| Wayne Gretzky, the Hall-of-Fame hockey player | | | | want to become one of the businesses that |
| was once quoted as stating that the reason for | | | | Harry S. Dent talks about, that doesn't survive |
| his success was that he "always went to where | | | | the competitive evolutionary climate to come; you |
| the puck would be, not where the puck was at." | | | | must be very proactive in your business. You |
| Anyone who is able to read or turn on a television | | | | need to surround yourself with competent people |
| has heard the news: we are in a recession. | | | | who know what questions to ask and have ideas |
| Everyday it seems that one company is trying to | | | | and solutions as to what should be done to |
| outdo the other company in terms of how many | | | | remedy the situation. Are you reading your profit |
| people they can lay off. Just last week, on one | | | | and loss statements as a banker would (i.e. with |
| page of the Wall Street Journal I counted over | | | | no emotion and seeing things in black and red)? Or |
| 30,000 job positions that were cut due to the | | | | are you too personal with the stores you operate |
| poor economic conditions in the marketplace. | | | | and treat them like a family member? |
| That's 30,000 moms and dads, sons and | | | | Never fall in love with a business or a building, |
| daughters, friends and co-workers that no longer | | | | because it can't love you back. The operators |
| have a job...or a source of income. And that was | | | | who emerge victorious from this "survival of the |
| just one day. | | | | fittest" competition will be those who can stand |
| Oftentimes these workplace casualties cannot find | | | | back, look at their business in an objective |
| alternative employment. The result is an historic | | | | manner, and know when to hold them or know |
| number of people filing for unemployment benefits | | | | when to fold them. They'll be able to cut out the |
| putting a tremendous amount of financial strain on | | | | non-performing items within the stores or get rid |
| the State governments that are supposed to | | | | of the under performing stores altogether and |
| fund the unemployment claims. This, in turn, is | | | | reinvest into new stores or get liquid. |
| prompting the Federal government to draft | | | | Continuing to operate a non-performing asset is |
| legislation intended to send emergency bailout | | | | just dumb! Especially in a market that is not |
| money to the States. Just so the States can | | | | expected to improve for several years. Many |
| continue to pay the people who are currently | | | | people will take a wait and see approach. They will |
| receiving unemployment benefits. No matter | | | | wait until the market is better and try to get a |
| where you come down on the political side of the | | | | better price for their assets. Nobody wants to sell |
| debate, there is one glaring truth to all this: we are | | | | at the bottom of the market, right? Well, what if |
| in a recession. | | | | we are not at the bottom of the market? |
| It seems that everybody I talk to is in | | | | To test this theory, I checked the records on all |
| agreement as to how bad it is out there. In his | | | | the stores I had sold five years ago, three years |
| new book, "The Great Depression Ahead" New | | | | ago and one year ago. I compared their market |
| York Times Best Selling Author and renowned | | | | values then, to their market values today and |
| economist Harry S. Dent, Jr. says, "Businesses | | | | discovered that the stores have decreased in |
| need to understand that a "survival of the fittest" | | | | value every single year. These results were based |
| battle is coming between 2008 and 2012 that will | | | | on over 100 stores that were sold by our |
| determine the leaders for many decades to | | | | company within the last 5 years. None of them |
| come. The businesses with the largest market | | | | are worth more today than they were when |
| shares or niche dominance and with the lowest | | | | they were sold. Some of those Sellers still call me |
| costs and strongest balance sheets and liquidity | | | | to say thanks for selling their stores when they |
| will grow stronger and gain long-term market | | | | did. Like most people at the time, they thought |
| share, but many more will fail or be taken over | | | | they had missed the high point of the market and |
| by the stronger companies." | | | | were hesitant about selling their assets. Ask them |
| Mr. Dent bases his economic forecasts on the | | | | about the "wait and see" approach.. |
| demographics of people throughout the world, not | | | | I'm not trying to convince you to sell or get out |
| just the United States. You may as, "how does | | | | of the business. Quite the opposite actually. Think |
| this affect me? Why should I care what goes on | | | | of this as a call to action. Get your business |
| in India, Indonesia, Latin America or China? My | | | | tuned-up and running properly. Capitalize on the |
| store or stores are in Ohio or South Carolina or | | | | existing opportunities that are available in the |
| California. I am worlds away from these places." | | | | market. Yes, the existing opportunities. I told you |
| Well you should care, because what is going on in | | | | about the two operators that were losing money, |
| the production and manufacturing countries; is | | | | because of their lack of attention to their |
| going to dictate what you pay for the gas and | | | | operations (and by the way, they are correcting |
| products you sell. | | | | their situation by selling off non-performing assets |
| Remember the $4.00 per gallon gas last summer? | | | | and hiring consultants to guide them through the |
| I bet you'd like to forget about selling gas for | | | | process of correcting their situations). But now I |
| $4.00 per gallon and the fact that you might not | | | | would also like to tell you about the operators |
| have had enough credit to keep your tanks full. | | | | that see the great opportunities that are available |
| What about the fact that fuel prices were | | | | to them now. |
| fluctuating so rapidly that some were getting | | | | Recently I was talking to a banker friend of mine. |
| caught with gas they had bought a high price and | | | | He is not only a banker, but a past convenience |
| now has to sell under cost? | | | | store operator/retailer and a manufacturer. He |
| Do you remember the pain of the consumer who | | | | knows our industry well and he too has lived |
| had to spend $80.00 or more to fill up their | | | | through turbulent markets like the one we are |
| vehicles? What about the hit your inside sales | | | | experiencing now. He is aware that I consult and |
| took because the high fuel prices often left the | | | | work with convenience store operators |
| consumer with too little money to come inside | | | | throughout the country. So I asked him, based on |
| and purchase the products they usually do? | | | | his position and experience, "What businesses are |
| Remember the price increases on food products | | | | making money right now?" His response was |
| that were a result of the corn prices going up to | | | | interesting. "The convenience store business", he |
| help satisfy the demand for ethanol? Which | | | | said. |
| prompted you to charge higher prices for some | | | | He knew first hand from his financial connections |
| of the daily items you sell in your store? | | | | that the convenience store business (with the |
| All of this sounds like a long time ago, doesn't it? | | | | selling of tobacco and alcohol and other items that |
| Well, based on the predictions of many | | | | are staples in the convenience store business) |
| economists, we are not out of the woods yet. | | | | was profitable. He had seen the P & L's of |
| OPEC, the little cartel that has made billions and | | | | dozens of stores that were making money, |
| billions of dollars from the run-up in oil prices has | | | | because they were well run and kept up. He |
| publicly stated that they want the price of oil to | | | | spoke about one 12-store chain where every |
| be at $75.00 a barrel and they will do whatever it | | | | store was profitable. "Not a non-performing store |
| takes to get it there. And since they either | | | | in the bunch", he said. That was because every |
| control or influence over 60% of the world's oil | | | | time a store became unprofitable the owner |
| supply, there is a good chance that OPEC will get | | | | either sold it or closed it and replaced it with |
| the job done. | | | | another profitable store. |
| Now that I have set the stage for future doom | | | | I've know him for ages and he reminded me of |
| and gloom, let me make my point. Last week I | | | | my time years ago when I was in the |
| talked with two operators of convenience stores. | | | | entertainment business. He said, "When people |
| Both were men in their late fifties and both have | | | | have discretionary time either from lack of work |
| been in the business for over 30 years. One has | | | | or loss of employment, they tend to spend more |
| about 6 stores the other one about 40 stores. | | | | money on the things they can get pleasure from." |
| Both are very knowledgeable about the | | | | For example: cigarettes, beer, movies, snacks, |
| convenience store business and understand how | | | | sodas. "The reason is simple", he said. "They tell |
| to purchase fuel, merchandise a store, how to | | | | themselves regardless of how bad their economic |
| buy correctly and all the other functions of | | | | situation may be, they feel entitled to these items |
| running convenience stores. In short, they were | | | | and still deserve the pleasure derived from them. |
| both very experienced operators. | | | | Therefore, they will spend the money for them." |
| Both of them lost money last year. Why? I | | | | Believe me, I know this it true having seen it in |
| believe it's because they took their eye off the | | | | the early eighties when people were losing their |
| ball and lost focus on running their operations. Both | | | | jobs. It seemed that they always had money for |
| of them knew what was going on in the | | | | color televisions, my movies, a twelve pack of |
| marketplace (with the fluctuating fuel prices) and | | | | beer or a carton of cigarettes. But they didn't |
| did nothing. They were not paying attention to | | | | seem to have the money to make the bank |
| where their business was going until it was too | | | | payment (this too was verified by my banker |
| late. There is no sugar-coating this situation. They | | | | friend). |
| both lost a lot of money. I know because I have | | | | Tough times, call for tough decisions. Don't go the |
| seen their numbers and heard their stories. | | | | way of the businesses who won't survive |
| Admirably, both operators admit that it was their | | | | because you are reluctant to make the tough |
| fault, and I respect them for taking responsibility | | | | decisions today. Take control of your business |
| for their actions. They are both very good people | | | | and make those tough decisions. It is a lot more |
| and are trying to make a living in this turbulent | | | | productive to make those decisions now rather |
| marketplace. But they messed up and they know | | | | than waiting and having to make them later...or |
| it. | | | | worse yet having someone else making those |
| So how does apply to you? Because unless you | | | | decisions for you. |