The Great Winnowing of 2022
Industry News
Courtesy of Roofing Contractor, GAF recently announced a $100M investment in a 15% recycled-content shingle, one made from worn-out shingles that would be thrown away. While there have been attempts to make a recycled-content asphalt shingle in the past, this new project may finally be commercially viable, not just environmentally beneficial. In this situation, the main challenge is recycling the old material in a cost-effective and performant way. Although GAF hasn’t solved this problem yet, their investment and continued efforts are a sign of their belief in their solution. As for the implications of this product, typically recycled content is an advertising point for metal roofing, which can claim to be made from primarily recycled content with 100% recyclability once it wears out. If asphalt can start to reach heights similar to these, this point may become less effective in the future. Beyond this, reducing the massive amount of asphalt shingles that go to the dump every year would make a huge difference.
Isaiah Industries is sponsoring LeadCon 2021, an event for home improvement and remodeling contractors led by Tony Hoty from May 19th-20th in Orlando for $595. A livestream will be offered for those who can’t make it in person. An Isaiah Industries sponsorship drops the cost to $95, so visit their website, select Isaiah Industries as your sponsor, and buy your tickets!!
Winnow, verb: “To blow a current of air through grain to remove the chaff.”
I am writing this issue of the Executive Report to talk about something that I believe should be on the radar of every “Main Street” business – “The Great Winnowing of 2022.”
2020 kick-started an interesting sequence of challenges and changes for businesses everywhere. As the result of the Covid-19 shutdowns, we saw the closure of many “Main Street” businesses. Interestingly, though, we also saw a record number of new companies started by displaced workers. Amid this upheaval, many businesses found themselves granted PPP funds. The funds were essential to survival for some, but for many who tightened their belts in 2020, they were stockpiled for future use. Hitting those companies’ income statements largely in 2021, these funds seemed like a lucky windfall.
Here’s the basic scenario faced by many:
Early 2020 brought about declined sales and great uncertainty for most businesses. Those that chose to remain open could use the PPP “windfall” to pay workers and prepare for the future. The second half of 2020 saw some businesses (including home improvement) greeted by a booming market continuing into 2021 while other industries like food and hospitality limped along. Some companies “used up” their PPP funds while others kept them for a rainy day.
Companies that depleted their funds have faced great uncertainty about the future. Unless they are in an industry full of new technology, they should find a restored and robust market for their goods and services when things fully re-open from the pandemic – assuming they make it that long.
Companies sitting on a stockpile of cash in booming industries have three grave threats looming over them:
- Supply chain shortages and raw material costs eating into their profit margins
- Poor cash management
- A significant decline in sales as pent-up interest is met and demand lessens
Struggling and excelling businesses alike risk participation in “The Great Winnowing of 2022” – falling by the wayside. The key to survival is cash flow, and carefully tracking your cash flow will be critical in the coming months. Survival will be possible, but be careful not to take anything for granted during this period. Here are some steps you can take to protect your company’s cash flow.
- Maintain a cash flow statement and projection to know where you are now and where your future lies.
- Watch profit margins (and all of your numbers for that matter) very closely. During this time of rising costs, businesses run the risk of losing track of their profitability. Don’t be afraid of increasing your prices to keep your business afloat.
- Pay close attention to customer service and your pipeline of future business. During the times ahead, your best competition will be getting better at what they do – don’t let them surpass you when things are stressful.
- Watch expenditures. Thinking of making a major expenditure? Look at your cash flow. What if things do slow down for your business and industry in 2022? Will making the expenditure now leave you strapped for cash down the road?
- Be conservative and careful. Just owning a business is enough risk during uncertain times. Remember, “cash is king, and there ain’t no queen.” Furthermore, don’t let your business exist to serve your vices or your ego.
Over the years, I have seen far too many businesses fail when they thought all was well. You can make it through “The Great Winnowing of 2022”– be alert and wise in your decision-making. Please feel free to contact me if you’d like to discuss things further.
Todd Miller has spent his entire career in the metal building products manufacturing industry. He is president of Isaiah Industries, an organization recognized as one of the world’s leading metal roofing manufacturers. Todd is currently Vice President of the MRA (Metal Roofing Association) and a Past Chair of MCA (Metal Construction Association). Through his website, he strives to raise the bar on standards and practices to provide property owners with the best possible products for successful roofing projects.
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