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The Business Side

December 1, 2001
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How will the terrorist attacks of Sept. 11, 2001 affect your business?

Denny
I am sure by now (unless you have been hiding under a rock in the desert) you have heard about the World Trade Center terrorist activity in New York and the Pentagon in Washington, D.C. The press has covered just about every aspect of the event—except how it may affect the running of your company and your relationship with your employees. There is no doubt that the United States will be different in the future. I am writing this on the last day of September and you are most likely reading this about the first week of December. I do not know what is going to happen in that time, but my guess, because of layoffs and the reluctance to travel, is that the economy will continue to cool. This cooling off will start to affect the construction and housing market industry, and in turn effect our work backlog and profitability.

Let me say that over time the country will recover fully, just as the country has from all past disasters. In the meantime, I think there should be a response from you as company owners and managers. This is the time to put your business in order. What I mean by this is to take complete control of everything that happens within the portals of your office. Making the right key decisions during the coming 2002 has never been more important. We will cover everything from uncollected money to future business planning.

The business climate in the United States was already changing before 9/11. We, as a nation, were being sucked into a global economy whether we wanted to be included or not. Our manufacturing segment was, and still is, disappearing from the country. Manufacturing jobs are being replaced by service industry jobs. Many of the great projects that surveying companies have been working on for the last decade have been building infrastructure for the service industry. Good examples would be resorts, entertainment complexes and golf courses. Also included was a healthy dose of retirement housing. This economic slowdown was happening before 9/11. The recent events just accelerated the changes of 2001.

Before we go on to specifics, we also need to focus on one other event that was and is going to effect the United States’ economy for the next decade. Most of the retirement funds in 401-type retirement plans have taken a great hit in value since the beginning of 2001. Most of this loss has come from the drop in technology stocks value. These stocks were the darling of the stock traders because of double digit returns in stock value and almost all of them were increasing in value faster than the normal market.

You may be wondering why I am going to the trouble to bring you all this information. The reason is that the decreased value of many 401(k) programs may extend the retirement plans of some employees and may also cancel developments dealing with retirement aged people. Many people I talk to say the current value of their retirement portfolio is anywhere from one third to one half of the value it was one year ago.

People sometimes ask me where I find the information that I write about. If you want to understand more about the global economy we live in, please get a copy of The Marketing Imagination ISBN #0-02-918840-7 by Theodore Levitt. While this book was written in 1983, the ideas presented sure have come true. A good idea of the type of wisdom in this book is in the following quote: “There is no effective corporate strategy that is not marketing oriented. The strategy must be clearly focused, whether the customer is eager, reluctant or suspicious; and the human resources behind the strategy must be managed with firmness, intelligence and creativity.” This is good advice in any business climate.

Let’s now talk about some specifics.

Collection of Accounts

We have addressed this subject many times in this column. But this time I feel a sense of urgency in getting your accounts up to date. If a client who owes you money is in financial trouble, you greatly decrease your chances of collecting the money. Get busy today and finish the year strongly by collecting all the money you are owed.

Increase in Overhead

We all know there is going to be an increase in governmental regulations dealing with our safety. This may come in many forms, such as having to spend more time at airports. Doing survey projects near or around airports may require frequent vehicle searches. Working in boats along coastal waterways may result in searches by the Coast Guard. Just having survey crews working in remote areas may result in being stopped for questioning by law enforcement officials, or having employees of eastern nationalities detained for questioning. Survey companies working along border states that cross into Canada or Mexico may find they may need to carry passports. I see the time where a permit will be required for a survey crew to work on interstate highway rights of way. These actions will result in increased overhead and costs that need to be passed along to your clients, either in crew rates or as surcharges.

Employee Safety

With all the horror stories we have heard about employees or ex-employees who turn violent in the workplace, maybe our existing employees deserve background checks on any new hires. I can see where some governmental agencies might require that field crews have security clearance before working on a government site. I also see the possibility that survey crews working in high traffic areas may be on video camera surveillance. The crew needs to be aware that all their actions are being recorded.

I just witnessed a great field idea. A survey crew working in front of a residential property placed six traffic cones around the survey vehicle to give them access and keep other vehicles from parking right up against their vehicle. I can’t tell you how professional this looked. This would work well in a congested downtown location; just block off the parking space in front and behind the survey vehicle.

The Company 401(k)

Let me tell you from my perspective what happened to the value of your 401(k). In short, it is greed. I found the longer answer recently in a special edition of Money magazine. The front-page title was headed “What Now” (I am sure you can look it up on the Internet at www.money.com). This special edition contained information on what the WTC disaster might mean to the economy in the short and also the long term. But the real interesting information contained was a review of 100 stock funds and their performances over the last year. To my surprise there were about 20 funds that performed fairly well over the last year with an average gain of about eight to 10 percent or more. They did not take this 50 percent loss that many 401(k) plans suffered the last year. I became very interested and tried to find out the secret to their success. In a nutshell here is the answer. Most of their stock portfolio did not reflect the total stock market like most funds. They only invested in about 20 or 30 stocks that were undervalued. In fact, they had no high technology stocks because they tend to be overvalued. The real key to success was to only keep these undervalued stocks until they met their value, then they would replace them with other undervalued stocks. The bottom line? Don’t get greedy.

The most important part of what I am telling you is that in many cases you as company owners or managers are the keeper of the 401(k) fund portfolios and have a lot of influence into the stock fund. We as surveyors and engineers are by nature conservative, and perhaps we need to manage our employees’ 401(k) funds in a more long-term conservative manner. I also had money in a bond fund. While it did not increase much in value, it did not lose 50 percent.

Reacting in an Economic Downturn

At this point I do not know if we are going to experience a deeper downturn that will effect your company. But, getting ready and not needing to put your plan into action is surely more desirable than being unprepared. This may be a good time to look at your employee pool and decide which employees you would lay off first. Also develop a list of ways to control costs to lower your overhead. Is this the right time to upgrade to more efficient equipment? Remember, if equipment is not needed for a few days, it is cheaper in the long run than paying employees for services not needed. Now listen to me carefully: Don’t take jobs at less than cost to keep people working. An alarming trend I keep hearing about is that surveyors are driving the price for ALTA surveys downward by bidding against each other. Become lean and mean, and your company can weather just about any storm.

Company Planning

This is the time to start thinking about having a plan. You need to have a short-term plan of one year. Also, you need a long-term plan of five years. The five-year plan is hard to predict at this time, but I do believe in five years the country will be back to business as usual.

‘Till Next Time

I have just returned my contract to write my column for POB in 2002. Next year we will continue to explore business topics related to 9/11 and the return of our country to normal. But we will never forget the World Trade Center victims!

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