JF2238: Solopreneur To A Business With Mike Simmons

Mike Simmons has been on a previous episode JF179, so be sure to check out this episode to get his full background. For a brief reminder, he is the Co-owner of Return On Investments, Partner in 7 figure flipping, and host of “Just Start Real Estate”. He has 12 years of real estate experience and today he will be sharing the details of how he went from Solopreneur to creating a business that can run without him.

 

Mike Simmons  Real Estate Background:

 

 

 

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“If you have a goal to have a big company, your going to have to hire a team, & will need to develop your skillset to lead, manage, inspire, train, and motivate ” – Mike Simmons


TRANSCRIPTION

Theo Hicks: Hello, best ever listeners and welcome to the Best Real Estate Investing Advice Ever show. I’m Theo Hicks and today, he’s a repeat guest, Mike Simmons.

Mike, how are you doing today?

Mike Simmons: I’m doing great. Thank you for having me on again. This is exciting.

Theo Hicks: Absolutely. Mike was one of the earlier episodes. I’ve got Episode 179.

Mike Simmons: Wow.

Theo Hicks: Almost 2000 episodes ago, we had Mike on the podcast. A little bit about Mike’s background. He is the co-owner of Return on Investments, a partner in a mastermind group called 7 Figure Flipping and host of “Just Start Real Estate” podcast. He has 12 years of real estate experience. His portfolio consists of 20 single-family rentals. He also wholesales and flips about 100 homes every year. He is based in Troy, Michigan, and you can say hi to him at his website, http://www.mikesimmons.com/.

This is Sunday, so we’re gonna do a Skillset Sunday with Mike, and it’s going to be focused on what it takes to go from a solopreneur to a business that can run without you. That will be the main topic of conversation today. But before we get into that, Mike, do you mind telling us a little bit more about your background and what you’re focused on today?

Mike Simmons: Absolutely. My background, I like it because it’s so relatable and it’s not exciting. I grew up in the Midwest, had parents that worked in the automotive industry, very blue-collar, very union mentality. Not sexy, but relatable. I think a lot of people kind of grow up in that situation. I didn’t have entrepreneurs that I looked up to in my family or in my sphere of influence. Entrepreneurship was not fostered. It wasn’t encouraged. As a matter of fact, it was a little bit discouraged. The idea was, you go to school, you graduate and then you either go to college or go into the automotive industry or something that has a union and has benefits and security. I’m doing air quotes, because we all know how that is. So that was really what was encouraged.

I did go to high school, I went to college for a couple semesters, didn’t like it, got a job working for UPS. My parents were ecstatic. It’s a union, it’s stable, it’s secure. I thought, “This is where I’ll be the rest of my life. What do I need college for?” and dropped out of college and worked at UPS. Now, that’s all well and good. UPS back in that time, at least, it was so incredibly physical. I started at 18. By 24 years old, I couldn’t get out of bed without going to the chiropractor three times a week. I was 24 and I couldn’t get out of my bed without chiropractors, all week long. I realized, “Holy crap, I can’t do this the rest of my life. My body won’t physically be able to do it. I’ve just kind of wrecked my back.”

I went into the automotive industry, the next industry that is very intuitive in Michigan, everyone’s connected to the automotive industry. Went into the automotive industry in more of a desk job. I was an inside salesperson. And again, I thought, :This is where I’m going to be the rest of my life”, so I didn’t finish college. At this time, by the way, the automotive industry was very, very strong. But as we get closer to the year 2000, the automotive industry really struggled. It went real downhill for a while and people were losing their jobs. I thought, “Wow, I better finish my degree, because I’m not very marketable. I’m one of a billion people who’ve worked in the automotive industry without a degree.”

I went back and got my degree and I started going through that corporate climb, and I thought I was where I needed to be. I went and paid the money for the degree, went through the hassle of doing the classes and all that. I just wasn’t happy. I just hated my life. I couldn’t enjoy Sundays, Mondays were miserable and Fridays, I was just dreading Sunday because Sunday was the day before Monday, you know what I mean? It was this weird cycle.

I thought, how do I get out of this, or at the very least, when can I retire? At the time, I was 32 years old. I’m like, how do I retire? I started researching and trying to figure out what that looks like. The only thing I could think of off the top of my head was, “Well, I have to invest in stocks, the stock market.” That’s how you escape or at least that’s how you retire with some level of comfort. I started researching that, and I hated it. Long story short, I just hated it. It was like forcing me to read an insurance manual. It was just miserably boring. I kind of would drift off of that.

Eventually though, I landed on real estate and that did excite me. I started reading testimonials of people who had really done well and success stories and going to RIAs, and seminars and reading books and all these things. I got really, really excited.

Now, the worst thing happened to me that can happen to almost anyone who gets excited about something, they get stuck in the learning phase. I got stuck in that analysis paralysis and shiny object syndrome, and you name it.

In 2003, I decided I wanted to be a real estate investor. I didn’t buy my first house until 2008. For those of you listening, who go, “I’ve been wanting to do this for years, and I can’t get off the starting blocks. I kind of just feel like I’m stuck.” I hear you and I empathize with you. However, I also am going to be the person who’s probably the toughest on you, because I went through that, I know what that feels like and I know how debilitating and how pointless it is to stick in that mode. I did that until I bought my first deal.

Once I bought my first deal, it’s a bad analogy maybe, but it was like I got hooked on a drug. It was a positive drug. It was not a drug obviously that we all associate with, but it was something that I was addicted to. I loved it. All of my fears and doubts washed away once I went through that first deal and learned and got my feet wet and made a few mistakes, but still made money. Then I kind of figured it out from there.

Theo Hicks: Thank you for sharing that background. The topic today that we’re going to focus on is going from a solopreneurs – so you kind of brought us all to the point where you’re a solopreneur… And then we’re going to talk about how to transition from doing everything yourself to what you’re doing today. I think a good place to start would be to explain what your life was like, what your role in the business was in the beginning. And then before we talk about how to transition, just give us a contrast of how it is today. What were you doing then and what are you doing now?

Mike Simmons: When I first started investing in real estate, I still had a full-time job, I had and still have three kids, a mortgage, a wife, a job, the whole thing. What we all have. My life was getting up, going to work by 7:30 am, getting off at [4:30] and then going out and looking at properties. At the time, and this was 2008, GPS wasn’t as big, it wasn’t a thing on your phone. I had printed out eight and a half by 11 sheets of paper of all these maps, circled places that I had to drive. I would go look at four or five houses after work every night.

Now, I’m in Michigan. In the wintertime, it gets dark at five o’clock. By the time I got to the first house, it was pitch black out and a lot of these houses don’t have electricity. So I’m walking through houses with my cell phone light in the basements because we have basements here in Michigan… And they’re just cold and dark and creepy and weird. I’m looking at electrical panels to see, do I have to update this?

This is my life, going out after work and on the weekends, looking at properties, making offers and doing everything. I’m hiring contractors, I’m going to closings, I’m getting the insurance, I’m moving utilities into my name, because I was a pure house flipper at this point, by the way. Wholesaling, I didn’t even know what it was. I’d never heard of it before. I just knew house flipping. So everything was me. I had to go sometimes on my lunch break. If the house was close enough to where I worked, I would run there and just take a look at what’s going on. If not, every night looking at houses and going to the ones that I was working on to make sure the contractor showed up, to make sure nothing was going on that I didn’t authorize in terms of renovations, which if you flip houses, you probably know what I’m talking about… And that was my life on the nights and the weekends, every single day. I did that for about four or five years before I left my job and went full-time.

Now, contrast that with today… And by the way, back then, within those four years where I was kind of working a job and flipping, I think the most I ever did was 12 deals in a year back then. I was doing everything; I was running around working 50 hours at my nine to five and at least another 20 to 30 hours on my business.

Contrast that to now, we do about 100 deals a year. This year, maybe a little less just because the Corona thing kind of threw a monkey wrench and we had to adjust, but about 100 deals a year… And I almost never see the houses that we buy, because I don’t go out and get the contract and I never go to closings. We do a lot of wholesaling. I don’t have anything to do anymore with finding the buyer, the house flipper or the landlord that we’re going to eventually sell these to as a wholesaler. That’s all done by my team. Everything is automated. There’s a process or a person who’s in charge of that specific function. Right now as we speak, there’s a closing going on. I couldn’t tell you the address. But there literally is. I only know because I had to wire some funds because a lender had to back out at the last minute, so I wired funds, but I don’t know the address. I know it closes right now. I don’t even know exactly how much we’re going to make on that one. I have a team that’s running it.

Now, I’m obviously engaged. On a weekly basis, we do have a team meeting, and then a monthly basis, that’s like a state of the company kind of a thing. But I don’t pull the switches and I don’t push the buttons on a daily basis.

Theo Hicks: You mentioned that you do a state of the company that’s like a meeting every week, you said?

Mike Simmons: Every week, we have what we call a team huddle. It’s a real quick meeting. Are there any questions? Are there any problem, properties that I need to get involved in because you have to escalate it to me because there’s something happening that I need to make a decision on as the owner? But those are quick. Those usually last 15-20 minutes tops.

And then once a month, we have an all-company meeting. It’s more formal, I present information, where are we at? What’s the revenue look like? Where’s our profits? It’s more of a state of the company that I give. Then on a weekly basis, it’s a team huddle just to talk about the hot issues that can’t wait.

Theo Hicks: Sure. Besides those two meetings, what else is your involvement now in the business?

Mike Simmons: My involvement now, and this is really just in the past six months, and it’s specifically because of the state of the country, with everything kind of being a little topsy-turvy, I’m now involved in tracking and coming up with the marketing strategy. Prior to that, we had a marketing manager who we parted ways with at the end of the year. I’m involved in looking at our strategy as it relates to marketing, because it’s changing. We had some marketing channels that were typically our bread and butter, that stopped performing the way that they should. I got involved with that part of it. So for me, I’m looking at marketing on a weekly basis and making sure that things are happening that need to be happening, but it’s couple hours of my week.

Theo Hicks: Sure. Okay. Thank you for giving us that contrast, and I also appreciate you said how many deals you were doing then and now, which is also great to hear. Let’s talk about your first few hires. We’ll kind of just get as close as we can to now in the time we have left. Who was your first hire?

Mike Simmons: The first person I hired was what we call in our business, a transaction coordinator. A transaction coordinator for me, as a company that does the bulk of what I do is wholesaling – assuming everyone knows what a wholesale deal is, but essentially, we get a contract with a homeowner and we assign that contractor to a house flipper or landlord, and they ultimately close on it, and they do the work.

For me, a transaction coordinator is someone who takes the purchase agreement we’ve got with the seller, they take the purchase agreement or the assignment contract that we have with the end buyer, and they send them the title and they make sure that title gets everything that they need in order to close that property. It could be articles of incorporation from the buyer, it could be EIN numbers, it could be death certificates from the sellers if there was a death or something, it could be probate documents – whatever it is, whatever the title company needs, they facilitate that and they push it along. They’re a detail person.

The reason that was my first hire is since I’ve built teams and built my company and had to hire and let people go, I put a decent amount of emphasis on personality assessments; the Kolbe the DiSC, there’s one called Culture Index. There’s a million of them. But I do put some weight on to those.

What I’ve learned about myself – and this is a huge part of hiring, because you have to get good at assessing people. While you’re doing that, you might as well take a look inward and be honest with yourself with what you’re good at. And what I know I’m not good at – every assessment I’ve ever taken, every one of them to a tee says, I have no detail. I am not a detail person. If you want me to look over a document for the last pass to make sure it’s right, you’re making a huge mistake. I’m not the person to do that. I hired someone in my company that I knew would keep track of the details, because I’m not good at it. That was my first hire.

Theo Hicks: That was after, you said four to five years?

Mike Simmons: The first person I hired was in 2015. I started in 2008. It was quite a while. It was almost seven years. It was a while.

Theo Hicks: Who was the next person you hired and also the timing that [unintelligible [00:15:55]?

Mike Simmons: Exactly. Yeah. The first person was the first or second quarter of 2015. The second person I hired was in the second to third quarter, I can’t remember exactly, right toward the middle of 2015, was a salesperson. Because looking inward, like I said, I realized it’s my company and I am adequate at sales. I am passable, whatever other mediocre term you want to use, that’s how I am at sales. I can get it done, just not at a high level. But I didn’t really 100% know that until I hired an actual salesperson, someone whose superpower is sales.

When I brought him in and I started giving him the same leads that I was working on, he was closing them at a much higher rate. Whereas I might have to go on five or six appointments to get a deal, he was going on two or three to get a deal. He was destroying it out there. I thought, “Oh my, this is what it looks like to do something really, really well, not just adequately because I have to.” If I was being honest, I didn’t enjoy that part of it. I don’t enjoy the sales part of it. I’m not a natural salesperson. Bringing that person on was huge. But when I brought them on, and I think your next question – the next person I hired after hiring that person was a person to answer the phones… Because I was answering phones and doing sales. And then I hired a salesperson and I let him answer the phones. Now, the phone rings, because we’re sending out marketing at this point, we’re sending out postcards and letters and stuff like that. That makes the phone ring, and I’m letting him answer it.  Because in the beginning, when you’re building a team, especially in the sales capacity, it makes tons of sense to have the person that creates the rapport on the phone also be the person who shows up on the sellers doorstep, because they have some built-in rapport, right?

But at some point, that’s not scalable. So the next person once he started crushing it out there and I realized him answering the phone was keeping him from making appointments and getting in front of sellers, I thought the next person I’m going to hire is a phone person. Once I hired a phone person, now it didn’t matter how much the phone rang, because that was their only job; I could ramp up marketing.

Everything started to become this flywheel effect and everything started feeding everything else. Great salesperson. Now I need a phone person. Now I have a phone person, I need to give them enough to do, so I’m ramping up my marketing so that they can stay busy. They stay busy. My sales’ guy stays busy, revenue soars. That’s how it started.

Now, the last thing that I hired for—and by the way, my team has morphed over the years, and we’ve had to let people go and people have quit. There was some turnover, and we weren’t good at hiring. I wasn’t good at hiring at first for sure. I made mistakes. Probably the biggest mistake I made hiring – and to be honest, this dovetails nicely into the specific topic we’re trying to cover today… What keeps people from going from that solopreneur to building a team and scaling?

I think the number one thing is people don’t understand – I didn’t and I see this in hundreds of other people over the years… The same missing concept is that when you’re a solopreneur, and you’re building this real estate investing company, you get good at marketing, you get adequate or maybe even good at sales, you get really good at evaluating properties, you get really good at talking to buyers, to dealing with a title company… You get good at all of the mechanics, because it’s just you. You have to do them all in order to grow your business. People do that.

I always say, when I was in the automotive industry, one of the biggest mistakes I saw corporate America make was, for instance, in the automotive industry, we have a lot of engineers, and they would go into the engineering department, they would go, “Who is our number one performer? Who is a best engineer?” They would identify that person, and then they would promote him or her to the engineering manager of that department. Now, they’re not doing engineering anymore. They’re managing a team of engineers. That is a completely different skill set than doing the engineering.

As a solopreneur, we get good at doing the job. We get good at being technicians, we get good at being operators, but then when we scale and we start hiring, now we have to lead, manage, inspire, motivate… That’s 100% different than going out and finding deals, talking to sellers hustling, finding a buyer finding the next deal, evaluating properties. That is totally different than managing people to do that and training them to do that.

Here’s how I trained people when I first hired them. I would say, metaphorically, “We’re on the one yard line. The goal is the other end zone, at the other end of the field. Do you see that goal over there? It’s 100 yards away. That’s the goal. I want you to get there. I don’t care how you get there, just get there. Get there fast and just do it.” That’s not how you train people. That’s not how you inspire them, motivate them. That’s how you make them feel defeated and frustrated, like, no one cares.

So I had to get much better at streamlining and documenting my processes, so that they’re downloadable to people, that they’re transferable to somebody else. So they can look at it, make sense of it, and sometimes make improvement on it. But the fact of the matter is, being an operator doesn’t train you to be a leader, and you have to be a leader to scale your team. It’s a different skillset and people really get shocked by that. I think a lot of times, that’s why they don’t scale and they don’t build. They start doing it, it doesn’t work out; this person left, he got fired, I had to fire him, whatever. It’s like, “I’m not a good at hiring people. I’m not whatever”, and they go back to doing themselves because it feels comfortable and safe. There’s nothing wrong with that. You don’t have to scale your company. Just realize, if you have a goal of being a $50 million company, you’re going to need to hire people. You’re going to need to build a team. It’s probably not doable by yourself.  So if that’s your goal, understand you have to develop your skillset to lead, manage, inspire, and train and motivate. You have to.

Theo Hicks: Perfect. Okay, the last question before we wrap up – I really appreciate it, because I was going to ask you that, but you already answered it… So my next question is kind of more specific, but… I guess it’s kind of two parts. How did you know that you were ready to hire someone when you hire that transaction coordinator? And then how do you know how much I pay them?

Mike Simmons: Great question. I tell people when you hire, always look for the bottleneck and or the thing that you are not good at and don’t like, because it’s probably you’re not doing it very well and it’s going to end up being a bottleneck if it isn’t.

But some of the things that I did right in my company, as far as hiring and scaling was, coincidentally, right. It wasn’t like I knew everything going in. I knew that it was painful for me to deal with the title company, to gather documents, to make sure I organized my information, to look over the closing, the HUD, to look that over and make sure all of the fields were right. I would get to closing and realize I didn’t even look at it. And then there would be surprises, and sometimes the seller or the buyer would have fees or things that they weren’t ready for because I didn’t prepare them properly, and it would be a little bit of a disaster. It was painful for me to do the transaction coordination. That’s why I ended up hiring him.

Now, it turns out that’s a decent reason to hire someone, because there’s a pain point and something holding the company back. So that’s why I did it, I did it out of pain. There was so much pain associated with that part of my business… I wanted it to get it out of my lap.

Now, how did I know how much to pay? I really didn’t. But I knew that it wasn’t a job that you could easily come up with a commission structure. Luckily, at that point, I had enough revenue that I could pay that person… And I just figured it’s not a $100,000 a year job. I ended up paying that person $12 an hour, which was probably on the low side even for Midwest five years ago. But that position now in my company is a $15 to $16 an hour job. But I went a little bit low and got lucky, I found someone great.

By the way, the person I hired for that, my first hire, I burned her out. I expected way too much. I wasn’t a good leader, trainer, motivator, any of that. I was terrible. She ended up leaving and that’s the one person I regret having left my company. Of all the people that have come and gone, that’s the person I wish I could get back, because she was actually phenomenal. Looking back, she did so much more than I gave her credit for, and that’s on me.

Theo Hicks: All right, Mike. I really appreciate him on the show. You gave us a great rundown of high level going from solopreneur to a business that can run without you, as well as the specifics. My biggest takeaways was — I really like we’ve talked about when you gave that analogy of the engineer to engineering manager. And that when you first start your business, you’re doing everything, and that is a lot different skill set—that required a different skill set than managing people who are doing everything. A really good way to smooth that transition is to make sure that you have everything documented that you did, so that you can pass it out of them rather than saying “Figure it out on your own.”

You also talked about how to identify the first hire. For you, you hired a transaction coordinator because you didn’t like dealing with [unintelligible [00:24:33].02] you outsourced that to someone else. When you’re figuring out who’s going to be your first hire, figure out what you don’t like, what you’re not good at, or what’s a bottleneck in your company, and hire that out.

And then I also liked how you talked about the domino effect of when you hire someone. You did the transaction coordinator first, and then the next was a salesperson. You were okay at sales, but you figured that he was really good. And then you realized, okay, well the sales guy’s spending too much time on the phones, so I’m going to hire someone on the phone to answer phone calls. Okay, now I got someone answering phone calls full-time. Now, I need her to have something to do, so I’m going to hire a marketing person to increase amount of phone calls that they get. So kind of just thinking, what’s the next natural hire based off of your first hire. I liked how you explained that.

Again, really appreciate you coming on the show. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

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