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Decision Matrix

When I was getting started as a real estate investor, I didn’t have a lot of money.

Being fresh out of college, my job wasn’t the type that threw off a ton of extra cash each month, but I somehow managed to save up a few thousand dollars before I took the plunge.

In those early days, every penny was precious. If I wanted to make something out of the money I’d saved, I knew it was CRUCIAL for me to earn an actual return on each dollar I spent. If I failed at this task, the money would be gone and I’d be left with nothing… and this kind of scenario was simply unacceptable.

Knowing that this seed capital was the lifeblood of my future financial freedom, it’s not surprising that I struggled quite a bit with every decision that required spending money.

It seemed like every day, someone would tell me about some new product, service, gadget or subscription that I would be STUPID to go without. While each one of these “opportunities” may have been legitimately awesome and helpful in and of themselves, the reality was – I had to be careful with my money. Buying up every little thing that caught my eye simply wasn’t an option, and when every red cent matters (as it did for me), I had to start saying “No” to a lot of good stuff.

If you’re running any kind of real estate business – you probably know there are a TON of online services competing for your money. I just took a look at my own business, and these are just a handful of the things I’m currently subscribed (or have seriously considered subscribing) to:

Now don’t get me wrong… these are all valuable things in their own right, but it doesn’t take a math whiz to recognize that these costs add up, FAST. Each one may not be a huge expense as a standalone item, but when you put it all together, it can get really expensive!

And let’s not forget, these are just the subscriptions (i.e. – guaranteed expenses) that could be coming out of my pocket each month. These don’t even include the variable (and much larger) costs of running a business… computers, equipment, postage, contract work, direct mail, marketing, utilities, etc.

If your operation isn’t pulling in some serious coin each month, you’re gonna start drowning quickly. Especially in the beginning, you need to decide which services are a MUST for your business and which ones you can bypass altogether.

Measuring Value

When it comes to software, products, services and other paid subscriptions, measuring the value of what you pay for is usually anything but straightforward.

Some people might ask themselves,

Which subscriptions will pay for themselves and/or carry their own weight in value?

As much as I’d LOVE a simple, 2 + 2 = 4 formula to answer this kind of question – it’s never that simple.

In order to see the ultimate value of anything, we can’t just look at the thing itself and know exactly what kind of income it can generate for us, because these things rarely generate income directly. We need to consider what each thing brings to the table, and what part they can contribute to a highly profitable business when we use them to their full potential.

To illustrate my point, let’s look at PEPPERONI as an example.

Pepperoni by itself is NOT something I get excited about (in fact, it actually sounds kind of gross). However… pepperoni is also a key ingredient required to make my favorite kind of pizza.

I’m a pizza fanatic – and for me, pizza is never quite the same without pepperoni on it.

In a sense… the pepperoni is like a “paid subscription” and the pizza is like a “profitable business”. I don’t get excited about the ingredient by itself (i.e. – the subscription), but since I know what it does for the meal as a whole (i.e. – the business), I know what an important component it is for the end product (and something would be unmistakably missing without it).

In the same way – a paid subscription may not technically produce income in a direct, tangible way, but it may offer significant convenience, a way to streamline a time-consuming process, a way to automate menial tasks in a cost-effective way, or a way to consume less mental energy by solving an issue that would otherwise chew up a TON of time and brain power.

The Decision Matrix

It’s not always easy to make a complex decision with no clear answer, so whenever I’m at a fork in the road and I can’t decide whether the answer should be “yes” or “no”, my best attempt at making these decisions a bit more straightforward is to use a Decision Matrix.

When I have a clearly defined problem, and I’m presented with a potential solution to solve that problem (e.g. – a paid subscription, product or service), I start by looking at both the problem and solution and I grade them with five distinct measurements on a scale of 1 – 5.

Here’s how it works…

Severity of the Problem

  • 1 – This isn’t a problem at all.
  • 2 – This is a minor annoyance.
  • 3 – This is an ongoing irritation, but I can deal with it.
  • 4 – This a fairly big issue and it bothers me a lot.
  • 5 – This is a serious problem. I’m not sure how I’ve survived this long.

Frequency of the Problem 

  • 1 – I almost never encounter this problem.
  • 2 – I encounter this problem at least once a year.
  • 3 – I encounter this problem at least once a month.
  • 4 – I encounter this problem at least once a week.
  • 5 – I encounter this problem every day of my miserable life.

How Time Consuming the Problem Is

  • 1 – When this issue comes up, it consumes less than a minute of my time.
  • 2 – When this issue comes up, it consumes less than 20 minutes of my time.
  • 3 – When this issue comes up, it consumes less than an hour of my time.
  • 4 – When this issue comes up, it consumes several hours of my time.
  • 5 – When this issue comes up, it consumes several days of my time.

Importance of the Solution 

  • 1 – This wouldn’t meet any significant needs in my business. If I paid for this, it would just be for fun.
  • 2 – This might scratch a minor itch, but I could survive just fine without it.
  • 3 – This could solve a notable problem, but I can still get by without it.
  • 4 – This would solve a big problem. My life would be a lot easier if I had this.
  • 5 – This would completely eliminate one of my biggest problems. How have I survived without this?

Budget Available to Pay for a Solution 

  • 1 – I have no money available. I’d have to go into debt to pay for it.
  • 2 – I could probably find the money to cover it, but just barely.
  • 3 – I can afford it, but it might cut into my budget.
  • 4 – I definitely have room for this in my budget.
  • 5 – The cost is nominal and would have no noticeable impact on my budget.

With this grading criteria, I can simply answer all five questions and use the final score to get a clear indicator of what I should do.

Granted, this isn’t always a fool-proof method (some things still deserve more time and careful consideration), but even in the instances where it doesn’t point out an abundantly clear answer, it will at least point me in the right direction. For example…

  • If the sum of my numbers adds up to anything higher than 20, the answer should be an easy – “YES!”
  • If the numbers add up to anything between 15 – 19, the answer is “Probably”, with careful consideration paid to which areas scored particularly low and what consequences and implications they might have.
  • If the numbers add up to anything between 10 – 14, this starts falling into the “Questionable” territory. This is when I have to take a long, hard look at which answers scored high and which ones scored low. Sometimes the final answer will be, “Not yet”, other times it will be, “Let’s give it a trial period, but only if we can cancel if it’s not working.”
  • If the numbers add up to anything lower than 10, it usually falls into the “Probably not” category.
  • If the sum comes out to less than 5, it’s an easy “No”.

The Matrix In Action

Let’s take a look at a few subscriptions I’ve looked at in the past, and how this system gave me an easy answer (note: these numbers pertain to my business and my situation – my answers shouldn’t necessarily be the same as your answers).

AgentPro247

Problem: “I need access to an easy-to-use, reasonably priced, nationwide database to help me conduct property research.”

  • Severity of Problem: 4
  • Frequency of Problem: 5
  • How Time Consuming the Problem Is: 3
  • Importance of Solution: 4
  • Budget Available to Pay for Solution: 5

Solution: This adds up to 21, so the answer is an easy YES.

Lead Propeller

Problem: “I need to create a selling website that is fully functional, looks great, is easy-to-use, and won’t cause headaches.”

  • Severity of Problem: 4
  • Frequency of Problem: 4
  • How Time Consuming the Problem Is: 3
  • Importance of Solution: 3
  • Budget Available to Pay for Solution: 4

Solution: This adds up to 18, so the answer is Probably, but I’ll have to look carefully at the areas that scored lower. If they aren’t significant deterrents from moving forward, then the answer will be YES.

RocketLawyer

Problem: “I need an easy way to create state-specific contracts, deeds and seller financing documents on-demand.”

  • Severity of Problem: 3
  • Frequency of Problem: 3
  • How Time Consuming the Problem Is: 4
  • Importance of Solution: 3
  • Budget Available to Pay for Solution: 4

Solution: This adds up to 17, so the answer is Probably, but I’ll have to look carefully at the areas that scored lower. If they aren’t significant deterrents from moving forward, then the answer will be YES.

Making the Matrix Work

In order for this matrix to work properly, there are a couple of things you need to have nailed down.

1. Understand the Problem.

For example, if you tell me…

“I need to sell more stuff.”

…this is NOT a clearly defined problem:

However, if you tell me…

“I need a well-designed, easy-to-use website that will help me establish credibility for my company, build a bigger audience and give my customers easy access to the information they need to make a buying decision.”

…now THAT is a statement from someone who knows what they need – and when someone knows what they need, they’ll be MUCH better equipped to know when a proposed solution is (or isn’t) going to fit the bill. If you don’t know what you’re looking for in the first place, you probably shouldn’t be spending money yet.

2. Understand the Solution.

In order to make a proper decision, you also need to be as educated as possible about whatever you’re buying.

So you think you’ve found a good subscription service to pay for? Ask yourself some of these questions…

  • What specific problem(s) is this going to solve for me?
  • Am I sure this will solve my problem(s)? What makes me so confident?
  • Are there any other ways I can eliminate any doubts BEFORE I pony up the cash?
  • Can I get my money back if this proposed solution turns out to be a total waste of my money?

The unfortunate truth is, most products and services cannot and will not deliver 100% of what we want. No sales person or sales page is ever going to willingly admit this, but it’s the truth.

Granted, this doesn’t necessarily mean it’s a bad deal. I can think of dozens of products and subscriptions I’m glad I paid for even though they weren’t perfect. The objective is to simply close the gap of uncertainty before you buy it.

How can you close the gap? Most respectable companies will offer EITHER:

  • A money back guarantee for a certain period of time.
  • A free trial for a short period of time, allowing you to get a good look at the proposed solution before you commit any money to it.

Again, the absence of these options doesn’t necessarily make something “bad deal” – but the presence of them should certainly make it easier for you to explore what’s being offered and get started down the right track.

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About the author

Seth Williams is a land investor with hundreds of closed transactions and nearly a decade of experience in the commercial real estate banking industry. He is also the Founder of REtipster.com - a real estate investing blog that offers real-world guidance for part-time real estate investors.

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  1. Josh says:

    Great post Seth! I was just thinking about this the other day. Being in the early stages of my land investing career and also on a tight budget, this is something that struggle with on a daily basis. In today’s world of technology and the virtually unlimited amount of different resources out there, it can get a little overwhelming trying to decide which ones are necessary to get started. I know that you utilize craigslist a lot for marketing properties, but I’m curious what your opinion is on monthly subscriptions for other sites to list/market properties that you have for sale?

    1. Seth Williams says:

      Thanks Josh – I’m glad you found it helpful! Honestly, I don’t pay for any of my listings – the only sites I’ve ever utilized are the free ones… that’s not to say there isn’t value in some of the paid sites (who knows, maybe I could’ve sold some of my properties faster if I had paid for some of these listing sites), but for all the properties I’ve sold, I haven’t found them to be necessary.

      1. Josh says:

        Great thanks for the feedback. It’s encouraging to hear that it’s feasible to hold off on the subscription based listing sites to get started (or even eliminate the need for them all together). I guess that’s where having a good buyer’s list comes into play.

      2. Chris Pritchard says:

        When you use the free sites like Craigslist, you had to have a few accounts, right? If so, what service do you use for the phone number verification?

  2. Chris Pritchard says:

    This is a great article, Seth! There’s no limit to the shiny things like this, and it’s a good way to think of them. I think the phone services are essential, and I’m working on one for land investors, which focuses on specific features at lower prices than services like RingCentral. I got an email from one guy today using a phone number service for verifying Craigslist accounts who is paying $75 a month for 30 numbers! I am able to switch him over and get him the same thing for just $45 a month.

  3. Mike T says:

    Great article Seth it is easy to spend a bunch of money upfront and then not have much left to mail. I have bought almost 50 parcels in the last 10 months and the tools that were must have for me were agentpro, google voice and a mailbox. I am now implementing things to make my life easier such as patlive and probably going with lead propeller (I have a square space site but it takes time to add properties.)
    Save as much money as possible to send mail and buy land, you can hustle through most of your issues early on.

    1. Seth Williams says:

      Thanks for chiming in Mike, I’m glad this stuff resonates with you too. That’s awesome to hear about the action you’ve taken to make this business work (that’s no small feat, believe me). Keep up the good work buddy!

  4. John Steve says:

    Deciding where to spend your money and how to get the most for your dollar is a hard decision. There a great new app out there for anyone doing business who is in need of an attorney called LegalClick.com. They are currently presenting their new app at the Collision Conference in New Orleans, one of the largest technology conferences of its kind. Attorneys list their services for a fixed fee, so as a consumer and business owner if you are in need of an attorney you can purchase the service you need for a fixed fee; no unforeseen billable hours or costs. The app cuts down on all the red tape and the process is streamlined and smooth for faster and more efficient transactions.

    1. Seth Williams says:

      Interesting idea for an app. Thanks for sharing John!

  5. Nicole Owens says:

    I have never used a decision matrix before. This sounds like an amazing concept. I will be using a decision matrix from now on. Thank you!

    1. Seth Williams says:

      Thanks Nicole! I don’t use it for everything… but when I’m dealing with an issue that seems impossible to decide on, that’s when this kind of thing really comes in handy. Hope it helps!

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