Putting “The Compound Effect” into Action in Your Real Estate Business

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I read a terrific book recently called the Compound Effect written by Darren Hardy the editor of Success Magazine. I love his wisdom.

The premise of this book summed up in one short paragraph would be,

“Success is often built by taking small consistent steps over time. While these steps in the moment don’t feel significant, the results over time are massive.”

Most real estate investors that I know are constantly multi-tasking – we have more jobs than hours in the day. And it’s pretty common for these investors like most entrepreneurs to get side tracked by shiny objects. The other problem is that so many folks don’t actually write their goals down. They simply fail to plan for success.

So how can we change that? How can we become more consistent?

Slow and Steady Wins the Race

Darren Hardy often says that he isn’t the smartest person. But he says that given enough time he will beat anyone in just about anything, because he takes those small consistent steps needed EVERY day. You’ll notice he doesn’t say some days or most every day; he says every day.

The Compound Effect in Action

There are 5 parts to making these permanent changes for massive results over time.

  • Choices
  • Habits
  • Momentum or “Big Mo”
  • Influences
  • Acceleration

Choices

There are some things in life we have no choice over such as illness, but by and large we are completely responsible for the life we create. We all come into the world the same; naked, scared and ignorant. When it’s all said and done, the life we end up with is almost entirely an accumulation of the choices we make.

The first step is to become aware of our choices. Choosing well takes you down a much different path than not choosing at all.

Don’t live your life on autopilot.

Habits

We are all creatures of habit; some habits are good and some bad, but habits are necessary to get through life.

Stop and think about this; what if you had to think of every tiny step necessary for brushing your teeth, mowing the lawn and a whole host of other things we just do without thinking about all of those individual steps. The problem is that by definition a habit is something we do without really thinking about it. Sitting down with a bag of potato chips or a whole can of nuts when we are watching TV then realizing that you have eaten the entire amount is nothing more than a bad habit.

So how do we stop living life on autopilot and create better habits? You need a big enough “why” to change bad habits and create new ones.

Habits influence goals. If you’re not making the progress that you would like to be making, it’s simply because your goals are not well defined and you don’t have the right habits.  In his book Darren goes over 5 strategies for eliminating bad habits.

Momentum or “Big Mo”

This was one of my favorite chapters. I wrote an entire blog post on “Big Mo”. When you are trying to get momentum in your real estate business the first steps are always the hardest. But when you get it, momentum is almost impossible to stop. So how do you get it?

Here are the 4 steps:

  1. Make new choices based on your goals and core values
  2. Create new positive behaviors by putting good choices to work
  3. Create new habits to replace your current bad habits
  4. Build routines and stay consistent over a long period of time

These 4 steps are pretty simple at their core, but they are anything but easy to implement when you are first trying to make these changes. The first step to making these changes are to identify those things that you need to change.

His advice is to start small; just pick one thing and create a new habit. For me it was getting up earlier each day. I’m still not where I want to be, but I have been getting up earlier for several months now. I think it’s time to go all the way and finally set that clock back another 30 minutes each morning. Remember, “Small consistent steps over time”.

You don’t have to jump right into a new habit requiring massive changes that you know deep down you won’t be able to keep. It’s OK to ease into it so that it sticks.

Influences

Even though everyone is 100% responsible for their life and their choices they make, there are subtle influences or external forces that you need to be aware of that will put you off track.

Here are the 3 kinds of influences:

  • Input
  • Associations
  • Environment or your surroundings

So let’s break them down a little bit.

Influences. These are things like the news. Did you ever notice how your mood and your confidence take a dive when you listen to a steady stream of bad news on the TV? I’m talking about things like:

  • The economy is tanking
  • Real estate sales are at their lowest in almost a decade
  • Unemployment is its highest in almost 15 years

Your mind is like an empty glass, so be careful what you put into it. Or as Darren says, “Don’t drink dirty water”.

Associations. You have all heard the saying that, “You become the average of the 5 people you hang out with”. Seek out positive people; those that share your vision. Look for mentors that are already where you want to be, join a mastermind and get an accountability partner that will kick your butt when you need it. Find a way to spend most of your time with people that that are “already sitting at the table you want to pull your chair up to”.

Environment. Sometimes your vision for your business or the dream in your heart may be bigger than your environment. I’m not only talking about where you currently live or other limiting personal situations. I’m also talking about physical and mental clutter that may be getting in the way. These things drain your energy. So finish your “incompletes”. Clean up your workspace or even your garage if that’s weighing you down.

Get all those unfinished projects done once and for all so that you can create an environment for success. Your physical environment has a direct correlation to your eventual success.

Acceleration.  When things get tough, our minds create all sorts of reasons or “alibis” for why it’s OK to stop or to throw in the towel. Your subconscious is more than willing to give up on this current new habit or the new choice we need to make in order to put the compound effect into place in our life. After all, change is hard! When tough times come our way and we hit those emotional and mental walls don’t be the one that quits.

Just do a little more each day so you can see those massive results – the compound effect over time. Take some time today and look down the road. Are you headed where you want to end up? If not, what changes do you need to make? Here’s the real question you need to ask yourself:

“Who do you have to become? If you want more, you have to become more. Success is something you attract by the person you become”.

Photo Credit: Kris Krug

About Author

Sharon Vornholt

Sharon has been investing in real estate since 1998. She owned and operated a successful home inspection company for 17 years. In January of 2008 she took the leap of closing her business to become a full time real estate investor.

31 Comments

  1. Thank you Sharon. A wonderful post and reminder to us all. A leading mind in business that I follow – Rich Schefren – often asks a similar question related to the final quote. He recommends asking yourself: “who do you have to be to do the things you need to do to get where you want to go?”

  2. Thank you Sharon. A wonderful post and reminder to us all. A leading mind in business that I follow – Rich Schefren – often asks a similar question related to the final quote. He recommends asking yourself: “who do you have to be to do the things you need to do to get where you want to go?”

  3. Sharon, people develop habits at an early age, 90% will go through life and never change. If one doesn’t dress for success they’ll never achieve it. I’ve haven’t read Darren Hardy but live by his rules. Like an orchard one tree at a time, each year your crop will produce more fruit than last year. To be a successful investor one should start out with baby steps with a doable plan gradually working their way up. Good article.

    • Hi Jim –

      That’s a great analogy; “Like an orchard one tree at a time, each year your crop will produce more fruit than last year”.

      I really believe this principle of taking small consistent steps over time will produce great results in the end. The key to making this process work lies in having good habits.
      Sharon

  4. Melodee Lucido on

    Great article Sharon. It rings so true. So many little steps each day and some weeks it seems nothing BIG got accomplished. But it does all compound—I can see that as I look back on the past year.

    Thank you!

  5. Looks like I’ve found another book I’ll have to pick up and read. These self-help motivational books really work for me. I read through them feeling like I’m missing the big picture but one sentence sticks out and its a small but important epiphany for me. Thank you.

    • Hey Steve –

      It’s a great book, and it’s an easy read. This book is really applicable to real estate investing. Sometimes we are going in so many directions we feel like we aren’t accomplishing anything. But this proves that if you keep taking those small steps on a regular basis, you will see a big payoff over time. Thanks for reading.

      Sharon

  6. Tom Sylvester

    Great post Sharon. Practical knowledge that is a good reminder for people to read from time to time.

    I had a high school basketball coach that used the following quote, and it has stuck with me over the years.

    “Championships are not won on the night of a big event, but years before by athletes who commit themselves daily to championship principles” – Dick DeVenzio

    It is along the same lines of this point. Define the things that will have the impact and allow eventually success, and make them a habit so that you do them everyday.

  7. Michael Dorovich on

    ‘Don’t live your life on autopilot.’

    Great article! I would agree except to say that you do want to be on autopilot, but autopilot with specifically chosen daily habits that get you where you want to be in each area, rather than random habits which do not get you where you want to be.

    • Michael –

      That’s exactly the point that is made in the book. Some habits are good habits like the things we do every day — brushing our teeth etc.

      It’s just so easy to let our “not so good habits” ride along rather than to do the work to change those. Change is hard isn’t it?

      Sharon

  8. Sharon excellent post as usual.

    I recently just finished reading the book. I found a lot of what Darren Hardy talks about can help people in all phases of their life. The 5 parts is something that should be reviewed every so often. Thanks again for the post.
    Chris

  9. Great quote and post, Sharon!

    I can definitely relate. We all have to make some sacrifices when pursuing our dreams and choosing the kind of life we want to lead. It’s all about planning for the future and spending your time wisely.

    For the first part of my career, I worked my face off. Seriously!! I missed a lot of events and focused the majority of the time working towards my goals. Family and friends just did not understand the concept of entrepreneurship as I was surrounded by professionals.

    There were definitely low points and high points. So many times I questioned why I was doing what I was doing. Even the folks around me asked why I’d put myself through so much hardship when getting a high income and working a job was so much easier.

    Though, I knew I did not want that kind of life. Ever since I was a kid I had entrepreneurial endeavors and it carried with me into adulthood.

    Looking back, it was not easy. Sometimes I do question the path that I take. Though, all my work has paid off and I can finely breathe a little and enjoy the fruits of my labor.

    Everyone has a different path; a different journey ahead. It’s the choices that we take that make us who we are today.

    Great reminder post Sharon, thanks for sharing! 🙂

    • Hey Rachel –

      I think all entrepreneurs are a little bit crazy. We work long hours to build our dream, often making less money (especially in the beginning) than we would in a job. What I think we are looking for is a certain lifestyle. I tell everyone they should build a “lifestyle business”. That may involve working crazy long hours in the early years. But eventually if we do it right, we can create the lifestyle and the business we want.

      That’s why so many of the ideas in the Compound Effect are so important. First of all, we rarely get instant gratification. The payoff almost always comes later. Secondly, if we can create new and better habits we can shorten this whole process.

      You are a perfect example of a person that has build a lifestyle business. (I think that’s a podcast topic actually. More on that later).

      Thanks for your insightful comments as always.
      Sharon

  10. Great points Sharon.
    I have not read the book but will put it on my list. Probably can get it for Christmas from someone. 🙂

    Little things over time really can add up to great things. The focus here are changing habits and personal actions to better yourself but it is really true with anything.
    You see people have some high level goal they want to achieve but don’t have a full plan yet and then don’t take any actions towards achieving things for a long time.

    You want to be debt free? Try not to use your credit cards and pay more than the minimum (no matter how small the extra is) every month.
    Want to get more leads? Find one new way to get out your message and do it every week.
    Need to build your team, find buyers, find private investors? Go to one new REI event in your area every month and talk to people.

    Seems like most new investors muddle around for 1-2 years before they really take action and get moving. Most of the time their issue is not having any money and bad credit.
    If during that time they just saved a tiny bit of money each month and paid all their bills on time (the only real key to getting at least decent credit) during that time they all of a sudden will have some money and decent credit when they finally feel they are ready to invest.

  11. Shaun –

    Great points. Small changes really do add up over time and where new investors are concerned, taking action quicker would definitely make a big difference for them. It’s tough to get “un-stuck” when you are new, but everyone has to do it. That first deal is the hardest.

    You should get the book. Give yourself a gift! I’ll be checking back to see if you have read it.

    Sharon

  12. Jeff T.

    I just listened to the audio version of this book and I thought it was excellent and had a lot of small practical steps that you could start right away.
    I think the most important thing for me that he stresses is DATA.
    “Don’t have enough money at the end of the month?” he says. Then track all of your expenses. You will likely find tons of waste.
    Don’t have enough time in the day. Well, track everything you do in a day. How much time did you waste reading the news or on facebook.
    It’s something that I’ve been doing with my finances. Picking an item, like insurance, and seeing if I’m paying too much.
    It’s easy to pick up bad spending, eating, and time-wasting habits, but looking at the DATA of what you are spending, eating and wasting time on each day allows you to find those habits and start to do something about them. I like that you can start really small and do something simple.

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