Pruning Expenses

When Neil Parham recalls his FastTrac course, four words ring out like a cash register: cash flow is king.

"I remember Bernie Meineke telling us about cash flow, that it's a constant battle to manage it," says Parham, president of Eagle Packaging Inc. in Lawrenceville, Ga. Meineke is area director of the Small Business Development Center at Georgia State University.

A rocky economy is hitting the industrial packaging industry hard. To weather the tough times, Parham is cutting expenses to increase cash flow.

When FastTrac interviewed Parham, he emphasized the need to differentiate his company from his rivals by delivering exceptional customer service. He continues to focus on service, but he's also intent on paying down debt.

For example, he's allowing attrition to reduce his head count. Rather than refill open positions, Parham has asked his remaining 15 employees to absorb the extra work.

He realizes that's a tall order. So he uses open-book management to help staffers understand the financial pressures the company faces.

Every quarter, Parham meets with his team to review the numbers. They pay special attention to expense control. In a recent meeting, an employee noticed the company's growing expenses for phone use and sought more information. Parham explained that the increase reflected not only phone service in the office but also cell-phone bills for Eagle's truck drivers and field personnel.

"Everyone's questioning expenses now," Parham says. "They understand the role expenses play in affecting our cash flow, and they want us to spend our money wisely."

More than ever, Parham relies on his employees to solve problems. He admits he shares an unusual amount of financial data with his staff, but he figures "that's the best way they can understand what I understand about how this business is going to make money."

When  he decided to raise prices, he leveled with his salespeople about his rationale for this risky move.

"We couldn't have everyone working on razor-thin margins forever," he says. "As much as there's a fear of losing customers after a price increase, we had to do it to survive."

As a result, one of his salespeople "stood tough" in presenting the price hike to a big commercial customer. Eagle salvaged the valuable account, even though "they wound up paying more than they wanted to," Parham says. He's glad his sales staff appreciated the gravity of the situation and didn't back down when dealing with such a large customer.

Your FastTrac Connection: Neil Parham, president, Eagle Packaging Inc., in Lawrenceville, Ga. E-mail: Neil.Parham@eaglepackaging.com.