Conquering the Climb: 5 Tips Entrepreneurs Need to Know to Overcome SetbacksDavid Cawthon
By guest contributor Andrew Syrios, Stewardship Investments LLC
Beginnings aren’t always easy; starting a business is no exception. But with everything you do, there are always lessons in the setbacks, and I have a few that any entrepreneur can use in their business right now.
I help run Stewardship Investments, a real estate investment and property management company, with my father and my brother. In 2011, I moved to Kansas City from the West Coast in to live in the basement of the KC office we bought for the company. My father stayed in Oregon, and my brother would join me in KC later. On my fourth day in Kansas City, there was an ice storm, and the temperature dropped below zero. It felt like a sign that I made a dire mistake.
A few months later, we bought a terrible apartment and inherited a few ill-tempered tenants who used drugs; we had to pay them to leave. Twelve months later, we thought we’d probably have to close up shop because our cash flow was so poor.
Fortunately, we fought through those challenges. Once we got some of our vacant properties rented, we were able to stabilize and move forward. Eight years and innumerable mistakes later, we have made it pretty far and own over 400 units in the Kansas City metro area.
That said, it has not been an easy journey, but I have learned a lot. (Sometimes, experience is the best teacher.) These are my top five recommendations I believe can help any entrepreneur.
1. You Will Make Plenty of Mistakes
Even the best-laid plans won’t work out as intended. And it’s hardly an understatement to say we didn’t have the best-laid plans when we started. For example, early on, one of our key metrics for purchasing properties was price per unit. Unfortunately, this pushed us to buy in really rough areas we were not specialized in managing. We lost a good deal of money and suffered through even more headaches before adjusting our criteria. Business is a never-ending game of adjustments.
Despite that and the many mistakes we made along the way, we were able to do quite well for ourselves. In fact, one of my biggest missteps was being too afraid to make mistakes. Of course, you should avoid mistakes whenever possible, but the fear of making an error is often more damaging than actually making one. There were several acquisitions we could have made but didn’t because I was afraid they would turn out badly.
With hindsight, I now see those acquisitions would have made for great investments. Unfortunately, at the time, while the numbers looked good, I still hesitated. Never forget that the mistake of inaction are mistakes as well. This is something that many new entrepreneurs face, and I would have benefited greatly from getting more involved with organizations, such as KCSourceLink, that could connect me with resources in Kansas City to help me clear such obstacles.
The same can be said of several employees we should have let go earlier than we did. In most cases, we knew well in advance that they weren’t a good fit. But fear of making a mistake caused to us to keep them employed.
My brother has a sign in his office that reads “make more mistakes.” This sounds counter-intuitive, but the idea is that there is no growth without mistakes. You have to be willing to take risks and look foolish to be a successful entrepreneur. Not doing so would be, well, a mistake.
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2. Get the Numbers: Don’t Rely on Your Gut
Early on, when we rehabbed a property and I knew the project went way over budget, I would avoid looking at the final cost. I knew it was bad, so I didn’t want to see it. Eventually, I forced myself to always review the final numbers. If I didn’t, how would I ever learn what went wrong so that I could avoid that scenario in the future?
By doing this, I quickly learned that huge rehab projects were not working out for us. So, I refocused on properties that needed less work, and we stopped breaking the budget over and over.
A lot of entrepreneurs are “go-getter” types who don’t like the analysis part of business. But the numbers never lie. Don’t fall for the “paralysis by analysis” trap (that would be the fear of making mistakes), but make sure your decisions are based on hard numbers and not just your gut.
Furthermore, make accounting a priority. Bad books will make it very difficult to attain financing, let alone show you what’s actually going on in your business.
3. Delegate When You Can
Economists have something called “comparative advantage.” Namely, even if you are the best at, say data entry, that doesn’t necessarily mean you should do it. If you can type 100 words per minute but make $50 an hour, it makes more sense to delegate that task to someone who can type 50 words per minute who makes $15 an hour. That’s because the cost per word typed is less when you delegate.
For example, I used to transcribe information I wrote down for properties I was considering buying. Then, I started paying a virtual assistant to do it and saved a bunch of time that I shifted to more important tasks.
Early on, I was obsessed with doing it all myself. This type of thinking will actually cost you in the long run. You may not be at the point where you can hire employees, but there are automated services, virtual assistants and third-party vendors you can use to delegate all sorts of rudimentary tasks or tasks you aren’t particularly good at. Take advantage of such opportunities.
4. People Will Try to Gaslight You
It’s unfortunate, but in business as in life, people aren’t always honest. I’ve had incompetent employees try to convince me that I was the problem, contractors do the same and tenants make every variety of “the dog ate my rent check” excuse you could imagine.
I’m not saying that you should become a cynic and believe everyone is lying to you, but if you believe something is wrong, don’t simply take another’s word that it isn’t. As I said earlier, you shouldn’t make business decisions based on your gut, but you should follow gut instincts where they lead. If something seems off, look into very carefully. More times than not, something is.
5. Don’t Get Too High or Too Low
Entrepreneurship is a wild ride. We’ve had huge highs, like when we purchased a portfolio of 97 houses at a great price. We’ve also had huge lows, like when we believed we would have to pack up shop because our cash flow was deep in the red.
These can take an enormous strain on your mental health and cause you to make impromptu and irrational decisions. It’s critical to know going in that there will be great highs and great lows. Prepare yourself and do everything you can to keep a level head. Activities like meditation, yoga and hanging out with friends and colleagues can help.
Entrepreneurship will require a lot of work, but don’t let it consume you. If you do, it’s more likely these lows will drive you batty.
There’s an old Chinese proverb I really like that says, “Every day is a new life to the wise man.” Take that wisdom to heart. Entrepreneurship is a lot of fun, but it can break you if you’re not careful. It’s never as bad (or as good) as it seems.
Andrew Syrios has been investing in real estate for over a decade and is a partner with Stewardship Investments LLC along with his brother Phillip and father, Bill. Today, Stewardship owns over 300 properties and just under 500 units. Andrew received a bachelor’s degree in business administration from the University of Oregon with honors and his master’s in entrepreneurial real estate from the University of Missouri – Kansas City. He has also obtained his CCIM designation (Certified Commercial Investment Member). Andrew has contributed to a variety of websites including BiggerPockets, Think Realty Magazine, REI Club, Elite Daily, Thought Catalog, The Data Driven Investor and Alley Watch. He also blogs at AndrewSyrios.com.