Over the past 9 years, RentQuick.com has been in the business of providing projector and laptop rentals to the meeting and conference industry. Whenever we do business with someone, like all businesses, we add them to our database. Over the years, we have built up a very large database that in my mind has become a bit of a problem.
Way back in the 20th century, employees would stay at the same company for their entire careers. Today, it looks like people spend two to three years before moving on to another job. I know this, because every year our database loses 20-30% of the contacts.
As a result, our database must be constantly "weeded" and "pruned" (don't you just love the horticulture related jargon?). It takes a good bit of time, because you don't want to just dump data. You need to be sure that the person has really moved on. And if they did move on, you need to find out who took their place.
Finding out any information from most companies today is pretty hard. Yes, you can go online and search, but you really need to make a telephone call to confirm the data. If you send an email, it likely won't be answered. But telephone calls are a pain too because no one actually answers their phone. The let the voice mail do it for them. Then they don't return the call.
All this is very frustrating and costly to a company trying to communicate with the clients. This is the main reason why we no longer do mailed advertisings. Most of the mailings come back undelivered.
So on one hand, I hate my database. It has gotten very big and cumbersome. However, on the other hand, it contains very important information about the most important people: our clients.
Thursday, September 06, 2007
Wednesday, September 05, 2007
Sub-Prime Mortgage Victim Joe
This past week, President Bush argued that the Federal Government should help the homeowners who are at risk of defaulting on their loans which they can no longer afford.
Over the past month, we have heard the media describe the borrowers as victims. They say that the mortgages were pushed upon them. They were tricked into taking out more money than they could afford.
It is easy to blame the mortgage companies. Yes, they did try a number of ninja loans that were risky. Yes, a bunch of those loans will default. And yes, the homeowners will lose their homes. All terrible stuff, right?
Wrong. The homeowners don't actually own anything. In fact, some of them will make a good bit of money out of their little mess. First, if they have a 125% loan-to-value deal, that means they never put any money into the house. If they have been paying interest only, then they have zero equity to lose. They are glorified renters. When the bank forcloses on the house, they will end up keeping that extra 25% of the loan. Why? Because it was used to pay off their credit card debt (Victims of the subprime mess were also victims of the credit card debt mess too).
So here is a little example:
Joe buys a house for $300,000. He takes out a ninja loan for $350,000 to pay off and "consolidate" his credit card debt which he ran up in his wild 20's. His monthly interest-only payment starts off at $1458 per month. All is well in the world. Joe is a fancy guy in a fancy house.
But wait! The evil lender pulled a fast one. (Not really, it was all spelled out in their loan agreement and Joe had an attorney do his close so he should have known it was coming!) The lender tied the 3rd year of the loan to float with prime. Now Joe is paying Prime +1 which makes his interest only payment $2890. How ever will Joe be able to get that new HD-DVR he has been wishing and praying for over the past 2 weeks.
Of course, this is when the Today show comes out with the sad story and the sad music about Joe. Joe who has already lost his dog to a Michael Vick dogfight. Joe who is a good guy and likes to work 40 hours a week. Joe who is an American just like you and me. (I apologize to our international readers, but being an American today means you never fail. That is why we have a government) Joe who is about to lose his house to a foreclosure.
After all the tears and sad commentary only briefly interrupted by a Flomax commercial, we all feel a little less secure.
If Joe, who is an American just like you and me, can lose his house then so can I!
On and on it goes with no end in sight. Here is the straight talk:
1. Joe is an idiot. He should never have bought a house without a down payment.
2. If Joe had not spent his earnings of his 30's while he was in his 20's (credit card debt) he might have a down payment.
3. Joe is an idiot (again). He never took the time to learn about how floating rate mortgages work. Nor did he ever learn how to plan beyond the next week.
4. Did I mention Joe was an idiot? By the way, Joe will make money by walking away from his loan because he is effectively paying off all his credit card debt when they take the house. You might say, but his credit would be destroyed. Duh! This idiot didn't have any credit. That is why he needed a sub-prime loan in the first place.
5. Finally, the government needs to butt out. Keep liquidity where needed. But forget about the Joe's of the world. Don't bail them out or the lenders or anyone else. Allow people to fail. It is part of life. It is how we grow and learn.
And this isn't even the reason I am so pissed today!
Over the past month, we have heard the media describe the borrowers as victims. They say that the mortgages were pushed upon them. They were tricked into taking out more money than they could afford.
It is easy to blame the mortgage companies. Yes, they did try a number of ninja loans that were risky. Yes, a bunch of those loans will default. And yes, the homeowners will lose their homes. All terrible stuff, right?
Wrong. The homeowners don't actually own anything. In fact, some of them will make a good bit of money out of their little mess. First, if they have a 125% loan-to-value deal, that means they never put any money into the house. If they have been paying interest only, then they have zero equity to lose. They are glorified renters. When the bank forcloses on the house, they will end up keeping that extra 25% of the loan. Why? Because it was used to pay off their credit card debt (Victims of the subprime mess were also victims of the credit card debt mess too).
So here is a little example:
Joe buys a house for $300,000. He takes out a ninja loan for $350,000 to pay off and "consolidate" his credit card debt which he ran up in his wild 20's. His monthly interest-only payment starts off at $1458 per month. All is well in the world. Joe is a fancy guy in a fancy house.
But wait! The evil lender pulled a fast one. (Not really, it was all spelled out in their loan agreement and Joe had an attorney do his close so he should have known it was coming!) The lender tied the 3rd year of the loan to float with prime. Now Joe is paying Prime +1 which makes his interest only payment $2890. How ever will Joe be able to get that new HD-DVR he has been wishing and praying for over the past 2 weeks.
Of course, this is when the Today show comes out with the sad story and the sad music about Joe. Joe who has already lost his dog to a Michael Vick dogfight. Joe who is a good guy and likes to work 40 hours a week. Joe who is an American just like you and me. (I apologize to our international readers, but being an American today means you never fail. That is why we have a government) Joe who is about to lose his house to a foreclosure.
After all the tears and sad commentary only briefly interrupted by a Flomax commercial, we all feel a little less secure.
If Joe, who is an American just like you and me, can lose his house then so can I!
On and on it goes with no end in sight. Here is the straight talk:
1. Joe is an idiot. He should never have bought a house without a down payment.
2. If Joe had not spent his earnings of his 30's while he was in his 20's (credit card debt) he might have a down payment.
3. Joe is an idiot (again). He never took the time to learn about how floating rate mortgages work. Nor did he ever learn how to plan beyond the next week.
4. Did I mention Joe was an idiot? By the way, Joe will make money by walking away from his loan because he is effectively paying off all his credit card debt when they take the house. You might say, but his credit would be destroyed. Duh! This idiot didn't have any credit. That is why he needed a sub-prime loan in the first place.
5. Finally, the government needs to butt out. Keep liquidity where needed. But forget about the Joe's of the world. Don't bail them out or the lenders or anyone else. Allow people to fail. It is part of life. It is how we grow and learn.
And this isn't even the reason I am so pissed today!
Tuesday, September 04, 2007
Helping the Helpless
I have been in the business field for most of my adult life, less 6 years in the Marine Corps. As a result, I have developed a wide range of business experience. As a result, I tend to get a large number of people who come to me for advice on thier businesses.
Although I have never charged for this advice, I put alot of effort into helping these guys out. Recently, I did some advising to a family business that I have done work with in the past. These guys had gotten themselves into a mess and they needed to make some tough decisions to get out of it.
I evaluated the deal and came up with what I thought was a pretty good route for them to move past the problems. I even pulled in some of my resources to help them refinance their business. The recommendations I made were agreed to by all the parties and it looked like a solution was in the works. Then...kablamm! They went a completely different route.
By different route, I mean they did nothing. They faced and continue to face total extinction, but they don't seem to worry about it at all. They have not moved on any of my advice and are in the process of actually working backwards.
The moral of this little story, and the only part that matters in our conversation is this: it is not the idea that matters, it is the execution. You can think things through, but if you don't act then you are going nowhere fast.
As a result, I have defined this as helping the helpless. They don't really want any help.
Although I have never charged for this advice, I put alot of effort into helping these guys out. Recently, I did some advising to a family business that I have done work with in the past. These guys had gotten themselves into a mess and they needed to make some tough decisions to get out of it.
I evaluated the deal and came up with what I thought was a pretty good route for them to move past the problems. I even pulled in some of my resources to help them refinance their business. The recommendations I made were agreed to by all the parties and it looked like a solution was in the works. Then...kablamm! They went a completely different route.
By different route, I mean they did nothing. They faced and continue to face total extinction, but they don't seem to worry about it at all. They have not moved on any of my advice and are in the process of actually working backwards.
The moral of this little story, and the only part that matters in our conversation is this: it is not the idea that matters, it is the execution. You can think things through, but if you don't act then you are going nowhere fast.
As a result, I have defined this as helping the helpless. They don't really want any help.
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