What Wall Street's Shake-up Means to our Industry.
by Edward A. Sloan Sr., President, Ed Sloan & Associates | November 06, 2008
Healthcare Chronicles
Note: This story originally appeared in the November 2008 edition of DOTmed Business News.
I know when I started my own business years ago it would succeed or fail based on my actions, reactions and that factor that's harder to identify, but some would call "luck." That's why it's troubling to see the government sinking more than $700 billion into Wall Street to bail out those who took big risks or made bad decisions. Now, I don't like the idea of people losing all their investments or jeopardizing their financial futures, but I also don't like the idea of the bad decisions of others negatively affecting my livelihood either.
Today, when I'm getting a business call, whether it's from Asia or Europe, or Southern Alabama, one of the first things people ask is, 'Ed, how is the current economy going to affect our business? Are we going to have more/less equipment available? Is it going to cost more/less?' At the end of the day, it's clear that people are concerned about finances. Although there are probably some more rough days ahead for the economy, that doesn't necessarily mean our industry can't benefit from those ups and downs. What I'm seeing is a market that is going to be friendly to the aftermarket in medical equipment.
With budgets being crunched and purse strings tightened, people and companies are going to be bargain shopping now more than ever. They're also going to look for ways to raise capital. In either case, that translates to a boon for the aftermarket industry. For equipment providers, they are likely to not only see an uptick in customers looking to purchase their equipment, but they will also find new equipment sources as hospitals and health care centers take a good long look at the equipment they have and more willingly seek to unload that which they don't use.
It would be misleading for me to tell you that it will all be sunshine however. I anticipate with the limited credit available for the next few years, it's going to be tough on some of the small players. Many work off credit - that's just the way it is. Many rely on credit from their lender to finance their operations and in a tight credit market you don't have that to lean on. So you have to work off cash flow. Even if you build a big receivables bucket, getting that money into the bank is a big challenge. There are a fairly large amount of invoices that never seem to convert on time - if at all.
Inevitably some of the smaller companies will be bought by larger companies and consolidations will occur. In my experience, this is a cyclical event. A few years will pass and some individuals from those consolidated companies will break off and form their own companies, years will pass and the cycle will repeat.
The most interesting development in bad economic times isn't the consolidations, but rather how companies deal with hardships. Too often, I see budget cuts hitting marketing first. To me, that flies in the face of logic. If you're not advertising and the economy is rough, past customers may assume you're out of business and new customers won't find you. So, that's less money coming in and more cuts to be made. Meanwhile, your competitors have an open field to let customers know about their offerings. Maybe I'm being unreasonable, but I think it's a decent time to advertise.
Just like everyone else, I will continue to hope this economic crisis will pass quickly, but in the meantime, I will also keep in mind that it's not the end of the world, just a clarification of some business structures.
Ed Sloan has been involved in the medical industry for decades. He currently serves on the DOTmed Board of Directors and works as a consultant.
I know when I started my own business years ago it would succeed or fail based on my actions, reactions and that factor that's harder to identify, but some would call "luck." That's why it's troubling to see the government sinking more than $700 billion into Wall Street to bail out those who took big risks or made bad decisions. Now, I don't like the idea of people losing all their investments or jeopardizing their financial futures, but I also don't like the idea of the bad decisions of others negatively affecting my livelihood either.
Today, when I'm getting a business call, whether it's from Asia or Europe, or Southern Alabama, one of the first things people ask is, 'Ed, how is the current economy going to affect our business? Are we going to have more/less equipment available? Is it going to cost more/less?' At the end of the day, it's clear that people are concerned about finances. Although there are probably some more rough days ahead for the economy, that doesn't necessarily mean our industry can't benefit from those ups and downs. What I'm seeing is a market that is going to be friendly to the aftermarket in medical equipment.
With budgets being crunched and purse strings tightened, people and companies are going to be bargain shopping now more than ever. They're also going to look for ways to raise capital. In either case, that translates to a boon for the aftermarket industry. For equipment providers, they are likely to not only see an uptick in customers looking to purchase their equipment, but they will also find new equipment sources as hospitals and health care centers take a good long look at the equipment they have and more willingly seek to unload that which they don't use.
It would be misleading for me to tell you that it will all be sunshine however. I anticipate with the limited credit available for the next few years, it's going to be tough on some of the small players. Many work off credit - that's just the way it is. Many rely on credit from their lender to finance their operations and in a tight credit market you don't have that to lean on. So you have to work off cash flow. Even if you build a big receivables bucket, getting that money into the bank is a big challenge. There are a fairly large amount of invoices that never seem to convert on time - if at all.
Inevitably some of the smaller companies will be bought by larger companies and consolidations will occur. In my experience, this is a cyclical event. A few years will pass and some individuals from those consolidated companies will break off and form their own companies, years will pass and the cycle will repeat.
The most interesting development in bad economic times isn't the consolidations, but rather how companies deal with hardships. Too often, I see budget cuts hitting marketing first. To me, that flies in the face of logic. If you're not advertising and the economy is rough, past customers may assume you're out of business and new customers won't find you. So, that's less money coming in and more cuts to be made. Meanwhile, your competitors have an open field to let customers know about their offerings. Maybe I'm being unreasonable, but I think it's a decent time to advertise.
Just like everyone else, I will continue to hope this economic crisis will pass quickly, but in the meantime, I will also keep in mind that it's not the end of the world, just a clarification of some business structures.
Ed Sloan has been involved in the medical industry for decades. He currently serves on the DOTmed Board of Directors and works as a consultant.
