra gear in the back yard. Old Bessy costs money to license, insure, and keep running, and those costs will cost you money.
Taking the time to think about these things now and making a plan will be preparing everything we love. When things start to slow down, you are quick to take action. When things settle down, your ship will float higher in the water and give you peace of mind that your business is like a ship.
Russ Kathrein owns the LBM Division of Do it Best Corp. from Fort Wayne, Indiana.