There is no doubt that the forestry industry has seen its share
of ups and downs. But even within a constantly changing forestry
environment, there is always opportunity, right?
In the November 16, 2012 issue of The Province, Ian Austin and
Sam Cooper referred to the 'Logging Boom!' Good news,
right? It's always great to see a positive outlook for the
industry. However, as both the coastal and interior logging
associations commented regarding the article, there are concerns
facing contractors in all regions of the province. And the issues
are the same throughout the province, such as: attracting the right
people for employment, obtaining financing for the necessary
equipment and how to transition to a new generation of owners.
So if the industry is moving into a 'boom' and work is
becoming more readily available, what do you need to consider to
address these issues and have your company in a good position when
opportunity presents itself? Here's some important questions to
Do you have a good management team?
Do you have good cash management?
Do you have a good credit rating?
Do you have a good relationship with your lender?
Do you have a good understanding of your cost structure?
Do you have a good HR policy and benefits plan?
From my perspective, you need to answer "Yes" to all
the above points or you aren't taking full advantage of
emerging opportunities. To be able to respond to operational change
or increased demands, putting all these factors into place is very
important to ensuring your business is successful.
Although not listed above, equally important is the question:
"Do you know where you want your company to go and what your
company's objectives are?" As an owner, what do you want
to do in the next three to five years? How much time have you given
to thinking about where you want to end up? Or do you just want
out, but don't know how to start the process or how to get all
the parties and / or family members involved?
There are numerous clichés, but they all ring true:
Failing to prepare, is preparing to fail
If you don't know where you're going any road will
You can't hit the target, if you don't know where
Okay, I think you get the point, so I will stop now.
Being able to identify what your strategic objectives are is
critical to ensure you achieve the greatest success. When
opportunity presents itself you need to be ready – and you
also need to know if it is the 'right' opportunity for your
At a business level, one of the most important considerations
for a company to be able to seize opportunities is the ability to
recognize and make informed decisions. A simple question you need
to be able to respond to is whether more volume is an opportunity
or a liability? The ability to access more volume may not work with
your current cash flow situation. Understanding your working
capital position and the interaction of the balance sheet and the
growth of your company is important. A key indicator to be aware of
is whether your working capital percentage is higher than your
company's gross margin; if so, then for each unit increase in
revenue, more cash will be required. Even though you are gaining
access to more work, cash flow may become an issue which must be
considered before jumping in.
Working capital percentage measures the investment a company has
made in working capital for every unit of revenue. Simply going to
get more credit at the bank may just lead to greater debt, greater
headaches and greater frustrations.
From an operational standpoint, increasing your volume is not as
beneficial as being able to increase your pricing by the same
level. A price increase will have a more favourable impact on
business performance and improve operational results compared to
more volume. Why? An increase in price will not impact your cost of
sales and operating expenses. As we all know, this is easier said
than done. Has anyone been offered any great rate increases of
As a final thought, it's safe to say that opportunities are
emerging in the B.C. forest industry. Knowing what your goals are
beforehand will help you identify which opportunities are the right
fit for your company and ensure you are seizing the opportunity
that's best for you and your business situation. But before you
jump in with both feet and truly recognize how good an opportunity
is, you need to know how well you are currently doing. This
informed position is where your company should be before you decide
if something is truly an opportunity or a liability.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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