‘Good times are ahead'
February 1, 2010
ORLANDO, Fla. - Although attendance was down at last year’s Heating, Airconditioning & Refrigeration Distributors International conference, association officials said they were still pleased.
In an e-mail to members, Executive Vice President and Chief Operating Officer Donald Frendberg pegged the decline at about 12 percent - but added that in the midst a of recession and with other conventions experiencing drops of 35 percent to 50 percent, HARDI is holding up very well.
The association held the Nov. 1-4 event at the JW Marriott Grande Lakes in Orlando, Fla., with the slogan “Turning up the heat on recovery.” Many of the sessions were about helping member companies handle the downturn, such as the Nov. 3 session, “Hope is Not a Strategy: Practical Guidance for Survival in This Difficult Economy.”
The session, sponsored by HARDI’s Controls Distributors Council, brought Dave Molin, general manager at Honeywell International; Chris Eichmann, Johnson Controls’ director of North American sales; and consultant Rich Schmidt from St. Louis to discuss what they’re doing - and recommending to others - to survive this prolonged downturn.
SurvivalTo survive, panelists said, you likely have to make changes to the way you do business. Get to know your customers better.
Johnson Controls is already changing, Eichmann added.
“Our commitment is growing week to week and month to month to grow our distribution channel,” he said.
And growing that channel means forging relationships with potential customers and building on the relationships you already have.
“At the end of the day, we’re all in the relationship business,” Eichmann said. “If you have strong relationships with your customers, you win.”
One thing you should not do, Molin said, is get involved in selling solely on price.
“That’s a dangerous strategy,” he said, adding that deep price cuts should only be done as a last resort
Consultant Schmidt agreed.
“It doesn’t always have to be the lowest (price), but it has to be fair,” Schmidt said. “The scapegoat in this industry is ‘my stupid competition,’ driving wholesalers to do bad things. If you can’t be reliable, you won’t be the one-stop shop for that contractor.”
Also resist the urge to cut your staff too far and too deep, Molin added. Downsizing “beyond right-sizing,” is dangerous.
Watch inventoriesSimilarly, don’t let your inventory levels get too low, Eichmann urged.
“As a manufacturer, we’re set up for just-in-time delivery,” he said. “The folks who have the inventory on the shelf are going to get the business.”
The key, panelists said, is to keep trying to grow your business despite the economy.
“To break ‘paralysis through analysis,’ try small things, incremental things, and get right on them,” Eichmann said.
Don’t let the recession keep you from making major moves, Schmidt added.
“It’s always a time to consider selling or buying companies,” he said, adding that the days of overpaying for a company are gone. “There are some good values out there right now.”
But if you’re looking to sell, don’t price your company out of the market by believing it could fetch what it would have in 2007, Molin pointed out.
HARDI members enjoy presentations by brothers Alan and Brian Beaulieu. The economists from New Hampshire’s Institute for Trend Research have appeared several times at the association’s convention, and also author a members-only report. Their seminars are often mixed with a good dose of humor.
Alan Beaulieu’s Nov. 3 presentation was titled “Economic Recovery: Good Times are Ahead,” but for much of the presentation, those in the audience may have wondered if that was a joke.
Times are tough for wholesalers right now, Beaulieu said, and backed up his statement with an array of charts and graphs.
Big changes“The long-term growth potential of the United States has changed immensely since last I saw you (in 2008),” he said, citing the economy and federal policy changes being enacted by President Barack Obama.
“Taxes will be going up on your businesses. I hope that doesn’t depress you,” Beaulieu said to chuckles from the audience.
Nevertheless, true to the name of his speech, Beaulieu said there is a bright side.
“This recession as bad as it is … has dealt us some real growth opportunities,” he said. “We spend most of our time as an economy growing. Don’t ever forget that.”
After a period of sustained growth, many people seem to almost forget that recessions are as common “as breathing,” and tend to occur every 10 years, on average.
The recovery is already under way, albeit slowly. Lots of people will still be out of work, Beaulieu added.
“Unemployment is going to be high as we head into 2010. It’s going to be painfully high,” he said.
Beaulieu predicted it would stay around 10 percent for some time.
The credit crisis, which is keeping a lot of people from buying, will pass, Beaulieu said, although he admitted he doesn’t know when. Probably by 2011. Hundreds of banks will fail next year.
Buy, buy, buyAnd real estate will continue to be sluggish. Commercial real estate values are expected to drop, similar to what happened to home values in the last two years. He recommended buying commercial real estate in 2010.
If you have money or access to credit, Beaulieu recommended using it to invest in new equipment and software to boost efficiency - and do it soon. He said interest rates could hit 7 percent by 2012.
“Buy gold,” he added. “Gold is going to be to your advantage.”
He ended his presentation with a list of recommendations for businesses to survive the recession. They included:
• Prepare training programs.
• Renegotiate union contracts if possible.
• Develop a marketing program.
• Enter into a long-term lease or renegotiate the one you are currently in.
• Look for additional vendors.
• Look at capital expenditures, acquisitions.
• Make acquisitions - use pessimism to your advantage.
• Have a “can do” attitude.
For reprints of this article, contact Jill DeVries at (248) 244-1726 or e-mail firstname.lastname@example.org.