Yes, it’s true! The best investors operate “as if” they’re broke even when they no longer are.
But why is operating as if you’re broke the best approach? Simple – if you have cash, you’ll spend too much. We’ve seen it over and over. “Well, we were only $3000 apart and I wanted the property so I agreed to their price.” Wait; what?
While $3000 may not feel like a lot, this kind of spending adds up and can quickly suck in any “extra” cash that you could be putting into additional deals. And, this $3000 addition usually comes on top of the “absolute highest” price the investor was willing to spend. It won’t take too many times of spending more than your limit to cripple your progress.
Do your numbers. Determine your limit. Stick to it.
With cash on hand, it’s easy to throw money at your problems and cover them up rather than taking time to fix them. Oftentimes when a business fails, it’s because no one was paying attention to the details. Cash allows you to overlook the places where your business is hemorrhaging. How much easier to just write a check when you’re already so busy with the day-to-day details of running a business. “I’ll just pay it this one time so that we can move on.”
Over time, we have found that the best way to run our business is “lean and mean”. We keep a cash reserve that we never intend to spend. We know that, when finances are tight, this is when our company is the most efficient because we’re all looking for ways to cut costs and save a dollar. If there’s a hole where money leaks out, we find it. If there’s a way to accomplish a task for less cost, we figure out how to do it. This in no way means you cut quality, it simply means making better, more efficient business decisions.
Pay attention to the details. The quick fix is not always the best long term. Small leaks can bring down the whole ship and leave you wondering how it happened.
Are you convinced yet that being broke can be the best thing for your investing business? Does this give you more hope?!