There’s an old saying in business that “first you get on, then you get honest” – and that’s definitely true in the RV Park industry. In this RV Park Mastery podcast we’re going to explore why most RV Park buyers have to take a leap of faith at the beginning and then solidify their position later. We’re also going to review some methods to mitigate your risk when doing so.
Episode 126: "First You Get On, Then You Get Honest" Transcript
There's an old business saying that first you get on, and then you get honest. And that saying and the theme behind that saying is very applicable to the RV park industry. This is Frank Rolfe with the RV Park Mastery Podcast. We're going to talk about the concept of taking that leap of faith, which is getting on, and then supporting what you did later through good actions, which means to basically get honest. Now on the front end, I got to tell you, the quote originally has a third part. It's first you get on, then you get honest, but never get honorable. Now, what does that mean, never get honorable? What that implies is, if you're a big company, at some point you may lose sight that you're supposed to be there to make money for the benefit of the investors, and you start doing things which make no economic sense because it's just kind of fun to you. You feel like, oh, I got to give back. It's a form of philanthropy. For those in the St. Louis market, and I live an hour south of St. Louis, we all saw that in vivid detail with the purchase of InBev when they bought Budweiser. And the Bush family, apparently, and I didn't read the book, but it said in the news that InBev was able to cut about a billion dollars, if you can picture this, of kind of things that should have not maybe been going on, philanthropic adventures.
And I know that when InBev bought Budweiser, immediately they lost funding in the opera and the ballet and the symphony. There were all these things the Bush family was doing out of the goodness of their own heart, but to the perhaps punishment of the investors, you might see differently and might say, no, no, you're just supposed to make money. You let us, all of us shareholders, worry about the philanthropy portion. So that's what the get honest means. But for most RV park owners, you start now, you're probably not going to be successful enough to worry about the philanthropy risk. So instead, we're editing this down to just first you get on, then you get honest. So what does that mean? What does it mean when first you get on? That means when you buy an RV park, you often have to take a leap of faith because you don't know what you're doing.
That's true of any new thing we do in life. We don't really know exactly how it's going to work out, but we've got to convince ourselves that it will work out okay. Because if you don't have that confidence, you can't go out and sign a contract or do your diligence or get financing. If you went to a bank and said, well, I want to borrow money, but I don't know if it's going to work or not, you might get your money back, but you might not. You're probably not going to get the loan. So by saying get on, we don't mean being a liar. We don't mean being a criminal. What we're talking about is having the intestinal fortitude on the front end to send out the vibe to others, this is all going to work out okay. Even though you don't know for sure that's what the ending will be. But that's an essential part of any type of initial deal making, is you've got to believe in yourself and believe in the deal. And that's what getting on means. But what is getting honest mean? It means that after you've bought the RV park, after you've started to learn more about the business, you have to acknowledge where you made mistakes.
You've got to improve things that need to be improved. You've got to go ahead and the honeymoon period now goes off from the purchase and you've got to back up your early statement. So yeah, this is all going to work out with the raw muscle to force that to happen. But again, that's a natural part of life. It's part of everything we do. If you're not a good swimmer and you jump in the pool, you do so under the expectation you can swim to the other side and climb out. But it might be a little more difficult than you thought. None of us is really sure. But you can't make progress unless you do that. There's an old saying, behold the turtle, it only makes progress when it sticks its neck out. And that's true of RV park owners too. So in many ways, we're just like turtles. We have to take a gamble. We have to stick our neck out if we want to go forward at all. And when you're buying an RV park, often you're having to stretch because mom and pop want a value which is greater than if you were super conservative on the numbers that you would be offering. But yet you find you can't buy it unless you stretch.
So often getting on means stretching to make the numbers tie. You think conservatively the RV park is worth $400,000 but no mom and pop want $500,000. What do you do? Well, often if everything else pans out, if you love the market, sense the opportunity, you can fix the marketing, you can fill the darn thing, you say, you know what? I will take that leap of faith. I will step off. I will go ahead and buy this thing under the expectation. I can turn it around and make it worth more than $500,000. Although I acknowledge it's more than I should probably pay right now. Nevertheless, I believe in myself and I believe in the deal. That's definitely getting on. Now, a lot of times when you go to the get honest mode, you realize you might've made some mistakes in your calculations. It's not the end of the world. What do you do now? You're going to go out there and you're going to reshape those economics. You may have to go back in and alter things. You may have to get a cheaper manager. You may even have to self-manage the property if that's something you were originally dabbling with anyway.
But you've got to force, you have to manhandle those numbers back to being where they're supposed to be. There's an exercise we like to do called budget actual difference. You take your budget when you bought the RV park, the next column you put the actual numbers as they're coming in, and then the difference between the budget and the actual. Take two colors of highlighter, a green and an orange. Highlight everything that's better than you thought with green, everything where you're performing worse with orange. Forget the green and just focus on the orange. And try and brainstorm, how can I fix that? How can I make that number better? That's how you get honest, by looking at the numbers as they're actually happening and figuring out what to do. You saw that all the time in great world wars like World War II. There was an old saying by the general that no great plan ever survived first contact with the enemy, because that's what planning is about. Planning is a theoretical skill, but it's not based on actuality. And when you get out in the field, when you buy that RV park, you may often find some things are off. Some of your assumptions were wrong, but that doesn't mean you fail. Doesn't mean that you have to throw the whole thing in the trash can, you're totally humiliated and embarrassed.
No, you can fix that deal. You can turn that deal around. But you have to be honest with yourself on the assumptions you made that were wrong and brainstorm how to get it done. And then come up with a plan of action to make sure that you do those steps. Now, sometimes when you get in the honesty mode, you may realize that you made a great number of bad assumptions on the business itself. Maybe your location is not good. Then what do you do? Sell it. Do your best to patch it up, make it as good as it can humanly be and put it back on the market. Again, that's part of being honest. You say to yourself, well, I bought it with the best of intentions, but obviously I was wrong. This location really isn't that good. Take your early indications, as Stanley Marcus of Neiman Marcus said, take all your markdowns and people and merchandise as quickly as possible. If the property is not going to be a performer for you, then you're not stuck with it forever. Just get it back out the door, make it more aesthetically pleasing, try and bolster the occupancy as best you can, get nice computerized financials, you'll find another buyer for it.
But when you say get on and then get honest, what we're really saying is you have to be bold in two ways. You have to be bold enough to take action and to buy the property. But you also have to be bold enough to contradict yourself, to be your worst critic and say, no, I had that wrong. Here's how I'm going to improve that. The ability for us to critique ourselves is very, very important in RV park ownership. That's how we really learn, is by looking at the reality of the numbers, the reality of what's going on and adjusting our course, adjusting our path. It's no different than a ship at sea trying to get from one point to the other port. They're being knocked off course by the tide, knocked off course by the weather. That's just business. And you just keep reorienting your ship to get you to where you want to land. The bottom line to it is, there's nothing wrong with getting on. There's nothing wrong about taking a leap of faith.
There's nothing wrong about having confidence in yourself. Those are all positive things. Those are all part of making progress. But getting honest is just as important. That's where you truthfully acknowledge to yourself the realities of what's going on and you take immediate action to fix them. So remember the old saying, first you get on, then you get honest, but it's not a bad saying. It doesn't mean you should be a flim flam person out there promoting something you don't believe in. No, if you don't believe in the deal, don't buy it ever. But if you do believe in it, even though it's your first deal and you don't know what you're doing, it's worth taking the shot. It's worth taking the gamble and you can always fix your course. This is Frank Rolfe with the RV Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.