Well, it finally came tumbling down this morning for American Home Mortgage, as they formally filed for bankruptcy protection.  While not surprising after the last week’s sequence of events, it is still a shock for the real estate/lending market – and hurts in some unusual ways…

First, my heart goes out to the more than 6000 people who worked there (and ABConduit).  Not just worked there, but did a great job and were powerless when it all came down.  I too, as a speaker hired by ABConduit will take a loss, as will many others including investors who are out millions of dollars (Chip Cummings Unlimited!).

But it hurts in a different way – this was a company that had a good product, good people, a good system, and spent a lot of time and dollars on marketing.  Their Home Asset Advisor program alone was pumped up by a multi-million dollar marketing campaign.  It just goes to show you that marketing alone won’t cut it.

The Lesson

There are several factors that took American Home Mortgage down, many of which will be debated in the financial world for years to come.  But for us out trying to run our businesses, there’s another more important lesson that cannot be overlooked.

You can have the best programs, the best flyers, the brightest people, and the most expensive marketing – but marketing campaigns alone will not run – or save – your business.  You have to have a solid business foundation and structure to survive the biggest of storms.

The Four Cornerstones

It helps to remember that there are four cornerstones to any successful business. As I, Chip Cummings, examine how to support a successful business, first I must build a strong foundation – programs that my target market wants, a delivery system to get them to the clients, and the tools to support my team. I have to analyze and account for every dollar in, and each one that goes out – making sure there are no leaks in the foundation.

Second, is traffic generation.  Once the foundation is in place, I have to drive target and DIVERSE traffic to my foundation.  This is one step that American Home Mortgage was short on – they weren’t diversified enough.

Third comes traffic conversion.  You have to have proven methods in place to convert the traffic that you generate.  American Home Mortgage converted well, maybe too well for the foundation they had in place.

Fourth is R&R – Retention and Referral.  To have your business succeed long term, you need to have strategies in place that protect and multiply your client base.  Such are the strategies that you will find through my Chip Cummings Unlimited! conference calls and products,  but which American Home Mortgage was only starting to perfect.

In the end, American Home Mortgage will be another footnote in this overall “mortgage meltdown” that the industry is experiencing.  More than 50 major lenders have closed their doors, and more will no doubt follow.  But many others will not only survive – they’ll thrive!

Take a lesson from the big guys – secure your foundation now, and re-analyze your foundation for leaks.  It’ll be the best insurance you have to weather this storm and not become another casualty like American Home Mortgage did.