Thoughts about 2010

By Richard H. Yaun Jr., C.E.O

This time of year I usually write a review of the past year and my take on what I expect to find this coming year as a business environment. I think a little time spent on the future business environment is more appropriate than rehashing last year’s performance.

I don’t expect an easy time during the first 2 quarters of the year. Our customers are facing the most difficult business environment that they have seen in their careers. Credit lines have been stressed to the limit. Most are complaining that they are being held up for monies due them from customers who have always paid. Wholesalers and manufacturers are in the same situation. In fact one major manufacturer has gone bankrupt and I expect to see several more in the same position. What has happened to them is that they have expanded their businesses to take advantage of a market that was based on smoke and mirrors in the over cooked economy caused by cheap money and government intervention. Many find themselves overextended because they had committed to long-term growth plans or weren’t able to cut back expenses quick enough to prevent a substantial loss of capital. Now they are finding it very difficult to make up for those decisions as jobs are scarce and margins are being squeezed from all sides.

I want to stress that 2010 will be the year where “Cash is King”. I firmly believe that a recovery is on the way but it will not be typical. Housing starts will improve to replenishment levels toward 2011 but not close to the levels seen within the last 10 years. It will be very hard to pass up work even when you know that when money is not assured. I believe the key to continuation of your businesses will be selective acceptance of jobs based on your customers ability to pay. When working as a subcontractor, you will be venerable to situations were you might be providing working capital for your customers. This might be great if you have plenty of cash reserves, but if you don’t, you might find out quickly that you can’t afford to provide the capital at the risk of loosing your business.

Don’t be surprised when your vendors tighten their credit requirements. For those who are not able to pay there bills promptly you will find that COD will be the word of the day. You, our vendors and ourselves will not be in a position to provide “business as normal” terms. We are all in the same boat and we need to manage the cash flow to stay in business. For those who manage things will get better slowly and the business environment down the road will be easier as those who don’t will find a different way to make a living.