We love to celebrate growth in business. New offices, more people, more market share. Smartre Training openly discusses topics of growth, succession and expansion with its members. Growth in real estate can be a great way to extend your businesses life.
But growth isn’t always a good thing. In fact, it can be the very thing that breaks a business that’s not ready for it.
Let me give you two examples.
A gentleman reached out early last year saying he was thinking of opening a real estate agency. He and his wife already had another business (outside of real estate) that still needed plenty of hands-on attention, and would for the foreseeable future. My advice was simple: wait. Get the first business stable, profitable, and self-sufficient before taking on another one. They didn’t wait, they went ahead. 12 months in, and they’re close to broke.
Another couple I know have a real estate business that’s doing okay but not great. The profit isn’t consistent, the team needs work, and a few tough people decisions need to be made. Instead of focusing on fixing what they’ve got, they’re looking to open a second office. Our advice? Get the first one right first. Make it profitable, get the team humming, and then think about expanding.
Growth is only good if it’s funded by profit, not debt.
If you’re borrowing money to expand, the business doing the borrowing needs to be making strong profit, in this day and age, at least half a million or more a year. Anything less, and you’re asking for trouble. You need a healthy profit buffer to handle the inevitable dips of real estate growth.
And yes, I know, everyone thinks their new venture won’t affect the current business. It almost always does. Why? Because distractions kill focus.
When planning for growth, most people forget to factor in how much of the leader’s attention it will take. That’s where it all falls apart.
Never underestimate how much of your agency’s profit relies on your focus. Take your eye off the ball to chase new growth, and profits will slide – guaranteed. Add rising expenses from the new venture, and you’ve got a dangerous mix: higher costs, falling profits, and a distracted leader.
I’m not saying don’t grow. I’m saying grow smart.
If your current business isn’t consistently profitable, your second one won’t be either. If you need debt to fund your next move, make sure you can handle the repayments – and the inevitable drop in profit while you’re distracted.
Plan your growth. Let logic and accurate numbers lead the way, not ego.
Looking successful and being successful aren’t the same thing. You’d rather be quietly wealthy than look wealthy while struggling to stay afloat.
Don’t fall for the myth that all growth is good. It’s not.
We love to celebrate growth in business. New offices, more people, more market share. Smartre Training openly discusses topics of growth, succession and expansion with its members. Growth in real estate can be a great way to extend your businesses life.
But growth isn’t always a good thing. In fact, it can be the very thing that breaks a business that’s not ready for it.
Let me give you two examples.
A gentleman reached out early last year saying he was thinking of opening a real estate agency. He and his wife already had another business (outside of real estate) that still needed plenty of hands-on attention, and would for the foreseeable future. My advice was simple: wait. Get the first business stable, profitable, and self-sufficient before taking on another one. They didn’t wait, they went ahead. 12 months in, and they’re close to broke.
Another couple I know have a real estate business that’s doing okay but not great. The profit isn’t consistent, the team needs work, and a few tough people decisions need to be made. Instead of focusing on fixing what they’ve got, they’re looking to open a second office. Our advice? Get the first one right first. Make it profitable, get the team humming, and then think about expanding.
Growth is only good if it’s funded by profit, not debt.
If you’re borrowing money to expand, the business doing the borrowing needs to be making strong profit, in this day and age, at least half a million or more a year. Anything less, and you’re asking for trouble. You need a healthy profit buffer to handle the inevitable dips of real estate growth.
And yes, I know, everyone thinks their new venture won’t affect the current business. It almost always does. Why? Because distractions kill focus.
When planning for growth, most people forget to factor in how much of the leader’s attention it will take. That’s where it all falls apart.
Never underestimate how much of your agency’s profit relies on your focus. Take your eye off the ball to chase new growth, and profits will slide – guaranteed. Add rising expenses from the new venture, and you’ve got a dangerous mix: higher costs, falling profits, and a distracted leader.
I’m not saying don’t grow. I’m saying grow smart.
If your current business isn’t consistently profitable, your second one won’t be either. If you need debt to fund your next move, make sure you can handle the repayments – and the inevitable drop in profit while you’re distracted.
Plan your growth. Let logic and accurate numbers lead the way, not ego.
Looking successful and being successful aren’t the same thing. You’d rather be quietly wealthy than look wealthy while struggling to stay afloat.
Don’t fall for the myth that all growth is good. It’s not.
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