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For Newbies

What Is The 10% Rule? And How Can Real Estate Investors Use It?

What’s up, guys? Today, I want to talk to you about a little something that’s really helpful if you are an investor and are looking to grow your number of motivated sellers.

Now, this is not one of those “Do this thing you’re instantly gonna gets leads” type deals. This little something could have a massive impact on your investing business over time. The strategy we’re gonna talk about today is the 10% rule.

The 10% Rule and the Riskiness of Complacency

The essence of the 10% rule is that any business should be spending about 10% of its time, 10% of its resources, 10% of its capital experimenting with something that could radically change that business for the better.

Sound risky? It might be, but it’s necessary.

Let’s look at an example. Marketing is what I do, so let’s talk marketing. You are a business that is reliant on a single channel of marketing for all your leads. You do direct mail, as an investor. A very common thing, as most investors are only doing direct mail.

You get really great return on investment. The problem is if something happens to that channel, whatever that may be, you’re SOL in regards to your entire marketing plan since it relied solely on this one channel.

If that channel and the ROI formula that you’re using changes, the effect on your business is absolutely massive. It’s your only source of leads. If something happens to that source of leads, you could literally go out of business if you can’t adapt to that fast enough.

That sounds riskier than the 10% rule, doesn’t it? Luckily, the 10% rule is the solution.

Marketing Channels: Parthenon vs Diving Board

Jay Abraham, one of my favorite business authors of all time, refers to something called the diving board.

Your business is shaped like a diving board. You have one column here supporting it, and that’s your marketing. On top of that column you have your huge business that’s kind of going up and down.

Abraham says instead of this diving board, what you want is a Parthenon. The Grecian Parthenon has several columns. In business, each column is a channel of marketing. The diving board has one channel of marketing supporting the whole thing, and it’s going up and down the whole time. But the Parthenon has several channels. That roof on top of that Parthenon, that’s very stable, right?

Now, we know this. I think most people intuitively know this. If you’re relying on only one channel for your marketing, that’s gonna be risky. If you’re only doing direct mail, it’s a risk. If you’re only doing online marketing, it’s a risk.

How do we get around that? We don’t want to just spend money. We have to spend our money on the thing that’s already working and producing an ROI.

How do we decide how to add new channels, how to add new things? How do we build the Parthenon if we have the diving board?

Well, this is where the 10% rule comes in. Spend 10% of your time, 10% of your resources, and 10% of your capital testing. If you are doing direct marketing, say, “I’m gonna spend 10% of my time, 10% of my capital, and I’m going to test pay-per-click marketing. I’m gonna test search engine optimization. I’m gonna test Bing ads. I’m going to test a bunch of different options out.”

Maybe you’re already producing three times ROI. Now, maybe add Bing ads. Maybe Bing ads is going to work. Maybe Facebook ads are going to work. Use 10% of your time, 10% of your resources testing a new channel.

Even if many of these channels underperform, they are building stability. They might not be as good as direct mail for you. But if they’re producing deals, this provides security in the off chance that your direct mail channel blows up and you can’t use it anymore.

Every once in a while one of those experiments may become massively better than what you have. If you think about what your primary marketing channel does for your business, think about having two of those or more. We’re talking about 200%, 300%, even 400% improvement in your business if not more because all those channels tend to interconnect and talk to each other. It tends to be a geometric rather than an algebraic improvement.

The challenge here is doing this systematically because if you try it and give up, you will never end up making the changes you need to make in order to find those diamonds in the rough, the things that really work.

Maybe you can spend more time and resources from that 10% if you want to pay someone to do it for you because you don’t want to do it. You’ll figure out what you invest and you’ll invest it systematically.

That is the 10% rule. 10% of your time, 10% of your resources, 10% of your capital experimenting with something new and possibly great.

Don’t give up.

 

Thanks for reading!

 

Photo source: Pixabay

 

 

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