Don’t leave it too late to invest

There is no shortage of negative publicity concerning the economic downturn and credit crunch but there are a huge number of windows still needed and quite a few fabricators with enough work. It is also clear that margins are tight and many fabricators are struggling with this. We read plenty of editorial telling us not to sell on price but if we are in a very price sensitive part of the market what do we do? Well we all know we are supposed to sell quality, service, features and benefits etc but what happens when all that fails and the only way to keep the company going is to lower prices?

Probably most companies faced with reducing prices or running out of orders will reduce prices which is why the car dealers, shopkeepers etc are doing exactly that. The next move surely has to be to cut costs and so we get rid of all the surplus staff, if we actually had any, cancel the Christmas party, start turning the lights off, turn the heating down a bit, downgrade the company cars, freeze pay increases, reduce the advertising budget (if we are real lemmings) and so on but what else is there? Well how about cutting production costs?

What has to be done to cut the cost of manufacturing is make windows with less people and less waste. Well on the waste front getting the best prices for everything and then wasting as little as possible during the manufacturing process should be standard practice by now but how do we get the same or more windows with less people? There are only two ways. The first is to ensure that all operators are working all of the time and working efficiently, which means good supervision and good training all round and the second is to invest in more efficient machinery. The problem with the second one is that few companies want to take on more debt or use up capital during a downturn. This is the confidence factor that stops the purchase of capital goods early in every downturn.

What always happens in these downturns is that the companies that have been very successful over the years since the last downturn realise that it is the best possible time to get a good deal from machinery suppliers and they take advantage of this to invest in their business. Just for a change in this particular downturn we also have the advantage of very low interest rates which can be locked in for the duration of a loan which means it is an excellent time to buy.

One big problem for many fabricators that do not have spare capital will be the fact that the longer they delay in getting their costs down the more damage will occur to their balance sheets and the less likely they will be to get finance at all. Until this credit crunch appeared almost any finance deal could be done with enough hard work by all those involved but now the finance companies and banks are being very picky with what deals they will do and many deals are failing to go through for even quite well known and respectable fabricators. In fact finance is only easily available for those that don’t have to have it.

Whilst caution is understandable in the current climate many companies are going to find that they have left it too late to invest and they will be luck y to survive.