For our recent webinar, “Take Control of Tomorrow – How to Survive a Recession” we spoke with Doug Konop, the Chief Financial Officer of Specialty Forest Products. Doug is a survivor of the 2008 recession and has first-hand experience with preparing for an economic slowdown and finding the adjustments needed to grow within it.
As a wholesaler of hardwood, lumber, and plywood, Doug started to see changes in both the retail lumberyard and industrial market back when the 2008 recession first started to hit. Speaking from experience and with an outlook for the future economic slowdown, Doug answered a few of our questions below.
Q: How does the uncertainty during a recession affect the way companies should approach opportunities with not only their existing customers but also with new prospects?
Doug: We had to be careful with new prospects and do a lot of research on them, for our biggest concern was prospects exhausting credit limits at our competitors and then coming to us. We also had to apply that same process to existing customers and look at payment trends. During a recession, you develop a high level of skepticism when sales are decreasing, which is a difficult position to be in.
Q: What steps did you take during or even after the recession to grow your business?
Doug: Our relationship with Euler Hermes began in 2012, a time when we were coming out of the recession. We started to see within our customer base that there was a backlog of work going forward, which at that time was very unusual. There was a sudden increased demand and we had gone from a very conservative credit approval process to having to make adjustments to grow out of the recessionary period.
Euler Hermes was very helpful. They looked at our existing customer base and gave us credit limits—most of which were more aggressive than our existing. With this, we saw that our customers could probably withstand a little bit higher credit, so we were able to go to them and say, “We think we can be here with you. Here is how we can help on the credit side.”
Having Euler Hermes on our side helped us pull out of that recession period a little bit quicker. It is difficult to evaluate customers without seeing the negative, so that is where we needed additional help from Euler Hermes.
Q: What do you think can give companies a competitive advantage that can help with recession preparation or even recovery?
Doug: You must know your customers and who you are selling to. We always have to evaluate new customers carefully—no matter if the economy is good or bad. You must continuously understand where your customers are heading. It is easy to become super conservative going into the next cycle, but find the opportunities and invest time in evaluating your customers.