Executive Forecast, Part 2: Business Leaders in Arkansas Look Ahead

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Last week, Arkansas Business began contacting a sampling of business leaders to get their forecasts for the next six months of business amid COVID-19. Eight executives across various industries responded to requests for interviews, which took place from May 6 to May 14.

We’re presenting the final four of those interviews below. (The first four interviews were published yesterday.) These conversations have been edited for length and clarity.


JOHN BURGESS is co-founder and president of Mainstream Technologies Inc. of Little Rock, which offers custom software, cybersecurity services, hosting and managed services for businesses.

What’s the outlook for your business in the next 6 months? 

Our outlook is good. We haven’t really suffered that dramatic of a slowdown during the last two months because of the nature of what we do for companies. Our software development side, we had larger long-term projects that were already in the works. So those continued on. Our managed IT and security services that we do for other businesses, we’re frankly viewed as an essential provider. We’re one step below the electric company; a lot of businesses can’t, if they’re functioning at all, they can’t function without technology. 

We do have a couple of significant customers that are in the retail industry. So those customers have obviously been impacted and that has rippled back into us. So we’ve been working with those customers too. In some cases, we might have deferred some invoice payments for certain customers. In some cases, we just worked with the customers to give us both, keep them afloat and keep us working. 

I know some businesses that work with restaurants or work with hospitality-type customers or direct consumers, it might be slower for them to come back. But I think, just due to the type of customers that we have, other businesses and especially our work with governments, I expect that once things start opening back up, it’ll be pretty good.

What’s the outlook for your industry in the next 6 months? 

Again, I think it’s pretty good. I talk to businesses like ours. We’re part of a worldwide organization of technology companies, and, talking to the people that run that organization, they hear good things from across the country for businesses like ours.

There’s going to be a new normal, I think, in terms of people working from home. And our message through this has been — and some of my colleagues’ message through this has been — “OK, if you decide that you need to work from home more, or that you’re comfortable working from home more, you need to make sure that that’s secure and that that’s as effective as it can be.” So, we see opportunities for that. 

Also, the only thing that I have to compare this to is the recession back in 2009. Our industry came out of that very strongly because, as companies that had downsized because of the recession or now because of this recession, they were looking to right-size their IT support. And businesses like Mainstream made sense. It was a model where they could get all the support they needed for less than the cost of an IT person. So we did good in the last recession, and I think our industry will do well coming out of this one.

What indicators are you watching closely? 

We do a lot of work with state governments, so we pay attention to what’s going on there because, on one hand, there’s emergency funding that’s been coming up. Money’s been flowing around; it’s targeted at things that are related to employment or health care. But, on the other hand, that money has to come from somewhere. 

You’ve been paying attention to the state government — the Arkansas state government — there’s other agencies that are flattening spending or even having to cut spending depending on the sector. So we’re paying attention to what goes on with the various state governments; we do business with multiple states. 

We’re obviously paying attention to the retail industry. We have a number of customers in that space. It’s one thing to be down. It’s another thing to be bankrupt or to be completely out of business. I think there’ll be some of that that happens this time. So we’re paying attention to that because of our exposure. We do business with a number of different sectors, so we’re just paying attention to what those specific industries are, how they’re doing.

What’s one thing you wished other businesses and clients knew about economic conditions, as you see them, right now? 

It is not bad in every sector. There are sectors of the economy that are doing just fine through this just because of the nature of how they work. I know people that are really hurting, and there’s businesses that are really hurting. But I think, as we’ve all been hunkered down and shut in, I think it’s easy to start thinking that it’s just across the board. 

But our experience has been that it is not across the board, that there are definite bright spots in the economy. I think that all the indicators are that there is still money to be spent. And that there’s some pent-up demand for spending. So that, as governments start letting us get back to work and let people go about their lives, I think there is going to be a faster rebound than what we saw 10 years ago.

– By Sarah Campbell-Miller


MIGUEL LOPEZ is senior vice president and chief community outreach officer for Encore Bank of Little Rock.

 

What’s the outlook for your business in the next 6 months? 

I think the outlook for us, in the next six months, is really just to make sure we’re there for our community and our account holders. I’ll give the example of the PPP program (Paycheck Protection Program). Before COVID, this just didn’t exist, and almost, overnight, there’s been programs created and there’s a huge demand for it in our communities. We’ve been successful in submitting 100% of the applications that we received to about a tune of $14 million dollars in lending, which kept about 1,000-1,200 Arkansans on the payroll. And we’re real proud of the work that we did with that because, if PPP and all that taught us anything, it’s that it’s not about having a bank that’s in every corner, it’s about banking with the bank that’s in your corner. 

So the next six months is basically just, as the Federal Reserve creates new lending programs, how we can position the bank to be nimble enough to safely and soundly execute those on the behalf of the people that are needing them. 

Additionally, it’s no secret that the economy has taken it in the chin pretty hard. We were able to offer some assistance to some of the people that have loans with us. For some of them, we offered six months interest-only payments or we did a three-month deferral on the payments because we know that times are somewhat hectic and chaotic right now and want to be able to be there for them.

What’s the outlook for your industry in the next 6 months? 

I think it’s just a matter of being somewhat vigilant and responsive to what the community wants but also what the Fed starts doing. The Federal Reserve in the past couple of months has really kicked it into high gear, in lending a lot of money, which, traditionally, the Fed is there to control inflation. But, as Fed Chair Jerome Powell said, they’ve got all the bullets to help the economy weather the storm so, as a bank, you want to just stay on top of the programs that they’re offering so that you can offer them to your account holders. 

What indicators are you watching closely? 

Personally, I started looking at the number of cases that go up. For some reason, I feel more like a scientist than a banker, trying to figure out when we can go back to somewhat of a normalcy. So I’m definitely looking at the daily briefings that both the president and the governor are giving. 

Right now, our branches are closed. There’s drive-thru for our customers. We’re constantly keeping tabs on when things will open up in a safe and sound way so that we can open up our lobbies. So we’re looking at that; we’re looking at the unemployment rate. It’s staggering to see it every day, but also looking at, again, what the Fed’s doing.

What’s one thing you wished other businesses and clients knew about economic conditions, as you see them, right now? 

There’s a silver lining in all this; it’s that, prior to COVID, the economy was doing great. Unemployment was at an eight-year low. It was like 3.5%, and, almost overnight, now it’s an all-time high. So it’s not so much that the economy is bad. It’s just COVID has really put everything on hold, and rightfully so because everyone’s health and safety is paramount. 

But hopefully, once there’s a vaccine and we’re able to open up, establish new safety precautions, the economy can go back to roaring like it was before COVID. If you compared what’s going on now to 2008, the banks are well capitalized, the economy was doing well, excluding this. And it’s harder if you’re one of those who are unemployed. It feels like it’s horrible. It is, but hopefully once we get on the other side of this COVID deal, the economy can go back to how it was or some semblance of it.

Anything else? 

As a community banker, this has really taught us just how important it is for us to be there for our community. Your bank is no longer the place where you just go and deposit your check and leave. Now it’s a place where it’s important to have a relationship, to be able to call someone’s cell phone and really just to kind of peel the onion back. And, if you look at the data, the lion’s share of the PPP funds were executed by community banks. I think that’s one of the big takeaways from all this, the importance of having a strong community bank in your community, but ultimately in your corner, too.

– By Sarah Campbell-Miller


KERRY McCOY is owner and CEO of Arkansas Flag and Banner of Little Rock, which she founded in 1975 with an investment of $400. The company sells flags, custom banners and related products through its website and catalog. McCoy also publishes a magazine and hosts a podcast on business.

 

What’s the outlook for your business in the next 6 months? 

My outlook for my business is OK because we have a big internet presence, and we don’t have a walk-in storefront. So I guess everybody has seen that online shopping has increased. Our online shopping too has increased. Our telephone, our other sales have gone down in other areas. So we feel very fortunate. I don’t see any reason why online shopping would not stay strong. 

Now my business — the business of flags and banners and patriotic stuff — is very, very seasonal, so this is my season. So no, my sales will not continue to stay as good as they are right now because my season will be over. And I don’t think my season was going to be as good of a season as it might have been had the coronavirus not happened because we were on a really nice trajectory of having a 10% growth. And it looks like now we won’t have that. We’ll be happy if we could just stay flatlined. 

But who knows? Who really truly knows? I’ll tell you something really interesting about the flag business, when people get worried or sad or upset, they go to church and they become patriotic. So when the country is suffering, flag sales often go up.

What’s the outlook for your industry in the next 6 months? 

So the industry as a whole is suffering because there are some very small mom-and-pops out there who do not have the internet presence that I have. I have been on the internet since 1995. So I have a huge website with 22,000 products online. And I’ve got a whole department that uploads new products every day. 

So right now you can go in and buy all kinds of banners and advertising material for this new COVID way of doing business. And I’m not sure small businesses can get up and running that fast if they’re a mom-and-pop. They have a more out-of-the-box piece of software for their website, and they don’t have someone — probably — full time that manages it. If you look at the whole industry, there’s going to be a lot of small independent flag dealers that go bankrupt, that go belly up.

What indicators are you watching closely? 

I hate watching the news, but I do watch it. I’m watching my cash flow. If I had to watch one indicator, it’s my cash flow. If you can speed up the sales cycle, you can live on cash flow, even if your profit is low. So that’s what a lot of these big box stores do, is they live on cash flow. 

When I started this business 40 years ago, it was all about 2/10 Net 30, which means you get a 2% discount if you pay within 10 days, but nobody did. So everybody paid within 30 days. And you invoice and you always had more accounts receivable than you had money in the bank. 

Because of the internet, it changed the business model, and now you have people putting their credit cards in, and you have money in the bank, but you have this huge 3% that you give to the Visa, MasterCard companies. You’re living on cash flow because you have all this money in the bank. 

What’s one thing you wished other businesses and clients knew about economic conditions, as you see them, right now? 

I wish other small businesses understood that you don’t quit advertising when your sales go down. That really bothers me that, when your sales start to wane, the first thing small-business owners do — which I used to do too — is they cut advertising. And that’s like a self-fulfilling prophecy. So I know you might want to cut your advertising dollars while you cut other things, but don’t stop advertising. 

And then the other thing is we have been in inflation now for several years as the tariffs took hold. So I need to tell other small-business owners, don’t forget to slowly raise your prices. Not large price increases, 2% increases. And maybe do quarterly instead of having to wait and do this 10% increase at the end of the year. Watch your cost of goods and raise your prices to keep up with inflation. 

I wish consumers knew that they have all the power. They think that businesses have all the power, and they don’t realize that consumers have all the power. We are trying to jump through hoops to do what they want, and consumers want cheap prices, high quality and great service. You cannot have all three of those. Pick the two you want and that’s what you need, and that’s the way the United States economy will work.

– By Sarah Campbell-Miller


BARRY SIMON is president of Datamax Inc. of Little Rock, which provides technology and services to businesses including document management, print management, network management, IP phone systems and office equipment.

 

What’s the outlook for your business in the next 6 months?

It’s going to be an interesting six months. We are an essential business; because we are in the technology business we have an IT side of our company and the other part is our copier business that we service for hospitals and everything else. 

Our IT business is doing fine. A lot of people had to go home and get stuff on the internet so we set up a lot of companies to work from home. The next six months, we are hoping we will be back on track. I don’t know if we are ever going to make up this past couple of months but that happens. You got to move forward. We didn’t let anybody go. We made the decision from day one that we were going to retain all of our people. That’s our culture. 

How big of a financial crunch is that for y’all? 

We have an office in Little Rock, Hot Springs, Texarkana, El Dorado and we have a place in Dallas. We have 250-something employees. It is a big burden because we have technicians at home that aren’t making a lot of calls. You can’t go 40 years and talk about culture and talk about family, and then they’re not your family anymore. We protect our people because if they get a call, they have to do it. We tell them, “Always be safe.”

Every week I do a video —  “What’s the Datamax story this week?” —  and tell them what is going on. Our sales staffs, we have different groups and we had them come back to the office; some come in on Monday-Wednesday-Friday and some come in Tuesday and Thursday. They have to protect themselves with masks and we have all the distancing. You have to take a different path now.   

What’s the outlook for your industry in the next 6 months?

If this clears up soon, people will come back. Unfortunately I think there are people who are not going to be back in business. We sell phones and sell managed services and we have copiers and all that. We always took the initiative to put money back into the company. [We are] diversified and financially stable — with that we could hold ourselves a long time without having to worry.

I think some people aren’t going to have that. They don’t have that luxury. They are going to have to make decisions, not because they want to but because they have to. I feel sorry for them but people who deal on a shoestring, that is what is going to happen. 

I will tell you before all this went down, maybe in [mid-March], we knew something was up and we prepared ourselves to make sure all of our people who needed to work from home could work from home. Where I think people aren’t prepared — and this is the dilemma — is that the internet at their house isn’t capable of doing what they wanted to do. If you told your children at home, “go watch videos,” they’re streaming it and it is just slowing the internet down to nothing. That caused a bunch of problems. Some of the internet providers weren’t prepared. 

Fortunately, our people at home are kind of geeks in that area so they had the best Internet. 

What indicators are you watching closely?

There are multiple things for us. One is in our service part, where we service copiers and business equipment, we are seeing our calls going up. Before they bottomed out. That means people are going back to doing business; not as usual but it is starting to pick up. 

The other part is, how are the feelings of the people in the business world that I talk to. In all fairness, I do listen to the governor every day. I keep looking at our internal areas and what our people are doing. 

What’s one thing you wished other businesses and clients knew about economic conditions, as you see them, right now?

We have had some people tell us that now is a good time for us to deliver our product because things are slower. It doesn’t take away from the grind of their business. We do business with some schools and teachers are still printing up stuff. Some of this stuff has not died. 

The real thing of all of this is making sure that people do the best they can to be as considerate, safe and be healthy in this thing. We will come through it. The one thing about this is a virus. This is not an economic thing. It’s an economic problem for people but it’s not like 2008. This is something that can be corrected. It’ll be a faster turn than an economic turn.

– By Marty Cook