How to overcome / prevent analysis paralysis?

[HenkHolland]

I have had many fantastic opportunities in my life to close attractive business deals, but actually only grabbed a very limited percentage.
You read about very succesful people who look at an opportunity (it does not matter whether it is RE, a business acquisition or a trading deal) do a quick calculation that figuratively speaking would fit on the back of a matchbox and then decide whether to step in or not. All within a short time.

My problem was analysis paralysis. I used to over-analyze.
Since I still have that tendency I would appreciate your advice on how to overcome or prevent it.
Thank you.

 

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[Runum]

Short answer would be practice and knowledge. My experience is in RE. I got over it by practicing my analysis of hundreds of potential deals over many months. I tested large deals and small deals, all in all kinds of locations. In doing so I learned to get used to the numbers. Then I started gathering info on deals that looked promising. More facts and numbers mean more accurate analysis. After I got comfortable then I began seeing how much time it would take me to make a decision if I was pressed. Practice helped me a lot but I'm not where I want to be, yet. Good luck:cheers:

Greg

 

[S928]

Not too long ago, there was an excellent thread, somewhere in this forum, that dealt with such subject. I tried locating it, but it's buried somewhere deep. If I find it later on, I'll post a link.

Fear is normal, we all have it. Yet, in reality, the few who overcome it are the ones who truly succeed. Think about how easy it is to conform; it's so much easier to give in than to fight and that's why most people are plain conformists.

Hm, I think if you truly believe in what you're doing, you need to let go of the mental barrier. Do your homework and have faith in your system! The only person stopping you from achieving your goals is yourself. Why do you fear yourself?

:smx6:

 

[AroundTheWorld]

Overcome FEAR

I'm Scared

Analysis Paralysis

Some places to start!

 

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[phlgirl]

I too am a recovering victim of analysis paralysis : ) I am from an accounting background and, somehow, I think this disease comes hand in hand with the part of the brain that would draw one to such a field : )

In the beginning, I read for years - almost 3 full years I spent reading every REI book I could get my hands on. During this same period, I would scour realtor.com - if not on a daily basis, really close. I would build spreadsheets for each investment opportunity and do the numbers, over and over again - researching tax records, calling my poor insurance agent - How much would it cost to insure this??

Finally, I started making offers. Not sure what put me over the hump here but, most likely, it was some sense of confidence from all the reading partnered with an aching need to get out of my full time consulting gig. Offers were ridiculously low, of course....almost too low to even be considered but it made me feel safe and at least I was doing something - it was a small step forward and got me comfortable with the offer process. After a few, I suppose I got tired of the simple rejection (I like to win), so I brought my offers up to a reasonable place and eventually one was accepted.

Settlement - I was in my early 20's, in a room with approx. 5 men (seller, seller's agent, seller's title co., seller's attorney), who were at least 20 years my senior. I would be lying if I said I wasn't nervous; yet, at the same time, it was a great rush. I had done the numbers 600 times by this point and I knew it was a good deal.

I wish I could say that it all ended here and I moved forward at warp speed, from this point on - unfortunately, not the case. I wanted to get comfortable with my new investment, see what might go wrong, see how it affected my year end tax return, etc : ) I would estimate to say that I bought another new property about once every 1.5 years for the next 3-4 years.

Later, my husband and brother joined me in the game - they both really liked the business model, so (once the numbers were right), we all left our jobs and went into RE full time. My partners were MUCH more aggressive that I - they wanted to buy everything in sight...but wait, I have to do the numbers!!! They would say, 'ok, you've done them, now let's buy it'. Having never operated this way, I can say that, at first, it made me sick. Only do the numbers once? What about all the expenses I forgot today and will think of tomorrow, next week???? Ughhh?.. but the boys weren't having it. We had to keep moving and you know what? They were right.

Summarizing points:

• Practice - practice each individual step if you have to-analysis, offers, etc. but keep moving forward
• Partners - if you are comfortable with partnering, find a partner who has the exact opposite skills of your own. You will save each other in the end. They would have forgotten the analysis and you may have never been done with the analysis.
• Ask yourself what is the worst that can happen??? What is the most you could lose? Assess the risks, mitigate and move on
• On the reverse angle, ask yourself what will happen if you do nothing? What will happen if you never make a deal? Is your current lifestyle enough for you? Are you content with what you have?
• Set goals/deadlines - we analytical types do really well with deadlines. In Corp Amer, it is someone in upper management giving us a deadline. We will analyze and analyze up until the due date, but once the deadline arrives, we are prepared with an answer/report. Outside of the job, you need to set your own deadlines - in writing! Treat them just as seriously as if you had been given the deadline by a superior, at work (if not even more so).

Analytical/mathematical skills are great skills to have - so many people just HATE the numbers - so consider yourself lucky, in some respects. If managed correctly, those with analytical skills have potential to be outstanding investors/business owners. Unfortunately, due to this common issue, many end up stuck behind a desk in the back office, analyzing someone elses multi million $ deal. You decide.

 

[randallg99]

My problem was analysis paralysis. I used to over-analyze.
Since I still have that tendency I would appreciate your advice on how to overcome or prevent it.
Thank you.

There are a couple of threads concerning risk analysis on this forum currently and this is probably the number one issue that should be learned and understood before pulling triggers...

there are different ways of looking at deals. here is an example- I have a friend who has worked in restaurants for 10 years, has wanted to open one up the entire time and complains profusely about the management he works under stating that he can do better.

One night, we did a napkin pro-forma over a beer and punched in the calculations on
excel on my PDA only to find that the numbers can work. But who am I? We only used numbers he gave me and I have no idea how the business operates and what overhead is associated.

So, to keep this story relevant, I asked him what his downsides are and he rambled off the tip of his tongue about 20 things all in one breath!!!! I was in awe but then asked him how he could address each and everyone of them... he mentioned employees not showing up, I said OK... thats really not a problem because that is something he can deal with.

His knowledge on financials, employee relations, HR, negotiations, real estate, inventory control are virtually nil. I know he is not familiar because I started drilling him when he mentioned the concerns. So the whole time he was working in restaurants, he spent his time complaining and critisizing management instead of staying focused in learning the biz... he has not read a book on restaurant ownership or does not even know how to read a financial statement... BY THE WAY- LEARN HOW TO READ FINANCIALS. P&Ls AND BALANCE SHEETS. IF ANYONE GETS JUST ONE THING FROM ME, THIS SHOULD BE IT.

So... How to overcome / prevent analysis paralysis?

Read, learn, breathe, sleep, eat and crap the area of focus you want to master. Once you do that, then you will master the ins and outs of the area of focus and then making the decision will come with less risk and will be easier to make.

good luck

 

[HenkHolland]

Thanks everybody. Very helpful advice.
I'm pretty good at understanding financial reports, so that's not the problem in my case.

Reading through the recommendations and suggestions, I think that writing down the real risks of a deal and figuring out a back-up plan and writing that down too, could be the key for me to overcome my fears.
I will start implementing this immediately and will inform you whether it actually works for me.

 

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[kimberland]

I am from an accounting background and, somehow, I think this disease comes hand in hand with the part of the brain that would draw one to such a field : )

Accountant here also.

How do I solve this problem?
Before I do anything else,
I set a deadline (a drop dead date).
Then I stick to the deadline.

Simple as that.

Decide when to pull the trigger
before you pick up the gun.

: )

 

[nomadjanet]

I used to suffer from this same issue when I was young so I speak from experience.
After you calculate your numbers:
My questions are:

• What is the worst thing that can happen if you do the deal?
• Is this money or credit that you can live without if necessary?
• What is the best thing that can happen if you do the deal?
• What is the worst thing that can happen if you don't do the deal? (Usual answer is nothing you don't lose money on a deal & you don't gain money on a deal)
• But in truth you do lose. If you have assets that sit that are not appreciating and you do not reinvest them in an appreciating asset you are loosing at least the rate of inflation.
• What is the best thing that can happen if you don't do the deal? (Usual answer is nothing you don't gain & you don't lose)

How much risk can you tolerate to achieve the BEST thing, how much risk can you tolerate in case of the WORST thing? Only you know, if you decide what your level or risk is before calculating the deal your answer will be made when you run your numbers. For instance if you know that you can afford to risk 25K in cash and 200K in credit on this deal and no more then the deal that requires 100K cash and 500K credit can't be done by you ALONE.
You must know your financial position once you are empowered with this information; you will overcome the analysis paralysis.
Lots of heavy hitter’s claim they invested their last 10k and made 100k, good on them but do you have the tolerance for this type of risk? I personally could not risk any type of investment that involved credit until we had 6 months living expenses in the bank. Once that was accomplished, I could do anything because I knew we had that cushion to let us come back if we had a hit. After we achieved our cushion we were free to risk; we now have liquid years of living expense and passive income in excess of living expense. Your risk tolerance may be higher or lower than mine may but I believe this is the source of analysis paralysis.

 

[phlgirl]

Decide when to pull the trigger
before you pick up the gun.

Absolutely LOVE that.... lol. Going to have to write that one down

 

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