How to tell whether your business will sink or swim.
As I learn more about myself and my business, I realize how little I really know. Don’t get me wrong, my business is successful, but sometimes as an entrepreneur, I’m wearing filters that keep me from seeing the entire truth. Sometimes it’s ego or pride. Sometimes it’s perspective. When these filters are in the way, it helps for me to connect with people smarter than I am—and they’re really easy to find.
Recently, I returned from one of my quarterly mastermind meetings, which comprises some of the most successful real estate investors and business owners from across the country, and meeting with them certainly does adjust my filters and how I look at myself and my business.
If you’re not in a mastermind or networking group of industry-specific, like-minded professionals, find one and find it quickly. It can make a tremendous impact on your business and your personal life.
When talking with these other entrepreneurs, I was reminded to closely look at my business and scrutinize upward trends. Was the success coming from our sales and operations systems? Maybe I’m an amazing businessman? Maybe I’m just lucky? Or maybe it was because the market is really hot right now?
Question Your Success
Don’t let a hot market lull you into a false sense of confidence. The cyclical nature of the real estate investment industry has seen many ups and downs throughout the years. In an up market, business is booming and everything is perfect—so perfect that you can’t see the flaws.
This is the time to step away from your business and invest in systems, processes and operational perfection. I guarantee you there are holes in your boat that you’re ignoring and, if the market shifts, they might just sink your business.
If you think about business as a funnel, the top of the funnel is all of your sales opportunities, the middle is processing the opportunities, and the bottom is profit. Inefficiencies in the middle of the funnel are easily hidden if business is booming (the top of your funnel is full).
However, it doesn’t do you much good to have a strong top of the funnel, only to have those efforts leak out in the middle. Whether you convert those leads or not, you paid for them, so it makes sense to double down on your conversion efforts.
When the market shifts, a strong middle funnel could make the difference between weathering the storm or closing your doors.
Optimization Forces You to Measure
You need metrics to quickly gauge the health of your business and spot problems. Those metrics are key performance indicators (KPIs). Start simple when choosing KPIs. Too many and you’ll bog yourself down in details.
How many leads are you getting? Where are they coming from? What is the conversion rate into a customer? What is the cost of acquisition or potential deal?
As an entrepreneur, a visionary and a quick start, I have a hard time stopping to document processes or create training. I’d rather be dreaming up new ways to fill the top of the funnel for more business. In the past, I didn’t spend much time on the middle funnel. I was way too busy filling the top of the funnel, which can conceal a lot of the inefficiencies in your business.
The biggest investment you can make in your company is taking a real, unbiased look at your business, middle funnel and processes. Set aside your pride and ego, then try to get past your biased filters. Focus on middle funnel conversion and process. This is where the money is made. If you could close 5 percent more deals with the same number of leads from the top of the funnel, just think how that would impact your business.
It takes some practice as an entrepreneur because we typically wear many hats while we get our businesses off the ground. In the early stages, sales are critical, and we’re in survival mode.
• Define your KPIs.
• Apply some stress tests to your KPIs. What happens if your conversion rate doubles, assuming your volume stays the same?
• Document your core processes.
• Are your expenses out of whack? What is your fixed overhead? Where would you tighten your belt first if the market shifted?
It’s better to have a plan in place and not need it than to be caught with your pants down. (Because you were missing your belt, right?) A solid plan saves you time when you have to respond, and time is crucial.