"Women and children first" might be the right plan to follow when a cruise ship is sinking, but it's definitely inappropriate when you're trying to save your lumberyard. Those who need help will benefit from those who are alive, coherent, and able to help. This is the most important time for leaders emerge to guide the rest to safety and security. As always, people will look to the leaders for vision, integrity, and accountability.

Bill Hofius Here are three key things you need to do to emerge alive:

  • Build a new business plan and vision. Do this with the help of trusted advisers and other industry experts. Sometimes our own entrepreneurial enthusiasm may require a reality check. With a business plan built to survive in this market, layoffs and closings serve a purpose.

    Protect your intellectual and skilled collateral--your people. A room full of chiefs won't get the job done. This may mean removing some management or supervisors before yard men, drivers and clerks. When it comes to position, most people will step up to help; very few will step down.

  • Be truthful. This is especially important for employees. Not knowing what the future holds is hard on people. Let your core employees know who they are and those at risk know who they are. This will allow the employees at risk the freedom to move on while the core employees will be able to focus on building the new business. Someday this market will be a memory; the reputations we create, however, will remain for years to come. As we sit in front of suppliers, bankers, employees and customers, our reputation may be the only thing they see.
  • Manage inventory and receivables like never before. Sweep the corners of the warehouses for anything, and I mean anything, that is not making money and convert it to cash. Be prepared to take a loss, but do it and do it now. An orderly liquidation of overstock and obsolete inventory may yield 75% to 100% of cost. A forced liquidation will yield far less, often as little as10%. Use the new found cash to support the primary business plan.

    As for the receivables, we are in a market with very few options. Unless the builder was paying the supply company a share of profits earned during the boom years, there is no reason they should expect the supplier to assume the risk in these tough times. Tough times require tough love; do what it takes to collect.

This is an economic cycle that must be survived in order to thrive again. Suppliers can survive it and those who do will emerge stronger for having lived through it.
Bill Hofius is a 32-year veteran of the building supply industry. He served as vice president of marketing and business development for a company that reached $350 million in sales and was recognized as the 2006 pro dealer of the year by PROSALES. E-mail him at billhofius@leaderspact.com.