Preparing for the ups and downs
Jeff Crowley just invested $2 million in his business because he's anticipating the future.
No, Crowley isn't a fortune teller. He is the president of Wachusett Mountain Associates, which runs the popular ski area in Princeton.
You don't need to be a weather wonk to recognize that in the last several years the weather has become increasingly erratic. As a result, ski conditions have become a lot less predictable, leaving businesses like Wachusett Mountain Ski Area with a large unknown on its balance sheet related to the cost of making and maintaining snow on the trails. Throw on top of that this year's extreme drought conditions and a 50-percent increase in the mountain's price of water coming from the town of Fitchburg, and you've got too many variables leaning in the wrong direction. So Crowley decided to spend $2 million on a new energy-efficient, automated snowmaking machine that could double Wachusett Mountain's snowmaking capabilities. While that's a big ticket expense for what used to be considered a supplemental piece of equipment, today, it is a downpayment on the future the business. Delivering snow-covered trails, regardless of the more radical ups and downs of New England weather, is mission critical. Crowley followed through on the basic principle of “hoping for the best while preparing for the worst” – investing in his business and reducing his downside risk.
Cliche concepts are often good pieces of advice but are rarely followed. This maxim is often ignored by business in favor of imprudent spending in the good times only to be followed by painful cuts when they go away. There are other examples of forward looking leaders who have made the same kind of investments. Spencer manufacturer FLEXcon prides itself on the claim of never having laid off an employee in its 60-year history. How has that been possible? President & CEO Neil McDonough attributes it to the company achieving all of its growth by never taking on debt. Having that steady hand and ability to invest strategically in up and down cycles enables you to run a more stable enterprise, serve your customers better, and keep your employees engaged and focused on the future.
Having some dry powder can be critical when unforeseen business conditions or unique opportunities arise. One of the reasons cited for the lackluster economic growth of the last seven years has been a lack of business investment. Despite record low interest rates, corporate balance sheets continue to reflect a conservative approach to protecting the cash on hand. While this trend may have produced a drag on growth, it could well be a boon should economic uncertainty rear its ugly head anytime soon. The good news with Wachusett Mountain is they have the capacity to invest in new, transformative equipment that will reduce uncertainty and costs in their business. While our weather may be getting undeniably warmer, our economy still runs in cycles. The Massachusetts economy is going strong, and unemployment is down to a stunning 3.9 percent; but all businesses that want to thrive long term need to invest in the future.
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