Volume 38, Issue 10, October 2003
The Economic Roller Coaster
Facing the Industryís Economic Ups and Downs
by Dez Farnady
Several years ago, at the bottom of a previous economic downturn, I received a lesson in microeconomics from a friend who had taken his little glazing business through a few of the ups and downs of the second half of the last century.
We were sucking up martinis before lunch (you could do that back then) and he was telling me that he had just asked his estimator to retire. It was fortunate timing because the estimator was ready to retire. But the estimating position was not being vacated; it would be refilled. Even in the doldrums, you canít run a contract glazing business without an estimator or salesperson. It was the chief executive or the president of the company who was to be no more. He was redundant as an executive since he had no one to execute. So my friend, the owner, who had been reading the sports page with his feet on his desk and counting the money every day up to then, had to strap on the telephone and start calling his old contractor friends to dig up work.
He had a glazing contracting business that ran maybe 15 to 20 glaziers during the busy years, only to wind down to just one man when the bottom fell. With his estimator and all his glaziers gone, he would keep the doors open by doing service jobs while he worked on building up a backlog. The one man he kept on the payroll was his superintendent, who ran his crews (when he had crews to run) and did the hack-outs and actual service work until things turned around.
It seems pretty obvious that when the income goes down substantially the overhead had best go down as well. Glazing contractors, whether they handle large jobs or small, buy their glass and metal by the job typically. And when the work is steady they try to keep their crews stable. Then, when the jobs wind down and the material is used up and billed out, all that remains is the crew that installed it. The men donít get used up like the material and the payroll keeps on going long after the income has stopped.
Somewhere in his biography, Bill Walsh of the San Francisco Forty-Niners said the hardest thing for him was to release and let go of the players who had made him successful. While good glaziers can make you rich when you have the work, it is tough to pay union scale for a good mechanic when all you have for him to do is sweep the floor. When the backlog shrinks and the market dries up, the people who get hurt are the ones who over-extended themselves. If you canít cut back to reduce overhead or cannot sell to generate new orders, your business career may be abbreviated.
Your Customersí Needs
The perfect time for a sales push is when nobody is buying. That is the time to go out and make the friends to develop future business. That may sound crazy, but if you pay attention to your customers when all they need is sympathy or a shoulder to cry on, they may have time for you and remember you when they get busy. When the market rebounds and things start to pick up you may not have time to make those sales calls and they wonít have the need for the sympathy, but they will remember.
It is the modern economyís unfortunate nature to be like a roller coasteróit has its ups and downs. J.P. Morgan once said that the only sure thing about the stock market is that it fluctuates. (Anyway, I think thatís what he said.)
Certainly the same thing can be said about the construction industry. In my years, I have seen little fluctuations and big ones. I have seen little glazing contractors get big and big ones get little. Big or little, it seems the only ones that survive are the ones that are also smart.
Dez Farnady serves as general manager of Royalite Manufacturing Inc., a skylight manufacturer in San Carlos, Calif. His column appears monthly.
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