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PHIL HARRIS: Four lessons learned from setting up a new business

Four lessons learned setting up a new business

Blogger: Phil Harris, managing director, Harris Real Estate

American entrepreneurs boast you can’t be a success until you’ve had at least one business failure.

Personally, I’d avoid that approach but you can’t set up a business without experiencing teething problems. We certainly had them. Some were simply learning experiences, some were oversights, some were caused by rapid growth and some were just the product of bad luck.

Harris Real Estate is now entering a substantial growth phase with three new offices and a fourth on its way. We have had a month of significant hirings – just to keep up with demand – and our property management business is readying itself for another step-change.

So I’m now in a more comfortable position from which to think about what happened – and what I would do differently if I was doing it all over again.

First steps

For those of you who have to step over the piles of cash before opening your own business, congratulations. For the rest of us, there are business partners.

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Understanding your potential business partners is vital. If there is a mismatch, then the best you can hope for is an amicable buyout that causes no financial stress. The worst can see your business distracted by conflicting loyalties while its cash flow is drained, trying to pay out a former partner and keep the business ticking over.

So find out who you are going into business with. Know their personal goals, know their professional goals, know their business goals. Understand their expectations of themselves, of you, of the business and of key staff. This tells you where they want to be and what they will need to get there. But you need to ask the same questions of yourself so you can tell others and set up the right structure to help you achieve your own goals.

Also be prepared to ask the hard questions. Do you need to tell your business partners of anything that might be a risk? It is a hard conversation, but essential to establish a “no surprises” policy for the business.

Prepare yourself now to be swamped by mountains of paperwork, most of it legal and printed in a font size of less than nine points. Take your time and read it. Understand it. Your shareholders agreement, for example, contains details about breaking tied votes and restrictions on competing ventures.

Does it really capture what you and your business partners agree to? And your leasehold agreement: you probably know the rent and the term, but what else are you paying for? Know what your outgoings are. And if you disagree with something, change it.

The right people

It’s an easy line to preach, but essential to understand for success: Real estate is about people, so make sure you get the right people from the start.

Begin with your advisers. If you have read your agreements, you can then appreciate whether the advice you are being given sounds right – or whether you are paying for a pup. They are professional advisers, but they provide advice only. The responsibility for every action remains yours.

Surrounding yourself with good people is a start – but it is better to surround yourself with the right people who share the same culture. This is something we have become better at doing as we have grown, if only because we have better understood our own culture.

More broadly, employ ahead of the curve, so you can maintain your standards as your business expands. And from a management perspective, don’t neglect the back office. These are the people who will bring in the cash you have earned – and without that, your business goes nowhere. It is an essential investment.

The unspoken things

We recently spent a couple of months distilling our company values and culture. Previously, I thought we should “just get on with it” and turn over the transactions, but I can now admit: I’m a believer.

These values underscore everything we do and the way we do it. They explain why we think one consultant may be better than another for our organisation. They explain why we choose one action over another. And they are the basis for our strategic plan and where we are heading for the next decade.

The future

Real estate is a sensational industry, where good people can make a real difference. But as a new business owner, the temptation may be to commit to every new business opportunity to ensure your business grows.

Sometimes the best decision can be to say “no”. Not all growth is good. Ask first whether it is only for a short-term gain or whether it opens a sustainable opportunity that ties in with your long-term goals.

Yes, your business will grow – but you need to make sure it is the business you want, growing the way you want it to.

After three years, Harris Real Estate is there.

PHIL HARRIS: Four lessons learned from setting up a new business
Phil Harris
mortgagebusiness

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