Percipio has spent the majority of the past decade in residential real estate investment. Typically, our strategy has been to seek out distressed, undervalued, under-cared-for properties that we can renovate and bring back to a high standard. However, the Omaha residential real estate market has softened significantly in recent years.
There are a number of factors behind this shift, not least of which is a rush on residential real estate investment and development due to previously favorable market conditions. Regardless of the reasons behind it, the fact remains that the market for one of Percipio’s core business activities — investing in, developing and managing a portfolio of residential real estate — isn’t priced to a place that meets our requirements for new investments.
So here’s the question: How should you respond when you’re faced with conditions that challenge your company’s forward growth initiatives? What should you do when you’ve invested in skilled and talented individuals, developed industry best practices and have a well-oiled machine prepared to handle new investment opportunities, but those opportunities just aren’t present?
Adapt to Survive
There are countless stories about companies that failed to see the writing on the wall in their primary (or sole) industry. Cautionary tales like Blockbuster and Sears, which saw changing market landscapes but ultimately refused to adapt (at least until it was too late), are all-too-familiar.
Conversely, there are success stories — think about Apple, DuPont and Amazon — where gifted leaders recognized development opportunities (or greener pastures) and led a shift in organizational focus to ensure ongoing health and growth.
Not every company should expect to be able to turn into an Amazon; there’s a lot more at play there than adapting to unfavorable market conditions. However, every company has options available to it that might open up some exciting possibilities, provided leadership is willing to think outside the box a little bit.
Think about your own organization. What market are you currently in? What skill sets do you have in-house that you could apply elsewhere? What unique institutional knowledge do you possess that could be shared to benefit others (internal or external)? Where can you find strategic partnerships that may lead your organization into different industries?
There are three ways to change business strategy that I recommend for a company facing shifting market conditions.
A soft market presents an excellent opportunity to build reserves. You may have to adjust your mindset and realize that it’s OK to be patient and wait to act. But don’t interpret that as suggesting it’s a time to be idle. As you build those reserves, keep probing for new investment opportunities. When the right one comes along, you’ll be better prepared to move aggressively.
You may have built up an excellent portfolio of investments over time. But when the market slumps and demand recedes, you’ve still got the team that has supported your growth and made it possible for you to achieve your current standing. It might seem counterintuitive, but a down market is the optimal time to invest in your personnel in a significant way. Don’t leave them spinning their wheels waiting for a turnaround — or they may not even stick around that long.
Explore Possible Pivots
As I mentioned before, sometimes a company needs to shift its strategy in response to poor investment market conditions. This doesn’t need to be a hard pivot — you can explore and pursue options without completely changing your company’s long-term focus. But you should remain open to whatever opportunities present themselves. A landscaping design firm doesn’t need to become an investment brokerage when demand slumps in its local market — but maybe that firm can strategically partner with a technology developer to create an app for national (or international) consumers to budget, design and execute small-scale residential landscaping projects.
A Shift in Aim
I’m fortunate to work with a partner team of financially bright-minded individuals at Percipio. In addition to our firm’s investment arm, we also have built up a management and financial consulting business, putting our principals’ and our employees’ skills and abilities to work both within our own firm and for the benefit of other organizations.
As the Omaha residential real estate investment market has softened recently, we’ve had the opportunity to do some organizational navel-gazing and think about where we can apply ourselves while we wait for market prices to return to a place that makes sense to us for new investment.
Through all of our operations, we are consistently prudent in managing liquidity and performing regular cash flow analysis. Combined with our careful approach in targeting deep value-add investment properties over the past decade, this has let us optimally position ourselves to weather a soft real estate market.
But we’ve not been content to sit on our hands and wait for the return of favorable market prices.
Internally, Percipio has taken the initiative to invest in our own staff and strengthen our employees. We have used tools like the CliftonStrengths assessment to identify each of our staff members’ strengths. With a deeper understanding of individuals’ different areas of strength, we have learned better how to communicate with each other and ensure that the right person is given the right task.
Taking the time (and spending the money) to invest in personnel isn’t an entirely altruistic endeavor, though. It benefits your business to know that the people you have working for you are at the top of their game and are well equipped to handle the challenges your business might face. Having a more robust understanding of each staff member also benefits you because you can have realistic expectations for each project, task and interaction. If you know that one person is strong in strategic thinking, include her in planning discussions as much as is appropriate. But when it comes time to put a plan into motion, you might want to involve a different employee whose strengths lie in execution.
As a leader, you want to know the full value of the resources available to you, including your human capital resources. Percipio’s purpose in this internal personnel investment is twofold. It shows our employees that we value them and are as committed to their growth as we expect them to be to the company’s. But it also lets us know better how to activate our staff in and beyond their current roles.
We see great value in building strength upon strength. It’s hard to start something from the ground up; if you can reduce the effort required to drive successful project outcomes, that’s a win. Knowing what strengths you have on hand as you pursue new business opportunities goes a long way in assessing the feasibility of the venture.
As we have expanded our management and financial consulting business alongside our investment portfolio, we’ve been able to evaluate our personnel’s existing skills and strengths and apply them more fully to benefit our consulting clients. The present softening in the Omaha residential real estate market has given us the chance to put a greater emphasis on our established consulting business, including expanding our services to involve more of our personnel in that side of the company.
While it’s not a sea change in business strategy, Percipio has pursued potential new business opportunities that merge our consultative strengths and our real estate development and management expertise. Our personnel’s depth and strength in these areas has opened for us the possibility of taking on third-party real estate management opportunities. Such opportunities will let us leverage our institutional knowledge and background to quickly make an impact for clients.
A company’s leadership should always be probing for new opportunities that can strengthen the business and open new growth avenues. If Percipio got into a soft market situation without having already established the consulting side of the firm, we might have found ourselves struggling until the market rebounded.
However, because we diversified our approach early on, we have been able to shift focus to business management and financial consulting while we carefully search for our next real estate target. And we don’t have to jump early at something that doesn’t make sense, because we have strategically positioned ourselves for success, insulated as much as possible from market dynamics beyond our control.
Have you found your company in a tight spot because conditions in your primary (or possibly your only) market turned, leaving you limited in options and wondering how to keep afloat? Or maybe you’re in that kind of situation now. If you’re looking for a way to adapt your business to changing circumstances — or if you want to explore growth possibilities before your hand is forced — reach out so we can talk. Our partner team would be glad to speak with you and discover the opportunities waiting on your horizon.