The media is full of bad news. Every day, week and month there are indications of the economy going from bad to worse and sometimes beyond. Rightfully so, there are changes as we all know, but are they as drastic as the media leads us to believe? I don’t think so. People still have jobs, products and services are plentiful, the ATMs are working and the banks are open. The financial markets on the other hand are in disarray and most likely, are in much worse condition than during the Great Depression. It all sounds drastic but if given attention you can weather the storm. As a business owner you most likely have a plan for what to do in the immediate future, this week, next week, this month and next month. But, do you have a long-term strategy? Most likely not. Typically, a small business is managed on a day to day basis only, there is no plan for how to tackle the future or deal with changes in the market and in the general economy. It is important to have a strategy that helps you work on the strengths you need to preserve and deal with the weakness that limits your prosperity. It is hard to give your own business a bird’s eye view but it can be done. Here are some suggestions.
Where are the problems? Where are the opportunities?
As a portable storage operator you should look at your business and try to assess your exposure to problems as a result of changes in the economic climate. It is important to deal forcefully with the elements of your business that seem to be failing. The initial step is obviously to identify the areas that are changing in a negative way and the second step is to identify new opportunities that present themselves in this changing climate.
Look at customer groups
Construction is down, way down, and is likely to be so for an extended period of time (may be two to three years). If you want to be conservative go on the assumption that within the next one to two years containers will be returned from customers in the construction industry. Construction is never completely dead, there are always repairs and maintenance of buildings and infrastructure that have to take place and you can assume that some rental units will go back out to the same industry but not many.
Retail sales are down, consumers are holding back on spending so the retailers will require fewer containers for their merchandise. However, there are exceptions, low price leaders such as Wal Mart and TJ Max are showing increased sales as the penny pinching consumer now prefer to shop at the big box retailer rather than at the fancy mall. The small retailer will probably continue to rent his container provided he stays in business. The cost of renting a container versus renting a warehouse or building new storage space is minimal so if your container is part of their operation it is likely to stay there.
While a general economic slowdown should affect all industry groups, the construction and retail industries are more pronounced at this time. Fueled by easy credit both categories have flourished over the last three to five years and are now coming to an abrupt halt. What is your exposure to these two industries?
The overall change and where to look for trouble
Expect other industries to slow down as well and keep special attention to your slow paying customers. Given the times they could be hurting and not just managing cash flow by paying slow. Instruct your sales people to visit the sites of the slow payers to first of all assure that the boxes are there and secondly talk to the customers about their payment situation. It is important to have a feel for the customer’s situation, therefore visiting and talking is a better way than to send a past due notice. If you have reasons to believe that your slow paying customer is going bankrupt make sure your rental agreement is clear and allows you to take back the container without dealing with a bankruptcy trustee. The latter can be a long and tedious effort with no other benefit than getting your own container back while having to take a loss on the receivable.
Opportunities in dark times
The doom and gloom is not a stimulating environment to work in, but it is a commercial reality. Another commercial reality is that there are opportunities out there all the time. The flip side of a business slowing down is that it may need more storage space for equipment, machinery, furniture and other bulky items not be being used during these times. We all believe that the times will turn good again so the storage is temporary and a portable container is an excellent solution.
For the same reason customers may also look for more offsite storage (containers rented from you and stored at your facility) than they previously did. If you have the ability to offer storage at your site, now is probably a better time than ever for this service. Start to promote your new services nearby. Canvas your industrial neighborhood, look for opportunities and talk to the local leasing agents because they usually have a good feel for who is looking for new space (smaller or larger) as well as who is moving in and out of the area.
Be ready for change
If you start to offer offsite storage, think through your business model and make sure you differentiate between the two products. There are new situations that may require new routines. Customers are going to want to visit there containers to add or remove items and you have to assure their safety. Secondly you have security issues. You need to know who is visiting a customer’s container. It is easy if it is the owner that you’ve dealt with but trickier when it is an employee of the customer or someone else who tells you that they are authorized to enter the customer’s container. Therefore keep a log of who is going in and out, when and what container they are going to. Customers may also store items that you don’t want to have in your yard such as chemicals, paint, explosives and other harmful items. Make sure you give the customers guidelines as to what they can and cannot do when your facility is open and what the procedure is for visiting a container. Inform your staff of your routines in dealing with this new customer group and finally talk to your insurance agent so that you have the proper coverage for the added business.
The bigger picture
In addition to looking over your own business take a look outside of your company. Talk to your vendors, suppliers as well customers and keep them abreast of your situation and expectations. Given the current turmoil in the financial world it is extra important to talk to your bank. Provide them with information frequently; better to be proactive than reactive. If your banker hasn’t been to your facility, invite him over and show him how you operate. Most companies in our industry function very well, they have internal routines and controls. We may not be as formal as a bank or larger companies but in most cases it works very well. Your banker should get a good understanding for how you operate if you bring him over and show your business on a regular day.
Take a look at your local competition. Are there opportunities to buy any of your competitors? Most likely an established operator is not going to want to sell during a time of economic downturn. However, companies that got started in the last three to five years may have had the majority of their customers in the construction industry and are feeling the slow down more than you are. Secondly, you know that they have paid premium prices for their containers as prices have risen to new highs in the last couple of years and can’t afford to have them off rent. Nor can they be easily sold if the market is weakening.
Times are tough so take a bird’s eye view of your business and develop a strategy to deal with necessary changes internally and look for opportunities outside of your company. The good times will roll again, we just don’t know when that is.