There is a long time business owner I know that I highly respect. When he was 16, his first vehicle he bought was a dump truck to start his construction business. Since then, he’s been able to grow a great construction company and get into play on various business transactions that’s helped him build wealth. That’s a good person to follow. Entrepreneurial and wealthy.

Well, I thought so as well until I realized that all this person does is work. 80 years old and they’re still out there working every day. I’m not talking supervising or sales but down-right hard work with a shovel digging out trenches and moving dirt around. I have to say, hard work is an admirable trait and many entrepreneurs wouldn’t be where they are without it. What we have here is the classic old school business owner. Start a business, work hard in the business your whole life, and you will have enough funds to take care of yourself and your family. Don’t worry about vacations or money for another house because you probably won’t have time to enjoy them.

Instead of paying someone $10/hr. to shovel dirt or $14/hr. to drive truck, do it yourself because hiring people costs money and you can just do it yourself anyway. Does this sound like any so called “entrepreneur” that you know of? I’m not trying to knock these people down because they’ve done more than the “work 40 hours for 40 years for a 401k” (direct quote from entrepreneur Ken Brown) have done or will ever dream of doing. Can I suggest a better way though?

Where did valuing our time and making good business decisions take a back stage to plain old hard work? Why do we as investors and entrepreneurs feel like we have to do it ourselves because we’re the only ones that can do it and we have all this free time anyway? It starts out this way because our education growing up never teaches us the entrepreneurial way. We learn that if you want to get ahead you should work hard and save, which will give you enough money with social security to retire. We never learn about leveraging Other People’s Time (OPT) and Other People’s Resources (OPR).

To be successful and to grow a business whether it’s investing in Detroit Real Estate or running a factory that creates and distributes widgets, you have to master these techniques. Let’s use our construction company owner as an example. We know that his time is better served going other tasks like sales or marketing for his company rather than digging ditches but how do we measure this?

What we have to do for the construction owner and what you need to do for yourself is to figure out how much your time is worth? Let’s place a dollar value on your time. So what do you think? What’s your time worth? What should it be worth? Is it $50 an hour (~$100,000/year), $250 an hour (~$500,000/year), $1,000 an hour (~$2,000,000/year) or more? You have to decide how valuable your time is to you.

Let’s be very conservative and say our Construction Owner is only worth $50 an hour. What he has to do is to decide each task during the day and put an hourly rate on it. The tasks that fall below $50/hr. like digging trenches, driving truck, and going to the City Building to apply for permits, MUST be completed by someone else. The tasks like sales that can produce far greater than $50/hr. the business owner can do. Now what this does is it makes the business owner focus on the areas of his business that he can really add a tremendous value. The areas where he is adding almost no value (compared to the price that it can be completed by an employee for) no longer will get in the way of these higher priority tasks.

Because he is able to focus on areas in his business where he is adding a tremendous value, he not only can leverage his time more but he’s going to see his business grow. As his business grows, you will see his hourly rate increase to where he may have sales people and a company-wide manager. His time may become so valuable that he can only review reports from the company manager and tell the manager corrective actions to make. Now isn’t this really the goal of most entrepreneurs? I can hear someone saying right now, “What if this guy really likes to be working in his business and digging trenches?”. Well, that’s the beauty of leveraging other people’s time and growing your business. As you work on your business and not in your business, it frees up much of your time to do whatever you want (sitting on the beach in Maui, traveling around Europe, digging ditches), whatever that may be.

What does this mean to you as a real estate investor (full time or part time)? Well, it means that you need to figure out what your hourly rate is and make sure you have other people doing this activities that are below your hourly rate. Now don’t just take your annual salary at your J.O.B. and divide it by 2,000 hours. No, I need you to figure out what you should be making or what you will be making as an entrepreneur and do this calculation. If you’re making $5/hr. at a fast food restaurant, I don’t want you doing every task that is $5/hr. or more. If you’re going to be an investor and an entrepreneur, you have to think like one.

Once you figure out this hourly rate, you then need to start looking at the activities and tasks that you complete for your investments and assigning hourly rates to them. Anything that’s not at your hourly rate or above, needs to be outsourced to someone else. Do you think it’s too difficult to do or that there’s not anyone that can do these tasks? I’m here to tell you that it’s much easier than what you think. I know many people that offer outsourcing arrangements to investors and entrepreneurs and specialty companies that offer very specific outsourcing arrangement for real estate investors (Our company being one of them).

If you have a job and are investing part time, you MUST leverage other people’s time so you can grow your investments and leave your job. If you’re a full time investor, you MUST leverage other people’s time so you can continue to grow your business and do the activities that you want to do. I’m not here to judge your activities so if you’re the 80 year old construction company owner that just likes to dig trenches and drive truck, I’m not going to tell you that you shouldn’t be doing it. I just want to make sure you have the free time to do it.

Successfully Yours,
Jared Pomranky
Detroit Market Expert

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