Everything seemed to be falling into place for Dominic Coryell. Garment Valet, Coryell's laundry and dry-cleaning delivery service, had close to $1 million in sales and 1,900 customers in the Boston area. And he had big plans to roll out a nationwide network of franchises and chains. But when the credit market began drying up and his bank -- which supplies Garment Valet with a $100,000 line of credit -- appeared to be in jeopardy of going out of business, Coryell paused. He and his partner, Adam Jacknow, asked themselves a tough question: Should we slow down?
No doubt similar conversations have been taking place in offices around the country. Optimism among private-company CEOs is at a 16-year low, according to a survey by PricewaterhouseCoopers. As a result, companies are putting expansion plans on hold, says Ken Esch, a partner at the firm's private-company-services practice. That could be a mistake, warns Esch, who has been encouraging clients to do more than just hunker down. In fact, he says, now may be the best time to start planning for a rebound. "Companies can build a strong competitive advantage during a recession," Esch says. "Many successful businesses got that way because they made a strategic decision during difficult times."
But planning for better days is no easy task when the economic outlook is so uncertain. Coryell, for instance, thought about delaying Garment Valet's expansion until the economy started to improve. But he and Jacknow agreed it would be shortsighted to put off their plans as long as sales remained steady. "Other people were going to be slowing down and trying to just hold on," Coryell says. "I am a big advocate of living on the edge."
So far, Coryell's credit line remains intact, and since January, he has taken out low-interest loans to invest $50,000 in developing proprietary Web software that will allow customers to place and track orders and update cleaning preferences on the company's website. The system will help maintain a high standard of customer service and efficiency as Garment Valet begins to roll out franchises, Coryell says.
Garment Valet is also hiring at a time when most companies are scaling back. Coryell recently received more than 300 responses to a Craigslist ad for part-time marketing help, some from former executives with M.B.A.'s who were willing to work for as little as $10 an hour. He also is hiring college interns in 10 cities, including Chicago, New York, and Miami, to do market research and identify apartment buildings that might be a good fit for Garment Valet "laundrolockers" -- bins where clients can pick up and drop off clothes. "When the economy bounces back and people are less skeptical and ready to invest, we'll have a packaged product," Coryell says.
Some companies are making the most of the recession by forming strategic partnerships that will pay off down the road. Paul King, CEO of Hercules Networks, a New York City company that makes Automated Charging Machines -- ATM-like kiosks that charge cell phones and MP3 players -- has been busy striking up deals with major mall and theme-park developers. In exchange for providing space for the charging stations, developers receive a cut of advertising revenue generated by the kiosks, which feature a mini billboard and an LCD screen that streams commercials, news, sports clips, and entertainment programming in 10-minute loops -- the time it takes to charge a portable device.
King doubts that as many of the developers would have returned his calls during the height of the building boom. "Today, they are very happy to sit down with us," King says. After signing deals with several small developers, King worked up the nerve to contact Simon Property Group, an Indianapolis outfit with a stake in almost 400 malls. Today, Hercules has kiosks in five of Simon's malls and plans to roll out hundreds more by the end of 2011. "No doubt the economy helped us get a better deal than we would have before," King says.
King is building relationships with prospective advertisers as well. Instead of attempting to sell ad space on kiosks to executives with no marketing budgets, he adopted a no-pressure approach to meetings. "We told clients we understood things were tough, and that we wanted to learn about their businesses so we could help them in the future," he says. Based on feedback from executives gleaned during the meetings, King has added new offerings, including a "mobile coupon" service that sends digital discount offers to mallgoers' cell phones as they near the kiosks. He hopes the new services will position Hercules perfectly once ad dollars start flowing again.
Brock Coleman, CEO of Commercial Kitchen, a San Antonio business that services and sells replacement parts for restaurant equipment and had sales of $11 million last year, is focusing on hiring and training. Many of Commercial Kitchen's smaller competitors are struggling, he says, flooding the market with out-of-work technicians. Coleman is seizing the opportunity to snap up skilled workers. Commercial Kitchen, which has 84 employees, has increased its staff of technicians from 40 to 50 in the past few months. Coleman expects to hire six more this year.
To make sure the new hires are up to snuff, Coleman invested $150,000 to overhaul the company's training program. He also spent $6,000 to outfit two of the company's vehicles with software that allows technicians to create invoices on the road. If it works well, he expects to supply all 40 service trucks with the software, which will standardize the billing process and reduce the need to hire additional support staff once business ramps up. "It's a pretty big risk," Coleman says. But even if the economy remains sluggish, he says, these initiatives will strengthen Commercial Kitchen's services.
Given the tight credit market, most companies must do some belt tightening to finance growth. The key is to analyze expenses carefully and make strategic cuts, Esch says. King, for one, has asked his 12 employees to limit plane trips from Hercules' offices in Miami to those in New York, encouraging them to rely more on videoconferencing for meetings with co-workers and clients. He also has assigned two advertising associates to work part time in the company's sales and leasing divisions until the retail industry rebounds, which he expects will happen this Christmas season. Says King: "Any business that does not adapt to its environment is in serious trouble."