5 Business-Building Lessons Re-Learned in Nicaragua

I just returned from my monthly business trip to Nicaragua, where my partners and I are developing 3,000 acres of immensely beautiful land on the Pacific Ocean.

It’s been a seven-year project. When we first invested there, our friends and colleagues thought we were crazy. “It’s dangerous,” they warned us. “Isn’t there a civil war going on?”

The civil war had long ago ceased and the country was rebounding. The Nicaraguan culture is rich and its people are wonderful. With property prices ridiculously low, we knew it was the right time to buy.

And buy we did: 1,700 acres for less than a million dollars. A couple of years later, we added another 1,000 acres for thee times the price, and we are in the process of finalizing another 300.

Buying land, we discovered, was the cheapest part of this sort of project. Bringing electricity, roads, communications, and water to the homesites – that’s where the real expense comes in. So far, our total investment is more than $12 million. In other words, our infrastructure costs were almost four times higher than our land costs.

Keep that in mind if you ever consider starting a development of your own, or even buying a lot from a developer. If the property isn’t already fully serviced with good roads, reliable electricity, working phones, Internet connectivity, and plenty of potable water, its value may be much less than it appears to be.

Boy, were we naive in the beginning! As publishers, our experience in developing and selling land was near zero. I knew something about local real estate investing from my Delray Beach ventures. But what did I know about digging wells, putting in sewage systems, and negotiating deals with homeowner associations?

To make things worse, we decided to build a little hotel. That became a little resort – and now the little resort is becoming a medium-sized resort. Yet, we don’t know the first thing about the hotel and entertainment business!

But we are doing it.

I was in Nicaragua for a week this time. The first two days were spent listening to complaints from customers and working with our management staff to make sure the problems were fixed well and permanently.

Midway through the week, I gave a speech – in Spanish, no less – to the president of Nicaragua, members of his cabinet, business VIPs, and the press. There were about 240 people in the room – all listening carefully for the Gringo to mess up their language.

I had written my speech in English and practiced the translation with a Spanish teacher beforehand. After a shot of tequila to calm my nerves, I felt pretty good about meeting the president and giving my speech … until I was handed a document in Spanish that indicated all the people I had to address before beginning my speech.

The introduction was longer than my speech! And I had no time to practice pronunciation. So I approached the lectern with what my partner described as a “very frightened face.” I pushed through the introduction as well as I could and then, when it came time to do the speech itself, I felt like I was coasting.

Maybe it was the tequila. Maybe it was the practice. In either case, the performance was better than I expected. I fumbled only one word: “estadounidense.” Otherwise, I hit pretty much every syllable as instructed. When I sat down afterward, the assistant minister of tourism, a woman who had seemed austere when I met her, leaned over, patted me on the arm, and said, “You speak Spanish better than I do.”

Of course, my English-speaking friends didn’t give me such easy marks. Julia Guth, the Oxford Club director, said, “I didn’t realize you could speak Spanish with an Italian accent.” Bill Bonner acknowledged that I “didn’t do nearly as badly” as he expected.

But the telemedia, whatever they thought about my pronunciation, decided I was perfect for the evening news. When I got back to the development the next day, many of the employees there told me they had seen me on national TV. Maybe the TV directors thought it would be amusing to show an American speaking Spanish with an Italian accent.

On Saturday, at the end of my stay, we inaugurated the new stables and snack bar and a new casita development. About 250 people showed up, and everyone had a grand old time – “un buen bacanal.”

I left on Sunday feeling pretty good about all that we had accomplished and pretty charged up about doing more.

If you’d like to see the ranch, you can make accommodations by calling Michelle de Filippis at Agora Travel (888-671-8247). When you get down there, drive around and you’ll see the beginning of a really impressive seaside resort that is comprised of almost 300 lots, 40 finished homes, a small hotel (with an office that provides property and rental management to homeowners), a large stable housing eight horses, a nature trail, tennis courts, basketball, baseball, and soccer fields, two restaurants, five world-class beaches, and much more.

Every time I go down there, I realize that the experience of getting into this business has made me a better businessman by helping me re-learn basic business principles in a new way. For example:

1. Sometimes, you can break (or bend) a fundamental rule and still be successful.

I have always said that you should invest only in what you know. Well, when we began this development eight years ago, we didn’t know the first thing about developing and selling offshore real estate. And yet we have already generated more than $10 million from this project, repaid our investors handsomely, and have left untouched the great majority of the land. That means there’s still plenty of profit to be made.

How did we do it? Although we didn’t know how to make a hotel work or create a community, we did know how to sell ideas. And by treating the project as an idea, we were able to do the first and most important thing: establish a profitable sales structure. The rest, we eventually figured out.

2. If you don’t know what you are doing, be prepared to make mistakes.

Mistakes can be costly. Lucky for us, we had the cash and the stubbornness to survive our mistakes, make improvements, and keep on selling. That strategy seems to be working.

3. Replace weak leaders with strong ones.

When we first began, we hired some local people to fill some important positions. They didn’t have the right kind of management experience, and almost destroyed the project. Then, about three years ago, we hired a very hard-working American to take over. She was great. Her changes made a world of difference. Recently, we appointed one of our partners to head up the development aspects of the project, and he too is doing a great job. We have one or two key positions that are still managed by “okay” people. When we get them up to “great” (or find “great” replacements), then everything will be just the way we want it.

Your business is only as good as your best person. If he’s not great, your business never will be.

4. Every complicated business needs an organizational structure and a chain of command.

Until recently, we were operating in an informal way, with lots of people doing lots of things. That kind of approach can work in the beginning of a business, when there is one boss and a handful of lieutenants. But when the business gets larger (say, 50 employees or more), you need to assign specific responsibilities to key people.

That’s what we’ve been doing: designating areas of responsibility, naming managers, and giving them authority to make their own decisions. This feels risky – letting go of authority – but it’s necessary if you want to grow.

A tool that helps is an organizational chart. When your business is growing, your employees need to understand how their jobs relate to the overall purpose of the business. They also need to understand who their bosses are and to whom their bosses report. Publishing an organizational chart makes decisions easier for everyone.

5. Respect the chain of command.

Frustrated by some lack of follow-up, my partner and I began going past a key manager to give his managers direct orders. Although some of the work we wanted got done faster that way, the system itself eventually started falling apart and chaos nearly erupted. We went back to funneling our comments through the right person. And even though we believe he has weaknesses, we are seeing better results.

[Ed. Note.  Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]