After the Storm

Declining sales, layoffs, shutdowns -- signs of the distressing times for many companies this year. And yet, the results to our most recent survey of growth companies show the first stirrings of a genuine economic turnaround.

Tweet

Forecast

They're still digging out, but the Inc 500 CEOs in our latest survey are seeing the first signs of renewed growth.

Mark Comiso did two rounds of layoffs at Maus Haus, his interactive-marketing company, in 2001, slashing his 48-person staff to 12. He also "found a roommate," as he puts it, by subletting part of his 6,000-square-foot office, in San Mateo, Calif. To boost morale for the remaining employees -- still rattling around in the nearly empty space -- Comiso and his two partners abandoned their window offices for desks on the main floor.

Joe Pfender is down to a single sales rep at the fledgling Los Angeles office of Cargo Express, his international shipping company based in Yardley, Pa. He also severed ties with his New Jersey-based partner, who focuses on trade with Pakistan. Pfender's Yardley staff is down to 16, and he's exhausted by a frustrating two-month-long effort to get a Small Business Administration loan, which has required voluminous paperwork.

Larry Rodbard is in even tougher shape than Comiso and Pfender. He laid off all the employees at Rodbard & Associates, a systems-implementation consulting company in Ellicott City, Md., including himself. Since last September he has been working without pay alongside two dedicated commission-only salespeople.

So it has been for many Inc 500 companies during the past 12 months. If misery loves company, the three CEOs have plenty of it. Nearly half the respondents to our most recent survey of growth companies saw sales stall or drop in 2001 compared with sales in 2000. Slightly more than half had stagnant or declining profitability. For companies that had been racking up double- or triple-digit annual growth rates, it was quite a comedown.

And yet, almost to a man (and woman), survey respondents say that right now things are looking up. A whopping 87% predict an increase in sales in 2002. Almost as many -- 81% -- are planning to boost their payrolls this year. Compared with the survey we published three months ago (see " Cloudy With a Chance of Monsoons," December 2001), this one shows upticks of optimism in nearly every category. Respondents now believe the downturn in the economy will be shorter and milder than respondents to the earlier survey predicted. Fewer are worried about the viability of their companies. (See below.)

Maybe, of course, the rosier outlook merely reflects how rotten business has been. "The one good thing I can say is that 2002 can't be as brutal as 2001 was," says Comiso. But other prognosticators have been more hopeful about the prospects for a turnaround. A November survey by the National Federation of Independent Businesses (NFIB), for instance, found that increasing numbers of its members were anticipating hiring and capital investment. "I believe [the recession] will be very short-lived and we will return in many sectors to more normal growth patterns," says Bruce D. Phillips, a senior fellow at the NFIB's Education Foundation. Andrew Zacharakis, professor of entrepreneurship at Babson College, in Wellesley, Mass., concurs. Investments in young companies are once again picking up, he points out, and the large corporations that many growth companies sell to are working through their excess inventory and starting new budget cycles. "They should be prepared to buy again in the near future," he says.

The best evidence of an incipient turnaround may be that even the most battered companies are seeing an upturn in business. "Things are starting to pick up," says Peter Laughter, CEO of Wall Street Services, a staffing company based near Ground Zero, in New York City, that was particularly hard hit by the events of September 11. "We've seen a jump in business in the last six to eight weeks." Comiso and Rodbard also report fielding more calls, whereas Pfender thinks that his core business, importing from China, will help Cargo Express attract customers looking to reduce production costs. "We're getting some new inquiries about sourcing overseas," he says. "Companies are looking at finding ways to save some money and push manufacturing offshore."

John Metzger, CEO of Metzger Associates, a high-tech public-relations company in Boulder, Colo., takes heart when he looks at how his company stands in contrast to the proverbial other guy. "We had a tough year," he says, "but there were a lot of firms that were devastated. A lot of our competitors had minimum retainers of $45,000 a month, but we maintained the flexibility to work with smaller companies with smaller budgets, which a lot of the larger PR firms are not capable of doing." Something similar is going on in the once-crowded field of interactive marketing. Comiso sees competitors who are much worse off than Maus Haus is -- and who didn't take some of the steps that Comiso did, such as making sure to collect accounts receivable promptly. "It's like a forest fire," he explains. "You've just got to be one of the last trees standing."

For every company still digging out from the recession's storms, of course, there are plenty that avoided the blizzards altogether and that are now looking at a substantial upside. One example: Atlanta-based Afterburner Seminars, headed by CEO James Murphy. "We have $2 million on the books already for the first three months of this year," says Murphy, "compared to $3.1 million in sales for all of 2000, which was our biggest [year so far]." He attributes the promising start to Afterburner's highly specialized niche: his staff of fighter pilots trains executives to manage as if they were flying F-16s. "[Our clients] think business is like combat right now. They need to execute flawlessly -- and that's what we teach," he explains. Renewed patriotism and interest in all things military have no doubt given the company an extra boost, but so has some astute management. Before business started to take off this winter, for example, Murphy and his colleagues diversified their product line to offer cheaper seminars aimed at small companies and began offering one-on-one coaching services that would bring in a stream of recurring revenues. They also changed their staffing model, decreasing the number of facilitators per seminar and thus lowering costs.

 1 | 2  NEXT 

Read more:

Sign-up for our Sales and Marketing Newsletter

Email Address: