Real estate investor and business coach @ themelissajohnson.com.
Growing a successful business is a lot of hard work, but it can also be very rewarding. Most people I interact with in the real estate investing space do not have formal business training but have built successful organizations through self-education, hard work and experience. When I look back in my own organization, I am able to identify several key factors that have played into our team’s success.
1. Clearly define your company culture. Taking the time to explore and define your company culture with your team ensures that you have a good filter for decision-making. Hiring for cultural fit, not just skill, makes a huge impact on your organization. It means everyone in the company has a sense of belonging, which creates an environment of trust, innovation and accountability.
I didn’t realize how critical it was to hire for fit until I hired someone who just wanted to be a “cog in the wheel” for a position on my team. After weeks of observing I realized that this person had no apparent desire to improve themself, and upon recognizing the negative effect this was having on the rest of the team, I made the decision to cut ties. It also led me to bring back a core value — always improving — that I had initially thrown out when I didn’t realize how important it actually was to me.
2. Document your systems and processes. Having clearly outlined systems and processes in place allows for future growth. When your operations are documented, you can easily hire and train new team members. Documentation also allows you to more easily delegate tasks as needed. Periodically reviewing the systems and processes in your organization helps you spot inefficiencies quickly and implement effective changes.
3. Set goals. When you take the time to lay out the short- and long-term goals for your investing business, it helps everyone stay focused on the most important tasks. Monitor progress by meeting regularly with your team to identify and discuss any issues that may hinder the achievement of those goals. Make sure that when setting goals, you are giving a reasonable timeline and providing flexibility in the implementation if necessary.
4. Know your numbers. It’s hard to know where you’re going if you don’t know where you’ve been. Having a good working knowledge of your numbers helps you make informed decisions. It helps determine where to spend and where to make cuts. Knowing your break-even points helps you know where to focus dollars and energy. Utilizing a budget, understanding marketing ROI, calculating gross and net profit margins and knowing your conversion rates all contribute to the financial health of your organization.
A few years ago, I took a deep dive into all of my numbers and was shocked to see how much we were wasting on ineffective marketing, software and services. After that, we made cuts, redistributed funds to more profitable endeavors and tightened up budgets and timelines — all of which contributed to increasing our gross profit margins.
5. Create a solid business plan. Your business plan is the road map that guides you to the financial freedom you’re most likely seeking. Understanding your ideal client, mission statement, operating principles and strategic objectives allows you to create a plan for your business that aligns with whatever goals you’re trying to achieve. It’s also imperative to have contingency plans in place in the event something happens to you or a critical member of your team.
If you’re just starting in REI, or even if you’ve been running your business for a while, taking the time to evaluate these five areas in your own company can be extremely effective. Having a healthy organization with clear direction, a great team and a solid business plan and understanding your numbers all contribute to a successful business in the long run.