Leverage

“Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” --Archimedes

The physics of any business rests on the successful use of leverage. Many real estate investing books have been written about leveraging money. Using other people’s money (OPM) is a powerful tool, but I want to discuss another important tool, leveraging other people. There is a finite limit to how much we can personally accomplish in a day, but if we harness other people’s time (OPT) our capabilities increase exponentially. Getting things done through the use of other people’s labor is essential to having a functional business.

The distinguishing characteristic between owning a business and being self employed is the use of OPT. If operations are centered on your input, you have a job. Many physicians, attorneys, architects, and others in personal service fields have private practices. They may be in business for themselves, but if they are the primary rainmaker, they are self-employed. When they stop working, business activity ceases. True businesses rely on the owner for guidance of operations that are dependent on the labor of other people.

Take as an example a local barber/hair stylist that has their own shop. They may have staff in supportive functions like answering the phone, shampooing hair, or doing nails, but it’s all a prelude to the barber/stylist’s chair. It may be a successful operation, but when the owner stops, the business stops. Contrast this with the local owner of a Haircutter’s franchise. The owner may not even know how to cut hair, but they employ stylists who do. They may be in the shop regularly to provide oversight, but the business continues to run even when the owner is sick, on vacation, or is otherwise unavailable. Furthermore, the system is scalable, and a sole owner can have several shops operating simultaneously and independent of each other.

The turnaround of a MHP is a very complicated process. There are the normal, ongoing day-to-day management operations: rent collection, evictions, maintenance, rules enforcement, etc. In addition, there are the logistics associated with the finding, buying, and setup of homes. The last component is the sales and marketing operations necessary to fill the community. The dynamic nature of this business demands a myriad of decisions be made on a daily basis.

Our approach to this challenging undertaking was to jump in with both feet. Initially, we lived in Madison Woods 24/7. While this experience was invaluable, we knew that eventually we would need to create a system so that operations weren’t dependent on our direct efforts. We would design a system, the system would run the business, and people would run the system. That was the plan, now we’re executing it.

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