July 22, 2008
COMMERCIAL, RETAIL, AUTO, FABRICATION : BUSINESS, HUMAN RESOURCES, MANAGEMENT, MARKETING, SALES
M3 Glass Technologies cutting and polishing departments
with the new water recirculation system in the background.
This article is first in a series that will explore how to run a successful shop, and will touch on various aspects of managing a business including: when/how to expand, downsize, sell your business; decide on location, whether to rent or buy; when to add new products, services and people; when to diversify; and when to change name, logo and marketing materials.
In this time of housing, credit and financial crunches, many businesses are struggling to stay afloat, some are going under, while others are deciding whether to hang in, diversify and change business models or simply fold.
In the first quarter, the economy trudged ahead at a 0.9 percent pace, slightly better than the 0.6 percent growth estimate and final quarter performance this past year, according to a May 29 article in The Washington Post. Builders slashed spending on housing projects by 25.5 percent, on an annualized basis, in the first quarter. That was the most in 27 years, according to the article. During the April-June period, expected to be the weakest quarter of the year, the economy will slog along at a 0.4 percent growth rate, said forecasters at the National Association for Business Economics.
In such hard economic times, plan for a more even distribution of jobs for plant capacity, says Bob Trainor, chief executive officer, Trainor Glass, Alsip. Ill. "We recently had three jobs put on hold around the country, and our management adjustments from the previous lesson learned have worked well," he says.
The lesson learned was from a letter of intent, Trainor explains. His company had a letter of intent on a 40-story project in downtown Chicago with a reputable contractor. "We proceeded on the basis an initial $500,000 payment would be forthcoming for engineering, design and system approval," he says. "Fortunately, we stopped working at a critical point and are in a protracted-hopefully not legal-process to collect our money. The bigger problem, when job was put on hold and later canceled, was that it created a huge gap in our projected billings, cash flow, for our Illinois operation, and our plant and field labor."
People and equipment management
One option to stay afloat during crunch times is downsizing. "When you discover that you are in markets that are unprofitable, disappearing, or otherwise undesirable, [downsize]," says Chris Mammen, president, M3 Glass Technologies, Irving, Texas. "Or when a part of your business no longer fits your business plan. For example, our company started as an auto glass company in 1956, but by the late '80s we made the decision to leave the auto glass market completely to focus on and grow the more profitable parts of our business. If you can make a larger profit on a lower sales amount, why wouldn't you do that?"
Your people, however, are your company, Mammen says. "When you find a superstar, hire him or her immediately. Hire the best and take care of your employees," he says. "Give credit where it is due: your employees, your customers, your family, your God. Develop friends and resources in the industry that you can trust, and be willing to both listen to their advice and to help them first."
Trainor agrees about personnel and business relationships: "Choose customers and jobs wisely," he says. "It's not volume, it's bottom line. Set up mutually agreed to and detailed schedules and stay on them, no matter what. Contract glazing requires project management intensity every day, with key person involvement."
When it's time to add to the team, "make sure that the need is really there," Mammen says. "If demand has increased, and overtime along with it, then we consider adding someone. First, however, we look internally to see if another area has slowed down, and we can afford to lose a person to the area that needs more help. Oftentimes this is the right answer, and we end up with employees who are cross-trained in multiple jobs. This is always a win-win scenario, as it helps the company and also increases the employee's value at review time."
Another key component of running a smooth operation is machines. "Raise productivity through technology-automation and equipment-and overall best management practices," Trainor says.
Buy good equipment and take care of it," Mammen says. A good point to keep in mind is you get what you pay for, he says. "A few times over the years, we have tried to save money by choosing a piece of equipment based on price alone, assuming that all-polishers, drills, trucks, whatever-are basically the same. Each time, we ended up paying much more in terms of down time, frustration, late orders and upset customers than if we had bought the more expensive but better quality machine in the first place."
Mammen did not learn a lesson the first or second time, but eventually he did, he says. "We still negotiate for price and usually have more than one vendor we will consider, but that list of vendors has shortened considerably and now includes only the best. We differentiate ourselves with our quality, and we must have quality equipment to make that happen. This also results in good relationships and better service from your chosen vendors."
Location and product planning
A downturn in the economy could be a good time to acquire real estate for a new facility.
Equalizer Industries, Round Rock, Texas, recently separated its international division and moved it into its own new facility next door.
"If you're going to begin this [relocation] process, you have to map out specifically what you have in mind, making sure you have the right space allocated for the right function," says Ray Asbery, president, Equalizer. "Moving is a big part of it. You have to recognize how your business flows from this point to that point. You will disrupt it, and you want to disrupt it minimally."
The company prefers to purchase its facilities rather than rent, Asbery says. "Our business changes often and we like having the flexibility to make those changes when needed," he says. "When you're in a rental situation, you're at the mercy of the landlord. If you want to knock down a wall, we can without much hesitance."
When planning and diagramming a relocation, don't get selfish, Asbery advises. "Get everyone involved in the process who is a part of the whole process," he says. "There might be red flags that you aren't seeing that someone else will raise."
Creative Mirror & Shower, Addison, Ill., also made good use of the down real estate market to acquire a new showroom. The company is preparing to move into its new 1,500-square-foot showroom in downtown Chicago this summer.
Creative's 20,000-square-foot headquarters was built in 1995 and includes a showroom, offices and fabrication shop. Building the headquarters took longer than it was supposed to, "our lease expired, so we had to move our shop into an interim location for six months," says Mark Pritkin, owner. "We moved in with a fabrication company. We gave them a whole bunch of business, and they carried us for six months until our new building was ready."
The lesson learned there: "It pays to be nice to the other people in our industry in the local market because you'll never know when you'll need each other."
For the new showroom Pritkin is working with the architect for the interior build-out. "A showroom can't be static, it has to change," Pritkin says. "You have to update the displays, move things around. When people come in, you have to give them something to look at. We sell products that will keep customers coming back."
Innovative products and knowing when to add those and new services to the inventory are a primary component of a successful business.
"This is usually driven by our customers," Mammen says. "For example: if we have customers asking for a particular pattern glass, like 3Ú8-inch German Antique, we will source it and add it to our product line." There are many products and variations out there, but Mammen rarely brings one in just on speculation. Sometimes the company adds products due to opportunities that come its way, usually as a result of a good relationship with an equipment vendor, he says.
"When we decided to add a larger tempering furnace, a decision that was driven by our customers' size and volume needs, our equipment supplier worked with us to add capabilities to the new machine so that we could also add curved tempered glass to our product line," Mammen says. "The most important part of the decision, and something we always consider, is this: will the new product or service compliment your core business, or distract you from it? Don't try to be all things to all people."
The economy is expected to turn and growth should pick up to a 2.2 percent pace in the third quarter, according to The Washington Post article. The fed's series of rate reductions and billions of dollars worth of tax rebates from Uncle Sam should force new life force into the economy.
Until then, "do what is right. Always. Even if it costs you. Especially if it costs you. Watch out for distractions, stay focused on what you do well," Mammen concludes.
-Matt Slovick contributed to this article.
Next poker play: Learn from other glass company owners who successfully expanded or built new customer showrooms! We'll have floor layouts, photos and do's and don'ts to follow-all in the Retail glass section of this new Glass Magazine.
Stack your own deck! Do you have a story to share for our Poker Play series? We will publish your story and give you credit, or leave your name out if you so prefer. Send me an email at email@example.com.