Living in Paradise!!

Aloha,
I am happy to report that Christine and I and our two children have recently moved to Hawaii. We now reside on the Big Island in the middle of the pacific. It has been a very busy year making the transition from our loved home in southwest Montana, but we are all very excited to be here.
As a result of the move I am focusing my on-site consulting work on properties in the Hawaiian Islands and the south pacific, but am available for web based work for properties and businesses world wide. If you could use experienced assistance in advancing your small hospitality operation, please contact me and let’s help you reap the rewards of your efforts.
Enjoy and, once again, aloha,
Nick

Stepping over dollars to pick up nickels

Lately, I’ve been running into a lot of people who are doing exactly this: stepping over dollars to pick up nickels. Let us never forget the maxim that you have to spend money to make money. The important thing to consider when faced with a decision on what may seem like a big expenditure is not the face value of the price of your options, but instead the true value of what each choice will potentially bring to your business. Nowhere is it more important to do a deep analysis of  value than in the hiring of personnel- especially in management positions.

Now, determining the VALUE of something is as much an art as it is a science. Yes, there are straight up financial calculations that can help put a Return on Investment (ROI) to a cash outlay, but there are also a number of much more intangible factors that can affect the true worth of an investment. Some such alternative factors to consider are Time, Efficiency, Security, Longevity, and many others. Now, I could put a bunch of these together and make a nifty acronym out of them and charge you a bunch of money to buy the book, but in reality every major expenditure will have its own collection of factors that will play a part in what will be the VALUE received from the cash spent. The important thing to do is to make sure that you include an assessment an analysis of these factors before you make your decision.

How to value a thing is easy; how to determine the potential value of a person to your business is perhaps one of the most difficult things to do- just ask any baseball scout (or Michael Jordan’ high school basketball coach that cut him from the team). Let’s examine some of the example factors I gave above and see how they might affect the decision on hiring a management position for your business.

1) How will this candidate affect your Time? Are they fully independent and self-sufficient with great problem solving skills, or are you going to be getting daily phone calls with a need for help on how to proceed? What then is your time worth? Also, will the changes you need to be made be done quickly, or will you be waiting until next season to make them? How much money (or customer satisfaction, or good will or whatever) will be lost between now and then. There is a lot to be said for “Fast”.

2) That brings up the concept of Efficiency. This may be what I consider to be the most crucial element in a business. If your business isn’t efficient, then most likely it won’t be around very long. So, ask yourself if this candidate is Efficient? Do they place Efficiency as one of if not their single highest priorities? If not, then be prepared for the time factor above to bite you in the ass, not to mention that over the long run, efficiency is what will be the difference between red and black, between an extra vacation on the beach to tightening your belt at Christmas time. An employee that affects the efficiency of a business is invaluable.

3) Security is another factor that is often unidentified. Now, I’m not referring to how good your alarm system is, I’m addressing how confident you feel in this person you are going to entrust with your business. If it’s just “adequate” or “OK”, but they’re a bit cheaper than their competitor that instills in you a feeling of true Security in knowing that your business is in good hands, then you should really deeply consider what that worth is to you. I know, for me, that knowing my investments are being looked after by someone that I have full confidence in, then I sleep better at night. What is that worth? Doubtful that it’s not worth more than the difference between the two candidates.

4) Another question to ask yourself is how much Longevity will this person provide to my business. This can be looked at in a couple of ways. Will they still be their in 3, 5, even 10 years? How important is experience in your industry? This really is the one thing that there is no replacement for. Do you want to be re-hiring next year (see Time and Efficiency above)? Are you making a long-term or short-term investment? If the candidate asking for the higher pay is around in five years, do you think the money on this first contract is really that important on the big picture? Another consideration in Longevity is not just the length someone might work for you, but the length that the changes they make will continue to have affects on your business. If you’re hiring someone who truly understands Efficiency and the idea of remodeling business systems, then the return from their changes will ripple deep into the future.

As a reminder, these are just examples of some of the factors to consider in any major purchase or contract. The important thing is to learn to respect the total VALUE of a person based on a deep consideration of all their intangible factors. Too often I see people who, when choosing between two options that are things, they seem to make good decisions, but when it comes to people, they make a choice that doesn’t truly respect the VALUE of their candidates. In essence they are stepping over dollars to pick up nickels. Don’t be that person. Take the time to accurately assess what some of the intangible costs and rewards are in a major decision, especially in regard to hiring personnel, and be willing to pay for VALUE. Never forget that all businesses are people businesses.

Sometimes, it is best to subcontract out major decisions like hiring a general manager in order to get an impartial, non-emotional opinion on which candidate really represents the highest worth to your business. Even though this might cost you a bit of extra money to do this, once again, don’t get caught stepping over dollars to pick up nickels.

Enjoy the New Year and may you find VALUE where you seek it,

 

Nick Kern

You’ve got a business plan- now use it!

So, you’ve taken the time and energy to write a business plan, and there it sits on the shelf collecting dust. Writing the business plan is not enough- using it is what’s important. I often compare a business plan to a map. You wouldn’t want to go walking off into the Alaskan bush without one, but it does you no good if it just sits in your pack and you don’t use it. The same thing goes for your business plan.

A key to using the business plan properly is to schedule how often you compare your actual numbers to the plan itself. This will vary depending upon what stage you are in with your business. For example, a new start-up might want to review their numbers every month, while a long-standing business might do so quarterly. Nonetheless, both companies will want to use their plan to gauge where they are at and why.

Understanding the why is important. It doesn’t do much good just to look at the numbers and say, “golly, we’re down 20% from where we should be.” A business owner or manager needs to dig deeper to gain understanding. Maybe a major deposit hasn’t been received yet for a resort buyout next summer which would bring the cash flow right back up to where it should be. Gaining an intimate understanding of the numbers of your business is crucial to long-term success.

At the end of the fiscal year, it is also very important to sit down with your business plan and your actual numbers and adjust the future expectations accordingly. If you realize that your labor costs are going to be 30% higher than what you had originally put into your plan, then change the predictions for the next couple of years and make sure you err on the side of too high.

All in all, what’s really important is to remember that your business plan is not a static entity. It is a constantly evolving document that needs to continually be reviewed and adjusted in order for it to be accurate and to provide you with any form of benefit.

Enjoy,

 

Nick Kern

 

Looking to buy or start a resort- HIRE A CONSULTANT FIRST!

When looking to buy or start a destination resort, it is extremely easy to see only the rainbows and butterflies, and to ignore the snakes and thunderstorms. By this I just mean that it is so easy to see the bright side of buying a resort. Most likely it is in a dramatically beautiful location with white sand beaches or mountain rivers sitting right out the front door.  It probably also has cute little rooms, cabanas, cabins, or bures for the guests to sleep in, a nice restaurant, and all the amenities. When you look at it, you probably think, “Wow! This place is paradise, and it’s ready to go. All we have to do is hang a shingle on the door saying vacancy and we’ll be packed!” I know that is what I thought when I was looking into purchasing The Lodge at Potosi, the land we ended up buying and turning into Potosi Hot Springs Resort.  Talk about being blind to the reality of a situation!!

After we bought the property, we quickly learned about how much we had overlooked- not just with the physical property, but the operating costs of the business as well. Quickly it became very apparent that the property was going to require quite a bit more repairs and capital improvements than we expected (I mean how do you not notice that some of the chimneys show previous signs of having been on fire?!). And despite the business plan I wrote including “all possible expenses”, after year one, we realized that in fact it was about twice as expensive to operate the business as we had planned. Back to the bank we went and luckily they were there to support us- much less likely in today’s economy.

From this hard-leaned lesson, let me pass on this one piece of advice for anyone thinking about buying, or starting a resort:  hire a knowledgeable, experienced consultant to help you BEFORE you jump in. The money invested in getting sound, third-person advice is invaluable. Here are three reasons to make this investment:

1)       First off, they are not emotionally attached like you are. They can look at the proposed business with a certain degree of emotional separation, thus allowing them to advise you logically. While your eyes are clouded by rose colored lenses, they can bring you down off your cloud and point out the potential costs and difficulties you may encounter with your project. They are your best friend at this point- your Devils Advocate to keep you from making a potentially disastrous mistake.

 

2)      Secondly, the consultant you hire should most likely have experience in this arena and be able to see what ‘s really going on behind the curtain.  Their ability to assess the prior operating numbers with some degree of accuracy is key.  Unless you’ve been in the business, it is very easy to miss hidden costs, or even possibly other streams of income the current operation is missing out on. The insight a good consultant can provide may very likely be the deciding factor on whether or not you should pursue this venture. Now what’s that worth?

 

3)      Thirdly, the consultant’s assistance in preparing a business plan for your new operation will be the guide for the next three to five years of your business operations.  As I told one client: “imagine you are going for a ten day hike across Alaskan wilderness. Now, you don’t necessarily need a map, but there is a lot more likelihood you are going to walk out the other side alive if you do.” Ask yourself:  “would you build a house without blueprints?” I don’t think so.  Would you make the blueprints yourself or would you hire a professional architect? So, why would you even think about starting a business without a business plan written by a professional consultant?

 

So here is my simple advice:  hire a consultant to help you start or purchase a resort and save yourself a lot of money and headaches in the long run.

 

Enjoy,

 

Nick Kern

Branding- more than just poking cows with hot metal

Here in Montana, the word “branding” has a few different connotations. If you’re down at the local diner and hear someone talking about branding, most likely they are talking about putting their mark on their cows. However, this word has also been adopted in the marketing realms to mean about the same thing- putting your mark on your business (just not quite as painful). Your brand is everything in marketing. It says who you are, what you offer, and it becomes your reputation.

Recently, a friend of mine who owns a restaurant in the area committed what most people in the industry consider to be marketing suicide- he destroyed his brand. He had been operating his restaurant for about four years and had built a great, steady business upon the foundation of quality food at reasonable prices. Whenever I drove by, his parking lot was full, and we made it a regular place for us to go out as a family.

He and his wife had also started another restaurant- a pizza joint-  in our small town in a building that they rented. This seemed like a side venture for them as they typically closed their main restaurant down in the winter and I’m sure this helped bring in some money during the slow months.

This spring, however, I noticed something strange. They had replaced their sign at their main restaurant with the one from the pizza place. I was very curious about what was going on, but life was keeping me very busy and I didn’t get a chance to stop in and talk with them. However, about a month after they made the change, I was having lunch in a different restaurant, and I heard some people bemoaning the fact that such a successful and reliable restaurant had closed.

This spurred me to make the call to my friend and see what had happened. He explained that they had decided to move the pizza joint in with their other restaurant to save money on rent. He said they were still serving much of the same food that they had been in their original restaurant, but they’d just gone with the pizza place’s name when they combined the two together.

I attempted to explain that by taking down his sign, most of the people in town and returning summer home owners were very confused and assumed they had closed down and now it was just a pizza place run by someone else. I tried to explain that by doing what he’d done, he was walking away from the wonderful reputation and reliable clientele that he had built up for the past four years. I continued to tell him that in my opinion he was committing the greatest blunder a business could make- he was wiping out his brand. I also tried to explain that it wasn’t too late to restore his brand by putting up his original sign and maybe adding something like, “Now serving Pizza too!”, but he stuck with his move and unfortunately, all summer long, I overheard people wondering what happened to his restaurant and wishing it was still open- even though it actually still was. All I can say is that I hope my friend’s business did not suffer too much from this learning experience.

Plain and simple, marketing is all about building your brand- from logo to photos to brochure to website to ads to everything! It all must be consistent and of the same quality. It all must get across the same feel and the same message. I was lucky enough when I first got started with Potosi to have my ad guy explain this to me in great detail, over and over (thanks Rob Esperti). It took a little while for it to settle in to my brain, but eventually I got it.

Then, once you’ve built a great brand, for Pete’s sake, don’t change it. The largest companies in the world have the simplest logos for a reason. Look at McDonalds and their “M”, the Nike “swoosh”, the Facebook lower-case “f”. Would McDonalds ever think about changing their name to Frank’s and changing their signs to an “F” instead, or would they change from selling burgers to hot dogs? Never. And if they did, would people still go there to eat like they do? Nope.

So, my advice is think real hard about what you are branding ahead of time. Plan it all out- the logo, the brochure, the website. Get an idea of what its all going to look like, the feel and the message, before hand. Then put it together in a consistent, high-quality manner. Then, never, ever, ever change it.

Oh and one other thing: if you are thinking about buying a business, make sure to get a very comprehensive understanding of their current brand. When we bought Potosi, it took us a long time to overcome the residual carnage left over from the prior owner’s business (The Lodge at Potosi), even though we started our business from scratch and even changed the name to Potosi Hot Springs Resort. We didn’t just start at ground zero, but right from the beginning we were climbing out of a hole because of their terrible reputation. In this case, ignore what I said in the above paragraph and change the brand as much as possible…

Enjoy,

Nick Kern

Top 3 Reasons Why Hiring a Consultant is a Crucial Move for a Small Resort

For small destination resorts, hiring a consultant is an excellent choice, if not a necessity for a number of reasons. The following are some of the top reasons why this is so:

 

1)      Outside looking in.

It is very easy for owners of small destination resorts to become emotionally attached to their property and their business. Often these operations take place in a gorgeous location that the owner fell in love with even before they bought it and began operating a resort there, or maybe this property was family owned and has been for generations. Either way, decisions can become clouded by emotional and historical influences.  This goes for the operation of the business as well.  It is extremely difficult for someone dealing with the day-to-day operations of a business to have any form of perspective on how it is operating.  I clearly remember sitting at my desk at Potosi working another 14 hour day, so overwhelmed by the list of things that I had to do, that the idea of reviewing past decisions or planning far in the future was totally out of my realm.

That is why the use of a consultant in this industry is so valuable.  By bringing in a third party with a fresh set of eyes with no emotional attachment to the business, owners and managers are able to receive an unbiased, logical assessment of their business, resulting in suggestions and ideas that could make a world of difference to the success of their operation.  A good consultant can come on the scene, and in a short amount of time, pick up on many problems and issues that a business is having simply because they haven’t seen them every day for the past who knows how many years.  Like the saying goes, “it wasn’t the fish that discovered water.” In other words, it’s all about perspective.

 

2)      Special-forces efficiency.

Small destination resorts are often very remote and have a limited supply of available work force and employees. Often times the available work force that is there doesn’t have the skills and training necessary to fulfill the job’s requirements. Owners can often overcome this issue by hiring a consultant to come in, do the job that is needed, and then move on. It can be the perfect solution for objectives like building a marketing plan, designing a website, or assessing a restaurant’s food costs and efficiency.

Through the use of a consultant, owners can get a high quality, well-educated employee for a short period of time. Yes, they may cost a bit more in the short run, but simply by avoiding the classic employment issues of housing, taxes, and availability, the bottom line of the resort will be much happier, not to mention that the quality of the work will tend to be higher. Every army needs its special-forces sniper team as well as its standing militia.

 

3)      Do what you know, and know what you do.

In many cases small resorts are owned by people who have never actually been in the hospitality industry. I don’t know how many times I heard people at the breakfast table at Potosi say something like, “I would love to retire from being a ______ (insert profession here), and own a bed and breakfast.”  A few things would always run through my head when I’d hear that. First, I’d think, “if you owned a bed a breakfast, you certainly wouldn’t be retired.” Next I’d wonder “what would a person who does _____ (repeat profession here) for a living know about the hospitality industry?” The answer, of course, would typically be “not much.”

In the case of small resorts though, the owner usually has a manager or management team operating their resort. This is just fine and most often the best situation, but this begs the question, “if you’ve never operated a resort, then how do you know the people running it for you are doing a good job?”  Toward the end of our time at Potosi, we finally had a General Manager for our resort.  Despite the fact that she was excellent, she just didn’t know the business like we did after running it for six years. It took regular instruction and oversight to get her to truly understand our vision and how we would operate the business and make decisions.  Even still, there were occasions where her actions and our desires were incongruent.  Only because we had already previously done every job that we asked of her were we able to truly judge and guide her decisions properly.

So how does an owner that knows very little about the hospitality industry assess the performance of their manager(s) and the efficiency of their business operations? They hire a consultant who understands the industry to observe, report and advise them on how things are going. Now this can be a touchy situation for an owner and manager’s relationship- bringing someone in to review their manager’s performance, however if presented properly, any manager who feels they are doing a quality job, will most likely be receptive to advice on how to increase efficiency, improve the final product, and actually make their life a bit easier. Meanwhile, any manager that is really opposed to an owner’s desire to use a consultant, most likely knows that the owner won’t like what they hear when the report is delivered.  So, whether a resort is being run by its owner or a manager, hiring a consultant to review its business strategy and management performance is a great idea and money well spent.

 

So, these are the three best reasons for an owner of a small, destination resort to bring in a consultant. Of course, there are many other possible motivations to do so, but this sums up some of the key benefits that a consultant can provide to the boutique resort industry.

Here we are!

And with this entry, I officially enter the blogosphere. What, no welcoming committee? No cupcakes? Oh well, here is what I’ve got to say:

With the launch of our website, Reap the Rewards Consulting is officially open for business. If we were a main street business, we’d have balloons, a band and free food for everyone, but since our business storefront just exists in the digital universe, we’ll have to settle for this blog. Some things have certainly been lost with the invention of the world wide web. On the other hand some things have certainly been gained.  We can now operate an international consulting business from anywhere in the world with our laptop and smartphone.

What I’d like to address is the ”why” behind Reap the Rewards Consulting. There are times I drift off and remember what it was like in the first couple years of operating our intimate, destination getaway, Potosi Hot Springs Resort in southwest Montana, and I recall just how hopelessly buried we were by the overwhelming demands of running that business. Exhausted, confused, frustrated,under-financed, naïve- so many negative words to describe our situation. I remember desperately hoping to find someone who could show up and walk me through the basics of the business- the filing, the marketing, the improvements to the grounds that were necessary, and so many other areas that I had questions. But I never found that person. Instead, I slogged through the mire, day after day, pushing the huge ball an inch up the hill only to have it roll back three. I just remember so desperately wanting help, and it was nowhere to be found- and believe me I looked. Sure there were people who worked with the Hiltons and Marriots of the world that would show up for half of our gross income, or people who had owned a bed and breakfast for a year in Vermont that could give us a couple of pointers, but no one that truly understood the complexities of an intimate, destination resort like ours.

It is because of this void that my wife and I decided that we could help a lot of people that are currently in the same situation we were in by offering up the experience and wisdom we gained the hard way. So we decided to  form our business, Reap the Rewards Consulting, and here we are- ready to come to your resort, bring a fresh set of eyes and perspective to your operation and help you take it to the next level of success.  We’ve been in your shoes. We’ve stood up to our knees in the same mud, and we know how to get you onto dry land! Give us a call and let us help you reap the rewards of your business…

Enjoy,

 

Nick Kern

Owner, Reap the Rewards Consulting

EnglishFrenchGermanItalianPortugueseRussianSpanish