How to Protect Your Margins in a Downturn

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Construction

"The most common way to make money in construction is to drive revenue as high as you can by taking on bigger projects, then getting them done as efficiently as you can. In this economy, that's hard to do. Fortunately, we have always focused on niche markets that require expertise for which we get paid high margins."
-- Jim Ansara, chairman, Shawmut Design and Construction

Finance + Insurance

"The collapse of the economy hit financial companies, of all sizes, more quickly than those in other sectors. So we've seen the industry make dramatic changes in head counts. And while I am cautiously optimistic about a recovery, it is not going to be immediate."
-- Larry Zimpleman, CEO, Principal Financial Group

Health Care

"We get paid a set amount per customer, so our profits are determined by how well we manage the costs of the medical expenses incurred by our customers. Our success depends on our ability to manage those costs without our customers feeling constrained by their available options."
-- John Baackes, CEO, Senior Whole Health

Information

"Our people drive our success, so we're focused on increasing the efficiency and productivity of how they work. In our sales team, for example, we make sure that our people are spending the bulk of their time working on the most profitable deals and keeping our most profitable customers happy."
-- Evan Goldberg, founder and chairman, NetSuite

Manufacturing

"We're looking to trim labor costs in an agile way. Rather than laying people off, we've cut costs by bringing jobs in-house that we used to outsource. That way we capture all the benefits of the increased productivity of our workers."
-- Jake Nichol, CEO, Leatherman Tool Group

Real Estate

"Rents across most markets are down, and there is a lot of space available. We're helping clients take advantage of the situation by renegotiating leases if they got stuck paying market rates two to three years ago."
-- Roger Staubach, executive chairman, Jones Lang LaSalle

Retail

"Our goal is to turn over our inventory four times a year. We're working more closely with our manufacturers to shrink our development time and buy closer to the market. We're also taking advantage of falling prices for materials and production."
-- Lexy Funk, CEO, Brooklyn Industries

Professional, Scientific + Technical Services

"Our biggest cost by far is the cost of our people. That's why I pay close attention to the ratio of total compensation to total revenue. If that number gets below 50, then we're working people too hard, and they'll start quitting. If the number gets to 60 or above, we're not making any money."
-- Chuck Porter, co-chairman, Crispin Porter + Bogusky

Transportation + Warehousing

"The biggest asset for a trucking company is its vehicles. So how a driver treats that asset can determine profits. But with the drop in rates and tonnage caused by the recession, companies are having a hard time making any money at all. In 2008, more than 3,000 trucking companies filed for bankruptcy."
-- Doug Clark, CEO, AmeriQuest Transportation Services

Wholesale Trade

"To make money, we have to manage our variable costs, such as shipping and trucking. When gas prices spiked, we had to suddenly get very creative with our routes. We also ask our buyers to pay in advance. That way, we can take our interest-rate spread out of the mix."
-- Jeff Hoffman, CEO, Enable Holdings

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