Seeing the light to ride out recessionTough choices helped a custom manufacturer outlast a drop in activity
When the family that has owned Jersey City-based custom lighting manufacturer Rambusch Co. for more than 100 years faced the start of the recession nearly five years ago, it knew it would have to change some longstanding practices.
"Ours is a very long-term business," said Catha Grace Rambusch, in charge of collections of the firm, which is owned by her sons. "Two or three years is not unusual in a contract, so it was very hard for us to adjust on a dime."
Fewer orders came in to the business — whose projects range from restoring and redesigning fixtures at the Utah State Capitol to restoring the fixtures at Our Lady of Mount Carmel Church, in Hoboken.
"We certainly did have to reduce our staff, there's no question about it, but we did it with great reluctance," she said.
Like other New Jersey business owners, during the recession that ended in June 2009 — though its effects still linger — the Rambusches had to make a series of difficult choices to lower their costs. But the difficult recession-fueled changes have positioned many businesses in the state to become stronger and better able to handle the next downturn.
Rambusch company Chairman Martin Rambusch, who co-owns the firm with twin brother Edwin Rambusch, said the company had to explore cost-savings options that had long gone unexamined.
"We've tried to more thoroughly price our suppliers, which we typically did not do before — which is really a bad on us," said Martin Rambusch, who also is vice president of crafts. "We started to shop our higher-cost items" including health insurance and business insurance.
But the review stretched down to smaller items, too, like cutting back twice-weekly trash pickup to a weekly visit.
Company President Edwin Rambusch said it can be difficult to leave longtime suppliers — which may also be small businesses.
"Sometimes, those are mature relationships — and they may be struggling just like you are, and they may not give you the best deal," Edwin Rambusch said, adding that business owners must primarily do what's best for their clients.
The company also started charging for a service it had previously provided for free — the designs for the lighting solutions it would provide to clients. "If you can capture some of those costs by providing those designs (for a fee), then you've increased your margin and you've filtered those people who are truly interested," Edwin Rambusch said.
The experience of cutting costs was true for many companies, according to Michael Aversa, partner in charge of the private business services group at accounting firm EisnerAmper.
"I think the major lesson that was learned by many businesses was they were not running lean," Aversa said. "A lot of companies had cutbacks; a lot of consolidation took place in the 36 months after the recession hit. In the last 18 months, things have started to improve."
But improvement in the bottom line isn't leading to knee-jerk spending from wiser owners, Aversa said.
"A lot of my clients — they're not adding headcount, they're trying to stay lean," he said. "They realize you can't do that."
And this isn't because businesses
are building a cushion for hard times,
"I think most of my clients are at the point where they should have been all along. If there were another downturn, they're in a much stronger position than they would have been in 2008, because of the changes they've made," he said. "I don't think it's industry specific at this point. Some made the change sooner than others, but ultimately, they all made it. Now they're running at the right level, because if they're not, they didn't survive."
One business that may have been better positioned to survive through the recession was in an unlikely industry — custom home building.
Anthony Zarrilli, owner of Brick-based Zarrilli Homes, said he made the right choices during the recession because he had learned how to approach a recession from his father, Richard Zarrilli, who had owned his own homebuilding business, Buchanan Builders, for more than 40 years.
"My dad is conservative," Anthony Zarrilli said. "In the booming times, he wasn't out like some of these builders making a gazillion dollars, and in the bad times, we never felt it."
While Zarrilli Homes did speculative construction before the recession, it never overburdened itself by buying many undeveloped lots, he said.
When the recession — which Zarrilli calls a depression for his industry — started to hit homebuilders in 2006, "we were selling off homes where we maybe didn't have the margins that we he had hoped for — but we didn't have upkeep, and we got our capital back."
After selling off the spec houses, Zarrilli concentrated on building larger houses on the site of existing homes.
"Basically we took a nosedive in '07, '08. We emphasized knock-down/buildups," Anthony Zarrilli said. "Right out of the box, we didn't have to purchase the land, so there's less capital that has to go out. You're bringing in cash, you're making a profit, your name's out there and you're keeping your guys working."
The upshot of this decision, according to Zarrilli: "We're a strong company." With six houses under construction in Lavallette, ranging from $1.5 million to $2.1 million, Zarrilli said he is optimistic about the future.
Other business owners were in a less tenable position at the height of the recession, said E. Martin Davidoff, proprietor of South Brunswick-based CPA firm E. Martin Davidoff & Associates.
"Don't trust that a credit line will be there next week," he said. "What we learned here is that credit card companies and banks are not your friends in bad times — and even if you're a good solid customer, even if you've never missed a payment in 30 years, they're going to close down your credit in tough times."
One company that succeeded at keeping its line of credit open was Rambusch, which has banked with Bank
of America since the company moved to New Jersey from the Bronx, N.Y., in 2001.
"We have a line of credit that we husband," Martin Rambusch said. "As
a result of having an ongoing relationship in advance of hard times, they were comfortable with what we could or couldn't do."
The combination of taking care of the line of credit and lowering business costs has put the business in a stronger position for the future, he said.
"Of course, we're dependent on work continuing to flow, but I do feel that we are as efficient and agile as possible at this time," he said.
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