Surviving Tough Times

I just got back from a builder's conference in Las Vegas and the keynote speaker was Al Trellis, noted author and business consultant to homebuilders all across the country. He had so many good tips and advice for us but the overall theme of this conference was surviving tough times.
The first tip he gave to us was to reduce risk. He said you reduce risk by reducing inventory of land and houses, and reduced overhead. Just a tip I had never heard before, but in good times you should carry about 2-1/2 to 3 years of lot inventory, and in tougher times 1-1/2 to 2 years of inventory. The second tip he gave was to increase demand through product improvement and pricing. He stressed doing this by studying the next new trends in product enhancements for the home and making sure that your prices didn't increase even though you were providing a better product. The third tip he gave was to improve effectiveness and productivity in marketing, sales and production. As a company, I know we stress improved production and effectiveness in our weekly strategy meetings. This is key because most importantly we are able to pass this on to our clients in terms of improved pricing. Just today, we were showing a potential client several of our homes and he asked me point blank, how are you guys able to build for these prices? My response to that is I don't know what anyone else is doing, all I know is that the increased efficiency we strive for we pass through so our clients can get the most for their money.

San Antonio Economic Market Conditions

Courtesy of the San Antonio Express News, there was an article posted today discussing the economic conditions of our great city. The news is not all bad. We are slowing a little economically, but we did have 2% job growth quarter over quarter for Q4 of 2007. We are 35% down on new housing starts and still enjoy one of the lowest unemployment rates not only in the country but also the state. If you couple that with the fact that interest rates are extremely low right now, this correction can be a good thing. As excess inventory clears you should see a rise in demand for new and residential housing again.

Subcontractors

In the contracting business, oftentimes we are only as good as our subcontractors. It's hard to find the good ones because they are always in demand. The trick to keeping the good ones around and getting them on your team is to pay them on time, and treat them fairly. I've got a true story that happened to me just today. One of my best contractors is a landscaping company called Maldanado's Scenic Landscaping located in Boerne, TX. These guys are super professional, service-driven and do exactly what they say. Anyways, this is a family-run business and Jesse and Josh Maldanado are brothers who plan, estimate and execute the jobs for the company. Over time, I have seen these guys operate and we have become well-acquainted with each other and developed a friendship. One of the first things I noticed about these brothers is they had the coolest sunglasses. They wear an Oakley brand called Gascans (I know don't laugh) and I told Jesse months ago that I was going to get me a pair. They offer the sunglasses in regular and polarized. The polarized pair is twice as much, so I opted for the cheaper pair since I had a gift card to Bass Pro Shop and the difference wouldn't be so bad. Short story long I had the toughest time buying these things. First, they only had a display pair and wouldn't part with them, the second time I tried months later their gift server was down and they couldn't process my gift card. I told Jesse about my frustrations and didn't think twice about it. Fast forward to today, Jesse and I were sitting back admiring his recently completed job for one of my clients and he said, come over here to my truck I got something for you. So I go over there and he hands me a box with a bow on it. Lo and behold I open it up and they are a polarized pair of Oakley Gascans! I was so fired-up I put them on and gave him a big hug. He told me that he appreciated our business and said all kinds of nice things about our company. There is one quote I want to leave you with that I have said for a long time- leadership without relationship equals rebellion. I use that with my kids, and the business relationships that I have. If you are in the position of influence and you have no relationship with that person, then you can get people to do what you want, but ultimately they won't respect you. Here's hoping that you lead with a respectful hand.

Investors

I was talking to one of our investors today and after we got done getting caught-up we started laughing and cracking one-liners and all kinds of fun stuff. I hung up the phone with him and thought how blessed I am, as well as my company to have investors like that. That's the way it should be. We have a saying around the office and that is we treat investors like our own. What we mean by that is they are like family. They have entrusted us with their money. This is money they depend on to feed their families, plan their lives and fulfill their dreams. Our job is to deliver and provide an excellent return for them. These guys and girls are not just money sources for us, they are our friends, college roommates and even family members. We don't use them all the time but when we do we try to set them up to win. We simply align our goals to theirs, trying to make sure that the investment makes sense and their return is way above average. I think people can get in trouble when the investment goal is slanted heavily to one side or another. The other thing that we do is prepare heavily for the investment. We do weeks of research, and then carefully explain everything that is going into the investment. We then make sure that they fully understand. Warren Buffet once said that he doesn't invest in things he doesn't understand. In fact, if you ever are pitching your product to someone, the last thing you want to see across the table is the deer in the headlights look. Finally, we give regular updates on the investment as much as possible. Part of that is common courtesy, but the other part is they feel they are part of the process. To date, every single investor that has completed a transaction with us has reloaded for another. That's such a great feeling, not only to see their satisfaction but to gain their confidence and trust. If you are looking to gain investment dollars to pursue your dream, keep in mind some of the things mentioned above and remember to treat them as your own.

Faith

In case I haven't told you yet, I am a Christian. Jason is too as are others in our organization. This doesn't mean that we too don't fall short and sin just like others, are judgemental or anything like that. All it means is that we surrender our needs, hopes and desires to God. That's huge you see because it wasn't always that way. Probably up until about 2001 I use to get upset when things didn't go my way. Probably like you, I want to be in control of my life and do things on my timeline. There's nothing wrong with that, in fact it's human nature. The only problem I've found with that theory is that is it leads to a whole lot of worry and stress. When I started going to Church more, and understanding the price that Jesus paid for us and the fact that he wants what's best for us- it hit me that things that happened to me are preordained and part of his perfect plan. There is a story in the Book of Matthew where Jesus talks about worry. To paraphrase he basically commands us not to worry. He says that worrying will not add a single day to your life and that he will take care of you. He goes on to say that He wants what's best for you and knows what you need. Finally, he says that if you seek first His Kingdom and righteousness, all these things will be given to you. The past few months for builders has not been a bowl full of cherries. The headlines are dominated with negative press on the mortgage industry, the declining housing market nationwide and not to mention we along with other builders have had increasing theft on our jobsites. We learn those painful lessons and adjust our strategies daily when encountering them, but we don't worry too much because of our faith. Friend, if your days are met with worries, stress and just the daily pressure of life- please consider reading Matthew6:25-34.