Big, Fast-Growing Businesses Are NOT the Ticket to True Financial Freedom: Here’s Why

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It seems like everyone on BiggerPockets these days wants to quickly build huge real estate empires, syndicate their way to a fortune, and become the dominate force in their market. I appreciate those points of view, but I’m here to tell you that bigger and fast-growing real estate businesses are overrated.

I have no inherent problem with some businesses getting big or growing quickly. Our capitalist system thrives because ambitious entrepreneurs set out to climb their own economic mountains in bold, new ways. Billions of people around the world are able to invest their money safely and profitably because these ambitious entrepreneurs need capital to fuel their growth. This is a valuable service and a noble pursuit. If the top of that mountain calls to your soul, then go for it.

Related: Should I Invest for Cash Flow or Growth? An Investor’s Analysis

But the problem I have is the myth sold to us that the same goals and strategies that work for big, non-stop growth businesses will actually help us, the small entrepreneurs and part-time investors, to meet our personal goals. The myth usually goes something like this:

“When you build your empire, finally get 200 units, put money in the bank, create foolproof systems, and assemble an awesome team, then you’ll be able to go on vacations, have a lot of free time, and do what you really want to do with your life.”

I would certainly love to meet people who can prove me wrong here, but I rarely meet owners of big, fast growing businesses who have a lot of free time and who live their lives in the way they want. Yes, they have money, but they don’t have freedom or autonomy as I define it. These entrepreneurs are doing amazing things, but on a personal level, they are busy, stressed, and chained to a Frankenstein monster (their business) who never lets them leave.

Here’s the main point.

If the real reason you got into real estate investing was to create more economic security and more personal autonomy and freedom, it makes a lot more sense to keep things small and simple. I’ll explain 5 reasons why in the rest of this article.

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1. Small and Simple = Less Risk

“It’s hard to fall off the floor.” – Jack Miller

In the last few years, I watched in amazement as my two young daughters learned to walk. They fell thousands of times along the way. They cried after a few falls, but for the most part, they just got up and tried again.

What was the secret? Their little butts were really close to the floor! How much force could they actually build up with a 1-foot drop plus a diaper as a landing pad?

Small businesses are the same way. While you’re learning to walk (and this learning can take years), it’s safer to stay close to the floor. Borrowing a lot of money, bringing on partners, or syndicating may allow you to start a big business and to grow quickly, but you’re still a wobbly toddler. Falls from great heights could cause fatal damage to your business and to your finances.

It’s far better to stay small and patiently learn your business. Then you can fail, get back up, fail again, and then get back up. You will always make mistakes, but you want to avoid mistakes that will set you back for years or forever.

2. Small and Simple = Less Stress and Hassle

You’ll never avoid all stress and hassle (and a little bit of the right kind of stress is a good thing), but you can reduce the amount and the longevity of stress and hassle by staying small and simple.

From my experience, getting too big too fast creates stress because you take on more complexity than you’re ready for as a new leader of your business. I admire leaders of large organizations, but those expert leadership skills were acquired over years of practice, often working under other expert mentors and leaders. As a small entrepreneur, don’t jump too fast into leading others before you’re ready.

It’s ok in the early days of your business to do everything yourself. Of course, you’ll have to work hard and long, but that’s less stressful than losing control before you’re ready.

Learn every task and responsibility. Make the most common mistakes yourself. Build checklists and systems to correct a mistake each time you make it. Over time these checklists will allow you to delegate (not abdicate, big difference) to someone else. Because you have done everything yourself, you’ll be much more ready to hold this new person accountable.

My own small real estate operation has one part that buys/sells houses and another part that owns rental properties. A business partner and I have been in business for almost 12 years now, and after an initial sprint, we’ve chosen to slowly expand our scale, our systems, and our team. This slow and deliberate pace has reduced and spread out much of the stress and hassle that came with growth.

3. Small and Simple = Adaptable

In 2009 my wife and I took a 4 month sabbatical. We travelled to Spain, Peru, Chile, and Argentina. We lived with families, I learned to speak Spanish (my wife already spoke it fluently), we toured amazing sites, and we soaked in new cultures at a peaceful snail’s pace.

I didn’t take this trip because I won the lottery or because I had millions of dollars in the bank. I took this trip because I saved up the money (less than you might think) and because my little business was adaptable.

Often when your business is big and growing fast, it takes on a life of its own. I’ve had friends who describe their business as a runaway train or a monster. That means your business is threatening to swallow you up! Yikes.

I like the idea that you can turn the volume of your business up and down when it suits your life. I have really busy times when I work hard and hustle to move ahead. I have other times when I work at a slower pace.

Life is cyclical. Your energy and enthusiasm are cyclical. It makes sense to keep your business small so that it can adapt to your own natural cycles.

Aside from adapting to your life, a small business can also adapt to changes in the market. What happens when your best customers stop buying? What happens when expenses go up? What do you do when your entire industry changes overnight?

A small, nimble business can change gears and direction quickly. When you work in your small business, you are also more likely to notice these changes quickly so that you can steer clear or even profit from them. Author and investor Nassim Nicholas Taleb calls this ability “antifragile,” or the ability to thrive with change.

The size of large businesses may give other advantages, but the companies are often heavy and slow like a huge boat. In competitive, dangerous economic oceans full of icebergs, these businesses often sink like the Titanic (unless they’re bailed out by the largest slow-to-change organization, the U.S. Federal government, but that’s another story). 🙂

4. Small and Simple = Lucrative

You don’t have to sacrifice your goals and dreams by staying small. Quite the contrary; by staying small you can tailor your business so that its fruits serve your own definition of success.

I know professionals with very small businesses who make huge incomes. I know real estate investors who manage all of their properties themselves using a cell phone and a home office who make hundreds of thousands of dollars each year. These are little known stories, but they’re not as unusual as you might think.

But even if you earn an average income as a small entrepreneur, you still have many advantages over someone earning the same income at a job.

First of all, you can give yourself a raise if you really need it. Most entrepreneurs sell a product or service, so if you want more income, go sell more! Second of all, no one can fire you. If you want to keep doing this business the rest of your life, you can as long as you provide a useful product or service. Third, entrepreneurs enjoy many opportunities for legitimate tax savings by creating entities that can write off expenses normally paid for personally (think healthcare, retirement accounts, cell phones, etc.).

If your goal is to not work forever, but rather to earn money, accumulate assets, and eventually live off the income from these assets, a small business (especially one focused on or matched with real estate investing) can accomplish that.

Here’s my little game plan to do just that:

  1. Earn as much as possible.
  2. Save as much as possible
  3. Invest as safely and profitably as possible

I set yearly goals in each of these categories, and I measure my progress. I want to earn a certain amount, I want to save a certain amount, and then I want to invest that amount and add it to past invested capital, inside and outside of of retirement accounts.

The third step for me is measured in regular income generated from real estate investments. Like a little trickle from a fresh water spring, your income from investments is very small early on. But as you continue to work this plan over and over, your income stream will begin to compound and grow until it is a small brook, a rushing stream, and someday a mighty river.

5. Small and Simple = Meaningful

We all have to take care of ourselves financially. Adding value to our customers’ lives and earning money in return to meet our personal needs is an honorable process.

But I have also been amazed that my business can meet even more of my needs than just a paycheck. On a deeper level, my business has given me meaning, fulfillment, and happiness.

I can hear some cynical responses or hesitation and doubt about mixing meaning and profits. We live in a world where many of us feel like our role at work is just a cog in a meaningless wheel. We contribute to organizations that give us a paycheck, but they give us little feeling of gratification or fulfillment. We leave our fun, our meaning, and our fulfillment until after work during recreation, at church, or volunteering at charitable organizations.

Related: What a Failed Hedge Fund Can Teach Us About Risk in Real Estate

Your own small business, however, has the potential to be much more because you create it. You get to decide its purpose, its mission, and your role within it. You get to choose the customers you will help, the problems you will solve, and the values and standards by which your business operates.

Your business can be a vehicle to make a difference in the world. And in addition to all of that, this wonderful business can still make a profit for you. Those two concepts are not mutually exclusive.

Like me, earning money might be the motivation that drives you to start your small and simple business. But I also hope that like me, you find that the larger meaning of business is what keeps you excited over the long run. You might just decide to be in the “business” of positively changing the world for the rest of your life.

The fact that you have read this article validates the meaning I get from this part of my own businesses. I am first and foremost a real estate investor, but I get enormous satisfaction and meaning by sharing ideas and insights with fellow entrepreneurs. Thank you for lending me your time and attention.

Do you like to keep your own business small and simple? Or do you have arguments for getting bigger or growing faster?

I’ve love to hear from you in the comments section below!

About Author

Chad Carson

Chad Carson invests in Clemson, South Carolina. He also writes at coachcarson.com about using real estate investing to retire early & do what matters. For practical advice each week — join his free newsletter at coachcarson.com/newsletter.

20 Comments

    • Chad Carson

      Great question, Mark. We took a one month trip out to your neck of the woods in Colorado when our youngest daughter was a few months old. It was easier to carry her around, even hiking on trails. We took a bit of a break and stuck to beach trips and 2 week jaunts, but we are dipping our toes back into international travel with a 2.5 week trip to Costa Rica this May. If that works out well, we think we’ll push out to a month or more next year, but we’ll see.

      What kind of travel plans are you working on, Mark?

  1. Jay C.

    Thank you for a great post and the best one I have read on this site for sometime. I now have the “just bought 7k unit apartment building for no money down” posts on auto delete. They are not realistic and seems none of these posts bring up what you did……RISK, Those mega deals fail to leave out the fine print. The part about your on the hook for that $1,000,000 you got your investors to put up for the apartment complex. I agree that you don’t need to walk in the room with your shirt have buttoned displaying your gold chain collection to be successful. You have seen that guy haven’t you? Thanks for the post !

    • Chad Carson

      Ha, ha. I hear ‘ya on the 7k apartments for no money down topics. Yeah, risk is that ugly concept that sneaks into equations whether we like it or not. Even beyond the obvious financial risks, like large amounts of debt, I wonder about the risk of having to use up your health, personal time, and family relationships trying to satisfy every partner, banker, customer, vendor, and everyone else but yourself.

      This isn’t to say that we entrepreneurs don’t take risks. I know I have. But I’m just trying to help us quantify the risks, financial and nonfinancial, that are not so obvious. Then if we choose to get big, because there are certainly benefits, we’ll do it with open eyes.

      Thanks for commenting.

  2. Doug Sheridan

    Thanks for sharing a fine bit of life wisdom Chad.

    “You can’t drive a Cadillac with a broken back” as Billy Joel said!

    At 53 I’ve seen many people burn out, especially when they get pockets of cash and are still unfulfilled. This can be a horrible revelation that many money driven folks never recover from, especially if they’ve missed out on family and their health begins to fail.

    There are also the obvious sound economic reasons for slow growth in R/E. There are dozen’s of “boom and bust” stories right here on BP.

    Take it from the old guy; enjoy your kids, keep your health up, and seek lifestyle businesses that allow one to work at one’s own pace as you pointed out.

    Cheers,

    • Chad Carson

      Well-said, Doug. ” Can’t drive a Cadillac with a broken back.” Lol.

      I agree that there are sound financial and non-financial reasons to pace ourselves. And like a road race, some entrepreneurs have the body and fitness to handle faster speeds and a lot of others need to stick in the middle or the back of the pack. That’s my main message … don’t worry about hanging with the sprinters if you’re not in shape for speed or if you’re having to drag your kids and family along while trying to keep up:)

  3. Marina Sud

    Andy McFarland is a good example of growing a business, more than one actually, and being able to spend his time NOT working. I don’t know about “fast”. What I do know is some of us don’t have the luxury of keeping things slow and steady, for a variety of reasons. Also, some of us may actually enjoy the growing/development part! Systems work. Teams work. With careful planning you can significantly grow your business and still have a life.

    • Chad Carson

      Hey Marina, no doubt the growing/development is fun. It’s a game as far as I’m concerned. If you or anyone wants to get big because it makes your life more fun and fulfilled, do it. I’m more concerned with people talking as if they are getting big for the amazing lifestyle, when at least in my experience it doesn’t usually happen. I’ve never met Andy, and as I said I’d love to see more examples to prove me wrong. Maybe we could all learn from them.

      As for those with lack of time, even if we need to make money fast I’m not so sure the bigger, faster approach is best. Excuse me if I use a football analogy and you care nothing about the sport, but some teams try to come back at the last minute to win a game. They call this the 2-minute drill. The ironic part is that throwing really long (big, fast) passes won’t win. Short, smart, deliberate passes actually achieve better results if your goal is a comeback. I think it works the same with financial comebacks. Just because you need to move fast doesn’t mean hail-mary, risky strategies will work.

      • Kevin Yeats

        Five (or six) people who represent the antithesis of your premise. These sharks have managed massive wealth through growing their own businesses … sometimes starting with only an idea and very small amounts of money … but with a clear focus on a defined target.

        Read Mark Cuban’s book (the first 3 chapters available free – search for it). Or read his blog to learn about focus.

        It is possible to build wealth quickly but the entrepreneur must be focused and learn to delegate and negotiate.

        • Chad Carson

          Kevin,
          Thanks for the explanation. I don’t doubt the Sharks or plenty of other entrepreneur’s have successfully grown fast or built enormous wealth. My main point is that this model is not the sure path for most small entrepreneurs to reach their financial goals. These sharks are the NFL quarterbacks of the business world, and they can handle the pressure and the skill required to focus and grow in that way.

          I’m writing more to the part-time entrepreneur who wants to grow him/herself into a passive portfolio of rental properties or notes without taking the risk or spending the inordinate amount of time required during the focused growth phase. Shark tank business models are fun to watch on TV, but most of us can reach financial independence without venture capital, detailed business plans, huge teams, and breath-taking growth.

          I’m glad there is variety to keep it interesting. To each his own.

  4. Jay C.

    I bought several homes from “careful planners” in 2011 when the market tanked. Seems things look really good until they don’t.

    Since we are commenting on Bigger Pockets…some here give some great advice……some pass out some really poor advice and it appears the postings are money driven…pay per post…..just a guess cause some of its just nonsense doing more harm then good.

  5. Chris Clothier

    Hi Chad,

    First, I think you wrote a really nice article today. I want to throw a couple of comments at you and as a fellow writer I know you could have probably written all day on the topic from all points of view, but their is limited time and space…so I am just offering a counter view! I know a few entrepreneurs who share your sentiments about growth. They operate from an adage of “stay small and keep it all”. For some of them it works well and others have failed as entrepreneurs precisely because they chose to stay small.

    In my experience and depending on the actual business itself, none of the advantages you mentioned about staying small are exclusive to small business entrepreneurs. In my experience, stay small and keep it all entrepreneurs are the exact opposite of what you wrote. They can’t afford to be away from their business at all because they choose to not build a team to help them. The size of the portfolio or company are secondary. The size of the team is what holds them back. No matter how big or small, they choose to never grow their help.

    If you set out to use real estate to gain some level of independence and free yourself from working for someone else, then your plan really should never include trying to grow big and fast. Technically you can call yourself an entrepreneur and you may hire a person here or there to take tasks off your plate and free your time, but growth and the time it take to get there should all be functions on your plan to simply leave the job world and work for yourself.

    On the other hand, for those who actually want to build a company or a business, their plan can and often will look entirely different. Those are the entrepreneurs whom I have seen fail with the stay small and keep it all way of thinking. They end up failing to be any good at any one thing because they are trying to do everything. They are the ones, quoting an earlier comment, who are driving Cadillacs with broken backs. They are the ones who take an extended vacation and hope that when they get back the list of issues and problems are not too over-whelming.

    If someone desires to build one of those over-rated real estate businesses, I hope they read your article for a couple of reasons. 1. They need to know that there are many different ways and different reasons for wanting to be an entrepreneur. They need to be clear why THEY want to be an entrepreneur and the type of business THEY want to build. 2. It will motivate them to build the business they want without giving up the benefits you mentioned of staying small. I am a perfect example, along with my family, of starting with buying just one house and building a company that today buys between 600 and 700 a year. With an incredible team and great leaders, a big, fast-growing real estate company has been exactly what we set out to build. And yet today, our lives are exactly the way we have planned them and incredibly rewarding.

    Good stuff today – I appreciated reading the article. Chris

    • Chad Carson

      Chris,
      I REALLY appreciate the comments. Unlike Ben Leybovich, I don’t know it all and welcome the counterpoint (where are ‘ya Ben?:).

      You made some awesome distinctions. What I liked the most was reiterating that for some people growing big is great while for others it does not make sense. The key is to figure out your goals and match those to a strategy.

      What you and your family have done is amazing, and you fit into the category I described in the article of entrepreneurs who are moving the world, making huge impacts, and hopefully also big out-sized profits:) I think we would agree that it takes a lot of planning, leadership, energy, and tenacity to successfully grow a big business. True growth entrepreneurs and leaders of teams are special individuals who get rewarded for that uniqueness.

      For those who love the business game, who can’t imagine doing anything different, who love the boldness of a huge challenge, and who understand the risks and the rewards of getting big, learn from someone like Chris and shoot for the stars.

      But for those who just got into real estate to replace their job income and then eventually to live off of passive investment income, my main point is that you don’t have to get big to do that.

      Step #1 is like Chris said, you can start off doing everything in your business and make some money for a while. You can learn while you earn. This won’t free up your time, but it’ll free up who you have to answer to. This is wonderful in itself.

      Step #2 is the big fork in the road we’re discussing. To get out of the “stay small, do it all phase” most think they have to get big with staff, huge syndication’s, more risk, etc. I have found there is a middle ground, especially in the real estate business. You can effectively systematize and outsource enough so you don’t do all the work and yet still avoid the challenges of a huge, growing business.

      Communication technology, cloud property management systems, remote payments, and a lot of other recent innovations have made much of this small but systematized business possible where it wasn’t 10-15 years ago.

      But it also has to do with capital allocation strategies. You can plow $100,000 of retained earnings into hiring staff, new marketing, and other growth investments, or you can pay-off a debt with a large payment and free up $1,000/month in cash flow. The second choice doesn’t add any new overhead yet increases my forever cashflow by a significant amount. Eventually getting 10-20 free and clear houses, for example, can generate a nice income without a lot of hassle or overhead.

      There is much more to discuss, but that is why we have future articles:) thanks again Chris. It would be fun to do some 1-1 business philosophizing sometime:)

  6. Joel S.

    Chad.
    You said that you have been building Your business for 12 years with a partner. If the partner is someone other than your wife you may have a smaller business than you think. I have had bad experiences with partners owning single family houses.

    • Chad Carson

      Hey Joe,
      thanks for the comment. I don’t recommend partnerships owning single family houses to everyone, but mine has worked incredibly well. We have closely aligned long-term goals, and all along we have clearly articulated our respective roles and contributions.

      Relative to this article, having a partner has also allowed me from the very beginning to have someone other than an employee to watch the shop when I’m not around (and vice versa).

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