We all know that economically things are at a high level of uncertainty. Inflation, interest rate increases, continuing supply chain snags, rising material costs, employment challenges. I’m not telling you anything that you don’t know – nothing that you’re not experiencing.
Running a business is never easy. Now it is exponentially hard.
Although I’ve been at AMT for more than a decade, prior to that, I was working at companies that are not unlike yours. I’ve had to do my best to manage through travails just like the ones you may be facing right now. I get it when things are hard. I’ve had to close a company.
I’ve given a lot of thought to what one can do to deal with economic challenges.
And I’ve always come back to the fundamentals – two things that you need to address, two things that, at the end of the day, you can control or influence:
Sales up and costs down!
I know – obvious, right? But if you make it a point to always drive that message with your employees, all the time (and especially now), you actually move the needle.
So, one of the recommendations I make is for people to come up with three things they can do to help accomplish those two. Just three things. It may sound too simple, but when you get down to it, the only way a business exists is by having revenues in excess of costs.
And I have a third suggestion: Think of the top three people in your organization who are core to driving sales up or costs down. They could be a salesperson, a plant manager, or someone in product development. Identify these people – people you know who will be with you in trying to keep things moving in a positive direction – and then bring them in close and share everything with them. Their assistance can be immensely advantageous.
One of the first reactions that managers have is to cut costs. And one of the first places where those cuts occur is in personnel.
While it is true that salaries are something that can have a quick impact on the balance sheet, it can have an equally quick and long-lasting negative effect on operations.
If sales is one of the two key elements, you need to have products to sell, which means that you need personnel to build them. You want what your company is building to be better than the rest because that can help give you a market advantage. Good people make that happen.
Keep your employees in your camp. Communicate with them.
I was running a company at age 30. Our bank gave us six months to meet our covenants or they were calling our loans. I decided that I needed to get all the help that I could, so I went out in the shop, climbed on the table of a DeVlieg in one of our machining bays, and addressed all of my employees. I told them what metrics we needed to hit. I told them that I couldn’t guarantee their jobs but that if we hit the numbers, we all had a better chance. I told them that if wages were going to be cut, mine would be the first.
I held that meeting monthly. And I’ve held one every month since.
When you are honest with people, when they can get information from the top rather than on the gossip-net, then they’re likely to provide the support your company needs.
Yes, you’ll need to cut things. Look at what’s on the docket: Are there plans to modify the shop floor? Do a website update? Is that something you can delay for six months or a year?
Look at the RFQs and quotes that are outstanding. Which are the ones that will have the greatest likelihood of turning into orders? Which are the ones that provide the greatest manufacturing overhead absorption?
Consider whether there is something that you can do to improve your quote: Is there something that you could add that wouldn’t be inordinately expensive yet might give you a value-added edge over your competitors?
One of the things that I caution against is deciding that it is time to switch to another industry. This is not just because the grass may not be greener, but your company may have spent years building a reputation in your current industry, and that is something that you need to leverage to advantage. In another industry you simply don’t have the credibility, and that is something that you’re not going to achieve overnight.
But what you can do – especially if you’re in a larger industry like auto or agricultural/construction equipment – is find opportunities with companies you aren’t working with. If you’re producing steering knuckles or valves or other components that companies in a given industry all use, you have a solid example of not just what you can do but what you are doing.
A final suggestion. AMT has an array of resources that can help companies – through networking, surveying, forecasting – get the competitive edge that is arguably now more important than it has been for some time.