Getting Lean and Mean

By late last year, Joe Pozo knew his marine business would need to be dramatically retooled to remain competitive.

Since that time, his Boat Tree business – with locations throughout central and coastal Florida – has closed one location; relocated another; cut its workforce in half, downsized from about 100 to 50 employees; reduced its inventory; increased its cash flow and redirected its advertising dollars.
“Our company is smaller now, but we will be more profitable going forward,” says Pozo, president of his Orlando-based family business. Here’s how he did it:

Location
Boat Tree closed its Jacksonville location and left that market altogether. To ensure the closure wouldn’t hurt customers, Pozo and his team arranged for area service centers to take care of service and warranty issues. Customers who had patronized the business within the last five years were all contacted.

Boat Tree also closed its Melbourne location but, not willing to abandon the market completely, leased a new location in nearby Port Canaveral. The company continues to own its Orlando and Sanford locations.

Employees
After instituting a hiring and salary freeze across the company, Pozo began evaluating each staff position to determine what nonessential functions could be cut. Then he began looking at individuals to determine how to best allocate the essential tasks needed to keep the business going.
“As the business slowed down and with one less branch to manage,” he explains, “there was less administrative work to be done so we were able to reduce staff substantially at our headquarters. We also reduced sales positions to make sure that the remaining staff had sufficient opportunities with the reduced traffic coming through the door.”
In all, 20 people were cut from the Orlando location and 30 were also let go as a result of the Jacksonville closure. The employees were given two weeks notice and severance pay based on their longevity with the company.

At the same time Boat Tree downsized its staff, the family beefed up certain revenue-generating positions including technicians.

“We figured that more people would be hanging onto their boats and getting them serviced rather than trading up,” Pozo says.

Pozo also added back two of the three positions cut in lot personnel when it became apparent that the deep cuts had resulted in a slippage in service.

One side benefit of the current climate at Boat Tree has been an increase in communication and keeping department heads and management in concert via weekly staff meetings, where goals for inventory reduction and other metrics are reviewed and discussed.

Inventory
When management began retooling Boat Tree, the company had about $23 million in inventory. That has since been decreased to about $12 million, and it remains a focus of concern.

“We have worked very closely with our manufacturers and let them know about our plans so they could reduce their production,” Pozo explains. “We also eliminated some of our product lines. We are going to focus on just our key products and not try to be everything to everybody. We still aren’t comfortable with our inventory levels, but we have made a big dent in it.”

Cash flow
In addition to keeping its primary lenders apprised of the situation, Boat Tree increased its lines of credit while looking for other ways to increase cash flow.

“We had a truck on the books for $18,000 that was paid for, so we sold it for $15,000. It was a $3,000 loss but we got $15,000 in cash,” Pozo says. “Our focus now isn’t necessarily on profits but on cash. It’s the name of the game in a downturn.”

Advertising
Every dollar spent on advertising is now tracked via coupons and calls to action. Those that don’t produce are redirected to other channels such as the Internet and in-house events. Direct mail and e-mail blitzes are used to generate and follow up on existing leads.

Pozo has been in business for about 16 years. Although he doesn’t believe that his market has hit bottom yet, he is confident that Boat Tree is well-positioned for the future.

“I think the industry got spoiled during the heydays and became complacent because business was too easy,” he says. “Now we have streamlined and are doing well. We’ll come out of it leaner and meaner.”