Knowing when to pause, pivot or persevere (in a fast-changing UK property market)

Originally published in Property Investor News magazine, 1 November 2018

Knowing when, why and how to review and ‘pause, pivot or persevere’ is universally important: in property investment, other business contexts, and aspects of life from health to hobbies.

In investment, it’s never been more relevant than in this increasingly complex, challenging and fast-changing UK property market. Strategies and tactics that once worked brilliantly are becoming outdated, and new approaches are replacing them with every month that passes.

Reviewing and identifying what to put on pause, what to pivot or change within your approach, and what to persevere with as an investor or business owner can help you to focus harder on the activities you want to focus on, move away from dead ends, and move towards approaches which are more likely to deliver your targets, going with rather than against the grain of what is happening in the market.

On a personal level, I’ve taken the last few months to review my property investment activities, and decide which aspects to pause, pivot and persevere with. It’s been a great opportunity to understand what is working, and likely to, and what is not. It’s taken time and effort, but already I feel more optimistic than ever about the strength of my business capabilities, and the future results. 

I wanted to share the approach I’m taking, as I think it could be relevant and useful for so many others, whatever their current property, investment or business focus.

Firstly, knowing when and why… 

Across industries, business scales and strategies, having a regular opportunity to review results vs inputs is part of ‘best practice’. For example, a company might review and adapt following their financial results, at the end of each year. 

It’s also important to review before and after significant changes in market dynamics (for example actual demand and supply, or new policy announcements likely to affect future demand and supply), or business circumstances (for example business, supplier and customer desires and capabilities which may affect your future position in the market). Sometimes, as for many of the older property investors I’ve spoken to recently, the two coincide: market forces change, which can exaggerate a business owner’s change of heart due to age, health and personal circumstances. 

The reasons why it might be worthwhile to review centre on productivity and effectiveness. To narrow this down, specifically, I look at changes to opportunity costs, and changes to two ratios: risk vs reward, and effort vs reward. 

If these metrics change significantly, it makes sense to check in to ensure that business and investment activities are still likely to lead to the results you are aiming for, and that activites are underpinned by strategic decision-making rather than being fallen into due to inaction, emotional decision-making or thinking about the decision too late.

But understanding the risk vs reward, effort vs reward and opportunity costs isn’t always easy. 

Firstly, on risk vs reward, there’s a fine line between taking on and managing risk to reap rewards, and taking on unnecessary risks. There would be no profit for businesses or investors without risk. Knowing how much is right is fundamental for sustainable success, but it’s not easy. The question to answer is, is the potential reward worth the possibility of the potential downside?

Secondly, on effort vs reward, there’s a fine line between giving something (in this context, a property investment strategy or property business idea) enough time and effort to work, and refusing to respond to objective feedback or market forces which are beyond your control. It can be difficult to tell if something isn’t working now but will soon, or if it simply isn’t going to work. This is especially true if it’s a relatively new venture, or if the market is fast-changing. The question to answer is, is the potential payoff worth the effort and resources currently being allocated to it?

Thirdly, on opportunity costs: it’s important to appreciate the costs and payoffs associated with alternatives. There’s a fine line between the grass being greener on the other side, and a new business venture genuinely offering better actual and potential rewards. The question is, what are you sacrificing in favour of this activity, and is it worthwhile for you?

If the part of the market you’ve been focusing on has changed since you got started, for example your niche is moving into decline, or demand is falling, then it may well be a trigger to review, then ‘pause, pivot or persevere’, on the basis of new risk vs reward, effort vs reward and opportunity costs. None of us can control the market, all we can control is our actions within it.

Investors and property business owners need to be as objective and dispassionate as possible in assessing these metrics, and need to be willing to reallocate efforts or shift focus in response to the results. 

If an area of business focus no longer seems viable or worthwhile following your objective review of financial and non-financial inputs, risks and rewards, and alternatives and you know change is needed, the next question is how to pause, pivot or persevere. 

There’s three main approaches to how:

1. Pause or pivot, immediately. Quit anything which isn’t deemed worthwhile, and start something new which you believe is, now.
2. Create a logical plan for future action and effort, with clear timeframes. Include which activities to stop and when, which to slow, which to pause, and which new activities to pivot to, as well as how you will do this, and what the back up approach or alternative approaches will be, and how it suits the new market dynamics, risk profile, and relevant business circumstances 
3. Persevere - carry on, which may be especially relevant if market dynamics have changed, and are anticipated to change further, moving back into your favour 

Some parts of the UK property market are undeniably more challenging and complicated, now, and potentially less appealing and profitable than they were just a few years ago. Strategies that worked brilliantly for the last 20 years have suddenly become less viable and less rewarding for many independent property investors and business owners. 

For example, demand has fallen for buy to let investment properties across the board as a result of policies such as mortgage interest relief change and the additional property stamp duty surcharge. Meanwhile, demand for new properties is lower and sales cycles slower thanks to our uncertain and less optimistic political and economic environment. 

Consequently, many small scale property investors and developers are now receiving lower returns in relation to risk, effort and potential alternatives, where those returns were tied to property sales, or to a now lower post-tax rental income. Realising this might be a trigger to pause activities in this part of the market, and observe how market dynamics unfold. It might be a trigger to change focus to a new strategy. Or it might be a trigger to carry on as you were, and wait for all of your competitors to leave the market, strengthening your relative position.

From my side, I have been running a boutique property investment and development company for the last 2-3 years, primarily working with private investors looking to get access to better returns through residential development projects of 2-30 flats and houses. Having developed c. 60 units, I’ve recently taken the opportunity to review and pause, pivot and persevere with specific aspects of the business, on basis of new market dynamics, risk vs reward, effort vs reward and opportunity costs. 

The changes I’m making include longer term investment time horizons, greater scale and impact (financial and non-financial), and a greater focus on minimising risks, and maximising certainty of returns for all parties. Aspects of this are still being refined, but I am increasingly optimistic about rewards relative to risks, efforts and opportunity costs.

Meanwhile, market dynamics continue to change. So, I’ve also refocused my investment podcast (www.thereturnpodcast.com), to explore and share forward-thinking ideas, hot trends, information and strategic insights about the UK property market. The goal is to help others in the field and stay informed, whilst making sure I’m at the top of my own game in terms of understanding strategies, payoffs and the implications of market forces and regulatory change.

Whether you decide to keep pushing and building momentum (discussed by Jeff Olsen in The Compound Effect), adapt your business and investment focus (discussed in the context of small businesses in Eric Reis’s The Lean Startup), or pivot or quit (discussed in Seth Godin’s The Dip), taking the time to reflect, review and ‘pause, pivot or persevere’ can be a positive and productive approach to take to help you meet your business and investment goals, in a more strategically-driven way. 

If my experience is anything to go by, it’s worth putting the effort in as soon as you recognise the need, so that you can come back stronger across your business and investment activities in relation to risk vs reward, effort vs reward and compared with the alternatives.