June 2008 Mammoth Real Estate Q&A as it appeared in this week’s The Sheet. The smoke has cleared out of Mammoth and the Motocross crowd is exiting. Looks like Mammoth is ready to settle into summer.
Q: With all the reports of businesses closing in Mammoth, and it seems like the other half are for sale, what is going on? It’s not just the Village businesses. Over the years we’ve watched the businesses come and go, some sooner, some later. Mammoth appears to be a great place to own a small business, why is it so transient?
A: Sometimes I have to laugh when I get the “you’re in real estate, what do you know about business?” question from certain people. (And in the real estate business there is nothing worse than trying to sell somebody else’s brilliant business that is a black hole and yet they think it is so “valuable.”) Between drinking beer in college I took plenty of business classes and I have the diploma to prove it. But a diploma in business is glorified toilet paper compared to experience. Before getting into real estate brokerage in my mid-20s, I was fired from, or quit, plenty of jobs. But I always took away something valuable from each one.
Early on in my Mammoth life I was mentored by many local business people. They didn’t necessarily know it, but I was watching what they were doing and trying to make some correlation between success and failure. And this was the early 80’s, and surprise surprise––there were lots of businesses going under. It was great time to watch and learn. One of my favorite mentors was Sam Walker (of Whiskey Creek, Angels, Mammoth Brewing, etc.) and it pissed me off he wouldn’t hire me, but he probably knew better.
Back then the first thing that was so obvious was that Mammoth is a seasonal economy––a very seasonal economy. In the 80’s it was worse than today because summer was completely dead. Another interesting phenomenon I noticed, and is even truer today, is that once you are a “Mammoth business owner” it means you have to go out and buy a big fancy truck. It’s a “business expense” after all. But those payments are every month, and you’re only going to make money for four months. Mammoth teaches you to make hay when the sun is shining and stack it up because you’re going to need it later in the year. Back then I first learned what a “Mammoth Millionaire” was––somebody who came with $5M and was in business here––and only had $1M left. Appearances can be very deceiving.
In the winter of 1983 I worked at a place called The Boulangerie. It was located next to the new Safeway (now VONS) where the kitchen/bath store is. It was so incredibly ahead of the times––a bakery/bistro/hangout with display cases of wonderful food, espressos and fine coffee (what was an espresso?), over a hundred colorful microbrew beers in a wall of reach-in glass-doored refrigerators, sit-down lunch and dinner (people clamored for the chicken breast Dijonaise) and wine tasting on Saturday night while folks waited for their tables. (Sorry, no wi-fi, but plenty of newspapers and other interesting things to read.) The place cranked. It was alive––like a Starbucks on steroids. The owner was almost always there––like an orchestra leader dressed in baker whites. He is imprinted in my mind.
But what happened? He hired me because I was an old Charthouse guy with some experience. He asked me to help him run the business more efficiently. What I discovered was a nightmare. He had no sense of management––calculating food costs, internal control matters, personnel training, etc. He had none of it in place. He had five waiters working out of one cash drawer! No wonder it came up short every night. In his dry storage room he had large bags of expensive imported spices. I can still see him walking in and grabbing a big handful and spilling half of it on the floor only to be swept up at the end of the day and thrown in the trash. On and on it went. I tried to explain to him what I was seeing and how a finely tuned corporate restaurant dealt with it. He would have nothing to do with it. He thought volume would overcome the deficiencies. I left after a couple of months, and he was out of business within a year. He was one of my mentors.
As a broker, I’ve listened to the dreams, the concepts, the plans of wanna-be business people. I’ve asked a lot of questions. Some want to buy a business, and some want to start something fantastic. Some want a franchise. I’ve negotiated purchases and I’ve negotiated leases for them (no thanks, anymore). A few years ago I was in a meeting with some folks that wanted to buy a small business. They had reasonable qualifications and plenty of enthusiasm. I asked them if they were familiar with the accounting software Quickbooks. I got a blank stare. I knew what would happen when they bought the business––and it did. I remember my first college Accounting class and the thick textbook’s cover––Accounting, The Basis For Business Decisions. You could glean the greatest value from that book by ripping the cover off and throwing the book in the trash––but keep the cover in front of you the rest of your life.
Another anecdote that stands out for me––Mammoth Monthly. I had sold George and Jean Shirk a condo a few years before and they came to me with their business plan for Mammoth Monthly. Both were immensely qualified in the “real” world to pull this off. And the breadth of their homework was like nothing I had ever seen––work by top-notch consultants, realistic projections, detailed distribution plans, etc. (Probably far greater research than for some of the recent real estate developer’s acquisitions in Mammoth.) George had written a year’s worth of stories before publishing the first issue. Amazing preparation. They “bootstrapped” much of their operation (which is one of the keys to success here in Mammoth). After a great start a few years ago, today they are no longer in business. What happened? A big part of it might be they just couldn’t take small town, culturally deprived living after so many years living in the Bay area. That happens too.
Another thing that happens is that people discover owning a business is a huge responsibility (who knew?). And in a resort town the recreational opportunities are always pulling like an addiction on an addict. It’s a big part of the balancing act. Some owners are better at it than others. Some lose control. I’ve learned to be satisfied with “cherry picking”––skiing or riding on the optimal days (like when you know there’s great wind blown and no crowd). Some have enough “scale” that they can hire people to do most of the work–(or they have enough partners to dilute the profits). And some are Mammoth Millionaires. But survival is often knowing when to put business before pleasure––and not being a workaholic/burnout either. It helps to really like what you do. And don’t forget the commute is often less than a couple of miles.
Over the years I’ve spoken to representatives of many national companies taking a peek at Mammoth. Ultimately, there isn’t sufficient demographics or “traffic counts” to meet their criteria. Call it the Trader Joes Effect. Simply, there are too many better places with a higher likelihood for success to warrant the investment of dollars and energy. They aren’t emotional. Lifestyle or “quality of life” has nothing to do with it. For them it’s all about the numbers. That factor is what ultimately breaks so many Mammoth businesses. You better understand it going in. And high expenses, especially rents, are the first killer. Oh, and the big fancy truck too.