Mike the Mover has been a household name here for more than 40 years, but that was no protection against the recession that hit hard, and fast, in mid-2008.
George Anastasakos, 61, and Monty Carodonna, 59, friends since Grade 2, have been business partners since they purchased the moving and storage company (affiliated with United Mayflower) in 1995. They work six days a week, proud of never having taken a sick day. Both have a hearty laugh and a knack for finishing each other's sentences.
The 2008 downturn, though, was no laughing matter.
“My secretary picked it up quite fast,” recalls Mr. Anastasakos. “In June, 2008, she said ‘George, we are not where we should be for this time of the year.' … That was the beginning of the major crunch.”
The next 18 months turned into a financial freefall, broken only with a major restructuring worked out with their local credit union, with which they have a long-established relationship. That branch is part of Meridian Credit Union, the largest credit union in Ontario after a 2005 merger. In battling through their cash-flow crunch, the partners learned some hard lessons, including when to say no.
“You have to think of a strategy to keep your operation going,” Mr. Anastasakos says. “Survival is a must.”
Four months after the company restructured its finances, business is on the upswing for Mike the Mover. As of late April, sales are up 28 per cent over last year and the two partners, Monty Carodonna, left, and George Anastasakos, hope to break even this year.
The company's financial troubles flowed directly from Canada's worst recession in 60 years. Layoffs by local auto parts suppliers and other manufacturers in southwestern Ontario's industrial heartland, and a sharp drop in home sales, flattened the demand for movers."People were scared and not budging, even though interest rates were at their lowest in my lifetime," Mr. Anastasakos says.
The partners knew they had to take unprecedented action.
For the first time in its history, the company laid off employees – six out of 55 on staff in November, 2008. The partners cut the advertising budget in half and slashed discretionary expenses. Meanwhile, some customers delayed payments to 120 from 30 days, further tightening cash flow.
“From every which way we were getting belted,” sighs Mr. Carodonna.
Company sales that peaked at $2.8-million in 2007 (up from $700,000 when the partners bought the firm) fell an alarming 20 per cent in 2008. That year, the company reported its first loss.
The financial picture worsened in 2009. To save money on insurance and fuel, the company took half of its fleet of 18 trucks out of operation. Last fall, after several rounds of painful layoffs, the company shrank to 18 employees - as many as when the two partners bought the company. Sales fell 35 per cent in 2009, forcing Mike the Mover to record a second year of losses.
“We did everything we could to cut back on everything possible during that period, but the pressure was still around your throat,” Mr. Carodonna says. “You feel like you are drowning.”
In December, 2009, anxious to borrow additional working capital, the partners turned to their local Meridian branch in Guelph with whom they had an existing commercial loan at 6.75 per cent (with their homes as security). Adding to the loan would have been expensive given the high interest rate and higher monthly payments. Instead, Meridian switched the two partners from its commercial to retail lending division at the same branch to map out a more flexible strategy.
The partners took out personal mortgages ($200,000 each) on their homes, for a total of $400,000, to lend money to the business. With the “blanket” residential mortgage, pegged at prime plus one per cent, they were able to retire the commercial loan, take on cheaper debt and inject badly-needed funds into the firm.
