Did you swim naked in 2018?
Now that I have your attention with what I'm hoping is the title and not the image, let's talk about 'skinny dipping' i.e. the practice of bathing naked.
Some are going to enjoy this post, some are going to find it very confronting, and some will wish they had kept their clothes on….figuratively speaking of course.
One of the richest men in the world, Warren Buffet was famously quoted as saying "You only find out who is (or has been) swimming naked when the tide goes out." It was a nugget of wisdom he shared with many of his investors at Berkshire Hathaway, which referred to the exposure and level of risks that companies take, which are only revealed when they are tested by adverse conditions; that is, 'when the tide goes out.' While the tide-going-out metaphor clearly applies to businesses, it is very much relevant to personal finances as well.
When things are humming, (like the last 5 years in real estate), we don't have to worry too much about our debt, our obligations and our expenses. Having a 'safety net' is not on the top of the priority list.
We don’t have to worry so much about where that last dollar goes, because there are a lot more dollars on the way. Everything seems to be ticking along nicely. But when times get tough, many discover that they are the ones that have been swimming naked: "Gosh, I guess I shouldn’t have bought that new car”. Or, you know, “I’m spending a lot of money each month on my health club membership, and I hardly ever go” (me, Mr Guilty as well!). And, “Hmm, is that all the cash I have on hand? I guess I’m living closer to the edge than I thought." You get the picture.
And when you’re running a business; it gets even worse. I'm a strict believer of being debt free where possible and always operating in 'code red.' i.e. with no excesses in running expenses and measuring a ROI on every expenditure. But when the cash is rolling in, profits high, complacency sets in and the discipline and urgency to 'peg back' seems to disappear. Thereafter many businesses find the 'unnecessary' and 'feel good' items do creep in and impact the bottom line and future cash reserves.
But this is the big catch & the big lesson…..
The tide has ALWAYS gone out…..and we've ALWAYS known it will happen!
We've been anticipating the correction in the real estate market for months now, if not years. And it's been a big correction; for Melbourne at least the biggest on record. Sales volumes have plummeted. We ALL knew the correction was bound to happen – it was a matter of when not if! So why are so many surprised and caught off guard?
We know, in business and in life, everything goes in cycles. There is always a Winter, Summer, Spring and Autumn.
So what do we do now? Now that the tide is truly out, do we simply pack up and run away, or do we look at ways to take advantage of the situation? What's the best way to navigate this environment and profit from it? I'll make reference to the advice from another famous businessman from the 18th century, British nobleman Sir Baron Rothschild from the Rothschild banking family who is credited with saying that "the time to buy (& create great fortune) is when there's blood in the streets."
Now I'm not trying to paint a picture of doom and gloom. Quite the opposite. Because as sure as we know the tide does go out; we know the tide WILL come back in, and before we know it, the cycle begins again.
But whilst the tide is out and whilst some find themselves 'naked,' others will emerge from the shadows and begin to thrive. And there are just a few simple steps to make sure you are one of the thrivers!
STEP 1 – Let's start by ensuring our bathing suits are back on
For those who have been enjoying the skinny dipping – sorry the party is over! What do I mean by the bathing suit? It's getting your house in order. Personal, business, financial. Cut out the unnecessary!
STEP 2. We need to have/start building a buffer.
In reference to real estate, it's a buffer in finances i.e cash reserves and LISTINGS! He who HOLDS the MOST listings in this marketplace WINS! Control the listings, you control the marketplace and you can leverage more. It's in these markets that market share is paramount. It's in these marketplaces that working as ONE team is critical.
STEP 3 – DON'T PANIC!
I have capitalised this because panic is your worst enemy. Channel all energy into the positive. We are entering a period of opportunity. I'm not stating this just because of saying it and putting a positive 'spin' on the situation. It's tough out there – when volumes are down by 50% on the same time last year, there is pure commercial reality at play. For some, it's going to be a dramatic pay cut (including ourselves!) in the SHORT TERM.
STEP 4 – It's going to be the little 1%'ers that will get you over the line.
It's closing the deal at 9pm instead of the next morning at 9am. It's going to take more private inspections as opposed to just waiting for them to come through on the home opens. It's going to take weekly face to face vendor meetings to get the 'gap' between buyer and seller together. Our I.M.P.A.C.T. framework is more important than ever. Be prepared for it.
STEP 5 – Protect your mindset & invest in yourself.
It's a fact that when things get tight, most will stop investing in training, in self promotion and not just in a monetary aspect; but more importantly a time & attitude aspect. You see, when things get tight, results from activity drop. So we do more activity for reduced results, so there is a tendency and a dangerous mindset which sets in which is 'why do it – there doesn't seem to be any light at the end of the tunnel'. Listening to daily podcasts WILL keep you in the right frame of mind. Mirror & leverage those in your team who are dominating in their marketplace – coffee catch ups with the positive ones, avoid the negative water cooler talk and protect your mindset at all costs. You cannot afford to have a 'shrinkage' mentality in these times – you must invest even more in every area.
STEP 6 – Be SEEN as the one ACHIEVING the results.
Let's put real perspective on this. If anyone is coming to market to sell now, they are not about 'testing' the market. They need to sell and if they are upsizing, it's the best time to be doing so. These sellers will be looking at the agent, agency, network that are getting the results. 'Sold' stories and seller testimonials will be a huge differentiator between one agent and another. Make sure your marketing reflects this. Social media success stories are a must – get out of your comfort zone if you haven't commenced these. Try it for a day!
STEP 7 – Data is important, but relationships are KING!
Your ability to network and 'love the ones' you’re with are critical. We know referral networks are a key component of any prospecting strategy – in a tough market, they can potentially be rivers of gold. Good agents will stand out in this marketplace.
STEP 8 – Critical conversations.
Understand that there are agents who have never navigated this sort of market – and if that is you, you need to skill up QUICKLY! You cannot 'fake it till you make it.' Process, strategy and critical conversations with both sellers and buyers and delivering on your promises each and every day & communicating that with your clients is what will drive results. And if you truly understand this one step in the process, you will understand why so many 'veteran' agents love this type of market as they know there are great profits to be made because the competition cannot match their skill or mindset.
Lastly, bring the right ENERGY to the table. Yes, you're probably thinking just like I do on so many occasions, not another 'pep' talk. But it is the alpha and the omega; the start and the finish. Without it, we might as well hang up the punching gloves and get out of the ring.