February 14, 2018
by Gregory S. Dowell
In a recent article from Hartford Insurance titled “Is Your Small Business in One of the 10 Worst Industries? Here Are Some Ideas”, author Gene Marks refers to research performed by Sageworks, which is a company that gathers and collects data on various industries and re-sells it to the accounting, financial and legal communities. Sageworks identified the worst-performing industries, based on a comparison of sales from 2015 to 2016. The following are those industries that experienced the worst declines or the lowest growth in sales from year-to-year (note that the percentage decline in sales is noted in parentheses):
2. Gasoline stations (-9%)
3. Metalworking machinery manufacturing (-3%)
4. Direct selling establishments (-2%)
5. Machine shops and screw, nut, and bolt manufacturing (-2%)
6. Merchant wholesalers — nondurable goods (-1%)
7. Other fabricated metal product manufacturing (0%)
8. Plastics product manufacturing (0%)
9. Machinery, equipment, and supplies merchant wholesalers (0%)
10. Other general purpose machinery manufacturing (+2%)
It goes without saying that, in general, businesses in these industries likely suffered the greatest decline in valuations from 2015 to 2016. Another observation that is evident from a quick review of the above is that, absent the worst two performers, which are in the mining and energy sectors, the rest of the group experienced year-to-year sales changes of between -3% and +2%. Hovering around break-even in sales growth isn’t a death sentence for the industry or for the companies within that industry. That said, no company should sit on their collective hands, waiting for a turnaround to occur.
What are the best takeaways for companies doing business in these industries? First, do some self-reflection and self-assessment: What were the overriding factors that put us in this position with regard to the decline in sales? Second, analyze what pro-active steps can be taken to reverse the downward or stagnant trend in sales. Third, don’t be seduced by the illusion of creating sales for the sake of sales growth; understand the profitability of your various business opportunities and channel growth opportunities where opportunity and profitability intersect. Fourth, consider the overall expenses of the business and determine where the company might be able to reduce expenses without impacting its ability to grow – after all, slow sales without overhead reductions will eventually cause a decay in the bottom line. Finally, based on the analysis you’ve done in the preceding steps, determine and develop the best plans to put in place that will have the most impact – but drive mere planning into reality by developing a timetable for the implementation, assigning responsibility, and monitoring progress. Stay customer-focused and always stay positive – a positive nature is infectious to those within your company, your customers, and your business partners.