How Mark Walker prepared First Preferred Mortgage Co. for the downturn Featured

8:00pm EDT September 25, 2010

Some might say it’s a wonder that Mark Walker has been so successful through the recession — or that he’s even around at all.

In late 2007, when banks began restricting the warehouse lines of credit that First Preferred Mortgage Co. depended on, Walker faced a crisis. The co-founder and CEO of the retail mortgage company and its wholesale division, Michigan Mutual Inc., knew he couldn’t operate if those disappeared.

But thanks to some strategic planning, Walker was prepared for the worst.

“You have to always plan for a downturn,” he says. “Try to keep enough money in the company for reserves for those times. Always be proactive for unfortunate economic or legislative things that could affect your company.”

By diversifying, Walker guided the Detroit-based company to 2009 revenue of $30 million and nearly $1 billion in loans. His 145-employee work force grew 14 percent from 2008 and 30 percent from the prior year, proving he not only survived the downturn. He thrived.

Smart Business spoke to Walker about planning before you panic.

Get outside help. I don’t think you can ever just stay the same. You have to be looking proactively at any opportunities that are out there and, at the same time, keep a 4,000-foot-level [view] of what’s going on with the company so you don’t get too enamored in the minutia of everyday details.

One of the things that we advocate is trying to get outside help, to get consultants. Our board of directors has outside people on it that are not part of the company, so you get an opinion from others from a different view. Companies that just get the view of the employees or the management team can sometimes not get a good overall view of what other things outsiders could say.

So we use consultants quite a bit. We try to have them take a look at what’s going on in the industry to get fresh opinions. We’re always asking what’s going on in Washington, what is Washington looking at? There’s so many changes going on in our industry today, from licensing issues to legislative issues and regulatory issues, so we’re always asking that question.

We get input from as many consultants (as) we can. We’re going to seminars to find out what’s going on in the industry, and we try to stay abreast of all that.

Play what-if. Then we come back and we just plan, ‘What happens if this happens? What are we going to do if this catastrophe happens? Where are we going to move our business? If we can’t sell to A and B and C players, who are we going to sell to?’ We have those conversations monthly and weekly, so we play those scenarios out all the time.

[Leaders] get bogged down in the everyday issues and it’s important that you break out of that from time to time. Look around. Look at what other companies are doing in your industry — or any industry — and just see how they’re managing. We’re not bashful about taking advice from other companies and putting those policies and procedures in place to make our company better.

We do a lot of role-playing at our executive meeting. We take outside consultants and we have them role-play with us and say, ‘What happens if you’re doing this?’ or, ‘Are you doing this properly?’

Diversify with alternatives. We’re always trying to plan ahead for any scenarios. We’re trying to keep the company as nimble as possible so we can move in any direction.

We do most of our selling to the larger banks, the Wells Fargos of the world or the Bank of Americas. There was a push a year or so ago of those people maybe getting out of the business of purchasing our loans. In light of that possibility, we got licensed to sell directly to the agencies [Freddie Mac, Fannie Mae, Ginnie Mae] so we had an alternate way of selling our business.

It’s important to always look at alternatives in case things change. Once you’re set for those alternatives, then you can change directions very quickly. If you’re stuck with just one or two ways of doing something and that goes away, a lot of times that puts you out of business.

If you have all your eggs in one basket, that’s a problem. If something changes and you’re not able to diversify, you’re in trouble. We’re always looking for ways to diversify our business. If somebody is selling a product and all their products go to Wal-Mart and Wal-Mart decides to stop selling that product, what is that company going to do? I’d want to be able to have other avenues. You always have to look for ways to diversify other avenues to place your product and be ready to move if the climate changes.

Don’t take your eye off your core focus, but just [keep] looking for opportunities to diversify your business in case things change.

Plan for the future. So let’s say one of our goals is to double our volume of sales in the next two years. We’ll break that right down to the minute detail: What has to happen in the IT department in order to make that happen? What has to happen in the accounting department to double our volume? Are we going to need more people? Are we going to need a different accounting system in place? What has to happen in each department, whether it’s adding more people, adding systems, procedures, whatever?

We have certain goals that each senior manager has to accomplish before the next monthly meeting. He would take his goals; he would then meet with his department [and] say, ‘Here’s what we have to accomplish in the next 30 days when I report back.’

We hold each other responsible for doing the big-picture items in addition to doing the day-to-day things. We also have a weekly meeting on this so we take an hour and a half to two hours every week to see how we’re doing on this.

We talk about it all the time. It’s in everything we do. At every meeting, it’s discussed, it’s reminded. You just have to plaster it everywhere.

How to reach: First Preferred Mortgage Co., (800) 700-5839 or www.firstpreferred.com