This article is a repost of the BuilderRadio article “Bob Schultz: Hidden Perils In A Hot Market” by Scott Shroud. Click here to read the original article here.

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Every builder, Realtor and sales professional that has survived the housing recession of the past few years is happy to finally see that behind us. Sales are climbing and the outlook – for at least the near future – is bright. However, we’re not ‘out of the woods’ just yet.

“Up times are when builders can be the most vulnerable,” says Bob Schultz, president of The International New Home Sales Specialists. “Even if a company does nothing differently, it will make more sales by default. This creates vulnerability because it can lull builders into a false sense of security… Making sales at a reasonably good pace can be seductive. Success can lead to complacency.”

In a recent article in Professional Builder magazine, Schultz offered the following advice (reprinted with permission of the author. Read the original article here.)

  • Stay on the lookout. When the market is hot, proceed as you would in leaner times. Think about the market share you could gain. What you’re doing while the market is good will dramatically affect how well you will do when the market declines.
  • Don’t buy into hype. This calls to mind the expression coined by former Federal Reserve Chairman Alan Greenspan in the mid1990s, who described the run-up to the tech bubble as being a time of “irrational exuberance.” Stay grounded. Stay real. Stay rational.
  • Don’t confuse paycheck size with skill level. In the first month of the 1973 downturn, a consultant hired to turn things around at Bering’s company told all of us that we were some of the highest paid unskilled labor he had ever seen. Sadly, he was right. Our skills were nowhere near what they should have been, but we were still making money. Be sure to evaluate your sales team based upon their provable skills and sales processes. Video evaluation is a useful tool for assessing interactions.
  • Beware the lowering of the bar. I’ve recently seen ads for new homesales representatives. One read, “Looking for rock star salespeople.” Another company stipulated, “Two years’ experience and able to think outside the box.” But what about a great attitude and being highly coachable? And don’t forget about PHD (professionalism, hunger, and drive).

When Business Is Booming, Keep Evaluating

You may be lucky and have salespeople who have been through downcycles or who at least understand that hot times can pose risk. You may have staff who appreciate the value of strategizing for lean times in an upcycle. Here are questions to ask yourself:

  • How are my salespeople performing? If you could trail them and be a fly on the wall during their customer interactions, do you think you’d be pleased with what you see?
  • Do I know the numbers? If you were asked about the conversion ratios of each of your salespeople, as well as sources of traffic, would you know? If not, is there someone in your operation whom you could ask, or a source you could consult to get a quick answer?

If you answered yes to both questions, congratulations: You’re poised to take whatever market share is left from those who aren’t as well prepared when the market slows. (Remember: History repeats itself, so it’s only a matter of time before a slowdown.) Now, regardless of market conditions, ask yourself this question, and ask it frequently: Doing what I’m doing the way I’m presently doing it, how many sales and how much revenue am I missing? Why am I missing that sales and revenue, and what’s my plan to fix the situation?

Bob Schultz, IRM Fellow, CSP, is president of The International New Home Sales Specialists. Want to discuss your market position? Write him at bob@i-nhss.com with the subject line, Hidden Perils.