Taboo Topic
As housing and the related businesses that make residential real estate a full point-plus–to the good or bad–of our Gross Domestic Product take their medicine, a hard reality is that many, many companies will go under. If rule No. 1 of this historically bleak stretch of time is “don’t go broke,” what are it’s corollaries, given that so many outfits large and small will vanish as the downturn’s casualties?
One of the corollaries is this: if you’re going to go broke, do it right and do it with class. Names of companies may come and go as the slump worsens, tightening the stranglehold it has on companies whose cash position and capacity to repay on loans has dried up. But people resurface in the business–at least many of them want to–and if they’ve been gracious and upstanding as they’ve swallowed the bitter pill of insolvency, lenders, trades, and suppliers will remember that and encourage another go when recovery comes around again.
The world of residential real estate has divided itself into two parts, probably inequal in size. One part includes all that is out of control of the companies who make a living in the arena or not. The other part includes what is within the realm of action and effectiveness.
Those who’ve got experience with the wretched toll of this business’s cycles past have seen massive shifts in home building’s landscape before. They’ve had to shrink their companies down to the bare bones; some of them have let go of two-thirds of their associates; many of them don’t know when they’ll be net income positive in the next year or more. They just know that when the current cycle runs its course they’ll be there.
New home building and selling is a $91 billion business in the U.S. at its current scale. That’s not big enough for the same number of companies who were doing a $350 billion business three years ago.
The issue is going broke, if you’ve got to do it, may be your exit from home building all together, or it may serve as a place holder for your return in a couple of years as a trusted professional. Litigation is not the way, even if banks are playing hardball now. It may make for a short term gain, but it’s the surest way to map your way out of home building for good.
So don’t go broke, but if you do go broke, do it right. Do it professionally; work with your banks, partners, trades, and people to do the right thing by them. It’ll pay.
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