There’s no avoiding the pinch of a global economic downturn that has driven customers large and small into “wait and see” mode, relying on their existing material handling equipment as long as possible, and thinking long and hard about investing in any new capital equipment or other supplies. And let’s not forget that other small issue—getting them to pay their outstanding bills.
Despite the economic pressures, MHEDA distributors nationwide remain optimistic for the future, and are keeping their companies competitive by helping customers, reducing costs, motivating employees and pressing hard to generate sales.
Find the Markets that Are Still Making Money
Nearly 18 months ago, Joe Schmelzer, president of Equipment Inc. (Jackson, MS), began noticing the effects of the downturn and quickly adjusted his inventory accordingly. “We saw sales begin to slow and started to whittle down our stock. Any item that’s obsolete has been unloaded.” Despite noting a gradual softening of sales, Schmelzer plans to focus his efforts in those areas that “traditionally are not affected by a downturn” and sees opportunity in food, beverage, medical and government work. In another effort to generate business, Schmelzer has encouraged Equipment Inc.’s sales staff to take advantage of the slow time by improving customer communication. “When times are slow, customers have a chance to listen to your presentations and consider their options. The sales staff has the opportunity to sit down and talk face-to-face with customers they normally would have to communicate with through a gatekeeper.”
A similar strategy is being employed by Mark Heyrman, president, MEE Enterprises (Milwaukee, WI). “Certain industries are doing better than others in these times, and that’s pretty much how we’ve turned around our focus,” he says. “We’re looking more closely at our territories to determine what industries and products have slower reaction to a downturn and reallocating our time accordingly.” New equipment sales are down, but there is an increase in service work. “People still need to move their product,” Heyrman says. “They aren’t going ahead with the full order; they’re placing part of it now and pushing the other parts off to another quarter. We work with the customer based on their conditions.” Even with fewer sales, Heyrman would still like to hire additional road technicians and aftermarket employees. “There are going to be good people out there, and we will be careful about choosing the right ones.”
Siggins Company (North Kansas City, MO) is looking to hire engineers, in spite of the economic downturn. President Kobus de Kock has seen a slight increase in the length of time people are taking to pay receivables, but the company’s order intake is about normal for this time of year. “The vertical markets that we operate in aren’t as badly affected. We do a lot of business with government projects, such as lockers for schools, hospitals and army bases. The customers that we deal with still have money.” Having a diverse product line also helps, as major systems projects are being put on hold. “We have a very healthy parts line, and we also sell general material handling and construction products. That diversity has kept us afloat. Plus, all the years of being debt-free is also paying off now,” he says.
“Nobody wants to pay on time,” laments President John Williams of ConveyorMan‘s (Memphis, TN) collection efforts. Williams has considered implementing a late fee of up to 2 percent, but is hesitant to do so. “In times like these, that extra late charge is enough to knock us out of a project.” While ConveyorMan’s domestic sales have slowed notably, international business remains solid, and Williams is actively puing ursnew accounts. “Some of our competitors’ accounts are suddenly opening up, and customers are looking for a more competitive price. That gives us an opportunity to get in and grab market share.” To take full advantage of that opportunity, Williams is determined to “get more quotes in the pipeline. There aren’t as many jobs out there, so it’s crucial to bid everything we possibly can.” He also has outsourced some controls and engineering responsibilities to cut costs.
Cut Your Expenses
“We have made some adjustments on hourly people. We’re not paying any overtime unless it’s absolutely necessary,” says Mike Dubbs, president/CEO, Storage Equipment (Minneapolis, MN). “We’re watching all of our expenses, particularly our travel, entertainment and repair maintenance budgets.” Taking these measures is paramount for Dubbs, who is seeing a one- to two-quarter delay on customer financing approvals. Dubbs says the company is increasingly cautious determining customers’ creditworthiness, and has begun to run credit reports with third-party credit agencies. He cites one example of a Fortune 100 company that has not paid its $80,000 bill for a project completed in October. “It’s an extremely frustrating position to be in, particularly when there was a lot of pressure on us to fulfill timeliness of delivery and meet the customers’ needs.” All that being said, Dubbs says the company had a positive 1st Quarter, with bookings equal to last year’s.
Offer Creative Solutions
Craft Equipment Company (Tampa, FL) has taken a new approach to quoting projects, says President Don Mays. “We make sure to emphasize a package’s ROI value during quoting. Customers have to know how a product will pay for itself.” Mays is also encouraging his sales force to focus on specific industries, such as defense contractors, military bases and public health—areas where Mays sees growth potential. In addition, some drastic changes have been made to Craft’s internal communication methods. Monthly staff meetings, conference calls and an internal newsletter are a part of Mays’ effort to comfort and motivate personnel. He has even begun writing personal letters to his employees to update them on the economic situation and the company’s condition. “Employees are our greatest asset and communicating with them is now more important than ever.”
Employee training has helped mitigate the downturn’s effects on LiftOne (Charlotte, NC). “We invested in extensive sales training two years ago, and then rearranged our sales team to free up one person to act as a full-time sales coach, reinforcing that training in the field,” says Vice President/General Manager Bill Ryan. “Because of that, our sales staff is making more calls, and we have more quote activity now than we did a year ago.” Working with customers has also helped LiftOne generate sales. When a customer can’t finance an entire project, Ryan and his staff encourage the customer to complete the project in phases. “Dividing a project into phases helps customers accomplish what they need to without cheapening the product. That strategy has helped us retain customers who are having trouble acquiring credit.”
As customers struggle to obtain financing, Gary Ashley, president of Conveyors & Drives (Atlanta, GA), is offering creative financing options. “If you need an order but don’t want to take the risk on a customer’s credit, the best way is to try an irrevocable letter of credit, which the bank pays the supplier if the customer doesn’t pay, and then the customer owes the bank.” He also describes another option where he dictated more specific and strict terms to the customer. “We said, ‘This is the way we’ll sell it to you.’ It took a lot of back-and-forth to get the job done; it was something we’ve never done before.” Ashley lowered his own company’s line of credit on the advice of his banker in order to free up some of the bank’s money to give to other clients. He’s also encouraging more customers to pay by credit card. “It costs us more money, but we know we’re getting paid and we’re not worried down the road.” The most important thing to remember, Ashley says, is that tough times take discipline. “Be willing to say no to a sale, even if you need it desperately. Because if they can’t pay, you’re going to be in deep trouble real quick,” he says, admitting that it’s not easy to do in dire times. “If you sell something to somebody who can’t pay you, that might sink you even if everything else you do to run your business is right.”
Adjust Your Marketing Plan
For Jay Terry, president, Allstate Equipment Company (Chesapeake, VA), now is a time to cut costs and focus on what works. The company is increasing marketing efforts in areas like cold calling and direct mailers, and cutting back on less successful methods. The company is cutting back in other areas, too, like equipment history data collection, fuel consumption and 401(k) matching funds. There is, however, one area where Allstate is increasing its spending—used equipment. “There are a lot of struggling companies out there looking to liquidate equipment,” says Terry, “we’re looking into those situations so that when the demand for equipment returns, we will have plenty on hand.”
At Babush Material Handling Systems (Sussex, WI), President Chris Shult is doing more Internet and direct mail marketing. Shult uses the company’s internal newsletter as a forum to keep employees’ spirits up and remind them that business is cyclical. “We’ve had downturns before, and we’ll come out of this one just like we’ve come out of every other one. There’s no need to panic,” he says. In fact, Shult encourages his sales team to see even more customers. “When times are tough, customers have more time to see our salespeople. So our sales staff has a better opportunity to develop a relationship with a customer in this economy than they do when everybody’s booming.” Shult has made a few adjustments, including a stricter approval process for overtime and putting unpaid accounts on credit hold sooner.
Bode Equipment Company (Londonderry, NH) had the best month in its history last December, according to Steve Fawcett, president. That doesn’t mean that sales are easy to come by; the company is just working harder. Fawcett believes that marketing should be increased during slower periods, and Bode’s Web site improvements and increased direct-mail marketing efforts reflect that philosophy. To make sure his sales force stays on top of things, Fawcett loads them up with information. “We’re constantly giving the salespeople direction by clueing them in to which industries are still doing business and which companies in our geographic area are doing well.” Experience drawn from past downturns gives Faw-cett confidence for the future, a fact he is sure to point out to his staff. “We have come out of past downturns with some very big gains. Anything we have lost we gained back and then some.”
Keep a Positive Attitude, and Be Honest
According to President Richard Strickland of Allied-Callaway Equipment Co. (Kansas City, MO), slowdowns for local Ford and General Motors plants have softened his company’s sales. “The slow economy has definitely affected how much work we’re getting out of those guys,” he says. To offset the drop, Strickland is investigating the fiberglass market for sales opportunities. “It’s a niche market and requires a specific set of skills, so we’ve hired someone to focus on those accounts.” In spite of the difficult market, Strickland’s attitude remains positive, and he hopes to motivate his sales force with his optimism. “The market may change, but there are products that the American consumer is always going to want—food, cars, houses. We supply the people who make those things,” he adds. “It may not be terrific, but there’s still a market out there.”
Although he put off the construction of a new building because of the economy, Jeff Pennell, president of Pennell Forklift Service (Jacksonville, IL), had the best January he’s had in three years by more than 25 percent, a result he attributes to weeding out non-producers and taking on the duties of sales manager himself. Pennell hired the company’s longtime banker as CFO, a move that is paying dividends. “He’ll be putting together a five-year business plan, and it’s really done a lot for departmental expenses, setting budgets and quotas for each department, and fine-tuning it all for us to be more efficient.” Pennell uses the negative news in the media as a scare tactic. “I don’t want to lay anybody off, but if they don’t do their part to help out, they jeopardize everybody’s job.” Since he delivered that message to employees, they have “really gotten after it,” he says. “Everyone has started hustling and watching every penny. It has seemed to bring our company together.” The rental market is struggling, though, and Pennell has begun to collect money up front on rentals from customers who have no credit history with the company. “We’ve become more aggressive instead of just being glad to get the business,” he says. “Some business isn’t worth having.”
Try a New Tactic
At Hooper Handling (Hamburg, NY), President Doug Ward hasn’t yet seen credit lines freeze up for his customers. This is due in large part to the company’s in-house leasing company, Raymond Leasing. “Having our own capital leasing company has allowed our customers’ to obtain lines of credit relatively easily,” says Ward. Overall, though, sales are still slow in the company’s western New York market, forcing the company to make adjustments. “We’re trying to go into some other areas of equipment sales,” says Ward. One product line that the company has successfully adopted is industrial lighting. Most of Ward’s customers have not yet made the switch to energy-efficient lighting—a process with a ROI of less than a year in most cases. “Especially in this climate, it’s much easier to sell a solution when it provides such an immediate return,” says Ward.
WHAT WOULD YOU DO?
It’s times like these when MHEDA membership can really pay dividends. Having access to other material handling distributors going through the same issues is a valuable asset, particularly when it comes to getting advice about how to handle economic conditions that many of us have never seen before. We asked a handful of distributors to share their best pieces of advice for someone who may be going through his or her first down economy.