Lessons learned from the Great Recession

Editor’s note: BizTimes Milwaukee gathered feedback from the leaders of several companies across southeastern Wisconsin to explain how their businesses survived the Great Recession. This special report examines some of those lessons learned.

Christopher Morgan Fulfillment Services, a third-party provider of logistics, fulfillment and distribution services for consumer product and service companies, plowed right through the Great Recession, posting record revenues in 2008 and 2009.

The firm recently added an 80,000-square-foot expansion to its facility in New Berlin, bringing its total size to 205,000 square feet, to accommodate for the company’s growth.

“Typically, companies like ours do well in a tough economy,” said Christopher Morgan president Christopher Rebholz. “Traditional companies are downsizing and looking to outsource some of their workload to companies like ours. We’ve added a lot of software supports and have automated a lot of the processes, which has helped us grow over the last two years.”

According to Eric Nelson, vice president of Christopher Morgan, the firm has also been able to work with clients to streamline processes and develop ways to drive more orders for them, which increases business for both sides.

“Our main focus is always, ‘How we can help you grow your business?'” Nelson said. “If we can help them grow their sales and orders by trying new things, we have control over our growth and expansion as well.”

The company adapted its business approach to account for changes in consumer spending habits and the technology associated with making mobile and online purchases.

“It was paramount for us to roll up our sleeves and stay positive when everyone was saying that consumers had stopped spending,” Rebholz said. “We knew there were still people out there with jobs, there were still people out there buying, and those were the people we needed to reach.”

Christopher Morgan has to adapt its business practices every day, Rebholz said.

“It’s easier now to purchase things,” said Rebholz. “It’s not about waiting for the Sunday paper for coupons. Now people expect to get discounts, coupons and payment plan options on the web, on the television and even from their mobile phones. We have to adapt our technologies and our skill sets to accommodate those web and mobile markets.”

Adapting to mobile technologies and more interactive sales marketing is at the top of the agenda for Christopher Morgan in 2010, Rebholz said.

“We’ve never thought of ourselves as just a warehouse,” Nelson said. “We’ve always been a marketing partner to our clients, figuring out ways we can help them drive orders and that has allowed us to grow significantly during this recession.”


Overcoming tight credit limits

Randy Spaulding, founder and chief executive officer of Spaulding Clinical Research in West Bend, began putting together a business plan for his company in July of 2007. According to Spaulding, the company has faced challenges throughout the down economy, but the uptick in the country’s pharmaceutical market combined with a team willing and able to do more with less helped the firm get through the Great Recession.

“I raised the money to start the company relatively quickly back in 2007.That was before the problems within the banking industry were even evident,” Spaulding said. “When we purchased the facility in April of 2008, we knew it was going to need some renovations, and that’s when it became very clear the banks were in distress.”

Spaulding worked with a local bank to get the financing he needed to do the renovations on the new facility, but he could not help but notice that a new business model was going to emerge for his company. The business would have to operate with a limited amount of credit, but if it could do so, it would be better-positioned in the long-term.

“Going through that, I couldn’t help but think that’s what it was like in the ’60s when my father was running his business,” Spaulding said. “But to be honest, I also felt that learning how to manage debt and operating without excessive credit was a good thing for us. I couldn’t argue with where the economic climate was leading us. If our company could get very good at this it would be very helpful in the long run.”

In addition to learning to operate efficiently without excessive credit, Spaulding believes that as a startup company, he was better-positioned to adapt to the twists in the economy during the recession, more so than some of his larger competitors.

“It became clear that a whole new business model was going to emerge and that as a startup, we were ideally situated for that change,” he said. “We are a very lean and agile company that can respond quickly to customer needs and change directions quickly in order to maintain our customer focus.”

Regardless of the economic climate, those ideals are ones that every company should value, Spaulding said.

“I keep going back to my father and how he ran his business,” Spaulding said. “Of course, you listen to your customers. Of course, you adapt to your environment. And of course, you don’t take on more than you can chew or take on debt that you can’t handle. We’re all going back to the basics.”


New client focus

Pewaukee-based Integrated Risk Solutions, an insurance and risk management firm, survived the Great Recession through a process of redevelopment and organic growth, said Tom Precia, president and CEO.

“Over the past three years or so, we’ve experienced a lot of growth, and in an industry that is a very competitive one,” Precia said. “Rates are going down for our clients, which is obviously a good thing for them and a goal of everyone’s. However, if you don’t grow organically along with those rate drops you are certainly going to end up shrinking.”

The company’s strategic planning, which began even before the bottom fell out of the economy, helped Integrated Risk Solutions make a couple of acquisitions in the heart of the recession that expanded two core business solutions of the firm, including the integrated risk modeling solution and the benefits solutions, Precia said.

“A big part of what has helped us through this challenging economy is planning and building metrics and outside-the-box thinking,” Precia said.

Over the past few years, Integrated Risk Solutions has entered more vertical markets and has learned to pay close attention to the specific needs of its clients.

“The job is never done, and there is a great deal of work we want to get done,” Precia said. “Throughout the recession, we’ve been able to become more focused on investing in capabilities to help our clients achieve what they need to get through it.”

According to Precia, the company is more focused on bringing value to its clients in this market.

“When you bring value, it is more tangible for them to make those decisions to continue working with you,” he said.

The company invested more heavily into transportation expertise and construction safety consulting on big public projects over the last few years.

“Our goal throughout this recession and beyond is to help our clients improve. If they improve, we improve,” Precia said. “If we can minimize their risk, we can drive their cost of insurance down and we feel that we are going to continue to grow at a high rate.”

Integrated Risk Solutions is positioned to hire more staff in 2010, including the addition of a chief operating officer/chief financial officer position.

“It’s going to be an exciting year for our business, but we also have to proceed a little bit cautiously and make sure everything is in good alignment before we move forward,” he said.


Know your strengths

Arvid “Dick” Tillmar had worked in the insurance industry for 45 years when he decided it was time to move on.

“You get to a certain point that you say, ‘If I’m going to keep working, and if I had my wishes, what would I do?'” he said. “The insurance industry was not what it used to be, and what I really liked doing is connecting companies with great ideas.”

Tillmar left Brookfield-based Diversified Insurance Company in January to form Tillmar Connect LLC, a consulting services firm.

“Two years ago, I asked five of my friends what they thought I did best, and I told them to be brutally honest,” Tillmar said. “Their core responses centered around networking and putting people together. So, one begins to think how do you get paid to do that? And I decided to build Tillmar Connect and see if they would come.”

After five months, Tillmar has six clients, for whom he basically does whatever they need, he said.

“If my clients have something on the back burner, but don’t have the time or the talent to get it done, and if it’s something within the scope of things that I can do, I do it,” he said.

According to Tillmar, he has connections within other professions that can assist him with the projects.

Tillmar’s business is very relationship-driven.

“I help other businesses accomplish their business goals,” Tillmar said.


Invest for the rebound

During the Great Recession, Milwaukee-based Engberg Anderson Architects invested in new equipment, software and training for employees to better position the firm for a recovery.

“We have invested in the future because we believe there is one,” said Chuck Engberg, principal of the company. “We’ve invested in new technology and training for our employees because we can see a change in our industry in regards to how we convey and share our information.”

The firm has purchased the new equipment and has hired a part-time instructor to provide the tools and technology behind Building Information Modeling (BIM), Engberg said.

“Once they become proficient, those people will teach the others in the firm,” he said. “We’re really trying to be at a point where people understand how they have to be flexible to be productive.”

The architectural industry is changing, Engberg said, so it is important to be flexible and open about the type and size of projects that the firm takes on.

“There are a lot of small fee projects that we have been able to take on,” he said. “I think that’s a good indication of how people are thinking these days. Rather than trying to get financing for a project that may have ‘A to Z’ subsets, they are subdividing that project even further, completing subset ‘A’ and holding off on doing the rest for now. We’ve learned to adapt to that.”

For his firm, the economy has started to turn around, Engberg said.

“As I said before, we believe there is a future. and it’s our goal to make sure our employees are there to meet the future when it gets here,” Engberg said. “We want to make sure that we can really benefit our employees by educating them with skill sets they didn’t have before. This way, they will be prepared to meet any kind of situation.”



Grafton-based Seek Careers/Staffing Inc., had to throw out its business plans during the Great Recession, when many companies cut staff.

“We were no longer working with the same elements that we were when the plans were made,” said MaryAnn Raash, Milwaukee district team leader for Seek. “That was hard for us, but we had to look internally to see what we could do to keep ourselves afloat, and then be there to best serve the clients we still had.”

Seek was forced to make some internal layoffs and consolidate a few of its locations.

“It became almost a day-to-day operation. Everyone was working two or three different jobs and we needed to figure out the best way to help our clients get the work done that they needed to,” she said.

Nearly 70 percent of Seek’s client base is in the manufacturing industry, Raash said.

“We needed to adapt our business model to somehow ensure our clients that even though they were laying off their full time employees, our services were still valuable to them,” she said.

SEEK diversified its offerings, and began to do more payroll work.

“We started putting those laid off workers to work part time,” Raash said.

According to Raash, the company will need to continue to diversify, and the new normal will be that people will have to perform two or three different jobs.

“As things pick up for us now, we’re looking ahead and paying more attention to what is going on in our city,” Raash said. “We’re seeing a lot of temporary jobs out there, which is indicative of the cautiousness and fear that remains in the community. What we’ve learned at least is that this is always going to be a peak and valley industry and in order to survive we have to be flexible, adjust and be leaders of that change.”


Stick to the plan

As a technology company, Oconomowoc-based Paragon Development System is an anomaly in the industry, said Craig Schiefelbein, founder, president and CEO. As many of its competitors were driven by the bottom line and became internal facing, his company chose to invest and double down during the Great Recession.

The company avoided making layoffs and even made two small acquisitions during the downturn.

“We’re in IT. Our job is to help people do a lot more with the same or do more with less,” Schiefelbein said. “All industries were affected by the recession, but the bottom line is that we felt it was a good time to invest because everybody was in trouble mode and looking for better ways to perform.”

PDS formed some strategic partnerships to provide additional services to companies who previously were locked into competitors because of relationships they had formed.

“We stayed true to our original strategy,” he said. “Everyone suffered last year. Our revenues were slightly down too. But because we stuck to the plan we’re positioned well and actually shooting to do $164 million in business in 2010.”

According to Schiefelbein, PDS offers clients a unique value proposition that is in demand in a poor economy.

“We’re committed to taking that to market,” he said. “I think 2010 is going to be a good year, a record year, and 2011 is going to be significantly better for us. We’re committed to grow. It would be foolish to say we’re all clear of this economy. We’re not. I think it’s going to be a very slow strategic recovery for most.”


Asset management

Milwaukee-based Douglas Dynamics LLC, manufacturer of snowplows under the Western, Blizzard and Fisher brands, has been able to weather the Great Recession with steady demand for its products.

The company has kept most of its workforce intact and recently launched an initial public offering, largely because of the way it manages its assets.

“In all parts of the cycle, whether (the economy) is strong or weak, you have to be very disciplined with asset management,” said Jim Janik, president and CEO. “During weak times, it pulls you through, and during strong times it makes you more effective.”

Douglas Dynamics launched its IPO in early May. The company’s shares are now traded on the New York Stock Exchange under the ticker symbol PLOW.

The company began investing in lean manufacturing in 2005, when its balance sheet was strong and orders were robust. Over a four-year period, it focused on operational efficiencies, improved shipping times, accurate inventory levels, reduced production time and reduced its overall footprint.

Douglas Dynamics is in the process of closing its Johnson City, Tenn., facility. That production will be moved to its Milwaukee facility.

“When you think about lean and asset management, you can now understand where you are in your business and the economy,” Janik said. “You can manage your asset structure and reduce fixed costs – and you can withstand different economic conditions. And when the economy comes back, you’re now positioned to have better performance levels.”

The company has taken many of the tenets of lean manufacturing into its office, administration and IT areas, maximizing its cash flow and accounts receivable.

“In my opinion, for a company to be truly successful and take full advantage of lean for asset management, it’s difficult not to do it company-wide,” Janik said.

The company has also fostered deeper connections with its dealers, to ensure inventory levels are appropriate.

“If people want inventory, we try to make sure we are looking at a market realistically. I don’t want to stuff a channel when the economy is soft,” Janik said. “Our philosophy is to manage receivables before we ship product, not afterwards.”


The fundamentals matter

The financial industry has been pointed to as both a cause of the recession and a victim of it. Banks allegedly helped fuel subprime lending, which helped drive the housing bubble. And they were also stung by it – many banks have been forced to write down hundreds of millions, even billions, in mortgage-related losses as waves of foreclosures have swept the country.

“The best lesson for the (banking) industry was that people’s repayment ability is more driven by economic conditions and the performance of businesses in those conditions,” said Russ Weyers, president of Racine-based Johnson Bank. “We stayed out of that business (subprime lending), so we didn’t feel the effect directly. But the effect on the overall economy has been difficult for our customers and for us. We didn’t have to participate in those markets to be impacted by them.”

The banking industry is now focusing on its fundamentals, Weyers said, especially in relation to its commercial clients.

“The ability to repay loans from an operating cash flow (standpoint) is the most important part,” he said. “As we look at underwriting, it goes back to the business plan and the ability to service debt. How we focus on that is by understanding the management team and the business plan.”

Many businesses have emerged from the recession and are in healthy shape – and those are the types of companies that Johnson Bank and other financial institutions want as customers, Weyers said.

“From a lending standpoint, if you have good management, good equity in the business, reasonable equity and a good business plan, you should have no problem finding financing today,” he said.


Redefine yourself

Trocadero, a popular Milwaukee restaurants, intentionally closed its doors in February – both because of the economic slowdown and road work to the Humboldt Avenue bridge, a crucial route to the restaurant from the East Side.

“It was the perfect storm, with the economy and the bridge being out for two years,” said Eric Wagner, co-owner of the restaurant. “The bridge is supposed to re-open in June, and this was the perfect opportunity to renovate Trocadero.”

Although the restaurant has been closed since winter, there has been plenty of activity inside. Its bar was moved to the front of the house, dining room floors were refinished, a new three-season patio was finished with heated floors, infra red heaters and sliding windows, and outside gardens were remodeled.

Wagner and his business partner decided that it was also time to revisit the restaurant’s menu.

“Trocadero was viewed as very French,” he said. “We wanted to create an approachable menu, one that used better ingredients than typical bar food. We’re eliminating boundaries, working away from the Parisian and French thing. Our new menu lets us do whatever we want, which should be a good fit for the destination quality of our real estate here.”

The revitalized menu is heavier on appetizers and the increasingly popular “small plate” fare found in many restaurants today. Trocadero’s wine list has also been expanded, and its bar now offers a wide selection of tequilas, as well as fresh fruit margaritas.

Between its menu and space changes, the restaurant believes that it will be better able to connect with casual diners and the business crowd during the lunch hour, Wagner said.

“We’ve created more defined spaces for that lunch meeting,” he said. “And we’re open for breakfast now. That’s going to create opportunities to connect with people as they use the bridge to commute to work again.”

Reporter Eric Decker contributed to this report.

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