A project I have been working on put me in the middle of the construction and durable goods manufacturing industries.   The scramble for government work in the construction industry (private sector building is still almost non existent) has significantly reduced margins but kept many contractors doors open.   On the durable goods front, it seems to be hit or miss.   Some consolidation and shutdowns have allowed lean oriented, creative fab shops to expand business.  Some companies are looking to take a leadership role in the cost area by heading up buying consortiums for big ticket raw materials.   Are there non proprietary activities you could be sharing with others that could significantly reduce your cost structure?  

After restocking during much of 2010, companies have been focused on reducing year end inventory for the last six weeks.   I think this is temporary and we'll see another pick up in general activity during the first half of 2011.    The general restocking of inventory could put pressure on the bank lines of your customers.  There may be opportunities with these customers to implement kanban or other just-in-time inventory management programs that help deepen your roots into the customer's supply chain.  

Finding new markets is the common catalyst in many strategic plans aimed at growth.   Serving new markets frequently requires new skill sets.  Without the requisite skill sets your venture into new markets could be expensive and disappointing.   You already have a number of long term customers; customers you know well and have served well for many years.  Don't underestimate the value your deep relationship brings to your long earned customers.   Find ways to help them improve their margin while you improve yours.  Let them know you want to grow their volume.   New markets are always the next best thing.  The best thing is your current customer base.  

Back to the basics.   Many of us still have cash flow as a top priority in our business.  We are working our way back from a weak period, still concerned with monthly, sometimes even weekly cash flows.   Solid reporting and cash forecasting is a must. Understanding how relatively minor decisions impact cash is important; while understanding the impact of big decisions is critical.  Juggling the business needs of long term planning versus short term needs is tricky.   Over the long haul the leaders of the business need to spend our time focusing on the future.  A well communicated operating plan, competent finance staff and an engaged banker will give you time to focus on building the business.     

In addition to the economic upheaval of the past couple of years we are in a time of unprecedented change - tax laws, health care, finance reform and accounting rule changes to name just a few.    Most of these changes will impact the periphery of your business.  Each change normally won't be earth shattering to a company but taken together the impact will be widespread.   Your legal, accounting, tax, HR firms and bankers should be keeping you abreast of how these changing rules could impact the company.   Demand value out of these relationships.

 The KRM Solution:  

Does your company have the financial expertise to give you everything you need? 

KRM has the Tools and the Experience to improve your profitability. Here is a 2 minute video to explain how we can help you.    We think you'll like what you see.     http://www.brcapitalinc.com/Documents/Public/KRMSolution.pps 

MR & Associates: I mentioned in our last Newsletter, KRM and Gary Mize LLC formed a partnership, MR & Associates,  in late 2009.   The partnership provides operations management and M&A services to the agriculture industry.  This chart Agriculture Value Chain, highlights the sectors and sections of the value chain where our expertise lies.  

By and large it covers ag commodities with 1) price risk that can be hedged through futures or forward contracting 2)  complex logistical requirements 3) multiple demand outlets 4) large % of demand from value added processing activities.     If you are involved in agriculture and would like to learn more about MR & Associates  call (360) 695-8605. 

Closing Thoughts:  We may be experiencing a slight improvement in economic activity but there is still enough to worry about.    

Supply Chain disruptions, competitors pricing products to sell - not to make money, limited or no access to capital,  consumers and companies alike afraid to spend money, top it off with a federal government digging a deeper fiscal hole that will need to be paid back while piling on more regulation.   

Pick your poison.   All the above are making the top 10 list of what's keeping corporate executives up at night.   

Well, look on the bright side - capital costs are low, labor is abundant and cheap.  And, if you have made it this far, there is a good chance you'll make it to next year.    The recent blip in economic growth is encouraging.  But for many businesses making through next year is all we want today.  

There is a lot of talent facing few opportunities.  It's a great time to improve your talent quotient and strengthen your business.   Identify what new positions can have the biggest impact on the business and get those position filled.    

Look at your bank.  Are they a partner, vendor or prohibitor.  Like the labor pool there is a reshuffling taking place in the banking industry.   Well capitalized banks are king while banks suffering capital constraints are de-leveraging by de-customering .  Somewhere in between is that perfect bank; one that will survive and needs your business -  needs it enough to be your partner in helping you be profitable not simply being a vendor, or worse, a prohibitor.   

Look at each of your customers.   Do they have the capabilities and products to survive? Do they have the collaborative business culture that allows, or better yet wants, you to succeed?  If price is all they are looking for, you better be the low cost producer.  Find partners who understand that a good relationship develops through mutual success.   

Hopefully you won't need it - but just in case - Good luck in 2011!