After spending the last six months on the road talking to hundreds of business owners around the country, I have come to a conclusion that might surprise you: the economic recovery is already well under way. And, if you don’t start putting a strategy in place to take advantage of it, you’re risking the future of your company.
Especially given all of the turbulence out there related to the debt problems in Europe and the ups and downs of the stock market, I know the idea that things are already turning around might shock some of you. I’m pretty sure my message surprised the folks who heard my speech at the Gathering of Games conference last week in St. Louis.
But I’ve been speaking eyeball-to-eyeball with entrepreneurs all across the country — in places like Pittsburgh, New York City, Richmond, Va., and Fresno, Calif. — and when I ask them how they did in the fourth quarter of 2009 or the first quarter of 2010, I keep getting responses like, “amazing,” “fantastic,” “record-breaking” and even “best we’ve done in years.” The funny thing is that despite their recent success, most of these folks seem reluctant to acknowledge that things have gotten better. Why? Well, I have two theories about that: one, people feel so burned by the last few years that they still fear a double dip — and they’re still waiting for another shoe to drop. Two, I think some people are staying quiet because they don’t want to give anyone in Washington credit for the recovery. They feel that they have recovered due to their own innovation, creativity and hard work and not due to anything related to the stimulus.
But regardless of why no one is talking about it, the recovery is happening. Here are some signals I’ve been watching:
Consider what’s happening at our company, SRC. Keep in mind that we sell into a lot of different markets, such as energy, housing, construction, agriculture, automotive, marine and rail, which makes us a great overall economic indicator. I’ll admit that I’ve been caught looking in the rearview mirror since the fourth quarter of 2008. When the economic tsunami hit, our businesses came to a halt, and we had to create new products and find new markets and new customers. I’ve been so focused on expanding new businesses to help us survive the downturn that I missed what was happening right under my own nose — the resurgence of our existing businesses.
All of a sudden, we experienced a surge in growth in the parts of our business that were hit the hardest, including our automotive division. We just had a record-breaking month for sales of brake-shoe kits in the heavy-duty truck aftermarket. These kits replace worn-out brakes on trucks. When trucks are putting on a lot of extra miles, it means they are moving goods from one place to another — a clear sign that orders are increasing. Meanwhile, Guildmaster, an SRC affiliate that makes home furnishings, recently attended an important industry trade show held in High Point, N.C. The company experienced a 70 percent increase in sales over a similar show held last October, suggesting that consumers had begun spending money on their homes again.
Here’s another signal: lead times — the time between when you order and when you actually get your parts — are becoming longer and longer. So many companies cut back on inventories and labor over the last two years that they’re not ready to handle an uptick in orders. At SRC, for example, we suddenly have $3,000 gasoline engines that we can’t finish building because they’re waiting for $30 worth of parts that we can’t get delivered. Those lead times are increasing because demand is on the rise.
But I’m also seeing clues beyond SRC. A friend of mine, Shawn Askinosie, who runs Askinosie Chocolate in Springfield, Mo., just called to tell me he’s running out of cocoa beans because his sales are so much greater than last year — and he can’t get a fresh supply from Ecuador until August. Fortunately Shawn has some great contingency plans to maximize the returns he gets from the beans he has left. But the point is that cocoa beans are suddenly in demand. Another friend of mine told me that Caterpillar just called up its suppliers and told them to expect to double their orders over the next year. Have you checked the price of copper lately? It has begun to rise rapidly and because copper is a critical component to many industries, a surge in demand can be a key signal that the economy is on the move.
If you’re still not convinced, do some research of your own. Ask your customers and peers how they’re doing (and tell us in the comment section below how you’re doing). Do your own eyeball-to-eyeball research. Just as important, start putting together a strategy to take advantage of the recovery whenever you believe it’s going to hit. If you keep looking in the rearview mirror and forget to look at what’s headed your way, not only might you miss a golden opportunity to build your business, you might just give your competitors the chance to move ahead of you or, worse, to eat your lunch right out of your hands.
Next: Why managing in a recovery can be as hard as managing in a recession.