Download PDF version (386.8k) Log In or Register to view the full article as a PDF document.

Keep a Lid on Overhead and Some Cash in the Bank

During the growth years, I discovered that the infrastructure required to operate a large company is much different than what it takes to run a small company. When the crunch came, I was surprised at the total investment I had made in vehicles, tools, computer systems, and layers of administration. I also discovered that it’s not easy to simply eliminate this infrastructure — the process takes time, and the accumulated overhead bleeds cash until the task is completed.

I was fortunate that I had always collected accurate financial data, so I was able to move fairly quickly to rein in these costs. During the summer of 2007, for instance, I had noticed a large increase in unbillable time for our design team — a key negative indicator. As a result of this observation, I cut my staff by nearly 25 percent in the fall of 2007, almost a year before the real recession hit us. This made my company’s entry into the deep recession slightly less difficult, because I had preserved cash instead of spending it for nonproductive office and field staff.

I’d actually learned about the importance of keeping money in the bank during the recession of 1991, when — as a member of a Business Networks peer group — I had the opportunity to observe how other remodelers navigated those lean years. One lesson became clear — that cash is king. In other words, when you’re earning a profit, save it. It will help you survive during a downturn, even as other businesses are folding. And when it’s time to make the investment needed for growth, you’ll be prepared.