Maine continues to claw its way out of the recession that officially ended in 2009, treading slowly on a path to recovery.
Economists say the state lost more than 30,000 jobs in the recession. Earlier this week, a new report from the Bureau of Economic Analysis in the U.S. Department of Commerce found that Maine’s gross domestic product, or GDP, actually dropped 0.04 percent in 2011— likely due to the final closure of the Brunswick Naval Air station. Even before the recession, Maine was experiencing economic challenges, particularly as a traditional stronghold, manufacturing, took an ongoing hit across the state.
Many Maine businesses closed shop during the trying economic times. Many, many more survived. Some even thrived.
At a recent roundtable hosted by KeyBank, several small business owners talked a bit about how the recession affected them, and what strategies they undertook to keep their operations going. Participants included Michael Huston, one of the owners and general manager of the Ocean Point Inn, a 110-year-old, 61-unit hotel in East Boothbay; David Kingsley, owner-operator of The Captain Lewis Residence, a 34-bed assisted living facility in Farmingdale that’s about to undergo a major expansion; Dave Sleeper, owner of Realty of Maine in Bangor, a real estate agency with more than 125 agents at seven locations; and Robert Waller, owner and general manager of Thermal Systems Inc., a Scarborough company that designs and builds alternative energy and steam systems for industrial, commercial and institutional clients.
Stephen Krolikowski, Key’s Business Banking team leader in Maine, asked the group a few questions that they chewed over during the hourlong discussion. As they discussed ways to survive and even excel during a downturn, some dominant themes emerged. Staying lean with an appropriately sized work force was one of them. Another was looking for the kinds of opportunities that a downturn provides, and taking advantage of them.
Krolikowski: Has your business faced any challenges from this business environment over the past four years, and if so, how did you overcome these challenges?
Kingsley: Health care is somewhat immune to it, because people have to end up receiving health care when they need it. But we still have seen a drop in terms of demand. Obviously, we deal with the elderly — if you were unemployed and your mother or father needed some care, you might end up taking them into your home and caring for them at home if you didn’t have a job. I think some of that has happened with our business, that we’ve seen a little bit of a drop-off.
I also ended up taking advantage of the down market to purchase a facility that would make sense for expansion in the future. It’s a combination of survival and thriving.
Sleeper: When the market went down we made a lot less money. ’09 was a bad year. ’05 and ’06 were killers — I’d love to have those back, holy cow. I made a ton of money. Right now times are good.
It’s really a matter of keeping your expenses low. I’ve got a format that I think is as recession-proof as a real estate company can get. We run a company where the agents pay all their own expenses — I don’t pay anything. All I pay for is the rent, the lights, the heat, the phones, the secretarial, all that kind of stuff. So I’ve got fixed overhead.
Huston: We made a commitment six years ago. We began taxing ourselves, putting more capital into this (business), making some minor changes. We hired a marketing company that knew the Internet. Three years ago, which was not exactly booming times, we had a 13.5 percent growth over the previous year. We still haven’t reached our best time, but we’re coming back. We’ve cut expenses. Last year we had a little growth, this year we’re still ahead.
(Huston said nearby island-based development also gave he and his partners a “big chunk of money” for a parking easement.)
We took that big chunk of money, and we have 61 rooms, and we renovated 35 of them — flat-screen TVs, new furniture, paint. The idea is we want to start driving business back. We’ve seen this growth even with the economy still down — now we want to make sure we can hang on to it.
Waller: We are a litmus test for industry. Over the last 30 years, it has been cyclical. Every 10 years in the industrial cycle, it seems the bottom falls out. Initially starting out, we thought we were going to be all things to all people in the energy world and provide these services and build the company and have a stable full of people to provide the various disciplines required to do the services.
We quickly realized at the first downturn that I spent most of my time trying to figure out which bank to rob so I could make payroll every two weeks. So we scaled back — painfully — and had an awful lot of layoffs. We just thought about what is it we do best, rather than be all things to all people. We just settled on alternative energy and biomass, which, here in the Northeast, made an awful lot of sense. Rather than the stable full of people in the backroom, align yourself with companies that would enhance your product, companies that would come on board as subcontractors to allow you to get the product out the door, but when the project is over, they’re gone.
In 2001, when all of us were affected, we just stayed small and it’s been better. In 2008 and all the way through, we’ve had good years — because we’re the right size.
Krolikowski: Do you feel you’re right sized, or do you see your companies expanding and adding staff in the near future?
Kingsley: I think we’re at the right size as far as our staffing right now — but in terms of a major increase of employment, [that will happen] when we do the physical expansion, which we’re going to be undertaking shortly.
Sleeper: The way I look at it is bigger is better in the real estate business. I can double or triple my size over the next few years without batting an eye as long as I can keep the income rolling.
We have expanded a lot over the last few years. We actually bought a small company a little over a year ago. That’s the way most companies grow, either by attracting other agents or by buying other companies. I see us going statewide. I see us growing without too much increased overhead. I have five employees — that’s my total staff, plus myself. All agents are independent contractors.
Huston: My goal is to see if I can get everybody working close to 40 hours. Once we’ve got them there, maybe we’d bring on someone else. We don’t have a lot of full-time people now, the more busy we are the more work there is. We raised the (wages) on some of the staff. When we did the hiring the next spring we made clear that instead of nine people in this department, there’s going to be five. And you’re going to be paid (more). And you’ll probably work 40 hours, instead of 30, 35. And it’s worked well for us.
Waller: In my particular situation, until the industrial market comes back, we’re going to continue on this path. It allows us to grow, but we have a lot of subcontractors. Ultimately we would like to hire full-time people to fill these slots. This interim is survival.