How to Start and Structure Your New Venture: 4 Lessons to Build Your BusinessDavid Cawthon
It’s been an incredibly difficult time for many, especially for small and new businesses. We all hope things will be much brighter as 2021 rolls on, especially for entrepreneurs. If nothing else, KCSourceLink has seen an enormous increase in calls from people looking to start a new business and reports of new businesses being formed.
So if you are one of those entrepreneurs starting a new venture, it is essential that you start on the right foot. Just as you start building a house at the foundation, entrepreneurs need to focus on finding the right niche and then building their business to create a structure that will not only grow, but also scale.
Kansas City entrepreneur Paul Worcester has four tips new ventures can use from starting his new venture Simplifyy.
1. Find that niche (or niche within a niche)
For his part, Paul Worcester and his brothers Joel and Jesse built Worcester Investments into a massive multifamily investment and property management company which owns and operates over 2,500 units in the Kansas City metro area.
Despite considerable success during his time at Worcester Investments, Paul still found himself constantly thinking, “There ought to be a better way to operate a multifamily property.” But this kind of thinking is what so often leads to dramatic innovation. As Paul said:
“Couple the idea that there must be a better way to do something with an industry or industry category that is worth disrupting, and you have something. You have to find a problem with that industry. Ideally, the problem should really annoy you. Honestly, it should personally offend you.”
And this line of thinking can be adopted to virtually every process, product, system of whatever in any company or business, no matter how big or small.
For example, Paul took this personal slight and decided to start a new venture in the property management space. He partnered up with Jake Lisby, who had been a leader at Cerner before moving on to help guide multiple startup companies. Paul brought the industry knowledge and Jake brought the tech knowledge and together they founded Simplifyy.
Simplifyy’s goal is to become the “first end-to-end multifamily software and service solution for multifamily owners.” The goal is to relocate property management for large properties offsite with tech-based solutions for everything from leasing to tenant retention to maintenance requests.
Indeed, real estate has been very slow to adjust to the wave of new technologies available. But as technology advances, we must all adjust to survive in whatever industry we are in. And on the other side of the coin, there will be enormous opportunities for those who can streamline industries or processes or use technology to offer more refined choices to very specific tastes and subgroups of consumers (i.e. niches within niches).
2. Think outside the box
Startups with the goal of “disrupting an industry” as Silicon Valley likes to put it, need to go to the drawing board and basically challenge every single assumption there is about that industry. This is, more or less, what Paul, Jake and his team at Simplifyy have done regarding property management. Their plans are based on the book “Exponential Organizations” by Salim Ismail, Michael Malone and Yuri van Geest. Such organizations must expand an industry or part of an industry to be 10 times more effective than before.
Luckily, if your goals aren’t quite so grandiose, there’s no need to try to reinvent an industry.
This doesn’t mean you should do things as everyone else does, of course. If something seems amiss about the typical way things are done in your industry, you should definitely run that sixth sense down. Interrogate each of those feelings until you can determine whether it was misplaced or perhaps there was something to that feeling.
And don’t be afraid to test a new approach. If it doesn’t work, you can always move along to the next thing. (Just don’t bet the farm on it.)
There are a myriad of examples of little improvements or changes having big results. Facebook simply adding the Like button dramatically increased engagement (albeit with some criticism). 3M gives its employees a certain amount of time to work on any project that “scratches that itch.” Of the many inventions that have come from this program, one is the extraordinarily simple yet extremely useful (and profitable) Post-It note.
And this by no means needs to involve massive changes or huge companies. Small improvements here or there (or alterations that appeal to your specific niche) can greatly improve your bottom line. The last company I profiled, Evergreen Flooring, did so with nothing more than hard work; working through the night to make sure their clients got their flooring installed much faster than they would have with the competition.
In our real estate business, if we can increase the rent just a little, say from $1,000 to $1,025, 100% of that additional $25 is profit. The reason is because the expenses are the same either way.
So if our profit margin at $1000 was $100, then we may have only increased the rent 2.5 percent, but we increased our profit margin 25 percent!
Paul and company took this approach across the board at Simplifyy in an attempt to reinvent the property management industry. But just keeping your eye out for those little things here and there can hugely increase profitability.
3. Scale a startup
I like to think of systems as a process. We are constantly trying things and seeing what works and what doesn’t. We have what we call a “Google Docs graveyard” of tried-and-failed systems. But every time we come up against a new problem that needs a solution, we attempt to systematize or “policyize” that solution so the next time we run up against that problem, we’ll know what to do.
For their part, Paul and Jake use the EOS (Entrepreneurial Operations System) designed by Gino Wickman in his famous book “Traction” to build Simplifyy’s systems. The book is a “must read” for entrepreneurs big and small. Indeed, Paul and Jake have gone so far as to hire a coach to guide and perfect their processes. Building your business’ systems isn’t something to be left to chance.
The first key point is Vision. Paul is constantly stressing the importance of their vision noting both that congruence with their vision is the first thing they look for when hiring and also that “having an inspiring and meaningful vision attracts talent.” Becoming the first exponential organization in the property management industry is certainly inspiring to many.
The EOS approach is quite powerful and has a lot of ins and outs that there isn’t space to go into here. Needless to say, though, taking a systematic approach to structuring any business is essential right from the get go. Without it, you’re simply reinventing the wheel over and over again. Even with it you will need to tinker and adjust your systems a lot. (See the Google Docs graveyard discussed above.)
Paul also stresses the importance of using KPI’s (Key Performance Indicators) which are a key part of the EOS and utilized by Simplifyy throughout the company. These are a few easily measurable metrics for employees, managers and the company’s performance on the whole. Such metrics take performance evaluation out of the realm of the subjective. KPI’s thus make evaluating issues such as employment, firing, promotions, marketing, expense cutting, etc. much easier to assess and thus, decisions are much easier to make.
At the beginning, it would be wise to start with just one or two such KPIs for the business on the whole. Make sure they measure what’s really important to you. Ask yourself whether that key thing at whatever stage your business is at is profit, revenue growth, brand awareness or something else. Then, as you grow, you can add more KPIs and adjust the ones you have.
4. Hire to scale
Paul considers hiring to be the most important thing they do. As he put it, “If there was only one thing I could do, it would be to build a great team.” When it comes time to hire, too many entrepreneurs come at hiring in a haphazard way or “go by their gut.” This attitude leads to failure more often than not.
Paul’s philosophy on hiring boils down to four key points:
1) A fit on values and vision
2) A “whatever it takes” mindset with regards to getting the job done
3) A firm belief that “our standard is the best”
In order to build their leadership team, Paul and Jake hired two recruiters and sorted through hundreds of resumes with those three key points in mind. Each person who was eventually hired for their leadership team was interviewed between three and six times. (For interviewing, they use both the strategies taught in the book “Who” by Geoff Smart and Randy Street and the Culture Index.)
Of course, this would be overkill if you were planning to hire a receptionist or someone like that. But the lesson is still clear: Be diligent and thorough when it comes to hiring.
The Lesson for Entrepreneurs
Simplify had raised $4.7 million going into 2020 and is poised to “make the property management industry unrecognizable” by 2030. But the lesson for us “normal” entrepreneurs is not that we need to radically change something or “disrupt” an entire industry. The lesson is to look for those little things being done wrong by everyone else and improve upon them. Or look for those things that your particular niche wants and is willing to pay for that isn’t being catered to right now.
Then articulate your vision and start building your systems in alignment with that vision. All of these things (especially systems) take time and will have plenty of false starts. Even still, it’s essential to begin with the end in mind. And that’s true whether you want to start an online retail business on the side, open up a restaurant or disrupt the entire real estate industry as Paul Worcester and Simplifyy intend to do.