How We Gave Our Company Legs to Weather the Recession

By Steve Getsiv, CEO, NOVA USA Wood Products, Portland, Ore.
NOVA USA Wood Products is a flooring and decking supplies company that imports exotic hardwood building materials from Asia. We used to get all of our business from builders. But in 2007, the construction industry collapsed -- and so did our sales.

The only way I could think to drum up new business was to diversify our customer base beyond wholesale. To do that, we needed to invest in our online and retail presences. One problem: We had no cash flow.

We relied on one kind of customer
We launched our wholesale business and one small retail store in New Hampshire in 2005. The building industry was booming and we constantly struggled to keep up with orders. At our height, we had 25 employees and $26 million in annual revenue.

Since our wholesale business had been keeping us plenty busy, we never bothered to invest much effort into finding other kinds of customers. So we had nowhere to turn when the recession hit and many of our long-time customers went out of business or dramatically dropped their orders.

I knew straightaway that we would only survive a few months using the old wholesale model. So I decided to build websites to showcase our products and invest in more retail space to sell our products. But the company barely had cash on hand to cover payroll. My only option, I decided, was to cut salaries and risk losing my best employees.

Making sacrifices
I decided to include the staff in the salary cutting decision. I sat down with all of my employees individually and told them that times were tough and we needed to make cuts. Then I asked them how much they were able to sacrifice, knowing full well that several had families. Some employees sacrificed as much as 50 percent of their salaries; others were able to make smaller cuts. I stopped drawing a salary entirely.

I didn't promise my staff that their previous pay would be reinstated. After all, we were on the verge of collapse, and I was just trying to keep the business afloat. Luckily, no one decided to leave.

Building the sites
The next step was to promote the company by improving our two websites: One for our wholesale business, and one for the retail store. An agency would have charged $400,000 for the site design, development, and search-engine optimization work I knew we needed, and we didn't have that kind of money.

Instead, one of my marketing employees and I created the sites on our own with help from several low-priced consultants. We developed two SEO-optimized sites with full product catalogs and features like a color design tool, all for under $15,000.

Once the sites launched, we saw results within weeks. Traffic grew from a few hundred to 40,000-plus visitors a month, and we saw pronounced growth in our retail and distribution sales. Within three months, the profits let us reinstate full salaries.

Vertical integration
We were now committed to diversification and invested the profits from the websites into new retail stores. We opened a second store in New Hampshire in May 2009, which once more substantially increased our gross sales. Then, that August, we purchased a retail company with two locations here in Portland, which also became quickly profitable.

With our retail stores, our products are now fully vertically integrated. They go from our warehouse to our stores to the consumer. We can set the product mix and be competitive with our pricing, since there's no middleman taking a cut off the top.

We used the same SEO system to build websites for our new retailers, and that's given us yet another boost in sales. Today we're up to 50 employees, and the retail businesses make up 30 percent of our overall revenue, compared to less than 10 percent in 2007. We made $32 million in sales in 2010.

Our wholesale business still hasn't recovered, and it may take quite a while to improve. But by diversifying our resources into e-commerce and brick-and-mortar shops, we've given our company legs to weather the next recession.

Steve Getsiv previously worked at Oregon-Canadian Forest Products, where he managed the import of Brazilian hardwood flooring products.
-- As told to Kathryn Hawkins

Resources

• Learn how to design an e-commerce site.
• Read about other companies who were forced to cut salaries during the recession.
• Find out why it is important to build a strong website.