THE LEAN APPRAISER!

Imagine traveling to a foreign land where everything is new and unknown to you. You are unfamiliar with your surroundings, the plants and animals of that region, the people are different. Everything around you is new and unfamiliar. You’re walking through a densely packed forest and your guide suddenly points off into the distance and says, ‘look! Look! Do you see it? Do you see the Pangolin?’ You look through the forest in the direction your guide is pointing but the trees and the leaves and the brush and all of the other stuff is preventing you from seeing almost anything. Not to mention, you have no idea what you’re looking for! You don’t even no what a pangolin is, for god’s sake! You’ve never heard of one, you’ve never seen one, you don’t know if you’re supposed to be looking up in the trees, down on the ground, are you looking for a bird, a cat, is it big, how big, is it purple, what are we looking for? So it turns out that if you don’t have a picture in your mind first of what it is you’re supposed to be seeing, or what you’re looking for, your chances of seeing it go down exponentially. That means if the guide hadn’t at least pointed in the general direction you’re supposed to be looking, you’d likely never see it as you make your way through the forest. And think about the thousands of other things your brain isn’t trained to see as you walk through the forest.

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A friend of mine from the Aikido world, a man named Craig Caudill, owns and runs one of the worlds foremost outdoor survival training academies called the Nature Reliance School in Kentucky. Craig has written a couple books on outdoor survival and I’ve taken some outdoor survival courses over the years. One of the skills in the survival experts tool bag is the ability to track. Tracking is way more than just looking for impressions in the dirt of where someone or something has traveled. Tracking is an art form that entails having a deep understanding that every action performed by a human, an animal, a bird, an insect, the weather, and the whole of nature itself has an impact on the surrounding environment. Every action has an equal and opposite reaction and that reaction in the environment leaves clues. Learning to track is learning to greatly expand your awareness in order to read the clues left behind. The clues all around you tell a story and they tell us about the past, inform us in the present moment, and guide us into the future. One of the foundational character traits of a good tracker is curiosity and openness. A good tracker is curious about the environment, about what is possible, and then open to learning and being guided in every moment. What is also extremely important for a good tracker is having a mental database of whatever might be out there. They have to remain open to the possibilities so as not to draw too many conclusions right away. They’re looking for tracks, of course, but they’re also remaining open to the sounds of the environment, the smells, the wind direction, the natural patterns of nature, the leaves, broken sticks, marks on trees, and a variety of other things that would make someone a good tracker. In essence, being a good tracker entails believing in all possibilities so as to be open to seeing everything that may be a clue. As soon as you narrow your mind to a limited number of possibilities, you start to close down your options and you only see what your mind has told you is likely to be seen. As soon as the tracker narrows down his or her belief that she is on the path of a grizzly bear, she may miss the chipmunk tracks just to the left that are telling a different story about the environment. Being on the lookout for the grizzly has them missing the antler scratchings on the Birch tree up ahead. All of these, of course, a metaphor for life and how our brains and reticular activating systems work. Until you know what a Pangolin looks like, you’re not likely to see it in a densely packed forest. And until your mind is open to all of the myriad of possibilities for your life and business, you’re not likely to see them. You’ll miss them like they antler scratchings or the chipmunk tracks that could be leading you somewhere much greater than the Grizzly tracks you’re running from. And Yes, a pangolin is a real animal. Google it if you’re interested and you’ll see why it might be difficult to see one of these creatures in a thick forest if you’ve never seen one and don’t know what you’re looking for.

Alright, todays show is not about outdoor survival, Pangolins, or Grizzly bears. After I do a show on something somewhat non-specific to the appraisal or real estate industries, I try to follow up with a show that has something a little more specific you can apply to your life and business. Not that learning about the brain and the science of success isnt usable today, it absolutely is! However, if you’re like me, information like that has to be heard again and again and again before it sinks in and we start to make use of it. You’ll have to listen to that 3 part series 4 to 10 times before some of it makes sense and you can start to implement some it into your life to get different results than you’ve been getting. So todays show is going to be an introduction to some ideas and methodologies for running a successful appraisal, real estate, mortgage, or really almost any business for that matter. I get questions all the time from listeners, members of our private Facebook groups, and of course, from coaching members about some of these concepts and how we implement them in our organization. In a few weeks, we’ll be doing a show on the virtual office and some of the vital components of running an extremely profitable business essentially from a laptop. No office, little to no real physical assets other than your specific work tools, no physical office space where all the employees show up each day, and the variety of virtual tools that we use to build this kind of business. But before we do that, I want to introduce you to a concept and practice that is kind of the seed that, when it takes root and blossoms, creates the kinds of thinking that is needed to build and operate such a business.

The concept and practice is called Lean, and maybe you’ve heard of it. It has nothing to with your diet or your body composition, although there is some crossover there. I got introduced to Lean by my brother, Sean, back in the 90’s. Sean is an accountant by study and trade. Not the CPA and do your taxes kind of accountant, but the kind that has always worked in large engineering and manufacturing companies. Almost all of them connected somehow and someway to the auto industry. I, on the other hand, do not have a college degree and never really had any interest in getting one so my university has been trial and error, reading books, watching videos, being coached, having some great mentors along the way, and basically just following my instincts and intuition throughout my working life. My instincts and intuition hasn’t always been spot on in every instance and it hasn’t always been rainbows and unicorns, but what every experience has been is a great learning opportunity. For some reason, don’t ask me why or where it came from, I got interested in several topics in business. One was customer and client service, and the other was systems that could deliver great customer and client service. I believe it was probably while working for the Stouffer Hotels in Chicago in the early 90s where I was introduced to next level guest service, the likes of which I had never seen nor experienced in my 20-some years on the planet at that point. What I learned while working at the hotel was, not only what very high level guest service looked and felt like, but also what kind of systems needed to be in place to make that happen. It started in the HR department with the hiring and weeding out process, went to the training department to deliver the company message of high level guest service and then show us exactly what that meant and how to do it, then on to the management, and eventually out to the guests. Every meeting, every word, every action, everything was focused on delivering the highest level of guest service possible at every interaction and there was a system behind it. It wasn’t just a plaque on the wall or some corporate platitudes thrown around at company meetings, it was in the blood that flowed through every employee in the organization and, if it didn’t flow in you, you’d be given a simple handshake, ‘thanks for stopping by’, and helped on your way to your next job.

From that experience on, I have been fascinated by the systems and processes that allow companies to deliver a high level product and service and do it profitably. Enter my brother Sean. After moving back from Chicago and beginning work in my family’s mechanical contracting business, I began implementing some of the things I learned in the hospitality industry into the business and began seeing really great results. The big problem I ran into initially was how to get the whole organization on board with this idea, and then the practice of delivering very high level service in an industry with what are oftener referred to as blue collar workers. These, of course, are the doers of the business. These are the installers, the fabricators, the technicians, the ones doing the dirty work, so to speak, of delivering the product and service in that industry. I’ve been in the role of management and sales, as well as all those work roles so I have some experience and insight into the mindsets and attitudes of those who get their hands dirty to earn a living. I loved that kind of work, by the way. I loved being able to make things. I loved working with my hands, tearing something out, building something new, crafting ductwork and metal transitions with my own hands and my own tools from a flat piece of sheet metal, and then staring at what you’ve created at the end. I loved walking the homeowner or business owner through the final system and answering their questions about what we did and how it all worked. I loved the look on their faces when they saw the shiny new system that they had just spent thousands, tens of thousands, and in our commercial department, hundreds of thousands of dollars of investment on. There was a very real pride in having taken either something old and replaced it with something new, or completely designed, engineered, built and installed something completely new in a previously empty space. Just an observation about how valuable it is to be creating things and working with our hands and bodies beyond just typing on the computer.

Nevertheless, having a brother in manufacturing gave me an opportunity to pick his brain, which I was doing all the time. He was gracious enough to invite me into a couple of the facilities that he worked in and had management roles in and he began introducing me to this concept called Lean manufacturing and lean processes. He turned me onto a book by several gentlemen who had studied extensively on the Toyota Manufacturing system, which was essentially where lean thinking was created. While I could spend hours on that topic alone, I wouldn’t dare bore you with all of it. What it has done for me, however, is think very differently about value, the value stream, value to the customer, value in the process, flow, and waste.  In Lean thinking, there are 7 kinds of waste the Japanese call MUDA, and I’ll go over those in just a bit to hopefully give you some insights into building systems and processes in your business to help you reduce it, reduce costs, lower expenses, add profit, add time, and ultimately add value to your internal and external customers (you and your employees are buying the business every day!). So, to give you the elevator speech about what Lean thinking is and how it can help your life and business: it all begins with a very clear understanding how and what value the customer assigns to our products and services. This is what ultimately determines what customers will pay for theses things over time. When there is clarity and understanding of this very real truth, then an organization can start to develop what’s called a ‘top down target price’. In the case of appraisers, this would be our fees and the costs associated with how we came up with them and then how we deliver based on those fees. Once we really begin to understand the market and the value that the market assigns to our product and service, we can start to dig deep into the costs associated with delivering all of it. Now, why is that important? Its important for a variety of reasons, one of which is that when you know the exact costs of delivering the absolute highest value product and service, you can then focus on eliminating absolutely everything that doesn’t contribute, in some way, to creating and delivering that value.

Remember, the market, the customer, the clients assign value to our products and services. Appraisers love to pat themselves on the back and say that THEY determine their value to the market. Unfortunately, this shows a very deep misunderstanding of how the world works! That’s not the way the world or markets works! This, by the way, is a different idea from figuring out what your own value and worth is. I work with a lot of people in coaching sessions and we work a lot on getting people to realize their own value, raising the quality of their work, raising their fees, delivering more value to the market, and doing the critical work to make all of that a reality. All of that doesn’t change the fact that the market will assign value to your product and service based on what they receive and what they believe that product or service gives them. Does it give them more time on this earth? Does it give them freedom? Does it give them income? Does it give them peace of mind? Does it give them a liability outlet? These are all questions we should be asking every week within our businesses? The reason to know what the market expects and what value it assigns to your product and service is so that you can constantly work on eliminating waste and upgrading your value offering. Value is assigned based on the customer and client expectations and beliefs about your value, and then value is created by the producer, that’s you!

So, before I tell you about the 7 types of waste in next weeks episode, I’ll introduce you to whats called the value stream. The value stream is the totality of a particular product or service’s life cycle from raw materials to the final use of it by the end user, to its final disposal in the trash can or data file somewhere. Of course, in a real estate or appraisal business, the raw materials we’re dealing are typically intellectual and thought based. Of course, we use some paper and ink, some electronics and tools to complete our work. But we don’t have to spend much time on thinking about the raw materials that were used to build our clipboards and tablets because we count on the company that makes those things to be thinking about those things for us. We assign value to that product based on its value to us and we pay the asking price. Nevertheless, it’s a worthy endeavor to be thinking about the whole life cycle of, say, an appraisal order. Of course, when I say that, I know exactly what every one is thinking: your thinking begins when the phone rings or, more likely, then little ding on your phone when an order comes in via email or AMC portal. For most, like 99.997%, that’s the beginning of the process for them. Its not the beginning of the value stream my friends! The beginning of the value stream for an appraisal order begins when a buyer first starts thinking about buying a home. It begins when a homeowner starts disliking their current house payment or interest rate. It begins when somebody wants to payoff some debt with their home equity. It begins when somebody is upset over their assessment. It begins when two people decide it might be time to start contemplating a separation and divorce. It begins the moment a heart stops beating and a family member will eventually need an appraisal to settle an estate. It begins the moment somebody starts to think about their future and needs to value their assets to set up a trust. Are you hearing me superstars? The value stream does not begin the moment an appraisal order comes into your business? That’s the during process of your business!

Every business has a before, a during, and an after segment or unit of their business. Appraisers, specifically, have a disease called ‘during-itis’ because it’s the only thing they typically ever focus on. That is, until their business starts to wane or the market changes and now they’re wailing for more and better business. Whats the problem with this mentality? How much time do we have?! Are you more likely or less likely to raise your fees when you’re slow? Are you more likely or less likely to accept lower fees when you’re slow? Are you more likely or less likely to begin working on your business when business sucks? You don’t need me to give you the answers, you already know them. Until you start thinking about your business and life a little more strategically, about the before, the during, and the after segments of your business, eventually you will find yourself in the all too common position that many appraisers find themselves in, which is a position of extreme weakness. You don’t get to dictate your fee when you’re hungry. You don’t tell the AMC that they can take their fee and shove it  when you’re trying to pay the bills. You’re just going to complain about it on social media and perpetuate the myth that the industry sucks and in its in decline. Its not in decline, you’re in decline if you don’t understand the value stream of the whole process and when it actually begins friends! It doesn’t begin when you get an order! How conceited, arrogant, and narcissistic to think that life begins when you get an order! A whole universe of activity has occurred prior to that order being generated and sent to you. Its no wonder so many appraisers and real estate professionals don’t get it! The value stream begins long before you get a call and if you’re not studying that whole process you’ll remain completely ignorant to when an appraisal order actually begins in the ether, travels through space and time, and eventually ends up in your queue. Remaining completely ignorant to the value stream, in this case, of an appraisal order, is to remain ignorant to the workings of the universe. You have to begin recognizing value throughout the whole process, which entails seeing the very origin of the first thought that impregnates the idea to start the process that gets the ball rolling, if even only in somebody’s head, about possibly, maybe doing something, sometime, with someone in the future that will cause some people to do something that will cause other things to happen and computers to begin stirring, beeping, and buzzing, and eventually cause an appraisal order to be sent your way. To be ignorant to the whole value stream is to remain absolutely helpless in adding any value whatsoever to that process. “Well Blaine, what kind of value can I add to a process that I’m not involved in?” Great question, but an ineffective and weak one. A better question would be, how can I be involved in that process long before it lands on my desk.

What understanding the value stream does for us is it forces us to break out of ‘during’ thinking and into ‘before’ and ‘after’ thinking. What it also allows us to do is examine very closely all of the steps that are involved, not just with the ‘during’ process, but the whole process in general. Learn about what goes on inside of the meetings between lender and buyer. Learn what’s being discussed and what that process looks, feels, and sounds like. Why? You ask. Because when you know all of that, you are now armed with the ability to at least think about your own process and where you might be able to add some value before the order has been created. You can also begin to potentially eliminate some waste from your system. And remember, waste in a business is anything that doesn’t add value to the process and ultimately add value to the end users of your product and service. All the teeth gnashing and wailing about portal fees, software fees, E&O fees, costs of doing business, and whatever other childish complaints you’re wasting your valuable life energy on add nothing to the value stream. I get it, that’s why you’re complaining. You have fees and costs associated with delivering your product and service and likely only some of it adds value to the process. The problem is that the ones complaining about all of those costs and fees use that as a justification for why their own fees should go up in the market. Nope! That’s not the way it works folks! “But Blaine, I’ve been doing this for 30 years and I’m making the same amount or less than I was in 1983!” Cool story! Quit, move on, get out! All of your habits of helplessness add zero value to the process so you have two options: keep complaining and starve, or start looking at the value stream and see where changes can be made. You’ll end up doing several things: you’ll cut some waste from your process that doesn’t add value to the end user, you’ll figure out how to be more efficient in your processes, you’ll start to upgrade your value offering and realize the commensurate increase in willingness of the end user to pay for that added value, and you’ll stop bitching about it and realize you create your own opportunities.

Welcome to the Lean Appraiser and the Lean Appraisal business my friends! It can be a somewhat heartless and ruthless process of examination and elimination. Anything that doesn’t add value to the end product and service for the end user gets eliminated, or it gets tolerated. This is the first step in this Lean Thinking process and we’ll continue the process next week when I help you identify the 7 types of MUDA, or waste, within almost every business. I’d like to thank you for investing your most valuable currency with me again this week, and that is your time. One of the benefits of lean thinking and leaning out your business is freeing up of that most valuable currency. When you free up time, you’re freeing up the most valuable resource we all have and can never recover once gone. Whether you believe it or not, theres is likely some hidden MUDA in your own business, the elimination of which will free up time and resources. All of which will allow you to add more value to the process, the product, and the service. Ask yourself some important questions this week my friends. Ask yourself how much you know about the whole process. Ask yourself how much of the process have you kept yourself deliberately ignorant of because you don’t think it applies to you. Ask yourself, ‘do I really think that the process begins when an order comes in?’ If the answer is yes, we have some work to do but it’s savable my friends! There is hope! You’re in the right place! You’re exactly where you’re supposed to be at the time you’re supposed to be there and I’m honored to be able to be in your ear on this topic.

Just a quick reminder that I’ll be leading some classes this year at the Valuation Expo in New Orleans. The first class is called Digging Your Well Before You’re Thirsty where I’ll be going over 11 things you absolutely need to be doing in your business if you want to be ahead of the curve heading into the next decade. If you have any interest whatsoever to get off of the AMC hamster wheel, increase your fees, attract better clients, and get more private work than you can likely handle, this is the class for you. This is a first for the valuation expo and I’m extremely proud to be able to teach some classes that will actually help an appraisers life and business, instead of ones that you just get CE for. The second class I’ll be teaching is called Building the Million Dollar Appraisal Business where I will be introducing principles and techniques for building the kind of appraisal business that will literally make you a millionaire. No, this is not some kind of salesy internet pitch and no, it doesn’t mean that you have to be producing a million dollars per year in appraisal work. I will show you how you can take the business your have right now and turn it into something that feeds you long into the future using time tested principles and practices. If you are a part time appraiser and only bill out $23,000 per year, you can still use this process to become a millionaire. It may take you a little longer than somebody producing $323,000 per year, but maybe not. We don’t know how much the $323,000 year individual is netting, saving, what their lifestyle is, what their expenses are, etcetera. If you want to know more, you’ll just have to show up in New Orleans and be ready to take notes! Let me be clear, for all the CE junkies that have been trained for the past 47 years that the only reason to get out of your cave and spend a day in another location is to get con ed credits, there is no CE for my classes, there are only fabulous financial returns that will pay for the cost of your trip 10 times over if you can implement some of the things I’m going to teach you. If you just want the CE, there will be classes at the Expo for you, just please don’t show up to mine unless you’re serious about learning and growing. You’ll be taking the seat potentially from somebody who does want to grow their business and be more profitable. If you’re thinking of going and want a discount code for the trade show, feel free to use my name and the number 50, which is how many thousands of dollars my classes will be worth to your income over the next year if you show up. So its Blaine50, not Blaine 50,000, we had to shorten it so people wouldn’t get carried away and add a couple more zeros. Let me do that for you when you show up! If you cant make it to the expo this year, have no fear, I will be doing some traveling this year and doing some one and two day workshops to teach more appraisers to be happy, healthy, prosperous and profitable. I hope to see you somewhere in the continental US in the coming year.

Until then my dear friends, fist bumps and bro hugs for all of you, and until next week, I’m out…