I recently spoke with a large Canteen franchise owner about how he was dealing with the current economic downturn in the US One of his observances prompted me to write this article.

The operator explained how the increase in the prices of fuels and products forced him to raise the prices in the accounts for the second time this year. He said that if he had known much earlier that he would face this increased cost, he would have raised more the first time, thus eliminating his need to raise so soon.

In November 2007 and again in January 2008, in newsletters I sent to over 1,500 traders in my database, I predicted that the price of gas at the pump would be $4-5 a gallon before the end of summer. And that was at a time when gasoline was still under $3 a gallon. How did I know this? Do I have a magic crystal ball in my office? What did I know that he didn’t?

I review financials, commodities, and even foreign markets daily for clues not only about what may happen to my personal investments, but also how the global financial condition will affect my clients’ operations here in North America.

There are a series of economic indicators that give us clues as to what may happen in the future. Although many of them are indications of past results, most will highlight future trends and directions of particular economic activity.

Earlier in the year, indications from the Petroleum Institute, the General Services Administration, and weekly crude oil supply and demand reports showed a continuing scenario that crude oil prices, along with gasoline, would continue to trend higher. Oil at the time had just broken $100 a barrel, but many predicted that oil would hit $120 a barrel or higher sometime in 2008. (Oil hit an all-time high of $144 this week.) Of course, a supply disruption in Nigeria due to civil war, Iran continuing to test missiles, and expert predictions of another devastating hurricane season have not helped matters. On the whole, an informed analyst would have no difficulty in predicting it. of higher oil prices versus lower prices.

On the commodity front, many individual products such as corn, rice and soybeans have hit all-time highs this year. Our government has mandated setting aside large amounts of corn farmland for ethanol production instead of food. This has helped increase the cost of food products made from corn and even the cost of beef and other meats, as the cost of cattle feed has increased due to lower supply. Then, when heavy rains and flooding devastated large agricultural areas in the Midwest this spring, thus shortening the growing season and reducing supply again, it wasn’t that hard to predict that food prices would rise and could continue to rise during the rest of 2008.

On general economic conditions in the country, reports on jobs and unemployment, consumer confidence, CPI and PPI, retail sales and other indicators will no doubt give even the casual observer an idea of ​​where the market has been. country and what is the future in the short term. probability of economic activity in the next 3 to 6 months. As I write this today (as I predicted in my January newsletter), 2008 is turning out to be the worst economic scenario we have experienced in the US in the last 30 years. And all signs point to no likely positive change until at least the second or third quarter of 2009 at the earliest.

Understanding these indicators and using them effectively will improve your operation and, in fact, will tell you, based on your particular financial situation, your age and the general conditions of economic activity in your area, if you should try to expand your operation at this time. buy market share from a competitor or, indeed, if declining revenues and profit potential for the immediate future have caused enough stress in your personal and professional life, that it may be time to exit the industry by exploring a sale of your operations.

USING THESE INDICATORS TO YOUR ADVANTAGE

How can you take these economic indicators and use them to benefit your operation? Let’s explore just a few of the many possibilities.

Obviously, our previous Canteen partner gave us one such example. If he had seen the continual increases in his costs, he would have raised the prices of his machines to a higher level the first time. Now, considering the high price of gas and all the economic indicators that tell us these high prices will continue indefinitely, let’s look at some other operational changes that might help.
First, get a map of your service area. Calculate drive times to your furthest locations. Proforma each location and see what the actual costs are in terms of staff, fuel and repairs at that location. Let’s say you have a large account 40 minutes away that you service daily. After taking into account all of the above costs, you may determine that the profitability of that account is very low. Let’s look at your options for that account.

Obviously you can just withdraw the account because the low profits are wasting the labor and costs to maintain it. However, you may be able to approach an operator closer to the account and see if they would buy the equipment from you and pay you something for your introduction to the account. Maybe he has accounts near you that he would be willing to trade with you. Perhaps you can find room in the account to install another bank or two of the equipment you have in your warehouse, thus reducing the number of service days to just once or twice a week. Or, if the account is large enough, find an on-site storage area to deliver product twice a week, and hire a part-time local resident employee to fill and clean equipment daily. Keep a safe in the warehouse and have your delivery man pick up the money weekly to take to your warehouse for counting. Now you’ve eliminated the cost of daily delivery, including fuel costs and valuable driver time.

If you see all the accounts within 30 or more minutes of your warehouse, choosing one of the above options could eliminate a lot of costs and make your operation more efficient.

Other economic indicators that will help are labor reports for the country in general, but more importantly, indications of employment conditions in your region or city. If Ford has just announced that it will be closing the local plant in 3 months, whether it is servicing their operation or not, it may in fact be servicing the local businesses that supply them. If you’re a major employer in your city, you know that ensuring layoffs will result in less traffic at your local auto dealer, Home Depot, and other retail establishments you serve. If you see where your income may decrease due to this closure, you may want to start planning ahead for reduced hours of service at these locations and possibly even reduced employment at your business.

Viewing the websites of Coca Cola, Pepsi, and other major vendors along with the news headlines for these companies on the financial sites I’ll show you in a minute will often give you advanced information. These companies may be announcing price increases at a certain time in the future, or have decided to phase out a certain brand, or that the high cost of crude oil indicates that they will further increase their prices for plastic bottle products. Wouldn’t it be helpful to know how much your product will cost in the coming weeks or months, today, rather than waiting for your local bottling representative to tell you that prices will increase tomorrow?
I have tried to give you a few examples of some of the moves you can make based on the proper use of the economic indicators available to you. Now you can ask where you find them.
If you read the Wall Street Journal, Barron’s or Fortune Magazine today, you are reading YESTERDAY’S news. You need to know what is happening today and what is likely to happen tomorrow.

I have Bloomberg and CNBC stations preset on my car radio. I listen to them when I drive. On my computer I have CNBC.com, MarketWatch.com, and business news headlines from Reuters, AP, USA Today, and other news gathering agencies. Sometimes I still tune in to CNBC’s business channel on my TV when I work, with the sound off but the closed captioning device on so I can see what’s currently being reported. All computer sites will have links to most major government and private industry reports such as current non-farm payrolls, crude oil supply reports, gas prices, consumer confidence indicators, manufacturing surveys , layoffs announced by major companies, etc. After a while, you’ll understand where to find the best directions that are most meaningful to you and your operation.

Of course, there is no better indicator than talking to local businesses and government folks. Attend networking meetings in your community, read the local newspaper and local business publications if your area has them. Call your local Chamber of Commerce, city hall, and other accessible government institutions to see what information they can provide. Knowing someone at local unions, city zoning boards and planning commissions, and other entities can give you advice on who is planning to lay off, who is planning to close a plant or move out of town, and who, in fact, can be building a new plant or distributor and planning an increase in staff.
The US is in an economic crisis right now, and most of you tell me that these conditions have resulted in declining revenues and lower or no profitability. Obviously, to remain viable in this environment, you need to adjust your operations and make adjustments where and when needed. Understanding the economic indicators will help you stay ahead of the curve and eliminate the need to admit at some point, “I wish I had known.”