Bowlers Journal International - February 2008 - (Page 77) HALLMARKS BY WALLY HALL 10 STEPS FOR DEALING WITH THE ECONOMY An economic turnaround will happen eventually. Meanwhile, you shouldn't just sit around and wait. HOW DEEP WILL THE U.S. ECONOMIC DOWNTURN BE and how long will it last? That's the big question on most every business owner's mind today. U.S. bowling proprietors, in particular, are concerned about the negative impact on customers from rising gas, energy and food prices, the increasing jobless rate, the declining value of residential real estate and the flood of foreclosures. They fear that, as a result of these and the sub prime mortgage credit crisis — as well as the declining value of the dollar — the consumer will hold onto discretionary funds because they also are nervous about the future. And all that could mean that sales at the bowling centers will decline. All the indicators as measured by current consumer behavior suggest the downturn is real. For example, many national retailers have recently been reporting sales below last year’s levels. A number of bowling centers have reported softness in open play activity and sales in the past few months. Years ago, when league bowling accounted for 70-80% of the total business, the industry was sometimes described as “recession proof.” That no longer is the case, especially in centers where open play is greater than league play. What can a proprietor do about this situation? Here are some suggestions: 1. Do not ignore what is happening. Be vigilant, monitor and act responsibly. 2. Meet with the key people both at the organizational chain and center level. Review the national and local economic situation. Reassure them. Identify threats and opportunities for the business. 3. Develop and implement action plans to build on current strengths and overcome weaknesses. 4. Increase monitoring of business activity by the day of the week, the segment of each day and price. Ensure that you know accurately what is happening daily at each center. 5. Review staffing schedules in the light of current business. Examine overtime carefully. Set new schedules, parameters and controls. 6. Ensure appropriate inventory levels to match anticipated sales levels. 7. Encourage everyone to be diligent in controlling waste, be it utilities, supplies, parts, etc. 8. Tightly monitor costs of all items from suppliers, and protest price bumps. Adjust selling prices to maintain margins. 9. Re-evaluate upcoming capital expenditures in light of current business trends and needs. 10. Review your marketing plan, and change it to reflect any new initiatives required to respond to current conditions. The focus should be on at least maintaining the profit levels of the prior year. It probably will require working hard to increase revenues — it is expected that most operators will see continued pressure on expenses due to increases in utilities, health insurance plans, costs of goods and supplies, mandated pay increases, and property and income taxes. The downturn in the economy comes at a bad time for those bowling centers in states wrestling with the consequences of smoking bans, as well as those which have recently had slot machine/casino legislation passed for designated locations in their state. They will have to be extra diligent. Always keep in mind that in times of severe economic downturn, “cash is king.” Take steps now to preserve your cash. For many bowling centers, summer is a time of negative cash flow. Plan now to ensure you will have enough cash to carry you to next season. Prepare some “what if” financial projections, and estimate the consequences of downturns of 5, 10 and 20% in revenues. To inspire yourself and your staff, do the same for improvements of 5/10/20%. Share these with them so they can see what is at stake. One of the bright spots of the present national economy is interest rates. For long-term borrowers, they are attractive. I spoke recently with a senior officer of the largest financial institution in the country. He informed me that despite the residential mortgage crisis, his firm is actively seeking commercial loans — both business and mortgage loans. They are being selective, however, and may require more coverage on loan-to-value ratios for mortgages depending on the quality of the borrower and the property. Business loan rates and terms again are very dependent on history and past performance of the borrower, but money is available, and lenders are actively seeking this business. This is good news for business owners who may need capital; rather than wait for rates to decline further, as they are widely expected to do, it might be smart to begin the process now, particularly if a mortgage loan is involved, as appraisals, surveys and title work all take time. Bowling is a business that is better placed than most to continue to do well during national economic downturns. It remains a relatively low cost form of recreation and entertainment. The social interaction and activity it provides is reassuring to people during difficult times. When they go bowling they relax, kick back, have fun and enjoy themselves. That’s why commercial bowling facilities have prospered for well over 100 years and why they will continue to do so in the future. We may well be in an economic downturn, but it is certainly no “doomsday.” Strangely enough, today’s circumstances could well lead to a period of increased prosperity and opportunity for the owner who rises to the challenge of fine tuning his center’s or his bowling center chain’s performance so that they at least maintain, if not improve, on their past operational results. FEBRUARY 2008 bowlers journal international 77
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