OPPORTUNITY BEGS [Part 3]

OPPORTUNITY BEGS [Part 3]

In Part 1 we used the acronym of COVID to good effect. Our COVID stands for:

Concentrate On Victory In Defeat

We said that using a crisis for victory, means that although you are not exempt from it and may even be infected, you use every ounce of your energy for two things:

  • To protect yourself, those closest to you, and those beyond.
  • To learn from the crisis and then begin to plan for life after the crisis.

Point is, you don’t plan for the crisis but through it. It is a juncture, a point in time, an event that can precipitate change if you isolate but don’t hibernate if you lift your head and don’t succumb to defeat.

Your immediate three actions are:

Hygiene. Isolation. Test [if you get a dry cough and sense a fever].

In Part 2 we considered some gifts that are human and precious:

Choice. Family. Panic vs Patience. Levelling. Connectivity.

We concluded with these thoughts:

  • Coronavirus begs a response from us. It is business unusual. We now have time to change where change is needed.
  • Character is refined in a crucible.
  • Choose Family. Be Patient. Allow yourself to be levelled. Stay connected.

I have had positive feedback from some readers. But in receiving that, I cannot describe how I didn’t want it in the sense that right now, I’d prefer to be writing about a rebounding market and interest rate drops and recovering businesses as staff return to them. What do I say in Part 3 to businessmen and women who are facing a financial crisis? How do I explain away Moody’s Ba1 Negative Watch rating and that the Nedbank share price is R67? Right now, to me the only good news on the horizon is a R2 reduction in the fuel price.

Most of my readers I imagine are businessmen and women. Anyone who has had the courage to step out from corporate salaries and face the prospect of commission-based sales as an originator, an estate agent, an estate agency or a conveyancer is a businessperson, in fact, an entrepreneur deluxe.

Let me tread this water as humbly and hopefully as I can:

    1. Saleable, Scalable, Sustainable: Being clever in hindsight is not my style. But allow me this one look in the review mirror. No matter how small or big you are, these three things are a guiding light for business.
      • Saleable implies that you are building a business that someone else will buy whenever you begin to prepare to sell it. Of course, this does not apply to sole traders other than you have a database of relationships built over years and you “sell” that in different ways. Financial brokers value their forward annuities from clients. Doctors sell a practice with known incomes over a previous period which it would be up to the buyer to retain. Principals would do the same.Large businesses would have developed structures of mangers to make the entity saleable without the original founders involved, and then the past income multiples would kick in. The only point I make is that this process takes time and strategy to work out for your business but don’t lose sight of the value you have built up over time through hard work.
      • Scaleable: Point here is that it would be preferable if your business was scaleable. Investors buy income streams, but they also often buy expansion opportunities. How many estate agency offices do you think Seeff started with? One. How many today? “Over 200” says Google with 1200 agents. Not bad for a company founded in 1964. Whether scaleable by opening branches, licensees, franchises, etc, it really doesn’t matter. Think about the scalability of your business and follow the strategy with intention.
      • Sustainable: This is the hardest one for me right now. Let me handle it away from our property focus. Edcon [Edgars opened its doors in Joubert Street, Johannesburg in 1929 and now incorporates JET stores], is in trouble again. I got to meet its CEO, Grant Patterson, who is ex-Spar and -Massmart, back in the days I managed Nedbank’s Card Acquiring division. He’s been overseeing the turnaround at Edcon. My heart broke for him on Thursday when he wept as he told all his Suppliers that Edcon does not have the money to pay them. Briefly, Edcon has R400m and that is needed to pay staff who cannot work during lockdown and by end of this period, Edcon will be R800m shy of budgeted turnover. Without a fresh capital injection by shareholders, Edgars and JET will finally be no more. He has been praised by some suppliers for having the courage to face them with the news instead of, as some have done, sending a cold “we-have-a-problem” letter to suppliers. While off the focus, the SOE’s have proven a disgrace for the government. Imagine the R100’s of billions used to save them being in the bank right now for COVID measures. R16bn is still set aside for SAA. For what? Com’on, shut it down. Richard Branson’s Virgin Airlines is asking for a rescue package and the USA’s airline industry is taking $60bn in rescue from the $2trillion package signed off yesterday. How do you think SAA is going to fly again? Right now surely the only sensible thing left, seems to be to salvage those businesses with a fighting chance and close the rest, thus giving the staff decent retrenchment packages. Heaven help us!These real-life dramas dramatically speak to Sustainability. Essentially, being sustainable is having money in the bank when times get tough and enough of it to survive commercial storms. Today the question is how much it would take to survive coronavirus for each of us in business?
    2. Caring for the assets: Many owners pay lip-service to their most important asset. Intentions dictate People but behaviour may demonstrate more inanimate things. In financial services, very little beyond brand and technology has much value. We are people-orientated and people-intense businesses; you just have to walk through a conveyancer’s office to realise that. I put to you that if you care for the Hero, the business, as I described in Part 2, then you will naturally care for the employees.When all is said and done and the virus is dead, your people will return to work. Some may have expected compensation, but I’m positive that loyalty will increase with having been cared for to the best of the owners’ ability. I’m not a cynic who says if you want loyalty, buy a dog; I have experienced gratitude even in instances where tough calls were made. People appreciate people – care as much as you can for your employees. After all, they are probably the reason why you got where you did in the first place.
    3. Protect the Hero: The business gives returns to the investors and employees to the staff. In that sense, if your actions sustain the business through the tough times, it may not come through unscathed, but it may come through. In doing so, however, downscaled, it will continue to offer returns and employment for many years to come. Here is the rub: What is needed to sustain your people and keep even a remnant of the business alive? Monitoring what you have in the bank, allowing for a high percentage of non- or short-payment from debtors who have their own predicaments, providing for delays in conveyancing and registration, and then looking at your costs, is your best estimate of how much you need to survive.This principle is no different for individuals and I have no doubt thousands of people are planning to delay their debt repayments in order to fund themselves or their businesses. No wonder Nedbank’s share price has plunged to R67 [by the way, it was R54 after the crisis of the early-2000’s]. Your finances will be tested to the hilt and you may need to make terrible calls way before you hit rock-bottom. And remember, you need to act sooner rather than later to ensure you’re not too late. At a national level, as an example, I can’t help but feel it’s too late for SAA. What I have written before when discussing these matters is that the business that survives continues to employ for many years. The originators and so many other stakeholders in the property industry bear testimony to this truth. Some I can think of right now have flourished even more in the last decade than before the Sub-Prime crisis.
    4. Protect your brand: Your brand, both personal and business, is the beacon by which others know you personally and commercially. Whatever you do, protect your brand. Openness, optimism, pre-emptive actions, foresight, understanding, consideration, humility and courtesy, to name but a few attributes, are the characteristics that matter most.You and your business can have those attributes. What also happens in a crisis is that people lose sight of these human and business qualities. Psychologists doing Management interventions test you often at your limits; it’s there that fuses shorten, negative instincts exhibit and the real “me” come to the fore. Especially be honest with your people. Many of them know your business as well as you do. Tell them the truth as best as you understand it, they will value your transparency.
    5. Make contingencies: There is an old term: Hope for the best, prepare for the worst. It’s not helpful at the extremes as very often the real scenario occurs between the two. The only way I know to deal with this is by using probabilities. Using base case as normal business, you need to assign probabilities to income, debtor repayment and creditors’ willingness to assist. These probabilities would then give you a worse case and then a worst case. At these cases, the amount you need to survive the storm becomes calculable.Some things from experience:
      • This exercise almost seems puerile to discuss. It is really obvious. However, the reason why I mention it is because we may become paralysed by anxiety and spend more time worrying than acting. The exercise helps you focus on what needs to be done and when. Action casts out fear.
      • Don’t delay. If you need facilities, arrange them. If you need debt relaxation, ask; there is nothing lenders hate more that borrowers who duck and dive their payments – talk, restructure, arrange to pay a minimal amount. And if you need to shed costs, shed them before it is too late.
      • A planned reduction in overheads proportionate to turnover may become a hallmark of your leadership in a crisis. Watching the originators who survived 2008-2010 and then diversified their businesses into auxiliary financial services, they have done very well and are now better poised with more annuity income to ride this storm.
    6. Working remotely: We have talked about this phenomenon since the invention of the computer. The internet raised the opportunity. It was interesting to hear the CEO of Verizon talking about his 135000 global workforces working remotely as far as possible. What he also shared was the upgrades to their systems to enable corporate-orientated bandwidths to be upscaled for domestic traffic; a project to which they allocated $500m. How do you now manage? – no coffee meetings, no MBWA, no social occasions, no physical meetings. I’ve never done this, but I am now chairing boards virtually at least until end-April and finding it tough. I tend to watch people and facilitate meetings accordingly, now, especially with some line-loss, I find myself interrupting more frequently. Here are some of my thoughts:
      • Monitor technology links real-time.
      • I would have a virtual meeting first thing every morning to uncover needs for each role.
      • I would contact individual staffers to ensure their anxieties are aired. This would not be forced but a natural conversation between “friends”.
      • I would check myself daily for stress. As intimated above, unnatural circumstances affect behaviour. “You can’t preach the measles if you’ve got the mumps”, said one of my pastors years ago. Even though your time is face-only time, your eyes and voice will resonate unease. Calm down as a daily routine.
      • Manage your expectations. Nothing changes in delivery required to satisfy your clients. They may make some allowances, but don’t assume they will; retain standards of performance and especially, business risks management.
      • For the rest, be yourself. “This too will pass” must be our mantra as we deal some of the shocking revelations from every information source.

In conclusion, this has been very difficult to write. People matter and I’m writing to and about people with as much empathy as I can muster. But we must prevail and prevail we will.

Homeloan Junction is in this with you. We are not immune in the least and have uncertainty at every turn. However, we salute those of you working from home. Thank you for your support. We assure you of ours. Please keep in touch and let us know how things are going.

We trust God’s protection on you and your families.

Yours in Property.

Jack Trevena

Jack Trevena

With over 30 years of experience in the banking and home loan industry, my hope it is share what I have learnt over the years with my blogging community, inspire conversation around the subject and in the process discover unique insights into this ever changing environment.
Jack Trevena

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