Setting up your own real estate business can be daunting, as it requires an extraordinary set of logistics and skills to execute those logistics. If you find yourself in this boat, then surely, you would appreciate any real estate-specific business management tips thrown your way. Keep reading for some valuable tips for managing a business effectively so that you can make your dreams a reality.
Tips For Managing A Business Effectively
Any seasoned investor will tell you that spending time setting up your business before launching it is just as imperative as the actual execution. Careful planning can help you avoid making some expensive mistakes. Of course, there will be some trial and error, but there’s no shame in picking up as many tips as you can prior to setting your business plan into motion.
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1. Start At The Beginning
Long before you launch your new business, it’s important to come up with a plan for how your business will be run, and how you’ll be turning a profit. From the lens of a real estate investor, managing your own business means that you should be asking yourself some important questions related to your business plan, identifying customers, and planning your finances.
The very first step that precedes setting up any type of business is writing your business plan. This exercise may seem tedious, but the purpose is in forcing you to ask yourself some questions that are imperative to mull over. For example — What is your value proposition? How do you plan to execute it? How will you acquire customers and grow your leads? What’s your compelling reason for having the business? Include as many details as you can.
Next, identify your customer or target market. Be as specific as you can. Not just “homebuyers,” but “first-time homebuyers looking for starter homes in Imperial County, California.” Create a profile for your ideal customer containing both demographic and psychographic information.
The last step, or at least of the ones proposed here as there is no set limit on business preparations, is planning out your finances. It’s key that you understand the numbers of your new venture so you can confidently answer a very important question: What can I do to learn how to manage my own business? How will I generate income in my business? By when? How will I finance my start-up costs? How do I intend to grow the business from a fiscal standpoint? Defining a blueprint ahead of time will put you leagues ahead of your less prepared competitors.
2. Build Your Infrastructure
Luckily, as a real estate entrepreneur, there aren’t massive start-up costs that are typically associated with those in other industries. However, there are certain business expenses that you should be aware of before you take the plunge. Some of these costs include setting up your business entity, creating marketing materials, and building your team.
The first step you should take in managing your own business is setting up your business entity. For most real estate investors, this will be in the form of a Limited Liability Corporation (LLC). An LLC helps to protect you and your private estate from any legal or financial liabilities down the road. It also helps tremendously come tax time. Get more tips on how to form a real estate LLC.
You should be aware by now that a large function of real estate investing success is good marketing. This includes things like your website, a credibility packet, direct mail postcards, and even the email database tool you use to communicate with potential leads. Though you may not need every single item of your marketing funnel completed before you get started, it’s important you have as much set up as possible before you hit the ground running.
Finally, you’ll want to consider building your team. When you’re first getting started, it’s perfectly okay to be a one-man show. Expect to execute a lot of menial tasks yourself. However, as you start building up your business and it becomes financially feasible, you can start outsourcing tasks — and then eventually building up a team — to help free up your time so that you can focus on big ticket items. The next section expands on this topic more.
3. Let Earnings Dictate Hiring
Assembling your real estate team before you have a substantial operating budget is strongly discouraged. Hiring individuals with IOU’s or with the promise of paying them back at a later date is not only unprofessional, it poses a legal liability. Regardless of how confident you feel about your business, preempting the hiring process before you are financially read could end in disaster. Adding overhead to your current business model before having the revenue to offset the difference is clearly not a good idea.
Instead, proceed to work alone, or with a partner, until your income can support the additional person. A good rule of thumb is to wait until approximately 30 percent of your income can accommodate another salary. Once you have enough money to pay yourself out and an additional teammate with the roughly 30 percent of your income that should be dedicated to overhead costs, go ahead and take the leap. Then it’s a matter of rinsing and repeating to add subsequent real estate team members. Check out this beginner’s guide to hiring your first employee.
4. Become Proficient In Your Own Systems
Those investors looking to grow and scale their businesses need to realize one thing: for better or for worse, future hires will tend to replicate the individual they learn their skills from. As such, it’s absolutely imperative that you are as familiar with the systems you intend to teach your team members as you will expect them to be. In other words, you must demonstrate an increased propensity for every task in your business if you hope those you hire will do the same. You are the sole person responsible for teaching them their obligations. They are going to carry out their job exactly as you instruct, so make sure you know what you are talking about when the time comes.
5. Create A System For Everything
To put it simply, systems are step-by-step instructions on how to complete a task or a set of tasks. Every task to be carried out on behalf of your business should be accompanied by a set system that allows the person doing it to replicate it to your standards on a regular basis. Tried and true systems are an efficient way to make sure things get done correctly, even without your direct oversight.
What’s more, systems can be implemented in everything your business does. From ordering office supplies and hiring employees to finding deals, everything can be made more efficient through the use of proven systems.
It’s worth noting, however, that the importance of systems is magnified in the event a company is trying to grow its employee base. If for nothing else, it’s each individual system that will allow the owner to place each employee in a role and still maintain similar expectations. In the very least, the employee will have a strict set of directions to follow; directions that have already proven successful in the past. Be sure to educate yourself on the process of systemizing your business.
6. Tweak And Improve
It may take a little while, but once your business is up and running, it’s time to look for areas where you can improve and optimize. Some methods for doing this include continued professional development, routinely looking for ways to make small improvements, and finally, finding ways to optimize your work-life balance so that you can be the best business owner you can be.
Starting with professional development, the importance of continued education cannot be stressed enough. It’s important to keep tabs on your industry. Whether it’s gathering more data about market trends, or mastering the latest social media marketing strategy, always be open to learning new things that can help your business.
It can be tempting to look for huge, earth-shaking improvements that will radically boost your business. But the key to long-term success, whether improving your website conversion rate or simply shopping around for a cheaper graphic designer, is to look for opportunities for small tweaks, that when put together can lead to consistent efficiency and improvement.
Finally, remind yourself that you can’t be all business all the time. Sure, you’ll have to make some sacrifices when you’re first starting up your business, but once you get to a good place financially and operationally, be sure to make time for yourself and gain some balance. Working non-stop on your business without a break is not only a recipe for burnout, but deprives you of the chance to realize huge business gains found outside your industry. Make time for recreational activities and charitable functions (anything that helps you recharge your battery). You might just find it’s a new pipeline to a whole new side of your business, and you’re also opening yourself up to new and creative ways to meet clients.
Summary
The above business management tips are enveloped in a general theme of careful planning and organization. This rings true no matter what industry you happen to be in. Get started by writing out a well-developed business plan, where you answer for yourself tough questions such as “who is my specific client profile” or “how will I get my funding” or “at what financial checkpoint can I start adding employees to my team?” Once you launch your business, you can then switch your focus to setting systems into place so you can scale your business efficiently. Finally, you can find avenues for continuous improvement and growth.
Do you have any business management pro tips that you’re willing to share? Please do so by leaving a comment in the section below:
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