How to Ru[i]n a Business

The post originally ran on the Hermit Haus blog because that is where we talk about running a business. It derives from efforts on behalf of our new non-medical, personal assistance company, Hearts Homes Hands.

This post originally appeared on the Hermit Haus Redevelopment website on 2019-09-28. A slightly edited version also appeared on the Hearts Homes Hands blog.

Over the past few weeks, our sister company, Hearts Homes Hands (Hearts, for short) has been trying to get some promotional items with the lovely helping hands logo embroidered on them. Since Hermit Haus has previously purchase such items from the big online vendors, we knew that the quality of the items they provide tends to leave a bit to be desired. So we decided to buy the shirts from Lands End and have a local company embroider them. This decision provides the quality we like while supporting local businesses, a win-win.

Based on our experience so far, here are a few rules to follow if you want to avoid doing business.

Don’t Have the Equipment

Our first call was to a local tailoring and alterations business. It was a long shot, but we like her, so we wanted to give them the business if we could. Unfortunately, they don’t have the right sewing machine for the embroidery work. That’s not really surprising, since it isn’t their core business. It’s not a big deal, but it does keep them from expanding.

They did refer us to another local business that does. They just didn’t tell us that’s what they were doing.

Don’t Follow Through on Commitments

The owner of the second business actually did have the equipment and called us at 9:00 o’clock on a Saturday night (impressing us with their dedication) to say they would call on Monday to talk about the details. They didn’t. We did get an email Monday night saying they would be in touch with us on Tuesday. They weren’t. Nor did they answer when we called back the original number.

Don’t Provide Contact Information

We then set about looking for another local business to do the work for us. We found a Facebook page for one with no phone number and no email listed. See the previous “rule” and guess what happened to our FaBoo messages. How are you going to get new business if you make it impossible for your customers to contact you? You don’t have to answer the phone yourself, but somebody needs to.

Don’t Have a Physical Location

Now you may think that brick and mortar operations are passé. It so, why did Amazon buy Whole Foods? Why does Google have so many offices throughout the country for Google Fiber and their other marketing ventures. No, if you’re going to have to interact with your customers—especially if you rely on local customers—you need a place to do it.

The result of all this is the Hearts leadership team is going to our first industry event without clothing to identify us to potential customers and referral sources. Sigh. Anybody have a Sharpie?

Inflated ARV: Market Timing

Source: Austin Board of Realtors® It’s much easier to predict market cycles in real estate than in the stock market (where many would say it’s impossible), but you can still lose your shirt by assuming the market will always go up.

This post originally appeared on the Hermit Haus blog on 2016-10-24.

One of the easiest mistakes to make in renovating houses is to overestimate their After Repair Value (ARV). In this post, I’m not going to delve into motivations for inflating a house’s ARV. After all, I’ve done it to myself, so far be it for me to cast asparagus on anyone. I’m just going to talk about how it happens, and there are only a few ways:

• Use the wrong comps.
• Mis-time the market.
• Make the numbers fit the model.

I originally planned to talk about all three of these risks in one post, but I soon figured out it would be way too long. Click here to open all posts on this topic.

Mis-time the market

In the stock market, they say the fastest way to go broke is to try to “time the market”—that is to buy when the market is lowest and sell when it is highest. Real estate markets move much more slowly, and we have leading and trailing economic indicators to help us time the market. Some things to consider are:

• Special uses
• Seasonal differences
• Renovation time
• Market cycle

Special Uses

Unless you really know what you’re doing, owning a farm or ranch can be very expensive. For example, a gate won’t stand up to a tractor. Oops!

Special use properties make it easy to misjudge their value.

Farm land is cheaper in bulk; buying by the acre gets expensive. But farm or ranch land doesn’t produce any income unless you actively work it, and—while it does appreciate over time—you can be looking at decades to see significant improvement.

Offices, industrial space, and recreational properties exaggerate swings in the local business cycles. You must have a really good finger on the local economy’s pulse to play in this park—or need the office space yourself. It also costs more to get into this game than standard housing. That said, there is plenty of money to be made if you find a property where the use is about to change—like along the perimeter of where a new Box Store is going in.

Seasonal Differences

We missed the sale window for this lake house because of a combination of factors. We’re now holding it over the winter and using it as a vacation rental to make the mortgage payments until we can sell it in the spring when people are thinking about life on the lake again. Always have more than one exit strategy.

Housing in general sells better in the spring and summer, but resort housing exhibits this behavior on steroids. Many fewer buyers even think about buying a lake house when it’s too cold to get in the water or a house on a golf course when the greens turn white with snow.

We also know that water frontage adds considerable value. But what happens when a drought sucks the lake’s shoreline a quarter mile out? During the last drought, the receding shoreline exposed everything from illegal sewer lines to missing persons still sitting in their rusting cars.

Renovation Time

This is a big one—and one that has bitten every investor I know. You expect a project to take 90 days, but it actually takes six months. Maybe you find unexpected conditions. Maybe it takes longer than anticipated to get permits. Maybe you contractor flakes out.

At a minimum, that means you have additional holding costs for each of those three months, and that can really add up on a big project. At worst, it means you may miss the selling season or even hold a property into a down cycle.

Market Cycle

Given time, real estate will probably appreciate. But never assume appreciation in your purchase decision. If you do, you may wind up holding the property for decades or centuries to recoup your investment. Just look at the Rust Belt or Detroit.

The rule of thumb in Austin is that we have a five year cycle. The market goes up for three years and slumps for two. But the market is unpredictable. As my friend Shenoah Grove likes to point out, “We are now six years into our five-year cycle.” While this prolonged up-cycle is being driven by bigger economic trends—growing population, strong economy, oil boom (yes, the price per barrel is down because we have so much production right now.)—the likelihood of an adjustment makes longer renovation project much more risky.

Given the human trend to assume an up market will last forever, I’d be extra careful about every buying decision.

Moving to Canada?

Photo by Suna

Suna blogged this campaign on the Hermit Haus blog on 2016-10-06, but I helped come up with the concept. And I wanted the graphic to show up in my feed when I scroll back through this blog to remember what I have done in life. Maybe.

Both sides are so divided and hate each other so much that Canada has actually been talking about their immigration offices being overrun with inquiries. We got to thinking, “If so many people want to leave the country, they must want to sell their houses. Right? Let’s see if we can buy some of them.”

Suna found the clip art and put the sign together. We all put them out. One of them is in front of our Cameron office. Let’s see if it works.

And It’s Gone Again

Selling a house can feel like shooting a rapids. It takes patience, stamina, and skill to get to the smooth waters at the end.

This post originally appeared on the Hermit Haus Redevelopment website on 2016-04-17.

The Blue Ridge house falling out of escrow is one of the forms of turbulence Carol writes about in her free handout “88 Forms of Turbulence.” Turbulence is anything that can make a deal go sour. It’s one of the things we protect sellers against when we buy a house. When we put a house under purchase contract, it stays sold. Unfortunately, we can’t protect ourselves against turbulence on the part of our buyers.

Within a couple of days after officially putting the Blue Ridge house back on the market, we again had multiple offers, and once again we accepted a full-price offer. Hopefully, it will stay sold this time. But when I was a kid, my mom used to tell me you had to sell a house three times to get it to close. So, who knows?

We Learned Stuff

Even though the slide I’m looking at is nearly blank, I did take good notes throughout the weekend. Photo by: Sue Ann

Sue Ann has her own comments on this seminar on the Hermit Haus Redevelopment website today.

As a long-time instructional designer in the corporate world, I appreciate good training. But the truth is, you can even learn something for poorly-designed training. This weekend seminar on marketing strategies wasn’t the best designed training I’ve ever seen, but it did have lots of good information. A passionate trainer helped.

My big take-aways include:

• Marketing takes time to be effective. Keep throwing good money after…it.
• While most mail campaigns can start to familiarize recipients with the sending business after four or five contacts, marketing to a probate list can take more than nine or ten contacts.
• People will respond more favorably to mail marketing from a female name than a male one. Really?
• The presenter has had good results from outbound calling. Again, really?
• “But what about the dog?”

 

Progress on a Number of Fronts

Rose is almost playing with Brody. Persistence pays off, just like in business.

The TV is up in our living room. Never mind that we’re still using lawn furniture.

We’re making progress on our marketing. Russell set up a website at hermithaus.com. We’re figuring out how to set up our credibility pack—the publication that tells all about Hermit Haus Redevelopment and why you should want to do business with us—in different pages. It will also have a new blog so we can talk about ourselves as nauseum there.

The Snicker Test

I can’t tell if this is brilliant marketing or if it fails the snicker test. Both?

What was I thinking?

What was I blind?

When I bought this outfit I must have been

Temporarily out of my mind

—Christine Lavin

My work friend, Jonathan Edwards, says every company needs a 14-year-old boy on staff to test their product and marketing ideas. If the boy can’t make an innuendo, it’s not a bad idea. (Yes, the double-negative is intentional.)

I stopped at Buc-cee’s to refuel on the way to look at an apartment community today and found this product. My first reaction was, “WTF! What were they thinking?” I even heard Four Bitchin’ Babes start singing in my head.

My second thought was that Jonathan is right.