Like most businesses in construction and remodeling, Billen’s Long Grove-based radiant heating company, WarmlyYours Inc., saw its revenues plunge when the recession hit. Until 2008, it had been one of the fastest growing small businesses in the United States, making the Inc. 5000 list in 2007, when it hit about $6.8 million in annual sales. Back then, it didn’t have to look for growth, because sales came easily, Billen said.
But when the market declined and revenues fell 27 percent, Billen was determined not to lose good employees. “My mantra has been, there are no layoffs. We are getting through this together,” she said.
Instead of hunkering down like many other companies in her distressed industry, Billen and her 60 workers went on the offensive, spending money to make money. They strengthened the company’s infrastructure, improved its systems by writing original software, and planned a strategy for growth. “We took time to make ourselves stronger,” she said.
The result is a new division that markets and installs heating under asphalt pavers to extend the outdoor entertaining season while also keeping pathways free of snow and ice during the winter. Another heating system runs along gutters and rooftops, eliminating the need to get up on a ladder and knock off excessive snow and ice. Already the new snowmelt and deicing division is profitable, Billen said.
The new product line is the result of a year’s worth of formal planning, based on market research that considered an aging population, growing interest in outdoor living and heating trends in Europe, Billen said. As an added bonus, the new line will even out the seasonality of her indoor heating business, which attracts sales from October to May but falls off in the summer. The new products generally are installed in the summer, Billen said.
As Billen reflects on the past 18 months, the recession helped her business. “It allowed us to be much more focused and thoughtful,” she said. “When you’re growing fast, you can’t get caught up. You feel like you are going in a million directions.”
Recessions often spur innovation, according to research by consulting firm McKinsey & Co. A study of 1,000 U.S. companies over an 18-year-period, including the recession of 1990-91, found those that pursued opportunities and spent cash reserves during the recession ultimately gained market share. “Winners invest behind innovation and research and development during a downturn,” said Asutosh Padhi, a senior partner at McKinsey & Co. in Chicago.
What’s more, recessions are conducive to change. “It’s very tough to drive change when things are going well,” Padhi said. A severe recession, on the other hand, provides a reason to try something new. “In a recession, everyone is focused on what do you do, and what do you do differently,” Padhi said.
Strategic planning can give companies a competitive advantage no matter what the economy is doing, said Rich Horwath, author of the recently published book, “Deep Dive: The Proven Method for Building Strategy.”
Yet few companies take time for it. “People think about it as this overwhelming three-month process, but great strategy plans aren’t that complicated,” said Horwath, president of the Strategic Thinking Institute in Barrington Hills.
Being strategic involves “intelligently allocating limited resources,” including time, talent and money, to outperform the competition. In his book, Horwath provides a roadmap for companies to follow, starting with evaluating the business and the environment, allocating limited resources appropriately and taking action.
Horwath’s book provides several different tools for strategic planning. Once companies understand the importance, they carve out time for regular strategy sessions. “Today, because market conditions are changing so much more quickly, we need to be able to think strategically on a daily basis,” Horwath said.
Launching a new line successfully depends on having the necessary core competencies, understanding the marketplace and competitive landscape, and developing a business model that will make money while providing value to customers, Horwath said.
WarmlyYours’ market research pointed to growing potential in snowmelt and deicing. When a competitor’s former employee asked WarmlyYours for a job, Billen snapped him up, recognizing he could help the company excel in outdoor heating. And despite a tight credit market, Billen was able to securea loan backed by the U.S. Small Business Administration in 2009, she said.
Besides the new snowmelt line, WarmlyYours also has added installation services to its core product of radiant heating for baths and kitchens, offering warm tile floors plus towel warmers and mirror defoggers. All quotes are accompanied by a visual plan that shows how the product would be installed , but now customers don’t need to find their own installer. WarmlyYours has partnered with another company to provide qualified tradesmen in 22 states, Billen said.
Billen also recognized the potential for Internet sales and marketing. “When you sell direct, you’re able to gain so much more insight and knowledge” about what customers want, Billen said.
Innovation is not new for Billen, who bought the Internet portion of an existing heating company in 1999, creating WarmlyYours with co-founder Georges Selvais. With marketing experience but no background in heating, Billen looked at competitors’ marketing focus on BTUs and voltage and knew there was a better approach. “The way I positioned it, we were selling luxury, warmth and comfort,” she said. At trade shows, she set up a Tiffany lamp, rug and decorative screen to convey a luxury image.
The name WarmlyYours spread “a feeling of warmth and welcome,” Billen said. It also reflects Billen’s nurturing management style. She doesn’t pretend to know everything and empowers workers by encouraging them to perform multiple roles and by soliciting their input. “If you’re not smarter than me, you don’t work here,” she said.
While the company imposed a salary freeze and cut its 401k match and tuition reimbursement after sales fell in 2008, it still provides health insurance and a free daily lunch for employees.
Holding the line on workers’ salaries, Billen cut her own and maintained an optimistic outlook. “I kept chanting, `Keep pushing and no fear’ until even I believed it,” she said.