True Differentiation: How it impacts profit and dictates strategy when selling a home.

I realize the image below may look a little Howard Hughes-ish, but there is a method to my madness. And this sketch, if you’re thinking of selling your home, may have a profound and direct impact on your bottom-line profit. You’ll also want to share this with friends and family members that you care about too.

When I set out to study Warren Buffett, his investment philosophy, to find out what made him the world’s greatest investors, and, ultimately, how his methods could be applied to my clients’ home sale—I came stumbled upon a book called Differentiate or Die. This book changed my entire perspective on real estate. Jack Trout was the author. In the book he laid out the fundamental reasons why a business must differentiate from competitors, not just to be successful, but as the key ingredient to thrive in our current era of Killer Competition. Now, admittedly, from a business perspective, this is common sense. Every entrepreneur knows he must differentiate his business. As a mentor once told me, “Nobody needs two left shoes.” In business, if two businesses are the same, then one is dispensable.

But, this got me thinking.

Business, and the fight for new customers, really, is no different than real estate and the fight for home-buyers.

Your home is a home, yes, but analogously speaking, it is also product no different than Tide laundry detergent, where you are the owner of that product, no different than Proctor & Gamble is Tide. And see, when you look at your home through this lens—the profit from your home sale; its ability to compete in the marketplace—comes down to your ability to differentiate.

Is your home no different than the many other homes on the market? Is it just a commodity? Or is it different, and could it be judged superior?

In my sketch above, you’ll notice there are three scenarios. Each scenario describes the starting position of your product, your home, in relation to other competing homes on the market. Each of these scenarios can also be thought of as a race.

The more and better you differentiate your product, the faster you move forward toward higher profit. And of course, the less you differentiate the faster you move backwards toward lower profit. All the while the other homes on the market, in your neighborhood, in your price range, with similar square footage, amenities, etc., are competing in the same race.

In scenario #1 – you, your home, you start even with your competitors. You are neither ahead of behind. There is no discernable difference between your home and others. No apparent advantages and no apparent disadvantages.

In scenario #2 – you, your home, starts out ahead of the competition. This could be for a number reasons. But through some means of differentiation, you have the advantage of a 5-second head start. So as long as you run the race appropriately, and don’t trip over your feet or make a fundamental mistake, you have increased odds of winning.

In scenario #3 –you, your home, starts out at a notable disadvantage to the competition. You are now the underdog, not the frontrunner. And to win, and bank the most profit from your home sale, you’ll have to run the race of your life.

Part of my job then becomes, prior to creating the actual “race strategy,” is to determine where a clients’ home’s starting position is.

If you’re running the 800-meter dash, for example, someone running on the inside lanes—from a strategic standpoint—must run a very different race than the runner who runs in the outside lanes. Similarly, the runner with a known disadvantage, like Aimee Lee Mullins who I wrote about last month, who set multiple NCAA records despite having her lower legs amputated as a child, must run a very different race than the runner who doesn’t have that handicap.

Now you would think that every home, given the three scenarios above, either a) starts out even, b) ahead or c) behind the competition, right? Wrong. There is actually a 4th possible scenario.

In scenario #4 – you, your home, starts out ahead of the competition but…only “in your mind.” For obvious reasons, this is dangerous.

When a homeowner is blinded to their true starting position in relation to other competing homes on the market; due to pride of ownership, ego, arrogance, lack of understanding of how true differentiation works, how value is created, etc., almost always, in my experience, they sabotage their chance for maximum profit.

There is, by the way, nothing wrong with starting from behind. The fabled underdog story exists for this reason, to upset the odds-makers. But the underdog, to win, must realize he is the underdog and, through strategy, offset his handicap.

David versus Goliath: An apparent mismatch, but in this fight Goliath’s size is no match for a small well-placed stone, shot from a distance, out of reach of Goliath, from David’s high-tension slingshot. Bing! One stone upside the head, and Goliath is out.

This is why, in my book, The Warren Buffett Approach to Sell Real Estate: How to protect yourself from Real Estate Greed and bank an extra $30K in profit by taking a Value-Driven Approach, I talk about the importance of getting an accurate and comprehensive diagnosis—for this very reason—to identify your homes’ true starting point.

The last scenario in the world you ever want to participate in is scenario #4.

One interesting tidbit too, about how true differentiation works, when done correctly and effective, you not only control whether your home moves forward or backward “in the race” toward higher or lower profit, you also control whether other competing homes (with yours) move forward or backward too.

I suppose its kind of like cheating, that is tying a rope around your competitor, and anchoring him to a tree before the start of the race, but hey – that other homeowner should have hired someone who understands true differentiation, then they wouldn’t have been in that position, chained to a lower potential profit.

The biggest secret, though, for maximum profit, you must know your “product’s” starting point in relation to its competitors. Without this, nothing else really matters, as the details are fiction and hypothetical, and not reality.

But with reality, we can get to true strategy.

If it turns out that we’re the underdog, so be it, we’ll run the race of the underdog and in accord to the facts, to strive for the upset.

For a more in-depth discussion on this topic, go to: www.FreeBook4cdaCharity.com. There you can request a FREE copy of my forthcoming book “The Warren Buffett Approach To Sell Real Estate: How to protect yourself from Real Estate Greed & bank an extra $30K in profit by taking a Value-Driven Approach.