Late First Quarter Assessment
March 2004

Each week, my confidence in the recovery for privately owned businesses rises. I believe that based on the nature and tone of calls we receive in our own practice, and from talking with others, that the strong economic reports and forecasts are well-founded and apply locally. Owners and managers are showing cautious optimism and for many the stress of survival no longer weighs on decisions they consider. They are again able to think strategically about their business. Manufacturing activity continues to gain steam. What is most encouraging is that the activity is evident in orders for big-ticket items, demonstrating that the hold on capital spending has relaxed. Inquiries and quotes are turning into orders and scheduled delivery dates.

We are fortunate in the Midwest (probably largely due to our conservatism) that we do not experience the dramatic swings that other parts of our country experience. However, because we are often suppliers of goods and services to larger organizations, we do not operate our businesses in a vacuum. We have the challenges of rebuilding and preserving our manufacturing businesses and retaining our distribution and service businesses. Many businesses went through at least 24 months in a survival mode. Cost cutting, closures, curtailments, cash management and pressure from lenders were the norm. Equity bases were eroded as companies absorbed losses from operations and excess capacity while hoping and trying to hang on to market positions, facilities and even whole business units in which longer-term viability was questionable.

My outlook for the remainder of 2004 is very positive for owners and managers alike. The opportunities will be the greatest for those who have used the last 24 months to improve their processes and productivity, prune their cost structures and lower their break-even points. They will have proven that they can adjust and turn profits with positive cash flow in hard times and they will have maintained or successfully restored or restructured their balance sheets. I have always believed that any business without a growth strategy in its plan is doomed. Therefore, having survived what we have experienced, wouldn't it be a shame if we failed to take advantage of the opportunities before us? Now is the time to evaluate objectives and strategies and to examine business plans, financial models and projections.

       - Dave Hamernik, CPA, CIRA

 

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