Much has been written and spoken about effective goal setting as a means of driving oneself toward success. The self-help gurus will have you narrow your goals to make them measurable. They would then have you write goals down to make them “real” and to make yourself accountable – does this sound familiar?
These may be good suggestions for some people, but having tried this I couldn’t get away from the thought that there must be an easier way to plan for success. I came to realize that having a specific goal is like driving a truck – you can move in the general vicinity, but there’s nothing exact about it. And the reason for this is not your shortcomings or mine, but life itself. If you’ve been around long enough, you know that nothing works the way we plan; sometimes better, sometimes worse, but never as we plan…
I quit making grand plans about 6 years ago. At times, as I’m seeing all of the busy people making plans, I wonder if I am missing out on some incredible insight and wisdom. But, I take solace in the fact that even Warren Buffet, the greatest investor of all time as far as I am concerned, reportedly has 3 trays on his desk: Yes, No, and Too Hard – which seems to validate the point of view that simple is good. Bottom line – there must be another way, a better way, a simpler way to ensure movement in the direction of success than a rigid goal; but what?
AND THEN I RECEIVED THE ANSWER
Allow me to introduce you to Bob. OK – his name is not really Bob, but I don’t think I want you showing up at his doorstep tomorrow morning 🙂
Bob and I go a little ways back. Bob is my friend, business partner, and mentor, and Bob taught me more about effective goal setting than all of the books combined. Bob has seen a lot and done a lot, and he has very little left to prove. Along the way Bob decided that I am a stand-up kinda guy and that he’ll set some time aside to give me a few pointer, and since then, about once per month I show up at his “office”…
About 9 months ago we were sitting at a plastic table in a sugar-shack he owns overlooking a gorgeous woods and a pond he’d dug up. For Bob this place is the personification of his nirvana…this is the setting he saw in his mind way back when – and here we were; sitting there. For me it is always a treat to be there with Bob, partially because it’s serene, partially because the place personifies accomplishments of a lifetime of doing, but mostly because I always leave smarter than I was when I came (and a little tipsy usually).
WE WERE THERE TO DISCUSS A REAL ESTATE DEAL
For most people, it would take all of 15 minutes to cover the bases on a real estate. But, those of you who know me best know that I tend to think in philosophical terms, and likely Bob is not very different from me in this respect. Therefore, a conversation which should only take 15 minutes usually lasts 2 hours. That’s just how we work, and that’s a good thing since I’m not too sharp and it takes longer than 15 minutes to cause me to get smarter – even for a guy like Bob…
Anyway – in the middle of all that, Bob fires off a thought which hits me like a ton of bricks and totally deciphers the essence of what it takes to succeed. I’d been struggling with this for a while, and there it was – plain as day. Are you ready for this, guys? Bob says to me:
“Son – just make sure the deal you do tomorrow is better than the one you did yesterday…”
Wow – this is simple, is it not? Think about it; it is truly mathematically impossible not to continually move forward if each step we take is better and bigger than the last…
MOVING FORWARD IS NOT ENOUGH – YOU SHOULD GROW EXPONENTIALLY
Rather early in my career I purchased a couple of duplexes; actually, one had an extra unit in the back so it was a triplex. Those were solid acquisitions and I still have them in my portfolio. However, over the following couple of years and for reasons unbeknown to me I bought 3 single family houses. Each one of those houses indeed added to the passive income of my portfolio, but not as much as another multi-family would have. By buying those singles I was moving ahead, but I did not maximize the returns.
Once I figured this out, I went out and bought another triplex, and having stabilized it I went and bought a 6-unit and year later a 10-unit. Here’s the thing – just as the single-family houses added to my cash flow, so did these acquisitions. But, these grew my business exponentially because the amount of cash flow I was able to generate with each transaction grew from one to the next.
The reality is that for the most part it’s just as easy to buy a triplex as it is to buy a SFR, and it’s not any more difficult to buy a 6-unit as it is to buy a triplex. But, a 6-plex throws off much more cash flow than a triplex, which throws off much more cash flow than a SFR. By ensuring that at every step I was bighting off a bigger piece, I was compounding and focusing the ROI, as well as diversifying the income. And going forward, I am not likely to consider anything smaller than 10 units. In fact, a 30-unit acquisition could instantly double the size of my portfolio with all that this entails.
I could have continued to buy houses and I probably would have done OK – this is what most people do. But, I think I’ve illustrated how Bob’s advice of ensuring that each deal is better than the last does indeed amplify results.
What do you think about this philosophy?