Tips for trading through a downturn
By Euan Youdale01 December 2008
The managing director of Ireland-based crane rental company Wm O' Brien Plant Hire has shared his experience of previous economic downturns in the hope it will help others through current conditions.
Established more than 50 years ago, the company has been through tougher times than Ireland's current economic situation, says Finbarr Warren. "William O'Brien senior built the business through a time when Ireland was asserting its sovereignty and taking the first tentative steps towards Europe. The first programme for economic expansion was brought in by a government led by Sean Lemass, which saw the beginning of foreign investment in Ireland resulting in the beginning of a more industrialised Ireland and a move away from the traditional farming background."
O'Brien began his working life in his birthplace, County Kerry. He started out by clearing country estates and golf courses using earth moving equipment. He then moved into the crane hire business. He quickly understood, adds Warren, that there was a need for waste disposal in the area, and later set up a string of plastics businesses around the city of Cork. "He was a real entrepreneur and where he saw opportunities he went for them."
The company helped to change the face of Ireland, says Warren, by working on a range of projects including Dublin's General Post Office, Knock Cathedral and buildings along the Grand Parade in Cork. "It traded through the difficult years of the 1980s when unemployment in relation to the general population was at an extreme high and when emigration was one of the only options available to the majority of the population. Yet in the face of these difficult times Wm O'Brien Plant Hire continued to trade and to grow."
As a result, the company learned how to trade through a downturn. "We saw the signs over six months ago and we stepped up our credit control at that stage. It's important to get your cash flow in order - to make sure creditors and debtors are up to date. It's also important not to have too much excess stock at all times. This is particularly important in the plant hire business with regard to spare parts, some of which can cost thousands of Euros. Tyres alone cost an average of €1,600 (US$ 2,023)."
Warren's advice also includes "not jumping the gun" in terms of sales. "At Wm O'Brien Plant Hire a sale is not considered a sale until the item has been paid for. Full ownership of a deal is given to the sales team right up to receiving payment. If payment is a problem for some customers they are encouraged to spread their costs, perhaps by leasing."
The company also makes sure it is not overly reliant on one or two large clients. "It is important to spread the risk out among the clients and to deal with reputable companies who have a solid business reputation. New customers to the plant hire company are encouraged to pay in cash to avoid losses later on and keep a steady cash flow system in operation."
Warren maintains the solution to surviving a downturn comes through knowing and understanding the business and its key customers. "If there is to be an upside to the downturn it is that it allows companies to slow down and to concentrate on re-establishing contact with clients that you may have previously been too busy to speak to. It could also be a time to use key staff in other areas, perhaps by researching other sectors where growth could be expected."
The company has invested in a 700 tonne capacity Terex Demag AC 700 wheeled telescopic mobile crane, the largest of its kind in Ireland, says Warren. It will be kept busy in the wind turbine industry, which, Warren forecasts, will be a growth area over the coming years. "This is a bigger and more solid market and it is exactly the type of proactive decision making which will result in real and sustainable business over the coming years."
"It is the companies that adapt to the recession without burying their heads in the sand that will survive and thrive in the future. It is clear that the team at Wm O'Brien Plant Hire, many of whom lived and worked through tougher times before, have learned how to cope and have developed solid strategic plans that will enable growth for this company in the years to come," Warren concludes.