Entrepreneurial Blues

A good entrepreneur finds balance. Image by: Bitmoji

This post originally appeared on the Hermit Haus Redevelopment website on 2016-04-05.

Warning: This post can be construed as whining. If I hadn’t promised to be as honest as possible about our journey, I wouldn’t post it. It sounds like whining to me, and I don’t like whining. Feel free to skip it. But if you want to know what it’s really like to run a small real estate redevelopment company, I guess I’m writing this for you.

When you’re getting started—and possibly even after you’ve been doing redevelopment work for awhile—you don’t have a huge staff to rely on. Some of the many tasks required to keep a company like this one working include but are not limited to the following (presented in no particular order):

Finding money Budgeting Plowing through the MLS Prospecting for buyers, sellers, contractors, handymen, etc. Reviewing contracts Signing contracts to buy, sell, and finance projects Keeping the books Finding money

Monthly, quarterly, and annual financial reporting Paying contractors, assistants, lenders, suppliers, etc. Communications (blogging, Facebook posts, one-off letters, advertising, etc.) Marketing, marketing, and marketing Crunching numbers Estimating repairs Finding just the right wine

Finding money Managing contractors and vendors Setting policy and defining procedures Negotiating with buyers, sellers, contractors, suppliers, etc. Record keeping (physical and electronic documents like permits, licenses, contracts, etc.) Envisioning, inspiring, and directing operations Finding just the right whine

I believe in job creation, but I also believe in profits. So there are only four of us working on this enterprise, and we each have unique roles and skills. To oversimplify: Russell works on finding deals and keeping the back-end systems running. Carol is our real estate guru; she keeps all of our preliminary numbers realistic, is our numero uno marketeer, and manages projects. Sue Ann is our social media expert, editor in chief, and networker. That leaves most of the boring business stuff to me. I love what I do, but...whine!

We do have assistants—virtual and otherwise—who handle most of our secretarial work: printing, copying, and mailing marketing materials. But the other listed tasks (and many, many more) fall to one of the four principle investors.

What set off this whine-arama is that I spent almost my whole day for the last two days chasing down random bits of paperwork for lenders and title companies involved in two of our current projects. In a perfect life, this would have been work I delegated to a file clerk. Unfortunately, I am the file clerk (technician level, in Kiyosaki’s quadrants).

Now you learn in investor school to prepare for this by keeping the most commonly needed documents in a folder on your desktop. This I do. However, each transaction we do adds to that list of documents. My “Commonly Needed” folder now runs just over 8MB, compressed. I’m waiting for some bank or title company technician to balk at looking though it and ask, “Why don’t you just send me the documents I need?” But so far, they always find just one more document to request.

My advice: Keep smiling and telling yourself it’s all a brilliant learning exercise that you’ll get through and eventually have it all down and a staff to delegate it to. That or learn to “play the guitar on MTV.”

Paying Contractors

We have paint and texture on all drywall at Blue Ridge, but we seem to have lost a week in the process somewhere.

This post originally appeared on the Hermit Haus Redevelopment website on 2016-01-23.

The Blue Ridge project is taking longer than expected. Don’t they all? But the texture is on the walls and painting has commenced.

As best I can tell, we are about a week behind schedule without having encountered any serious delays, just a series of small ones. But, as with pennies, small delays add up.

This situation is an example of why you should pay your contractors on completion of tasks, not on a time-based schedule—no matter how good they are or how much you trust them. Unfortunately, we agreed to weekly payments on this project, mainly because we had too much going on, had our primary contractor back out of bidding because of too much work already booked, and urgent relief at having found a recommended GC who was willing to start two weeks earlier than anyone else. Not to mention the distractions of the Christmas season.

All of that now leaves us in a situation where we have to renegotiate the payment schedule at the end of the project.

When you pay on task completion, you risk having your project become a lower priority than “more lucrative” projects. On the other hand, paying on completion guarantees you won’t be paying for undone work, but it doesnt guarantee timely completion. Either way, delays increase your holding costs during a project.

Here are some lessons we’ve learned over time:

• Have your contract written so you pay on completion of a task rather than on a schedule.
• If the contractor is furnishing the materials, keep the upfront payments minimal, but reasonable.
• Keep tabs on the work as it progresses, and don’t be shy about asking questions.
• Always plan on paying at least 10% more than the bid. There will always be things you didn’t know about when the project went out for bid.
• Plan for at least six weeks of holding costs beyond the scope of the project. There are almost always delays in the renovation and sale processes.
• If you plan for a longer, more expensive project, you’re in good shape if it comes in on time and on schedule. The inverse is not true.