IC Elesson–When Should You Hire?
One of the key questions that beginning and intermediate level real estate entrepreneurs struggle with is, “How do I know when it’s the right time to hire help?”
I’m not talking about virtual assistant-type help here; your lowest-level administrative work (sorting lists, looking up names in the public record, etc) and your high-skill but non-real estate work (designing logos, creating websites) can be quickly, easily, and above all CHEAPLY farmed out to VAs practically as soon as you understand what that “work” is.
I’m talking about “inside team”—people who work with you on a day to day basis, who understand the workings of your business more deeply than an outside team member like a VA, who may, by necessity, be ACTUAL, rather than VIRTUAL employees.
THIS decision—to bring aboard real “staff”, is always a tough one. It seems as if the point at which your business grows to where it’s difficult (or impossible) for you to keep up with the day-to-day activities does NOT usually coincide with the availability of a ton of extra income to pay an employee.
So most people (and I’m one of them) wait a lot longer than they should to take the leap of hiring inside team members to grow the business.
But there’s actually a relatively objective way to evaluate whether taking that (admittedly scary) step is a good idea, and it has nothing to do with the size of your business or how many years you’ve been at it.
Basically, you should hire help when (and only when):
1. You become skilled enough at your strategy that when you’re working it (as opposed to working on filing, bookkeeping, and other “housekeeping”-type functions—including actual housekeeping) that your income per hour is significantly more than what you’d have to pay help.
For instance, if you’re rehabbing a house a month with an average profit of $25,000 per deal, and your administrative work is keeping you from expanding that to TWO houses a month, it’s time to hire. Basically, you’re throwing away the entire annual salary of a part time admin EVERY MONTH by continuing to do the work they could do for you.
2. You’ve tracked your results clearly enough and for long enough be certain that #1 is accurate and;
3. You’ve systematized what you want THEM to do to the point that they can just follow your systems, rather than needing constant supervision and hand-holding.
In other words, you hire help when the time that your help frees up allows you to make more money than the help costs you. Here’s what I mean.
When I first decided to consider bringing on help in my wholesaling business, I knew that 1) it was going to be difficult to give up control of the many things that I did on a day-to-day basis and 2) that if I didn’t, I wouldn’t be able to grow the business any further—I was just stretched too thin.
But before hiring my first acquisitions coordinator, I analyzed the numbers from my business over the previous 2 years, like this:
- Our average net profit per deal: $10,100 (note—this net has DROPPED since hiring our first AC, because with her help in doing all the administrative work, we’re now willing to do deals with a lower profit margin than when it was all Drew and I. However, the overall net has grown enormously)
- Average number of leads/calls needed to get a wholesale deal: 20
- Average number of mailings needed to get 20 leads: 300-400
- Average mailings we were actually able to get out per week: 90-150
- Number of good names we could generate per week: 300-500
- Extra calls we could generate get if 300-500 mailings were going out: 15-20
- Additional wholesale deals/month based on the higher number of calls: 2-4
- Additional profit this would generate: at least $20,000/month
From there, the question was very simple: could I hire someone for LESS THAN $20,000 per month to send out mailings and do all sorts of other things (like pre-screen sellers, set up closings, etc)? The answer was a resounding yes.
In all likelihood, your first hire won’t be a full-time, in-house employee, and it won’t be someone who’s dealing with your customers. It will, instead, be:
- A virtual assistant, as mentioned above
- A part-time personal assistant who can take your usually chores, from housekeeping to errands, off your hands so that you can spend your own time on more income-generating tasks.
- A part-time on-site administrator to answer and screen calls, file documents, do basic bookkeeping functions, set up closings, etc.
If you need help, and that help will help you make more money, get it. In today’s employment market, there are multiple employee-employer options that can be exploited, from VAs to temps to part-timers.
But remember: you must have systems in place for them to follow first, and every person you add to your organization has to be one who ADDS income to your business.
Great article! Timely. Explains the concept well. Thank you.