Scaling: Appetite vs Competency
Over the years I’ve been involved in lots of conversations with vendors, budding investors, and in more recent years, consultancy clients. I have made the following observations:
People say that they scale to their level of appetite, but realistically they scale to their level of competency. And;
People make assumptions about scaling that are almost always incorrect
That brackets most of the conversations I ever have with people looking to scale their property businesses. From there, I often hear it said that you “only need two things” to scale a property business - deals, and money. It’s a vast oversimplification, and whilst you most certainly need deals, you can do them without much money (in the now, anyway), and/or exclusively by using other people’s. So not “no money down” - that’s for the marketeers - but “none of your own money down”.
It is hard to scale a business doing those deals alone, however. It is possible - but it is a strange objective to have. What are you doing with your own money you are making with those deals, if you are not looking to put it into property? Living on it at the same time? Well, that bears yet another challenge for scaling.
I’m going to concentrate on the second point above, because the first can be resolved if you are open and honest enough to firstly know where your shortcomings are, and secondly seek out whatever help you need in whatever form you need it to remove point one from the equation.
What are some of those assumptions that I am talking about, then?
Is a bigger business a better business?
Not necessarily. As soon as you get past the point where you can’t visit every property that you purchase, you’ve lost something. Efficiency. Leanness. Optimisation from your own eyes. Now, like everything, you can build systems and processes, and find great people, who perhaps can do that job even better than you can. Indeed, that should be the goal. But then you have to make sure they are appropriately motivated and compensated - and that will start dividing the pie. You have to pay for their time and expertise even if they are following your systems.
That spreads to every system and process within your business. I have seen many investors who are doing a great job as a property manager, tenancy co-ordinator, financial controller, asset manager and director of operations - and earning £10,000+ a month doing so. Well, they should be - because they are doing 5 jobs there. Admittedly, not all full-time, but they are certainly working many more hours than 9-5 office staff, whilst also taking significant risk. Risk, plus effort - usually obsession. Then they wonder how they can do any more - but the reality is that they can’t with their existing setup. Something needs to change.
The First-Hire Hurdle
That first hire is so critical. I see so many stuck before making that first hire - not quite as many would-be investors as I see stuck before making their first property investment purchase, because there are many of them - but it is a natural point to get stuck. They won’t do it as well as I do. They won’t take as much care as I do. They won’t be able to do what I do.
Here’s the tough love. They absolutely can. Indeed, they can do it BETTER than you can, if you recruit well and you build the right systems. There can only be one of a handful of problems - if it is attitude or behaviour, that is probably terminal but you need to get good at weeding that out before it starts. If it is competency, you need to check whether the staff member has had the appropriate training. 90%+ of the time, it is more likely your fault for not providing appropriate levels of training.
Training and Trusting Others
If this is holding you back, learn how to train appropriately. Did you know that people tend to learn in different ways, and there are (broadly) three different ways in which people do learn? It’s worth putting some time into. How would you know this unless you had trained people in another environment? You wouldn’t, unless you read about it somewhere….
It is worth putting that effort in, because if you don’t, that glass ceiling will happily sit above you for all time…..something to think about as we roll into autumn!
