Sounds like an oxymoron.  Probably is, but I’d argue that viewing adversity with the right perspective pays real dividends.  2009 was a tough year period.  The majority of the companies that I’ve invested in or have a relationship with have struggled in 2009 with the exception of the Cheezburger network.  Whether it was sales, raising capital, doing deals, HR issues, break-ins, litigation, it just seemed to be extraordinarily difficult in 2009 to meet/exceed goals and grow.  To their credit though, none have given up - maybe because I won’t let them.  In my day job, even though we grew signficantly in traffic and revenues, we didn’t meet our internal agressive goals.  In the spirit of being reflective, here are some of my thoughts on how to or why you and I should embrace adversity.   

1.  It forces you to prioritize what is most important.   If your revenues are down and you are not selling, why?  You should be picking up the phone and meeting with customers yesterday.  Stop focusing on website redesign or business card branding or what health care plan you should pick - plug the revenue hole or expense hole, and do it right away.  Adversity has a strange way of making it absolutely clear what you should prioritize - embrace it and do it. 

2.  Get back to the basics.  There is nothing wrong with going back to a successful plan and pushing the accelerator pedal on it - which means putting to death your latest and greatest ideas.  Imagine that you are the coach of a college basketball team and you have an 8-footer on your team, an absolute giant.  As a coach that is focused on winning, wouldn’t you keep going to the 8-footer everytime you had the ball?  You would keep doing it until a team proved that they could stop your guy from scoring, right?  I can’t tell you how many entrepeneurs (myself included) that I’ve met keep pursuing the shiny new idea when they are already sitting on success, they’ve proved the model and it’s time to scale!!  If you’ve had a successful model and got distracted with a shiny new idea, kill it and go back to the basics.

3) Forces you to have clarity on motivation and character.  Adversity is the badge of the entrepreneur, I’ve said it many times, it’s never easy being an entrepreneur, it’s hard and brutal and always takes longer than you want.  If your motivation was money and not passion/vision - lack of money will cause you to quit.  If you are an entrepreneur that enjoys the journey and not just the end outcome, these adverse events become badges of honor as it brings you closer to success.  You see things clearer in adversity and you appreciate the taste of success all that much more.  Don’t you think the taste of success is so much sweeter when you had to face adversity?  Use adversity to gain clarity on why you do what you do - get clearer on your vision - see that your character especially perserverance and faith grows each day. 

4) Determine who your friends are.  It’s in adversity that you learn who your real friends are and who you want to partner with in the future.  When things are good, everyone wants to do business with you, everyone is your friend.  Then when s*** hits the fan, who is working with you to help you succeed, who’s still in your corner when the accolades are few and far between?  It’s fascinating to me how short-sighted certain people are - they jump from ship to ship, your next business should be built from relationships that you know will stick with you thick and thin.  Banks, Angels, VC’s, Attorneys, business partners, employees, investors, customers, vendors.  Reward those that took risks with you and partnered with you when things were tough.  Remember them in your next deal.  Of course, it goes without saying, don’t hold a grudge against those who didn’t stick with you, but you might reconsider the relationship next time.  I still remember customers that bought from us even though our financials weren’t in great shape - guess who is going to get preferential service/pricing next time?

5)  Confidence.  Not arrogance, not ego, not unbridled optimism.  Just confidence.  Embracing adversity I’d argue gives you the ability to approach the unknown with no fear.    This might be a hard concept to get.  If you see adversity as an opportunity to get better, learn, grow, and ultimately get closer to success - you approach your job with absolute confidence.  This confidence exudes through the organization and people feed on it.  If you’re down and there’s negative energy around a missed quarter, it could easily go into a death spiral as other people feed on your negative energy, lose hope, and quit on you.  Embracing adversity should give you genuine confidence that is real - you know without a shadow of a doubt that these adverse times will make you a better person and a better leader. 

To sum it up, being an entrepreneur is not easy, adversity sucks, but embracing adversity instead of allowing it to break us will make us successful people.  How are you embracing adversity? Let me know below. Now onto 2010 and your success!

One of my hobbies is keeping tabs on the real estate industry. I’m not a big investor in real estate, but I definitely enjoy talking about the latest trends in real estate. I love ribbing my realtor friends that I think their jobs are becoming extinct and it’s time to rethink their value proposition soon or they may be going by the newspaper wayside. I’m a big fan of Redfin, estately, Zillow, and other real estate sites that are bringing more transparency to the real estate market. I’m tired of the industry driving profits through being opaque and keeping broken models in place in order to preserve their position. That being said, I’ve turned a bit more bullish on real estate as of late vs my very bearish position about 6-12 months ago. I’ve completed two transactions recently and thought I’d share about those transactions in more detail and my thought process.

One of my more popular blog posts was on my decision to walk away from Olive 8. I was ready to walk away, but did engage in a few interesting conversations with the folks there. Needless to say, we were able to come to an agreement to purchase property there. It’s far from clear that I bought at the bottom, nor was I trying to time the bottom. In fact, I’m probably early as only about 25% of the units are actually closed, there’s a lot of units still available. However, I approached the decision in a few different ways. First, the decision was a purchase decision first and an investment decision second.  Like I mentioned in past blog posts, when you buy a car, it’s a purchase decision, rarely is it an investment decision where you are trying to calculate your return on investment and equity gains after acquiring the car.  Because my wife and I really enjoyed the location of the property and the conveniences of the property - it fit us well for a purchase decision.  But, how about as an investment decision?

Once we decided it was a purchase decision first, we did want to make sure that we were not overpaying - in the car example, even if you decided that you wanted that Toyota doesn’t mean you should pay sticker. In real estate, you can always buy below market, but you can rarely sell above market. So, the lesson is to make sure you get in at the right price. For us, that meant that we don’t purchase more property than we can afford. If there was a lesson learned from the recent real estate debacle, it’s that real estate does not always go up and becoming overleveraged leaves you exposed to potentially horrible options. In fact, our decision was to downsize to a place that we wanted, reduce our exposure to leverage and stay well within our budget. There’s always the temptation to buy up and lever up and bet on the real estate market with your personal property, I enjoy risk and often take risk, but for less liquid assets like real estate and levering just seems like a bad risk-reward proposition. Remember, I’m just arguing for your personal property. For an investment property or buying undervalued properties, it might be different. Why overspend on your personal property when you can evaluate much better opportunities with professional investors that could bring better returns? My thesis is to keep your personal property to something that you like and equity returns are like icing on the cake and keep your investing decisions with strict criteria to secure the best returns. There are a lot of great asset classes out there, find the ones that best suit you.

So, about the price and the purchase decision. It’s pretty easy these days to look up recent comps on all the other units that closed in the building. For me, it’s just getting comfortable with the other comps in the building and getting the best “below-market” deal that I could. It took several months, but we were able to get a deal that worked well for the seller and for us. I’d even argue that developers are more willing to meet buyers to make the deal work than property owners - as a property owner myself, I admit that I get attached a bit to property and sometimes unable to make the rational market decision. The developer was more than reasonable to make something work which is really a welcome breath of fresh air.

The whole annoying part of the process was my conversations with real estate agents, I’ve had conversations with them multiple times and have blogged about this in the past. Not the sellers agents for Olive 8, but buyers agents. I’m absolutely convinced that as a buyer, you’ve got to control the process with your agents. The agents are there to close a deal, not to make sure you get the best available deal. Had I listened to my agents, I would have closed a terrible deal and I would have closed it quickly because the “market” was on its way back and for sure I was going to make my money back in a few years. Do your own work, control the process, and the buyer’s agents will make it happen because they want you to close. I think more experienced agents might be able to expand the conversation more, but at the end of the day, you should not allow yourself to be badgered into making a deal because you feel indebted to them. If you’ve done your homework, consider using Redfin or negotiate with your agent - I’m not being compensated by Redfin at all for this, I just love innovators that are changing the model.

On a macroeconomic level, take this with a grain of salt as I’m not an economist, but I think it makes a lot of logical sense. With the extraordinary amount of debt the US is taking these days, our dollar has quickly come down in value and will continue to go down in value. That means hard assets - gold, oil, commodities, and even real estate will go up in value relative to the dollar. In addition with interest rates at these unsustainable levels, there is a bit of a hedge play against the US dollar by buying real estate. That being said, rent prices have been coming down, so the rent/mortgage ratio still seems lower than it should. Take it for what it’s worth, but I’m buying a little gold, a little oil, and a little real estate these days.

My second real estate transaction was an investment property at Seabrook, a town near Pacific Beach in Washington. It’s a relatively new development with a great developer and friend of mine, Casey Roloff.  I’m in with a couple friends on this property, here’s how I thought about that investment.

I like to bet on people and Casey is a developer that is a visionary that makes things happen. I’ve been amazed what he’s been able to do, build a town literally out of nowhere and focus on building a bustling community with great thought on making it a walking town and family friendly. He’s a tremendous entrepreneur that has his sights set on building a large town where the community is first. I want to be a part of that.

It is a investment property that has cash flow with rental income. In fact, it’s a great washington coast beach town rental. The nice offset is that I will also be using the property as well so there is that individual usage value out of it. With the economy the way it is, vacationing has become more local and my bet is that more people will stay within 3 hours driving distance for vacations. It is situated between Seattle and Portland, two cities with great demographics for family vacations.

Similar to my argument above, I do believe this is also a hedge against the US dollar with solid individual usage returns and cash flow returns. Overall, I’m pretty bullish and excited with my bets. Even if they are wrong, I feel that worst case, I’ll drive them to the ground and enjoy the ride. What do you think? Do you think it’s time to start buying real estate or is it wiser to keep waiting?

As entrepreneurs, we are trained to react quickly - it’s actually a strength in most circumstances as large corporations can’t react as quickly as we can.  I don’t think we can or should slow down our reaction times significantly.  I think taking some time to get unplugged in the mornings or in the evenings whether it be 5 minutes or 60 minutes to just think will go a long way.  I want to process what happened in the day - what was the highlight, what was the lowlight?  If I can’t identify anything, perhaps I was just being a dumb reactive person the entire day not taking any risks or processing change that can spark the business or my personal relationships.  There is something to be said for leaders and entrepreneurs to start exercising their minds, processing more, understanding more, and having a bigger, better, long-term perspective on the daily grind.  How are you balancing your reflection time vs your reaction time?  Do you think it’s important to your success?

We all have limited budgets and we can only afford to hire against our limited cash.  We’re currently short about two developers.  In Seattle, to be competitive for an experienced engineer, you need to be in the range of $100K-$120K/year (obviously, it can be a little higher or a little lower).  We can hire an experienced engineer potentially at $80K-$90K that is not a US citizen, but would be excited to live in Seattle and work here.  We could hire three engineers, get more innovative, grow more quickly, and stay ahead of our competitors with three great hires.  Plus, we could find those engineers more quickly and get them up and running pretty quickly.  I understand that this may “supplant” two US-born engineers, but I’d argue that it does not.  First, for all of our current employees (especially engineers), this potentially would make our company more stable because we can get more accomplished per unit of cost (given that we’re working on the right stuff).  Secondly, if our margins continue to increase, we would continue investing in the business thus allowing us to promote from within those that are performing and bringing in new talent behind them.  Thirdly, many of these “new” employees are probably trained at universities locally and have built roots here as well leading to a more loyal, stable, and experienced workforce.  This, in effect, also benefits the ecosystem as these experienced engineers make it easier for more entrepreneurs to innnovate and create more opportunities - some may even become entrepreneurs themselves and hire more engineers both US-grown and foreign-born.  I’m a big skeptic of the zero-sum game that so many immigration-skeptics argue, the more talent we bring increases our output, innnovation, and the savings and investment character of the immigrants also lend to a more stable economy.

Long-term, having a more open immigration policy especially as it relates to high-tech will allow the US to compete more effectively in the global marketplace.  Already, it’s becoming increasingly difficult to compete with labor costs so high and similar companies offshoring or starting development offices abroad.  Taken to its end, our policy may make it extremely unattractive to start companies in the US, rather it becomes a competitive advantage to start elsewhere.  In fact, I’d argue by having a more broad immigration policy and allowing the best to compete for jobs in the US actually forces the US to innovate more.  Protectionism at its worst keeps our employees and workers doing work that is quickly becoming obsolete.  Having the best and brightest here keeps us innovating on what the next cutting frontier of the knowledge economy will be.

I admit that I’m not an immigration expert and I’d love to have those who have thought more and harder about this than I comment below, but as an entrepreneur this is one issue I believe we cannot let our guard down.  Our country was founded by immigrants and made great by immigrants, let’s keep them coming and I’m willing to bet that our economy and society is better because of it.  What do you think?  As an entrepreneur do you agree?  As an employee, what do you think?  Let’s have a healthy debate.

Being a Seattle sports fan is really tough these days, but I figure there are lessons learned even in lost seasons.  I’m generally the biggest optimist in the room when it comes to the Seahawks each year to make it to the Super Bowl, I’m now convinced it’s not going to happen.  However, even in the ugly win against one of the worst teams in NFL this past Sunday against Detroit, I thought there was a good lesson to be applied to our businesses.  The lesson is that there is nothing wrong with dinking away to success.  Let me explain.

Even if you don’t follow football, you should know being down 17-0 is a bad thing.  Seattle was down 17-0 almost immediately after the game started.  They tried running the ball to no avail and after being that far down, they had to change plans to pass their way to success.  And pass they did.  Over and over and over again.  They didn’t pass long with only 2 passes over 25 yards and 39 completions in a game, the most ever for a Seattle quarterback.  They eventually won the game 32-20.  The defense couldn’t stop the short passes and Seattle kept taking what was available to them all the way to victory.

I can’t help thinking that we should be running our businesses that way.  When we find something that is successful on a small scale, we should keep executing and take the small gains, it will add up to success if not a huge win.  I met with an entrepreneur last week that mentioned that he’s seeing success, but he wants to change the model and GO BIG.  I couldn’t help but wonder, you’re doing great right now and if you focused more and kept taking what is obviously successful, couldn’t you build a big business just executing what you know is working?  It’s a huge gamble to change what’s working and throw the long bomb, sure it can work and will pay off handsomely, but your percentage chance of success is significantly lower than taking the dink pass high percentage move.  This is not a rant against taking chances, but continue taking what’s there.  You can still test new models without betting the farm and if it works slowly shift your model.

I’d argue that finding a successful model is not easy, if it were easy we’d see a lot more entrepreneurs.  Once you find the model that works, keep at it and the pennies will add to dollars and it will keep rolling.  For me, it’s taken at least 1-2 years to get a model that’s barely working and then a few more years to really refine it.  I’m constantly battling all the new ideas that can be HUGE, but have to temper it with what is working now and taking the 5-10 yard gains every play rather than try to get the touchdown in 1 play.  In football terminology, it’s a field position game, keep good position, keep the ball moving and stay in the game - that’s how upsets and wins happen.  I’m convinced it’s being disciplined and focused, staying true to a plan that requires patience, hard work, and consistency that leads to success.  What do you think?  Do you fight the same battle?  Or, do you want to keep tossing the long bombs hoping for that big reception?

Now, if the Seahawks can just win the next game… just maybe, we can still make it!

This thought provoking video highlights how we’ve been using the wrong techniques to motivate others and it talks about the science of motivation.  Studies have shown that our most used method of motivation using the carrot-stick method (i.e. reward performance and punish poor performance) does not yield the results we are looking for, in fact it probably is hurting the performance of your business.  Given my capitalistic attitudes, this would require some real proof.  After watching the video, it resonated with me and I’m working on bringing some of these ideas to life.  These key motivational points are really good to keep in mind:

1.  Autonomy:  The urge to direct our own lives.  This is great motivation for the entrepreneur, however for the employee it is really important to give them the ability to feel autonomous.  Provide some guardrails and allow your employee to find their way to the outcome, the creativity may surprise you.

2. Mastery: The desire to get better and better at something that matters.  We want to excel at something, provide opportunities for your employees to grow through training, practice, and time.  It is a tremendous motivator.

3. Purpose: The yearning to do what we do in the service of something larger than ourselves.  Define and communicate a big vision that is impactful - it is a powerful motivator.  In one of my companies, our vision is to make life a little more happy and fun everyday by bringing entertainment closer to you.

Are you going to re-think your management style?  What do you think about moving away from the carrot stick management style?  What do you think about rethinking management entirely?

How about motivation?  How are you motivated?  Do you think your motivation is enhancing your chance of success or detracting from it?  Ultimately, I’m a big believer in doing something that is larger than ourselves and in doing so, we are well on our way towards a successful journey.

Hat tip to Russell for sending me this video.

The past few weekends, I’ve met with several folks working at Microsoft.  Microsoft is a great place to work, free sodas, good compensation with stock, great health plan, and reasonably good job security.  Plus, they have Bing, which I really hope shifts the search marketplace from a monopoly to a duopoly.  The conversations I have often with folks at Microsoft is that they want to start a company badly, but just can’t do it for a variety of reasons.  And, so I wonder - will they regret later in life that they just didn’t give it a shot?  Or, will they just forget about it?  What do you think?

As I reflect on my life one question that comes up and I like to ask in an interview is - what are your biggest regrets in life thus far?  I’m always curious if the biggest regrets have more to do with what you didn’t do versus what you did do?  I’m not sure I know the answer for everyone, but for me, I think it is what I didn’t do.  For regrets about things I did do, at least I know the outcome and can learn from it.  For regrets about things I didn’t do and I can no longer do, I’ll never know what could have or would have happened and the lessons learned.  I like to think of myself as someone who takes risks and really enjoys the unpredictability of life and the roller coaster lifestyle of the entrepreneur.  I think I would be bored silly in a relatively predictable corporate position.  Although I’m glad to have made the decisions I have thus far, there are many that I wish I would have tried.

So, on to you.  Many of you have thought about blogging and getting your passion out in public, but have yet to start.  You don’t need much to start - in fact, it’s totally free to start one on wordpress.com.  That’s how I started InspiredStartup.com, although I decided to pay a few bucks to start one because I wanted to have my own domain and have more control so I used BlueHost.com.  I’m even willing to bribe you to get started.  My last post talked about sending you to San Diego for a killer conference or a ticket to a Seattle startup conference and you’d be helping students in El Salvador.  By starting a blog, you start committing yourself to your dream and things will become a reality.  Write about your ideas, write about what you’re struggling with, write about about your execution plan, write about your passion.

So, start living life with no regrets.  Get started, push forward, get motivated.  Start making mistakes and learning from them.  Create your own luck.  And, share with stories with everyone - you never know who can take your business and idea to the next level.  Best of all, you never know who you can help along the way unless you put yourself out there!

The best entrepreneurs I know are scrappy, resourceful, and are hustlers.  They identify a problem and will not take impossible for an answer.  They make things happen, but rarely if ever by themselves.  They are capable of surrounding themselves with strong team members, advisory board members, board members, vendors, and good support from friends and family.  One of the best ways to recruit strong team members, advisers and “friends” of the startup is through conferences.

For the first time, Inspired Startup is giving away one free ticket to Think Tank in San Diego including $500 in cash to assist in your travels totaling a prize that costs $3,500.  Also, Inspired Startup is giving away one free ticket to Startup Day in Seattle.  Read on to find out more…

I go to specific conferences (not many), the ones where you can meet key folks face to face in the industry you are in.  In fact, some of the conferences, I won’t even pay to get in, I’ll stay out in the lobby and just hang out meeting folks in and out of sessions.  I’ll go to dinner with key folks (paying for dinner is much cheaper than attending the conference), and to evening parties with them as well.  By attending the right conferences, I’ve met some tremendous people and built some long-lasting friendships as well.  My tip - plan out your next year and identify which conferences will drive your business and attend them.  If you can’t afford the ticket, go and be intentional about meeting people there.  If you’re scrappy, you’ll have a ton of fun and build real value for your company.  Or, if you are a true scrappy entrepreneur looking to startup a new online venture - you can win a ticket to the hottest Internet conference called Think Tank held in San Diego.

Think Tank is already sold out and attendees are all successful online entrepreneurs.  You will be challenged in your thinking, your approach, and your execution of your business.  You’ll come away energized and ready to take your business to the next level.  You will be inspired.  I’ll be attending and hope you will be my guest at the conference.  All you have to do is blog (if you don’t have one, start one!) about your startup’s single biggest challenge and your thoughts on how to solve that challenge.  If you don’t have a startup, blog about your biggest challenge to starting that new venture and how you’ll solve that problem.  In the comments below link to your post and I’ll be sure to read your post.  I’ll select the best post by August 31st at noon PST.  This is a $3,500 value to a sold-out conference and is open to anyone over the age of 21 in the US.  No purchase necessary:)

For the 2nd best post, I will be also giving away a ticket to Startup Day in Seattle which is led by some of the best and brightest in online marketing.  Unfortunately, I won’t be able to attend.  But, this event is not to be missed.  It is a full-day session and includes opportunities to meet in an advisory setting as well.

Some additional thoughts - I’ve only been blogging for a short period of time, but have found it extremely helpful in getting my thoughts down on “paper.”  If you haven’t started a blog, consider starting one today and entering the contest, it will help keep you accountable to focus on the most important issue in your business or soon-to-be business as well as keep you accountable to solving that main issue.  I’d also encourage you to “syndicate” your post and get it out in the open as much as possible so that you get others thinking about your problem as well and for others to keep you accountable.  Here are some simple ways to “syndicate” your post:

1.  Make sure your post is on twitter.  Tell your friends to “re-tweet” it.

2.  Make sure it is on your facebook update.

3.  If you have friends that blog, perhaps have them “steal” the entire post and re-post on their site with their thoughts and link to you.

4. Add your blog to your signature line on your email.

5. Ask me to link to it.  Better yet, ask Neil Patel.

There really is no downside to entering.  It helps you focus your thoughts and put it down on paper, gives you a huge opportunity to help your business by winning a spot to ThinkTank or Startup Day, and you will be making a difference in the lives of those who really need it in El Salvador.  It’s a win-win-win!

For more information and details on this contest, please visit http://www.purposeinc.com/pwp/future-hope

UPDATE: A big thanks to everyone who took the time to enter the contest, you’ve helped make a difference in the lives of many in El Salvador, myself, and the readers.  I think I’ve read each post at least 5 times and I’m excited to announce the winners of the contest and I’ll also be doing a longer post on this well later.  So, the 2nd prize with a free ticket to Startup Day goes to Joe at Vori.us with a great post on how to handle the problem of money with 4 solid operating principles.  Great post Joe!  And, the grand prize winner with a free ticket to ThinkTank and $500 cash to help with travel expenses goes to Gyutae of Winning the Web. His thoughtful post around handling the problem of passion in a startup was spot on - it’s hard enough doing a startup, without real passion you just won’t make it.  His thoughts around maintaining your passion by staying in community with other like-minded folks resonated with me, it’s why I get involved with EO, Thinktank, Future Hope - it keeps me energized, motivated, and passionate about startups.  More to come later.  Again, thanks everyone for participating!  I hope it was as rewarding for you as it was for me.

This is a guest post by James Wong, co-founder and CEO of Avidian Technologies, the makers of Prophet, the easy CRM software for Outlook. James is a seasoned entrepreneur and founder of three successful companies, an active investor and supporter of entrepreneurship.

I personally believe that if you want to succeed in life, you have to take some chances.  I don’t know of any successful person who did not take risks in their life.  However, I do know many unsuccessful people who haven’t taken much risk and played it safe.  If you are waiting for that perfect business opportunity that is riskless and returns tremendous gains, you may be waiting for a long long time.

As a father with an entrepreneurial spirit, I try to build confidence and courage to my two sons.  Sometimes, it’s as simple as allowing them to jump off a small ledge to the ground. At other times it’s watching them ride their bike down a hill wondering if they will stop in time.  Other times is watching them skiing down the mountain faster than they should. Whenever I see these things occurring my heart aches with the fear of a loving parent who don’t want to see their child get hurt.

However, I know that for my sons to grow up feeling confident in themselves and just to be kids and have fun, I must let them take chances.  There will be times when they might get a booboo or worse yet, break a bone. However, if I protect them 100% of the time, how will they grow up?  If I wait for the 100% sure time they will not fall of the bike when I let go of their back seat, they made still be riding in their training wheels at age 10.

My own experience and learning from other successful people is that the perfect time will never come.  When I started Avidian Technologies, my current software business, I had every reason not to start it yet: I was too young, not smart enough, didn’t have enough money in the bank, had a mortgage, my wife didn’t work and/or I haven’t had enough business experience yet.  Besides there were too many competitors in the crowded CRM industry already.  After about 6 months of learning, analyzing the space and talking to other successful entrepreneurs, I decided to take the plunge.  Here I am 7 years later, we’ve built a successful business with happy employees, millions of dollars in revenue and making a positive difference to tens of thousands of customers around the world.

Avidian may never have started if we waited for the perfect time to come.  Whatever your situation is, don’t wait too long. Carpe Diem - Seize the day.  Like Nike says sometimes you have to “Just Do It!” Take the plunge.

Generally speaking I enjoy the whole car buying process, I find the process fascinating.  I enjoy interacting with salespeople and learning what seems to work for them and more importantly what their approach is to sales - whether it be pushy, non-pushy, hard, good cop bad cop negotiators, etc.  Normally, I find it engaging.  This time, however, it was truly a strange almost surreal experience.  I bought a car or so I thought only to have it rescinded the next day.  I actually got into an argument with the dealership.  How is that possible?  I’ll try to distill how that happened and hopefully be able to provide some gems of learning for both you and I.  Here are my key learnings and takeaways:

1.  As a business you are NOT entitled to customers. I don’t care what business you run, but customers are not there to serve you and should never be treated as such.  I understand there are businesses that have been successful despite this principle, but usually it is shortlived.  At this particular dealership, they were particularly arrogant that they had a “hot” car that was very hard to get.  Needless to say, they made it very clear that we should feel “grateful” that we were getting this car and the hard work they did to help us get it.  NO!!  The customer is parting with hard earned cash and should be treated graciously for taking the time to spend their cash at the dealership.  Takeaway - even if you have a hot and highly desirable item, treat your customer always with respect, there will be word-of-mouth sales, and future opportunities with that customer.

2.  Being transparent rather than opaque makes the transaction smoother. Most dealerships aim to fleece the customer, they’d rather trade long-term gain for short term profits.  This dealership on many occasions argued that they were making nearly “nothing” on this transaction when they were charging MSRP and in fact, they argued most dealers were charging markups on top of MSRP.  This was really troubling to me.  Not one dealer I called asked for more than MSRP and invoice price is very transparent on the Internet.  I was told I was “way off” on their margins.  Sure, I might be off on their net margins, but I was pretty darn close on Gross Margins and I know average Gross Margins for most dealers is 1-2%.  This particular car had a gross margin of 8%.  The real margins are the add-ons and service, which makes it all the more appalling that they would go after the jugular and fleece customers up front.  Once the customer discovers this, do you think they’ll ever come back?  Do you think they’ll be sharing their story with everyone they know?  The cost of being opaque is very high.  Throughout the transaction process, we were told we needed to sign a lot of paperwork.  It’s been a while since I bought a car, but it did seem like a ton of paperwork, so we’d ask questions only to be pushed - “haven’t you bought a car before?  This is all standard paperwork, you don’t need to read it.”  That sure doesn’t instill confidence that we’re working with reputable dealers.

3.  A deal is a deal when it’s completed. Let’s get to the crazy part of this story.  We spent over 45 minutes to drive to the dealership.  We then spend nearly 4.5 hours at the dealership and paid our money and signed all the paperwork to buy the vehicle, with handshakes driving off the lot thinking we were done.  Oh, were we wrong!  They call the next day to tell us that they need a check for the amount we paid on credit card not because the credit card was declined, but because they didn’t get the deal done right the night before.  This would cost us more time to drive out there both ways, get a check which we usually don’t carry around with us, and forfeit all the points and 0% interest that we get with our credit card.   I was told we needed to do this because they had done so much for us and again they were “entitled” to inconvenience us even after the deal was done because of all the hard work they had done.  Hey, I understand you needed to do some work to close the deal, but I also had to earn the cash to pay you for the vehicle.  Also, have you ever heard of a dealer asking for their car back after it was sold?  Totally surreal.  Needless to say, that didn’t sit well with me and they didn’t like the fact that I wasn’t going to just blindly agree with their approach.

4.  Take your time on larger deals, don’t rush it. Get comfortable with people you are going to do business with, make them earn your trust, respect and business.  In Japan, often times deals are done after several business meetings over long dinners and cocktails.  Our venture firm knew my co-founder and I for several years before funding us.  I had bells ringing in my head when the General Sales Manager called me after the deal was done saying that he didn’t even know this deal was done which was untrue - I had received a call from the salesperson stating very specifically this deal was approved by the General Sales Manager.  Several inconsistencies also ranged from potential liability that I would receive vs. all the liability they would receive.  I had originally asked for my deposit back only to find out it was never returned and was applied to a new vehicle that arrived later (should have been a red flag, but I wanted the car).  Do your diligence and if the other party loses your trust in the process, it’s best to move on.  In the end, they came and picked up the car and we walked away.  It was best for us and we will never do business with them again.

5.  Think Long-Term. No need to beat a dead horse, but it’s an easy trap to fall into - closing the deal at all costs without regard to the means.  The brands and retailers that have longevity generally have a long-term view of the customer even if the initial sale or return may be a loss-leader.  They work hard to make sure the customer is happy sacrificing a couple of points for long-term loyalty, great word-of-mouth referrals, and a sustainable business.  This dealership not only lost me as a first-time customer which is costly because the cost of getting 1 person through the door is extremely expensive, but will ultimately lead to the loss of future sales is just way too costly.  If someone doesn’t convert on that first visit, that’s fine, but you can ill-afford to have an unpleasant experience for them.  We will be sharing about our unpleasant experience during the sales process and the highly unusual after-sales experience for years to come.

6.  Don’t buy a hot new car. Have patience.  Enough said.

I understand that there are reputable dealers out there and I hope they are rewarded well in the long-term through this difficult economy - this is not meant to be a blind rant on dealerships.  I’ve also never run a dealership so I don’t pretend to understand all the stress that they must go through, so this may be an isolated incident.  Nevertheless, as in life, ridiculous stories such as these are learning opportunities.  I’ve picked up some lessons through the lens of the consumer of how we should run our businesses.  Let me know your thoughts and your crazy car buying stories!