Canada: Taking Advantage Of Emerging Opportunities - Make Sure You Know Where You’re Going Before You Act!

Last Updated: February 6 2015
Article by James Byrne

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.

Big picture

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 ask yourself:

  • 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 do
  • You can't hit the target, if you don't know where you're aiming

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 business.

Ground level

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 late?

Final thoughts

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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