Recession
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Last week we finished our United Way campaign in the city but it was not without a real push by its leadership and the United Way. Someone said that while the economy is cyclical, community needs are constant.
I have been thinking of some ways that small businesses can give back to the community that provide value to the recipient organization and at the same time provide some value to the company. A few suggestions came to mind:
- Give time and services instead of money. Most of us can afford to part with a few hours of our time, and the personal experience usually is much more rewarding than simply writing a check. Like many, we have participated in community service for a number of years, which is fun for our folks and helps worthy organizations. The Pig Iron BBQ competition is one that fits this category we usually do annually.
- Develop a charitable project for the entire company. Finding something the company can do together is a way to build a stronger bond among your team and help build morale.
- Donate to non-profits instead of charging them a reduced rate for your services. If you charge the full rate and then donate some of it back to the non-profit, the donation is tax-deductible.
- Join forces with other companies. If you cannot afford to give as much this year, reduce the amount of your donation but try to find some other companies to match it. A way to turn less into more.
- We allow non-profits the use of our facilities. A much-needed conference facility can be of much use to a lot of non-profits nowadays.
I’d be interested in hearing your thoughts on how you and your company help others. What’s the ROI on helping others?
Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email
Tags: Challenges, character, Communicate, Community, Customer Relationships, economy, hard economic times, Leadership, opportunity, Team
My oldest daughter, Chappell, an economics major at Sewanee, spent this summer learning about microfinance lending; first in Bangladesh with the Grameen Bank and Dr. Muhammad Yunus. Then several more weeks in the Dominican Republic working with the Esperanza Bank (Bank of Hope) making micro loans.
Microfinance is a movement whose object is “a world in which as many poor and near-poor households have routine access to an appropriate range of quality lending and thus help the poor out of poverty. Most of Chappell’s “clients” were women. It could be as little as $25, to capitalize a business, to buy food to resell on the street or buy a small fridge from which to sell juice.
A typical day for Chappell involved assisting her host family before heading to the bank to visit “associates” (borrowers) ,meeting with staff members or visits to the countryside to visit to met with the borrowers, which they tried to do a couple of times a month. On their visits they would collect a small repayment toward the loan and offer suggestions for the on-going business. These loans are not without risk, typically without collateral but with the upside so positive, these lenders have devised different ways to help provide somewhat of a social net to help lessen loan defaults.
A Different Process at the Grameen Bank….similar, yet different.
While they are also involved in the microfinance process, Grameen strives to assist in furthering education of the children of borrowers. One way that they have accomplished this is through the development of their own nursing school. This is in addition to the already existing pre-schools and elementary schools.
Grameen is a story in itself and is very inspiring. They are led by Dr. Muhammad Yunus, who has received the Presidential Medal of Freedom in 2009 and the Nobel Peace Prize in 2006.
You can read more about Chappell and her travels at her blog here.
Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email.
Tags: be prepared, Challenges, character, hard economic times, Leadership, opportunity, relationships
While I think our economy continues to heal from what we are seeing the next 12 to 18 months will see more failures of the weak in commercial real estate and the construction industry. 2012 will be a tough year on the sureties and surety credit will even be harder to obtain over the next couple of years.
Many years ago when we were getting started, it was another tough time for surety credit and I will never forget those times. The surety industry talks about the three “C’s” to obtain bonding capacity: Capital. Capacity. Character. To me it was more like Capital. Capital and more Capital were the three “C’s”.
I believe there should be an “E” added in for Experience. If I were a surety, I would take less capital if there was a healthy dose of “experience” mixed in, but this is hard to list on a financial balance sheet. To me no substitute for the experience of hard knocks.
Beyond the Three C’s
I asked our surety manager, Ms. Sandi Benford of Berkley Surety Group, what she looks for in a good credit risk (beyond the three C’s and other underwriting). Here is what she had to say:
- A contractor that is able and willing to communicate the good and the not so good. No Surprises.
- A company that is able to forecast with accuracy. Being honest with oneself. If there is a problem on the horizon have at least some semblance of an action plan.
- If the company is experiencing ongoing losses, does upper management act with personal responsibility equability considering others in the company?
Thoughts and Comments?
Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email.
Tags: Challenges, character, Commercial Contractor, communication, Community, construction, economy, hard economic times
“Necessity is the mother of invention.” I have always believed this as a truth, particularly in these tough times.
Some jobs might have vanished in the recent Recession, but to me, creative ideas will always be with us. There are plenty of smart people out there who found themselves unemployed in the past year. Instead of trying to find work with a different company, many of them took their ideas and developed a new business.
While the news media seems to focus on corporate layoffs, they rarely report on the creation of thousands of startup companies. A down economy actually is the perfect time for the development of quality startups. People who wouldn’t have taken the chance as long as they had a steady job no longer have an excuse for not striking out on their own. A mortgage-banking friend recently told me that in regards to retail space, there are more leasing opportunities these days because of all the new businesses. These ventures may not be credit worthy yet but it’s a prospect for landlords, just the same.
Statistics back up my friend’s thoughts, showing that employment is trending toward smaller shops. According to the U.S. Small Business Association, small firms:
● employ more than half of all private-sector employees.
● pay 44 percent of the total U.S. private payroll.
● generate 6 trillion in annual revenue.
I have seen a lot of small businesses start in the past year or two. Many will succeed where larger companies fail because they are able to nimbly maneuver through the economic obstacles. Once the economy gets better, I believe these startups will be poised to thrive.
Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email.
Tags: company, down economy, econmoic obstacles, economy, employment, layoffs, new business, private-sector employees, Recession, small business, startup company, startups, U.S. private payroll, U.S. Small Business Association, unemployment
I read recently in the Wall Street Journal that as of May, retailer Bed Bath & Beyond had $1.64 billion in cash and short-term treasuries, and expects to generate at least another $600 million by February. Nationwide, non-financial businesses had approximately $1.85 trillion in liquid assets as of June. That’s pretty good, I would say. It’s just short of the record high set in the first quarter of this year.
To me it seems that executives at many U.S. companies are in a similar situation these days. They have a significant amount of money at their disposal, and they’re not sure what to do with it.
They’re not expanding like they once were because consumers aren’t spending like they used to. There is no need to increase production amid such anemic growth. Couple that with low interest rates, and companies can’t find any meaningful way to invest their money. And so the cash sits, waiting for a profitable use.
Eventually, consumers will pay down their debt, begin feeling good about the economy and start spending again. The good news is, when that happens—and it feels like we are now on the up tick—there is a wealth of cash ready to pour back into the market.
Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email.
Tags: Bed Bath and Beyond, Commercial Contractor, Construction in the Recession, Liquid Assets for Construction, retail construction, Retail Space, Wall Street Journal
There is no denying that the fallout from this Recession has been widespread. Even companies experiencing a level of success are being affected by the financial issues of others.
Here’s an example. Hennes & Mauritz is a Swedish-based fashion retailer that appeals to teens and young adults. My daughters love their stores, and apparently they’re not alone. H&M reported a 23 percent increase in profits for the third quarter of this year, with earnings of $627.5 million.
That sort of growth inevitably leads to expansion. And indeed, H&M said it is on pace to open 220 stores this year, adding to its total of approximately 2,000 stores across 37 countries. That sounds great, right? Not when you consider that the retailer originally planned to open many more stores.
Why the decrease amid such strong profits and earnings? Fewer commercial properties are being built, and H&M hasn’t been able to find enough prime locations for new stores. From what we are seeing, the best vacated box stores have already been absorbed (or are being absorbed) and developers simply aren’t building many new ones right now.
To me, it’s somewhat of a face-off between what lenders and developers need on ROI and what the tenants are willing to pay. The result has definitely slowed the pace of property development. But, as there are more and more companies like H&M clamoring for new buildings, demand increases. Perhaps this is the first step towards an upswing in retail construction? We’d like to think so.
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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email.
Tags: commercial properties, Developers, earnings, fashion retailer, H&M, Hennes & Mauritz, lenders, profits, property development, retail, retail construction, ROI, space, upswing
As I see it, the need for large store platforms is diminishing, for a while at least. The retail community is starting to think outside the box.
When the economy was booming and credit was easy to obtain, consumers were buying goods at a record pace. Retailers began building bigger and bigger box stores to meet the demand. Now that the economy has cooled and credit has tightened, people aren’t buying as much. Fewer goods are required to satisfy the decreased demand, and suddenly these stores don’t need that extra space. Most of the new box stores we are building today are 15 to 20 percent smaller than five years ago.
But what about all the old locations that companies have abandoned? There are nearly 9,000 box stores ranging in size from 15,000 to 50,000 square feet sitting empty in the United States. What should we do with all this space? There are several possibilities:
● Adaptive reuse. Take a building and modify it into something different from its original intended purpose. A prime example can be found in North Carolina, where the old American Tobacco Company has been transformed into condos and office space.
● Backfilling. Bring in new stores to take over empty space in malls and other shopping centers. Be creative. There is no reason why an old department store can’t find a new retail life.
● Rightsizing. Turn a single store into multiple units. Take a 50,000 square foot box and divide it into two 25,000 square foot stores (or three 16,000 square foot entities). Both Walmart and Target announced recently that they are looking to open smaller 20,000 footprint stores in urban areas
The buildings are there, waiting to be used. We just need to effectively redevelop and remodel them for the good of the communities.
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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email.
Tags: abandoned locations, adaptive reuse, backfilling, credit, decreased demand, economy, redevelopment, remodel, retail, rightsizing, space
Many of today’s great U.S. companies were founded at the height of the Great Depression. Charles and Joseph Revlon introduced a new opaque nail polish. College classmates Bill Hewlett and Dave Packard started an electronics firm that became technology giant HP. Texas Instruments, Tyson Foods, Ethan Allen and Polaroid all began in the 30s as did one of our customers, Altec Industries, a world wide leader in hydraulic lifts for the utility industry.
Following the Great Depression, the US experienced an economic boom unprecedented in its history, “largely [due] to the tremendous backlog of innovation developed in the late years of the Great Depression,” says Rick Szostak of the University of Alberta. More recently FedEx and other great companies emerged from the economic crises in the 1970s.
What can we learn from these leaders? When the challenges presented by a recession are all around you, there are many opportunities and innovative ways to grow your company. To me, tough times have an amazing way of concentrating the mind on the way forward. At the same time, your competitors become less in number, giving pioneers an even stronger advantage.
The key is to remain strong and not grow recession-weary. When the downturn inevitably ends, innovations will place you ahead of your competition. You will have it figured out and as my friend Marc Eason, of EGS Commercial Real Estate told me last evening “all will be right with the world again.”
We are constantly looking for ways to reinvent ourselves and be prepared for whatever changes might lie ahead. Our company currently is in the process of expanding the way we interact with our customers and prospective customers. We are using Web 2.0 as part of a social media strategy. We have about 2,500 Twitter followers and the number is growing organically. Instead of meeting for lunch or taking clients to dinner, we are using the innovations of new technology to gain brand awareness and stay connected. Building relationships.
It’s easy to succeed when times are good and the tide is rising. The real winners are the ones who are prepared to change with the times. They are the ones who when life gives them lemons, they don’t just make lemonade. They make a whole lemon pie.
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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email.
Tags: Altec Industries, Bill Hewlett, Challenges, Charles Revlon, Dave Packard, economic boom, Ethan Allen, Great Depression, hydraulic lifts, innovations, Joseph Revlon, lemon pie, Poloroid, Real Estate, Rick Szostak, Texas Instruments, Twitter, Tyson Foods, U.S., Web 2.0, winner
Image from: emersonjs8, Flickr
In this economy, there are advantages to being moderate in size. Our company is not one of the 50 largest construction companies in the country. We do not have the same resources that our larger competitors maintain. But we are nimble.
Being “right sized” in any field can be a real plus. It’s easier for us to connect personally with our customer relationships. It enables us to be more value-oriented. When challenges arise, we have the flexibility to quickly make changes. This is the way we operate.
Last evening I was talking with a strategic partner Bill Parrish, who runs WP2DC in Los Angeles County, about this economy and how to prosper. Our thoughts:
- Dominate your niche. Focus on what you can do and then do it better than anybody else.
- Make yourself noticed. Stand out to be different. Find those things that make your company a leader.
- Satisfy employees. Smaller companies do not have to be as rigid as larger corporations. That makes it easier to attract creative types who thrive when given greater flexibility.
- Be innovative. Being moderate in size means you have to try harder. That is a good thing.
- Move quickly. Large corporations, much like large ships, often change course slowly. Moderate size organizations can react rapidly to a shift in the marketplace.
The size of our company gives us certain strengths. It is up to us to build off those strengths, and use our size to our advantage. Being larger is not always the same as being better.
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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email.
Tags: Bill Parish, Business leadership, construction, Contractor, Right size, Small company, WP2DC
The short answer: To me, nobody knows.
If we compare the normal demand for commercial projects in the United States to our current climate, the market is down 30-50 percent. The laws of supply and demand tell us commodities prices should decrease in order to level things out. The opposite is happening. On average, we are paying more for materials then we were last year. But why? Some may blame globalization, but I’m not so sure I agree.
I think it has more to do with manipulation of the futures market and the operation of hedge funds. These interfere with “normal” or what used to be a matter of supply and demand. In 2004 and 2005, steel prices rose 50-60 percent after being flat for many years. It got to the point that it was embarrassing. On long-term projects, I would have to go back to the owner and tell them of increased cost for no change in scope.
Then there was the asphalt. I remember being on vacation and meeting with someone from Wall Street. He was blaming rising prices on increased oil use in India and China, but I think this was faulty logic. Hedge funds and various other investment vehicles were driving the price of oil up.
The increases we have seen in the last two or three quarters are far less dramatic, but they do spike. It makes it really tough on our customers. During the last 12 months, average reduction in commercial construction has been in the 35 percent range. However, construction material prices rose almost 3 percent in February. Lumber went up nearly 8 percent in January and was almost 18 percent over the year before. All commodities including steel, copper and brass have increased while demand is decreasing substantially.
Now people are blaming China again. There are many myths about China and I am not sure what to believe. Their gross domestic product has increased while their energy consumption decreased. I’m just not sure how that can happen.
I will say over the last several weeks of bids, the prices have remained relatively benign, which is a good thing. Maybe we are getting back to core factors of supply and demand. I hope so, at least for a while—for our business, but more so for our customers.
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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email.
Tags: commercial construction, commercial projects, Construction Material, globalization, Hedge funds, supply and demand
