I have always found the phrase “be prepared” of special interest, perhaps due in some small part to my enjoyment of musical satirist Tom Lehrer’s song parody from the 1950s. If you are not familiar with his work, here is a link, hope you find it enjoyable – http://www.youtube.com/watch?v=fSwjuz_-yao.
Recently I had a birthday. I had stopped celebrating several years ago as the candles were setting off the smoke alarms. But this year promised to be something special as my son had flown in from Boston with one of my grandsons to celebrate with us. And “special” it was, although not quite as I had envisioned even though the cards and emails from over one hundred of my social media friends were certainly appreciated.
Several months ago I had coincidently scheduled a doctor’s appointment on my birthday as I try to make those appointments early Monday morning so that I may travel to clients Monday afternoon. This appointment was for my regular six month check-up but when the doctor looked at my chart and noticed that it was my birthday he decided to do something that he thought was “special” so he drew a smiley face on his exam glove for my prostate exam. He found this quite amusing; I did not and should have known then that the day was not going to go as had been expected.
After the exam I returned home to pick up my son and grandson to meet my mother-in-law for breakfast. The meal turned into an unanticipated extended event as, after waiting for our food for forty-five minutes, an “extra-special” treat when one of the diners is a three year old, our server realized that she had not turned the order in to the kitchen.
Now rushing to complete a few last minute errands before taking my son and grandson to the airport for their return to Boston, a phone call from my wife informed me that my mother-in-law had fallen on returning home from breakfast. As she had struck her head, the paramedics were taking her to the only level-one trauma center in the area, the county hospital 35 minutes away. I drove the kids to the airport and raced to the hospital to join my wife where I sat for the next seven hours while Grandma was immediately examined but then left virtually unattended for the next five hours until admitted for overnight observation.
My mother-in-law is fine, a hairline fracture of her nose, some bruising and injured pride and vanity. But the day was shot, no “special” birthday celebration for me. All I had time to do was snarf down some fast food, race home and pack for my 6 AM flight the following day. Fortunately, I am a follower of the creed “be prepared” and had updated all of my client files and materials for my trip several days in advance so that no serious harm was done, just minor annoyances in the great scheme of things. And I did have the opportunity while at the hospital to make some new friends – but more on that subject in a future blog.
The point to this lengthy introduction is that the world will constantly throw things at us that we do not expect. To survive we need to be adaptive and flexible and that can only be achieved by being prepared. That is true in the homebuilding business as well as in every other aspect of our lives.
Being prepared as a homebuilder requires having an intelligent strategy based on foreseeable conditions and regularly updating that strategy and implementing necessary revisions to our tactics as new conditions warrant. There is a section of the course that we teach in IRM II (Marketing Strategies, Plans and Budgets) that address market drift and inertia. Market drift results from changes in external conditions – those factors that we cannot control such as employment (or unemployment), financing (rates and availability), competition, the resale market, and a myriad of other factors. Inertia is our difficulty to adapt and respond as required to meet those changes and new challenges.
In one market where I am active (I will call it “Danville”) there are two production homebuilders who enjoyed very profitable operations in 2005. But unemployment in Danville has since more than doubled and is now over 10%, the resale market is down 35% by volume and 25% by price, in part due to the continuing supply of short sales and foreclosures, and the new home market is now challenged, at best.
One of these two builders had not deemed it necessary to prepare a written strategy in the past five years and made no revisions in his operation during this time except to change his total marketing and sales team four different times. No new housing products have been designed, no new communities have been opened and no truly new marketing campaigns have been created. This builder’s sales have declined by over 65% and what sales they are making are at steep discounts. Their future is uncertain, at best.
The second builder had their best year ever in 2009, both by number of sales (selling twice as many homes as in 2005) and by profitability, and is well on its way to an even better year in 2010. They revised their products for greater cost efficiencies and more appropriate features and finish details and presented the market with lower prices. They introduced all new housing products in each of their communities last year (admittedly many of the changes were cosmetic) so that they do not compete head-to-head with resales, be they distressed or otherwise. Because of their success they were able to open three new developments in the past year, two of which were brought to them by the developers on a virtually risk-free basis and the third was offered to them at absolute bargain basement pricing. They are now the second largest builder in the market and their future is bright.
The first homebuilder sat idly by while the market experienced substantial drift and thereby lost sales and income; the second builder regularly updated their strategy, was prepared for the market drift, took the necessary corrective action and prospered. Being prepared was the key to success for the second builder….but that’s just my opinion.
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