Creating a successful business requires forward planning and strategic thinking.
Before planning to scale your private lending business, it’s important to gather detailed information that will help to inform your decisions. In the spirit of the internet’s buzzword “scale,” here are five questions you need to ask.
1.What Are Your Strengths?
Every business has its strengths and weaknesses. It doesn’t matter if you’re a private money lender, real estate agent, wholesaler or flipper. Successful scale works only if you use your strengths to build a solid reputation that customers and prospects can rely on. Identifying your main strengths and learning how to use them to your advantage is crucial for developing an effective long-term plan for your business.
Focus on the areas of your business that provide superior experiences to those your competitors offer. For example, as a private lender, you might have more local market knowledge, skills, experience or qualifications than your competitors. Or, perhaps you offer additional services, such as 24-hour customer support, a custom online portal for borrowers to request a loan outfitted with AI to help streamline the process and communicate regular updates automatically, a sponsored meet-up where you provide a regular market update, next-day funding for seasoned borrowers, or a more personalized service.
Business strengths can also include benefits to the wider community. For example, many prospects also like to buy products from companies with a reputation for being socially responsible. So, is a certain percentage of your basis points allocated toward a quarterly donation to your favorite charity? Communicating and acting on your passions like this can make all the difference for some lenders, especially when the market competition is heavy.
2.What Are Your Company’s Values?
Honesty and transparency inspire trust and help build a positive view of your company. It’s important to share your business vision and brand values. Some lenders try to appeal to as large an audience as possible, but this kind of strategy rarely works. People tend to buy from businesses that share their values.
Defining and communicating your values is an important part of your brand and marketing strategy and, ultimately, helps to scale your business more quickly. Start by identifying your company’s most important values.
Let’s use an example that’s in a different industry. If your company sells soft furnishings aimed at middle-aged parents, you might choose to focus on family values, the local community or children’s education. If you’re selling health products aimed at young adults, you might focus on fun, fitness, independence or healthy eating. If you’re a private lender, what would you focus on? Take a few minutes to write down a few ideas.
3.Who Are Your Borrowers, Exactly?
As a private lender, understanding everything about your borrowers is the key to your business success. And if you’re like many lenders, the idea of casting as wide a net as possible to catch every borrower you can seems compelling. However, creating a borrower profile provides you with a detailed portrait of your potential borrowers and makes it significantly easier to develop effective branding and marketing strategies to scale your business. Some of those strategies may be blog posts, LinkedIn videos or targeted podcast appearances.
Don’t know where to begin? Start by gathering basic information about your ideal customers—age range, geographical location, marital and family status, annual income, number of completed projects in the last year, etc. Are your borrowers SFR owners, flippers, developers or focused on new construction? The more data you have, the better as you can use the information to research the interests, beliefs, values and habits of your borrowers.
Now that you have a clear idea about who your borrowers are, where do you find them and how do you interact with them? Social media, forums and other public platforms allow you to eavesdrop on your borrower’s conversations, providing a great opportunity for you to research their habits. Pay attention to the subjects they talk about, as well as the books and publications they read or the podcasts they listen to. This will give you clues about how and where to focus your advertising and exactly what to say in your messaging.
4.What Do Your Borrowers Ultimately Want?
Once you know who your customers are, you need to find out what they want so you can scale your lending business quickly. Customers don’t just get loans. They are looking for long-term relationships with private lenders for one main goal: to get wealthy with real estate. To make your prospective borrowers’ lives easier, your job is to discover which problems affect your borrowers the most and then find solutions to them.
There are many different types of problems, some of which are deeper than others. For example, if you are selling child safety equipment, such as refrigerator locks and baby gates, your customers are probably worried about the safety of their young children and will be looking for products to help keep them safe. Rather than simply selling child safety equipment, you are selling peace of mind and helping to alleviate deep-rooted fears. Put yourself in the shoes of your borrower and ask yourself: “What are my deep problem areas and what do I need to look for in a lender to solve my problems?”
5.Why Would Customers Choose Your Company?
The final question you need to ask when scaling your real estate business is why customers would choose your business over your competitors. It’s obvious that competition is tough, even with “joker brokers” with a developing brand. But, if you develop a deep understanding of your borrowers, know your strengths and have clear brand values, you should be able to answer this question.
You should also take the time to research your competitors. What are their strengths? How do their strengths compare to yours? Are your competitor’s products and services cheaper than yours? If so, why would borrowers pay for your loans? If your loan experience is of a higher quality, make sure your borrowers know they will be getting a better deal and significantly more value by choosing your company, even though they may pay an extra point in origination fees.
Creating an effective strategy to scale your real estate business relies on gathering the right information about your business, your customers and your competitors. Identifying your strengths and your brand values gives you a starting point to work from as you scale your marketing and business development efforts. In the end, it all comes down to understanding your customers and their needs so you can create an experience that fosters a long-term relationship. This means implementing smarter custom software, gaining visibility and, ultimately, building the relationship offline.