Sweat Equity to Build a Lucrative Business
When I began investing in real estate back in the late 1980s someone told me about the concept of “sweat equity”. The definition of this term, according to the Internet is an interest or increased value in a property earned from labor toward upkeep or restoration. This proved to be true as I spent endless hours engaged in painting, landscaping, and a host of other activities to get the homes I was purchasing ready to be rented or to be sold.
The goal was to make a profit in the process, and this sweat equity saved money I did not have in order to increase the market value of the property. This also served to make me feel more connected to the project and much more likely to want to spend the time and make the effort to do the things in a manner that would expedite the return on my investment.
Sweat equity does not apply only to real estate; any business can prosper when the owner takes a more hands-on approach to building it up.
Then if sweat equity is the non-monetary contribution made by individuals on a project, doesn’t it stand to reason that most everyone would take advantage of this concept and become more successful in their business ventures? You would think so, but it’s actually not such a commonly acceptable and utilized practice
During the 1970s a family from Vietnam purchased the doughnut shop in my neighborhood. This was the first time I was aware of an entire family taking daily responsibility for a business, rather than only the owner and perhaps a spouse or other business partner. The mother and father were there every day at the crack of dawn, sweeping the sidewalk in front of the store and washing the windows, before they got to work preparing the dough and other items for that day’s doughnuts and pastries.
By eight o’clock the oldest daughter would arrive to begin working alongside them. She was probably eighteen or so and very serious about what she was doing. I was in college at this time and would stop in a couple of times a week to pick up a few chocolate old fashioned’s and a glazed twist. She always had the counter tops sparkling clean and organized, and the glass fronts on the cases was so shiny you could see your reflection clearly while making your selections.
Around three in the afternoon the younger children, a boy and a girl who appeared to be around ten years old showed up, and they would take turns serving the customers while doing their homework at a small table in between the front of the store and the area where the baking was done. It wasn’t until they had been in business for a year or so that I saw the youngest family member, a child of about three who was either the little sister or the oldest daughter’s child.
In my neighborhood the discussion of this family and their business was an ongoing and interesting one. The conclusion reached by many was that these practices were common for people from other countries, but that Americans would never put their children to work in this way. Looking back, I see that they missed the point entirely on how the “sweat equity” each family member was putting in would pay off handsomely in the future. What I would have given to have been a fly on the wall during their family discussions of this venture and the hopes and dreams they shared for their children, and perhaps even for family members still living in Vietnam.
Entrepreneur Mark Cuban says that “sweat equity is the most valuable equity there is”. What do you think? I believe this is an excellent topic for further discussion among small business owners and entrepreneurs. Do we do things differently in the United States when it comes to business? Are immigrants more likely to succeed because they are more willing to do what others will not when it comes to building up a business over a period of time? Have you ever put sweat equity into a business venture of any type?