Can there really be “Too much of a good thing”?

Cato the elderMarcus Porcius Cato (234 BC – 149 BC) was a Roman statesman commonly referred to as Censorius (the Censor), Sapiens (the Wise), Priscus (the Ancient) or, more commonly, Cato the Elder (to distinguish him from his great-grandson, Cato the Younger). His most famous quotation is probably “Patience is the greatest of all virtues” which certainly has merit. But I have always been more interested in another of his maxims, “too much of a good thing can be a bad thing”, which I find somewhat ambiguous and vexing.

If “good” is defined as “of a favorable character or tendency; suitable or fit; commercially sound; agreeable or pleasant; well-founded or cogent; adequate or satisfactory, would it not seem that more would be better? In fact, one of Mae West’s most memorable quotes, and my second favorite after “You only live once, but if you do it right, once is enough” is “Too much of a good thing can be wonderful!” But I wonder if that is really true.

My opinion is that many consumer goods are specifically designed not to be too good. They often have built-in obsolescence and do not quite have all the features you really want so that the next sequential model, which includes new upgrades and bonus features, is attractive for purchase. Witness the iPhone 6 Plus which is arguably better (certainly bigger) than the 6 which is superior to the 5 which was better than the 4, etc. and once again created massive pre-orders and anxious customers waiting in line for hours to spend their money.

In the homebuilding industry we have usually not been able to create this same desire in the minds of the consumers although I remember several grand openings in better market conditions when buyers camped-out overnight to assure a place in line and lotteries where hundreds of potential purchasers eagerly signed up for an opportunity to buy. And while I see homebuilding continuously getting better with 2015 looking even stronger than 2014, I have to wonder if we as an industry are not that “good” and not doing all that we can to assure our success.

For my entire career I have been a strong advocate of prospect follow-up as it has been proven to be one of the most effective tools to produce incremental sales and profitability. But I have required proper implementation of this process with a consistent and positive approach. Today I received the following follow-up email from the concierge team at one of the largest national homebuilders:

Daniel,

Over the last several months, we have introduced you to our company and all we have to offer as a luxury home builder. However, we have only scratched the surface! Please let us know where you are in the process by answering the following questions:

Are you still in the market for a new home?
Have you purchased elsewhere?
Is there any reason or concern that is holding you back?
Can we provide any additional information to help in your decision?

If your situation has changed and you no longer require our assistance, please click on the link below our signature to access the Email Preference Center to unsubscribe. We would love the opportunity to connect with you again, so reply back or call us today!

(names omitted), Online Concierge Team

Perhaps I have misinterpreted this correspondence but I found it to be one of the most negative messages that I have recently received, lacking in the basics of what I believe would be proper prospect follow-up:

  • Other than the use of my first name, where is any part of this email that speaks to me personally?
  • Where is the positive “selling” message that would spur me to take action?
  • Why would you possibly wish a prospective customer to unsubscribe?

Continue reading

GET WHAT YOU NEED AND WHAT YOU PAY FOR WHEN YOU RETAIN AN EXPERT WITNESS AND LITIGATION CONSULTANT IN MATTERS RELATING TO HOMEBUILDING AND RESIDENTIAL DEVELOPMENT

HonestyI believe that honesty is an absolute; someone either is or is not honest, there are no degrees of or partial honesty and one cannot be honest in some aspects of life or business and not in others. And I believe that honesty, both personally and in their work product, is the essential requirement for any expert witness and litigation consultant.

The primary concentration of my business is acting as a strategic consultant to the homebuilding and residential development industries. I truly enjoy assisting in the conceptualization, creation and realization of successful new home communities that result in places and homes in which people wish to live. But I am also involved in expert witness and litigation consulting assignment when I find that the need for establishing the “truth” is, to me, both obvious and compelling.

Perhaps I am naïve but when I accept an expert witness or litigation consulting assignment I make certain that the attorneys and clients fully understand that until I complete my due diligence I cannot guarantee that my opinion will support their position. And I assume that other witness and consultants would follow the same process as I believe that it is both dishonest and a disservice to the client to first accept an assignment and then work, taking whatever steps may be necessary, sometimes in opposition to the “truth”, to create an opinion that supports their client’s position.

I certainly will not suggest that the expert is always right as there are always two sides to any dispute and both sides cannot be correct, in either fact or in the eyes of the judge or jury. But when an expert fails to have prepared a credible opinion based upon discernible and verifiable facts utilizing proven and accepted methodology, i.e., the “truth”, the outcome should be foreseeable and obvious.

I recently was retained as a litigation consultant and expert witness for a multi-million dollar trial concerning a proposed residential development. Interestingly, I had some familiarity and previous experiences with the company retained as an expert by the opposing side in the case:

- I first was asked to review one of this company’s reports for a second home community many years ago by a friend and respected competitor who had been brought in to assist with a struggling development. I found that the original strategy had proposed a development based on a target market segment that did not exist in any meaningful numbers in that metro area. Needless to say, the community had suffered seriously and now required substantial and expensive repositioning.

- Subsequently I was asked to review this company’s report for a proposed primary-use major community which was under development. They had recommended a TND community (traditional neighborhood design or “new urbanism”), apparently at least in part as one of the development partners had a fondness for this concept and already had an existing community of this type in the local area. My review of the local marketplace revealed that the two existing TND communities, including the developer’s, were struggling (one of them quite badly) compared to the more common conventional design communities as the local market had simply not responded to this concept. Additionally, my research suggested that the price points that this company had recommended were not achievable in this location in any meaningful numbers.

It appeared to me that this company had failed to perform proper due diligence and therefore lacked the essential understanding of the conditions and geographic preferences of the metro area and, specifically, the local sub-market in which the property was located. My recommendations, accepted rather painfully by the client, were for the redesign and repositioning of the property into a conventional suburban community, keeping only a small TND village center that was already partly under construction. The resulting revised community, when brought to market, was highly successful, substantially exceeded sales absorption and profitability projections and winning several major national awards.

Based on these previous experiences I personally did not hold the work product of this company in the highest regard as I was not certain that “truth” was evident but I was truly not prepared for what I read in their expert opinion in this case as it appeared to me to be pure fantasy.

In the preparation of my opinion I followed the same accepted industry standards for analyzing any proposed development – utilizing due diligence to provide a fact-based platform upon which to create a strategy (development program) that has a reasonable likelihood of achieving success or, in this specific example, to verify that the proposed development would not have been successful. Continue reading

HOMEBUILDERS – WAKE UP AND SMELL REALITY

Wake-UpI have taken the liberty of modifying the 1980’s adage of “Wake Up and Smell the Roses” which is probably the product of a mixing of metaphors – “Stop and smell the roses” (i.e., appreciate life) and “Wake up and smell the coffee” (i.e., get real).

The smell of roses and even coffee is usually quite enjoyable but what I am smelling lately in the homebuilding industry is something far less pleasant.  And we all need to take a deep breath of that reality and let it sink in so that we fully appreciate the implications if we are to survive and prosper in the future.  And that reality is the possible demise of the smaller, local production homebuilder who may well be forced into a permanent niche as an even smaller custom builder and remodeler. 

When I started in this business the homebuilding industry in this country was totally localized and smaller local builders dominated.  By the 1970s, the larger and more successful local builders expanded regionally and then, both through growth, merger and acquisition, the “nationals” came into being.  In recent times, aided by the downturn of the last decade, these industry giants have grown to the point that within the next couple of years they will account for over 50% of all new single family homes built in the U.S.A. and that is in addition to their overwhelming share of the multi-family for-sale segment. 

My uncle was one of those smaller local builders in the 1950s, 1960s and 1970s operating in the Chicago area and producing 30 to 50 new homes per year on in-fill sites.  He was quite satisfied to continue with that operation as vacant lots were plentiful and construction financing readily available and he made a comfortable living.  

Certainly conditions have changed – improved vacant homesites are scarce or non-existent in most locales and almost all of the choicest sites have been picked up by the nationals. Prices of land suitable for development are rising almost beyond reason and A & D financing often still remains elusive for smaller builders.  Competition is fierce with the “nationals” typically often enjoying price advantages due to economies of scale and national contracts providing cost savings and also from economies of scale in marketing. 

Instead of just rolling over and playing dead, however, I believe that there still substantial opportunities for smaller local builders to prosper in every market if they will make the commitment to properly research and analyze their markets and create a strategy for success!  That strategy will identify realistic opportunities in the market and provide a step by step program for implementation and success.  Continue reading