Vlad Mazek – Vladville Blog

Mark Crall handed me a book yesterday with the following line: “If you don’t like change, you’re going to like irrelevance even less.”. I think at times in the IT industry we spend far too much time standing at the odds with the user, the partners and really everyone that has anything but our best interest and comfort at hand. Think of BOFH for a moment.

Meanwhile, the average IT user is getting much more competent and the “IT knowledge” is no longer some high end skill that can only be managed by some “we’re more like an attorney or doctor just for IT” as if anyone ever enjoys having a conversation with their attorney or doctor.

Yesterday I had a long conversation with Arnie Bellini from ConnectWise about the change we’re both seeing in the IT “industry” and the IT “world” because those two are converging rather quickly and if you’re an “attorney or doctor” style company, your days are numbered. The ugly thing is, transitioning to where most IT people need to be is going to be a painful process. I know.. because over the past 18 months we’ve worked on transitioning to that model and I “enjoyed” getting bitched out by one partner or another during that process. We lost some good people, we screwed some partners – but the difference is that we’re still going to be around 2-3 years from now while the people that stuck in their comfort zone (be it VAR or MSP or vendor or big box maker) are disappearing quickly and at a faster and faster rate. I know there is pain out there, and it’s not because of the economy or Obama or the Easter bunny. It’s because the fundamentals of this business have changed.

On Monday I pitched my new world order idea to the UK HTG group and it was a prelude to the invitation I made to all of you to come and work with OWN on a little advisory group. At the same time, I am out working with HTG, with Autotask, with ConnectWise, talking with a bunch of people that at the end of the day – we will be competing with head to head. And in our little world and small mindset of Vendor => Partner => End user, which is going to shrink very rapidly, the new way services are acquired and used, there is no big future. However, the advantage of the community and business models that are already in place, shows a lot of promise.

Drop me an email at vlad@vladville.com if you want to work with me (OWN). Just to give you an idea of how the conversation went:

Vlad: How many of you consider Google your competition? (no hands go up)
Vlad: Do you have any clients that use their solutions?
Chris: Yes.
Vlad: Wouldn’t you like their money for that service?
Chris: Yes!

Now, here is where things fall apart: Why did they go to Google/Yahoo/Microsoft in the first place? And then the sad realization: Your sales and support process as it is will not be profitable in this new world. However…. your top line business model can be ridiculously more profitable than it is.

So… interesting 2009/2010 lifecycle at OWN. If you want to be a part of trying to help us figure this out, vlad@vladville.com

One of the hardest things in business is making business decisions that are clearly against your principles and what you believe in, all for the sake of profits. But as we are seeing with each passing day, the focus is on survival and the bottom line, much less about who or what stands in the way. Getting into the state of mind that you’re the exact replica – except opposite – is tough, mentally anguishing and raises the feeling of uncertainty even with all the black and while justifying the decision.

The response to this is generally (depending on who you’re talking to): “Grow a pair of balls and quit your bitching!”

I’ve spent a large part of my professional career preaching that the CAPEX of any business needs to be limited, that liquidity (cash balance) is what matters the most and that the cleanest way to run a profitable business is to move as much of the fixed/variable costs to the operational expenses that are quickly written off and profit / growth is easy to judge. Not to mention the flexibility that brings to a business, lower risk, etc.

But you can go to college if you want to learn about business.

I’m here to bitch.

I’m here to bitch about the inconveniences that growing a business – aside from the only one I know how to run well – is causing me to re-evaluate how I view the world of leasing, etc. Namely, my tiny growing Central Florida presence now has to get a bigger office. And office space is expensive.

How expensive is it Vlad?

It’s more expensive than owning the actual property. Yes, the inconvenient to get to, park and otherwise physically alter office space with a Mexican running around picking up paperclips off the floor for $3.50 an hour is apparently worth $30/sq/ft + CAM. Except it’s not REALLY worth that much because half the damn building is empty, the businesses that used to be in them have no chance in hell of returning anytime soon.. but like a crooked mob they are all keeping their prices artificially fixed at a level so high that they can’t get any new business in there and lowering the rate would trigger a massive renegotiating effort by current tenants in a marketplace where very few people are starting businesses that require class A office space. Yep, we’re doomed. 

Witchcraft & Astrology Decision Making

So now I’m in a position where I have to make a long term investment in a commercial property in Orlando. Simple enough, call the bank and ask for cash.

Buying the place… not so easy. Why? Most of the deciding factors are complete vapor, made on no substantial data.

How big do of an office space do you think you’ll have 5 years from now? (how many employees will you have employed 5 years from now?)

What do you think the eventual resale value of the property will be, ten to thirty years from now?

Commercial property in that part of town will always keep on going up!

This is where things get completely idiotic. First, I am as sure of the property value of the building and land in Florida in year 2019 as I am sure that Orlando will be under Atlantic Ocean.

Second, this is a total emotional cluster@#%. You are driven to overbuy because it’s easy to pay a little more but virtually impossible to expand the building.

The Bottom Line

At $30/sq ft ($25/sq ft/month) for class A office space lease, it is far more expensive to lease than to buy a property at $250/sq ft. This means, barring an the uneventful sinking of Florida into either the gulf or ocean, that buying a property is like making a savings deposit of your rent check every month and the ability to cash it in at any point. When you calculate the inflation and contractual annual increases in rent that are guaranteed on a commercial lease, it makes even more sense to buy.

Looking at the new tax structure proposals is making this an even easier decision. If we pull dividends out of the company, or take huge salaries, we’re taking a 39% hit. However, if we’re holding something for more than 3 years (not 100% sure on how many years) then we’re only subject to long term capital gains of 22% or so.

So with all the math, smoke and mirrors.. how big of a place do I want and where do I want it? This is where it gets REALLY hilarious. Random people sit around the table and try to predict the future of where people will live, how they will work and what they’ll be willing to pay for. Yes ladies and gentleman, I am no longer the king of SPAM killers, I’m Walt F’n Disney building Epcot.

At this rate, I’m getting a $50,000 crackhouse in the middle of Paramore, Orlando so I can at least have an excuse…

Game… over.