Analyze the facts
Even the best research is just cold data until you apply some analytics. In a service business, that means understanding what current trends mean for your clients’ future. That, in turn, helps determine the direction your company will take as you focus on the areas your customers need.
For example, Grubb & Ellis closely tracks sale prices of buildings. In the third quarter of 2009, for the first time in a couple years, it saw value increasing. That indicated buyers and sellers were getting closer in their ideas of pricing — and the market was nearing the bottom.
While research, charts and tables help convey that, the key is explaining what it means to the client.
“What we’re telling our clients is that the market really does feel like it’s reached the bottom,” D’Arcy says. “We think that the direction of rents is going to be moving higher. So from a corporate perspective, if you’re looking to make a longer-term investment in additional space or move to a new building, now is probably a pretty good time to do that.”
During that analysis, you’ll reveal areas where you need to focus your company’s attention, as well. Grubb & Ellis invests resources in high-return activities — and relies on research to identify demands that will reap the highest return.
For example, when banks began to take over buildings in dealing with problem loans, D’Arcy knew that would mean more appraisal business for banks trying to valuate properties. So in June, D’Arcy announced that the company would enter into the appraisal business. Three months later, Grubb & Ellis Landauer Valuation Advisory Services opened with 12 offices and plans to grow to more than 350 appraisers across the country.
“We’re not simply entering this business because we see a short-term market opportunity,” he says. “We think it’s fundamentally a good business over time, and we’re going to be good at it. In order to do it, you have to be national in scope, and we have the ability, obviously, to be able to deliver that to our clients.”
Although, as a public company (NYSE: GBE), Grubb & Ellis reports quarterly financial results, D’Arcy doesn’t run the business quarter to quarter. Looking longer term will help you validate opportunities as core areas rather than one-off transactions.
The key to evaluating whether opportunities will continue reaping success in the future is considering the past.
“You have to look back at what the business has been like historically,” D’Arcy says. “You’re looking at recent trends and you’re looking at what technology can appear, and then you try to make the best reasoned judgment that you can.”
Knowing what has affected an area in the past can help you predict future obstacles or successes. D’Arcy found that the appraisal business has been steadfast, driven mainly by the expertise of the appraisers. Even technological improvements won’t change the necessary skill set that makes an appraisal successful, so as long as the company can staff those competencies, the business line will be as fruitful next year as it will in the next five.
“We’re trying to make investments in our business so it’s going to create long-term value for our share owners and our clients and our employees,” D’Arcy says. “We’re obviously very cognizant of [quarterly] financial performance. We have strict metrics that we use. But when we’re investing in something, we’re not investing for next quarter or next year. We’re investing over the long term.”
