McCallum: Evolve to survive
Invercargill’s McCallum’s Group has survived five economic downturns. Louisa Steyl finds out what it’s doing this time around.
Wayne McCallum used to have an Ernest Rutherford quote up in his office that read: ‘‘We haven’t got the money, so we’ll have to think.’’
It’s a maxim that’s served McCallums Group well for almost a century, helping it survive at least five significant downturns.
Managing director McCallum and his team have been dealing with the impacts of Covid-19 since January already, but as they’ve done before, the group will evolve to survive this storm.
‘‘The company has always progressively adapted through the decades and been quick to adopt new technologies,’’ he said.
When his grandfather faced The Great Depression just a few years after opening his tailoring business in 1927, for example, he started reconstructing suits with the inside facing out, so the material could be recycled, McCallum said.
It was also when the business ventured into dry-cleaning services.
Then, in the mid-90s, during another downturn, McCallums Group partnered with the hospitality industry in Queenstown to offer a same-day valet laundry service from Invercargill. ‘‘They said it couldn’t be done, that we were mad,’’ McCallum recalled.
But the move earned the company an extra $120,000 in turnover that year.
In 2008, when the company was ‘‘crippled by high gas and oil prices’’, McCallum took out a million-dollar loan to build a more energy efficient factory using a wood chip burner.
It created a $7500 a week saving in energy and serving the business today.
McCallum said businesses should avoid getting into debt during ‘‘good times’’ so they had credit available when they needed it, but added: ‘‘Everything you buy must provide a good return on investment.’’
This was another situation where people thought McCallum was mad, he said, but the group had won 12 awards for it’s forward-thinking green solutions.
He was quick to point out that those awards don’t belong to him or his company; they represent the work of his team, suppliers and support businesses, he said.
‘‘It’s amazing what a collection of Southland businesses can achieve,’’ McCallum mused.
He believed businesses that adapted quickly were able to bounce back after a downturn.
‘‘In a recession, a new market opens up. Eventually there’s another boom,’’ McCallum said.
It was important for businesses to be ready for that boom, he noted.
The McCallums Group has used the lockdown period to speed up projects it had been working on – some of which have become increasingly important for trading during level 3.
A dry-cleaning app will be released shortly to offer contactless services to both commercial and private customers and the group’s Selector Uniforms business is developing an online store so sport and work uniforms can be bought instead of rented.
Then there’s the brand-new venture which, permit pending, will allow the company to use its low-value waste heat (steam) to collect and harvest raw materials for animal and human health food supplements.
McCallum said these things were already on the company’s ‘‘to do’’ list, they had simply been prioritised. ‘‘There’s always opportunity, you just have to recognise it,’’ he said.
He’s also used the time to upgrade software across the business, which production facilities were usually too busy for.
McCallum urged business leaders not to put too much pressure on themselves when implementing change. ‘‘It’s not going to be perfect every time. Fix it on the fly as you learn,’’ he said.
Innovation aside, there’s no doubt that the Covid-19 pandemic has caused significant disruption for the McCallums Group.
When the outbreak first began in January, the company’s supply chains for linen from Pakistan and China, garments from South Africa and cleaning supplies from Germany slowed down.
Managing the situation required forward ordering and using existing supplies as conservatively as possible.
The Southland floods in February were also problematic as the company’s supply and distribution chains within the Southland and Otago regions were blocked, but McCallum said the effects were minimised by keeping stock in a depot in Queenstown.
Work has now all but ground to a halt. The plant at Otepuni Avenue in Invercargill has gone from dispatching 2000 bags of linen last April to just 300 in April this year.
McCallum’s biggest concern has been keeping his staff employed.
When the lockdown was announced, McCallum and his team had to move quickly to ensure wage and office systems could run remotely, so he could continue paying workers.
‘‘That was the thing I was most concerned about,’’ he said.
The company applied for Government’s wage subsidy to cover its more than $50,000 a week wage bill and McCallum encouraged other businesses to do the same.
‘‘We absolutely couldn’t keep all the employees on without that wage subsidy,’’ he said.
He acknowledged that rule changes around the subsidy scheme had caused some anxiety, but added that he completely understood that the legislation was a work in progress.
McCallum said the subsidy had bought the company time until the economy got moving again, but the group would need the hospitality sector to reopen before it could breathe easy.
His advice for businesses in crisis was simple: communication is key and understand your cash flow position.
Just before the lockdown started, McCallum reached out to his landlord, transport contractors, suppliers and business support services – like accountants – straight away, to ensure the company could meet their payment expectations.
Customers with outstanding debts were also contacted to find out when payments would be viable.
McCallum said it was important to survey staff and find out what skills they had outside their core roles.
They could be redeployed to cut costs or create opportunities for diversification, he said.
Then there’s industry peers – including associations and the opposition – who McCallum said may already have found solutions to challenges a company was facing. ‘‘This means you don’t have to reinvent the wheel,’’ he said. ‘‘Look to partner with other businesses and don’t be afraid to ask for help.’’
In terms of cash flow, companies should understand their break even point and work to reduce their fixed costs to bring it inline with current turnover, McCallum said.
He had been poring over the company’s historical performance indicators and financial records to revaluate and develop a new business model.
McCallum said using these documents as a foundation meant the company could throw out what didn’t work before and embrace what did in the future.
‘‘This has almost given us the opportunity to start on a new sheet of paper,’’ he said.
Forward thinking was also important, he said.
Every day for the past few weeks, McCallum handed a list of anticipated obstacles to his personal assistant, Natasha McDonald.
She trawled the net and watched online seminars, looking for answers to everything from how to make sanitiser, to the rules around the wage subsidy scheme. ‘‘I must say that Natasha has done a tremendous job,’’ he said.
McCallum is equally appreciative of his other staff who are working unusual hours, have had to adjust to customer needs and unanimously accepted a 20 percent wage cut.
‘‘The support we’ve had from the team has been humbling,’’ he said. ‘‘They’re worried about the company and the company is worried about them.’’
Dealing with frequent regulation changes, process changes, and keeping up with PPE demands had been a mammoth task for both McCallum and his team.
‘‘But the way to eat an elephant is one bite at a time,’’ he said. ‘‘There’s a lot to do and I don’t expect it to happen instantly. Don’t worry about the things we have absolutely no control over,’’ he told his team.
McCallum is certain the current crisis won’t last too long for Southland.
‘‘We’re usually the last into a recession and the first ones out,’’ he said, crediting the region’s traditionally resilient population.
‘‘I have the utmost confidence that we’ll get the show back on the road relatively quickly,’’ McCallum said. ‘‘As soon as the red tape’s out of the way, we can get on with it.’’
‘‘There’s always opportunity, you just have to recognise it.’’
Wayne McCallum, McCallums Group managing director