QOTW: What are/ were your first steps to scaling your business?

[Alicia Marks]

Welcome to our new question of the week! As the newest market and economic data has rolled out the past few weeks, many investors are looking at decisions of how to move forward. Will there be deals in any market climate? Absolutely! Your business can continue to grow, but a big question that comes up is how to scale. While many new investors are still working a W-2 job, they want to build ways to continue to improve their business.

What was your first step or first few steps to scaling? How did you implement it? What would you have changed? If you're getting to the point of starting to scale, what is the biggest pain point you're experiencing? How do you feel these steps will help? What concerns do you have as you scale?

Let's help each other because if you haven't "been there" you will be. Let's get talking!

[Scott Trench]

"Scaling" for me is in the context of going from 1 to 5 properties (13 units). Some investors on this site will have different definitions of scaling. 

For me, I'd say that the biggest thing about scaling is that it's a process, not an event. 

Components of this process have included: 

- My personal financial situation

- The value of my time (DIY vs Property Management)

Personal Finances: 

As a real estate investor, my personal financial situation is paramount to my success. When I bought my first property, I was saving ~$1,500 per month. After that house-hack, my savings rate increased to $2,000 per month. Then $2,500, then $3,000. In fits, starts, and in some periods a "two steps forward one step backward" process, my monthly accumulation of cash has on average increased consistently for the past 8 years. This has allowed me to continuously invest in real estate, and stocks, as well as build and maintain a very conservative cash position in my personal life and business. 

This is a huge component of scale. Every month sees, on average, an acceleration in my rate of cash accumulation. I think that this is the most important part of scaling for my small rental property business. 

The Value of My Time: 

When I got started in real estate, my time was worth $25 per hour. I made $50,000 per year, and worked 40 hour weeks. That comes to $25 per hour, before tax. 

It absolutely made sense to paint my own walls, install my own blinds, complete handyman work and basic plumbing, do the landscaping, do my own taxes, and self-manage my properties. But, that certainly does not scale. 

Over time, and with each passing month, on average, the value of my time has increased. From $25 per hour, to $50 per hour, to $100 per hour, and now well beyond that. 

It absolutely no longer makes sense to paint my own walls, install my own blinds, complete handyman work and basic plumbing, do the landscaping, do my own taxes, and self-manage my properties. I hire that out now, and it allows me to scale.

If I had hired this stuff out at first, I would have been negatively arbitraging the value of my time. If I were to do this stuff now, I'd be negatively arbitraging the value of my time. This concept is critical, as new investors probably should not hire out many items, and instead should do that themselves. 

Understand the value of your time, and use it to inform decisions about how you deploy it. Doing things that don't scale today may be exactly what you need to build your business over time, and will help you increase the value of your time until you hit inflection points where it makes sense to begin hiring others.