< Retun to Randal Suttles's page

This Is Not My First Rodeo

Jan 01, 2010

It wasn’t mine either.  “This is not my first rodeo” is a quote from one of my clients.  It is a quote worth remembering.  Here is the context:

 

My client is a 50+ year old manufacturer of metal components.  They supply components for large turbines, locomotives, and diesel engines.  You get the picture.   They are highly influenced by the economy.

 

As the economy tanked in late 2008 and well in to 2009, their volumes collapsed.  The good news about that was that my client, having been through every recession since the ‘60s, is very financially conservative.  They carried virtually no debt.  So, for us the problem to solve was cash flow deficits as far as the eye could see.  But we were not being pressed by lenders.

 

We began taking all of the routine steps.  We scaled back the factory hours to 4 days, with 8 hours scheduled work each day. We laid off plant employees.  We cut office hours.  We laid off staff.  We reduced expenses:  supplies, computer equipment, travel, advertising, insurance costs.  You name it, we tried to reduce it.

 

We went from a monthly cash flow deficit in the mid 5 figures, to essentially cash flow break even.

 

And here is when we got the quote:  We were in an executive meeting, in a rather self congratulatory mood, discussing our successes.  The owner, who was sitting  back calmly listening and nodding in agreement, took his feet off his desk, leaned forward and said:  “Very good, but this is not my first rodeo.  We are not done reducing the expenses. I want bottom line profitability.” 

 

Everyone had become somewhat satisfied with the efforts we had made in getting back to cash flow break even.  And of course that is critical.  But the owner had been through these economic cycles before.  It was not his first rodeo.

 

We cut more.  The manufacturing plant was cut back to 3 days, with 11 hours each day.  Not having to start up the plant saved enormously on utility costs.  Where the belief was that we had cut the overhead costs in the office all that we could, we laid off 20% more staff. Those remaining had to pick up the slack.  Office salaries were reduced for those still working.  We staggered the office hours so we could maintain customer service.  But, we cut expenses more.

 

And then we laid plans for what to do next.  In particular, we laid out a plan to consolidate all of the manufacturing work still remaining into a much reduced foot print, which would save even more in electric and gas expense.  Just in case things got even worse.

 

It was a rough ride.  We got bucked off a lot.  But, the executives, the management, and the staff kept getting back up and back on.

 

We became monthly cash flow positive, in the low 5 figures, even at 60% lower volumes. And we are profitable, creating a “cushion” should volumes turn down even more.

 

One of the senior executives had the most telling perspective, once we had achieved cash flow positive.  With a sigh of relief she said to me:  “It’s not good news [the low sales volumes], but we can survive at this level”. 

 

It was not the owner’s first rodeo.  It wasn’t mine either.  But for most of the executives and management, it was their first rodeo.  Next time they will be better prepared.

 

This is not my first rodeo!   A phrase worth remembering.

< Retun to Randal Suttles's page

Back to Top