In this episode, commercial construction expert Colin Higginbottom discusses how to successfully scale your real estate business. Scaling your business the right way results in more productivity and makes your life more enjoyable. Colin explains how sometimes that means business owners need to step out of their comfort zone. Colin tells his story of reinvesting his equity, conquering his fears, and hiring the right people to allow him to continuously scale his business and take it to the next level.
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Hiring The Right People & Scaling Your Business with Colin Higginbottom
Hey everyone, Jeff Rutkowski here, and welcome to this week’s episode of the FortuneBuilders Real Estate Investing Show. I am pumped today because I actually have a powerhouse in the booth here with me today, actually one of my personal friends, personal mentors, that has built and scaled a $50 million company over the last 16 years. So I’m going to bring him up in a moment. I’m excited for you to meet him.
Word of the Week
But first, as always, we’re gonna get to the Word of the Week. And the word of the week this week is scaling. That word may or may not mean a lot to you right now, but I promise you by the end of the show, you’re going to think that word is pretty sexy and pretty powerful. But a simple definition actually, that my guest gave me today was simply: enlarging your competency and your capacity to basically build and scale an organization. Wherever you are right now, whether you’re looking to launch a business, whether you’re doing 10 deals a year, 100 deals a year, there is another level you can get to, but we have to know how to scale and grow into that. So I’m excited. Let’s get into the show.
Scaling A Company
So, scaling. I stole that definition from you to open up the show: “Enlarging your competency, enlarging your capacity”. Yeah. So keeping in mind, we have all listeners, mostly in real estate, looking to scale from one property a year, to 10 properties, to 100. Define scaling for us. And can you share your thoughts? Let’s get into some conversation around that.
Yeah, well, you really defined it well, or I defined it well for you. And yeah, but the reality is, wherever you are, there’s the next level. And a lot of times, we can get caught up with the fact that we want to be seven, eight levels ahead of where we are, right. But you can never scale from level one to level eight. You go from level one to level two, and it’s very simple.
Enlarging Your Capacity and Competency
Level one to level two has to deal with an increased amount of capacity. In other words, if I’m going to have one property and go to two properties, I need an increased amount of money to put down on the property or an increased amount of money to remodel the property or an increase of cash or something that has a capacity oriented thing. And then the other thing I need is a higher level of competence. Yes. And so to go from one house to two houses, or to go from one employee, to two employees, that’s where I have to grow my capacity, and I have to grow my competence.
So the question is how do we do that and one thing we were speaking about also, before the show, is how you scale from level one to level two usually is different from how you scale, for example, two to level three. So, what are some tangible techniques that we can give the audience that, maybe they hit a ceiling, and they’re looking to bust through it?
I’ll share a couple of big mistakes that a lot of us make when we’re scaling when we’re getting help. Let’s say my primary ability to generate income, that’s not real estate. Because if I’m going to do more real estate, I can’t stop doing the thing. That is my highest-producing thing, right? And so a big mistake we make when we’re scaling is we get away from the thing that is our number one producer, and we think we’re gonna hire somebody to come sell for us, right? And so what we need to do while we’re scaling is not hire somebody to come scale for us if that’s our best producing thing. We need to hire somebody that’s going to free us to do more of what we’re remarkable at.
Know What You’re Good At
And honestly, Jeff, the secret to enjoying scaling is not more stuff. It’s you and I doing more of what we love and more of what we’re good at. When you’re starting a company, you have to do everything. You have to wear every hat. You know, that’s fun for a season, but it gets tiring. You got into, you know, design school because you love art. And now you started your own design company. And now you realize you’re in payables and you’re in bookkeeping, and you’re on the phones, you’re not doing art anymore. You’re doing art 10% of the time. So scaling gets me back to what pays the bills and what I’m good at, what I love, and what recharges me. It’s not worth scaling if you’re not being recharged. If you’re spending more time doing things you hate just for money, or just for increased revenue, you’re not thinking through the right lens of scaling.
I’ll give you a perfect example. I think sometimes the easiest way to get into real estate is to be a realtor, you know? So that’s how I started. Yeah, really? Okay. And, and so let’s say my brother’s a realtor. And I think one of the greatest hindrances to him scaling, was he had the fear of hiring help because you’re, I mean, come on, like, you’re already going from sale to sale and big commission check. You’re leaving fat to like, living skinny. And so it’s difficult to take on somebody else. If you want to scale, you can’t scale if you’re not willing to be uncomfortable. You can’t. There’s no way up that’s easy or comfortable. And if you think, probably the greatest myth to scaling is there’s an easy way or a comfortable way. There isn’t one. They don’t exist. I would say, also a common mistake is we try to replace what we’re good at instead of supplementing what we’re not good at. Is that clear?
Oh, no, it is. You know, what we teach our students all the time, Colin is basically your highest and best use as a real estate investor is basically closing deals, finding deals, and finding money is really what it comes down to. And really when you start this company, as a real estate investor, you’re looking to take everything else that doesn’t position you for those two activities. But I remember feeling the same way. I have a military background, I love the chain of command. I love org charts and I remember starting my business, and I had the marketing department and the financing department and acquisitions. But then, you quickly realize that alright, you are everything, and it’s really the key secret to success, and this is why I wanted to bring Colin on is just how do we consistently fire ourselves. So have you found that? Is that the approach that you’ve taken? Did I set up this area in my company? I get it up and running? Or maybe you don’t? And then you’re stepping away, you’re plugging someone else in? Is that kind of the way you look at it as well?
It depends on what level you’re at. So I mean, the further you get into scale, the more specialized you can be and you can hire your competence. But when you’re brand new it’s trickier, and you have to pick which competencies to hire because you can’t hire 10 people when you’re going from one person to two people. Sometimes, you’re going from one person to a part-time assistant.
So you need to be very specific on what you really need help with. For me, I knew I was good at vision, I was horrible at execution. Horrible at the organization. So the first scale for me was getting somebody who could organize my brain, and I could share and get everybody excited, or get myself excited (was the only person I could get excited back then). But then what happens is if vision isn’t met with execution and organization, it starts to wane.
But when you can meet vision with execution, I needed an executor. And so the first hire I made and I might even have gotten a little bit lucky happened to be an extraordinary executor. She would actually get lit up by vision. I’d say we need to go to point B, and she would just get all fired up about how to get to point B, and then we would get there to point B, right? What happens is when you get from A to B, you’re getting really excited, and you start seeing C. I think depending on where you are you have to select where you need the most help to get from A to B. Not to Z. And I only have a limited budget.
So you’re talking about not just competence. So I needed organization and execution that would accomplish Since that was lacking, yeah, but my capacity was with a budget I had. Yeah, I could only hire somebody for $2,000 a month. That was my first hire. I was paralyzed by that hire. That was like one of the scariest decisions, it was the first hire! Well, the only thing scarier than that was leaving a secure income. Okay, that was the only thing scarier than hiring somebody, was leaving somebody paying me every month.
This is real stuff, though. And I think a lot of times, and why I like to stay coaching young entrepreneurs is they’re still in those early stages, and those early stages are so important. So let me just say, capacity-wise, if my budget is $2,000, I need to put $2,000 a month to work. What is the number one thing that’s going to benefit or scale or level up to where I’m at with my $2,000 Budget? And I got to know myself too Jeff,
“I got to know what I’m not good at, and I got to know what I’m good at”
Yeah, I think that the whole analogy you gave, or not analogy, but your experience of being the visionary and needing an executor – I think that’s common in a lot of entrepreneurs. I feel we just naturally see things that others don’t. We walk into a dilapidated property and we see a beautiful thing where most people are turned off by that. So I feel like the weakness for many entrepreneurs is the organizational silos and things like that.
Really the unique thing about being a real estate investor, I’m not sure how much it applies in your company, but I remember first looking at okay, I need to grow, I need to scale. What can I take off my plate with technology? It’s amazing there are so many tools that are available. And then a virtual assistant from there, things like that. So really just taking that gradual approach. So any thoughts around that?
Absolutely, Jeff, and you know me. I’m a big proponent of convergence. And I feel that convergence is so powerful. Convergence is: you and I live in the most authentic version of ourselves. That means I’ve mastered what I’m good at. And I’ve also said no to the things I’m not good at. When you’re just starting, you have to do everything, but you have to work yourself out of the things you’re not great at and supplement those.
Run in Your Own Lane
The second component of convergence is running in the lane you’re supposed to run through. I think all of us need to be in some level of a real estate lane. It’s just determining, am I just going to be the money guy? Am I going to be the deal finder? Am I going to be the closer? What I think we miss is real estate is all the same and I have to be the same person to be in real estate. No, there are so many things that you can be exceptional at that you want to find that thing that makes you unique and find that lane, all of us have to be in real estate. I mean, you’re crazy if you care about investing to not have an aspect in real estate. But for me, I’m not the deal guy. I’m not going to go and analyze a property. But you know, I bet Jeff, I’ll bet with the way you work, I bet your brain loves that. I bet you can do it all day and it feels like time didn’t even go by. Oh yeah, it’s so true.
But here’s what’s important about convergence is I need to know that if I start looking at charts and analyzing stuff, and I fall asleep, and there’s drool on my face. That doesn’t mean I’m not created for real estate, it just means I gotta find my lane. Yeah, I got to find that thing that I do. And then I got to partner with somebody like Jeff, who can analyze a great deal. Because you can have all the capital in the world, but if you put it in a bad deal, it’s a bad deal. But if you can take, let’s say, my ability to raise capital, or my ability is to find capital within my existing business that I’ve been building for 16 years, and I got money to work with.
Collaborate
What do smart people do? The way they build their competence is they find somebody who’s in a lane like you are and I say, “Hey, can you help me place my money? I don’t know how to analyze this deal”. Maybe I want to learn how to analyze it, but what if I don’t? And I think this is where mistakes are made. We think I have to want to analyze a deal right? In real estate, it’s not true. Because I can create a partnership where I have a deal analyzer and a closer and money grabbers. I might be way more powerful in a collaborative environment.
And this is how scaling happens. Scaling happens when I learn to collaborate, which is the third component of convergence. Knowing a version of myself, know who I am (self-mastery). Running in my lane. Knowing what I’m good at – what I like, what I love to do, what keeps me up at night for the right reasons. And then the third is doing it with people. Who are the people that make you better? Who are the people that make me better? Who are the people that I make better? And when I can do business, this is scaling. Scaling should not be more miserable, scaling should actually be more effective, more productive, and hopefully more enjoyable. More enjoyable because you’re doing what you’re good at. And I’m doing what I’m good at. And together, we get synergy. One plus one is greater than two. And so that’s kind of the dynamics of scale that have helped me. It helped me when I was hiring one person. And now when we hired 15 people last month, it helped us win at that stage.
Team Building
I want to touch on one other topic that is really impressive to me – that a construction company is voted in the top 100 places to work year over year. So to me, that speaks to the culture you’ve created in the company, the atmosphere you’ve created, just basically how you treat your employees. As real estate investors, you could run this company with one or two employees, you could run it with 15 or 20 employees as CT Homes does. What are the keys to building and creating a great team, keeping them happy, and getting the most out of it?
It’s so funny because we’re at all these award banquets. We actually got tired of going to the award banquet. We just like the award, and we actually don’t even like the award. We like the fact that we have a culture. Because when you’re in an award-winning culture, that alone is the reward. Because you’re going to work with people you love, you’re invigorated. And there’s a couple of things we do.
We unapologetically recruit people to do hard work. And we don’t apologize that the job’s difficult. And we don’t apologize that it’s not easy and that not anybody could do it. We’re not offering ping pong tables, beer kegs, cool environments, and collaborative whiteboards. We’re basically offering people the hardest job they can imagine. But we’re also creating a team-oriented culture where you won’t be alone, and you’re going to exceed your own expectations in terms of what you can actually accomplish in this environment. You will be shocked at how much winning you experience in a difficult environment.
That is so true. So unapologetically, this is hard. A project manager, who deals with a bipolar superintendent on a project that’s dealing with a temporary certificate of occupancy and is an absolute, crazed lunatic, will be calling you regularly for one month of the year this year, and he will not make sense. But you’re going to have to figure out things in the middle of a storm, and it’s not going to be fun, but you’re going to win at it and you’re going to exceed expectations and earn trust. That’s like, crazy stuff.
Wow, so, what type of meeting rhythms, what are you doing strategically to acquire the most out of your people?
Hire the Right People
Number one, hiring.
“No matter how many people you’re hiring, never make a bad hire”
Never, ever, make a bad hire. How do you avoid making a bad hire? Hire slow. So even if you know that you know that this is the person for your organization, if you’re going to fit them into the team, the team needs to make the decision. So you create what we call him the gauntlet. So no matter what the hire is, we’ll pull people from our organization to have a say in the matter.
We never tell them “This is what we’re doing, put your blessing on it”. We say, “Hey, I feel like I really like this guy” (even if I love them and it’s a done deal) “I really like this guy, but I need your input. Can you interview him for me? Can you spend some time and let me know what you think?” Think of the ownership you create in somebody who’s a nonowner because they had buy-in? They were able to contribute to the decision. And then sometimes you’ll get feedback like, “Actually, not only that, but I could see this and that”. And so by opening it up to people’s opinion, you get more than two eyes, more than two minds. And then you get people who, when they join, and there’s a challenge, and there’s always a challenge. Come on. You can’t ever bring somebody into your organization, and it’s just perfect.
But if they have buy-in on hiring the person, they put their mark of approval on it, guess what they’re rooting for them, they’re helping them. But if you just force somebody and say they’re working with you, they’re in your department now. You put people in a position where they’re actually automatically defensive. And so we work in the psychology of team orientation. And always raising leaders. We’re never telling people what to do. We’re always encouraging people to make decisions for themselves and for the organization.
This is a scaling topic. I’ll tell you if you need to make every decision in your organization, huge limitations. I mean, we don’t take responsibility. We give it. We’re always looking to give responsibility to our team. And what we found is if people own their job, they love their job.
You’re empowering. And obviously one of the mindsets I see a lot, I’m sure you see it as well, someone looking to start a business, is that mindset: if you want it done right, you do it yourself. We all struggle with that. So how do you push past that?
That was the hardest thing for me. Because I was a meticulous servicer, and I liked profit. So I hate profit leaks. So if I know I could bring the job in at a 35% gross profit margin, and somebody else is going to let profit slip, I can’t let that go. But sometimes when you’re scaling, you actually have to trust somebody to do something you probably (for the season) are better at, Even if it fails. This is excruciating stuff. Oh, yeah, excruciating stuff. And so I think you’ve got to be willing to deal with a project that maybe it’s surface-level dips for a season so that somebody can learn how to service. Because if you got to go around and clean up after, number one, you’re going to be miserable. You’re not really scalable. What I’ve found is people who are extraordinary scalars scale themselves out of work.
That’s so true. What drives this whole business on the real estate side is your marketing. We deal with students all the time that they’re there working, working, working to get the marketing set up, and then they get a deal. Then they stop doing everything in the marketing department that got them the deal and get hung up on this deal. So really, I just feel like a lot of you even listening today are probably in that spot, just because I see that over and over and over again. So to translate what Colin’s saying into, maybe you’ve been the one in your business taking all the seller lead calls, determining motivation, scheduling the appointments. The sooner you pass that on, the sooner you’re putting yourself in that lane, your eyes in best use, what we talked about closing deals and finding money. In this case what else do you do just to create a culture?
Fire Fast
Hirings everything. Firing: fast or slow? Oh, immediate. I asked that question earlier, knowing what I know today. Would I still make this hire? If the answer is no, I have to move. Because here’s what’s happening. You’re talking about culture. Anytime you tolerate somebody who doesn’t belong in your culture, you’re sending a message to the rest of the team that they’re not valuable. You’re always sending messages. If you tolerate people that don’t carry the weight, and then there’s somebody in the organization that’s carrying 80% of the weight, and there are three other people that are just kind of tagging along looking like they’re doing stuff, you’re killing the morale of the producer.
I never looked at it that way. That’s, that’s powerful. We reward the producer all the time. The squeaky wheel never gets the oil, the productive wheel gets the oil. You can squeak all you want if you’re producing. If you’re not producing, you’re replaced. Unapologetic culture of productivity, unapologetic, we are in this business to be successful. If you’re on this team, you get used to winning, you’re gonna win here. It’s gonna be hard here. But we do not tolerate average. I mean, literally you and it’s not me driving it anymore.
You know, it’s getting back to that Jim Collins model: good degrade. He says, hire eight people to do the work of 10 people and pay them like nine people. Then what happens is when you create a culture of diligence and ownership, the team will chase low producers out. And so, that’s one thing. The other thing, Jeff, is we believe that people have gifts. If you put somebody who’s good at analysis in sales, they might hate their job. Right. So we try to get not only the right people on the bus, but in the right seat, and we do a lot of testing. We love Strengthsfinder, 2.0. That’s my favorite test. But there are a lot of great tests out there. I like Strengthsfinder, because it celebrates, yeah, the unique gifts of the person. And I feel like you get a far better return on investment when you’re working in your strengths. When I go to work, and I know that I’m contributing, I know that I’m adding value. I know that I’m doing something I’m good at. It makes it more than money.
Here’s the other thing, we don’t pay more than the industry, but we give the opportunity to be rewarded based on productivity if that’s your motivation. We have people that are not motivated by incentives. So why do I put everybody in an incentive program if somebody is not motivated by incentives? You have to find what drives people. If you want to build culture, people are individuals that have organizational things that are similar, but you have different ways to motivate and inspire and bring security to different people’s wiring. And we master this like, this is what we’re good at.
But I’ll say this, doing that for 10 people’s a lot easier than doing it for 20. So what you find as you scale from 10 to 20, all of a sudden, you’re fine. Your morale dips a little because the system isn’t in place to be able to manage that many people. So now you have to repair the system. Great book (if you’re interested in scaling): Dr. Sam Chan “Bigger, Faster Leadership”. He talks through the Panama Canal, and how the Panama Panama Canal was the number one source of shipping to get to the West Coast. And vice versa, but the size and speed of business outgrew the size of the canal while the ships were growing at 10% a year and size. So they no longer fit through the canal. And so they had to rebuild the Panama Canal to accommodate the size and speed of business. That book is one of the greatest books if you’re interested in the middle of scaling and wondering what the heck am I doing?
Summary
Well, I appreciate you sharing the wisdom, man, we’re definitely gonna have to get you back in here, man. So, so much more to talk about, but so little time, but I appreciate your brother, what an honor. Appreciate having you in here. Appreciate you guys tuning in this week. As always, and here at Fortune Builders, we’re on a mission, as I always say, to empower your purpose through financial education. So if you know anybody that could benefit from what you heard today, share it. Share it. We want to get as many people building that financial education, just being able to live life on their own terms. So definitely follow us, share us, keep tuning in, and keep giving us feedback. One of the reasons I wanted to bring Colin on is I got a lot of feedback on who are some of your personal mentors, or some of the people that you go to just for business advice. So, anyways, appreciate you guys. See you next week on the FortuneBuilders Real Estate Investing Show.
