For builders and salespeople who have not been through previous housing downturns, especially the deep recessions of the early 70’s and 80’s, what happened in late 2005 and early 2006 came as quite a surprise. Prior to that wake-up call, everybody was doing well. Things were selling without much effort. In some markets, people were lined up to buy. We all were making money. Salespeople won awards. Times were great, and it was a fabulous time to be a builder.

Then, suddenly it seemed like the end of the road. For some, it was. For others, it would take just a little while longer for the pavement to run out. And, as others continued down the road, they traveled through what I call “the home builders’ stages of grief.”

Having experienced first hand the tough times, I can tell you that no builder or sales organization has ever successfully navigated through difficult times by relying on hope. Yet today I see many who are doing just that. History repeats itself, and as our industry goes through these extremely difficult times, I am reminded of interactions and conversations with builders and sales organizations over the years during times of less-than-stellar market conditions. Let’s take a look at the stages of grief that might be encountered during a market downturn.

At the onset of any significant sign of a downturn in market conditions, typically the first emotional reaction is:

1. Shock: What happened? I can’t believe this. We were doing so well.

Reality check: What took place in the years leading up to the “sudden change” was not normal. There were so many abnormal conditions that contributed to the irrational exuberance. Easy-to-obtain financing, speculators, and all the rest. We all experienced a market that, in retrospect, never should have been.

Reaction to shock: I sure hope this turns around quickly and we get back to normal. When nothing gets better, the next emotional reaction is:

2. Anger and Denial: Why is this happening to us? I’m a great builder. We’ve got terrific product. Our salespeople are experienced professionals.

Reality check: When the market is hot, any builder can look good. And besides, a great market can forgive a lot of mistakes.

Reaction to anger and denial: I’ll show them. We’ll bring out the discounts and sell our way out of this. When that proves not to be very productive, the next stage is:

3. Bargaining and Pain: I’ve discounted and discounted and I’m losing money on every sale, but I guess I’ll make it up in volume. I’ve got to do something to make my margins.

Reality check: Knee-jerk reactions and dropping prices do not make the market want to buy what you have to sell. On the contrary, they often create a counter-productive effect. Buyers wait for the prices to go lower, then every other builder starts offering deals and your entire marketplace gets more confused.

Reaction to bargaining and pain: I’ll get all our subs and vendors in, beat them up, and get my costs down. Then, with any luck, we’ll do better. When that doesn’t help the cause, then:

4. Depression sets in: If things don’t get better soon, I don’t know what we’re going to do.

Reality check: Reducing costs alone, especially short term, will not create a healthy business environment.

Reaction to depression: I hope that a miracle occurs and somehow things get better. I don’t know how long we can hold on. As the depression gets worse, wishful thinking sets in:

5. Waiting for the market to “come back”: If we can just hang on until the market comes back, we’ll be OK.

Reality check: Waiting for the market to come back is neither a strategy nor a plan. In fact, it’s downright foolish. First of all, the market that existed before the downturn will never come back. It can’t. It was a false market. And when some semblance of a market does comes back, you will still be in the reactive position you’re in now, with no thoughtful strategy or action plan, which means you will likely be at the very bottom of whatever that new market happens to be.

Reaction to waiting for the market to come back: I sure hope it happens soon. When it becomes rather clear that the “great market” is not coming back, the next stage is to administer:

6. Self help: I’ll throw some money into marketing and try to generate more traffic. This social media thing seems to be a big deal. Let’s go for that. And I might even “shop” the salespeople. That ought to shake them up.

Reality check: If you are not fully convinced that you have a sales organization capable of consistently demonstrating a proven and complete sales process, you will be spending money just to give them more chances to fail.

Reaction to self help: I think I have a plan. I sure hope it works. When relying on hope, wishful thinking, and short-term fixes does not provide any significant, measurable increase in sales revenue or profits, it’s time to begin a process of:

Proactive Transformation

We’re going to take a step back, look at this situation objectively, and create a strategy to navigate through this market. We’ll take a serious look at our position in our respective marketplace. If we need to modify the product, we’ll do that. We’ll evaluate every aspect of our marketing, website, and other means of generating traffic. We’ll fully evaluate each and every member of our sales operation and make whatever changes are deemed necessary.

We’ll analyze our construction process and procedures and take appropriate steps to reduce cycle time and cut unnecessary costs. By implementing this well-thought-through plan, we have a shot at increasing sales revenue and reducing costs, without sacrificing quality, integrity, or good business judgment. With this plan and the benchmarks established, we can measure the improvements, make corrections as needed, and be on the way to sustaining our business through the challenging conditions that still lie ahead, and be fully ready to dominate the scene when the market picks back up.

Reality check: Recognizing that hope is not a strategy, wishing is not an action plan, and success in today’s market is not an accident is the first big step out of the cycle of grief. The sooner you get into the stage of proactive transformation, the more quickly you will take control of your business destiny and establish a foundation from which to navigate successfully through what lies ahead.

Bob Schultz is president and CEO of Bob Schultz & The New Home Sales Specialists, a full-service management consulting and sales company based in Boca Raton, Fla. For more information, visit www.newhomespecialist.com or call 561.368.1151.