Some sun amidst the gloom
A look at how some local businesses are making the most of hard times, including one that is still installing $300,000 kitchens.
(Compliments of Lancaster Sunday News, March 08, 2009)
The economy may have turned sour, but that’s not to say it doesn’t still have its sweet spots for many companies.
People from several local businesses that have been thriving in the midst of the downturn say they remain positive about the future while at the same time adopting a cautious approach to growth.
One of those is Chip Cargas, founder of Cargas Systems, which provides computer software and consulting services for about 400 other companies.
The economy as a whole may be going down about 2 percent a year, Cargas said, but that means some companies are dropping a lot more than that and others are doing quite well.
Cargas said his company works with a diversity of clients but has strong focus areas in health care and energy, sectors that are still prospering.
In 2008 while the country was in a recession, Cargas’ sales grew 6 percent with revenues of $7.2 million, and three new employees were added, Cargas said.
“We feel we got through that pretty well, although we didn’t hit budget,” he said. “We were profitable, but not as much as we wanted to be.”
This year, he added, the company is taking a more cautious approach in its budget and is putting more focus on its existing customers.
The tendency in the past, Cargas said, was “you get busy on new projects and don’t focus on existing customers as much as you should.”
This year, he said, there will be a renewed effort to look at customers’ computer systems and find ways those companies can become more efficient by making better use of their systems or upgrading.
Another thriving company with a broad client base is Shumaker Plan — Design — Transform, or PDT, which provides planning, audio, lighting and staging for special events ranging from weddings and banquets to corporate gatherings and political rallies.
“Last year was our best year ever,” said Rod Shumaker, the company’s owner.
The business moved from the 300 block of North Queen Street to 240 Harrisburg Ave., increasing its warehouse space from 1,200 square feet to 5,000.
Shumaker also jokes that he expanded his work force by 25 percent, which means there are now “five of us” instead of four.
However, the business is dependent on the financial health of its clients, and Shumaker is wary about how the economy will affect their plans for special events.
“The carpet can get pulled from under your feet at any moment,” he said.
He’s cautious because he’s already seen some of his clients start to downsize their events, although he said he’s not had any outright cancellations.
But Shumaker said he’s optimistic he will be able to scale events “to a place where it makes sense for them” so he can “give them some of what they would have had” if the economy had remained robust.
“My main goal this year is to break even, pay my employees, pay my bills,” he said. “If I squeak by, then I’ve won.”
Reversal of fortune
One local company that’s seen how suddenly things can turn around is DORMA Architectural Hardware, a manufacturer of door closers for the commercial and institutional building market with nearly 200 employees in Reamstown.
Its president, Scott Duncan, said the company had been growing at a rate of about 15 percent a year for several years, a trend that continued for the first nine months of 2008.
“We were extremely busy in July, August,” he said. “We kept saying, ‘What recession?’ ”
But in October, all that changed.
“The credit crunch hit roughly a year ago and got really bad in the summer,” Duncan said.
Because door closers are one of the last things installed in a building, the company’s business stayed brisk through the summer as builders finished up existing projects.
“We have industry data that says the market is down 20 percent,” Duncan said, which is not as bad as the downturn in residential construction.
In response, the company is putting a lot of focus on cornering the business that’s still available, taking advantage of its reputation for quick turnarounds between orders and delivery.
“If you want it quickly, order it from me. That’s what we’re trying to use as a competitive advantage — very reliable, quick production,” Duncan said.
In addition to that, he said, the company is doing what it can to cut expenses, in some cases going to suppliers that had raised prices multiple times in the past couple of years and asking for roll-backs.
“It’s a real dogfight,” Duncan said. “These are extraordinary times. I’ve been in this business for 40 years, and I’ve never seen anything like this.”
One thing DORMA has not done is lay off employees, other than letting go 11 temporary workers added during the summer crunch.
“The equation for us,” Duncan said, “is we’re doing the very best we can to position ourselves so when [the market recovers] we are as strong as we can be to take advantage of the turnaround.”
The company has, however, been forthright with its employees about the challenges it faces, asking some of them to work shorter weeks when job orders fall short.
Duncan said his workers have responded with understanding and added initiative, taking a how-can-I-help approach to the situation.
Cargas credits a similar attitude among the people at his company with its continued success.
At Cargas Systems, about 80 percent of its workers share ownership of the company with its founder.
“I still own 59 percent, but it’s not too long before I’m going to drop below that magic 50,” Cargas said, explaining that about 4 percent of the ownership is shifting each year.
“I think the fact that we’re an employee-owned company … is the No. 1 reason why we’re growing in a down economy and others are shrinking,” he said.
Even in sectors of the economy most affected by the downturn, such as residential housing, there are companies that have found niches that are still thriving.
One of those is Steiner & Houck, an interior design and building firm in Columbia.
“Last year was probably our biggest year,” said Sandra Steiner-Houck, who heads the design portion of the firm while her husband, Todd Houck, oversees the building portion.
“We’ve been really fortunate,” she said. “We have larger projects that tend to be in the pipeline a long time.”
Now in its 16th year, the company focuses on the very high end of the real estate market, designing and building kitchens, bathrooms and complete interiors for homes that sell in the $1 million to $2 million price range.
The typical kitchen the firm builds costs around $300,000, she said.
At that end of the market, Steiner-Houck said, recessions can be some of the busiest times because that’s when people who have money tend to spend it.
The firm relies a lot on local subcontractors as well as its own five employees to provide the high quality work such customers demand.
Banta Tile and Marble, Lancaster, does most of the firm’s stone and tile work, she said. Brubaker Inc., Lancaster, supplies appliances, and Premier Custom Built Cabinets, New Holland, does the cabinetry.
“We’re doing roughly $2 million a year,” Steiner-Houck said. “We’re not out there installing 50 kitchens a year. When the average project is $300,000, you don’t have to.”
The firm’s work has been featured in numerous national publications, she said, which — along with referrals from previous clients — spawns new customers.
“We’ll go as far as anyone wants us to go [to work on a project],” she said, but most of the firm’s work has been within a 30 to 90 minute drive from Columbia.
“There are plenty of clients in this area who are doing that level of work,” she said.
As for the future, Steiner-Houck said she’s not so naive as to think the economic downturn could never affect her business, but she doesn’t let that possibility trouble her.
“I’m not concerned,” she said. “I’m really focused on the volume of work we’ve got now and keeping those customers happy. That’s what brings in the next work.”
The big picture
Striving for excellence can pay off regardless of the income level of a business’s customers.
Penn Ketchum, managing partner of Penn Cinema Entertainment, said that’s been his operating principle for the movie theater complex his company has developed in Lititz.
There are data, both recent and going back to the 1930s, showing that the movie industry generally does well during recessions, he said.
“One thing we’ve had going for us, even in the good periods when the economy boomed, is we have the cheapest form of entertainment,” he explained.
But he also said that doesn’t mean a theater owner should take anything for granted.
“It still needs to be a first-class affair even if it’s affordable,” Ketchum said. “People should feel like they’re being pampered.”
Penn Cinemas has spent about $2 million during the past year to add four screens to its complex and convert half of its 14 screens to digital projection.
The company has also looked for alternate ways to use its facilities, renting the theaters out during the day for corporate and school meetings, and expanding its entertainment offerings beyond films to include showings of live concerts, the presidential inauguration and major sporting events such as the World Series and Super Bowl.
This spring, Ketchum said, Penn Cinemas will expand its concession stands so customers will have shorter waits in line.
The company also plans to finish the digital conversion of the rest of its screens in the next year or two, he said, and expand the number capable of showing the 3D movies that Pixar, Disney and DreamWorks are starting to make.
“We need to show our customers we’re not content to be mediocre,” he said.
See the original article here.