Turn It Up a Notch

Good People, Hard Assets and Avoiding Debt

BY Dale Buss | July 1, 2002|

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Triangle Printers Inc. is in such an opportunistic mode. While small printers in metro Chicago got in trouble during the recent recession after investing wildly in expensive digital equipment without being able to pay up, Skokie, Illinois-based Triangle was more conservative. "Every week, another printer is going out of business," says Harvey Saltzman, president and owner. "So we've acquired three companies in the last few years and are looking for more."

* The availability of good people: Gone is the legendary labor market tightness of the late '90s, replaced by a traditional balance between supply and demand. That means people with the experience, skills and talents you're looking for may finally be available. But upgrading doesn't necessarily mean expanding staff. "Most entrepreneurs would rather see the business first and worry about adding staff once they see more orders," says Dexter of USBX.

"You don't want to over-leverage your company if the economy doesn't recover at the pace you expected."

As a surviving Internet company, YellowPages.com has its pick of many experienced but unemployed dotcommers floating around the job market. "We've found high-quality people at prices that are shareholder-friendly," notes Dane Madsen, 44, president and CEO of the Las Vegas-based online phone directory. "We're not bringing in new people indiscriminately, but filling slots."

* The quandary of hard assets: With interest rates at a an all-time low, construction capital is cheap. But owners aren't eager to expand their factories or offices just yet. Similarly, prices of capital goods and other business properties are soft in the early stages of recovery. "Everything is favorably priced right now," notes Horn of Tatum CFO.

But for many entrepreneurs, that isn't enough to justify making big purchases. Dickey at Heinemann Saw says the attractive pricing of the equipment he'd like to buy is enhanced by his intention to purchase from a European manufacturer. That way, the dollar would work to Heinemann's advantage. "But that's still not enough to adjust the decision at this point," he says.

* The burden of adding debt: The last thing you want is more long-term debt. Solicit short-term financial help from friends and family or other sources, but avoid more bank debt even if you can obtain it. "You don't want to over-leverage your company if the economy doesn't recover at the pace you expected," says Key's Butler.

* The art of the possible: You can advance your company by focusing on what you can accomplish against today's economic backdrop rather than on the major outlays you're not ready to make. A good place to start is making sure your customers remain happy.

Entology Inc. grew robustly even through the recession, but Lawrence Prager isn't taking anything for granted. "You've got to lock down your customers so they don't have an excuse to go somewhere else," says the 38-year-old founder and CEO of the Bedminster, New Jersey-based IT consulting firm, whose projected sales for 2002 are about $19 million. That's why Entology added electronic invoicing as an added convenience for its customers. "If we can keep costs low and operate more efficiently than other people," says Prager, "we're going to invest there, because if the economy continues to be uncertain, we'll take advantage of our strength."

NO FEAR

BIG MOVES EQUAL BIG GAINS
Irving Sparage wasn't going to let a little thing like a recession interfere with taking advantage of the business opportunity of a lifetime. That's why, even after a down 2001 and a sluggish spring, he's completing an investment of about $1 million to move the headquarters of his company, Smith Welding Supply Inc., from downtown Detroit to suburban Ferndale, Michigan.
"I'm making this investment for the long term," says the 53-year-old third-generation owner of a family business. "This move will make us a more efficient company and better poised to handle growth."
Not only was the urban site getting too tight for Sparage's rapidly expanding business, which now employs 65 people, but Ferndale city officials also indicated they would be fine with Smith Welding's storage of industrial gases at the new location, which was the site of an old gas company. "It was a godsend," he says. "It's hard to find communities that aren't reticent about our moving in."
Sparage purchased the property two years ago when Smith Welding's growing staff was already in the double digits, and the company was well on its way to a $14 million year. But when the industrial recession hit hard times last year, Smith Welding fell several hundred thousand dollars short of its 2000 revenues. The softness continued through last spring.
But Sparage kept right on with the move, including investing in "higher-tech equipment in this facility to try to get an edge on the competition." Now he wants to boost Smith Welding's sales staff by 10 new people in the next two years. "I guess," he concludes, "I'm an eternal optimist."

Dale Buss is a journalist and editorial consultant in Rochester Hills, Michigan.

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