We talk about it all the time on BiggerPockets: Success is a mindset. It’s the will to act and the will to persevere. We know that building an investing business is tough work. It takes years of dedicated study, courage, and vision.
But it definitely helps to have some hard skills.
In one format or another, time and again we’ve discussed the importance of the following three characteristics and their importance to long term success in Real Estate and other business.
1. Understanding the “Why”: Whatever the reason — be it freedom, security, or greatness — successful people tend to know why they are doing what they are doing.
2. Clearly Defined Goals: Successful people know where they are going, what they need to do to get there, and have a clear plan to get there.
3. Action: Successful people take the necessary steps to achieve success.
So what? I spend my days on BiggerPockets. I already know that!
Related: 3 Simple Traits that Will Take You Far in Business (and in Life)
I can’t take a course, pass a test, and then get my “why” down. I can’t read a textbook, go to a lecture, and then be a successful “big goal” planner. And no class can physically make me take action once it concludes.
Talking about these things is sometimes unhelpful. They are intangible qualities that are very difficult to teach and require a change in mindset. That’s usually not a process that you can start today and see real results from tomorrow.
Here’s a different take on developing your business skill set. I’m going to discuss two subjects that I’ve studied heavily and believe contribute to success in business. They are particularly useful to those of us attempting to grow a business, but are practical in most professional fields and occupations as well.
The best part is: competency in these skillets can be defined, measured, and improved. You can start immediately.
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2 Business Skills to Start Developing Today
Skill #1: Familiarity with Spreadsheets
My first job out of college was in corporate finance for a large corporation, so I may be a little biased towards this skill set (5 days a week, 9 hours a day for a year was spent crunching numbers in Microsoft Excel). Biased or not, part of owning and operating a business (or a personal portfolio) is accurately reporting numbers, reviewing numbers, and predicting future numbers. If you plan to be successful, you will deal with a lot of data, and over time, you will (hopefully) deal with increasingly large numbers.
Dealing with these numbers can either be very time-consuming and problematic — or very easy. A basic Microsoft Excel course (by far the most powerful widely available spreadsheet program) will pay enormous dividends in saved time, increased accuracy, and improved organization in the handling of your finances and critical business data. Novices and those who try to pick up this skill as they go will experience large and increasing handicaps relative to their peers when it comes to reporting, analyzing, and forecasting for their businesses.
How to improve:
I consider myself an expert in the manipulation of spreadsheets (though I’m sure I would be laughed at by true wizards). I attribute 90% of my skill to self-study via this course offered through a series of YouTube videos:
Excel Is Fun (Finance Course)
Everything I do that deals with numbers in my job, business, and personal portfolio is easier because I have developed comfort with spreadsheets. No, it is not absolutely essential to success in business, but I’d argue that your lack of familiarity with spreadsheets will slow you down considerably the longer you avoid them.
If you don’t like my suggested course, try GCFLearnFree. They are great for developing basic skills with Microsoft Office.
If you don’t like that one either, I came across this article that lists 40 awesome courses.
Skill #2: Basic Accounting Competency
Why it’s important:
I don’t understand why Accounting has a stigma — everyone seems to hate it! That doesn’t make any sense to me. I think that going over the numbers at the end of each month is one of the most exciting parts of building a business — you get to see it grow and develop each month! The numbers show you where you are weak and where you are strong. They allow you to spot problems, find solutions, and make big decisions with confidence.
Isn’t it better to have a full understanding of all the numbers involved with your business, how they improve or decline on a monthly basis, and how to play the tax game, than to pass it off to some CPA at $100+ per hour? Not only are you paying way too much for this relatively straightforward service, but you are missing an opportunity to study your business thoroughly from the ground up!
No one is saying you can’t pass off the mundane data entry and itemized accounting to a bookkeeper down the line, but I’d argue that you are doing yourself a disservice by not attaining and retaining the ability to do it yourself — and to do it well. There’s nothing like going over every single dollar of revenue and expense to understand your business.
I’ll use one of my favorite analogies here when it comes to explaining the importance of accounting:
Building a business is just like any other competitive sport. You have to be smart, visionary, and hardworking — and you have to have talent. But even a superstar like Lebron James couldn’t play basketball and succeed if he didn’t know the rules.
Here’s how to tell if you are an Accounting newbie and don’t know the rules of business:
- You don’t know what’s legal and what the “fouls” are when it comes to business expenses
- You don’t know how to keep score and have any idea if your business is “winning” (profitable)
- You don’t understand the difference between cash accounting and accrual accounting
- You don’t understand best practices in how to categorize expenses
Not to mention the whole taxes thing.
I actually took several courses on Accounting in college, but having taken this course through Coursera as a refresher, I’d vouch for its ability to give you the grounding you need to understand the most important concepts.
If you don’t like that course, you might try one of the courses offered by these 8 Universities.
Oh and by the way: Accounting becomes much less tedious and much faster when you are comfortable with spreadsheets (a la skill #1).
What do you think? Do you agree that these hard skills make the entrepreneur’s job much easier? Are there other hard skills that you believe are even more important?
Leave your opinions, stories and tips in the comments below!
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25 Comments
Great article Scott. Thanks for the resources!
Thank you Romica!
Scott,
You are truly a nerd’s nerd. I had accounting in college and got an A in it, my wife has an associates degree in business with her main focus on accounting, and we do not do our own taxes. I used to and it would take 2 to 3 days. I do not take courses on the new tax changes every year. Unless someone just casually mentioned it how would I know that they changed the rate of taxation on capital gains and plan to cash some properties out before it takes effect? I look at the books and I can check how much taxes, insurance and repair costs are. I can see how much I am bringing in, etc. What should I go over 20 spreadsheets for? If I need to I can look at specific properties and see what they cost me, but I usually have a close idea since I am he one who bought the supplies or worked with the contractor on getting the place fixed. I do enjoy sitting down on occasion and seeing how much principal got paid down that month. It is not something I do a spreadsheet for but once or twice a year its good to see the progress you make. I do not see the purpose of making spreadsheets and staring at them. Could you maybe explain? Of course this might be a case of I don’t know what I don’t know hehe.
Jerry – I appreciate the comment. I don’t think that it is necessary by any means to master the skillsets in my article. I think it is just very useful. As someone entering the game with a first rental property here for myself, I can feel much more comfortable about my expenses and expected income by having them listed out separately and by estimating them.
You get basically the same result if you are personally responsible for every expense and are involved in every transaction with the contractor. My thoughts are that for me, that might not scale well. I want to eventually build a business where the entire process is automated over a large number of properties, and to do that effectively will require, in my mind, a substantial amount of financial planning and analysis.
Good article, I can definitely see accounting and excel skills be useful for REI.
Many of corporate finance skills can be translated to that field. Those who rely more on instinct may have a hard time admitting it but extensive number planning allows far more accurate decisions and faster growth.
Thanks Mike! I think that those skills are not very difficult, and can be applied immediately for excellent long term results!
Excellent! I currently own about 60+ rentals and do about 10-15 flips year, Understanding of accounting and Excel is a absolute must for every investor. Doing what if scenarios, understanding the difference between improvements and repairs from accounting prospective etc is a great skill. Very well explained!
Thank you Aman! I love what if scenarios. Being able to understand the total return on your investments given a percent increase/decrease in rents would absolutely impact your decision making process, and I think that you have to be unnecessarily creative to be able to conduct those experiments if you aren’t comfortable with Excel.
Nice article! I’m a cpa myself, and agree whole-heartedly that we need to understand the #’s (using spreadsheets) and measuring how we’re doing (financials). Good job, and good luck with your job at BP!
Thanks Mark! I’ve considered getting my CPA for a while now, but haven’t gotten around to actually getting the degree. I’ve still studied accounting though, and feel that its a great asset to have up my sleeve.
Great article! Thanks for the resources. Although I’m proficient at Excel, the accounting area is definitely something I can use. Improving my knowledge in that area will help my business get to the next level!
Thanks for the comment Gretchen! Best of luck! Accounting isn’t that hard, it just requires a focused, methodical approach. I think it will be a benefit to you.
I agree if you don’t know your numbers how do you know if you are profitable or losing
Yup thanks Paul!
Spot on comments. You don’t have to be an expert in either, but you should be familiar enough with both to recognize when you need further info, and how to proceed. After all, ” you can’t manage what you can’t measure”.
Absolutely Kevin – Expert status is not necessary. Just enough to be able to make informed decisions and spot problems before they compound.
Nice article Scott, it’s good to see something written about hard skills that are useful.
I agree with the premise of your article that a successful investor will need to know what the “score” of the game is and the “rules” he is playing under, but I would argue that theoretically, the most successful investors will have a highly skilled team under them that will give them that info on demand. My end goal would be to be in that situation – I would rather spend my time down the road closing deals (that my marketing team has found for me, and my analysis team has determined to be good deals) than staring at spreadsheets.
Nevertheless, in my current place in life, I will definitely need to master these two skills on at least a basic/moderate level, as they will definitely help me transition from blue-collar work into true investing (and maybe later in life I can be in the place I mentioned above). Not to mention that in the future, as I transition from being deep in the numbers to overseeing, I will need these skills to be aware of how skilled my team members actually are, and that they are not cheating me or performing poorly.
Thanks for the good read!
Scott,
Thanks for the comment. I agree wholeheartedly that the head of a large business should not be doing the physical data collection and bookkeeping. However, I still think that anyone, even CEOs of fortune 500 companies are better off being able to do their own analysis quickly in spreadsheets, and understand the fundamentals of accounting enough to make informed decisions about money management.
In the meantime, those skills are even more important to me! I can’t really afford all of those team members right now, I certainly couldn’t afford them for the amount of time I’d need them to truly map out my business in the way that I want it done. I have to do it myself, and I’d be at a disadvantage if I didn’t.
Thanks Lisa!
Thanks so much for pointing us to these resources Scott!
Glad they helped Penny!
Thanks for the great article, Scott. When I read a title like this, I usually expect fluff, so I was pleased to actually read about some “actionable” tasks. I’m already a whiz at Excel, so it’s nice to know that I’m halfway there. 😉 Just started learning bookkeeping and re-learning basic accounting as my college course in accounting was many, many years ago, and most of that information is lost. Thanks again for helping keep this newbie on task!
Dave – thanks for the comment and I’m glad that they resources helped. Data and financials are just so critical – what get’s measured gets managed.
Scott,
Great article, I just pulled up the http://www.courser.org website. Seems to be a lot of interesting subjects to look at. Thanks for the resources while I develop my educational plan before I venture into REI.
Thanks again
George
George,
Thanks for the comment. You can spend a lifetime learning on Coursera – its a lot of fun!
-Scott