Saturday, February 21, 2009

The Hole Doesnt Pull!

Its a riddle of sorts :)

First off, it is one of those grammatically perfectly correct sentences that has absolutely no meaning to the rational mind at all!
There are of course an infinite supply of these sorts of sentences but they are rather difficult for most of us to construct since they defy our logical minds and the sets of associations attached to every word... (abstractions).
I find these types of sentence quite amusing when they pop up :)


This particular one however was given as an honest and useful description of a problem with a piece of equipment!
The situation was that I was sitting having a coffee in my mechanic friend Indy´s room at the end of the day. His phone rang, and it was a local farmer with a problem and this was the description of the problem! Yes, the actual conversation was in Spanish but its an accurate translation and it makes just as little sense in Spanish.
So how do you respond to this type of a problem? What to do? - Well, this didn´t phase Indy for more than a couple of seconds.... "Well, you better bring it in then and we can take a look".
Good answer.... Clearly the "hole should pull" or the guy would not have called :))

So, the phone call ended and the story was shared and I was left with a bit more of a riddle than Indy for a few minutes - like you all are now.






See, Indy knew what the piece of equipment was, and I didnt (yet) and it adds just a little more information that can solve the riddle.....

The piece of equipment is a water pump!


Clearly the hole should "pull" and if it doesnt then it needs to be fixed :)))))

Furious!

This post is just to share my current "Financial Struggles" with my Bank!
I hope it will be amusing to you all, although I have to say its getting a bit tiresome for me :)




Ron:

You suggested you would have an update for me on Friday.
Friday came and went and again I heard nothing from you.
It is now Monday and again, I have no information from you or any other Bank representative.

My understanding of professional behavior is that when you say you will do something then you do it (or at the very least advise in a timely manner that you will not, why not, and when you will).
My recent experience with you and my Bank has been the exact opposite!!!

Whats going on here????


Mea:
This is a direct instruction for you:
Please either directly forward this email thread to the branch manager (and copy me) or provide me with their email so that I may do it personally. THIS IS URGENT!

To any involved Bank Representative:
I am about a hairs breadth from booking a return flight to come back to Canada to sort this out...which will be EXTREMELY DISAPPOINTING for me!
If I have to do it, I will, and it will be with the express intent of canceling all my financial business with this Bank and moving to an alternate institution!!
I sincerely hope that I do not need to take this step. I have had years of excellent service from this Bank and am at a loss to understand what is happening at present.


History:
I initially contacted a Mortgage Manager in November 2008 to initiate the renewal of my Mortgage and to set up a secured LOC with my home equity. I was told at that time that this would be no problem - and I expected it to be so since I have had a positive client experience working with this Bank in the past.
I then met again in mid-December and all the papers were signed and I was told that all the details would trickle through and be done before New year.
In mid-January I was preparing to leave for Guatemala and I noticed that the LOC had not yet shown up on my electronic banking but had been advised of no problems by the Bank.
I have since then been trying to get the issue resolved (Though I have received absolutely no explanation of any sort as to what is happening!) - This email thread is a record of my interactions with Bank Representatives.
It is now mid-February and as far as I can tell, still nothing has happened with my LOC.
I am in Guatemalan (San Pedro La Laguna in the mountains to be exact) and am in SERIOUS need of funds from the LOC.
At no stage have I been advised volutarily by the Bank that there is a problem with my LOC application or that it would take longer than I had originally been advised.


My current situation is that Im rappidly running out of funds, time, patients, and the desire to continue to work with the Bank!


One last try to get a win/win resolution before we move to the lose/lose option :)

sadly and sincerely

Grant Else







I am back in Canada now and have a message into the branch already to get this solved. I should have an update tomorrow.


RON
Manager, Residential Mortgages
------------

From: Grant Else [mailto:grant_else@hotmail.com]
Sent: Thursday, February 19, 2009 9:06 AM

Ron

Im sure you are busy so I´ll keep it short...

Its been a week again and Id like to know how things are progressing with my LOC.
I have heard absolutely nothing from Jaslyn whom you had indicated would be contacting me (or from any other Bank representative).
As indicated in earlier emails, my liquidity is really stretched right now, so Im really hoping to hear a definitive date as to when funds will be available.

Can you give me an update please.
I will be checking email twice daily for the next week.


Sincerely

Grant




From: ron
To: grant_else@hotmail.com
Date: Thu, 12 Feb 2009 18:49:47 -0500
Subject: Re: Financing updates - Else

Will advise Jaslyn at branch to expedite and process to your acctt

RON
Manager, Residential Mortgages
------------------------



From: Grant Else
Sent: Wed Feb 11 16:38:42 2009
Subject: RE: Financing updates - Else

Ron

Thanks very much for the response.
I understand that you are on the road and comms are limited.

Im sorry to have felt the need to push hard for an immediate response but I really am running out of money here and I really do need to deal with it very quickly.
I certainly appreciate your efforts to secure me a good rate for the LOC, but I also need to hear about the progress so I know what options I have to deal with my own "liquidity"...

Question:
Will this be sorted out within two weeks (GUARANTEED) because I have no other options here?
I will want to transfer $10K to my chequing account immediately.
Please advise...

cheers

Grant



From: ron
To: grant_else@hotmail.com
Date: Wed, 11 Feb 2009 12:34:46 -0500
Subject: Re: Financing updates - Else

I am currently away from the country on a work event, but 0wasv advised yesterday that the branch had the documents and the manahger was aware iof the situation. Jaslyn was going to be in contact with you.

While our rates for HeLOC's are at prime plus 1.5%, we have been able to get an exceptio from head office to keep yours at prime.

I'll follow up with the brancj oiver the next day (once we stop going from plane to plane)


RON
Manager, Residential Mortgages
------------------------


From: Grant Else
Cc: Mea
Sent: Wed Feb 11 12:22:35 2009
Subject: RE: Financing updates - Else

Ron

This is not an email I wanted to send!
I have coppied Mea at the Hastings branch (who manages some of my money), and I have copied my friend Christine Wong whom I have provided with a Power of Attorney in Vancouver.

It has been nearly two weeks since you last emailed me regarding the status of my line of credit.
You specifically said you would email me within a week but I have heard NOTHING from you!
I am here in Guatemala and I am VERY rapidly running out of available funds (since I am trying to start a small business at present).
I can no longer accept that I have been given no information and no apparent progress in over ten days since our last communication - which I also had to copy Mea on to get a response from you...I find this extremely disapointing.

Can you suggest a way that I can get the SERVICE THAT I NEED! and continue to work with you??

If I do not hear DEFINITIVE action on your part within 48 hours, I will ask Mea to talk to the branch manager at your office and request an alternate contact to work with.

I truely hope that this matter can be resolved rappidly and that I do not have to take further steps.

Sincerely

Grant Else



From: ron
To: grant_else@hotmail.com;
Date: Fri, 30 Jan 2009 15:14:51 -0500
Subject: RE: Financing updates - Else



Grant, my apologies for the delay in getting back to you.
I've had someone looking after some of my other work, and will follow up on the status.
I'll let you know early next week.
RON
Manager, Residential Mortgages
------------------------------

From: Grant Else [mailto:grant_else@hotmail.com]
Sent: Friday, January 30, 2009 11:39 AM
To: Mea
Cc: Ronald
Subject: FW: Financing updates - Else

Mea

Thanks for your response to my question about the line of credit.

I have sent two emails (20th and 27th Jan) to Ron requesting further information on this issue, but have received no response at all (not even an out of office reply). This seems irregular to me.
I have also copied Ron on this email.

Would it be possible for you to please try to contact him either directly or through the management structure there at the Bank since my options from here in Guatemala are limited.

Please advise me if you can help me with this.

cheers

Grant



From: grant_else@hotmail.com
To: ron.
Subject: RE: Financing updates - Else
Date: Tue, 27 Jan 2009 14:18:40 -0800


Ron

Sorry to bug you again, but I need some feedback on this to know if I should be doing something.
I am expecting that I will want to draw $10K within a month to use in Guatemala ) it costs a bomb to keep drawing cash on a credit card...)

please advise.

cheers

Grant



From: grant_else@hotmail.com
To: ron.
Subject: RE: Financing updates - Else
Date: Tue, 20 Jan 2009 15:18:39 -0800


Ron

I had assumed that we had completed everything that we needed to, but I was just going over my finance stuff yesterday before I start my foreign adventures, and I couldnt see where the "available credit" was in my mortgage/line of credit.
I have not yet seen any specific "line of credit" (for $xxxxxx) show up on my Bank online site, and I am leaving for Guatemala tonight.
I contacted Mea at the branch about this last night and she informs me that it appears that it is still pending...
Could you please advise me what is going on?
If there is more paperwork to sign then my friend Janine (who also has a power of attorney from me) will have to do it.

Hope things are simpler than that, but not much else I can do at this point.

cheers

Grant



From: ron.
To: grant_else@hotmail.com
Date: Fri, 28 Nov 2008 16:28:18 -0500
Subject: RE: Financing updates - Else



The final approval of your mortgage will be happening later on today, and we have ordered the legal package to come to the branch for you to sign. Once it has been received, I will give you a call.
We were complicated on this because of the nature of the mortgage you had on the property, and some requirements from the insurers regarding dealing with your style of mortgage at the time of maturity....it's been straightened out now, and I look forward to finalizing everything with you shortly.
RON
Manager, Residential Mortgages

From: Ron
Sent: Thursday, November 27, 2008 6:44 AM
To: 'Grant Else'
Subject: RE: Financing updates - Else

I'm at a conference in Florida right now, but will follow up from here; I was told that the file would be ready, and will ensure that we make this work for you.
RON
Manager, Residential Mortgages

From: Grant Else [mailto:grant_else@hotmail.com]
Sent: Wednesday, November 26, 2008 1:15 PM
To: Ron
Subject: RE: Financing updates - Else

Ron

How are we going on the Mortgage details?
I was hoping to get it all signed off this week.

Please let me know when that will be possible.

cheers

Grant



From: ron.
To: grant_else@hotmail.com
Date: Thu, 13 Nov 2008 18:26:46 -0500
Subject: Re: Financing updates - Else

Just waiting for the approval certificates now....hope to have them by tomorrow afternoon.

RON
Manager, Residential Mortgages



From: Grant Else
To: Ron
Sent: Thu Nov 13 18:25:13 2008
Subject: RE: Financing updates - Else

Ron

How are we going with those mortgage details?
Just thought Id check in.

cheers

Grant



From: ron.
To: grant_else@hotmail.com
Date: Wed, 5 Nov 2008 14:21:45 -0500
Subject: Financing updates - Else


It was a pleasure to discuss various mortgage options with you.
Based on our conversation, I am confident that we can assist you
with your financing requirements, and design a mortgage package that will
truly meet your individual needs, while still maximizing any benefits
available from government programs or incentives.

In order to proceed further with your financing request, I will need the
following information from you to get started:

1. A signed credit authorization form located in the attachments to this e-mail.
This document does NOT need to be witnessed. It is a generic
form, used for a variety of lending products. In this case, it
would pertain only to your mortgage application. By signing the
document, you allow me to start the qualification process for
you, and to obtain the various reports I need to obtain in order
to provide you with a written approval certificate.

2. some proofs of income --- current paystubs would be best, together
with at least 2 years' T4's and/or Notice of Assessments from your
Income Tax Returns.

Also enclosed is a document which does NOT have to be returned; it outlines
our Privacy Policy with respect to your application for financing. It is for
information purposes only at this point. You will receive a formal copy of
this document from the branch when you sign your committment letters later
on in the process.

With over 20 years of experience in arranging mortgages on all sorts of
properties throughout Canada, I am certain that I will be able to assist
you in whatever financing you require, and would appreciate the
opportunity to discuss these matters with each of you further.

Please take a moment to review the documentation, and fax the information
back to me at your earliest convenience.If there are any other questions,
please do not hesitate to contact me at any time. I look forward to
assisting you with the purchase of these properties.

Sincerely,


Ron

Manager, Residential Mortgages

Friday, February 20, 2009

Local Fauna

An aspect of living here that I dont think Ive mentioned much about is the local wildlife....Not so much the big stuff you see on the roads and in the streets but rather the smaller and "very local" critters that you find in your room!
My room is quite nice and is in what would easily be classified as a regular back yard of a home even in Vancouver....grass, flower beds and fruit trees.
The room is clean and neat and dry and has good quality doors and windows. Its made of concrete block and stucco and there are no places for critters to hide or things for them to eat.
However, it is the tropics here and there are plenty of critters out and about in the night, and since my room is on the ground floor in a garden, and there are no screens on the windows, things get in!
So far Ive had to remove one gecko from the room, about a half a dozen small to medium sized scorpions (4cm - 8cm) and many brown beetles. There are also the usual supply of flies and some mosquitoes (though not the malarial kind up here in the mountains) but they generally let themselves in and out and I dont have to do any work :)
The best solution for the flying critters is to not leave the light on at night since it attracts them. This seems to work very well. However, the crawly types are more of a problem since they dont seek the light and they like to wriggle through very small cracks. The scorpions are the biggest challenge and despite checking the walls and floor every time I come into the room, I managed to get stung by a little one in the middle of the night in my bed!!
This is one of the aspects of a Hotel here that I would change and bring up to "developed world" standards.... I´d reduce the wildlife count in the rooms (sealing doors and screens on all widows should do it)!

I think this would also really cut down on my costs of running a hotel.... Id not have to invest nearly as much capital in livestock!... less money "on the hoof" so to speak. Im sure supplying all those critters for the rooms and the garden must cost a fortune, so if the place I get only has potted plants on the decks and no garden; and if I dont want the critters in the rooms... well its bound to save me a fortune!

So thats my plan then.... no livestock :))))))))

Thursday, February 19, 2009

The Project of the Day

What do I do with my self these days?

Well, this is what the start of today looked like:
Woke up at about 6am and stayed in bed till about 7am - just laying there, not thinking of much cos there aint much to bother thinking about.
Got up and got dressed. Went outside and up onto the roof where I sat in the warm sun listening to the sounds of a small Guatemalan morning and had a meditate for half an hour or so.
Then I went back down, got the motorbike keys, and started the three bikes up to warm up the engines. Then I drive the bikes one by one (they really dont heard that well!) out through the narrow dirt lanes between the houses to park them for the day in front of a strategically located local minimarket type shop. The people there watch the bikes and give me a phone call if people are interested (I give them 10% if we get a client) . This is a good arangement for me since I dont have to spend my whole day with the bikes.

Once thats done, I walk into town (200m) and find something for breakfast...its usually either a pineapple or cantelope from the market or scrambled eggs and a cup of tea at a little restaurant with a deck that overlooks the lake. But today I settle for a cantelope and strawberry milkshake from the juice sellers on the side of the street half way up the hill.

Once thats done, I start working on "the project of the day" and today that means getting the materials to make a simple leather sachel so that I can carry around the few things that I need to have with me during the day when Im wearing clothing with minimal pockets.
So up into the town I go and wind my way to where the leather shop is (my friends told me where it was). There is a round of introductions and I explain what I want in broken Spanish - this takes a bit of effort and as usual there are several rounds of minor confusion and entertainment, but the message gets through.

What I want is two or three square feet of leather sheet, about three feet of leather strap, and some thin leather thonging to stich it all together with.
In Canada it would probably take me about ten minutes to get this explaind and the stuff in my hand and paid for. However here, with the way the locals do things, it takes well over an hour to make all this happen. The little old guy does not have a single straight edge in the whole little shop to draw a straight line with. Likewise the cutting is done by hand with the saddest little knife I have seen in a long time. Its bent and worn and takes quite a bit of muscle to plow through the leather hide - but it does the job one more time for the little leather man :)

Finally my pile of pieces is assembled and then its time to figure out the cost... The little man has a calculator!... The batteries work!....he scribbles some numbers on a list on a piece of paper and then pushes buttons on the calculator...I watch...I wait...the little man runs the numbers through a second time...I notice while hes doing it that he is using the multiply button instead of the add button and never using the equals.... the little man has that confused look again... I offer to help, and he allows me to use the calculator which I do very slowly as he watches and nods... the numbers do what I think they should do and a result pops up. Then I do it all again to be sure...just as slowly :)
So, I think we are about done but the little man isnt happy, Apparently the final number should definitely be more... (blue eye tax maybe?) ... turns out that the little list of numbers is not really indicative of what I should pay...or something like that. The little man struggles internally for a few moments and comes up with a number its about five times the size of the number from the added up list...what can I do... I agree and pay up...there are smiles and shakes of hands... I take my pile of stuff and head off back through the streets toward home.

The total cost is about $40 which seems high to me for here, but it would I think cost me twice as much back in Canada. Was I ripped off? - I honestly dont know!... Do I begrudge the little man the money? - not really... Will I have to recut every piece of leather that he cut to have straight lines that fit together when I stich it up? -Yep :).... I guess that gives me something else to do with the day :))... but then the phone rings and I manage to figure out in rough Spanish that I think I have customers waiting at the bikes :))))


- This will be my third rental in just over a week.....hmmmm aint gonna make millions this way but I might make a living if Im lucky :)))))

Wednesday, February 11, 2009

How Much Rope Did I Give Myself??

This is a big post... but Ive been thinking about it lots :)))

I have been looking for a nice place to rent here long term, and the place at the top of my list (just waiting for a chance to rent it) looks like it has way more potential than is being utilized...
While Ive been waiting, It’s got me thinking…
...The theory is to buy the property on the shores of lake Atitlan, and convert it into a motorbike friendly hostel/hotel.









PROS and CONS
Positive Aspects:
1) It is located near the end of the main paved street that runs through San Pedro on the waterfront (the tourist strip). This is an excellent business location without being too central and thus noisy or too remote and thus unpopular and undesirable for foot access to other tourist facilities.
2) It is already developed with a large, six bedroom, two bathroom house. The house is of simple concrete block/stucco construction and appears basically sound. It is however also quite run down (20+ years old at a guess) and is currently being rented out to groups of young tourists at a cheap rate.
3) The house is currently generating 3000Q per month in very basic rent. As a hotel, the house could start business immediately with virtually no further investment other than cleaning and probably some painting. (The current rent would be sufficient income to pay for the loan to purchase the place at a 5% interest rate)
4) The house appears suitable for easy additions to add up to four or even six more rooms on the existing deck space. It could be done in stages with controlled costs (would greatly increase revenue generation possibilities).
5) The land is steep and the house has been built in three layers with very large uncovered deck areas facing over 180degree views of the lake. The potential here is wonderful. The decks can all be extended forward and a fourth layer of rooms could also be added if desired.
6) The property is on the waterfront and in the past had a dock. A small spit of rocks is all that is left of it now but with relatively little effort, a new wooden dock could be built for swimming from or boat/kayak activities.
7) The kitchen and common area in the house is large and could probably be used as a cooking facility for a small restaurant/dining area (either guests cook and share the space, or staff use the space for restaurant cooking).
8) In the short term, meals are easily supplied to guests (if food services are needed at all) since there is a restaurant directly opposite the road and Im sure a deal could be worked out to use their menu/kitchen services and only waiting/services need be provided in the new hotel.
9) The road frontage of the property is simply a concrete wall (back wall of the house. The property is fully fenced and quite secure. The existing single steel gate access is right onto the road and is too narrow for easy motorbike entry but this is easily widened and motorbikes can be parked and stored on one section of the main deck.
10) Access to San Pedro from the main PanAmerican highway is fully paved but is not well known to travelers. The only other road access to the town is a very poor quality dirt road to neighboring Santiago (thus no “through” route). However, The main highway through Guatemala is currently being given massive rebuilding and is well on the way to becoming a four lane divided highway of developed world standards. Likewise, the dirt road to Santiago is currently being replaced by a new high quality paved road. In short, the road access and infrastructure for the entire area are mid-way through a major redevelopment and I believe this will lead to a significant increase in tourism and property values in the next five years.
11) In the short term, the building would provide an excellent base for the small motorbike rental business that I am committed to starting. In the longer term, the hotel is again an excellent source of clients for the bike rental business.
12) The location in Guatemala is perfect for trans-America motorbike tourists. It is nominally half way between the North and South extremes of the two continents. There are no existing businesses that cater to this market in the area (I have checked this on the most popular moto-touring websites) and I am sure it would be a very welcome rest stop for riders traveling in either direction. It would be easy to get a web presence and thus rider awareness of the business with a couple of postings on the relevant websites.

Negative Aspects:
The property has the following negative features:
1) The building is a house and was not designed as a hotel. It was also designed and built about twenty years ago and the services installed were very limited at the time. As a result, substantial work would need to be performed to bring the plumbing and electrical services up to current standards. It is also likely impossible to upgrade the old rooms to each have a private bathroom. New rooms could have this feature though.
2) There are legal limitations to foreigners purchasing land in Guatemala as well as for running a hospitality business. There are also different types of land titles that I do not know much about. I will need to locate a trustworthy local lawyer to look into this. I will also need to start a “permanent residency” application as soon as possible. (Actually it turns out that if I am prepared to bring in $US50K – which I would have to buy the property anyway - then the whole residency/business license thing gets “facilitated” by the Guatemalan government).
3) To buy the property will cost in the order of $CDN100,000. I can get this money from my secured line of credit but it will immediately start accruing interest in Canadian dollars (yet it could only earn money in Guatemalan Q) and once committed to the property in Guatemala, it will be very difficult to get it out of the property and the country if I wanted to abandon the project. It is also possible that once I declare my interest in the purchase that the owner may just raise the price out of my reach.
4) It will take time and effort to build the necessary awareness/reputation to bring in money from the enterprise. I would be effectively committing myself to the project for three years or so – Is running a hotel what I really want to do? – Could be good but could also be bad.
5) On one side of the property the adjacent lot is a small coffee plantation that is undeveloped but very nice and green as it is – I don’t think it is likely to be developed soon. On the other side, the block has foundations built for a large structure that if completed would restrict the views. It appears to have been abandoned temporarily but this could easily change. It would be very nice to also purchase one or other of these blocks of land but it is certainly out of my financial reach.
6) The water and sewerage services for the property (and for that matter for every town on the lake) start and end in the lake! This is bad for the lake and bad for the people and clients. Substantial work would be required to filter/purify the property water supply, as well as to create an effective and environmentally friendly waste water system. – This would be a long term project and not possible in the first couple of years.
7) I have yet to actually set foot on the property as it is currently being rented by other people. Therefore, I do not really know how suitable the house is for conversion to a hotel or how much work is needed to upgrade the plumbing and electrical services and I thus could have made some incorrect assumptions – Clearly I need to inspect the property before going too far down the purchase path – should happen in a week or so.


PROFIT and LOSS

Well, Im not actually aiming for the hotel idea to make me lots of money. I really am happy just subsisting here. That said, I simply do not have the resources to be able to try to start this sort of a venture and invest this anount of capital and then have it run at a loss...
So, the obvious question is would this business make enough money to pay for the loan required to make it happen?? My “gut instinct” is that yes, it would be able to do this when up and running…quite easily I think! (perhaps a year after starting the business). Trying to justify that “gut instinct” is much harder since there are so many unknowns…and I actually have no relevant experience to justify why my “gut” has this “instinct” in the first place.

Capital Costs
Guess that property can be obtained for $100K CDN
Guess that associated costs for purchase, residency and business license are about $10K – $15K
Assume that improvements in the first two to three years will cost about $20K - $30K
So, total investment of about $CDN 150K.

Customers and Competition?
Hmmm, well, very hard to assess (at least for me) but…. Rooms here in San Pedro rent out between about 35Q per night for very basic rooms with no view, no bathroom, no TV etc. The other end of the scale is “open” but a very nice room with view, bathroom, and TV (but no AC) is 80-100Q per night. Prices come down a bit for stays of a week or a month. I am currently staying in a mid range room for 50Q per night and I would imagine that the rooms on the property in question (in their current state) would be roughly equivalent (no private bathrooms but with decks and views).
There are, as expected, already a broad range of accommodation options available in San Pedro so, would one more hotel be patronized or not?
The place where I am staying is at present regularly turning away people who want to stay simply because they are full, but this is the “high” season.
I am sure the popularity of the lake, and thus the town of San Pedro is increasing – I have noticed at least a half dozen new building projects (in the tourist area) as well as 3-4 new tourist based business frontages, and the civic infrastructure is also being actively improved (streets repaved etc…) since I was here less than a year ago.
I am sure there are NO equivalent “motorbike friendly” hotels in the country let alone the town (though there are of course places that can provide the same services).
There are only 5-6 other hotels in the town with roughly equivalent features and location and half of them are currently adding rooms.
I am sure there is a regular “supply” of motorbike tourers from both the transAmerica route and from the local capital city (the lake makes a very nice weekend trip!). I see one or two different touring bikes here each week – and that’s just the ones I can see that are not parked out of sight or on the many streets that I don’t walk.
Of course, rooms can be rented to anybody, not just those with motorbikes – The motorbike slant is aimed at capturing a specific market segment that is not currently catered to.

Operating Costs
Gas, Electricity, Internet, Business License (“wild assed” guess at 30-50Q per day)
Single cleaning staff (20 - 30Q per day when occupied – 2-4 hours work?)

Usage Rate???
Well, in its current state there are 6 rooms and if I live there then there are 5 that can be rented out at about 40-50Q per night.
If I guess at say 3 rooms rented out for 75% of the time, we get average income of 110Q per day.
Average operating costs look like 50Q-80Q per day. This leaves only about 40Q-60Q per day of income to cover loan payments.

If I use a basic $110K model (This is the house as is with 6 rooms only), the loan costs 5%, that’s $5500 per year, which is 31000Q per year. Which is 2600Q per month or 87Q per day of interest.
If I use the $150K model (This is the improved house and increases available rooms to 10), the loan costs 5%, that’s $7500 per year, which is 42000Q per year. Which is 3500Q per month or 115Q per day of interest.
So, if I use the $110K model, and if I stayed in the house and didn’t contribute to the rental income, then I’d likely have to keep the place more or less fully occupied to make it work (not sure I want to live like that!)
I think I would want to live in the house (for at least the first year or two, so this pushes me toward the $150K model which adds more rooms and better services. This model requires a lower ratio of occupied rooms (60% occupancy) to cover costs but that lower percentage is in fact one extra person than the basic model requires… Not sure which is easier to achieve – larger number of people needed in better quality rooms, or fewer people in lower quality rooms?

Current Outlook
I could of course be way out on any or all of my assumptions!!!
There are so many missing details here that its not funny!
I guess the biggest concern I currently have is “How low is the low season” since Im sure that even the basic model is financially viable in the current high season… I shall have to ask the locals some more questions and spend some more time locking down details…

Probably the best approach here is to rent the place for a few months and get a good “up close and personal” view of what the place is like to live in, and what it would take to do the upgrades I envisage. I can try sub-letting rooms to other tourists and see how hard/easy it is as well as how much I like/dislike the experience. I can also use the time to learn more about the local seasonal tourist variations as well as running a local hotel…..



Hmmm, Seems like this is what I should do…
So, now all I have to do is get the rental contract ...   We shall see if I can make that happen  :)))

Tuesday, February 3, 2009

Bussiness Plan 01

This is what Ive come up with to earn a bit of money down here. Sad and pathetic as it may be, This is what passes for my current business plan!!

There is a steady flow of tourists in this town. Most of the tourists are young travelers (in their 20s). They come here to visit lake Atitlan on their way through Central America and they usually stay here longer than expected - The locals call it “Quick-San Pedro” ‘cos people tend to get stuck here!… just like me :) 
People like to “do something” every few days even when they are on holidays and there are various activities like hiking and zip lining and bike rentals etc already happily running in the town.
There is a small motorbike rental outfit that is run by locals. It used to get quite a lot of activity (according to my friends who live here) but the bikes have become old and ratty and are terribly maintained (as I said, run by locals) and it is no longer very popular, even though the tourist traffic is still good (and I think improving).
My plan is to buy a couple of new small rugged motorbikes and go into "competition"!

Probable bikes are the "Honda CGL125TP", which is old and reliable technology but the bikes are still made new. The TP version has large crash bars to protect the engine and handlebars, and different gear ratios for slow speeds. It comes with off-road tires and costs about 10 000Q new which is about $1500 (basically a small Agricultural bike). I would also purchase 4x open face helmets to go with the bikes. The bikes are small (125cc) so that the riders can’t get them selves into too much trouble. They also evoke that wonderful feeling the moment you sit on them of “Im on holiday in a cheap developing world country” – great fun :))

The initial plan is to get two of these bikes and advertise them in a very popular local Israeli restaurant (I have friends there) since this will immediately be visible to a large percentage of the available market.
The bikes would for the time being be stored where I am currently living (Ive worked this out with Joel).
Services and maintenance I would do myself. Any significant mechanical work on the bikes would be done by my mechanic friend Indy (and I could watch/do/learn).
Business registration, insurance and other “formalities” are rather negligible here in Guatemala. I am sure that the locals run these activities with no “formal constraints” (Ive never seen them fill in liability waivers or take credit cards/ drivers licenses) – its all cash in hand, below the tax radar stuff…, but I will set about investigating what would officially be required just because I cant help myself :)
My plan is to hold a passport as security on the rented bikes, have a formal waiver document as well as a safety instruction session and require them to show me they know how to ride.

Stuff Needed…
Bikes x2 - $3500
Licence plates/rego - $400
Helmets (2xL, 2xM) - $200
Fuel drum - $10
Lock Cable - $10
Garage Space
Passport Lock Box
Log Book
Town Map
Lake Map
Safety Instructions Sheet
Advertising Notices
Disclaimer Form

Costing/ROI
Guess that 20% of income goes to running costs, 40% goes to recovery of capital, and 40% is "profit".

Capital Costs
Total Capital Costs Approx $3600
Assume bikes and helmets last for 3-5 years before needing to be replaced.
Therefore need to clear $1200 per year for capital replacement.

Operating Costs
Gas - For day rentals, they get 1 tank of gas free.
Tank of gas is about 45Q (use 50Q for calculations)
Oil/plugs/filters/tires/brakes etc. – negligible – assume 50Q per month
This should fit in the planned 20% easily.

Usage Rate/ Pricing Structure???
Lets be quite pessimistic and guess at an average usage of say 1 hour per day for each bike (two bikes in fleet) as a start point. So, 14 hours per week.
Guess at 40 active weeks per year. 40x14 = 560 hours.
Based on 550 hours, and total income required of $3600 gives 3000/550 = 6.5$/hr
This seems about right at 40Q per hour.

So, on an hourly basis, charge 70Q per hour ($10).
For a half day say 210Q ($30)
For a whole day, say 350Q ($50)

Profit/Cost of Living.
I need between 150Q (tight) and 200Q (easy) per day to cover my living costs.
So if each bike truly is rented on average 1 hour per day – at an averaged 50Q per hour rate. That’s 100Q per day coming in from 2 bikes which is only 40Q of profit.
At this rate I need 8 bikes to rent out! :(

But I think the rent out frequency will be higher than my initial pessimistic estimate and if it rises to two hours per bike per day (half day every other day) that’s only 4 bikes required ( This should be possible I think!).
Also, if, I plan to recover say half the capital costs when the bikes get sold after three years (They will have been well maintained so, again I think its reasonable), then profit from two bikes goes to 60Q per day for the one hour model and I only need three bikes to rent on the two hour per day model. :)

Bail-Out Options
Now all those numbers are just guess work and Ive watched myself “adjust the numbers” when I don’t like the result I get to be something that I do like…
This is incredibly bad business management! … Very much like I have constantly seen my former employers management do when it comes to schedules and sales models – They have been doing it for years and it runs throughout the company from executive level to the junior managers. In all the time I was there, I NEVER saw a single schedule/resource plan that was even close to the actual results! (or even the constantly revamped estimates throughout the project for that matter!)... so endeth the "rant"!

So I know self delusion when I see it, and my numbers may turn out to be Self Delusion :) …

And what then?
Well, If it turns out that Im wrong I’ll have invested about $3000 in a couple of new motorbikes. There are lots and lots of them here and the locals use them, abuse them and replace them when they eventually die. I am good friends with the local bike mechanic and he knows who wants what and when so my “sales channel” is already in place. I can accept a loss of say 30% and just sell them if it really comes down to it. It may take a month or two to do it but I have a month or two available. So I think I have an exit strategy if needed...
And realistically, its only a few thousand dollars all up, so if I really had to I could just walk away and take a total loss... Though thats clearly not the "primary" plan.



And so, We are thus resolved…
A motorbike renting we shall go! :)))

Coffee Picking

















I spent yesterday out in the coffee fields picking coffee.

Joel, the guy who owns the rental room where Im staying at the moment (actually its in the back garden of his family home) owns some coffee plants. He is an Israeli who has been living down here for more than ten years and has a Guatemalan wife and several kids. He has a small block of land over near the neighboring village of San Jaun (Almost all the towns are named after assorted Catholic saints here in Central America)
Its about the middle of the dry season here and its getting toward the end of the picking season for coffee. The coffee berries ripen over the dry season and they are picked in four or five passes as they become ripe. So it’s the fourth pass for Joel’s little block of land. We wear work clothes but nothing special. We leave San Pedro on foot at 7:30 am which is a rather late start compared to the local pickers. We walk over to the next village which is only about 3Km away and we meet Jose who is one of Joel’s local friends, and he’s already been picking for half an hour.

The lot is not big (say 30m x 50m) and has a couple of hundred coffee bushes on it. The coffee plants are about 15-20 years old and are about 3m tall though they are quite spindly/flexible bushes rather than small trees or hedge like.
The coffee grows best in dappled shade, so the usual situation is that they are grown in amongst loose plantations of trees – usually Avocado trees. The equipment used in picking is “Spartan” to say the least – You get a bag or a basket with a bit of old rope attached to tie it around your waist…. So equipped I am ready for instruction in the fine art of hand picking Guatemalan Coffee…
Again, this is far more minimal than you might expect –
Work one branch at a time, pull off the red berries and leave the green ones,
When you have finished the branch, move on to the next one,
When you have finished the tree move on to the next one in the row,
When you have finished the row, move on to the next one down the block
…and that’s about it.

OK, so off I go…Three or four hours pass and I have learned some more…

1)Its very dirty work but not very strenuous or difficult.
The dirt is from all the road traffic and the dry season. Dust is unavoidable and it settles on all the coffee plants in quite a thick coating.

2) Some trees are easy to pick and some are difficult.
The easy ones have all ripe berries that are very juicy; they “pop off” easily and can be collected in clusters. The difficult ones have berries that are mixed green/yellow/orange/red which are not very juicy. They have to be individually picked out, and they are quite tenacious and difficult to pull off. I asked why the difference, and it seems that it is mostly due to the shade and water supply. The water supply is what it is – no one irrigates coffee plantations here. The shaded plants ripen more slowly but the resulting berries are far larger juicier, and ripen evenly. The berries from the plants in direct sun are far smaller and not at all juicy. When the coffee plant gets dried out, it stops growing the fruit and tries to ripen it as is. The result is those partially ripe/mixed colour/ hard to pick berries.

We have a very meager meal break of some tortillas and a few little salty sardine like fish and then we go back to work for another three or four hours of picking.
At the end of the session, we have a combined total of about 100Kg of berries which is about three large flour bags in volume (Joel and I picked about 28Kg each and Jose picked about 45Kg).
The bags are tied closed and we each carry one down the road a few hundred meters to a pick up point. This is where the small coffee growers bring their harvest to sell. There is a guy here with a very simple weight balance who pays for the picked coffee by the pound. He in turn transports it to the small coffee processing plants in the town and sells it too them… but that’s another story.

So Joel watches closely as they weigh the coffee and is then paid about 170Q ($25US) for the days work. Of this money he pays Jose 50Q ($7US) which is the standard rate for a coffee picker. Pickers are sometimes paid by the day and sometimes by the pound. When paid by the pound, those easy to pick, big juicy berries are “gold” compared to those measly little dry hard to pick ones! The current price being paid is quite good… If it drops to 70Q per pound (which it does from time to time) then it is no longer viable to grow coffee as a business down here.
Jose then says goodbye and gets a ride with about twenty other pickers in the back of one of the very tatty little pickup trucks that careen along the mountain roads here delivering coffee berries or workers too and from the fields and towns.
Then Joel and I, covered in dust and dirty from berry juice, walk back home along the winding road in the late afternoon. We stop for a small home made “helado” (just a pineapple put through a food processor and poured into small cups and frozen with a bit of stick as a handle) at a tienda in San Juan before we walk back to San Pedro.

And that’s coffee picking!
As I said, its not that hard but it is a long and dirty day and it doesn’t pay much…
I think I’ll need to find a different way to earn some money down here!

So, The next time you lot in Vancouver (Sak et al...) are sucking back a brew from Starbucks, just think that what you paid for your single drink, is the same as the daily income for a whole Guatemalan family!