Expert Interview: Tackling Tough Times
© 2001 Door & Access Systems
Publish Date: Fall 2001
Author: Tom Wadsworth
Tackling Tough Times
Like a veteran Army medic walking through the trenches, Bruce McConnell has seen a wide variety of door dealer casualties and survivors of the current economy. Since January of this year, he has offered financial counseling to nearly 100 door dealers in the U.S. and Canada. He guesses that about 35 percent of dealers have been negatively affected by the current economic slowdown.
We caught Bruce between visits to dealers in California and Georgia. To find out his perspective on dealing with the current economy, we asked him a few questions.
Which kinds of door dealers are more vulnerable now?
The most vulnerable are those whose primary focus is on new construction. It is typically much more sensitive to economic downturns. In a tight economy, plans for larger and newer facilities are often put on hold. That can hurt you if most of your business comes from new construction work.
Which type of dealer will fare the best during the economic slowdown?
The best scenario is a dealer that has a balanced sales mix including service, retrofit, and new construction. These dealers don’t rely on just one segment to survive.
Do dealers gain a similar benefit when they diversify into other products, such as awnings, gates, and house vacuum systems?
Yes. These can be very helpful if they have the product and installation expertise, and if it does not take them away from their core business. It’s hard to generate a high sales volume of these products without making a very concentrated effort to do so.
Are certain regions of the country more vulnerable right now?
I believe you will find it to be spotty across the country. With the right sales mix, a dealer can do well in a region that is having difficulty.
Can you describe the typical telltale signs of a dealer who is struggling with the current economy?
The first sign is usually when they start falling behind in their payments to suppliers. Cash flow becomes tight due to the reduction in sales without a corresponding reduction in expenses. Losses occur as more expenses are not covered adequately.
In your opinion, what are some of the least beneficial ways that a dealer might react to a business slowdown?
One of the least productive reactions is reducing prices to maintain sales volume or taking unprofitable jobs just to have work to do. This can often lead to prolonging losses. If considered at all, these jobs must be done on a very selective basis.
What are the top three business adjustments that you might recommend to dealers in the midst of a business slowdown?
First, improve labor efficiencies and administrative output. Each employee must work for maximum efficiency when handling installations, paperwork, phone calls, and customer service. Second, evaluate and change your sales mix and make price increases wherever possible. This will let you get more profit out of fewer sales. And third, eliminate unnecessary expenses.
Do you think the worst is over? Do you see any signs that the slump will continue, or does it look like it’s going to turn around?
I don’t think anyone really knows for sure.