By Attorney Michelle Flagg, inspired by the E-Myth Revisited
This article will discuss how to apply the principles of the E-Myth to your Real Estate Investment Business. The E-Myth Revisited, is divided into 3 parts, Part I: The E-Myth and American Small Business, Part II: The Turn-Key Revolution: A New View of Business and Part III: Building a Small Business that Works.
The E-Myth is a myth that says that small businesses are started by entrepreneurs (the E in E-Myth) risking capital to make a profit. The author Michael Gerber suggests that this myth rests on the fatal assumption that if you understand the technical work of a business, you understand a business that does that technical work. This fatal assumption leads real estate agents, carpenters, electricians or plumbers to become real estate investors because they know the technical work of real estate investing. They understand how much repairs will cost because they could do the repairs themselves. What most would regard as their greatest single asset is actually a liability. It is a liability because you are working in your business as opposed to on your business.
On vs. In
6 Rules to follow to make sure you are working on your real estate investing business and not just in the business.
1. Develop a model that provides consistent value to your customers, employees, contractors and lenders beyond what they expect.
2. Judge potential employees and/or partners by their ability to pass the real estate licensing exam, not by whether they are a top producer or how well they “fill in the blank”.
3. Have order in your real estate investing business.
4. Develop an Operations Manual.
5. Follow the Operations Manual to provide uniformly predictable service to the customer.
6. Pick a uniform color, dress and message.
Developing a Business Model . . . Systems Systems Systems
In running a real estate investing business, instead of Location Location Location, the focus would be Systems Systems Systems. In developing your system you must see your real estate investing as a business for producing results for the customer. If you are flipping houses then your customer is the end buyer, however, if you are buying to hold and rent, then your customer is the tenant. All roads should lead towards profits to you the business owner. You can reverse engineer your systems by focusing on the desired result for the customer.
Top Producers Need Not Apply
Your model should be dependent on your systems that are in place, not the individual itself. You would not need to hire brilliant salespersons or property managers. You should create a brilliant system through which good salespersons or property managers could be leveraged to produce exceptional results also known as profits.
Order in the Court
Your files should be organized and kept clean. You can obtain order through your systems. How are tenant files organized? When you receive a phone call for a potential lead what is the next step? Are files easily organized to facilitate obtaining feedback and being able to follow up on potential leads.
Operations Manual
Your systems should be documented so your staff can open up the operations manual and know exactly the steps they should follow. Without the Operations manual you cannot create the consistent results that you hope to achieve.
Trade Dress
Who buys ugly houses? Most real estate investors could tell you exactly who buys ugly houses. HomeVestors buys ugly houses. HomeVestors is a real estate investing business franchise. You may have seen their billboard signs or even received a letter from them. The author of the E-Myth suggests that you at least pretend the business you want to own is the prototype for 5,000 more just like it and that your business will serve as the model business.
In conclusion, I am not suggesting that everyone go out and get a HomeVestors franchise. I am suggesting that it is not about being a better real estate investor. The quest to be the greatest investor of all time is the “Technician” in you trying to come out and run the business. It’s about creating a better system for providing consistent results to your tenants and/or end buyers. Your system is comprised of scripts, investment criteria, tools for lead generation, checklists, brochures all which help you to generate profits in real estate investing.
- Analyzing a Rental Home Investment
- What is Enough?
- The 4 C’s of an Action Plan
- Finding the Best Mortgage Lenders
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I’m Interested in your thoughts.. Does 37signals or E-myth have the right philosophy for business start-ups today? http://www.purlem.com/blog/?p=38