Week 2: Scaling a Residential Construction Business

What we did to scale our operation from 20 to 800 projects.

I want to add as much value as possible and split the blog into sections where I write about various things I do throughout the week. This ranges from things I'm learning to problems we're solving within our company.

This edition has the following sections:

Learning: Books, Videos, etc

Adding Value: Problems we're solving or we've solved.

Exciting things: Tweets, podcasts, articles

I hope you enjoy it!

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Learning:

The Rational Optimist

"The Rational Optimist" by Matt Ridley is a book about how humans have become more prosperous. Ridley argues that trading goods and ideas has helped society progress. He believes that despite problems, things will keep improving because of new inventions and better ways of doing things. The book suggests that this positive change happens more from individual actions and less from big plans made by governments. Ridley thinks many people must be more pessimistic about the future, especially the environment and resources. Still, he says human creativity will help solve these problems.

The book was very insightful and made good points. However, our innovation and progress as a society have also come with some downsides, mainly in mental health, quality of food, and medicine. The world is complex, and the results of our actions are not binary. Our quality of life is much better now, but we still have our ancestors' monkey bodies and brains. Thus, we still experience the same negative emotions as they did, except now we experience them more often through social media and connectivity to the world. Our bodies are still harmed by what they were before, and our food today has microplastics and other contaminants that hurt our bodies. We have a pharmaceutical industry pushing drugs and vaccines that hurt people more than they help. Whether our ancestors had it better or more challenging is hard to say. It depends on what you're talking about. Still, I am fond of innovation and progress; it makes life fun and worth it.

Occam’s Razor

Occam's razor is a concept that can help people solve problems more efficiently by shaving away overly complicated explanations. The rule is to go with the simplest explanation of why something works. It is important to note that it doesn't claim what is true but is a rule of thumb. Simplicity is best, and fewer complications make it easier to work with.

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Adding Value

How to scale a residential construction business

When we first started the construction part of our business, we only had about 20 projects that we were working on. Today, we have about 800.

When we started, our "business" was a way for my family to earn passive income through real estate. We would buy a few properties, add value, sell some, and keep some with the money we made from selling. It was not a real business but an excellent way to reach my parents' goal of $10,000 in passive monthly income.

We had a small team of about 10 people, bringing in deals, building the homes, and selling the deals. We had a good culture because many of these people were family and friends, and the workload wasn't that much (and neither was their pay).

A few years ago, we started offering our construction services to others, making our business take off. We started taking on many more projects, but when we got to about 100 projects, things started getting ugly; people were overworked and unorganized, and we couldn't track the projects at what stage. Doing this with a small, inexperienced team took a lot of work.

We wanted to keep growing, and we liked the challenge of pushing ourselves and helping others, so it prompted us to turn our small operation into a real business that can work on a large scale.

I wanted to share some of the steps that we took to be able to scale for those who may be in the same situation or want to get a feel for what running an actual development business looks like

Step 1: Hire a team

One of the first things we had to do was hire more people to pick up the workload. Before, our 10 employees wore different hats to help the operation run. Salespeople were also acquiring land and doing transactions. When we scaled, we needed so much land that we had to make acquisition agents only do acquisitions and transaction agents do transactions. When people can specialize in their work, they get much better at it and can output much faster than when they worry about many things. Don't get me wrong, people with a broad skill set are valuable, but for a large operation to work, you need people to spend where they can provide the most value.

Step 2: Separate into departments

After hiring people, we realized we had to group them together to complete specific tasks. For residential construction, we grouped them into departments where each department played a role in an output that helped to give us a finished product. Here are our departments:

• Acquisitions: Acquire the land that we will develop or sell