Regional Companies Expand Despite Down Market

LAS VEGAS — Many companies in a down market take the “run-for-cover” approach, resulting in cutbacks, layoffs and a virtual business standstill to weather the storm. Others, however, view the economic downturn as an opportunity to gain momentum.

Rat Sound Systems of Oxnard, Calif., has been preparing for the current economic climate for about a year, since the housing market began to decline, by refining and streamlining business operations. The company recently took delivery of more than a million-dollars worth of L-ACOUSTICS K-1 systems, a venture that President and Founder Dave Rat believes will keep them in demand.

“We now have one of the newest, hottest systems on the market,” says Rat. “We are only one of two vendors in the U.S. that carry it, giving us a major advantage over the competition.” Since the system is louder and sounds better than the previous system, the company can use less truck space, saving money for its clients. 

The company purchased the sizable inventory to stay ahead of the curve instead of following its competitors’ moves. “By the time everyone jumps on the bandwagon panicking and selling it’s already too late,” Rat says. “And that applies in both the economic upswings and downturns.”

While Rat Sound has experienced some challenges in the down market, mostly difficulties obtaining financing, business has remained fairly normal for a winter season.

“In my experience, bands tour no matter the economy,” he explains. “The size of the tours may drop a little because people don't have money to go to the shows, the ticket prices will be under pressure, and to keep prices down the extravagance might be reduced, but the quantity of tours will be the same.” 

By staying aggressive in its pricing to maintain profitability and adding value to its inventory and services, Rat believes his company has an action plan in place to stay strong while its competitors fall behind. “We’ve been working hard to ensure we're running efficiently, but also that we're in a position to buy and expand in the New Year.”

Similarly, Gand Concert Sound of Glenview, Ill., has made strides to stay ahead of its competitors to gain market share.

The company recently expanded its warehouse space by 50 percent, a move prompted by Gand's purchase of a third complete NEXO GEO T/Yamaha-powered system earlier in 2008. Now home to one of the largest inventories of NEXO in the U.S., the company needed more space to stage gear for upcoming large-scale events.

 “We have seen some competition disappear in the Midwest market place, and we are going to concentrate on expanding market share to make up for any downturn in the industry,’ said Vice President Tim Swan.

In order to meet the needs of its growing business, H.A.S. Productions in Las Vegas has expanded its warehouse space from about 5,000 sq. ft. to 11,000 sq. ft.

The sound company needed more space because it has recently acquired a lighting department, increased its backline inventory, started manufacturing cases and purchased a complete Adamson line array system featuring Y18s and Y10s.

Larry Hall, owner of H.A.S. Productions, says he didn’t hesitate to expand because he signed a couple of long-term contracts with local casinos, which he describes as a “blessing in this economy.” “I want to be ready when the market picks up,” Hall says.

Richter Scale Productions of Denver is currently in the process of looking for warehouse space in Phoenix, a location that would bring the company closer to its clients on the West Coast, says Vice President Judy Richter.

While Richter Scale Productions has noticed some decline in the scope of corporate events, the number of them has remained fairly consistent.

“We believe our company can do this expansion now despite the economy because there are indicators that the business is there and will continue,” Richter says.

Richter advises companies to be smart and take calculate risks in a down market.

“I don't think everyone should put on the breaks for their business plans—they should be tailored to the economy,” Richter says. “We’ve always been conservative and cautious in our growth and this is no exception.”

While the company has not made as many purchases as they would in a vibrant economy, Richter reports that it is not “paralyzed” either. Rather, management takes calculated risks based on its projections. “I believe our expansion plans are well thought out and will bring us farther along in our growth and development because we’re starting now.”

John Stiernberg, president of Stiernberg Consulting in Sherman Oaks, Calif., says expanding in a down market can be a wise choice for live event companies that have good management, finances under control and the right gear and people to operate them.

A reason some companies tend to expand in a down market. Stiernberg explains, is to build stronger relationships with existing clients.

“The better-run companies already have a stronger, more collaborative relationship with their end-user clients,” he says. “So, when they see a downturn coming, they want to do something for their existing clients that says, ‘We’re in it for the long haul.’”
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