I am a huge proponent of thinking big. I believe that entrepreneurs should embrace the practice of BHAG – that is, setting Big Hairy Audacious Goals. When I mentor other entrepreneurs, I frequently challenge them to think much bigger than they are comfortable. When we are grinding away each day it’s easy to get tunnel vision. It’s easy to become mired in the little things that consume much of our time. As a result, we may forget how big our vision is supposed to be. But here’s a little secret. We can support the notion of thinking big by actually starting small.
I started my real estate career fresh out of college as an apartment manager in 1975. After several months, I had figured out how to operate my 234-unit property in a reasonably effective manner. It wasn’t long before I wanted a greater challenge, and I convinced the owner of the company to allow me to prospect for new property management assignments. I did the research on the market and identified several properties that I thought might be candidates for our services. Then I started knocking on doors. Shortly thereafter I was successful in signing an agreement with a partnership that owned an 18-unit apartment building. I was ecstatic! If I recall correctly, the management fee was a paltry $150 per month – I’m sure we lost money on this property – but I worked tirelessly to prove to the partners that they had made a good decision. They apparently thought so because they expressed their satisfaction to other property owners, and before long we landed a 39-unit building. This was followed by 64-units, 66-units and 120-units. Within a few years we were the dominant management company in that particular market.
Flip the calendar forward a few decades and our development business had been successful. We saw a void in the market for the re-purposing of historic structures into affordable housing in small Midwestern communities. The approach involved utilizing several complicated funding structures that had rarely been utilized. I was certain that the concept would work and had big plans for its implementation. However, to manage risk and to “de-bug” the program, we decided to start small. We acquired four small historic buildings – a former grocery store on the courthouse square of a small town; a couple of hotels built in the late 1800s in two more small towns, and an historic mercantile building in the downtown of a slightly larger town. When fully developed, we had buildings of nine, ten and 18-units – quite small by development standards. Today we are successfully delivering affordable housing that is much larger including properties of 93-units, 139-units and 184-units.
At one point in the early 2000s, we were fortunate enough to be asked to step into a number of smaller affordable housing partnerships as the replacement general partner. At the time the upside wasn’t obvious. We were paid a small upfront fee to take on this role, but the property management fees weren’t significant and the opportunity to monetize these assets (as in sell them) was many years away. My partner wondered several times why we were “messing around” with such small assets.
Here’s what I’ve learned. By taking small steps in the beginning, we have been able to realize big dreams. Over the course of my career, I’ve been involved with procuring the management of nearly 70,000 multi-family units. Our organization has developed affordable housing at a cost of hundreds of millions of dollars. Those small replacement general partner positions are now resulting in substantial sale proceeds some 15 years later and more. Starting small in all cases helped us build credibility. It helped us build relationships. It allowed us to experiment in a controlled and low-risk fashion. There’s no question it helped us learn what we needed to be successful.
We entrepreneurs are impatient. We covet hockey stick growth. I can tell you that my sense of urgency is off the charts (a fact that my colleagues will attest to emphatically). And yet, had we swung for the fences and tried to hit home runs every time, I’m convinced that our success would not be at the level it is today. Climbing the mountain was hard and it would have been a lot easier for us to simply take a helicopter to drop us at the top. Except that no helicopter can fly high enough to the peaks we want to reach.
Our thinking must be in terms of BHAG. However, we are smart if we use small steps as the building blocks to realizing our big vision.
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This blog is being written in tandem with my book, “An Entrepreneur’s Words to Live By,” available on Amazon.com in paperback and Kindle (My Book), as well as being available in all of the other major eBook formats.