Off the Cuff: Crisis vs. Opportunity, Part 2

Any economic downturn will affect some businesses more than others. Here's how you can make the best of the situation.
April 14, 2008

By Mark L. Venit, MBA

In "Crisis vs. Opportunity, Part 1," we advanced the case that regardless of what lies ahead for the North American economy in the next year or two, apparel decorators will weather it largely intact, and that those who can use it to their advantage will weather it rather well!

Here's what the latter group will do to make the best of the situation. And my counsel here, for most companies, is to emulate their views and actions.

1.  Ignore the bad buzz that goes around during periods of economic uncertainty. Inevitably, some say, "This is the worse year in a long time." Others will report they're having record good times, complaining only that "Our biggest headache is finding good help."

The truth boils down to a situation in which we're all looking at the same set of variables but experiencing them differently, as we're viewing them from different angles. Actually, everyone will be correct in his or her assessment, since truth is often only our own perception of it, and that perception becomes our reality. I'll add that buzz — good or bad — may become a self-fulfilling prophesy on its own volition.

So, who will fare well and who won't? If the past is prologue, the demand for custom embroidered garments will by and large be more resilient than that of screen printed garments. That's because embroidered garments are more entrenched as workwear and affordable casualwear and therefore less subject to being eliminated or significantly reduced.

T-shirts, particularly involving those units used in promotional campaigns, will see some shrinkage in order volume. Historically, orders for custom-decorated apparel used for general promotion does take a hit. But garments sold for applications in athletics, events merchandising, fundraising, school spirit, summer camp, required dress/uniforms and recreation, among other sectors, will see little, if any reduction in demand and, in some cases, may actually experience increases in volume.

Licensed products, which won't affect the average screen printers and embroiderers in our industry, will take big hits, as consumers tighten their belts and wear the garments of their favorite teams, characters and celebrities longer — until the economy turns around, at which time pent-up demand will restore normal order volume. Big contract operators who serve accounts that sell popular licensed categories in apparel will be those most adversely impacted.

2. Eliminate excess labor, sooner rather than later. No one wants to lay off staff members if they don't have to, but smart businesspeople weigh the financial damage of carrying employees for any time longer than necessary and make the hard calls when they need to be made. Waiting too long may jeopardize the company's survival itself. Ask any veteran business owner and he'll tell you the economic security of the organization supersedes a bleeding, albeit caring, heart.

Most of us old guys learned this lesson the hard way, but we learned it for keeps. Remember that you're running a business, not a social service organization. If you're not sure of the situation, first trim hours, explaining to your staff the realities, the forecast and what you're planning to do to bring everyone back on full employment. At least, you're providing information so that they can better effect their own decisions, as necessary, for their own well-being.

3. Tighten your belt where possible, sooner rather than later. You already know where you can cut corners. What are you waiting for? You should do it anyhow if you're a good manager. But most belt-tightening measures are small. It's the big expenses that require your real attention. One of them is healthcare benefits. If you offer a plan to your employees, you've undoubtedly seen your costs increase in recent years. It's probably long overdue, but it may be time to ask your employees to help defray costs by assuming a higher percentage of the premiums. Yeah, it hurts. But the alternatives are worse.

Scheduling production more efficiently also will yield savings. Don't let dryers run idle with the temperature up, because they're usually the biggest juice suckers in your shop. Cutting out a day of production instead of letting work expand to fit the time allotted will yield measurable economies in energy usage and payroll costs.

4. Consider purchasing labor-saving, more efficient equipment. Is this the right time to actually automate your pressroom or add a multihead embroidery machine? Do the math, compute your estimated labor savings and improvements in quality and efficiency, and the sooner you buy better equipment, the faster your recovery time and return on investment. Automation also includes looking at upgrading your office equipment and management software as well as pre-production technology for art, screen making and digitizing.

5. Upgrade your staff's skills and cross-train wherever possible. Your employees are more valuable when they can do more and do it better. You might even have to pay more, too! But the efficiencies of having staff that know more, can do more things, and produce more are worth the investment. If you don't have in-house trainers, technical consultants might be the solution here. Also, many of your technical supply salespeople are skilled in teaching how best to use the products they sell you — and they rarely charge to conduct in-house clinics.

Offer the training as a benefit and, wherever possible, ask employees to attend after-hours classes or clinics on a voluntary basis. Those who care most about their jobs and the company's well-being will respond gratifyingly. They'll be the first ones you'll remember when things get better.

6. Farm out big orders. If it's worth the savings, contract out work that's more efficiently and logically completed offsite. The urge to bring back staff to do it is a good thing but not always the best financial decision. It's your call.

7. Increase your advertising and marketing endeavors. "Huh, and maybe even spend more money when I should be cutting expenses?" Yup, conventional wisdom considers such things as expenses. But pros know advertising and marketing are expenses only when they don't work or aren't at work. Effective campaigns don't cost money, they make money! Here's the secret to why virtually every company I work with in the custom end of our industry will do well in the year ahead.

A. We KNOW the competition will cut its advertising, as most companies do routinely in down times.
B. We KNOW most of the competition thinks second quarter is usually so busy, there's little need to promote during this period because the shop will be busy anyhow.

The truth, however, is that the most efficient and effective time to advertise is when demand is highest — spring! Essentially, advertising dollars and marketing efforts reap a greater return because the audience for your products is both bigger and more likely to buy in peak periods. So, while the conventional wisdom is hard at work in the typical custom competitor, restraining expenditures on promotion in high times, the smart marketers are turning up the volume on their campaigns and earning both short-term and long-term increases in market share — at the expense of competitors who don't know they're the ones paying for it. Sweeeeeeeet!

Hope you've weathered the winter. The second quarter is just beginning!

Mark L. Venit, MBA, is president of Apparel Graphics Institute Ltd., Ocean Pines, Md., which provides management and marketing consulting and proprietary research to apparel graphics companies throughout the Americas and Europe. He is also the chairman of ShopWorks Software LLC, a provider of industry-specific business software. Venit teaches pricing, strategic marketing, salesmanship and other business management topics at the Imprinted Sportswear Shows. He will be teaching a new all-day workshop, "Getting to the Next Level: Surviving and Thriving in Good Times and Bad," at the upcoming shows. You can reach him at markvenit@cs.com.

For further reading:

Crisis vs. Opportunity, Part 1

Off the Cuff: Confidentiality Agreements
Confidentiality agreements protect more than your assets. Just as importantly, they protect your customers.
Some of you might recall a column I published last November that addressed how to keep contract customers out of your production area in order to protect your work. This week's column looks at the other side of the same coin -- employee confidentiality agreements. These are legal agreements that are intended to keep your employees from talking about who's placing orders, for what quantities and dollars, what's being produced and who the end-user might.
September 15, 2008

Off the Cuff: How to Charge for Rush Service
Charging for rush service is justifiable, but be sure to outline  policies upfront and inform your customers.
The issues of whether and what to charge for rush service are common in the decorated apparel industry and there are valid arguments on all sides. Most companies feel they’re entitled to some degree of additional compensation for going our of their way to accommodate a rush order, for bumping other customers a notch or two back in the production line and for having to deal with the potential hazards of doing something faster than necessary. Oh, and the more sanguine reason: you can, if you choose, stick it to ’em when they’re on the ropes.
August 29, 2008

How to Profit from the Tax Write-Off for Conventions and Trade Shows
Thanks to Uncle Sam, you can deduct certain trade show and conference expenses from your income tax filing. Learn what’s deductible — and what’s not.
Imagine an enjoyable — and educational — vacation with Uncle Sam picking up part of the tab. That's right, every decorated apparel business, the owner and employees of that business (even someone who is a shareholder/employee), can legitimately claim an income tax deduction for the expenses paid or incurred in attending trade shows, conventions and meetings.
August 18, 2008

Tax Breaks for Education — What Every Decorated Apparel Business Owner Needs to Know
Embroiderers, screen printers and promotional products distributors can profit from breaks in the tax code to educate their employees and themselves.
Finding, hiring, training and retaining “smart” workers have long been key factors in the success of small businesses, including decorated apparel companies. Lawmakers have also recognized the importance of a smarter workforce and created a number of educational and training-related tax breaks and incentives. Those tax benefits allow every commercial embroidery, screen printing and promotional products business, large or small, to offer training and education as a “fringe benefit.”
August 04, 2008

Economic Stimulus Package Offers Tax Break for Equipment Buying
Decorators interested in expanding their business or replacing old equipment can rejoice in the new round of government incentives designed to help small business owners.
Earlier this year, Congress passed, and the President signed, the Economic Stimulus Package of 2008, a $168 billion economic “rescue” package that included rebates for taxpayers and tax breaks for businesses. In addition to those tax rebates, the heart of the package, there also were tax breaks for businesses such as decorated apparel operations — breaks retroactive to the beginning of 2008!
July 21, 2008