A roundtable discussion with GAWDA Members who find value in the ITR Report
By Steve Guglielmo, Mark Raimy, Bob Ewing, Bill Visintainer, Brad Armstrong and Pete Anderson
Each issue of Welding & Gases Today contains the ITR Quarterly Report. This issue’s report can be found on page 72. GAWDA members who attend the Annual Convention are very familiar with Brian and Alan Beaulieu, ITR’s CEO and President respectively, who give a presentation each year discussing the economic trends and what GAWDA members can expect going forward. So how should GAWDA members be using the information that the Beaulieus present and that is contained in the quarterly report? We had the opportunity to speak with six GAWDA members who are using the ITR Report as part of their company’s strategic planning about how they are using the report and why they think this information is valuable. Thank you to Mark Raimy, Bob Ewing, Bill Visintainer, Brad Armstrong and Pete Anderson for your input and participation.
What about the ITR Quarterly Report do you feel is most beneficial to somebody in our industry?
Mark Raimy: This type of report and this type of information can be used in many different ways and many different situations. The information can be used within your business, outside of your business and with your customers. It can be used all types of different ways. I would say it’s important to use it. Engage it. Find a way to use it. What I would say to somebody who is saying, “I don’t really get it,” is to stick with it. At some point, it will occur to you, “Hey, I can use this in this way.” The idea is that there is no one way to use it. It’s what you want to do with it.
Bob Ewing: We all rely to some extent on gut instinct. How busy are we? What’s the sentiment from our suppliers and customers? It’s a very sound idea to check that gut feel against actual data, because by the time we sense things changing, it’s often too late to react in a measured way. The investment decisions we make in our industry often have years long impacts, so it’s important we don’t get got flat footed by the cycle.
Bill Visintainer: The report gives the user a clearer picture of the leading indicators and their rates of change. This allows for more useful conclusions regarding timing and direction of business cycle trends.
Brad Armstrong: For at least 15 years now, we have subscribed to ITR and their monthly reports on our own. We get a monthly executive summary describing what is happening in the economy in all of the different sectors. I use it for a general indication as to what is going to be happening in the economy. As an example, for this next year, we’re budgeting for a flat or slightly less that last year. What decisions will that cause us to change? We’ll look at how aggressively we’re investing in some of our Capex initiatives, how aggressive we’re going with some of our expenses that we’re monitoring, like wages. Anything that we have control over, it helps us determine how aggressive we should be.
Pete Anderson: I have the magazine on my desk with the report every quarter. I thumb through it and look at it and I see what Alan has written and see if we see similar trends in our business. And then if you do the shift on the rate of change, where are things heading in the next 4, 6, 12 months, etc. I look at that and it helps me match up and validate our numbers as a whole. If we’re seeing similar things, it increases my confidence level in the report, knowing that our markets are similar to what is being shared.
Are you able to extrapolate the data that is included in the report to your own business/economic climate?
Mark Raimy: Yes. Anybody can do that. The 3/12 and the 12/12 are blended moving averages. And so, you take a whole bunch of the data and you average them together and you get a data point. And you plot that. Then, the next month, if you’re using your sales data or delivery data, really any type of data you want, the new data goes in the front, the old data falls off and then you do the math again. So, yes, you can pick out anything in your business that you can get data on and you can apply this to it. This type of moving average analysis is not unique or centered on macroeconomic analysis. If you don’t know where you’re going, you’re never going to get there. Somebody in your company needs to say, “This is where we’re going. And we’re doing these things at this time because…” This fills in a big part of that. It’s imperative to be able to say to your team, “We’re not hiring another salesperson right now because I think things are going to slow down and it will be tough sledding for the next nine months. But after that, things will start booming, that’s when we’ll start looking at it.” That is an informed answer to a question that is difficult, sometimes, within your company. People will look at you and know that you know what you’re doing and where the company is going.
Bob Ewing: We are. It doesn’t correlate exactly – our geography is impacted much more heavily by oil and gas field activity than other parts of the economy, for example – but there’s no question that we participate in these business cycles just like everyone else.
Bill Visintainer: To some degree. We are always trying to understand where we are in our own business cycle compared to our competitors.
Brad Armstrong: I use it more from a 50,000-foot view, general indication. Now, sometimes it gets more granular than that. We have some of our business that is easily attributed to the gas and oil segment. It seems like the data, whether it’s the PMI or the Industrial Manufacturing Index, are just proof of the conclusion that they’re coming to. We do track our 3/3 run rate versus our 12/12 run rate just to see if we’re in more of an expansion or contraction mode.
Pete Anderson: We track rate of change analysis on total sales, gas sales, hardgoods sales, rent and propane. And then we break it down, even for individual account manager territories. So, we have leading indicators on different territories, who typically is in what phase. And we look at that on a monthly basis.
Do you consider the trends/prognostications of the ITR Report when doing your own company’s strategic planning?
Mark Raimy: If you’re in any organization, especially if you’re in the leadership of an organization, having a world view is very important. And having a strategic vision is very important. Where you put your money, when you make your moves, how you do things. How do you get that world view? You have to know when things are coming up through your company, here is when I say yes, here is when I say no, and here’s why. This is an integral part to developing that.
Bob Ewing: We do. It’s not the only or even predominant data point we consider, because local market conditions are always going to play a big role. But it does let us put boundaries on the conversation. We can upgrade or downgrade a forecast based on whether the tide is coming in or letting out. It encourages everyone to bring data to the conversation – both national trends and facts particular to our customers and markets – that are likely to affect our business.
Bill Visintainer: Absolutely! ITR has changed our decision-making behaviors and processes.
Brad Armstrong: Yes. Everybody measures something different in their business. And they draw conclusions from that. So, I’m amazed at how little a lot of organizations do measure. And on the other hand, I’m amazed at how much others do. I just put this in front of my general understand bucket on what’s happening in the economy and how my business is operating. I think it makes me a more informed leader and I think that I probably make better decisions for our organization, our employees and our families. So maybe we’re a little healthier because of it. Sometimes when you’re making decisions, you feel like you’re throwing a dart in the dark. This is just one of the things that help me make decisions with a little greater intentionality.
Pete Anderson: We look at everything, I look at all the leading indicators that the report points out. And we look at current growth rates, on the 12/12, and it helps us take a look at our CRM program and see what’s in our pipeline, what’s the hit rate, what is the expected market growth, and balance it against that growth rate and come up with a budget for 2020 and 2021. Say we’re going to shoot for 4% growth next year. I’m not licking my finger and sticking it in the air. We are using a CRM pipeline and using the ITR Reports and Conference Calls. We have some benchmarking. And we do trend analysis to determine what we’re seeing.
Are there any misconceptions you have heard among GAWDA members about the ITR Report or the information that it contains?
Mark Raimy: No, I don’t think so. If anybody says they don’t get the report or they don’t like it, I would point them to how they feel when the Beaulieu brothers come speak. Everybody loves that. There is no difference between the two. Sometimes it takes two or three times to read the report but if you pay attention to what it’s saying and see the trends and the movement in your company and what your customers are doing, it won’t take long to figure out that this stuff is all connected.
Bob Ewing: Not really. Most of the folks I have visited with appreciate the data and factor it into their thinking. Some have expressed points of disagreement, or incorporate other sources, but that’s all well and good. It’s important not to over-rely on any single source of information. GAWDA and ITR have done a great job at educating the membership on the format and method that ITR uses. If you’re at all confused about ITR’s report and how to use it, the teleconferences are an easy way to get acquainted quickly.
Bill Visintainer: I have not. Unfortunately, I don’t feel most of our members are using ITR tools.
Brad Armstrong: I’ve certainly heard this topic talked about a lot. I think that there is a general consensus among some of the members that it’s too much information and that it doesn’t have a ton of value for them. I don’t feel that way. But because I’m an individual subscriber and will purchase whatever webinars are applicable to me, our thought process is independent of GAWDA. I get lots of different opportunities to hear the Beaulieu’s speak. Whether it’s at a GAWDA event, or they usually speak at CEO forum here in Colorado, I’ll always make sure, if at all possible, to try to hear what they’re saying. I find value in it. I trust them more than I trust most economists. Even if we’re not exactly seeing it in our market in the current state, to me it’s like, “Well, it’s coming. What would we do differently this year?” Or I’ve got more confidence next year because they’re talking about it being a bullish year. We will adopt some of that confidence in some of the decisions that we’re making for next year.
Pete Anderson: I have not seen or heard anything. But I also don’t know of anyone else who is doing what we’re doing, either.
For members who aren’t reading or carefully considering the data contained in the ITR Report, how big of an opportunity do you find that they’re missing?
Mark Raimy: It’s huge. If you go back to the Great Recession, how that presented itself was: September and October of 2008 were great, then November fell off the cliff. Out of nowhere for people. People were blown away by that. There was shock. If you were following this data, you knew this was coming. You knew six months before that something was going to happen and three months before it happened, you knew it was going to be significant. So how many people during that time had just bought a truck or just bought equipment or just hired somebody? If you would have had this information, you wouldn’t have done that. You would have held onto your cash. So, this information will help you get ahead of the next Recession and be better prepared.
Bob Ewing: Hard to say, because I’ve met a lot of members who are much more savvy that I am. But one thing ITR’s report and presentations have helped me to think about is adapting management tactics to fit the cycle. When should you tighten up or loosen up on credit? What about debt tolerance? Capital investment? Sales staffing? It’s very easy to become a prisoner of the moment – how complacent or paranoid we are can be driven by the most recent quarter’s sales. The problem with that is looking behind instead of ahead is no way to drive. So yeah, I think this data can have a big impact on how a manager runs their business.
Bill Visintainer: It would be like flying blind. I consider it to be a gift to have advanced warning of an impending change in their business cycle. For instance, if you suspect that growth is or will soon be slowing, would you slow down or cancel new hires? Would you delay purchase of new Capital Assets? Would you be putting on a full court press on A/R. Would you be rethinking earned discounts? Would you be negotiating better terms from you suppliers AND would you be doing this weeks or months ahead of your competitors? I think you get the picture. The ITR Tools will help in your strategic decision making regardless of the business cycle phase.
Brad Armstrong: To me, our industry is correlated to a lot of these indexes. It’s pretty easy to see how we perform in comparison to some of these indexes. Why you would not want to be informed on contraction or expansion is beyond me. It seems like it’s a no-brainer.
Pete Anderson: We don’t know that yet. We’ve been doing this for a little bit longer than a year. Right now, we’re looking at further implementation. We’ve got the data and we’ve got some history behind us. I’m doing this and it’s an automatic thing. Now, when we start to see a trend, the next question for us, as a management team, is what do we do about it? Do we look at different markets? Do we look at curtailing our expenses? How do we control costs? On the flip side, if we know that there is going to be a growth cycle, like from 2020-2021, what does that growth trend look like? Hiring or training people now so we can be prepared for key market opportunities.
Is there anything else about the report that wasn’t covered above that you would like to mention?
Mark Raimy: I was president when we made the agreement with ITR and it’s something I am incredibly passionate about, because this is something that is invaluable. I don’t think our industry was taking advantage of looking at it. The next step of this is to use the data that we have within our own companies. It’s interesting, hedge funds will actually call you up and pay you for a 20-minute conversation. They ask where your sales are going, are they going up or down. It’s the same stuff you’d be plotting yourself. This information is so valuable that Wall Street will pay you for it.
Bob Ewing: One thing we have done, and ITR encourages, is building the 3/12 and 12/12 charts with your own sales data. We’ve also done that with indices that are important to us in our geography, like oil and gas rig counts. This really helps us get a sense of the trend. Combined with the ITR report, we feel like we can a bit of a peek around that next corner, and that’s all you can really ask for.
Brad Armstrong: In the Great Recession, we actually had one of the Beaulieu brothers come out and do a seminar for some of our customers. That was just a value add. Our industry and our customer groups are highly relational customers. They’re our friends. We want them to know what we know and hopefully that helps them make some different decisions. We have sent out the subscription to some of our larger customers and they have found value in that. It’s just another positive touchpoint with some of our customers. I share the information with our employees, usually on a quarterly basis. It helped us a lot in the Great Recession and it helped us a lot in the oil crash of 2014.
Pete Anderson: One thing I have done is shared this information with some of our top customers. And I have said, “Here is the report we get, here’s what we’re involved in. I can break this out for you. Here’s what we’re seeing, what do we need to do different for you?” They don’t even know what to think about it, because they’ve never had a meeting like this. We will continue to figure out if there are things we can do better and how we can implement this. You’ve got the report, you’ve got the data, it makes sense and it matches. Now how do we implement it? That’s the next step.