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Reality Check

Oct. 1, 2008
With all the talk of a Wall Street meltdown, it's a good time to take stock of the core value your company provides.

The numbers are mind-boggling — a $700 billion federal bailout. In electrical terms, it's roughly equivalent to the total sales of electrical equipment sold through electrical distributors in the past nine or 10 years. Even for Wall Street, that's real money.

The numbers get worse when you think about the potential trickle-down damage from the credit crisis, if businesses and taxpayers can't borrow money to finance construction projects, buy cars, purchase homes, take out loans to send their kids to college, or borrow money for millions of other reasons.

Hopefully, it will never get this bad. But while I am writing this column, Congress had just voted down the bailout plan earlier in the day and it's not clear how quickly legislators will regroup and agree on a revised package.

Realistically, you know Congress will eventually work its way through the legislative process and come up with a plan that will be tolerable to all parties involved. And plenty of investors will pick through the wreckage of a 778-point drop in the Dow Jones Average to uncover investment opportunities in well-run, debt-free companies whose stock prices were trampled in the panic of the herd fleeing the market.

Yes, it makes you sick that some slick Wall Street weasels are going to get bailed out of a mess entirely of their own creation, and that some housing industry economists and trade groups kept saying the housing boom of the mid-2000s was completely sustainable even though much of it was being fueled by questionable financing and speculative building.

This issue of Electrical Wholesaling will help you make sense of all that's going on. In one of his quarterly economic forecasts, “A One-Two Punch” (page 48), Herm Isenstein, president, DISC Corp., Orange, Conn., provides a sound reading of exactly where we are in this economic cycle and sketches out the path for the next few quarters. For the short-term, it's not a real pretty picture, but it's the type of real-world evaluation of the electrical world's business climate that Herm has been providing us for more than 20 years.

George Spilka, president of Spilka & Associates, Allison Park, Pa., has written many articles over the years in Electrical Wholesaling that helped distributors and other business owners learn the basics of selling their businesses. In “Wall Street Meltdown” (page 24), he analyzes the impact of the credit crisis on mergers and acquisitions and advises business owners in the middle of a sale process to stand tough against any potential acquirer who tries to use the Wall Street meltdown as a scare tactic to drive down a selling price.

This month's cover story will also help you steer through this crisis. The excerpt from the soon-to-be-published 2009 Electrical Marketer's Survival Guide (page 26) will remind you about the real value that electrical distributors, independent manufacturers' reps, electrical manufacturers and end users provide for the U.S. economy

The long-overdue update of this book, first published 10 years ago, will walk you through the many changes that have occurred in this market over the past decade. But The 2009 Electrical Marketer's Survival Guide also highlights a basic market truth — that distributors, reps and manufacturers provide tangible products and services that are absolutely integral to the commercial, industrial and residential infrastructure of the United States. These companies don't sell some esoteric financial derivative invented by a financial wizard, or some quirky here-today, gone-tomorrow residential financing schemes.

In these uncertain economic times, that's a good thing. While you can't expect the electrical market to be a safe economic haven impervious to the fallout from the credit crisis, you can take comfort in the fact that 99.9 percent of the companies in this market provide real value that serve a real need.

Snake-oil salesmen don't last long in this business. The electrical wholesaling industry has survived two world wars, the Great Depression and assaults from home centers, dot-coms and many other potential competitors. It will survive this crisis, too, because its goods and services provide real value to the U.S. economy. You can't say the same about many of the Wall Street financiers who got us into this mess.