The Power Of Forcing Factors

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I recently had a chance to catch up in person with a good friend of mine, who is the founder and CEO of a mid sized technology company with about 100 employees.  It had been about three years since we’d spoken, and at that time the company he’d started years before was occupying every aspect of his life.  He was being pulled in every direction at work and putting in excessively long hours to the point where one might think he was living in the office.  Needless to say, he seemed very stressed the last time we spoke. 

As with most entrepreneurs, he has several other endeavours or side hustles to which he devotes his spare time.  One of these ventures had brought him to Santa Barbara for the day to meet with a vendor, and we made some time to catch up. 

As we sat in a small bar by the beach drinking beers, I was struck by just how relaxed he appeared.   He seemed less tense, he wasn’t checking his phone every thirting seconds. … heck, he was even laughing and smiling – something that was absent from our last conversation.  

Curiosity got the better of me, and I rather bluntly pointed out his new demeanor and asked him what had changed. 

“Well, it’s a funny thing”, he said.  “About two years ago, I got together with a group of colleagues and personally invested in another company.  Almost immediately after receiving our check – which was slated for investment to increase capacity, the CEO gave himself a pay raise and a bonus totaling almost the entire investment. He took nearly every penny. ”  He went on to describe his sense of responsibility to the other investors, the lawsuit that they filed, and the subsequent legal actions that followed.  

“The lawsuit consumed every aspect of my life.  I didn’t have time to spend on my company, I was so entrenched with the lawyers trying to recover our investment.  This went on for some time.“ He continued. 

“But a funny thing happened.   The team at my company stepped up in my absence.  All of the tasks and responsibilities that I thought only I could do … well, my team did them.”  

He went on to explain that now that his team was taking over the repetitive tasks he used to do, he was free to do other things to help the company grow.    Their previously impressive growth was even more impressive, as they continued to capture market share from competitors.  

This is the perfect example of a Forcing Factor.  Forcing Factors are events that happen, often outside of our control, and force us to make changes.  The recent global pandemic is a perfect example.  People who would never shop for groceries online, or use video chat to communicate, are now being forced to do so in order to get what they want and need.  The pandemic is a forcing factor.   They can happen to business owners, and consumers.  Sometimes we call them “ah ha” moments; the exact moment when it all clicks.   

I’ll never forget the moment I realized the value of texting.  “Back in the day”, I didn’t understand texting.  All of the phones were flip phones, and to text someone you had to type out the message using a numeric keypad.  Want to type the letter C?  Hit the number 2 button three times.  

I would think to myself “Why text someone when you could just call them.  Calling is so much easier.”    Then one night I went to a club to meet some friends.    As I made my way through the club looking for them, I tried to call them.  The music was so loud you couldn’t hear the conversation.  I stood in the middle of the dancefloor, the phone up to my right ear and my index finder in my left ear, yelling “hello? … hello!”.  

And then I got a text.  “Second floor, right side, tbl 34”.  And suddenly I realized the value of texting.   The loud music had been a Forcing Factor which pushed me out of my comfort zone and forced me to use something that I wasn’t accustomed to using. 

The great thing about Forcing Factors is that you don’t have to wait for them passively.  You can engineer forcing factors, and push yourself outside of your comfort zone to make them happen.   

  1. You start by identifying an action or activity that is standing between you and your goals.  I call this “The Blocker”. 
  2. Then you identify what enables The Blocker.  I call this (very creatively) “The Enabler”.
  3. Then you disable The Enabler.  

It’s just that simple.

For example, let’s say that you identity that constantly checking email is keeping you from getting your work done in a timely manner.   You’d then identify what enables you to check email (perhaps it is having a computer on, or having Internet access, or having the email client open).  And then you’d simply disable that enabler.  So in this example, maybe turning off the computer and Internet will inhibit your ability to do work, so perhaps you just set an autoresponder that you’re only available by phone for emergencies and you close the email client.   You’ve just become your own Forcing Factor. 

Monetizing Vacant Land Through Camp Hacking

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As the residential real estate market in the United States continues to heat up, I’ve been looking for alternative ways to invest.  One option, first introduced to me by my Grandfather years ago, is landing banking.  Land banking is the practice of acquiring land, and then just “sitting on it” like you would a savings account in a bank.  

The premise is that over time, as development progresses in surrounding areas, the value of the land will increase.  During that time, because you’ve kept that land undeveloped, the maintenance cost (including the tax basis) has stayed very low.  At some point in the future, you sell the property in a 1031 exchange, and the process starts all over again. 

This real estate investment strategy has its pros (such as it’s easy to start and has a low maintenance cost) but it also has its cons.  The two biggest cons is that the land can generate little to no cash flow, and empty land is a prime target for dumping.  

The easiest solution for this is to find a way to monetize the empty land, and two friends of mine have come up with one which I call “Camp Hacking”.  

The concept is simple.  Scouring public and private auction sites, they acquire small remote parcels of land.  Their goal is to acquire a piece of property for under $1,000. 

They then add a composting toilet to the site (est. $500), and voila – they have a campsite.  

They post this campsite of listings websites like www.hipcamp.com, where they generate $20-$30 a night ($300-$500 a month) from campers looking for remote getaways far from the hustle and bustle of “city life”.   Suddenly their empty piece of land is a thriving revenue generating machine.  

Let’s run the (hypothetical) numbers:

Initial Costs

Acquisition Cost:  $1,000

Equipment: $   500

Sub Total $1,500

Annual Maintenance Costs

Accounting: $   400

Corporate Licensing: $   300

Marketing Fees $   500

Insurance $1,000

Property Taxes $   150

Sub Total $2,350

Monthly Revenue

Average Monthly Revenue $   300 does not include fee to manage

The Numbers

Months Until Break Even: 20 Months

Ongoing Monthly Profit: $104

Return on Initial Investment: 6.9% not including appreciation

So even at a conservative estimated monthly revenue, the property delivers a tidy return.  If you can increase occupancy and / or the average nightly revenue, and decrease costs  … perhaps by acquiring more properties, and allocating the fixed costs against a greater revenue stream … then this number only increases.   

As with all real estate investing, it all comes down to the numbers.  Camp hacking represents just another opportunity to creating semi-passive revenue from real estate.

How I Simplify Being A Landlord

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It seems that lately a lot of friends with residential rental properties have been lamenting to me about how difficult they are to manage. They talk about constant issues and problems, and how they’re so fed up that they just want to sell their rental properties and get out of the landlord business completely.I can relate – this used to be a consistent source of frustration for me as well. And for a short period of time, because of the frustration and a few other reasons, I got completely out of real estate too.But the good news is that being a real estate landlord doesn’t have to be a frustration. Much like most things in life, the difference between difficult and easy is a little bit of knowledge. I’m going to share a system that I use to manage my properties. My hope is that if you’re experiencing the same issues, you’ll find my system helpful. And by all means, please feel free to adapt and modify my system to suit your particular needs.So without further delay, here’s how I make being a landlord easy.

  1. I choose the right tenants.
    This is so critical, and the origin of most any problem can be traced back to having the right tenant. I’d rather have the home empty than have the wrong tenant in place.
    The right tenant is more than someone who pays the rent on time. In fact, paying the rent on time isn’t my top criteria for a tenant. My number one criteria is that they treat the home with care, and communicate with me. Communication is key. They need to feel free to reach out whenever there is an issue (more on how I manage that below); I’d much rather catch a problem early when it is simple to fix than later when it is more difficult.

    How do I know that they meet this criteria before they move in? I meet with them! I’m honest and upfront about my expectations of them as a tenant, and give them an opportunity to share with me their expectations of me as a landlord. I scrutinize their application, run the credit and background checks, call their references, etc. And I welcome them to call my current tenants to learn more about me.
  2. I’ve built an amazing team.
    Having the right team makes any landlords job exponentially easier. These aren’t employees, they are simply people who are dependable, trustworthy, smart, knowledgeable in their field, and make themselves available. I’m constantly evaluating new potential members of my team, and adding people to the bench in case one of my “starters” isn’t available. And I keep copious notes on the performance of existing team members, so that I don’t accidentally rehire someone who doesn’t do a good job.

    One pro tip: I never burn a bridge. You never know when you may be in a jam and absolutely need to rehire the person you swore you’d never use again. No matter how bad the work product, I never make it personal. I’m not a push over – when a job isn’t done right I address it – but I don’t take it to Defcon 1 either.

    My team includes:
    1. A real estate agent (for each geographic region)
    2. A lender
    3. An insurance agent
    4. An attorney
    5. A handyperson
      1. I also keep specialists, like plumbers and electricians, on hand
    6. A gardener

      I insist that the latter two are capable of video chat, and sending me before and after photos … just in case I’m on a beach and cannot be there in person.
  3. I check on the properties.
    When I’m in the area I drive by the properties. I keep in touch with the neighbors. Every three to six months I inspect the inside of the properties. Before the tenants move in, I explain that this will happen and how it will happen (I give them plenty of notice, let them know that they can be home if they like, assure them that I am only looking for specific things like water leaks, etc., and that it only takes about 10 minutes).

    If there is an issue, we address it. If there is an issue caused by tenant behavior, we address that too. This goes back to clear, professional communication.
  4. I create a home guide for each property.
    I “borrowed” this idea from an AirBNB host. I loved the idea of an online document which outlined all of the particulars of the property. I have a Google doc for each of my properties which outlines all of the important numbers, local resources, rules and guidelines. If the tenant has a question or problem, they can check there first … then contact me if the home guide doesn’t answer the question (after which I immediately update the home guide!).
  5. I collect rent using an automated system.
    Some landlords accept checks. Some accept direct deposit. I’ve found that both of these are flawed, and use Cozy.co instead. Checks get lost in the mail. Some states make it difficult to evict tenants if they pay and you accept a portion of the rent, which is possible with direct deposit to your bank (not to mention I’d prefer they don’t know where I bank!). Cozy is awesome. They accept the rent, allow tenants to pay with their checking account with no fee (or credit card with a nominal fee), apply late fees if necessary, and don’t charge a fee to the landlord! How do they make their money? They hold the rent income for 7 days before releasing it to my bank account, and make interest on the float. You can upgrade to their pro membership which will transfer payment within 3 days. Cozy also offers a host of optional fee based services like background checks.

    Thanks to Cozy, I no longer have to wonder when the rent will show up, drive the my PO Box and hope that the checks are there, deal with tenants who claim the check is “lost in the mail”, etc. Cozy tells me when the tenant has scheduled the rent payment to be paid, so at any given time I know immediately who is planning on paying their rent on time and who isn’t. And Cozy deals with the uncomfortable conversation (for some) about late fees, as the late fees are automatically applied when the rent is paid after the grace period.
  6. I purchase a home warranty for each property.
    Some people don’t know that you can purchase a home warranty for rental properties. While coverages vary, home warranties generally cover issues with appliances (including clothes washers, dryers, refrigerators), air conditioners, interior plumbing, pools and spas, etc.

    For each issue, there is a nominal call out fee (ranging from $0 to $150, depending on the plan you choose). The rest is handled by the home warranty, provided it is a covered item. They choose a vendor, coordinate the appointment time, follow up to ensure the work was done correctly, etc. If an issue isn’t covered by a home warranty, I can either use one of my vendors OR the vendor the home warranty company recommends (and pay them directly). They have a list of trusted vendors who have been vetted.

    I purchase a home warranty for each of my properties, and build a clause into my lease that the tenant will pay the first $150 of any repair (which covers the call out fee).

    There is a lot of debate on whether a home warranty is worth the money. Some people question if the $350-$500 you spend a year on the warranty is more than you would spend on having repairs fixed yourself. I think that this argument doesn’t take into account the biggest value of a home warranty – the tenant has a hotline that they can call 24/7/365 about any issue with the home … and that hotline isn’t me! While I love and expect great communication with my tenants, I don’t want calls at 2 AM nor while I’m on a beach in Hawaii. Not to mention the tenants deserve prompt, professional responses to their immediate needs. The home warranty covers both.
  7. I turn current problems into future solutions.
    It’s unrealistic to think that being a landlord is going to be trouble free. You’re going to have issues from time to time. The trick is how you handle them. My system wasn’t just created, it was curated. Each time there is a hiccup, I focus on creating a solution so the next time the same problem occurs it won’t cause me as much stress.

    I call this “future proofing”. It’s why my leases have an addendum with 12 items that aren’t included on boilerplate leases, and it’s why I have a home warranty on each home.

I hope that you find these tips helpful, and it gives those of you thinking of selling your rental properties simply because they are a hassle some other options.If you have questions or suggestions, please let me know. As I mentioned, this system was curated over time thanks in part to people who had more knowledge than me at the time. It can always be improved, and I welcome the feedback!

The Top Real Estate Marketing Tools

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As part of my series on real estate marketing best practices for real estate agents, I’ve put together a list of my favorite real estate marketing tools and solutions.  These tools and solutions will save you time and money, and most importantly you don’t need to be a technical wizard to use them!

Website

I’m a huge believer that every real estate agent needs their own domain name and a website.  As a real estate agent, you’re an independent contractor. In effect, you’re building your own business – and your website (and the information – like your client contact information) is an asset of that business.

Fortunately, thanks to “modern technology”, getting and launching a website is VERY easy.  Remember, if you’re just starting out as a real estate agent, you don’t need a fancy website.  You only need a website that is professional, represents your brand, and is flexible enough to grow as your real estate business grows.  

First, you’ll need a domain name (for example: www.BeautifulMalibu.com).  A domain name is what a person types in a web browser to get to your website.  Technically, you don’t own a domain name, but rather you rent it on an annual basis from a registrar like GoDaddy (www.GoDaddy.com).  They usually cost less than $20 a year – and you can get a custom email address attached to the domain name (for example: scott@beautifulmalibu.com) if you like (I HIGHLY recommend this!).

Once you have your website domain name, you’ll need a website and find a place to host it.  You can hire someone to do this for you, but if you’re just starting out I recommend that you choose a do it yourself service which allows you to easily make and host your website.  Inevitably you’ll make a lot of changes in the first few years of being an agent, and if you hire a professional website builder you’re likely to spend a lot of time and money making countless changes.  

I think that Wix (www.wix.com) offers a good “all-in-one” service for website building and hosting.  They have countless templates (some free, some at a nominal cost) which offer enough variety so that your website doesn’t look like every other agent’s website.  

Wix is easy enough for someone with a working knowledge of Microsoft Word to use, and their support is excellent.  So unless you have money to burn, or you cannot use Microsoft Word, I’d choose Wix over hiring a professional for your first site.

Email Marketing

Within your website you’re going to want to build a sales funnel where you capture the contact information of potential clients … with their permission of course.  Typically you’ll entice someone to provide their contact information by providing valuable information (like a local market report) or simply offering to follow up.  

And at some point, you’ll want to follow up with those contacts via email.  Perhaps you’ll want to send them an invitation to an open house. Or wish them “Happy Holidays”.   You could send them each emails individually. Or you could use a email marketing system. (Hint: I recommend that latter!).

MailChimp (www.mailchimp.com) and Constant Contact (www.constantcontact.com) are email marketing systems which offer easy to use interfaces which allow you to build forms to collect the information from the client, and then send them beautiful custom emails.  They are very easy to use, and have features that allow you to set up your process once then forget it. For example, you can send a personalized email to each person the first time they sign up – automatically.   Or pre-create emails that will be scheduled to be sent months in advance.

Marketing

Unfortunately, just having a website and email marketing doesn’t cut it anymore.  We’re a multi-channel society now, and you’ll need to reach clients across numerous channels like Facebook, Instagram, LinkedIn, YouTube, Pinterest, Direct Mail, etc.   If you’re starting to think that this could be a full time job, well, it could be. (Read my article entitled “The Content Engine for Real Estate Agents” for tips on how to make this whole process manageable).  But fortunately, it doesn’t have to be.  There are numerous tools and solutions that can make the process of creating content and communicating with your clients easier.  

  • Customized Hand Written Notes
    In a word of digital overload, small touches like hand written cards stand out.  But hand writing cards is extremely time consuming. With Postable (www.postable.com) you can automate the process of sending personalized follow up direct mail letters and cards.  The best part is that Postable will grow as your marketing efforts become more sophisticated.

  • Programmatic Direct Mail
    The magic of programmatic direct mail allows you to send personalized direct mail pieces based upon the what the visitor views on your website – even if you don’t have their address!  Pebble Post (www.pebblepost.com) identifies anonymous visitors to your website based upon the visitor having previously registered at another website, watches where they go on your website, and automatically sends them a preconfigured postcard based upon the pages of the website they visit.  So if they visit your web page showing condo listings, they’ll get a follow up postcard about condos. Quick note: Pebble Post works best for agents with significant traffic coming to their website.

  • Lead Capture
    Almost everyone wants to know how much their home is worth.  If you’re trying to attract home sellers, Corefact Home Estimate (www.corefact.com) is a clever tool.   The homeowner receives a direct mail piece which leads them to a website where they can get an instant listing price estimate.   And you capture their contact information, which can be fed into a marketing drip campaign!

  • CRM System
    Keeping track of your current and prospective clients can be challenging.  Contractually (www.contractually) is a full CRM (customer relationship management) solution suite which streamlines how you communicate with current and prospective clients.

    Note: Even though Contractually was recently acquired by Compass, all of your data is kept private and separate from Compass.  If you’re concerned about this, you might consider MoxiWorks (www.moxiworks.com).  

  • Stock Imagery
    Content is key in real estate marketing, especially imagery.  Let’s face it, it’s tough to sell the dream when your images are beautiful.  Social Curator (www.socialcurator.com) helps makes this process easy.  You’ll get access to high quality gender neutral content, and insightful keyword research to help increase the reach of your marketing efforts.

  • Content Capture
    As your content gets more sophisticated, you’ll likely want to include how-to videos.   Loom (www.useloom.com) is a free web browser plug-in which allows you to capture screenshots and video (with voice overlays).  
  • Social Media Management
    Buffer (www.buffer.com) and Hootsuite (www.hootsuite.com) are easy to use social media management tool, which streamlines your marketing efforts.  Create a post once then distribute it to numerous channels (Facebook, Pinterest, LinkedIn, etc.).  You can even schedule them for future delivery.

    RIPL (www.ripl.com) allows you to edit video, including adding effects.  

    Hootsuite offers a free version with limited capabilities.

Content Creation

And as for creating professional video content, I have two “must have” recommendations.  

  • Smooth 4
    There’s nothing worse than “bumpy” video as you’re doing a walk through of a home.  Creating professional looking walk-through videos from your cell phone is easy with Smooth.

  • Professional Grade Lavalier Lapel Microphone
    Make sure that the audio in your walk-through videos is perfect.  This simple lavalier (a fancy name for a small microphone you clip to your shirt) captures clear audio and can attach directly to your phone.

I hope that you find these tips helpful!  If you haven’t done it already, make sure that you sign up for my email newsletter – where I’ll be offering more information and special offers.  Just a sneak peek, I’ll be offering a no-cost marketing consultation to a few lucky readers soon. Keep an eye on the emails!

Starting A Successful Real Estate Career

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As many of you know, I’m passionate about sales and marketing. And I love real estate. So I decided to combine my interests into a short series on effective marketing for Real Estate Agents. This is the first article in the series. Whether you’re a seasoned veteran real estate agent, or just starting out, you’ll find this information valuable.

Being a real estate agent is an amazing career which offers the ability to have a flexible schedule while making a lot of money.  But the “dirty little secret” they don’t tell you is that not everyone is successful.

In 2014 the National Association of Realtors noted that 87% of all real estate agents fail in the first five years.  That’s quite a daunting statistic for anyone aspiring to be a real estate agent.

Let’s face it – anyone reading that only 13% of real estate agents are successful might rethink becoming a real estate agent.   

But thankfully, there are a few things you can do to help insure that you’ll like being a real estate agent and, more importantly, that you’ll be successful … before you take even your first real estate course or exam.

Identify Your Focus

This is a critical decision that you must make early in your real estate career.  You must decide on the type of real estate you want to focus on and where. There are many categories and subcategories from which to choose: Single family residential, high-rise, multi-family, commercial, luxury, etc.   You may decide to combine them into one: for example: Luxury High-Rise. You’ll just need to choose one.

This decision can be harder than it seems.  But don’t worry, you can pivot and choose a different focus later in your career.  It’s just important to make a single decision and focus on it for the first year or more.   By initially focusing on a single specialty, you’ll make it easier to build a network, as well as systems and processes that will save you time and money.

How do you make this decision?  I’d suggest that you start with location.  Where would you like to work? Where is convenient for you?  Where is the greatest opportunity? Then identify the types of real estate that are growing in that area (hint:  it’s usually what developers are building). Eliminate anything that doesn’t interests you. If you’re not passionate about it, then don’t do it.  Then validate your assumptions by asking current agents in that field. If they’re all too busy servicing clients to take your call, it may be a sign that business is booming!

Remember , your revenue is a function of commissions and volume !  If you don’t choose an area and a specialty that has client demand, you’ll be setting yourself up for a difficult road ahead.

Research Your Future Competition

There are a lot of real estate agents out there.  Do your research and find out who the most successful agents are in your area.  You can do this by simply asking some agents and brokers in the area. Or use Google to look for recent press releases promoting agency successes.  

When you’ve figured out who the top agents are, you’ll need to find out how they are marketing themselves and their businesses.  Do you see them at industry events? Do they advertise in locally? Are they active on social media (Facebook, Pinterest, LinkedIn, etc.)?  If so, follow them. Dig deep – their tactics will be a future playbook for your marketing efforts.

Once you’ve done all of your research (and NOT BEFORE!), you may even consider calling them.  Tell them that you’re thinking of becoming an agent (and why), let them know that you’ve studied their career, and ask them a few questions like : “what makes the difference between agents who succeed and those who fail?” or “why did you decide to focus on [insert their speciality here]?”.  

Now here’s the most important part.  If you really believe in the agent, and their market focus, offer to work for them for free.  Yes, you read that right. Before you spend time and money working to just pass the real estate exam, you’d be wise to make sure that you like the job.  You don’t have to donate 40 hours a week. But you should spend at least one day a week over the course of few months living the life of a real estate agent.  You’ll likely learn more during this time than you will in your first year of being an agent. Worried about giving up your weekends? Newsflash – if you become an agent, you’ll most likely be working weekends anyway.  

Build Systems and Processes

Once you get your license, you’re going to want to hit the ground running.  So now is the time to set up the foundation for your new business. And as you identify the actions that you’ll need to take to be successful, think about how you can automate them.  

You may need to do some soul searching.  Think carefully about your strengths and weaknesses.  I like to evaluate each task and ask myself “is this easy or hard for me?”.  Notice that I don’t ask if I can do the task. I’m a driven person capable of most anything that I put my mind to.  I ask if it comes easily to me. If it doesn’t, I find a way to streamline it, then either automate it or outsource it.  

This is a skill that does come easily.  For inspiration, you may want to read the books (or listen to them, if that is easier for you!)  Rich Dad, Poor Dad by Robert Kiyosaki and The 4 Hour Workweek by Tim Ferriss. These two are experts at building a mindset which focuses on systems and processes.

Start Networking

A big part of real estate is networking.  It’s central to building your client list, and the list of vendors who will help you quickly get your clients through escrow.  

Identify the key networking events in your focus area and start attending them.  They can be both events for real estate professionals and for non-professionals (like community events, charities, church gatherings, professional networking events like YPO, etc.).  

Use your networking to start building a permission based target list.  Friendly reminder: It is so important to get the person’s permission for marketing to them directly before sending them a marketing email.  Not only is it polite, but in some places it is the law.

Don’t Stop

Most importantly, don’t stop.  You’re about to embark on a challenging career.  I know firsthand from my own research that the top agents put in the work.  Top agents never quit. They do the work, and sweat the details. And they reap the rewards from that hard work.

Once you have these steps completed, and assuming you still want (hopefully more than ever) to be a real estate agent, you’ll want to establish your marketing.  This is a topic we’ll cover in a future article.

Ideation: Self Authenticating Smart Sprinklers

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I recently made the ultimate jump into the 22nd century, and purchased a Rachio home sprinkler controller. This technology not only allows me to control my sprinklers from my phone (because, let’s be honest, who doesn’t have the frequent need to water their lawn remotely) but it also monitors the weather and turns off my sprinklers when it’s raining. Living in a desert, this is an important feature.

As a part of its water conservation plan, the Southern Nevada Water Authority offered a 50% rebate against my purchase of the smart home sprinkler controller. The only problem – they had to come to my house to inspect it, and have me answer a short survey.

After three attempts over four months, they finally made it to my house to inspect the unit, ensuring that it was installed and operational and ask me a handful of questions related to the survey. It was at that time I shared with them my idea: do the validation remotely.

With my permission they can easily pull data from Rachio showing that my unit was installed and operational. The unit is connected to my home internet, which pulls an IP address which can be traced back to my location. Additionally, the IP address of the home unit can be associated to the IP address pulled from the mobile app, and the mobile app can allow (for a limited time) lat/long location data to be pulled – ensuring that the Rachio is installed at my home.

And the Rachio pulls activity data, showing that it is active and working.

The survey can be completed online, and the entire process automated – negating any need for an in person visit.

The magic of technology!

Adjusting Sales Quotas Mid-Year

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This afternoon I received a call from a friend looking for some advice on building out a sales compensation plan. Her challenge was especially difficult because a lame-duck manager (who had secretly been planning his exit) had reduced his teams’ 2019 sales quotas by 30% – absorbing the difference under his own quota. Naturally, since he left at the end of 2018, the company was left with a gap of 30%. Her question: how would I fix this situation.

As we spoke, I realized how much I missed the problem solving aspects of sales management. While it’s only been two years since I left sales management to round out my resume with product and strategy roles, I realized today how much I’ve missed the challenge of creating win-win resolutions that ultimately drive revenue and power organizations.

Getting back to my friend’s dilemma, let me see if I can describe her problem in detail while maintaining her anonymity.

  1. The sales manager had deflated 2019 sales quotas (both new business and existing business numbers) by 30% +.
  2. He left behind a sales team consisting primarily of account managers. He hadn’t built a hunter sales group. Across numerous divisions which he managed, not one had exceeded their quota for new business.
  3. He failed to properly manage up or out his sales talent.

This isn’t the first time I’ve seen a similar situation. Recently, I encountered a sales manager who miscalculated his teams quotas; when you added up the quotas of his entire team they didn’t equal his quota for the team as a whole. Best practices are that the sum of your teams quota should be 20-30% higher than the team’s cumulative number. So if you have a 1 million dollar budget to spread amongst 10 salespeople, you give them each $120K to $130K. The logic behind this is very simple – it’s likely not everyone on your team will hit 100% of their number!

To solve his revenue gap, the sales manager wanted to raise the entire teams individual goals, mid-year. I pointed out that his sales team would (accurately) perceive this as him penalizing them, and suggested that rather than raising goals he should create an incentive program to encourage team members to over-achieve their existing numbers.

Back to my friend’s issue – during our conversation, I laid out a multi-step approach to resolve the sales issue at hand:

  1. Adjust the sales numbers. While the sales team has been given their numbers for 2019, they hadn’t had their review for 2018. This would be a great time to increase their quotas for existing accounts. I suggested doing this for existing accounts, versus new business accounts, simply because while each salesperson carries both a new and existing quota, this group tends to gravitate towards existing business sales. They are not hunters.
  2. The Carrot. Create extra incentives, with accelerators, for sales people to exceed their numbers. The most fair system I’ve seen breaks the yearly number into months or quarters, and only pays a salesperson when they’ve reached 80% of their goal for that period. So up to 79% of goal they get no commission. From 80-99% of commission they get 80% of commission. At 100% of goal they retroactively get their entire commission, and anything beyond that has multipliers to incentivize the salesperson to really knock the ball out of the park.
  3. And The Stick. They need to manage out the poor performing talent. During the weekly sales meetings (which were non existent under the previous management) they need to hold all salespeople accountable for their numbers – and in particular their historical sales commitments. It’s not uncommon for sales to talk about the shiny object each week, and forget to mention the incredible account from two weeks ago that is no longer viable today.

While the numbers of building sales compensation plans is all science, the structure is all art. You need to build a model that incentivizes that right behavior, and in particular with situations like the one I’ve described above, quells any “sinking ship” fears that a salesperson may have.

Blockchain in the Adtech Ecosystem

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Advertisers have (seemingly) always been trying to analyze the effectiveness of their advertising dollars.  The old adage “I know that 50% of my advertising is working – I just don’t know which 50%” has never been more true.  While technology has provided advertisers with tremendous insights into their ad campaigns and audiences, the more advertisers learn, the more questions they have – especially as we move to a multi-channel ad environment where countless ad impressions across several channels (display, mobile, TV, email, etc.) impact a single consumer decision.

Blockchain is being seen as the latest tool to solve this problem.  Advertisers hope that by utilizing Blockchain’s unique open ledger structure, they can share ad transaction data anonymously (even amongst competitors) which will help them better understand path to purchase, media spend accuracy, and ultimately the true impact of the campaign.

There are a few challenges with utilizing Blockchain in digital advertising:

  1. Speed.  Blockchain can only process a limited number of transactions per second.  While the number has improved from 2016, when it was 6 transactions per second, it hasn’t caught up with programmatic advertising which is millions of transactions per second.

    The solution may lie in hybrid Blockchain solutions, which eliminate the time intensive elements of Blockchain but keep the key anonymous accounting functions.  For example, minimizing the historical look-back window to cut down on the transaction time to generate a new block.

  2. Quality.  Blockchain is truly a “garbage in, garbage out” solution.  Providers have to be vetted and trusted to transparently supply accurate data, which if they were truly doing in the first place there wouldn’t be a need for a Blockchain solution .  Blockchain is a “trust but verify” solution as it pertains to the data providers.  And Blockchain still can’t (currently) connect the offline component, where a consumer sees a digital ad but makes a purchase offline.
  3. Reach.  In order for Blockchain to be an effective tool for advertising, it will need to process substantial advertising transaction data points across the entire ecosystem from publisher to advertiser.  The more data inputs, the more valuable the network is … and conversely the fewer inputs the less valuable it is.  Publishers, DSPs, advertisers, etc. all have to adopt the same Blockchain solution to enable accurate tracking.

Fortunately these hurdles are not insurmountable.  Blockchain technology will most certainly improve transparency in advertising ecosystem; it just won’t happen overnight.  It’ll take influential advertisers leading large publishers and other adtech companies to create a more transparent (and consequently efficent) advertising environment.

Social Media and Elections – A Reflection

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It’s been a little more than 6 months since news broke that (allegedly) Russian backed online hacktivists targeted US voters across several social networks, including Facebook, Twitter, and Google’s YouTube.  [You can read the comprehensive timeline here, which traces these types of activities back to a Ukrainian election in 2014.]  By current accounts, the total budget spent on these ads equaled less than $500K over the course of approximately a year and a half.

Now that everyone else has weighed in on this topic, I thought that I’d share some of my thoughts on the matter.

  1. This Isn’t A Surprise.  Fake accounts, “fake news”, and online social engineering are not new activities – they’ve been going on long before the 2014 Ukrainian election referenced in the previously linked Mashable article above.  Foreign powers trying to influence elections isn’t new either.  And if we look closely (especially at “arms length” 501 c 3s), we’d likely find these same practices being conducted domestically, even between same party candidates in primary elections.  Sadly, these practices also span beyond elections; deceptive practices in marketing have been going on for decades if not centuries.
  2. The Influence in the Election of 2016 is Questionable.   Even with hyper targeting, a $500K media budget spent over more than a year isn’t that big.  Having run large campaigns before, I question the ultimate reach and the potential influence these campaigns had … especially during an election season when ad rates are inflated based upon increased demand.Political campaigns are spending hundreds of millions of dollars on online advertising.  If an election could be won with less than $500K in spend, publishers have bigger issues to worry about.

    This doesn’t make election tampering right, by any means.  Interference at any level is abhorrent, whether it is had the desired outcome or not.

  3. This Could Have Been Easily Prevented.  Dunn & Bradstreet, Experian, TransUnion (among others) have business databases which could have been used to verify the legitimacy of these ad accounts.  This first line of defense could have further been strengthened through a more stringent ad review policy.  With the benefit of 20/20 hindsight, this is an issue that can easily be managed through industry wide self policing.

    In addition to validating the advertiser, publishers need be transparent about the source of the ad, and the details of the advertisement.

  4. This Won’t Be The Last Time.  Some bad actors, foreign and domestic, will use every tool at their disposal to impact elections.  So unfortunately, while the tactics may change, the target will likely not.  And ultimately (as with all political marketing material) it is up to the voter to actively question all information so that they can cast an informed vote.

Everyone deserves a fair and transparent election process, free of interference both domestically and internationally.  And hopefully the outcome of this controversy is a more fair and transparent election process.

 

Net Neutrality – Why Should You Care?

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What is Net Neutrality? 

In short, it’s the FCCs rules which require companies, in particular Internet Service Providers (ISPs) like Verizon, Cox, etc. , to treat all content equally.  These rules (note that they are rules, not laws) prohibit ISPs from blocking or discriminating against lawful Internet content.

In a world where ISPs are playing multiple roles (content creator and content distributor, to name a few), the Net Neutrality rules are designed to protect the consumer.  For example, Verizon (who now owns AOL and Yahoo) cannot slow down content from Facebook and Google.  Cox Communciations cannot slow down content from Netflix, Amazon, and Hulu (or even worse, block Netflix altogether), in an effort to curb the trend of cord cutting.  ISPs cannot “throttle down” startups developing competing online services.  Nor can these ISPs charge more for content from one company versus another.

In short, Net Neutrality recognizes that unique position that ISPs have in delivering what is arguably a public service built initially with public funding, and imposes rules to ensure that they maintain a level playing field for all Internet providers.

Why Is Everyone Talking About Net Neutrality?

Consumer protections under Net Neutrality changed yesterday.  Claiming that Net Neutrality rules are not necessary in the protection of consumer choice and freedom of speak, the FCC voted 3-2 to eliminate the key consumer protections afforded in Net Neutrality.  This means that ISPs are no longer limited in how they prioritize content delivery via the Internet.

What’s Being Done Now To Protect Net Neutrality?

Several state Attorney Generals have moved challenge the FCC ruling.  Others are using existing state subsidies as a carrot to force ISPs to maintain Net Neutrality rules.  In either case, we’ve moved from a unified nationwide system to a state by state system … which hardly seems efficient.

What Can You Do?

At this point, the best thing you can do is contact your legislators.  Congress can enact a law that would offer the same protections as the FCC rules.  This is a topic that impacts Internet companies and consumers alike.