Style is in The

When

By Alan Oakes

Moving forward and upwards

firrnsr. A BELATED but Happy New Year. I hope you had a chance to enjoy the holi.|-' days. recharge the batteries, and prepare for what could be a good year-provided a deal was struck to solve the "fiscal cliff' crisis. I have no doubt a deal of some type will be reached, but I hope it is one that it is reasonable. I already sense during my calls that small business owners are very wary of the outcome. I can already hear that with the impact of the new health care plan really coming to light, we are still in a fragile space and the recovery we are beginning to sense could go back in the other direction. We have all fought hard to keep our businesses operating, we have all cut costs and seen diminished retums, and we have done our very best to keep our people employed-we do not need any additional hits. I hope by my next column the uncertainty will be over, as uncertainty can cause more harm than the outcome.

Once a year, we tend to look back and reflect on the year just passed-the successes and failures, in both our personal and business lives. There is no doubt that in both cases our expectations have been lowered compared to perhaps any time in our lifetimes-especially in this industry. Downturns are normally 18 to 24 months, not six years.

After all that has happened these past years, by all accounts 2012 was a steady year. It was relatively quiet, despite the divisive election. In our industry, we started to sense for the first time that the tide is turning. So, perhaps a B-. Not great, but welcome stability after a horrendous 201 1

As I reported last month and sensed everywhere I traveled, the mood is changing. You can already see some smiling, and hope is hanging in the air. Most stats show improvement. Employment is modestly better. Banks seem to be giving out mortgages and loans a little easier (although maybe not to this industry). The housing numbers are improving, albeit shadows of their former selves. The stock market is hanging in there, despite wony about the cliff. Manufacturing is slighttly improving. Even Apple announced it will start making some Macs here. While the stats show we still have some way to go, improvement is measured in inches and the transition to a growing economy has begun. We are all mostly more efficient out of necessity, and this is perhaps both good and bad for the market to come.

So what can go wrong? External to our industry, bad economies elsewhere could bring a chill. Europe is in duress pretty much everywhere and the Middle East seems under constant stress. The good news is that the U.S. economy has stood tall this year throughout the various crisises abroad.

I think the biggest issue in this industry in a growth scenario will be lack of supply. I am already hearing about sold-out positions and with so much less capacity, production cannot be increased at the flip of a switch. Also, with so much human capital experience having been lost in the downturn, it will be difficult to staff up again. Credit limits and lines that have been lowered in recent years might not be able to change fast enough to keep pace with higher volumes of business. Transportation will be a huge issue at some point again, too. Therefore, it will be hard to meet market demand at some point (with all that means), and it takes very brave senior management to recommend to the board to start expansion ahead of the curve, with always a sense of insecurity about what will hit next. But I am getting ahead of current reality-we are not there yet.

In some ways, it's a nice position to be in after what we've had to deal with in recent years. I suspect, though, that we have learned the hard way and will not succumb to the excesses of 2004 to 2006. If 2013 shows a steady increase over 2012, I will be happy to take that! Again, have a great year and I look forward to seeing you on my travels. Stop me and say hello.