The author, Jay B. Barney, starts off immediately talking about firm performance and realizing early on whether a firm has a competitive advantage, competitive parity, or a competitive disadvantage. Jay defines performance “by comparing the willingness of the firm’s customers to pay and the cost of developing and selling its products or services.” Basically, what value does the firm create? The difference between these is commonly known as “economic value”. Simply put, either you create value or you do not. Those that create value stay in business, those that do not create value do not stay in business. Sounds simple, right?
In the context of Commercial Real Estate Development, it is important to realize what you are good at and when you should use outside help. Real estate development of any kind is capital intensive so knowing your strengths and weaknesses are critical as one bad move can cost you greatly depending on how leveraged you are. Since Acqudev is new and we do not have a performance history to really investigate, I believe it may be good to talk about where I believe our competitive advantage and disadvantages are.
First, a competitive advantage is when firms create greater economic value than their competition. When a firm creates the same economic value it is considered competitive parity, while a firm who creates less economic value is conserved a competitive disadvantage. Each category can be temporary or permanent given the situation of the company/firm.
Winston, Acqudev is a new commercial development company so how could you be anything but at a competitive disadvantage?
Great question! To be clear there are few people out there who have a started a similar company like Acqudev. Commercial real estate development is a hard industry to get in to and I believe our niche to get started. My intention isn’t to stay only in this niche, but to constantly learn more about the industry, network through industry events, construction sites, and just being a resource for others who may have interest in what we do to take Acqudev to the next level. Personally, I believe we have a competitive advantage and here is why:
- Defined services
- Acqudev provides land development management services in the areas of land acquisition, due diligence, market analysis, site selection, and land entitlement. Acqudev Consulting intends to get REALLY good at the basics of Real Estate development first before venturing into the other areas like capital financing, which I hope to discuss in depth in future blog posts.
- Defined market
- Acqudev services communities throughout Tennessee and Kentucky markets now. That’s it. Apologies, but for the thousands of readers I have in Hawaii I cannot provide you services at this time. (Kidding, this is the first post so I doubt I have one reader 🙂 Will I eventually provide my services to more markets, absolutely. Actually, we are growing very well with our first customer and hope to be in two additional states by the end of 2017. Exciting times!
- Flexible fee structure
- Acqudev knows that each project is different requiring a bit of flexibility in billing so we cater our fee structure to each client’s needs. Our fees typically average between 1-5% of the total land development budget. In addition, our clients who require land acquisition services typically ask for a per lot fee which allow them to include our costs as part of the development soft costs. The fact Acqudev does not have significant overhead allows us to work for smaller fees versus our much larger competitors.
- Mission Statement
- Do the right thing the first time. Easier said than done in real estate development. It is very easy to lie in this business to get lower costs and therefore higher margins. As you continue to learn and decide to make the leap into the real estate industry you will come across unsavory people trying to make a quick dollar. We have decided that is not how we want to do business now or in the future. We are a young and hungry group that aims to develop a reputation as the team to turn to for their development needs. By doing the right thing the first time, our clients and tenants know we have their best interests at heart. Mistakes are inevitable and we have a continuous process improvement plan in place to constantly get better, but hiccups will occur. When they do, we will not be defined by those moments.
Thinking about what Acqudev’s advantages are helps differentiate us in the market as we start to market our services to a broader, albeit very defined, group of customers. I challenge people to think about what their competitive advantages and disadvantages are in the business they invest or work for. If you are looking to get into commercial real estate, then find ways to stand out by knowing what you offer to the employer or tenant!
“If opportunity doesn’t knock, build a door.” – Someone
Winston W. Parks
Chief Partnership Officier