Contractor Tip of the Month - August 2014
Words: Damian Lang Contractor Tip of the Month
By Damian Lang
I couldn’t sleep. The elephant on my chest was planted firmly. The deadline date was approaching, and I had to make a crucial business decision. Do we stay or go?
My thoughts a moving Ping-Pong ball in competitive play. How much debt do I have? If this happened, then this could happen, or this. The relentless options, possibilities, tragedies, would not shut off. Oh to be 21 and single again. I could shrug any losses, have a beer and find a sofa to crash on.???????Ǭ? Instead I had millions invested, a family, employees and one gut feeling.
A few years ago, my manufacturing company, EZ Grout Corp. (EZG), entered into a partnership with a large manufacturing company to become the exclusive distributor of EZG’s equipment. With the bigger company having so many distribution channels, our team felt partnering would reduce our marketing expense, and greatly increase sales. After we signed the contract with the other company, I learned the hard way – a big lesson. Never make a deal without considering the repercussions of things not going the way you planned! In EZG’s case, our plan to work on tighter margins only worked if the sales volume increased.
The hammering of the Great Recession shattered EZG sales by more than 60 percent. As well, in 2007 we invested millions retooling and moving into a larger manufacturing facility to gear for the increased sales volumes we thought were coming. We got the opposite: a larger facility, with less equipment to build. The tighter margins, due to the discount we gave our exclusive distributor partner, along with lower sales volumes led to major losses.
The agreement we made with our partner included an option that allowed either company to discontinue the partnership after the first three years, as long as certain criteria were met. With a few grains left in the hourglass, I went to my top managers for advice. Do we continue the partnership, or get out and try and make it on our own? Funding years of losses, we burned through all the cash reserves of EZG’s and my personal savings. My managers came back with the opinion that, in our current condition, continuing our partnership was the route to go. With all this information at my fingertips, something still didn’t feel right. My gut told me to discontinue the partnership.
It was a time of sleepless nights and despairing thoughts. Yet, my gut feeling and the spirit within me kept jabbing. I told the management team we were discontinuing the partnership. It was embarrassing, as other than what my gut was telling me, I was unable to give a good explanation to back my decision. To tell you the truth, I felt we were probably screwed either way, so why not go down swinging?
Our partners had made some promises that were broken. With the recession, I gave them the benefit of the doubt. Yet, one must wonder if this played a part in my gut feeling? It did make the decision to “get out” easier, as the personal connection with them wasn’t what it once was. Furthermore, I had made a promise to myself that no matter what, I would keep fighting the battle and never give up. Management supported my decision.
Once our partnership was gone, we started doing things that a street kid with no “big brother” would do. Our options were to die or find a way to survive. I devised a plan, and called a special meeting with management and factory operators to lay it out. Putting all the cards face up on the table, I explained to them that we had six months to get back to break-even, or the manufacturing operation may die.
We went straight to work. We bought back the equipment our ex-partner purchased at the same discount we gave them. This actually helped cash flow, as we had equipment to sell, with no current cost to build it. We quickly diversified our product line, started doing shop work for local plants, and took on specialty work that I wasn’t even sure we could build, until we tried it. All this led to sales increases, with better margins on those sales. To even my surprise, the plan worked almost the way it was laid out. Six months later we were breaking even. Since then, we have remained profitable, and I am sleeping much better now.
I am sure there was a lot of luck involved in our survival story, but let me tell you this: If I never trusted what my gut was telling me to do, our company would not be where it is today.
Regardless of where you are in your career, you have the most chips on the table during your decision-making process. Your gut will most likely tell you what you should do. Listen to your team. Get as many opinions as possible. Consider the advice. Trust your gut, and make the call!
Damian Lang owns and operates four companies in Ohio. He is the inventor of the Grout Hog???Grout Delivery System, Mud Hog mortar mixers, Hog Leg wall bracing system and several other labor saving devices used in the masonry industry. He is the author of the book “RACE???Rewarding And Challenging Employees for Profits in Masonry.” He writes for Masonry Magazine each month and consults with many of the leading mason contractors in the country.
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