Knowing what to do when the market toughens and having a plan. That is what has separated the average businesses from the great ones.
Topic – The big moves of 2018
Mentor – John Knight
- Building room to move
- Refocus on risk
- The strong get stronger in a tough market
Developing your leadership style – Jacob Aldridge. If you talk to most experts in real estate, they’ll say most problems are easily solved with more sales people and more sales. Jacob says that is not the case.
Kevin: As we have a look at the reflections and take aways from John Knight at Business Depot on 2018, we’d be remiss, I guess, if we didn’t have a look at the impact on the industry because of the toughening housing market. Good morning, John how are you?
John: Yeah, good. Thanks Kevin. Thanks for having me along again.
Kevin: That’s a pleasure, my friend. Of course, Business Depot specialists in the real estate field, in terms of accounting, coaching, legal and broking. They’re the people to have a talk to. I’ll just cancel that call. John, let’s have a look at the tougher housing market and if we could just talk about how that’s impacting our industry.
John: Yeah, I suppose from a business perspective, we’re having principals, especially in the southern states, especially in the Victorian and Sydney sort of markets. feeling the market is quite tough. And now whenever we have people coming and wanting to talk to us about those types of things, we default to how do we refocus our attention, and reduce the risk within your business. The simplest way to do that is to calculate, focus, and continually review your break-even points. Because take risk out of your business, you’re going to want to reduce your break-even point. You’re going to want to reduce the amount you have to pay every month, just to break even. Because we see a month here, there and everywhere, where you quite often can make a lot. I know August in the Queensland market is often a top settlement month.
John: It can be a month where you go backwards. By reducing that break-even point means if you have a couple of months in a row, or a couple of months within even a 12 month period, you can survive by not being too much in the red, during those periods.
Kevin: What about … I guess a constant review of the business really, shouldn’t we? Be looking at our financing all the time?
John: Yeah, of course, and by looking at it from a break-even perspective can just put a bit of a different spin on looking at your strategy, and looking at your business model. Because once you know your break-even you can then have your discussions around, “Well, what do we need to do to reduce that break-even?” Of course one way to reduce it, is to reduce your fixed ongoing costs, or another way to reduce it, or to improve the position is to increase your margin that you get out of your sales. Growing a rent-roll, organically or acquisition. Looking at that from a net position, can help you focus on that break-even point. But you should always be reviewing those, and set yourself a reminder every six months to have a look at your costs and see if any excess has popped into the model.
Kevin: I notice you have said, and you said in your notes here, remember the strong get stronger in a tougher market. We develop good habits in tough markets, I find too.
John: It’s amazing how some tough discussions can create some really good practises within the business, because usually things that people have been putting off … The things that they know that sort of let them get away with for a little while, and having those transparent tough discussions, can put you in a position to get stronger, because whenever there’s a downturn, and I’m not suggesting this is a downturn, but whenever when there are tough times, the strong undoubtedly get stronger.
Kevin: You can’t do this on your own either, John. I’m just a great believer in having a coach, or a mentor, or someone who sits besides you as a co-pilot and makes you feel uncomfortable at some of the things that you’re not prepared to face.
John: Well, it’s a pretty lonely world, running a business. Whether it’s real estate business, or any business. It can be pretty lonely if you’re sitting there on your own, with all this pile of hats that you have to wear within the business. Getting a mentor, getting a coach, getting someone to hold you accountable is a great way to get you thinking a bit broader than your own … I suppose blinked view of the world. And also, part of the value of coaches and so forth is that continual every month, “Why didn’t you do this, you said you were going to do this?” Sooner or later, you get the point home, and they make it happen.
Kevin: Yeah, and sometimes when we’re knee deep in crocodiles, it’s hard to see the opportunities too, and that’s what coaches and mentors can do, they can … We talked yesterday about the adjacent services. Sometimes it’s obvious what we can do, but we just don’t even see it.
John: Sometimes it’s just that new perspective, new idea that challenges your thinking, that makes you look at it from a different perspective and see it from a different angle. And that’s why for adjacent services we talked about yesterday, a lot of people were like, “No, I could not be bothered with going down the adjacent services route.” But maybe there’s a different way that you can provide some of these things? That’s where coaches and so forth can help.
Kevin: Excellent. Back to round out this series again tomorrow, when John Knight returns. Thanks John, talk to you soon.
John: Thanks, Kevin.