Podcast Summary
Become a Power User of BiggerPockets Podcast and Shape its Future: Join a select group, get exclusive content, and contribute to shaping the future of the BiggerPockets Podcast. Learn from experts on growing, scaling, and selling businesses in real estate.
BiggerPockets is looking for passionate fans of their podcast to join a small group of power users, offering exclusive access to new content and the opportunity to shape the show's future. This is an excellent opportunity for those who want to be part of building something bigger and better. Additionally, the podcast discussed the importance of growing, scaling, and selling a business, emphasizing that real estate investors have businesses and can benefit from these principles. The guests, Sharon Lechter and Michelle Seiler-Tucker, shared their expertise in this area, and the conversation revolved around the 6 P's outlined in their book "Exit Rich." Furthermore, BiggerPockets offers weekly webinars to help people invest in real estate and succeed, and Rent to Retirement offers the opportunity to invest with no money down.
Vacasa's full-service vacation home management and NREIG's insurance coverage for rental properties: Vacasa helps homeowners maximize revenue from their vacation homes with professional management services, while NREIG simplifies insurance management for real estate investors with coverage for multiple properties
There are companies like Vacasa that make owning a vacation home easy and profitable for homeowners. Vacasa offers full-service vacation home management with proactive property maintenance, a hospitality-driven booking platform, and around-the-clock support, resulting in an average of 20% more revenue for homeowners. On the other hand, for real estate investors, NREIG provides insurance coverage specifically for rental properties, making it simpler to manage multiple properties on one insurance schedule with one monthly bill. Sharon Lechter, a financial literacy expert and author of Rich Dad Poor Dad, and Michelle Seiler Tucker, a mergers and acquisitions specialist, wrote Exit Rich to help people understand the difference between owning a job and owning a business. Their book, published by Inc. Magazine, provides valuable insights for those looking to build wealth and financial freedom.
Building a strong foundation for your business: 8 out of 10 businesses don't sell due to lacking foundational elements. Prioritize creating systems and processes to manage real estate investments effectively to scale and potentially sell your business.
Whether you're a real estate investor, an agent, or a lender, understanding the importance of building a strong foundation for your business is crucial. Michelle, a business broker and international speaker, emphasized that 8 out of 10 businesses don't sell because they lack the necessary foundational elements. This concept can be applied to real estate investing as well. Just as a house needs a solid electrical and plumbing system to sell, a business requires a strong foundation to thrive and grow. Real estate investors should focus on creating systems and processes to manage their investments effectively, allowing them to scale their business and potentially transition into larger investments. By neglecting the foundation, investors may struggle to grow their business or may be unable to sell it when they're ready. Therefore, it's essential to prioritize building a strong foundation for your business, just as you would for a piece of real estate.
Building a business with strong systems and the right team: Having strong systems and the right team in place makes a business more valuable, easier to manage, and sets it up for success during the selling process.
Building a business with strong systems in place makes it more valuable and easier to sell, as opposed to being overly dependent on individual personnel. Buyers prefer to acquire businesses that operate as independent entities, not jobs, and having systems in place allows for easier management and scalability. Additionally, having the right people on your team is crucial for success, and it's important to bring in team members who complement your strengths and weaknesses. The Kolbe test is one tool that can help identify the differences between innovators and those who prefer facts and figures, and having a balanced team with elements of both can lead to the greatest success. Building a business with these principles in mind can set you up for a smoother selling process and a more sustainable, successful enterprise.
Hiring and Retaining Competent Employees: Slow hiring, mission alignment, necessary training, open communication, addressing gossip, and fostering a supportive work environment are all crucial components of building a strong company culture to retain competent employees.
Building a strong company culture is crucial when hiring and retaining competent employees. Hiring slowly and ensuring alignment with your mission and code of conduct sets a solid foundation. Providing necessary training and support can help employees reach their highest potential and choose to stay. However, it's essential to protect your business by implementing measures like non-competes and open communication. Regular check-ins and addressing issues promptly can prevent small problems from escalating and leading to employee turnover. Remember, teaching people enough to leave but treating them well enough that they choose not to is a powerful approach. Effective communication, addressing gossip, and fostering a supportive work environment are all essential components of a successful business culture.
Bridging the gap between owners and employees: Effective communication and understanding team needs are vital. A liaison or COO can help manage interpersonal issues and ensure team alignment, while ongoing learning, adaptation, and management are essential for long-term business success.
Effective communication and understanding the needs of your team members are crucial for the success of a business. As a business grows, it becomes increasingly important to have a liaison or a chief operating officer who can act as a bridge between the owner and employees. This person can help manage interpersonal issues, communicate important information, and ensure that everyone is working together effectively. Additionally, the business landscape has changed significantly in recent years, with a larger percentage of businesses surviving past the initial startup phase. However, even among long-standing businesses, a significant number still go out of business. This highlights the importance of ongoing learning, adaptation, and effective management to ensure the long-term success of a business.
Designing systems for business success: Entrepreneurs should focus on creating customer-centric processes, delegating tasks, and continuously innovating and marketing to build a sustainable and scalable business.
Business success is not just about having a good product or service, but also about continuous innovation, effective marketing, and well-designed business systems. These elements are crucial for making a business an asset that can thrive and grow, even in the absence of the founder. The importance of systems and processes cannot be overstated, especially in today's rapidly changing business landscape. From day one, entrepreneurs should focus on designing processes around the customer experience and delegate tasks to focus on their strengths. By doing so, they can create a sustainable and scalable business that can adapt to changing consumer habits and market trends. Ignoring the importance of innovation, marketing, and systems can lead to stagnation and eventual failure, as seen with businesses like Toys R Us and Blockbuster.
Investing in the right legal and business foundations early on: Proper agreements, systems, and documentation save time, money, and headaches, increase business value, and make it sellable.
Investing in the right legal and business foundations early on can save significant time, money, and headaches in the long run. Having proper agreements, systems, and documentation in place not only makes a business more successful and scalable, but also increases its value when it comes time to sell. Neglecting to do so can result in costly and time-consuming clean-up efforts, and may even make the business unsellable. It's essential to recognize the value of professional expertise and prioritize the investment in building a solid foundation for your business.
Determining Business Value with Multiples and Synergies: Businesses trade at multiples of EBITDA, with smaller companies having lower multiples and larger ones reaching higher multiples based on synergies. Private equity, strategic buyers, and sophisticated entrepreneurs seek proprietary assets and synergies, and securing federal trademarks is crucial to protect value.
While real estate investors often use comparable sales to determine property value, businesses are evaluated differently using multiples and the presence of proprietary assets and synergies. Companies with EBITDA under $1,000,000 typically trade at multiples of 1 to 3, while those above this threshold can reach 5 and up, depending on synergies. Private equity groups, strategic buyers, and sophisticated entrepreneurs are the main types of buyers, and the presence of proprietary assets and synergies significantly impacts the multiple offered. Branding and trademarks are essential value drivers, and business owners should ensure they secure federal trademarks to avoid costly legal disputes.
Building a mission brand for easier business sales: Focus on problem-solving or needs served in branding for smoother business sales. Secure efficient insurance and simplify loan processes. Understand property rights and consider geographic expansion.
When building a business, considering the future and potential exit strategy is important, especially if your name is tied to the brand. For instance, Tony Robbins and T. Harv Eker found it challenging to sell their companies due to their names being synonymous with their brands. Instead, they became celebrities attached to their companies. However, if you're planning to sell your business, building a mission brand that focuses on the problem you solve or the need you serve can make the separation process easier. For real estate investors, securing fast and affordable landlord insurance with steadily.com and working with a lender like Host Financial that simplifies the loan process can help streamline your business operations. Additionally, understanding your rights as a property owner and considering your geographic area when expanding your business are crucial factors to consider. Tune into the Walker webcast for more insights on commercial real estate, entrepreneurship, leadership, and the economy.
Protecting Intellectual Property for Business Growth: Separate intellectual property from business for maximum value, secure ideas with patents, protect brand names with trademarks, and copyright expressions, essential for long-term business success.
Building a strong brand is crucial for business growth, but it's essential to consider the type of brand - celebrity or professional business - and the implications for potential future sales. Intellectual property protection through trademarks, copyrights, and patents is vital and should be in a separate entity. The value of intellectual property was highlighted in the example of a company sold for $4 billion, where the founder failed to separate it from the main business and missed an opportunity to monetize it further. Additionally, most sales are asset sales, and buyers often prefer to keep the existing brand name. Patents offer the strongest form of protection, securing the idea behind the product or service, while trademarks protect the source of the goods. Copyrights protect the expression of ideas but do not prevent someone from creating a similar product. Building a robust intellectual property portfolio is essential for long-term business success.
Flipping businesses for profit: Buying, improving, and selling businesses or commercial real estate can lead to substantial returns. Valuations depend on potential synergies and buyers' willingness to pay top dollar.
Buying and selling businesses, or improving and then selling them, can lead to significant returns. Using a simple example, if a business brings in an annual profit of $10 million and sells for a 10x multiple, it would be worth $100 million. But if the revenue is increased to $12 million, the business would be worth $120 million at the same multiple. This concept, known as "flipping businesses," involves buying a company, fixing it up, and selling it for a higher price. Valuations in business are considered more of an art than a science due to the importance of synergies and economies of scale. The right buyers can bring maximum value to the table by taking advantage of these factors. The same concept applies to commercial real estate, where the value of a property can be increased by improving its net operating income (NOI) and then selling it for a higher price. Valuations are not based on a strict formula but rather on the potential for synergies and the willingness of buyers to pay top dollar for those benefits.
Run real estate business like a pro enterprise: Implement systems, hire right people, treat business as customer-centric operation to maximize profits, attract larger buyers and adapt to markets
Successful real estate investors need to run their businesses like a professional enterprise in order to maximize profits. Many investors get away with operating sloppily due to the unique nature of real estate, but this approach limits growth and potential value. To truly succeed, investors should focus on implementing systems, hiring the right people, and treating their business as a customer-centric operation. By doing so, they will be more attractive to larger buyers, such as REITs or hedge funds, and will be better positioned to adapt to changing markets and customer preferences. Don't settle for "good enough" – strive for excellence and watch your profits soar.
Importance of owning a strong database: Maintaining a strong database is crucial for businesses to communicate directly with their audience, build relationships, and create a valuable asset, especially in the digital age where social media followers are not truly owned.
Building and owning a strong database is crucial for any business, especially in the digital age where social media followers are not truly owned. Lack of profits is often a symptom of deeper issues, such as people or process problems. In the real estate industry, for instance, having a transactional mindset and failing to maintain relationships with clients can result in missed opportunities for referrals and repeat business. Building an email or text list allows businesses to communicate directly with their audience, build relationships, and ultimately, create a valuable asset. The loss of social media accounts is a reminder of the importance of owning one's database, as it is a more reliable and stable way to connect with customers and grow a business.
Maximizing Business Value Beyond Product and Profit: Focus on contracts, celebrity endorsements, and content to increase business value. Ensure proper ownership and licensing to avoid missing out on high valuations or failing to sell.
Building a successful business goes beyond just focusing on the product and profit. To maximize the value and longevity of a business, it's crucial to pay attention to the structure and key assets, such as contracts, celebrity endorsements, and content. Contracts with transferability clauses, client contracts with subscription models, and exclusive deals with celebrities or prime e-commerce positions can significantly increase a business's value. However, it's essential to ensure proper ownership and licensing of content and assets, including headshots and website design. Neglecting these aspects can lead businesses to miss out on potential high valuations or even fail to sell. The book "Exit Rich" by Michelle Seiler Tucker and Sharon Lechter aims to provide valuable insights for business owners to avoid these pitfalls and create greater success.
Entrepreneurial Success: Perseverance and Faith: Successful entrepreneurs, like Michelle and Sharon, prioritize personal habits, read influential books, and maintain faith in themselves and their ventures to overcome fear and achieve success.
Successful entrepreneurs, like Michelle and Sharon, possess grit and faith in themselves and their ventures. They consistently work on personal habits, such as exercise and nutrition, and read influential business books. Michelle, the founder of Silent Tucker, enjoys writing and can be found at silertuckerdot.com. Sharon Lechter, co-author of Rich Dad Poor Dad, operates a guest ranch in Arizona and can be reached at sharonlechter.com. Their upcoming book, Exit Rich, can be pre-ordered at exitrichbook.com for $24.79 before its official launch on June 22nd. Both women emphasized the importance of perseverance and faith in overcoming fear and achieving success.
Join a rich book club for business insights and networking: Invest in a lifetime membership to a book club for valuable business knowledge and networking opportunities, including video content, strategies, techniques, and business documents, for just $24.79 with a 30-day free trial to Club CEO's mastermind.
For a limited time, you can get a lifetime membership to a rich book club offering video content, strategies, techniques, and business documents for just $24.79. Additionally, you'll receive a 30-day free membership to Club CEO's, an entrepreneurship mastermind. The speaker emphasizes the value of investing in knowledge, believing that every nonfiction book provides more value than its cost. Therefore, this opportunity is worth considering for potential business-building insights. With BiggerPockets Agent Finder, you can also find an investor-friendly agent to help navigate the real estate market and take confident action towards financial freedom. Remember, it's not about timing the market but time in the market.
