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Posted about 9 years ago

Focus on Business Building: Part One

I’ve preached about two subjects often, and even more so after reading “The E-Myth” by Michael Gerber (highly recommend), which are if you are starting a business, are you just trying to create a job, and second, if you aren't building systems, you will never get far.

Jumping into starting a business is a difficult but exciting venture. Often times, the budding entrepreneur is setting on a journey where they see themselves as being on a path of financial freedom and overall improved life. The reason for many failures in starting a business occur is because of the business owner creating a job as opposed to creating a business, as well as the business not having proper systems, networking, and organizational design to be successful.

This is no different in real estate and investing, and all new members to the real estate world should beware!

As it relates to are you creating a business or are you creating a job, you have to examine two items. First, why are you going into the business of real estate investing? Are you fed up with your boss, and want to work for yourself? This is one of the biggest traps if that is your main, if not only, reason for getting into the business. What often happens is that you begin the journey simply trying to replace your 9-5 job with a new 9-5 business. You start the new business with your old and regular routines. And what you find is that it doesn’t match well with the business environment.

The next trap is that you become the real estate investor, and you are seeking deals, you are calling prospects, you are doing site visits, you are painting walls, you are doing demolition, you are hosting open houses, you are putting up bandits signs….bottom line…the business is you, and only you. You have successfully created a job. And you will not be successful.

The reason? If you have created a job, and a very stressful job with lots of lost time and high stress, you likely won’t have time for the next step of business formation and organization, which is establishing processes and systems to be efficient and effective.

New business owners cringe at the thought of having to pay others for work they CAN do themselves. So they often do those things, which they SHOULDN’T do themselves. Moreover, they don’t do them at the best effort or in effective ways. The hope is that a 60% effort will yield just enough to get by until such time that they can afford to pay someone to do it at a 100% level of effort. The hope is that it will work just long enough to lead to better things.

But this mindset often only leads to the position that the business owner is doing these things so much, that they believe the way they do it is the only way. They then are not worried about paying someone, but rather paying someone that may do things differently.

This is where systems and procedures come into play. As a new business owner your schedule and your tasks should be monitored very closely. There the things that need to be done, things which can be second priorities but still important and need to be done, and all other things (saying things to be vague for space concerns with the blog, but these “things” can be everything from prospecting for properties, prospecting for partners or funding opportunities, selling properties, etc).

When establishing the business, the owner should know what these things are (many forums on Bigger Pockets which explain the ins and outs of the business), and set up processes and systems to get them done. Moreover, in rough form and draft, the business owner should start assembling operational manuals and procedures. Not that they will need to have them for themselves, but rather that the business owners should be seeking people to fill the roles that take the owner away from the most important core tasks. If you have established processes and systems, you can find the right candidate to join your team, and have more faith that what needs to get done will be done efficiently and effectively.

Now, this blog isn’t to suggest that these things being ignored are the only reason for business failure, but they are indeed an indicator that the business is in trouble before it gets off the ground. Remember, your top tasks include being CEO, CFO, and COO. Chief Executive, Finance, and Operations Officer. You should not be bandit sign placer, open house host, demolition specialist, painter, electrician, and plumber. Being the top level executive, you will establish systems for those other positions, and procedures, to assure items are done well. This includes communicating and working with contractors to assure items are completed to your liking and need.

This topic can very well be expanded, but I limit my time for blog posts to assure I tend to my CEO, CFO, and COO responsibilities to the best of my ability. I hope I have given some things for good thought and reflection for the group!

Thanks for the read, and happy investing everyone!



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