Monday, January 07, 2019

2019 Goal: Business Quadrant


2019 feels like a continuation of 2018 in many ways. I learned how to play bass guitar and want to continue improving. I also worked on Majordomo and will continue to do so.

Even though I have a goal for Majordomo, it doesn't feel right to publish it here (in the same way I don't post my HP goals because I'm not the sole owner). Instead, I'll focus on personal items and Furlo Family Homes.

Although I didn't have a specific goal for Furlo Family Homes last year, the focus, in retrospect, was automation and removing tasks from my plate. It wasn't an altruistic "let's get more efficient," but more "I don't have time and something needs to change."

Here are some of the changes I made:
  1. I transitioned the rent payment system to be through Cozy. I previously offered 2 additional payment methods.
  2. I switched the accounting system to be in Quickbooks. I started in 2017, but 2018 was the first full year of exclusive use. Versus a spreadsheet, this saved me at least 20 hours this year. I do miss my custom reports, but not enough to spend the time re-creating them.
  3. I tracked all my miles using TripLog. Not only am I capturing each mile, but it also takes less time.
  4. I completely turned the application and screening process upside down, saving 9 hours of work on each turnover. This was a big deal!
  5. I hired a virtual assistant to help with back-office tasks like tracking payments, handling maintenance requests, and resident turn-over tasks.
  6. Right before the end of the year, I turned the new-resident onboarding process into an online course. Not only does it save me an hour on each new resident, but it also creates a better experience.

Again, in retrospect, that's a lot!

CASHFLOW Quadrant

I've also been re-reading a book called "Rich Dad's CASHFLOW Quadrant" by Robert Kiyosaki, and it's doing a great job of challenging me to think bigger. For a little bit of context, here are the four quadrants:


Kiyosaki proposes that true financial freedom comes from getting your income, or at least enough income to cover your living expenses, from the B and I quadrants.

What's the difference between an S and a B? According to Kiyosaki:
"Those who are true B’s can leave their business for a year or more and return to find their business more profitable and running better than when they left it. In a true S type of business, if the S left for a year or more, chances are there would be no business left to return to. So what causes the difference? Saying it simply, an S owns a job; a B owns a system and then hires competent people to operate the system. Or put another way, in many cases, the S is the system. That is why they can’t leave. (p. 34)"
At the beginning of last year, Furlo Family Homes (FFH) was solidly in the S quadrant. Today, it's straddling the S and B, which is great, but... I think you can see where my goal is heading for the year.

The other quadrant of interest is the I quadrant, which has 5 levels:
  1. Spend all that you earn. No investing happens.
  2. Savers. The most common example is people who put their money the Bond market.
  3. I'm-Too-Busy. Likely a 401(k) and IRAs where you let other people manage your money.
  4. I'm-a-Professional: The DIYer. "If they invest in real estate, the do-it-yourselfer will find, fix, and manage their own properties. (p. 105)" That sounds familiar...
  5. The Capitalist: Uses other people's money, and usually invests with a team.

I'm a level 4, which isn't bad, but I got a glimpse of being a level 5 investor with the apartment building, and it is more exciting.

I want to point out that you can retire at levels 3 and 4, not just 5. Many people, especially advocates of FIRE (Financial Independence Retire Early) typically focus on level 3 investments with 401(k) matching, IRAs and index funds. A lot of them do it as E or S. So it can be done, if you spend less than you earn and invest. If you have money (15%-50% of your income) and little time/interest in learning about investing, index funds might be perfect for you.

And finally, the Bible says work is good. Perhaps my favorite example is right in the beginning with Adam: "The LORD God took the man and put him in the garden of Eden to work it and keep it. (Genesis 2:15 ESV)" After Adam and Eve sinned, work became toil, but the work itself is a good part of creation. We are stewards of our stuff, our families, and this planet. So it's good to work hard and take care of what's been given to you, no matter what quadrant you do it in.

So the only way to retire isn't through the B and I-5 quadrants. If you're an employee (E) and investing (I-3) 15-50% of your income for retirement, you're doing it right.

2019 Goal: Business Quadrant

I like the clarity of focusing on ONE Thing. So I'm going to do that again. I also like the idea of solving a problem. It allows you to not have all the answers day one but gets you thinking about how to solve it and acting upon it, so you're headed in a purposeful direction.

My goal, my problem to solve, is to make Furlo Family Homes a true business, one that I could leave for a year or more and return to find it running better than when I left it. I don't think I'll entirely move it to a B-Business by the end of the year, but I want to continue the process I started out of necessity last year and have a clear roadmap by the end of the year. There are a few sub-problems I'll need to solve:

  • I need someone local who I trust to meet residents and open doors.
  • I need to change my mindset to stop saying "I". FFH needs to find a trusted local person who can meet residents and open doors.
  • Currently, I personally do 90% of the maintenance, how can that switch to 0%?
  • How can FFH afford these changes? Related, how can FFH improve its operating margins?
  • Following the recommendations from E-Myth, business roles/responsibilities/tasks, the entire system (!), needs to be documented and followed. What's the best way to record this? We have an internal wiki, but perhaps there's a better solution?
  • I'd like FFH to grow this year. It currently owns 16 units. I want that number to be 45 (given some per unit profit assumptions). What's a consistent way to buy and hold rentals? This likely requires becoming a level 5 investor. How do I make that transition?
  • Does hiring a full-service property management company make sense? What are FFH's core competencies and differentiating factors?
  • Plus, a few more questions I haven't thought of yet.

For a single goal, this feels like a lot, but it'll be good for me, my family, and FFH's current residents.