MONEY 52 - SALES

THIS IS MY 52^ND POST ON UNDERSTANDING MONEY TOOLS

In this Blog let’s talk about selling as it’s importance in today’s world to get a job, or to do better in the job we currently have. Everyday selling is very important whether it is selling yourself, a product or service.

What brought my attention to this topic?  A week ago one of the large homebuilders told me they adopted a certain book on selling homes and wanted all the people in their national company to read it, which I also did. In my opinion it left 95% of true selling out of the picture. I won’t mention the name of the book or author, in respect for him and his theories.

In light of my finding the book incomplete, I thought I would hit upon some key points on selling that I have learned over the past 45 years.  Sales are sales so it really doesn’t get outdated much.

There are two types of sales people, one with the born, innate ability to sell and the trained salesperson. I guess I am of the trained ilk. I have attended sale’s seminars, been sent to national sale’s seminars, been forced into sale’s seminars, so you can imagine how dear I am to them. Each sale’s guru has a gimmick. Many put on costly sale’s seminars because they can’t make a living in the real world.

Okay, let’s jump into this. I am going to hit on several basics, some may seem too obvious, but I’ll cover them anyway. First we start with “you” and selling yourself. Let’s look at the company interview. Take a look in the mirror, do you like what you see, as the person you are selling to is going to see you the same way. The competition in the work place is incredibly tough so a person needs to be one step better.

-       Are you overweight and frumpy, get on a diet. It is proven the leaner      more attractive person makes more money.

-       How is your personal hygiene?

-       Women, are your gray roots showing, have your hair dyed. Men, you might try a little hair touch-up also. I am not kidding. It is against the law to discriminate about age, however many companies won’t hire over 50. Companies know exactly how old you are from resumes and social security numbers.

-       Is your hair clean or brushed?

-       If you are a woman put some make-up on, but not too much.

-       Men, a bit of after-shave is okay, but most people are turned off by too much perfume or cologne.

-       If you have tattoos cover them up, corporate America is very conservative.

-       Dress appropriately for the interview or the job. You can over dress and under dress. Dress to your market so they relate. If you are going to an interview and in the past have done well, it is still best to leave the Gucci purse, or Rolex at home. You are being interviewed, you want the job, you want the money, you don’t want the interviewer to be jealous of you, but relate to you. A friend’s son was recently hired by a large tech company. Once he had the job and inside his working environment I was surprised to find that he and others could wear shorts, T-shirts and sandals to his work place. Tech today has come a long way. They realize the most important thing for many employees is freedom, once the basics of money is covered.

-       Do your homework ahead of time. The company has an opening because they have a need or problem. You want to know what the problem is ahead of time, and you can solve the problem.

-       Do not bring up salary, but talk about  the position and the company. When appropriate the human resource person or interviewer will address compensation and then it is okay to discuss the topic.

A common thread to all good salesmanship is that you maintain control of the sale’s process without your customer feeling the least bit uncomfortable.

We are going to relate a lot of selling to new home sales because of the book I mentioned above, but it is the same for most sales.  The customer needs to be able to trust you and relate to you; want to have you over for dinner type of relationship. First, back to basics, dress to your market. Are you selling $200,000 homes to families, $2 million dollar homes, resort homes, or perhaps time-shares. Let’s leave time-share selling out of this, as it normally is very high pressure selling and unique. One shot at the market and you better sell them something.

Before the sales process begins we need product knowledge. You need to know every aspect of the product. You need to like your product or service and respect it. If you don’t have this attitude go on to another product, company or service.

The selling technique of “product features”, “benefits for you” lacks an emotional sale and can be used for selling such items as hardware, insurance, and other products normally less expensive and utilitarian in nature.  Interestingly, insurance is sold more out of fear. What will happen to you and your family if you die or are hurt in an accident? We are going to stick to the emotional type of sale, so we need to “paint the pictures”.

The term salesman, even though it shouldn’t, has a negative connotation as far as a profession with the buying public.  I try to get my customers to know that I am a knowledgeable “guide” through “the process of purchasing a home”. You do not want buyer’s remorse in the end. One negative comment will negate a hundred positives remarks. Referral business is very important. I knew a very successful salesman of insurance products, who won tons of sales awards and made a lot of money, but on the other hand he had the most cancelled policies in the agency; he over sold to his customer and when they found out, they cancelled their policies. To me this is not success, but immediate gratification.

There are several types of home sales. Let’s stick to new home sales and a new customer. The book I read defined a customer as one currently “dissatisfied” with their home or living situation. Right there I disagreed and would say it was one small part of the whole market place. I started in real estate in 1970 in Vail, Colorado, and have been in high end sales, land development or consulting.  My “clients” weren’t dissatisfied with their current homes, many had several, they just desired another home, or something new/different. Take for instance, the person who has a Rolex and Cartier watch. They may want an Omega, but are they dissatisfied with their other watches, no. I have friends who buy the latest high tech thing as soon as it comes out. Are they dissatisfied with their one month old I Pad, no, they just want more or something different and still keep the others.

Let’s relate it to an actual customer. The customer walks through the door. First, if you have an office, don’t approach too quickly or too soon, meet them half way.  This is one problem I have with car salesmen. They all stand around like vultures with nothing to do, except lunge when a customer drives into the lot.

Next, look the customer in the eyes, welcome them and introduce yourself shaking hands, be sincere, don’t be too rushed. If it is a couple you shake the hand of the man and woman, not just one. After that back off slightly from your position as you’ve entered their “space”. Leave your hands down to your side, or behind your back, this opens you up. Rarely should you fold your arms across your chest unless you want to end it with your customer, this will close off the relationship. Stand straight, don’t lean against walls. Through dialogue and comfort you will then come closer to one another and feel comfortable with that situation.

The next step is to talk about something other than business, small talk like nice day, you drive a car I admire, you have a very nice family with you, etc.

Here’s the scoop. The people who just walked in, walked in for a reason or purpose. You need to find out “why”.  Remember when you were 5 years old and you kept asking the question “why”?  After some small talk you need to ask important questions,  the first step I take is to ask the customer if I may ask questions, I am entering their “space”. This is polite and also gains access to them. This is necessary for effective selling. For instance, “why are you looking at gated communities”? Oh, you want quiet streets and safety for your children.  “Why do you want a large lot”? Oh, you want a swimming pool and have two dogs”.  “Why did you select this area of the city”? Oh, you want your children in this A rated school system.  Etc.  Why, why, why!

Many people are professional lookers at real estate, some people are redecorating and just want ideas, however some really have a want or need to buy. I am trying to find out three things about them. These three important things are, “are they ready, willing and able” buyers.  If any of these are missing you need to have a strategy. Most buyers are not ready, at least for that day, so you need for them to sign a “guest card” or sign in so that you know how to contact them in the future; who they are, how they came by the project, etc. This also monitors your marketing effectiveness. To some people this is an intrusion of privacy, but if you’ve gained their trust to this point they most likely will sign in.

Here is where we go with “ready, willing and able”.  Is the person able, by this I mean can they afford to buy or have they been pre-qualified by a bank to afford the home. This is a major obstacle in today’s financial world. Most people are not ready and willing today, so that is why you have them sign in so that you have their email address, mailing address and phone contact. You are going to wait a few days and send them a nice thank you for coming in letter with more information on the development.

You have time to talk with people while you are putting a package of information together for them including floor plans/optional floor plans, exterior elevations, price sheets and a subdivision plat.  If multiple customers arrive at the same time have a few pre-made to hand out. Now, you have one on one time with the customer and it affords you more time. They are a captivated audience, use the time well.

True customers of any product are normally never a 1 nor a 10 on the scale ready to buy, they are in the 4 to 6 range. One class on selling I took year’s ago said people are somewhere between 48% “no”, to 52% “yes”. What you need to do is educate them to the product or solve their needs so they shift from the 48%; (I have the money) to the 52% (you can have my money for the product).

I always use the total respect approach and mean it. I will use  “sir” or ”miss” or their first or last names to reinforce the relationship. Honesty and sincerity is what creates sales and repeat business.

If you are not totally positive on an answer, tell the person you don’t know or are uncertain, and will find out and contact them.  Too many “I don’t knows” and you don’t know your product like you should and you will lose a sale.

Know the percentage of customers you need to meet to make a sale. The sale’s manager will know. On less expensive homes you may have more lookers and more people not qualified to buy so it could be a 1 to 2% closing ratio. I have found that on expensive homes, wealthy people don’t want to waste “their” time, they may waste yours, but not their own! This closure percentage might be about 5% of the people who look at new expensive homes.

I introduce the customer to the front door of a model and then back off telling them that I respect their time between themselves to discuss the home in private, however will be there when they finish the tour to talk about any questions they might have.

Before they leave I recommend they come back another time of day to see how different the lighting is in the house, they should sit down, spend time and feel comfortable in the home. You are starting to “paint the picture” of how great it would be to live there.

I hope you received some benefit from this Blog. There are zillions of books on selling, but these are a few ideas that I hope will help you.

MONEY 51 - ECONOMISTS

THIS IS MY 51^ST POST ON UNDERSTANDING MONEY TOOLS

In this Blog let’s select four well known economists and view their theories on the best way to run a government or country. These men I am quite familiar with, but unlike most of my Blogs I needed to resort to doing more fact finding to get my history correct.

With each of these men books and volumes of information have been written so we will only touch upon their basic beliefs to keep this brief, and yet transfer a bit of information to you.

Let’s start out with a bit of fun trivia. I had coffee this morning with a close friend and academic who I love to debate with. We discussed several topics including the distortions of truths in our media industry, both right wing and left wing.  I chose education and how much of the information we learned in school is not accurate. Two topics I immediately went to was the history behind General Custer/the American Indians and the original political formation of the United States.

Here is a fun question for you, and one that I lost on a bet several years ago. “Who was the first president of the United States?  ” Everyone answers as we were taught in school, George Washington. Perhaps wrong?  Yes, the Declaration of Independence was signed in 1776, however George Washington wasn’t elected president until 1789, 13 years later.  There were several presidents before George. Some say the true political organization started in 1781 with the Continental Congress under the Articles of Confederation. John Hanson was the first elected president of the United States under this organization. We had 8 presidents before George Washington, and could perhaps count as many as 14, depending on how you look at history.  George Washington was president of the “First Continental Congress” under our Constitution where we separated the executive branch of the presidency from Congress.  We signed the United States Declaration of Independence in 1776, Did we not have a Constitution in place until the 12 Bill of Rights were placed into it and then ratified by all states in March, 1789? Did we not have presidents? Oh well, there goes accurate history out the window in our school system, or let’s say incomplete history. (For the inquisitive minds go to Google.com and put in “Who were the US presidents before George Washington?”)

Let’s start this endeavor with the person best known as the father of modern economics, Adam Smith, a Scotsman. In 1776 he wrote “The Wealth of Nations” which was actually 5 books. Before this, we must understand that Europe had little growth from the year 1000 until the early 1700s. The period called “The Dark Ages” had nothing to do with light, by the way, but instead nothing substantial was accomplished. One of the first changes was patent protection for goods. This was a claim to a uniqueness and gave value to a product. The two countries that embellished patents were the Dutch in what is now the Netherlands and England. Adam Smith accounted for many things including, but not limited to, economics.  For instance, in those times people paid for goods and services with either gold or silver. Because of corruption and scales being inaccurate a person couldn’t be certain if they were getting consistent value. Mr. Smith placed a measured value on these metals to start holding a constant.

Adam Smith was the first to divide labor into various categories, and place a value on each. He was also noted for assembly line work and efficiencies. A product could be made quicker and better if a person worked with others and specialized in an aspect of the whole.

Was he a right-wing or left-wing individual, hard to tell as times have changed so much that these definitions can’t be related to today’s world. He did believe in a free market theory, and “laissez faire”.  This French term is still used today and roughly means, “let the buyer beware”, versus governmental intervention. I am certain the world is even more corrupt today than it was back 250 years ago….greed then, greed unfortunately now.

Adam Smith believed that monopolies can cause interventions on pricing. This we see today in the US as our Anti-trust Laws have gone out the window, especially from the early 1980s until 2000.  Mr. Smith believed in supply and demand for the creation of value.

We’ll move on to another notable economist, John Maynard Keynes. Mr. Keynes theories were last used big time by George W. Bush in 2007-8 when the banks were failing, and big businesses like in the auto industry were going down. Mr. Keynes was English and died after WWII in 1946. He believed in “macro-economics” in doing what is necessary including government intervention to save an economy and smooth things out. Mr. Keynes believed in a balance of savings and its relationship to inflation or recession. In previous Blogs we discussed the importance of monetary controls set in place after the Depression by FDR in the early 1930s including the Bretton Woods Agreement. Mr. Keynes was a key figure in creating the Agreement and also England’s social reforms. Bottom line, free market thinking with government intervention.

Our next move is to another economist of today who believes in government intervention, Mr. Paul Voelker.  Mr. Voelker held the position of Chairman of the Federal Reserve from 1979 during President Carter’s reign until 1987 through most of President Reagan’s presidency. Mr. Voelker is a Democrat and continues to act as an economic advisor today.

Mr. Voelker is a hero to many today with his monetary intervention to curb the high rate of inflation primarily brought on from escalating commodities in the late 1970s.  At the time, oil was reaching prices of about $39/barrel; gold, silver and diamonds were rapidly increasing in value. Inflation was running at 13.5%. Similar to Adam Smith’s and John Maynard Keynes’s on how to control economies, Mr. Voelker intervened from a monetary standpoint and started raising interest rates to slow down inflation. The Federal Funds Rate reached 20% in 1981. This pushed the bank lending prime rate to 21.5%. Looking at supply and demand, fewer people could afford this high rate of borrowing and banks would not lend money to individuals and small corporations because they didn’t meet lending requirements. Unemployment soared to 10% very similar to post 2008. My  business interests then moved from real estate to the oil and gas business with Energetics, Inc., and we were immune to the high prices because of our profitability until about 1984. (Please see previous Blogs on this.)

Even today, Mr. Voelker’s approach to fighting inflation is controversial. My personal opinion is that it was wrong. One reason is that it hurt middle Americans. Yes, it proved “supply and demand correct”, however the cost of necessities such as food, home buying and mortgages went through the roof. High interest rate costs were passed on as an expense item by large companies, so they and the wealthy were little effected. Commodity prices crashed.

Next let’s discuss a couple free market theorists. Friedrich Heyek, an Austrian, later became a British and then an American economist. He was one of the great 20^th century economists. Mr. Heyek was a money supply theorist advising President Reagan and Margaret Thatcher. In 1950 he taught at the University of Chicago and met a man a bit younger by the name of Milton Friedman, “Uncle Milty” to many. They were friends but sometimes opposed in philosophy. A major difference between the two was that Mr. Hayek did not believe in manipulation of money supply to correct economies like Mr. Friedman did.  With a somewhat pessimistic nature he believed in waiting before reacting too quickly, and to watch and see if the markets would naturally correct themselves.  Both believed in supply and demand and that free markets would adjust economies.  Mr. Heyek believed that all citizens of countries were entitled to unemployment insurance and universal healthcare. He further believed that a country should create a “safety net” for its people to provide a minimal standard in food, shelter, clothing, and necessities for life. He was an advocate for same sex marriage, legalizing drugs and prostitution which was pretty liberal. Maybe the guy wasn’t all bad!  He stated that the best form of capitalism was seen in Hong Kong, China. I have traveled to Hong Kong and it is an inspiration to any capitalist reflecting beautiful architecture and an abundance of money.

He, like Milton Friedman, was invited down to Chile when President Pinochet took power as a dictator and inflation was running rampant. His advice to Mr. Pinochet was the same, control inflation through money supply. (Here is an offshoot to our topic. I went down to Chile in the mid-1990s and had studied the country well beforehand. Even though President Pinochet was brutal and a dictator, he brought many good things to bear for his people. Each citizen has his/her own retirement account and felt comfortable to be able to retire at retirement age. Pinochet set up the branches of defense after the world’s best; the navy being trained and patterned after England, the army after Germany, and the air force after the United States. When I was there President Frei held the office, a good German. I attended a celebration held in the city center of Santiago, and the army proudly paraded in Germans dress with helmets and high leather boots “goose stepping”. Great country to visit and very nice people.)

Lastly, let’s take a look at Milton Friedman, one of the “Chicago Boys”. Mr. Friedman died only a few years ago in 2006 and had great influence over 20^th century economics. He taught at the University of Chicago’s School of Economics. As fore-mentioned he knew Friedrich Heyek well. He also went to Chile and Argentina and met with the dictators of those countries who had problems especially with inflation.  Milton was another supply and demand, free market economist. Sometimes free market can best be implemented an autocratic dictatorship.

Mr. Friedman had certain views. One was that every country has a certain degree of natural unemployment, this being around 4%, as many people just don’t want to work.

To synopsize here these are a few of his theories:

-       Opposition to a Federal Reserve System that has major controls.

-       An expansion to money supply that brings forth some reasonable inflation.

-       Minimal government interventions.

-       An actual negative income tax; putting as many incentives and money back into the system. If deflation exists, no incentives.

-       Money and supply system all-important for good values for a country, which can be traced back to the 1500s.

-       If price deflation exists there is no incentive for people or corporations to invest in the future.

-       He was a major advisor for President Reagan during his presidency terms.

Now, we will leave these economists behind and talk about one other topic that concerns economics, and that is “Fascism”.   Fascism began in Italy.  “Neo-fascism” gained its name after World War II. It is an economic theory/philosophy that believes in authoritarian views, especially between the government and private sector.  President Franco used Fascism in Spain after World War II until 1975, and President Peron, a dictator, used it in Argentina. The basis of the theory is that the “state is all important”.

With this philosophy in place one can see how Italy and Germany came together in World War II besides the natural geographical locations.  Hitler believed in nationalism and unification. There are parallels in many of the European countries and the United States that existed before and after World War I and today. This winter being somewhat bored, somewhat interested, I went to my local library and checked out “Mein Kampf” (In English My Struggle by Adolph Hitler).  Hitler wrote the two volume book in 1924 while imprisoned and then first published in 1925 and 1926. It is a rambling writing, but he was in jail, most likely bored with nothing else to do but write. The book could be consolidated to about 100 pages versus 900 pages, and a worthwhile read.

George W. Bush and the Federal Reserve Bank implemented Keynesian theories in 2007 after the destruction brought on by Wall Street, mis-rated mortgage derivatives and poor bank regulations. The strategy was so different from Paul Voelker’s actions. Government intervention this time lowered interest rates.  Lending money was, and is, only to the wealthy and large corporations, not to the middle class therefore there is no money circulating and no inflation, although money supply has significantly increased We, as a government of power, and control over the Federal Reserve Bank selected which companies survived and which did not. Lehman Bros and Bear Stearns of Wall Street went down, Goldman Sachs which does tons of business in alignment with the US government, including overnight trading, cannot be touched.  No corrupt white-collar worker who I have ever heard of has ever gone to jail. The tax payers took stock in General Motors.  AIG, Moody’s and others got a big bailout, Chrysler Corp, needed to go private. On and on, not ethical, not proper, not right but the way it was.  Fascism? Definitely government intervention, and beyond.

Let’s analyze how the US Government intervened in the pure free market and supply side economics over the past 80 years. In October, 1929 the stock market crashed and we began a worldwide depression that lasted about 10 years. President Franklin D. Roosevelt intervened with government money for a Works Progress Administration or later called Works Projects Administration (WPA). This program was designed to put unemployed people back to work on public infrastructure projects such as public buildings, roads, dams and bridges. Some of our great reservoirs came from this period such as Hoover Dam and Lake Meade in Nevada started in 1931. In this “government intervention” we employed people and it worked.

As previously discussed we had a real bout with inflation in the late 1970s caused by very high commodity prices and demand for products, goods and services.  In this case Mr.Voelker intervened and raised interest rates extremely high so that borrowers of money no longer had the desire to borrow at the rates banks were willing to lend. In this case there weren’t limitations on the supply of money, just the cost of money that brought down inflation.

Next case 20 years later and we move to 2007-8.  As most of us have witnessed this one first hand, banks were failing, there was little government regulations over lending practices and the world had was dipping into recession.  We have known this to be “The Great Recession”.  Even tough it is reported that we came out of the recession several years ago, growth has been minimal at best, jobs are part time at low wages and we periodically have quarters of negative growth like first quarter 2014, a negative 1.7%. 

George W. Bush followed Keynesian theories and intervened, in conjunction with the Federal Reserve Bank.  The government selected which companies were bailed out with government money and which were not and let them fail. Unlike Mr. Voelker, Mr. Ben Bernanke, who took over as Chairman of the Federal Reserve in 2006, decided to lower Fed Discount Rates to 25 basis points, or 1/4 of one percent. Along with this there was the need for more money to assist banks and big business, so the Federal Reserve started printing money in stages known as “Quantitative Easing”. To date the Federal Reserve has printed approximately $4.5 trillion. Also, this printing of money diluted the value of the dollar thus making our manufactured goods in the USA more appealing to other countries.

Very strict banking regulations went into effect for the average middle class person wanting, or needing, to borrow money. This “easy money lending” was and is only available to a select few, these being the US Government, big businesses and the wealthy. The average person has not enjoyed this ride to wealth as they don’t have the same income levels they did 14 years ago with little money, or none, to invest after paying for necessities. In fact many middle age and older people are taking money out of their retirement accounts to live.

Central Banks around the world have made “easy money” available now for several years. I watch as poor countries get into debt they most likely can’t pay back, thus leaving themselves vulnerable to big corporations and the wealthy. They move in to control assets, mainly commodities such as oil and natural gas.

This has been a fun Blog for me to write. When you write, it reinforces your thoughts.  We have seen that free markets really work best under autocratic governments. Without controls of some sort greedy and monopolistic corporations come into the picture.  Therefore, there is no possibility for free markets and supply side economics. We most recently saw what has happened since 2007 with similar tactics as Fascism and government interventions that diminish the middle class, only aiding the wealthy and big businesses.