Shark Tank investor Barbara Corcoran says one of the most important factors in building an innovative real estate company is a ‘failure budget.’ So why would you need one of those? How much should it be? What should it be spent on? Perhaps even more importantly, what is it?
Why Your Real Estate Company Needs a ‘Failure Budget’
There are many ways to spur innovation within real estate companies. Via the American Express Open Forum and Inc., Corcoran suggests that it is important to plan to fail. Specifically to; accept failure and “build it into your budget.” Corcoran says she implemented this by giving all of her managers 5% of their operating budget to use for whatever they wanted, with no accountability. She claims this is where all the best ideas and changes came from in her businesses. Not from conference room meetings, or behind the desk. But from “playing outside,” and spending money.
While the concept of planning to fail might be a brain twister for many. it has its obvious perks. We always want to be positive, and to plan for success. Yet, one of the biggest business killers is simply disappointment. That’s if they make it past the fear of failure to get started. If you tear down those barriers and throw them out the window, it’s game changing. Plan to succeed. Learn, strategize and plan for success.
you need to accept that not everything will go according to plan. There will be many challenges along the path of the average investor. Money won’t come in when it is supposed to. Things will cost more than you expect (always). And you’ll have to switch up directions. Provided you have a budget to accommodate these things and don’t let them get you down, they won’t be a stumbling block, but rather an inconvenience. This is what a ‘failure budget’ can do for your real estate company.
It also provides liquidity to pursue new projects, test new ideas, and engage in innovation boosting activities.
What to Spend Your Failure Budget On
The cautious real estate business owner may wish to hold their failure budget as reserves for tough times. Note that 5% alone probably won’t cover most overages on home renovation projects. And probably not the short falls and unexpected costs associated with buying and selling property every day. Some may plow this slush fund into extra insurance to cover operational disasters.
Most probably don’t think they have 5% of their operating budget to give their employees free control over. Most CEOs would fear it would be blown at happy hour, on personal items, and on vacations. There’s a good chance they would be right, but trust the employees you hire. Remember, you hired them for a reason.
In some cases, spending on these ‘frivolous’ items might actually help boost innovation. Casual networking and team get-togethers can be great for brainstorming, exploring new ideas, and finding new ideas. Many leading companies have been extending their vacation allowances. Some have even gone to the lengths of paying staff to go on vacation. If your real estate company isn’t in a position where this seems feasible, it may be something to aspire to and plan for.
There are plenty of other staff perks to consider – many of which can be useful for sparking innovative thinking among team members. They can be as simple as putting better snacks in the office or providing gym memberships. It could be as grand as throwing corporate retreats, or offering great bonuses in hope of sparking an innovative solution for achieving better results.
One of the best ways to put a ‘failure budget’ to work and ensure innovation is constantly in action in your company is to fund pet projects. Allow team members to spend a few hours a week working on ideas of their own and testing them out. you could even fund them to implement new ideas and tests. This won’t just spur innovation, it will build team loyalty and productivity.
8 More Ways to Spur Innovation in Your Real Estate Company
- Plan to launch into at least one new niche per year
- Set higher goals
- Commit to testing a new marketing campaign, or tweak each quarter
- Sponsor external competitions to come up with new ideas
- Create better workspaces
- Invest in boosting your personal innovation as the CEO
- Offer awards and rewards to team members for bringing new ideas
- Empower staff to use their creative talents and frontline experience to make improvements to processes all the time. Let them think, try, and fail
Summary
Innovation is critical to success as a real estate firm. Freeing your organization of the threat of failure is a great way to ensure more innovation and success. Having a budget for this can help. Calling it an ‘innovation budget’ or success budget’ might be the most positive approach. Use this fund and planning to consistently push ahead.
