Managing your book of business, branch or small mortgage brokerage often leaves little time to keep track of national or even regional, economic indicators that might affect your sources of income and the operational systems you have in place. Yet conditions such as interest rates, inflation, gross national product, stock prices and consumer confidence have an impact on your profitability, relationships with referral partners, customers and even employees.
During a period of economic decline, whether widespread or local, mortgage sales professionals are most likely to bear the brunt if they do not adapt. Yet the fact that conditions are changing opens up opportunities for resourceful LO's to outsmart larger or more established competitors who, during a downturn, carry on business as usual or are unable to adapt quickly...sound familar?
Such innovative individuals or firms can:
- Gain market share by taking it away from competitors unable to adjust to shifting market conditions.
- Maintain a strong cash stream throughout the downturn, in contrast to other individuals/companies that may have liquidity problems.
- Become a leaner, more cost-effective and more efficient operation, better positioned to do well when the market improves.
The challenge is to be aggressive and imaginative. LO's that survive and even prosper during hard times must be able to look beyond the present, to overcome the constraints of tradition, to see their environment from a new perspective, and to do business differently.
Here are specific recommendations for LO's and mortgage brokerage owners and managers to follow during economic upheavals:
1. Watch your opportunities carefully and the loan programs that can help you fill the niche the market opportunity presents. Typically during a downturn, there is a tightening of credit guidelines and subsequently many of the popular loan programs are either eliminated or tightened. Can the replacement programs be old and forgotten ones?
2. Monitor your cash flow very diligently, and forecast it monthly to ensure expenses and planned expenditures are in line with your receivables. Make sure you know your key numbers and metrics that provide information that is timely, relevant and accurate. Be able to project where you will stand three months in advance.
Negotiate with suppliers, contractors and landlords for better prices or short-term reductions.
If the cash bind has already surfaced, talk to creditors before the bills are past due to persuade them to extend payments of your current bills. Your chances of getting their cooperation will lessen if you wait until they send collection memos. Keep in mind that suppliers' credit managers will be more receptive if your payment history is a solid one, and you can assure them future bills will be paid on time.
3. Separate the "nice to do" from the "have to do," and eliminate nonessential expenses as much as possible. Ask yourself, is that activity necessary? If not, don't do it. Also consider cutting personal spending. Simple solutions such as brown bag lunches can make a difference.
4. Evaluate the marketing worthiness of all your referral sources. Remain close to existing customers, and checking to see how they are getting on during the economic downturn, not only helps avoid unpleasant surprises but could also lead to new opportunities.
Besides, when sales are sluggish, keeping in touch with customers (always a sound business practice) becomes vital to head off eager competitors. If appropriate, call on every customer on a regular basis. Frequent face-to-face meetings with your referral partners provides an excellent opportunity -- probably your only one
5. In a related vein, look hard at capital spending. Consider delaying both the purchase of high ticket items and expansion plans that take a long time to pay off. At the same time, make sure you have enough capacity to start filling orders again when the economy stabilizes.
6. Strengthen your banking relationships. Just like you, banks are looking for business to boost their income, but are also trying to minimize risk, so they are careful about what kind of loans they undertake. Most experts agree, however, that seeking additional credit during a recession is not advisable.
7. Look for opportunities to reduce rented space. If, similar to many companies, you acquired space in anticipation of staff expansion that ultimately proved unnecessary, this may be a good time to sublet that space -- thus reducing overhead and generating extra income.
With this in mind, commit yourself to subleasing a set percentage of your company's space. By consolidating operations and removing unused equipment, you may find that much of the space you thought you had to have was simply draining the bottom line.
8. Now is the time to be prudently aggressive in the marketplace. Actively seek out new business, and perhaps add a salesperson or two or an extra service to give you an edge over competition.
9. Similarly, don't skimp on service and quality by being understaffed. One advantage of a slowdown is that hiring gets easier because there are more candidates from which to choose due to layoffs and other cutbacks.
10. The importance of excellent service cannot be overstressed -- especially as their buying power or willingness to spend is lessened during tough economic times. Studies show that perception of service is fixed primarily in terms of time in a customer's mind. Three examples are: waiting time to obtain service; reaction time to deliver service; and length of time of the service. In mortgage banking, prospective customers will walk out or hang up if their time perception is strained.
While economic downturns are admittedly difficult, and increase the obstacles LO's face in trying to survive and grow, it is essential LO's not take too long to realize what must be done, or which resist change. Resourceful LO's capture the available opportunities, and take steps during today's hard times to lay the groundwork for tomorrow's prosperity.
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