Here Is What Entrepreneurs Can Learn from Real-Estate Developers!

Any project needs vision, dedication, and funding to get it off the ground in today's competitive economy. When it comes to successfully executing a project, an entrepreneur can learn something from those employed in the commercial real estate sector.

The Feasibility Factor

A professional real estate developer takes every step to investigate all possible outcomes before committing to a certain project. This is known as a feasibility study in the commercial real estate sector. In fact, the developer will research all financial, economic, legal, and technological factors before going ahead with the project.

A feasibility study usually entails the analysis of the market, usage concept, competition, location, and risk involved in the project. The developer will have all this information in a written report before he/she decides whether to move forward.

Most of the time, a new entrepreneur will dive headfirst into the product development session without even making a true business case for the app, service, or platform. Such an entrepreneur is a likely to be surprised very soon when the costs skyrocket and he/she faces an unreceptive market.

Lesson: You are setting yourself up for failure when you don't analyze the market forces and risks before you start building.

 

Proper Planning

Once a developer decides to go ahead with a project, he/she takes on all the planning and coordination onto their shoulders - such as scouting, purchasing land, getting the licenses and permissions, creating a project team, financing the project, and managing the construction work. All this tends to happen within a few months or a very short period.

An experienced developer can take on multiple projects at a time even with all these responsibilities on his/her shoulders. How? It is through realistic project planning. As soon as the project is launched, the developer will draft an initial proforma plan and revise it as and when required. The project is rooted in the correct timelines, goals, and budgets even with an informal outline.

Lesson: Map out your strategies and objectives early on. Make sure you revise them regularly to stay in touch with your progress.

 

Smart Syndication

Commercial real estate projects come with a sophisticated financing structure - including debt and equity capital. In fact, different types of capital are arranged through a capital stack or a structure that dictates the order of claims to investment returns.

A developer may consider syndicating a portion of the capital stack depending on the project specifics. In fact, syndication is a precursor to crowdfunding. It is a process where the developer would divide some of the equity among a group of investors - such as high-net-worth people in their network. The investors will be informed about the investment terms, return projections, and project timelines up front.

The developer can easily raise funds for their projects due to the organized nature of syndication. An entrepreneur's effort to raise capital can be haphazard without a similar framework. In fact, an entrepreneur fails to close investors because he/she doesn't communicate or have a compelling exit strategy.

Lesson: You should have a well-structured strategy when approaching capital raising. Clearly inform the investors how you plan to earn them returns.

 

The Reputation Game

An experienced developer is quite adept at converting a personal colleague into an investor. That is because they emphasize ROI and they know that investing is not just about making money - it is also about backing someone you trust.

A developer will build a reputation as he or she completes projects. The investor will look at what the developer has accomplished, how his/her investors have fared in the past, and who is his/her partners.

You should be able to back up your pitch with past performances to find the right investors for your project. Keep your network informed and motivated to be a part of your success.

Lesson: A verifiable reputation is important for your success. This will compel the people who trust you to invest in your project.