Business as Usual

We have all watched and read the news nervously the past few months as Wall Street and the White House best decide how to handle the country’s newest financial crisis. But what few people, especially business owners, ask themselves is, ‘What does this really mean for me?’

The answer: Re-evaluation of the coming year’s business plan, some forecasting adjustment, and in the end, not much .

This newest economic slowdown can be interpreted as part of the economic cycle. We, as a country, have been through numerous recessions and stagflations through the years. The recent failures of Wall Street giants do not necessarily mean the business owner is going to shut down.

All business owner should re-evaluate expenses to make sure spending aligns with the overall business plan; however, growth and maintenance of any company relies upon continuing to operate in a manner consistent with the company’s overall vision.

Many in the business world view this current crisis as an industry-specific recession; affecting those companies associated with the financing and banking industries. According to Jim Elsener, business writer for The Business Ledger, “You have to separate what is bad business from a recessionary trend.”

Getting credit is more difficult. Nevertheless, a company or individual who has a good credit history, as well as cash collateral are able to find financing. Banks are not freezing loans, just being more responsible to whom they lend money. The current state of affairs does not allow risks to be taken as loosely; lending institutions are being more selective in their lending practices.

When a company has something of intrinsic value to sell, there are buyers. The overall quantity of bids may be low; quality of bids, however, should remain high.

The bottom line is…business as usual. Our economy needs companies of all sizes to continue selling and buying.

To read more from Jim Elsener’s article, please click here.

Strategic Planning Crucial in Real Estate

Anytime decisions are made regarding the allocation of a company’s assets, the decision makers generally consult the company’s overall business strategy. Such actions as hiring and firing, purchasing equipment, and production demand knowledge of a company’s strategy in order to execute the plan appropriately.

However, many business owners do not fully realize that real estate decisions also need to be tied directly to the company’s overall business plan.

Without this type of executive planning, companies run the risk of getting themselves into difficult real estate transactions. Defining a company's real estate investment leads to positive productivity and growth, rather than negatively impacting the company's pocket book

In an article written in the Journal of Real Estate Research, authors Hugh O. Nourse and Stepehen E. Roulac provide rationale for incorporating a company’s real estate needs into its overall corporate strategy. Some topics that warrant consideration before any real estate transaction should occur include:

• What value does the new real estate add to the company?
• Is real estate essential to the success or failure of a firm’s product distribution, or an auxiliary factor of production?
• How important is geographic location to the business?
• Are workers impacted by a specific office or building design; specifically regarding job performance?
• Is there a plan in place should the company need to upgrade facilities in the future?

Surprisingly, many business owners do not give proper thought to incorporating, or even designing, a real estate strategy that fits into the overall business strategy of an organization. There needs to be a plan for action should an organization require real estate now or in the future.

Furthermore, many businesses focus in on “let’s make a deal” approach in securing real estate. Shopping around and performing due diligence is always recommended, however, price should not be the ultimate factor in making a real estate decision. The most important decision making factor should be whether the property connects with and supports the company’s overall business strategy.

In conclusion, tying real estate decisions to a company’s overall business strategy is crucial for any firm. Real estate decisions are just as important as those affecting personnel, production, or operations. Otherwise, it is possible that corporate real estate decisions “may be made that are unrelated to or even in conflict with the enterprise’s overall business strategy rather than being consistent with the real estate strategy and thereby reinforcing the overall business strategy” (Nourse 488).

To read the entire article, please click here.

Nourse, Hugh O. and Roulac, Stephen E. “Linking Real Estate Decisions to Corportae Strategy.” Journal of
Real Estate Reasearch. Volume 8, Number 4. 1993: Pages 475-494. 30 September 2008.