Marginal Gains: How “1 Percent Better” Triggers Massive Success

by | BiggerPockets.com

What makes one person better than another at a given activity?

One answer is better mastery of the fundamentals, of course. But if both people have the basics down, then what separates them?

The little things. The details. What one person bothers to account for that the other skips over.

No exploration of marginal gains theory would be complete without a nod to the man who popularized it, Dave Brailsford, so let’s talk cycling!

Cycling? Huh?

In 2010, Dave Brailsford took a tough job: taking a terrible team, the British national cycling team, and making them world champions. Specifically, the goal was to win the Tour de France, the ultimate cycling race.

Which the Brits had never won. Ever.

Brailsford was a huge believer in marginal gains theory, which he explained as “the 1 percent margin for improvement in everything you do.”

Before going nuts with the details, he started with the obvious. What were his cyclists eating? How could their training regimen be improved? What kind of bike equipment did they have? What wasn’t the absolute best?

In other words, the fundamentals. If you haven’t mastered the fundamentals, you have no business focusing on anything else.

But assessing his team on the fundamentals didn’t take long. He made improvements wherever possible, but then moved on to granular level.

Brailsford started brainstorming list upon list of every detail he could possibly imagine that impacted his team’s performance. Sleep was a big one—how could he make sure his team was well-rested before each competition?

daily-habits-entrepreneur

By researching the best pillows and bringing them with you on the road for competitions. And don’t stop there, either—find the best mattresses, and bring them, too.

It went on and on. He noticed that dust and grit were causing wear on his team’s bikes in the training room, so he had the floors painted white so the cleaning staff could more easily keep the facilities perfectly clean.

He even found the most effective massage gel for his team!

Long story short (or is it too late for that?), his approach worked. He thought it would take five years for his team to accumulate enough small advantages to win.

It took three.

The British cycling team won the Tour de France in 2012 and took 70 percent of the available gold medals in the 2012 Olympics.

It’s Not About the Highlight Reel!

Everyone loves the highlight reel. They love focusing on the game-winning play or looking for that one magic bullet.

Small changes can make a huge impact on results, but not the way marketers want you to believe.

How often have you seen “this one trick helped her lose 200 pounds!”? Spoiler alert: She did all the fundamentals right—and did a lot of little things right, too. One trick may have helped, but it didn’t do everything.

“She” (let’s call her Sally) probably started by cutting out desserts. Maybe she then eliminated alcohol or severely cut back.

Then Sally started cooking all her own meals to keep control of what she put in her system. She started eating more vegetables and lean proteins—and less of the empty carbs and fatty meats.

Gradually, she scaled down her portion sizes.

Exercise was slow at first. At first, it was a two-minute walk around the block every morning. After a few weeks, she added an evening walk. These walks gradually grew from two minutes apiece to five, then to 10.

Sally started doing short, light jogs. Then runs. Later, she added weight training and yoga.

Eventually, Sally was paying attention to when she ate what foods. She had protein within an hour of getting up every day and within an hour of her (daily) workout. She spaced small meals throughout the day and didn’t eat within four hours of bedtime.

But guess what? No one wants to hear about all this work that Sally did! What they want to hear is “I took this pill and then lost 200 lbs.”

Forget the highlight reel. Focus on the fundamentals at first and then get increasingly fanatical about the details.

Marginal Gains & Real Estate Investing

Let’s get tangible here. What makes a good real estate investor?

Here are a few of the fundamental skills:

  • Identifying and securing good deals
  • Implementing high-quality, affordable repairs in a timely way
  • Quickly placing high-quality long-term tenants in vacant units
  • Keeping tenants performing well (paying rents on time, treating the property well, etc.)
  • Implementing exit strategies to sell properties when the time is right

I could go on, but you get the idea.

Each of these broad fundamental skill sets contains dozens of sub-skills and activities. For example, consider what’s involved in placing high-quality, long-term tenants.

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Related: Yes, Financial Success Is Simple. But No One Said it Would Be Easy.

That includes advertising vacant units. This, in turn, includes understanding your target tenant demographics and what advertising platforms reach them best. It includes how you photograph the unit. You need to understand what amenities are most important to your target tenant demographics and how to present them in an attractive way.

Then there’s an entirely separate set of skills in tenant screening. What reports do you run? How do you set minimum tenant qualifications for each rental property, and what qualifications are prioritized over others?

What references do you talk to? What questions do you ask them? How do you verify them?

How do you determine if an applicant will treat your property well?

There are always more details you can drill down into to make your processes that much better than your competition—which in real estate investing means being able to earn better returns in the same market than your competition.

Small Improvements, Big Results

First, take a step back. Look at the big picture. What are the most critical fundamentals?

Then start zooming in. What can you improve, even by 1 percent?

Most of these 1 percent improvements won’t revolutionize your business. Over time, however, they add up to create increasingly better results.

But as part of this ongoing process of identifying small things you can do better, occasionally you’ll hit a home run.

I talked to Seth Williams of RETipster.com about what small improvements he’s made that have made a big impact on his business. Here’s what he told me:

“I’ve been able to sell my properties exponentially faster by posting my listings in multiple markets, on several different listing websites. My listings get FAR more visibility and exposure this way, which gets results much faster than if I listed it once on the MLS.”

The flippers among you know: Turnover speed matters. A lot. It’s not just about carrying costs, but also about opportunity costs and held-up resources.

The longer each property sits on your books, the longer that capital is tied up with that one property.

That means it limits the number of deals you can do in a given year.

Seth knew that if he could move his properties faster, he could do more deals, which means he could earn more money. So, he started looking for small changes he could make to sell his properties faster, and it paid off. Big time.

Small Changes in Hiring: Big Changes in Revenue

Consider Mark Ferguson (of InvestFourMore fame) and his team of real estate agents.

Mark was losing a huge portion of his potential hires to competing real estate teams. This was holding back his office’s growth, while accelerating his competitors’ growth.

He decided to get granular on his hiring process:

“In the past, I would hire agents strictly so they could sell houses. We would provide leads, training, and mentoring, but many applicants ended up choosing other offices because of higher commission splits to them.

“Lately, we changed the way we hire agents. We now offer them hourly work on the team. They can help with marketing, my blog, paperwork, or other things we have to pay someone to do anyway. Instead of losing most of our initial applicants to other offices, we are now hiring 50 percent or more of the agents who interview.

“This means we can be much more picky about who joins and we have instant help with busywork at the same time.”

In retrospect, this probably sounds like an obvious solution, but it’s not. Mark had to identify why his prospective hires were choosing to go work for other brokers—the simple answer was “money.” But then he had to dig deeper into that answer: New real estate agents aren’t greedy to keep more of their commissions; they’re desperate for financial stability. They’re worried they won’t be able to pay their bills without a steady paycheck.

So, what did he do? He found a way to address their real concern about money by giving them reliable work while he trained them to become commission-producing agents.

An ordinary person would have just raised their commission to match their competitors. And in doing, they would have missed a huge opportunity that Mark only saw because he was willing to keep drilling down in understanding and improving his hiring process.

Related: Sorry, But Real Estate Investing is NOT Easy. Still, You Can Succeed if…

Marginal Gains: First an Evolution, Then a Revolution

Step back. Review your mastery of the fundamentals. Where can you improve?

Gradually drill down. What one thing you can do 1 percent better? Start there.

Tomorrow, improve by another 1 percent. It could be the same activity that you want to keep improving by 1 percent at a time. Just like Sally, starting with a two-minute walk around the block and bumping it up to three minutes.

Or it could be another aspect of your business or life that you want to improve by 1 percent. Sure, Sally’s been walking, but she also decides to cut all fried food from her diet. From now on, she’ll be baking her tilapia rather than pan-frying it.

What’s one thing you can do better today in your real estate investing business? Perhaps in your tenant screening, you’ll start walking through applicants’ homes before approving them to see how they treat it. Or maybe you start automating your rent collection to ensure the rent comes in on time every month.

Marginal gains are all about developing habits and systems that are a little better every day. Your results won’t be instantaneous, but they’ll be inevitable.

What can you do today to make your business systems and habits 1 percent better?

Weigh in with a comment.

About Author

Brian Davis

Brian is a landlord and long-time rental industry expert, who teaches a free mini-course on passive income from rentals at SnapLandlord.com. He's also preparing to launch a revolutionary rent deduction from payroll service. Swing by his website, SparkRental.com, for free resources and education for landlords, rental investors, and property managers.

10 Comments

  1. Joshua B.

    Brian thanks for another great post. As a beginning real estate investor, the idea that I can make small changes as I learn and see results in the future is comforting. Real estate is not a get rich quick scheme.

    This post again shows the small things do matter. with so much information out there its hard to know where to start. Reading this helped me take a step back and understand focusing on one item at a time is just fine; I don’t need to know everything tomorrow.

  2. Sandeep S.

    What a great post, Brian! I am a big believer in the marginal gains theory. I think that can explain so many cases of one investor getting “ordinary results” and the other getting “extraordinary results” doing roughly the similar things in the same market.

  3. John C.

    Absolutely. It’s attaining the small goals on a daily basis that eventually add up to being able to win the big one.

    Most people only see the big win. And they also tend to see it as “luck.”

    They don’t see all the hard work, the daily improvements, the small wins that you did for years in order to win the big one.

    It’s absolutely like the 2 minute walk that you easily up to 3 minutes. By the time the week is over, you may be walking 20 minutes and surprising a lot of people.

    • Brian Davis

      Yep! When people talk about “luck,” they’re usually only seeing the pivotal moment, from the highlight reel. They don’t see the years of preparation and work, the constant search for improvement, the mastery of the fundamentals!

  4. Awesome article! People get so enamored with whatever the latest trendy tactic is that they lose sight of their core business and the bigger picture of long-term results. Thanks for another great post!

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