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Six tips for surviving the downturn
Right now, business isn't easy. But some companies are still doing well. They are not just surviving, but actually reaching new levels of performance. CW spoke to a few of them to find the factors that are helping them thrive, while others struggle.
1. Spread risk and diversify your customer base
It is all about risk. The industry saw the financial crisis sweeping across the West, and foresaw that expansion in the GCC could be a risky business. So what's the best way to deal with risk? Spread it.
"The bursting of the bubble was triggered by external forces. Everybody knew it would come, but not as soon as it did, and not to that extent," says Ulma Formworks general manager Andreas Gathmann.
So Gathmann moved immediately to spread the risk beyond the borders of the UAE. "We prepared by ensuring we had a foot in other markets," he says. Ulma furthered operations in KSA, Qatar, Oman, Abu Dhabi and also Egypt.
"Of course our volume of business was affected but we are maintaining and even increasing profitability," Gathmann says.
Recent start-up Cladtech took a similar approach. In the words of president Giampiero Alessandrini, the firm, which started operations last September, "started moving when everything crashed."
"Being a lean organisation in terms of people we were able to move our focus immediately from a single country to other markets," says Alessandrini. "On top of Dubai we shifted focus to Abu Dhabi, Saudi Arabia and Qatar."
Drake & Scull International, a contractor prominent in the MEP sector, is still performing well despite the ongoing downturn, says executive director civils, Saleh Muradweij. This is because the company has resolutely guarded against putting all its eggs into a single basket.
Just over two years ago it diversified its portfolio of services and established independent functioning units focusing on infrastructure, water and power (IWP) services, in addition to civil contracting. "Together with our portfolio of MEP projects, this has given us the advantage of diversifying our risks and maintaining growth despite the slowdown," says Muradweij.
2. Control your cash
In tough, mid-credit crunch times, cash is king, no matter what market you are in.
"Businesses live and die by the cash they have, and it was our goal to have free cash flow," says Andreas Gathmann.
Ulma Formworks' renewed focus on the rental market facilitated the firm's cash flow ambitions, along with a careful approach to ensuring the finances of its customers.
"Look for new opportunities, new products or systems. You have to explore every angle available to you," Gathmann says.
As companies are affected by economic changes, the willingness to collaborate in small-scale joint ventures has increased, as Cladtech has discovered.
"By doing so we have the cost benefit, while at the same time we have avoided the burden of taking too many people on board," says Giampiero Alessandrini.
Alessandrini says that such opportunites may not have been so forthcoming were it not for the tough times.
"Try to use more outside resources," he says, "You can get very good deals with companies to work together, which will help you to face any kind of problem without burdening you with costs."
3. Add value...
"Even the downturn has its upside," says Laith Haboubi, business development manager of Mapei. "People are being more discerning. They want to provide more value to their customers. Our products are a little more expensive, but the price is right the first time."
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