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Wednesday, December 14, 2011

Lessons Learned of a First Time Entrepreneur

Because of my real estate business and this website I have had the experience of being an entrepreneur and business owner for a couple of years now. In that time I have been able to pick up a few good business lessons that I would like to share with you.

Some people might think that to be successful in business you have to resort to some undesirable conduct or looking out for yourself at the expense of the other in order to make a profit. The reality that I have encountered is not like this at all…

 Although people have a tendency to see the world as they think it is rather than what it is, my experience in business and observing other successful business owners is that successful business is based on successful relationships…with clients, suppliers, contractors, employees...

Successful business is about finding win-win relationships with everyone involved.

Since I strongly believe that one of the keys to creating wealth is creating your own stream(s) of income through business ownership, even if it is a part time side-business, here are some guidelines to help you along if you are considering your own business:
  • Deals and negotiations have to work out for everyone involved (unless you are negotiating with Bank of America...ha, ha). Joking aside, if you are the only one benefiting from a negotiation you might get away with it a few times but eventually it will come back to bite you...

  • Protect your investors. If you have the good fortune to have found someone to share your vision and lend you money or invest in your business make sure you honor and protect their investment at all costs.
For example, House #6 was purchased with money I received from a private investor. First of all I offered them a generous return on their money in order to make it attractive to them to invest with me. I offered them a return that was several times what they can get from any bank in the market and their investment was secured by real estate.
  
Second, even though I had my share of difficulties selling that house, the margin at which I purchased the property, the expenses involved and the eventual sales price, left plenty of profit for them to get their return. I was more than willing to sacrifice my profit if need be so as long as they got their money back with interest and they were satisfied.

In my mind that is the best way I can get them to want to do it again and attract more investors. It's like taking care of the goose that lays the golden eggs...
  • Your verbal commitments are as important as your written ones – honor them both. I am a stickler for putting things on paper especially when dealing with multiple contractors like I do. However, I take it more seriously when I tell someone I am going to do something and it's not written down. I have also noticed that when you follow through on a verbal agreement it pleases people and leaves them wanting to do business with you again.
  • Share what you learn in business. Don't worry about who might be listening, even if it's a competitor, just share what you learn so others can benefit. This is not the same as giving away "proprietary" stuff. You should still protect that kind of information but there is plenty of lessons learned that can be shared without damaging your business.
  •  If you have employees or hire contractors, pay them what they are worth. Just because you can pay them less does not mean you should...
I am not saying these are the end all be all rules of business but they sure are a good start. I can't wait to be able to share more lessons learned with you. What would be good is if you share your own in the comments box below…thanks for reading.

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4 comments:

  1. Good comments, specially the one about paying contractors what they are worth. I know that I have been able to find good ones here and there and they are worth their weight in gold.

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  2. Amen to that Jake...a good contractor can make a rehab go so much smoother and let you sleep at night. I should have probably mentioned that another way of paying them what they are worth is using them on the next job and the next one and so on...

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  3. Shane in TX3/15/12, 9:08 AM

    Hey Luis, I've seen you on 123Flip the last couple of years commenting. It's good to read your thoughts on this subject. I'm in the beginning steps of starting our RE business, and appreciate that I'm not the only one who knows you have to take care of people and they'll take care of you. Keep spreading the good news :)

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    Replies
    1. Shane, thanks for reading and the kind words!

      Yep I have been around 123flip for a while because I have known J for a few years and have learned a lot from his flips here in Atlanta.

      Since real estate is such a relationship intensive business this is a crucial step. I have met other investors that have nothing good to say about tenants or contractors. Thankfully my experience has been very different. I am trying to keep it that way...

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