3 Success Factors That Separate Thriving New Businesses From Failed Ventures
Earlier this week, I started a thread on the BiggerPockets Forums with the intention of inspiring new and experienced investors to grow their business. I wanted to detail how contributing to BP has helped me grow personally and professionally. I received a couple of requests to write a more in-depth article for the BP blog, so here we are.
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As I’ve learned about business, I’ve come to define three success factors that will ensure your business thrives:
- Understand your competition, then beat them by adding significantly more value.
- Build a mutually beneficial network.
- Test your ideas before throwing them away.
I joined BP back in 2013 having just entered the professional world as a consultant with a Big 4 company. I very quickly realized the corporate world was not for me and that I needed to figure out how to eventually break out of it.
I always had the entrepreneurship bug, but as with many entrepreneurs, ideas are all around us, and it’s difficult to pinpoint which one you want to run with. On top of that, while I loved the thought of investing in real estate, I was the typical “no money, no experience” guy. Basically, I didn’t know where or how to start.
Joining BP allowed me to gain insight into the real estate investing world and gain said insight from people who had investing experience and were actually doing it. I learned how to build financial models, how to spot deals, all about capex and why $30,000 pigs will eventually come back to bite you. Best of all, I was able to figure out approximately how much liquid capital I needed to close my first deal.
Living in DC and being a recent grad, money was not something I had much of. So I tightened my budget and began saving a large percentage of my pay, but set a goal to revisit real estate in 2015.
By “tighten my budget,” I mean that I focused on the bigger ticket items that I could spend less on. For instance, I slowly moved away from weekend bar hopping with my buddies, I cooked more and prepared lunches rather than going out to eat at work, and I did other simple things like moving to lower cost providers for insurance, internet, and utilities.
I’m a proponent of expanding one’s income over living as frugally as possible, but cutting your spending in places you are splurging absolutely makes sense. Once I had a goal in mind, it became a no-brainer. Come to find out, skipping the weekend bars for building a business would turn out to be quite rewarding, both from a monetary and productivity standpoint.
While I was studying for my CPA exam mid-2014, I began frequenting BP more and more often. I figured a good way to test my knowledge and prepare for my tax exam would be to answer tax questions from real estate investors.
Though I’ll touch on this more in a bit, I slowly began to realize that there was a wide gap between the people asking tax and accounting questions and those providing high quality answers. I nudged my way into the space and answered as many questions as I could.
At the beginning of 2015, I became an officially licensed CPA and decided to try my hand at business ownership by starting Hall CPA PLLC. The purpose was to provide tax and accounting advice solely to real estate investors and business owners in hopes of helping to fill that gap I mentioned above.
At the time, the IRS had announced crazy changes to the tax code, which I wrote about in two comprehensive member blog posts. These two posts were viewed tens of thousands of times and really propelled the launch of my business. After seeing the success of these two posts, I figured I’d ride the wave and see if BP had an interest in signing me on as an official article writer. A year and 37 articles later, here we are.
In March of 2015, I closed on my first rental property, a 3-unit, for right under $100k. The 2015 actual ROI was about 20 percent. It’s been a great first deal, and the purchase and subsequent hold was much easier than I had anticipated. I chock the feeling of ease up to the almost two years of intensive education and preparation.
Fast-forward to today — the CPA business is growing at a healthy level, and I have my sights set on a new service offering for my clients. My rental is continuously performing well month-over-month, I have great (inherited!) tenants, and I’m currently under contract for a big rehab project in Maryland.
Understand Your Competition, Then Beat Them
When I realized that plenty of investors were asking tax questions yet few accountants were providing tax advice here on BP, I was reminded of the Blue Ocean Strategy, which is defined as the pursuit of differentiation to open up a new market space and create new demand. Ironically, the market space and demand were already there — just few accountants seemed to care enough to take advantage of it.
So I set up keyword alerts and followed various forums, allowing me to be the first to respond when a tax or accounting question popped up. I also had a logo drawn up with a big “HALL” that would catch people’s eye so they could easily see that I was commenting if they were quickly scrolling through the forum. I upvoted anyone who mentioned my name or tagged me in a post as a form of “compensation” for calling on me to provide an answer. I connected with individuals who seemed to enjoy my responses, which led to phone calls, which led to their business and referrals.
All of that wouldn’t have been possible, though, without the core part of my strategy to add significant value whenever I get the chance.
This meant I needed to answer forum questions in comprehensive depth and then provide examples so that the average person with little to no tax knowledge could say, “Ah ha!” My posts turned into lengthy explanations; however, the key was that none of it was fluff but instead high quality information. People loved it, and some of my oldest posts still get read today.
I took the same approach with my BP article writing. Each week, I wrote in-depth articles on a specific area of real estate taxation. I don’t believe any one of my articles is less than 1,000 words. Not that 1,000 is some magic number; I just write until I feel that I’ve fully explained the topic at hand and find I often can’t do that for less.
My strategy worked because few other accountants were providing comprehensive information. It was clear they did not put the same time and effort into writing as I did. Of course, they are probably very busy with their own businesses, leaving them little time to write lengthy explanations. But this left a large gap that I was able to come in and fill.
My point is that you can apply the same principle to your own business. Determine who your competition is and how they operate their business. Figure out how you can tweak the model just a bit to add significant value to the customer. You must do this and you must always be focused on adding significant value.
I found discounting prices is rarely a way to add significant value. Offering your services at deep discounts will only discredit you and cause you pain as you scale and later need to increase those prices. I’m not a pricing expert, and it’s something I currently struggle with; however, you must understand that simply lowering your prices will not win you loyal business.
Look through the eyes of the customer, and try to determine what they really want. Actually, what they crave. For my target customer, they wanted information. They wanted to understand how real estate investing will affect various aspects of their lives, taxes being one of them. When I came in to kindly offer up detailed explanations and examples on how it may affect them, they loved it.
Building a Network That’s Mutually Beneficial
Heed the following advice if you want to really shoot yourself in the foot here on BP (and probably anywhere): Before you take the time to educate yourself or learn about the industry, start a discussion and lead off with, “I have no money, no experience, and bad credit — how can I raise capital for investing?”
You’ll, of course, be shocked when people pointedly advise that you need to better educate yourself about the industry. But really, only you are to blame. You’ve provided no value and shown that you are not capable of preliminary research. Who wants someone like that in their network?
The real estate industry, as I’m finding, is a small world. You must do everything you can to add value to the lives of others and prove that you are worthy of someone’s time. How else will you convince the guy or gal who owns a multi-million dollar apartment building to give you 20 minutes of their time?
I had it a bit easier, as I’m a CPA, and seemingly everyone wants to talk to a CPA. But it still took me over a year of writing and collaborating to really connect and build relationships with the successful investors I had been targeting from the beginning.
So figure out how you can add value to the lives of the people you want to connect with. Prove yourself, connect with them, and then keep in touch. Because later on when you are growing a portfolio, you will be pleasantly surprised with how eager all of your connections are to help you, whether it be analyzing a deal, providing strategic advice, playing devil’s advocate, or best case — providing capital.
Test Your Ideas Before Throwing Them Away
Every day I seemingly come up with a new product or an entirely new business I want to run. And every day, someone, somewhere, tells me there’s no way to make it work.
I call BS, and I call it frequently. You want to start a paper goods company when the industry is clearly dying? So what? Go for it. Even if you only earn a couple hundred bucks, you’ll benefit from the wealth of knowledge you gained by trying to get a company up off the ground and then operating that company effectively. You can carry that knowledge with you forever.
I was told by a successful friend of mine who runs a multi-million dollar accounting business that I shouldn’t focus on the real estate niche because there’s simply no money to be made in it. I told him — and these are my exact words — “Good, that means I won’t have many competitors to worry about.” If the majority of accountants don’t think there is money to be made in the real estate niche, then the majority of accountants won’t be in the real estate niche.
You see, people have preconceived notions about results before even testing the product, service, or business. It’s a fatal flaw of any business leader. True, while my friend was in a completely different industry, what happens when one of his employees presents an awesome idea to expand their product offering to their clients? Will he say, “Bah, no money in it” or move forward and test the idea?
If someone tells you it’s not going to work, take that as motivation, and set out to prove them wrong. I firmly believe that you can make any idea work if you’re able to craft the business model needed to do so. And at the end of the day, if you do fail, you may be out a few thousand bucks, but you’ll have gained more experience in a short amount of time than many people do over a span of several years.
Summary & Takeaways
If you take anything away from this article, it should be to always focus on adding significant value to the lives you touch. That alone will allow you to grow and scale any business.
Your reputation matters. Be careful about what you say and how you say it, and consider how it will be perceived. Real estate is a small world, and people remember those who rock and those who stink.
Focus on building a network of successful investors that you will be able to lean on for future advice. You will need to add value to your network to “compensate” them for their time. Figure out how to do that, and everyone will want to connect with you.
And test your ideas before throwing them away. Don’t let naysayers get you down. Ronald Wayne knows this best — he sold his 10 percent stake in Apple for $800 back in the day. Today, that same stake is worth billions.
Running a business has been humbling. While all of the above may seem great, truth is I still have a ton of work to do, and I don’t feel it’s much to brag about. I just wanted to offer candid advice for those people starting out because I was there too — merely a year ago!
I’ve figured out what I’m good at: strategy, sales, content creation, and building business systems. And I’ve also figured out what I’m really bad at: pricing, organization, administration, and prioritization. Luckily, I’ve met fantastic people along the way who I lean heavily on for advice. Though I’m the owner of my business, I couldn’t image running it alone.
If you’ve had a similar experience in leaving a corporate job to invest full-time (or if you’re aiming to do so), I’d love to hear your story.
Be sure to leave a comment below.