Avoid single points of failure

One of the biggest lessons I’ve learned in business is that you should avoid unnecessary risk. It sounds obvious, but it deserves attention. Know your systems, solve for your customer, and don’t lose money. Only when you ensure those things can you focus on the upside.

The dumbest risk I’ve ever taken was exposing myself to a single point of failure. In 2020, I bought a property in a small town (pop. < 2,000) in British Columbia, planning to put it on Airbnb. At the time, it was a huge investment for me but the numbers worked. I believed in the market (still do), the price was great, and the potential upside was enormous.

The thing I failed to consider, however, was the almost non-existent supply of cleaners and handymen in the market. Since I planned to operate the Airbnb remotely, I needed a dependable staff to keep the lights on and put the fires out. I was looking for a needle in a haystack.

Amazingly, I did find this person. But I also knew that if they called in sick or had to leave town, it was money and reputation down the drain. They were my single point of failure.

Whenever I research an investment today, I figure out my operations first. I decide who does what and ensure there are replacements, in case I need them. Through my own ignorance, I’ve learned how to put out the fire before the fire starts. I hope you do too.