SUPPLEMENT OR SCALE?

The race is on! That’s right friends, the race is on in the real estate appraisal world to diversify your appraisal business during this time of change. The interest rates have doubled, the lending work has slowed considerably, everyone is calling all their past clients to try to drum up business, and the survival instincts have finally kicked in. I say ‘finally’, because this was predicted some time ago and we’ve been telling our coaching students and podcast listeners for some time now that you’d better diversify your business if you don’t want to find yourself behind the 8 ball when one of the 3 legs of this economic stool: interest rates, housing supply, and/or buyer demand, changes. And here we are.

No, this is not an ‘I told ya so’ moment because nobody could’ve predicted the timing of these changes, just that they would happen. I mean, after all, real estate appraisers are in the business of analyzing the market and looking at historical trends to develop opinions. Since markets always move in cycles, this one was quite predictable and, if you were like me in 2008 and 2009, you vowed never to be caught unawares again when a big market change happens.

Is it too late? Is it too late to diversify your appraisal business and get back to where your business might have been in years past? Of course not! It’s never too late! Although there will always be those preaching doom and gloom and the end of an industry, I’m not one of those people. I am a realist in many ways, and I fully recognize some of the shifts in almost every industry, but I do not believe it is the end of the real estate appraisal industry or business. What I do think you need to do if you want to have a thriving business in this industry, however, is to expand your palate, so to speak, and be open to all of the other avenues for providing your wisdom, your expertise, your knowledge, and your experience to the world.

If you’re not quite clear on what all of those different options are for real estate appraisers and how you might capture some of that market, then you might just want to watch the training I did called ‘How to Make Your First $5000 in the Non-Lender Appraisal Biz’. It’s completely free, it’s over an hour long, and I detail what you need to be doing and how to do it to start building a healthy non-lender appraisal business. Just go to www.coachblaine.com/diversify and learn what you need to do to diversify your appraisal business. We’re talking about all of these things in last weeks and this week’s podcast episodes as well, but if you want to see it visually, go there, watch the video, and take lots of notes.

One of the things I’m really proud of with what I teach is that it’s all stuff that I’ve actually done, and usually multiple times. I’ve tried and failed at lots of things over the years, but I slowly learned what works and what doesn’t work to eventually end up with a six figure non-lender division of my appraisal business. Why is it important that I tell you about my successes, as well as my failures, and also put a number on it? It’s important for two main reasons:

First, because there are lots of people who will jump on a trend and start trying to teach people whatever the next big thing is without ever having done it. And, while I’m not necessarily saying that you can’t learn something that way, I learned a long time ago that money loves speed, which means that it’s worth finding and paying for information from people who have actually done what you’re trying to do. If you can shave off 2, 5, or 10 years’ worth of mistakes by learning from somebody who’s already made those mistakes, your investment in that education is pennies on the dollar for what you’ll save in time, money, headaches, pain, frustration, and failure. The great part of all of this is that I have nothing to sell you. Yes, we coach appraisers every day on how to build very profitable businesses, how to free up their time, and how to become financially independent, but you can do all of that stuff on your own for free. I point you in that direction every week on this show and give away all my best stuff for free.

The second reason I think it’s important to put a number on all of this is to save you time. If you wanted to lose 50 pounds over the next 12 months, you wouldn’t take advice from someone who lost 5 pounds last week eating Snickers bars. It might make for an interesting story, but there is likely no correlation between the eating of Snickers bars and the losing of 5 pounds. You also know instinctively that it’s not a path to long term success, it’s likely a fluke. If you want to build a business that gives you the life, the lifestyle, the income, and the freedom you truly want, you don’t take advice from someone who maybe does that same business, but as a part-time side gig while working at Home Depot. There is an inconsistency there that will likely have some huge gaps in the advice given. If you want to have financial freedom at some point in your life, you don’t take advice from somebody living paycheck to paycheck with a negative net worth.

No, if you want to achieve something, you look for people who’ve done what you want to do and you seek out proximity. You get close to them in whatever way you can to learn what they did to achieve the success they’ve had. If you can’t quantify what success looks like, you will waste precious time chasing something that might turn out to be a bust. When I was looking to learn how to supplement my appraisal business with non-lending work, I was not seeking a specific dollar figure in revenue or income. I simply wanted to know what needed to be done to start diversifying my business. What I learned through that process was that there are those out there that had built appraisal companies that do nothing but non-lender appraisal work and I automatically labeled that success. I was amazed that it was even an option since I had been raised, so to speak, on the lending side of the appraisal business.

The problem was, and this was my own mistake, I never qualified what I was looking for so, when somebody would tell me that they had a 100% non-lender appraisal business, I automatically assumed that they were producing as much non-lender work as what I was producing in lender work. Here’s the big rub! What I learned over time and from the education I received from some of those folks, which was all very valuable information, by the way, was that most of them did, in fact, have a 100% non-lender appraisal business, meaning they didn’t do any appraisal work for banks, AMCs, credit unions, or any type of appraisals for loan purposes. They maybe did some appraisals for cash real estate purposes, but not for a mortgage or any type of loan.

However, all of the people I was taking advice from had what I would call small, boutique style appraisal businesses doing enough business to allow them to pay the bills, or at least some bills, but none of them really needed that much, wanted that much, or had the desire to grow to much more than, say, 1 or 2 appraisal orders per week.

Now, let me say that there is absolutely nothing wrong with those numbers. One $500 appraisal order per week is $26,000 per year. Two $500 appraisal orders per week is $52,000 per year before expenses and taxes. The second number is an ok living for almost anyone and I’m not knocking it, even if it sounds like I am. The problem wasn’t theirs; it was mine. I made assumptions about what it meant to have a solely non-lender appraisal business and I equated it with what was possible in the lender-based segment of our industry. You can trip over yourself and fall into a cactus and end up with one or two appraisal orders per week, regardless of which segment of the business you decide to focus on. It’s one of the great things about this industry! You can make a very reasonable living having zero business skills, almost no personality, hate all of your clients, and talk down to them on the regular. It’s a very interesting phenomenon.

When I wanted to build a martial arts business, I didn’t want to be teaching 10 or 20 people, I wanted to be teaching and impacting hundreds of people, so I sought out a teacher who was impacting thousands of people worldwide. I sought out somebody who had multiple schools around the world and a big audience of people because there was evidence of success in those metrics. When I set off into the appraisal business, I had no interest in just making a decent living, whatever that number may have been. I wanted to have an impact, build a thriving business, be surrounded by motivated people, and leave a legacy. If you want to make $26,000 this year, you can. One $500 appraisal order per week is all it takes. If you want to make $52,000 before expenses and taxes this year, you can. Two $500 appraisal orders per week is all it takes to do that. And, again, you can be almost completely incompetent and do that. You don’t need me or anyone else to help you stumble into 2 appraisal orders per week.

The reason I tell you that we’ve built a six figure non-lending appraisal business is because I want you to be able to qualify the advice that I’m giving you with the type of business or income expectations you might have. Anyone who gets an order or two per week can teach you what they did or do to get that work, and that might be all you need. Hopefully, if you’re a long-time listener of this show, however, you know that’s not how I teach and coach. I’m typically speaking to those who want to build something sustainable, something duplicatable, something of value, and something that could potentially be sold at some point since you’re the one buying that business every day as you trade your time for dollars.

For me at the time, I just wanted to build something that could supplement the lending side of my appraisal business. I had learned from my mentor and previous company that, with a good name and good marketing, even if you weren’t trying you would get a fair amount of inquiries for non-lender work. We didn’t even try to get that type of business and fell in our laps because of our marketing and reputation. The failing there was we just didn’t care about it, so we didn’t do anything to nurture that business or take care of it after the report was delivered. Which is one of the big things I learned in building a six figure non-lender appraisal business: if you’re not nurturing that type of business through all phases of process, the before, the during, and the after process, you’ll likely not achieve the kinds of results you’re hoping for. Was I shooting for a six-figure segment of our business? Nope! I was looking to supplement what we already had but was growing dissatisfied with because of the uncontrollable elements like interest rate changes, the lack of loyalty in the larger banking industry, having what we thought were great clients just up and leave one day because management switched AMCs, and so on, you know the story. 

No, friends, I was not looking to build a six-figure segment to my business, and that was my first mistake! Why? Because when you set out to do something big, you look at differently than if you are just trying to supplement what you have. When you are trying to 10X something, you act and think differently than when you’re just trying to double something. When you’re trying to 2X something, you can typically get away with just working harder, working more hours, doing almost double the work or effort and you’ll hit the numbers. You may kill yourself in the process, but you can do it…for a while.

If you’re going to set out to do something, set out to do it at scale. Set out to do it big. There is no benefit in playing small. Even if you don’t hit the numbers or goals you set out to achieve, you still end up much further ahead than if you’re just trying to supplement. Go into it with the mindset that this is the final frontier and you’re going to conquer it. Go into it with an understanding that it will likely take more than just you to succeed. If you can do it alone, great! However, what happens if you break your leg? What happens if you have a stroke? What happens when you want to go skiing in Colorado for 10 days like I just did last week? Does your income stop for those 10 days? Do your clients just have to get by without you for 10 days? What kind of business is that? It’s not. It’s not a business at all, it’s simply a commoditized vendor style business where the vendor chooses when they want to perform and when they don’t. Then they wonder why their clients choose other vendors at some point.

The last thing I’ll leave you with on this topic is the idea that it’s actually harder and more work to run a small, supplemental business than it is to scale a business and here’s the logic. When you’re just trying to add a few units of something here or there, you’re not efficient with it. Your production line, your processes, your thinking, and your systems are not optimized for the one or two offs that don’t fit your normal type of work. Why? Because they require different efforts. If you manufacture plastic spatulas, all of your systems and processes are set up to efficiently produce spatulas. If a customer comes along and says, “I’d like to pay you to make pizza cutters!”, you can’t do it unless it’s so damn profitable that you can’t say no, because you have to completely reconfigure the line, the processes, the people, the training, the materials, not to mention the numbers might different.

However, if your business is scaled to the point that you either have a pizza cutter division that operates alongside the spatula division, or you have the systems and processes that allow you to make spatulas on Monday, Tuesday, and Wednesday, and then crank out pizza cutters Thursday through Saturday, then it makes sense to do. Until then, it’s best to focus on the thing you do the best or you’ll lose precious money and time.

If you’re going to try to supplement your appraisal business with a little bit of non-lender work here and there, ok, I won’t stop you. There are lots of appraisers who do it this way. What I will encourage you to think about, though, is how those two segments of the business are different, how they’re similar, what it takes to get both types of business, what it takes to nurture them, and what it takes to scale both types of business. They’re different in many ways, even if they’re similar when it comes to the theory and steps to developing an opinion of value. They require different before practices, different marketing and language, and different activities to fill that funnel. The during practice, the part where you’re actually doing the appraisal, may feel and taste similar. But the after care and feeding looks and feels different than the lending side, for sure!

If you’re not ready to reconfigure your spatula production line to efficiently crank out pizza cutters, you’re going to come away from the experience burnt out, disappointed, and jaded from all the time wasted just trying to supplement with a little extra business. Be careful who you follow and take advice from, be clear with what you think you want, and be ready to adapt and evolve if you want to scale another segment of your appraisal business. 

Until next week, I’m out…