A successful REI business requires a multitude of skills, ranging from marketing and sales to accounting and IT.
And since no one is great at everything, you probably think you fall short on a few of those things. It’s fine, everybody is better at some skills than others. But even if you call certain skills your “weaknesses”, you can still lapf your competition in them by using a method by a Lebanese mathematician (and don’t worry, you won’t have to break out your calculator).
In this episode, you’ll learn how to excel at your weaknesses without throwing tons of time or money at them.
Show highlights include:
– The most profitable method for business growth which you already know, but probably aren’t executing. ([4:10])
– If you’re sticking to your plan, you might be sabotaging your own success. Here’s why. ([7:45])
– How to experiment in your business without risking ruin. ([9:40])
– If you plan your year, don’t make resolutions or exact plans. Do this instead. ([16:45])
To get the latest updates directly from Dan and discuss business with other real estate investors, join the REI marketing nerds Facebook group here: https://adwordsnerds.com/group
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You're listening to the REI Marketing Nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of Ad Words Nerds, a high tech digital agency focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition and live a freer, more awesome life. And now, your host, Dan Barrett.
Dan: Alright, hello everybody and welcome to this week's REI Marketing Nerds Podcast. How are you? I hope you're doing awesome. By the time, you're listening to this we should be safely out of the holiday season, out of the New Year season and into 2019. However, I'm recording this in 2018 so hellooooo from the pastttt. [0:01:04.8] I wanted to do this episode because planning for the year and strategically trying to think about what I want to do in the New Year absolutely one of the highest value things that I do every year. It is one of my favorite things to do every year which I realize is a pretty nerdy thing to say but it's absolutely true. It's just something that I feel like give my life a ton of direction. If you've known me for a little while, you probably heard me say this but I am not particularly good at marketing, I am not particularly in terms of business sense, I am by no means a natural business person. What I am is very self-aware, or at least I hope so and also very good at planning. [0:02:00.3] What that does is allow me to get much further with much less with whatever you want to call it, raw energy, raw talent, whatever it is than most people have. I would actually say that in most cases, I am a worse marketer than almost anybody you meet but it's knowing that about myself and developing the systems I needed in order to get really above average, excellent results for myself and for our clients. It's the need to develop those systems that has pushed me to actually build the things that we use for our clients today. This kind of strategic planning system, this kind of strategic planning idea – it's very close to my heart and it's a huge part of why I am where I am lucky enough to be today.
I wanted to just pick apart one thing from the annual planning process that I do. If you're interested in knowing more about this, let me know; hit me up on Facebook, wherever you can find me, go to AdWordsNerds.com, drop us an email, let me know. [0:03:07.6] I'm happy to get more into this process because it's really something you should be doing multiple times a year. This is the perfect opportunity to get into it because all the New Year's resolution stuff is probably done for you right now. You probably did that if you're going to do it. Everybody's off breaking their resolutions and not doing what they said they were going to do. It's actually the perfect opportunity to take a step back and just say, "okay, am I doing what I need to be doing to have my absolute best year ever in 2019?" If you could pull apart one part of this process – I'm going to give you the absolute most valuable mental model, mindset, whatever you want to call it and it's this idea of convex tinkering. Convex tinkering, now this is not an idea I made up. This is an idea that is basically as old as time and as an investor it's something that if you don't know it in terms of being able to talk about it or write about it or whatever, you never heard that term before – you absolutely intuitively understand what I am about to talk to you about. [0:04:15.7] Because it is at the core of all investing, real estate investing specifically, whether you're wholesaling or lease options or flipping or whatever you're doing – apartment buildings or whatever. It is at the core of what you do everyday. This idea of convex tinkering is essentially the beating heart of your investing business and is why you have been able to make money doing deals and if you haven't done a deal yet, it's at the core of what you are going to do when you get your first deal. So it's a really, really critical huge idea. It's just not something that people apply to their everyday lives. It's not something that we apply to our own businesses so I want to talk about this.
So what is convex tinkering? What does it mean? [0:05:01.0] Well first we need to understand – I think the problem that a lot of people have with planning and a lot of people like to talk about planning and goal setting and everything, I think if you're like me and you're into self-help and business books and all this stuff – it's all stuff you've heard a whole bunch of times. But when you actually look at what people do – most people do not really plan much. They might spend a little bit of time on it and then they typically abandon that plan pretty quickly like life happens, things change and the plan goes out the window and you forget to make the new one. Right? Or you make it and it's cool and you put it on your vision board or whatever it is and then you just kind of become blind to it. You ignore it. The reason this is is because planning is actually very risky. There is a very real danger to the planning process. The reason there is a danger to it is because when we try to predict the future and we plan around that predicted future we actually make ourselves more fragile. [0:06:10.3] We make ourselves less flexible. If you say, "Look my plan for my investing business is I'm going into this zip code, I'm going to be there, I got to get 20 houses in this zip code by the end of the year and I'm going to spend $10,000 on mail and I'm going to spend $10,000 on this" and you build out the whole plan and you just do it. You put your head down and you relentlessly, ruthlessly execute on this plan – well chances are that things don't work out exactly the way that you predicted. Predicting the future is very, very difficult especially when you're talking about things that are complex like marketing or real estate. I mean real estate markets like the perfect example of something that is so complex – I mean no one can really predict what it's going to do, we can make a guess, but we can't really predict it, right, with 100% certainty. [0:07:07.2] So things change. That's not even taking into account things that might happen in your personal life. God forbid you get sick or someone in your family gets sick. Or you have to move. Or there is a weather thing or whatever it is, right? All sorts of things happen. If you just follow your plan no matter what, the likelihood that you are following a suboptimal path, the likelihood that you are doing the wrong thing at the wrong time is very, very high. So there is a real cost to following that plan. I think we all intuitively understand this. When we sit down to plan a year ahead or recently someone asked me to plan 25 years ahead – what do you want your life to look like in 25 years? I'm like, "Good Lord, I don't know. I have no idea what I'm going to want in 25 years." [0:08:01.8] It's so hard to understand what the future is really going to be like. What we are going to want to do much less what we will be able to do. There is a real cost to that.
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So when we talk about planning, people tend to get very nervous, they tend to get tense, they don't want to get wrong. There is this whole feeling of we don't want to plan it wrong. I don't want to do my yearly planning wrong. What if I pick the wrong thing? [0:09:00.1] I think we can avoid all of this. Not only avoid the downside but actually get massive improvements on the planning process and get 5 to 10X our results simply by switching away from this idea of trying to plan the future, trying to predict the future and moving towards this idea of convex tinkering.
So let me breakdown what this is. Convex tinkering is a term I stole from the book, Anti-Fragile which I highly recommend if you haven't read. It's great. It is essentially a fancy term for experimentation and a specific type of experimentation because it's not just any kind of experimenting or any kind of testing of new things or whatever. It's a very specific kind of experiment. Specifically what we are looking for are experiments that have a quantifiable known and minimal downside while having the potential for a massive upside. Let me breakdown this concept a little bit. Let's start with the downside. What do I mean by this? We want to do experiments that have a quantifiable known and minimal downside. [0:10:01.5] That means that the experimentation that we do, let's say you're an investor and there is something that you want to test. You have to make sure that the potential worst case scenario of that test is going to be something that you can handle and preferably handle with no problem. So you want something that is going to be not too expensive, something that is not going to take up too much of your time, something that is not going to take up too much of your effort, something that is not going to ruin you if it doesn't go well. This is one of the reasons that when people come to us to work on their online marketing, we typically put them through what we call a "kick start program". The kick start program is limited to 90 days. [0:11:01.7] You set your budget at the beginning so there is a set cost that it doesn't go above. We set the time period at 90 days. The reason that we do that is because we want the potential downside of that experiment to be known. We want to know for a fact the worst case scenario, nothing comes of it, you don't get any leads, it's terrible, whatever we send all your leads to your competitors instead of you - just like the worst case scenario. We want to know that. You can know that cost and that it's completely okay to the business, to your business if that happens, right? Obviously no one wants to lose money and no one wants to fail and most of our clients get a positive ROI pretty quickly but you never know. So you want to understand that downside and make sure that it is relatively minimal. That's the first step of convex tinkering, you look for an experiment with a known quantifiable and minimal downside but we also want to look for experiments that have a high potential for an incredible upside. [0:12:06.5] So we want to look for things where the relationship between the downside and the upside is not linear. So we might have a $5000 potential loss but the potential win of that experiment might be hundreds or even millions of dollars. Marketing channels are a good example of this. If you get into Adwords and you have a budget of $2000 a month for three months then you're potential cost is $6000. So you know that potential downside and if that's doable for you as a business, awesome, but the potential upside of that experiment working well is a deal a month or a deal every other month for the next five or ten years well that's hundreds of thousands of dollars as a potential upside to that experiment. So the relationship is completely skewed towards the potential upside. [0:13:03.5] Now it doesn't mean that we're actually likely to have that happen. It doesn't mean that we are actually definitely going to get that upside and in fact most of the experiments that you're going to pursue are going to be failures. This is just the way it is even in Adwords Nerds, my business, we launch all sorts of different services for investors every year, and in fact we test a lot more of those behind the scenes. We're always testing new campaigns and new channels and new approaches and new landing pages ... I mean it's on and on. It's continuous. Most of those experiments don't beat our current average. It's just the way that it is.
But I know that even if just one each year produces a two or three times multiple on our current rate of lead generation for clients; that is a massive win. [0:13:59.5] In reality, we really need to do that once every three years, right? We only need to leap frog our competition once every three years or five years even in order to be by far the most outstanding, most advanced people in the field. It's the same exact thing with you. If you look at let's say – we'll get away from marketing channels for instance let's talk about adding a zip code to your business. I'm going to experiment with adding a zip code. I'm going to try investing in that zip code. I don't know how it's going to work but that's going to be my convex tinkering experiment for the quarter. So you could say first we want to quantify and know our downside and keep it minimal. I'm going to budget for that. You budget $5,000 for marketing. I'm going to spend two months working on this zip code. If I don't get a deal or almost a deal under contract within those two months I'm going to abandon the project. [0:15:00.9] Immediately we already know what our potential downside is, the worst case scenario is I lose my $5,000 and I lose the two months that I spent working on it. The potential upside of course is all the deals I can do in that zip code over the lifetime of my business which is hundreds of thousands if not millions of dollars. So huge potential upside, relatively minimal potential downside and that is an experiment.
So when you set down to plan out your year, I don't try to predict everything I'm going to need to do in the year and I don't try to predict where I'm going to be. Instead I think about what experiments can I do that have a quantifiable known and minimal downside but have a huge potential upside. This podcast was one of those experiments. I agreed to do 12 episodes. If it didn't go well that would be cool, I would have them, I could send them to clients, whatever, I could put them on my blog and it would be fine. [0:16:02.1] I spent a certain amount of money to get it all set up but if nobody listened to it, I wasn't going to keep doing it. Instead what ended up happenings is, we ended up getting a bunch of new email subscribers from it, a bunch of new clients, it's been a lot of fun to do, it's got me in touch with a lot of really awesome people and so it's been really great. So the potential upside is absolutely massive especially over the lifetime of whatever this podcast is going to be and the potential downside was pretty minimal. It did great. There are other things I tried this year that were absolute disasters and I'm never going to do them again. I only need a few to work and that's the key here. We only need a few to work.
So when you sit down to plan your 2019, don't think about trying to predict where everything is going to go and exactly what you need to do. Instead think in terms of experiments, it might be one experiment a quarter. That will actually put you far ahead of anybody else; I got to tell you because most people are not doing this. [0:17:02.1] Really figure out how you can minimize your downside while getting the potential for massive, massive upside. If all you do is hit one of those as a success in 2019, it could be your absolute best year ever.
So I hope that makes sense. I hope that is helpful. If you are listening this and you are not in the REI Marketing Nerds Facebook group, I got to tell you; you got to get in there because it's a great group of people sharing a ton of awesome information. I'm in there pretty much every day. I would love to get you on the Adwords Nerds mailing list. So if you want to go to AdWordsNerds.com/list I email out high quality stuff. I'm going to try for every single day in 2019. It's like my goal. I'm going to make this list the single most valuable list for investors anywhere. I'm going to deliver such wild value. I really want to blow people's minds. So you can go there, get on the list at AdWordsNerds.com/list. [0:18:02.8] I'll send you a bunch of free stuff for your trouble. As always guys, hope you're having an awesome day. Hope you have an excellent 2019. This is Dan Barrett signing off. Talk to you next week. Bye.
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