Healthy Business
May 4, 2022

When Is The Right Time To Scale Down Your Business

CEO: SE Housing

The goal of every business owner is to unlock their venture’s fullest potential and achieve constant growth at all levels. But if you are not quite ready to deal with these things, you might find yourself lagging behind your success, and it would be better if you scale down. Brett Snodgrass chats with Tyler Hazel, CEO of SE Housing, to explore when and how a business should adjust and scale down a little bit. Tyler shares the dangers of letting business growth go out of your control and how to set rules of engagement without messing up your personal boundaries. He also explains how scaling his business down helped a lot with his battle with burnout and opened brand-new opportunities.

When Is The Right Time To Scale Down Your Business With Tyler Hazel

CEO: SE Housing

I'm talking to a good friend of mine, Mr. Tyler Hazel, a real estate serial entrepreneur. We’re talking about something different, finding freedom and fulfillment by scaling down your business. Let’s go.

IDP 20 | Scale Down

I got a good friend of mine on the show with me, Mr. Tyler Hazel, a real estate serial entrepreneur. What's going on, Tyler, T-money?

What's going on? I’m glad to be here.

I’m super excited to have you on this episode. Tyler and I go back. We've known each other now for a decade, give or take. Probably not even that long, but I met Tyler as a young kid. He still looks like he's 17. What are you now?

I'm 34 years old this 2023.

He still got the baby face, but here is a quick story. I met Tyler many years ago. I was selling a house on Craigslist in Anderson, Indiana and Tyler shows up and buys the house for a little under $30,000. I remember that number. He was a great negotiator and I didn't know who he was. Since then, it's transpired into a great friendship, and we talk shop, God, friendship, family, marriage, and whatnot. I always call Tyler up. He’s one of my best friends. Welcome to the show.

We're going to be talking about a topic that might go against everything that you're hearing on social media or from some of the gurus out there that continuously talk about how we scale up. How do we get bigger? Do we grow? I'm not saying that that is bad, but we're going to be talking about a different of finding more fulfillment and freedom in to maybe going lean on your team, scaling down a little bit. This is what we're going to be talking to Tyler Hazel about. Tyler, why do you give us a little bit of a glimpse of who you are and what you've been doing for the last several years?

I'm from the Midwest, here in the great state of Indiana. I've got a beautiful wife of several years. I have two boys. We're starting school season for our oldest. I'm also running a business while trying to be a dad, a father. It's been an awesome opportunity to be able to steward the gifts that God's given us from where we live to the church we go to having a business to take care of and run, and this has been a challenging last few years. Going with the seasons that God has for us, we're up for all kinds of new adventures right now.

Don't take Tyler's humility on the professional side too. You’re a very successful real estate entrepreneur. You got into real estate in your teens. You've been doing this for a while. You've owned multiple rental properties. You've had this pretty large portfolio of rental properties. You own a self-storage facility. You converted as self-storage and did that. You've owned commercial properties. You've had a big business in the real estate world where you've had multiple people working for you. You've been scaling down and getting lean on your team.

I want you to talk about this, because again, when we go to events or mastermind groups, we hear people speak, especially in the real estate field, people constantly want to get bigger to grow their team, to add more people to reach this certain level. You've been down that road. I've been down that road. Sometimes, when we look back, we’re like, “What do we want or where are we led?”

Right now, maybe not all the time, but you're in this season of wanting to get a little bit leaner, not do as many deals, not grind so hard. Can you talk to us about that? Was there something that happened in your journey? Was there a point where you were like, “I don't know if I want to have this huge business with multiple people working for me. I don't know if I want to do 150 or 200 deals a year or flips or whatever it is?” Can you talk to us about your mindset behind that?

I want to take a step back here and give a little bit of substance behind my journey and why talking about scaling down a business is so important. I don't think it means that you have to shut down the shop. I don't think it means that you have to give up on potential revenue. It has to do with pivoting in a complicated market. For me, the traction of my business started in 2024. I was very much into the tube stock millionaire guys that I knew around locally running rental homes, going around being my maintenance man, doing property management, buying homes, and selling homes.

IDP 20 | Scale Down
Scale Down: Scaling down a business does not mean you have to shut down the shop or give up on potential revenue. It has to do with pivoting and dealing with a complicated market.

It was this world that I understood. It created income. It created opportunities, setting myself apart from the average people that are working every day. It gave me the opportunities that freedom that I wanted. Everything was great. The day when I met you, Brett, at that home that I purchased from you through Craigslist, it was down the street from another home that I found. I remember that moment of meeting you. There was something different. You were then starting to ramp things up into this industry that I didn't understand. It was wholesaling.

I couldn't fathom why you advised something to resell. In my mind, owning the home and renting it out, that's how you got successful. That's how you made your money because why would you sell something if it was a good deal? Over that next year year and a half, as I'm continuing to do the grind that I'm doing, I remember calling you after swimming in a crawl space during a big torrential downpour. I said, “I am over working so hard to make money. I'm tired of tenants moving out and tenants not paying.” I remember that opportunity when I came to work with this wholesaling company and had a taste of a business that had steps from beginning to end, transactional.

I remember seeing how quick it was to make money from start to end, and it was much more simplified than owning a rental property. For that specific situation for me, as we kept growing and doing this, we began to scale. That scaling was necessary. It was in a market that was changing, and it happened to be that we were going with the wind. We were going with the industry, and we were able to grow. As you grow, you have to scale your business because if the opportunities are there, you have to make sure you have enough resources to be able to cover those opportunities.

I remember growing and growing. We did this at the expense of probably some personal life issues, and my health. That's the stuff that we compromised when we're pushing forward and achieving these great monumental successes. It's very easy to scale a business or to scale yourself in your business to the point where there's not a lot left of you for the other things that matter. For me, my relationship with the Lord is so important. My relationship with my family is so important. I'm still trying to balance this business that I'm passionate about doing, which is negotiable there. The passion part because it comes in ways.

Coming out of the season when everything was growing, it was essential for scaling. Now that we're in this period of time, as things have shifted both culturally, we've got financial issues as a country, as a world. We've got changing environment. We've got social media influencers. We have everything that's accessible to us now that never was before. It changed the rules of the game. Figuring out how to still be applicable in this market is the conversation that we're having right now, and that's why we're bringing up the subject of scaling down a business. I don't know if that brings some validity behind some of the experiences.

I want to ask you maybe some personal questions about it. Take ourselves back to years ago. The market is growing. We've all seen it from 2017, 2018, to 2020. We had COVID. Now, we're here. The market prices are still high. We got interest rates raising, which you talked about a lot. Back then, we had all these opportunities coming at us we're growing. We're taking up on these opportunities.

Let me ask you, one of the reasons why maybe you're pausing, you're taking a step back and evaluating everything, is it because you're seeing maybe fewer opportunities? You see possibly an opportunity for destruction coming, and there are a lot of unknowns with a lot of things that are going on. Is that because of maybe a lack of opportunities or you compromise yourself so much, and there's this personal internal decision? You’re like, “I don't want to sacrifice myself that much because it doesn't stop.” You continue thinking.

I had a conversation with a friend of mine, thinking, “If I can get here, then I'll be able to take a step back into pause.” My comment to him was, “I don't know. I've probably been saying that. I have had seasons of that, but for years, in certain situations, sometimes, we keep moving the bark.” My question is, Is maybe scaling down, getting more lean because of a lack of opportunities? Is it more of, “I don't know if this big business is for me, I want to have more of myself I want to be able to do the things that I enjoy. I'm going to be there for my family. I don't want to sacrifice myself and thin myself out all the time?”

The easiest way to respond to that would be, it's choosing the right opportunities. Since our opportunities have been limited, it's not the same supply of opportunities that come down the pipeline anymore. It's now selectively choosing which ones and making them the best. For me, over the last couple of years, as we've scaled down on the volume of transactions, we've been doing our deals. Our margin of income has been 3X. Some of them are higher than that and we've been selectively buying.

In our business, we came from a time as a small operation, 5 to 10 deals a month, and it was fairly easy to move those deals. Those same headaches, we could do in two deals, and we can make the same revenue. Sometimes even two times that. It's utilizing our time and stretching it out for more and being resourceful. The trap is when you start working for your business. You're not able to work on your business, and that's something that's in all kinds of business books.

It's so easy to get stuck and the monotonous steps that go into a business, working in your business, and you waste all that time that you have that you could be spending with your family. You could be spending the margin of bandwidth on the next investment that you're going to keep. You could do a development project with all that extra time that you're saving by not burning it up on sticking to the hamster wheel of trying to do a volume of deals, not making the same margin because we all have so much time and attention we can devote a day. Where do you want to devote that?

IDP 20 | Scale Down

Opportunities aren't what they were. There are all kinds of things that are moving right now, and in the real estate industry, there are all kinds of homes that are for sale, but they're not good deals. It still takes an in-buyer, still takes you as the investor to believe in enough to be able to buy the property to flip it. Now we're dealing with even more issues with banks and underwriters approving sales and cutting me on appraisals. Everything is tightening up. It’s harder and riskier with these purchases right now.

The saying goes to work smarter instead of harder. A lot of times, as an entrepreneur, we talk about making money and having freedom of money. We talked about having freedom of time, and then our sanity. We talked about that sanity or the energy. What's taking up our bandwidth? What's taking up our energy? Everything that we do or say yes to takes up energy. What's taking all that up, so we have leftovers for whatever? You've scaled down. It seems like you're not doing as many deals, but the deals that you have done have been more profitable.

Let's take you, for example. What does your life look like right now since you're working smarter, instead of harder? You're doing less deals, maybe making more margin when it comes to money. Are you as profitable as when you were doing more deals? Let's talk about your time. We had that conversation too. I feel like I see you doing all these fun things. I'm in a season now. We've had a lot of shifts. I'm working a lot. Talk to us about your life, money, and time when it comes to the season.

I'll start with the last couple of years. As we went on, I'm down to one full-time employee, and I have a few vendors that I work with that assist with some of our marketing. As a result, I'm not responsible for those vendors. I don't have to keep them busy. I don't have to check on them. I don't have to make sure they have all their needs met. I have one worker that I am responsible for. That on its own takes away so much. It gives me so much more time a week.

By scaling down my business, we're still operating. We're selectively buying. Everything is great. We're spending about an hour and a half up true admin work a day. At least for me, I'm spending about an hour and a half of true admin work, and then, I'm available throughout the day. This is giving me so much margin of time and also the ability to think.

That sounds silly, but the ability to visualize the next steps to think about the next opportunities to think about what I want to do going forward. For so long over the last several years, it's been a grind because the harvest is plenty. We're going out. We're getting deals. As things have slowed down, I've gotten that margin of time back, and I've got that energy. I'm working on that fire in my belly for the next thing.

Over the last year, because of having that margin, I got done with a big development project. We’re able to build a warehouse. We were able to renovate and completely rezone a commercial property. It was an amazing opportunity. We picked up another commercial property that was in the middle of a full exterior remodel. We already have tenants in place. Those two deals on their own are amazing opportunities that only happened because I had the ability to look for them.

I had the energy to divert because, in the scaling method, you have to have the volume of transactions. You've got to have the revenue to justify a full team. The reality is, had I had a team, we probably would have missed out on one, if not both, of those deals because people don't know the true vision. Only I know the vision for my company as a visionary. That was a reminder for me.

As far as profitability goes, in the last couple of years, we've been blessed with the deals that we have done. We've been selectively buying, and it's worked out quite well. Now we're in this new shift that's taking place, and we've had some hiccups with appraisals on some retail flips that we've done. We're starting to re-evaluate how far we want to go with these flips. As far as cashflow goes, we're taking it in strides. We're able to utilize the portfolio and keep maintaining everything.

Sometimes when you're in a mess and you're trying to grind out deals and popping through deals. Transactionally, you miss stuff and some of the bigger opportunities. That's awesome. One of the things is you talked about reigniting that passion. We've had those conversations over the past years. There have been seasons when I have lost my passion for real estate. For me, it was an income-producing engine that could help me do something else. It wasn't maybe the thing. It was the thing that got me to the thing, but lately, I've had this season for a few years.

I've been out of the business now, I've had to step back in, and there has been a little bit of passion in there, maybe something new. I've also seen other people lose their passion for what they're doing. Maybe they're burnt out. A lot of them don't even want to flip it. They could care less if they ever see another house, flip another house, or see another contractor. They don't want to do that anymore. They've lost a lot of the fire that they once had. Can you take us on your journey a little bit? Maybe you had lost passion, but it seems like now, you have some of that passion back. What can you attribute to that,? How can you encourage other people in their journey?

Being fully transparent on this show, something I'm still actively working on is getting that true passion for growing again. Not grown as far as trying to grow the business but growing in the sense of wanting to learn this new way of doing business and how to chase new opportunities. I'm still struggling with burnout. I have been for a while, and perhaps, that's why I've scaled down. It helped give me some margin. Time does heal, but it takes a long time.

As far as burnout goes, the one thing for me that I've learned about myself over the last six months is I had to establish rules of engagement with anything. Whether it's my family, my wife, my walk with the Lord, or my business, I have to establish rules of engagement. It doesn't mean that I need to have itemized steps on how I focus on each one of those items, but I have to know the parameters and boundaries. I have an addictive personality where I go all in, and then when I get burned out, I want to move on to the next thing. The problem with that is you can't get burned out in your family and then leave your family for the next thing.

IDP 20 | Scale Down
Scale Down: You have to establish rules of engagement to avoid being consumed by burnout. You do not need to have itemized steps, but you must have clear parameters and boundaries.

It doesn't work. Rules of engagement, that's the secret sauce that I have been following and I'm not perfect. I don't think I'm fully healed from being burned out, but I am starting to get my passion back with some of these. It's been mostly the portfolio purchases that I've done that have made me excited. It has nothing to do with money, but I like the visualization. I like the creation. I like the development piece and that's been fun for me. That's not enough to keep me fed, but it's something that I can add to the overall pool. Rules of engagement don't have to be complicated, but you need to establish what that looks like.

Let's talk about the rules of engagement. Can you elaborate on this? What does that look like? You don't have to get in, not to put you on the spot or get in super details. What does that mean when it comes to the areas of your life, business, work, and family? Can you take us into your word a little bit? What does that mean for you?

What ultimately keeps us nourished and alive is our walk with the Lord. For me, that's my walk with the Lord. I know where your heart stands. We say this as Christians, but we don't always believe this. One of my rules of engagement is truly partnering with God. God's the CEO, and that's the way it needs to be. I'm not saying that I don't question the CEO, and I'm not saying that I'm not doing things I'm not supposed to be doing as a partner with God, but one of my rules of engagement is that He comes first.

It's enough that it's one of my rules of engagement. It's something I'm constantly striving for every day, whether I need to ask for forgiveness or keep praying. That's what I'm going after right now. My rule of engagement for my family is that I'm present. I have not been present for the first 5 to 6 years of my marriage. I was chasing the things to be able to supplement everything else in my life.

Now that I'm processing this, my rules of engagement are that I'm home every day by 5:00. That was my baby steps in the very beginning. Now it's changing to where I'm adding a new one and that's where I work from home. I've always been an advocate for traveling, working from remote workspaces, but I'm trying to figure out how to shuffle the deck to make the home more part of my life. That's one of my new ones.

My third for my business is I'm trying to make the best decisions out of the hour and a half a day. I say an hour and a half because I strive for an hour, but I always go over. One of my rules of engagement is that I give the very best hour and a half of business focus on running my business. With an hour and a half, I haven't figured out how to add more people to my team, to be able to utilize that hour and a half. The more people you have, the harder it is to work less hours because we're still babysitting. Those are mine. The rules of engagement, you start out small. You can't start all off hardcore writing down an itemized list. You're going to fail every time. You want to achieve the goal. We'll see what works for you.

Another personal type of question is, do you only work an hour and a half a day? Is that your goal? What do you do with the other time in your day?

That hour and a half is 100% on my computer, completely uninterrupted focus. As I'm still going through this, I'm still available throughout the day for emergencies. I'm still available if an opportunity comes up. I'm not necessarily only working hours and a half, and I'm going swimming. I'm still available. Somedays, it's an hour and a half in the morning. I'm done and in about two hours, I have to make an appointment in another city. I'm going to make the appointment but that's the first appointment for the week. It hasn't become an issue yet, and eventually, if things do start to change, or we end up going a different direction with what we're doing, and if it does create more busy work, that's when we have to re-evaluate what those rules of engagements are with work.

As we wrap up the show, Tyler, what feedback or advice would you give to a real estate entrepreneur, the entrepreneur out there, or the business owner that is feeling overwhelmed by the demands of scaling up? They have the books. They have a coach. They're trying to put their systems in place and adding more people and but they're continuously overwhelmed. The demands are upon them. The heaviness is upon them. I am even probably talking to myself a little bit during this season right now. What would you encourage them with? What feedback would you give to the person that's feeling that way and they've been feeling that way for a while?

Especially in the last year and a half, there's been a huge push for masterminds. There's been a huge push for business coaches, all kinds of anonymous reels, and TikTok videos about how people have their businesses all figured out. Everybody can aspire to be them. I would say, because of that much attention to everything that's happening right now, clearly, there's a problem everywhere with all of us business owners where we're all treading water right now in a big pool. We think if we read that next book or if we do the next mastermind or that next business coach, that is going to solve our problems. It might, but there's a good chance that it might not.

It could even cause more problems.

IDP 20 | Scale Down

I would argue this with anybody. There is such a thing as too many systems in place where you lose your customer. Systems are great because they make perfect sense on paper, but it doesn't always mirror the language of your in-buyer, your in-seller, or your customer as a whole. My rebuttal to that would be you got to work it backwards.

What are you looking for? Do you want to be somebody that's accomplishing a lot of transactions or do you want to be a profitable business? Being a profitable business is not based on how many transactions you're doing. It's the margins that matter. That's something that everybody would probably have to figure out in their own unique market or their own state because every territory acts a little bit differently.

Thank you so much, Tyler, for being on the show. I appreciate the advice and the feedback. One final question is about your future. You’re 34 this 2023. In the future, do you feel like you will maintain this balance of life, this freedom of working less and having this lean team? What do you think? Let's say opportunities again start flooding the market. You start to see that happen like we saw five years ago.

For me, personally, as we start pivoting here, with this new culture and market, I suspect that we'll probably ramp up again. It's probably going to be more dictated if we can figure out the right channels that were wanting to go to because I'm not going to give up on the profitability of the transaction. The volume of transactions no longer matters to us. Going forward, we will probably ramp up to a smaller team again. It's still very profitable. We're still building out the portfolio. That's probably the direction we're going to go. None of us know. Everybody has different conspiracies as to what's happening. As soon as we can figure out a channel that makes the most sense in the best use of marketing dollars, we will probably start ramping up again.

I had this show, looking at what the opportunities are before you. God's laying it out before us all. Sometimes, we get focused on this long-term vision 3, 5, or 10 years down the road and things can happen. We have different seasons. I've mentioned that I'm in a different season that I probably didn't think I might be in years ago, for example. That's okay. Look at the opportunities that are before you and things can shift. Tyler, thanks so much for being on the show. I appreciate you.


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