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Being an investor is a lot like owning your own business. You have money and people to manage, important financial decisions to make, and systems that represent your strategy. While these assets and operations result in successful and profitable deals, there are always problems arising, just like in a normal business, that can slow down productivity and progress of whatever activity is currently in motion.
A problem with many investors is that they do not view their process as a business. They do not have a company name or multiple teams working below them. They do not have business rules, regulations, checks and balances, or protocol for the people they work with. However, the truth is, commercial real estate investing, no matter how small, is a business all itself. In order to optimize this fact, one should follow proven business strategy that allows great companies to flourish with very little constraint or pain.
A very important theory that is used not only in business, but in science, politics, sports, and even everyday life is the Theory of Constraints. This theory literally transcends all boundaries as it is a scientific principle that can be applied to any relationship between two or more subjects. You have all heard of the expression, “You are only as strong as your weakest link.” This is in reference to the Theory of Constraints.
What is basically introduced is the concept that you can look at a process or relationship as a chain. One link to another, that chain is reliant on the strength of the relationship. If it is a process, and each link is a task, then each task must be working optimally so it does not weaken the chain. If one link becomes tired, lazy or behind, then the chain is all together weaker and ineffective at producing the result.
At any one time, there can only be one constraint. You must tackle that constraint, and then another may appear. However, at that time, there is only one constraint to attend to. In order for a process or system to be working 100%, each link must be strong. If not, you suffer from inefficiencies; sub-optimal performance and a complete slow down of the process.
Do you find that there are areas in your business of commercial real estate investing that you are not pleased with? Are there areas you feel you and the people you work with and rely on could improve? Could wasted time be eliminated? What areas could you improve that would increase overall profitability of your commercial real estate strategies?
Within these questions you will uncover the areas where a streamlined process can greatly improve performance and decrease crisis and other problems. If your current strategy and processes are running at 100%- then there is no need to read this article. However, if you feel there could be considerable improvement, or even a small improvement that could increase your results exponentially, please read on!
Implementing processes and systems are the best way to optimize total performance. How this is done is that you should write down every single task within a certain boundary. For example, write down every task in creating the information packet to submit to a lender to get approval for a loan on a project. Write down every task for this specific process and then number them in how they follow in sequence.
Are there certain people involved who make this process happen? You may realize how you can cut out duplicated efforts, combine tasks into a single person who performs them, and completely streamline the process. What you do next is create a process map or flow chart showing the entire process from first step to last in the proper sequence. Identify who does what task and any time allotments or due dates if necessary. You now have a tangible, easy to learn, communicate and control process for submitting a proposal to a lender for a new project. Doing this alone will allow others to follow along with your process and have a clear understanding as to what is supposed to be done.
Do have protégés or other eager minds willing to help you in order to gain a valuable education from an experienced investor? Now you don’t have to worry about being the only one who “knows” the business. With a clear system and process map, you can now teach those around you the same, working, proven systems. With a process map individual tasks and relationships can be easily changed as continuous improvement is a benefit of process maps.
Now- back to those constraints. As you can see, if you have a reoccurring problem, you can create a system around it to alleviate the problem and have a working process to follow. With systems in place for every area of your business, you can identify the constraints. Constraints are identified by a build-up of resources where the weakest link can be found. At a certain point, if the streamlined process gets slow and the results are trickling through or you are behind on due dates, go to the place where everything starts slowing down. This is your bottle neck. This is your constraint.
At this time, you need to focus every ounce of energy you have in eliminating the constraint. Look behind the noticeable constraint as well- where was the source? It may not be where you think it is. Dig deep and find what really caused the chain to break.
By identifying the constraint in your process, it can be quickly remedied. You do not have to guess where the problem is or jump from crisis to crisis because you know exactly where the hold-up is.
If you truly want to be a successful, profitable commercial real estate investor, and a continuing improved and profitable investor, treat the investing as a true business with process maps, metrics and controls. It may take a little work to really streamline the business and create the processes from the current tasks being performed. However, I am sure you can agree, by putting in the effort this would have on your overall positive impact on performance and profitability.
Eliminate excess resources and duplicate efforts. Maximize total control and effectiveness of each task within the process. You will find your operations moving very smoothly and the capacity for more deals to increase significantly because you will be lean; no excess which allows for greater performance. You will see a decrease in time spent on any one activity and less money going out. You want leverage not only in your commercial real estate deals but in every phase of your operations as well? Implement systems and identify constraints! And watch your investing flourish.
Bill Manassero is the founder/top dog at “The Old Dawg’s REI Network,” a blog, newsletter and podcast for seniors and retirees that teaches the art of real estate investing. His personal real estate investing goal, which will be chronicled at olddawgsreinetwork.com, is to own/control 1,000 units/doors in the next 6 years. Prior to that, Bill and his family lived in Haiti for 11 years as missionaries serving orphaned, abandoned and at risk children.
