Hope is not a plan: Times up?
By Adam SnookFeatures Business Intelligence
In the face of an impending economic downturn, it’s best to play your business by the books.
If you read the mergers and acquisitions sections of this magazine, or any other industry-specific publication it’s hard not to notice all of the consolidation being written about weekly.
The national and strong regional players have been on a spending spree acquiring both specialty and general rental centres. Given the deteriorating macro conditions, specifically the increased cost of capital, that party will likely be over soon. That generally is a sign that the boom times may be coming to an end as well.
The Canadian Rental Association reported on the state of the event and euipment rental industry in the news section of this magazine. The trends still look positive for the foreseeable future but things can change in a hurry. Assuming that your business is still rolling along smoothly, it’s hard to look past the good times at what might happen. Especially when it’s something you don’t want to hear. But, as the old saying goes, “failing to plan is planning to fail.”
Many of the things that you should be paying attention to when heading into a possible
downturn are things you should already be watching as a general course of business. It’s east to forget that small things add up. Now, in the midst of an impending downturn, these business basics can become vital to your business’ survival.
First, control your expenses where possible. With increased costs on things like utilities, wages and parts, there’s only so much you can control. Small things, like keeping overtime to a minimum; motion sensors or upgrades to LED lights; and shopping around for deals on parts can all add up substantially at the end of the year.
Second, make sure you’re passing on as many of your expenses as possible. Ensuring proper customer charges for things like fuel, cleaning fees and damage not covered by waiver is an important way of keeping your overhead manageable. It’s not a profit centre, and customers shouldn’t be made to feel like you’re taking advantage of them. But they should also understand that you’re not in business to lose money either.
Next, if you’re sitting on under-utilized equipment, consider selling it off now. With the manufacturing backlog on new equipment, used values are still sky high. Having that extra capital could come in very handy.
Finally, watch your receivables. As construction slows, payment terms will get strung out. The guys who paid you in 30 days will suddenly be paying in 60 days, 90 days and so on. You need to stay on top of this. Know the rules for putting a lien on a job, and don’t be afraid to do it. Sometimes it’s your only recourse.
The CRA’s report on the event and equipment rental industry shows that the economic drivers our industry had been experiencing for the past year is starting to slowdown. The CRA expects recession fears to hold back spending and the forecast for 2023 already shows a meager increase in growth. As if the last couple of years haven’t been hard enough, now we’re facing what looks to be like very volatile times financially.
Keep your head on a swivel.
Adam Snook owns Just Bins, a Regina-based provider of waste disposal solutions.
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