It’s broken! I still remember the disappointment felt as an eight-year-old when the jewel-encrusted Roy Rogers six-shooter that conformed so well to my hand stopped firing caps. I think my older sister Tyra was the culprit, but she wasn’t admitting anything. For some reason, the hammer would not respond with enough recoil when engaging the trigger. I responded in second-grade fashion and cried.
Mom’s hug comforted my heart, but the gun remained broken. Had I known then what I know now, I would have taken the toy apart, found the fatigued spring and sent it to Luke for analysis at SMI. Obviously this level of problem-solving goes beyond second grade ability; yet no matter our age, knowing the full story can be empowering and set us in the right direction.
Since my first day at SMI on September 24, I’ve been working to learn the full story. What brought the organization to this place in time? What needs to be done to radically improve connection with members? How can we ramp up services, benefits and expand value? What should SMI’s five-year and 10-year horizons look like? Where is the industry headed, and how can we parallel that track successfully? Is it possible to double membership? Why are some members involved while others remain on the fringe? What needs to be done to make membership irresistible?
All good questions, all needing answers.
The first answer came for me this past July. I drove to Chicago for an interview, walked into the hotel lobby, found the correct meeting room, and walked inside. I found myself in a small room with Dan Sebastian, Reb Banas, and Scott Rankin. Flash forward two hours: As I walked out of the room, I reflected that this group of leaders was excited about the future, cared about the organization they represented, and were ready to embrace change by trying new approaches to involving members and operating the association. These were all minimum requirements for which I sought in an opportunity but the clincher for me was their cooperative sincerity. I knew that if they represented a cross-section of the membership, this would be a wonderful place to work and ply my skills.
As I learn SMI’s story, which is each of your stories, I will gather information and insights as to how we can build the organization into a forceful entity, united in strength that empowers membership to success. I will be traveling around the country to meet face-to-face, so I encourage you to begin gathering ideas for those upcoming discussions.
The broken six-shooter eventually disappeared no doubt with mom’s help. I’m sure it’s resting, or rusting, at the bottom of a landfill in Webster County, Iowa. It’s part of my past, part of my story. Because this is a two-sided learning process, as we engage, it will help for you to learn my story along the way. With this in mind, I’ll end each of my columns with a hint that you can ask me about by e-mail or in person. I’m looking forward to meeting you, and may you have a blessed New Year.
Hint: Surviving a 12-foot sinkhole at Badger Rapids while kayaking the Grand Canyon.
Shane Johnson Esq. is the executive vice president of the Spring Manufacturers Institute. He brings more than 15 years of association and management experience to the institute, most recently at American Safety Training in Davenport, IA. He has been a congressional deputy chief of staff, served as media spokesperson for the White House and USDA, and even skinned a bear when he lived in Alaska, while working at the State Chamber of Commerce. Readers may contact him by phone at (630) 495-8588 or e-mail at firstname.lastname@example.org.
Is Your Banker Hassling You
on Your Line of Credit?
By John Mackay, Mackay Research Group.
The fundamental question that creditors (bankers and suppliers) ask potential borrowers is, “What assurance do I have that I will be paid back?” Short-term creditors are not as concerned about your earnings as much as they are concerned about your liquidity, or the relationship between short-term debt and short-term assets available within the next year to repay that debt.
One of the key ratios creditors use to measure liquidity is the current ratio. It is calculated by adding up all of your current assets (those you expect to convert to cash within the next 12 months, such as inventory and accounts receivable) and dividing them by all of your current liabilities (those you have to pay in the next 12 months, like accounts payable and short-term notes payable). The ideal current ratio is 2.0; you have two dollars of current assets to pay one dollar of current liabilities.
According to the SMI Annual Market Report, the typical spring manufacturer has 27-28% of their total asset investment tied up in accounts receivable, and approximately 24% of assets are invested in inventory. In other words, one-half of your assets are allocated to inventory and accounts receivable. Current liabilities, or short-term debt, account for only about 20% of total assets. Furthermore, spring manufacturers generally have $3 of current assets to pay $1 of current liabilities. Bankers normally like those kind of results.
Creditors are more likely to extend credit to companies with good liquidity, or a high current ratio. The more liquid a company is, the more flexible it can be in a poor economic environment, such as a downturn. In order to improve your liquidity, you need to pay attention to a number of factors: inventory levels, shipping schedules, operating efficiency, A/R collections, negotiated terms with customers (and suppliers), and the like.
The current ratio measures the margin of safety that management maintains in order to allow for the inevitable unevenness in the flow of funds through the current assets and current liabilities accounts. A company needs a supply of current funds to be assured of being able to pay its bills when they come due and to be able to take advantage of cash discounts offered by suppliers.
John Mackay is president of Mackay Research Group, the survey research organization that conducts the SMI Annual Market Summary survey of spring manufacturer profitability each year. Readers may contact him by e-mail at email@example.com or phone at (720) 890-4255.