Recession: Shelter from the storm

Written by ProfitGuide Staff

Real entrepreneurs, it’s said, see opportunity where others see challenge. If that’s true, then Canadian business owners must be licking their chops over the prospect of an imminent U.S. recession.

Given that 25% of Canada’s national output goes stateside, few companies are immune to a U.S. downturn. But for those entrepreneurs who are ready, willing and able to make the right moves, the recession could allow them to leapfrog their slower-moving competitors and even to generate higher profits. “As long as you can put your head down and work at it aggressively,” says Mark Wardell, president of Vancouver-based consulting company Wardell Professional Development Inc., “it’s never too late to start recession-proofing.”

Of course, no one will feel the sting of a U.S. recession sharper than those who already sell stateside. That’s why Tom Sunder, president of Surrey, B.C.-based Coast Clear Wood, a lumber manufacturer and distributor, is diverting sales and marketing attention away from the U.S. to untapped markets in Canada, China and India. Sunder is projecting a 30% jump in sales in 2008, due largely to his firm’s substantial investment in international trade-show attendance last year. He’s homing in on his current customers, too. “Because we’re so small, I’m able to be more customer-specific,” says Sunder. “We’re focusing on custom orders, which will be our edge over the big mills that are geared to produce in bulk.”

Thriving in a U.S. recession entails investing in product development for Lewis Media, a Kitchener, Ont.-based developer of website-management software. Because president Joseph Fung expects demand from U.S. end-users to drop, the firm has earmarked 25% of its R&D budget to increasing the multilingual capabilities of its software. Because of the expected downturn, “We’re looking to expand into a European or Canadian market, and so will our U.S. distributors,” says Fung. (Lewis Media’s distributors are not restricted to specific geographical territories.) “This was our way of making sure they choose us when they’re ready to do that.”

Now is also a great time to negotiate with U.S. suppliers, who should be more willing to cut deals to preserve cash flow and retain your business. Combine that with the high-flying loonie, and now could be an ideal time to invest in automation.

At the end of the post-9/11 downturn, Michael MacAdam went south of the borderto acquire new production machinery for Teldon Marketing, his Richmond, B.C.-based promotional products business. The result: revenue climbed by 50% as labour costs dropped by 20%. “If we hadn’t taken those steps, we would have lost money every year since 2003,” says MacAdam. “Instead, we’ve turned a profit every year since and we’re continuing to grow.”

Like the experts say, you have to spend money to make money — even in a recession. “When times are tough, investment can be a hard pill to swallow,” says Wardell. “But it’s exactly the medicine a business needs if it is going to successfully ride out the coming economic storm.”

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