00;00;00;02 - 00;00;23;07

Unknown

Welcome to the Profit First for Real Estate Investors podcast. This series is the simple CFO Case Files, where our CFOs break down real client scenarios, financial systems and practical decisions from inside the business. Enjoy the episode.

00;00;23;09 - 00;00;46;11

Unknown

All right. Cristina Gutierrez here, CEO with simple CFO solutions. I'm here again with another CFO that's a part of our team. And we're pulling back the curtain again right now viewing Aaron Judge. He's here with me. Welcome, Aaron. Thank you for being here with us. Thank you. Aaron has been with us since November 2024. He's super committed to improving the business of all his clients.

00;00;46;13 - 00;01;02;13

Unknown

No matter what it takes. I know Aaron came on like, oh, I'll take a few clients, I'll do this, I'll do that. And then he never ceases to amaze me. When we get a client, we're like, this is perfect for Aaron. We contact him and he's like, sure, yeah, I'll take them on. So, he definitely works with the clients now.

00;01;02;13 - 00;01;22;27

Unknown

Shows them, you know, a lot of value has been able to not only improve their business financially, but coach them on business, help them with what he's been through. He's got a vast background in real estate, understands every step of it. You know, he's personally has made an impact on me and CFO and just an all around great guy.

00;01;22;27 - 00;01;54;21

Unknown

And I just love the way he helps with financial clarity and helps the team. He's always there and just never stops at, you know, helping wherever he possibly can. So Aaron. Yes. Thank you. That was really nice. So this hey, I love you guys. Like we're a family. And, you know, even though we're far away or, like, you know, this new world way of being remote and everybody being a different places, I truly feel like we're all family and like we're friends, and, you know, we get to speak and hang out and chat a lot and that's what we're doing here.

00;01;54;21 - 00;02;19;22

Unknown

So kind of fun. So real quick, give us a 32nd version, 30 to 60 second version of who you work with. You know, who's made an impact on you. And you know what you do as a CFO and maybe some clients that you work with and, you know, just kind of a small snippet. Well, I would say that I get all of at least I think I get all of the unique clients that come to simple CFO.

00;02;19;22 - 00;02;51;23

Unknown

So my background is as a principal and investor and, mostly commercial real estate. And then in the private equity space, with a great deal background. Debt, specifically leveraged financing, variety of different things. So, I get a lot of, of the not I would say nonstandard simple CFO clients. So most of my clients today are, either contractors or developers, construction guys.

00;02;51;25 - 00;03;30;04

Unknown

And then real sort of, real estate investors, I've got, both young and experienced, contractors and developers, guys that, own large real estate portfolios, and that have done investing, for, you know, many years. So those are most of my clients. I get, and, you know, I would say that, you know, simple CFO provides the methodology for financial clarity.

00;03;30;06 - 00;03;51;12

Unknown

You know, most CFOs, what we're trying to do is, is bring a sense of, understanding of the numbers to our clients. And then, you know, the profit first and simple CFO method, helps us with that sort of avenue to get to the sort of solutions that are, that are needed that that makes sense, makes perfect sense to me.

00;03;51;12 - 00;04;11;15

Unknown

Yeah. That's why it makes sense to everybody listening. Yeah. I couldn't have said it better myself. And you're right. Like it's, you know, one of the clients that you actually have because I've been a CFO for, you know, almost ten years now and been practicing trained CFOs, I've been in the realm of it for a long time. And I know one of the clients actually came to me personally, was referred to me to help them.

00;04;11;15 - 00;04;32;19

Unknown

And I thought, Aaron's way better at this. And you're the first. He's out of the panic. And J Street. No, I don't I don't recall who it was. I want to I don't want to name names either, but, Sure. But I know they were referred to me. They came to me. We had, like, a pretty big construction business and just had a lot going on that.

00;04;32;19 - 00;04;50;26

Unknown

Yeah. Sure thing. The Co here, I don't really have the time either. But like you were the first person where I was like, I think Aaron would be really good. And your personality like, you know, you're easy to talk to are easy. You make relationships pretty easy. So, you know, it makes me think, you know, this person could really show some value to him.

00;04;50;29 - 00;05;08;23

Unknown

Then you bring I brought him in simple CFOs world. And then you're still working with them now for fix it. Yeah, y yeah, I get a lot of those clients. I mean, if you want, we can dive into a couple of them. One of my, one of my favorite clients is my. Should I name, names? Is that okay?

00;05;08;26 - 00;05;35;12

Unknown

Yeah. We don't need to name names. I mean, okay, well, I've got a client that, was one of my first clients. He's, on the sort of top tier executive package, right? He is a real estate investor. He's probably in his early 60s. He owns, we'll call it 40 to $50 million worth of commercial single tenant, retail space.

00;05;35;14 - 00;06;01;01

Unknown

He probably makes two and a half, 3 million bucks a year just in cash flow. And he's a great example of our simple CFO. Works because he tried to, implement, after reading the book, simple CFO on a methodology by himself. And he used an outside bookkeeper who tried to set the whole thing up and when he came to simple CFO, it was because it wasn't working.

00;06;01;03 - 00;06;19;05

Unknown

And it wasn't working because of a couple different things. And so what we do a lot of times is not only get to know the person and the client, but what's going to work for them. And as someone who is really intelligent, but also very sort of ADHD and he's self admits, like, I'm, I'm a baby in a box, right?

00;06;19;05 - 00;06;40;29

Unknown

Like I'm always thinking of 10,000 ideas and going in ten different directions. And so for him, like one of the things that we have to focus on, on all of our meetings and I do this more so than any other client, is I set an agenda and I drive through what I want to accomplish, accomplished because otherwise he will go off in ten different directions.

00;06;41;02 - 00;07;14;07

Unknown

And, you know, we sort of miss what the sort of progress and, and, and goals of, of our, of our processes, as a successful real estate investor, cash flow helps hide a lot of issues for him. Right. So he's my client that not only has, successful, again, single tenant retail investments, but he was doing, startup and er, that business that he wanted to do throughout the past year.

00;07;14;07 - 00;07;36;12

Unknown

He spent, we spent 3 or 4 months working on data co-location centers that he was, you know, making an investment in. And because of his personality, I got a call in the middle of the summer that basically said, Aaron, I'm making a $7 million investment in buying hardware to set up my own data, data center. And we want to do a data node sort of rent to own or rental node center.

00;07;36;12 - 00;07;56;26

Unknown

And I was like, all right, well, where are the numbers? Did you underwrite this deal? What does this look like? None of that was done. So we, you know, bringing that sort of like real sort of visibility into what the numbers look like and helping him sort of build a business. You know, sort of paramount as, as, you know, you know, he's sort of firing from the hip kind of guy.

00;07;56;28 - 00;08;26;29

Unknown

But the core of his business is he has a sort of real estate operating company, and then he has, you know, QuickBooks running for his personal stuff. And I would tell you, the the most successful thing with profit CFO or with the simple CFO and profit first for him, was that 2024, on the, you know, business side, he ran expenses of about 300, $300,000 for that particular business.

00;08;26;29 - 00;08;46;12

Unknown

Now there is no income. So he's just funding this as an operating company. Interest income from some other minor stuff that comes in here. But this is sort of his holding company. Call it a management company. He doesn't really record any income. It's just a way for him to pay a bunch of expenses. And he does the same thing on the personal side.

00;08;46;15 - 00;09;12;21

Unknown

And I think that was about 225,000. So between the two of them, he's spending $600,000 a year in 2024. That jumped up last year to nearly almost $700,000. The money he has, right, several million dollars a year that he's gotten positive cash flows all sort of operating. Outside of simple CFO. They're all, you know, partnerships and distributions and everything else.

00;09;12;23 - 00;09;36;01

Unknown

But that cash flow comes in. And then he essentially, on a monthly basis, works with, we have first thing we do is we had him switch over to do, bookkeeping and accounting services within our platform, with Michael and, and really sort of get, you know, that sort of ten foot level, accuracy that he needed.

00;09;36;03 - 00;10;01;13

Unknown

And then the second thing we did, throughout the second half of this year was go through as you can imagine, if you're spending $600,000 a year, there are thousands of charges and none of them are payroll related. They're all just dues and subscriptions, education, you know, whatever it is that he decides, that would be interesting for him or his companies or his family to sign up that shiny object, whatever it is.

00;10;01;13 - 00;10;18;23

Unknown

Right. And we had to spend an inordinate amount of time walking through all of this stuff, and I eventually just put together a plan for him and say, here's what you're going to do. Because of the, you know, his personality and the ADHD. It was like, no, no, I'm going to tell you exactly what you're going to do at this point.

00;10;18;23 - 00;10;41;02

Unknown

You're going to go through and cancel this, this, this, this. And there was a dozens of stuff that we had to go through and just say, you don't need this stuff anymore, like, get rid of this, get rid of that. And so we cut down for his budget this year, I think we're down to about 125,000 on the business side and, you know, personal side because his wife and his kids are all in that one.

00;10;41;02 - 00;11;01;19

Unknown

We've cut that probably in half. But really sort of set up a plan for him because what he does then is once or twice a month, just writes a check back to each of those businesses as a, as what he calls a bill pay an approval and it just funding his lifestyle. Okay. Well, that's you know, if you're not in control of that, that just sort of runs away from you.

00;11;01;21 - 00;11;20;03

Unknown

And that's been great because I think where he really saw at the beginning of this year was the clarity that he had lacked. He understands all the expenses. And the money rang out, but he doesn't quite get that sort of visibility that the profit first method then was able to set up for him. And I always refer to him as buckets.

00;11;20;10 - 00;11;48;12

Unknown

What bucket do you want to spend and how much bucket, you know, money do you want to put in each bucket? Then we need to monitor each of those buckets and understand why they're off at any specific time for time period. So anyway, that's a great sort of mature client. I've got another client, who's a brand new client, and in two months I love, construction, contractor out in Utah, who's really only been in business for three years.

00;11;48;12 - 00;12;18;19

Unknown

And they had tremendous, you know, success last year because of one project. And it was, I think it was a 7 or $8 million school project that he landed. And so he really wants to sort of press ahead, into, growing his business. But what he lacked along the way, and they had an internal sort of part time CFO that was a friend of his that, you know, not only, you know, he's known for many years, but also has another job.

00;12;18;22 - 00;12;43;24

Unknown

When I started with them, they were six months behind on doing just basic account reconciliation work. Right? So, I mean, it looked like they were profitable. But at the end of the day, when we went through, it sort of worked on updating all that information. Yeah, they weren't as profitable as he thought they were, and they definitely didn't do any sort of, you know, forward looking budgeting plans like that was not in their sort of radar.

00;12;43;26 - 00;13;15;08

Unknown

And so I've taken a lot of that work off of his sort of plate. And we've set up a plan for him so he can focus on what's most important to him, which is getting business and driving business as sort of the founder of this, you know, contractor and, construction company. And then one of my I would tell you, my superpowers that I work with him and another client on is, we put together, I call him pitch decks or lender decks.

00;13;15;08 - 00;13;46;25

Unknown

Right. Just, decks that, are more presentable to lenders because as businesses grow, they understand their business, but they don't understand the commercial lending environment. And what needs to be presented to a lender to show them as a viable business to borrow money. And in this particular case, he's doing a new project that's a three and a half, $4 million, ground up, mixed use development deal that he wants to hold on the back end of this.

00;13;46;25 - 00;14;15;12

Unknown

So it's construction of permanent financing. But his solution was to go find, some of the, fly by night mix lenders to finance the whole thing. And that's that's just not, you know, it's not a viable solution, and it doesn't make the deal work. So, you know, I help guide some of these these, you know, emerging businesses into more, medium and almost institutional level, type of work.

00;14;15;12 - 00;14;37;16

Unknown

So that that's one of the things I really enjoy. And that's what simple CFO allows me to do within the framework. So but all of it comes back to using, you know, the tools and the dashboards and specifically, for example, my, Utah construction client never set up a budget in their life. They don't even had an internal CFO, and they've never done budgeting once.

00;14;37;19 - 00;15;01;20

Unknown

So the idea of, in the first two months to set up a real budget for 2026 and then be able to look at that on a monthly basis within the dashboard, and then set up KPIs for them. And my view on KPIs, after many years of doing this is the fewer KPIs that you can identify for a business that are meaningful, the better.

00;15;01;23 - 00;15;22;19

Unknown

The second you get into six to 10 to 12 KPIs, that they'll wash over each other. So set up for whatever those four are. Right. And this particular client, it was all right. One KPI is just going to be your, you know, your, gross profit margin. We want a goal of doing 25% on a gross profit margin.

00;15;22;21 - 00;15;39;16

Unknown

His is a little higher because he runs a lot of his, overhead, or I should say payroll overhead on the expense side. That's okay. I don't need to change that. We don't really make that a cost of goods. Just understand that your operating expenses are going to be higher, which means you need to set your goal on the gross profit margin higher.

00;15;39;16 - 00;16;16;23

Unknown

So, and then, you know, one of the other, interesting things that I think was sort of revealing to him, which he really loved, was the fact that they do weekly payroll, with, with everyone. Their payroll runs about 75% of their overhead because of the way it's set up. Great. Do you realize that in in January, in May of this year, August and October, that those are five week months and that four week months and millions, if it affects your calendar going different and you need to plan for that, especially when you're instead of paying 75,000, you could pay 100,000 that month.

00;16;16;23 - 00;16;30;07

Unknown

Like those are big indicator months when you get in the middle of, you know, the next one coming up in May and you're in mid-May and you go, holy, you know, whatever, I don't have any cash this month. Why don't I have a cash? Well, you've had an extra payroll week and it's coming up at the end of the month.

00;16;30;07 - 00;16;52;29

Unknown

So, that's sort of visibility I think, is what people really love. And you can set that up. Specifically in the dashboards that we have. So sorry, I just went on a long tangent there, but that's okay, because it's kind of reverse engineering, because at the end, I would ask you for, you know, some stories like that anyway, so get the stories out of the way.

00;16;52;29 - 00;17;20;16

Unknown

But that and I love how you brought some of those things. I'm just thinking in my head, like so many things, like when a cloud come on board, we always say, we meet you, we meet, we meet you where you are. So that's a bunch of different examples of, you know, clients that are coming in and doing multiple things, like the vet visit and you know, this from from yeah, you know, this from doing this for so long, that first initial battle plan meeting, you know, there's a lot of questions that we go through.

00;17;20;19 - 00;17;36;22

Unknown

And most of the time they'll take the full 90 minutes. But at the end of the day, what you're trying to determine is, where am I meeting you right now in your business? What is it that you've done? What is it you haven't done? And that could be. And that is almost entirely different for every single client.

00;17;36;22 - 00;17;57;01

Unknown

And it's. Yeah, stuff. It's they've done really well. Some stuff they've never done, some stuff they're doing poorly. And you're identifying that along the way so that you can put a plan together of, okay, I know where we're going to go in the first 60 days or I know where we're going to go this year. And these are the things that are important for us to watch, and that'll change by the end of the year, and that'll change throughout the year.

00;17;57;01 - 00;18;14;15

Unknown

So with that changing a month, that's what's important about the onboarding process too. So like, you know, it's not just one thing to have a sales call. Right. Because sales you know you don't know what you're going through. You don't know what the salesperson is going to bring out of them at that point. So then once they actually become a client, then they do the whole onboarding call.

00;18;14;22 - 00;18;30;09

Unknown

And then we get more information from onboarding because now you're you're our client. So it's like, all right, let's tell you what the expectations are and what we're going to do for you. And then show you what that that journey looks like. And then they fill out a form and about me form give us all the information they can.

00;18;30;09 - 00;18;57;26

Unknown

So then you as a CFO can come in and you have all these calls, all this information, and it helps you kind of narrow down like, okay, this is what I really need to focus on. And then we can kick off with that first 60 days. So perfect transition to you know, what do you, what do you see like is the biggest pain point and biggest feelings like take all the clients not just not just a few of them, but like I feel like they all kind of have the same type of pain when they come in or the same type of issues.

00;18;57;26 - 00;19;20;19

Unknown

What do you see across most of the clients of like, they come in a certain way. Doesn't matter. We meet them where they are for what their needs are, but they all have something that they're coming in with. I would say the commonality for all of them is the thing that that simple CFO provides, with all of their fractional CFOs and that's understanding and visibility into their numbers.

00;19;20;19 - 00;19;43;22

Unknown

What does their numbers mean? Right. Like they don't quite understand all the nuances of, the details, if you will. And what I mean by that is they could all look at a financial statement, and many of them manage their business from their bank accounts. How much cash I had in it. Right. That's a classic small business entrepreneur thing.

00;19;43;24 - 00;20;03;26

Unknown

And then they all solve problems in the, in the sort of classic entrepreneur way, which is I solve problems by throwing people at them. Right. Like whatever that that problem is, let's hire somebody or bring somebody in to do that because they're standing up a description for it, or right, signing up with subscription or whatever it might be.

00;20;03;26 - 00;20;33;18

Unknown

Right. And, you know, apart from the, you know, variety, they all sort of, run personal expenses and someone who's, who's, run a business himself for, for at different points in my career, I'm all we've all done that. We run personal expenses through there. But if you're, you know, if you're running a whole lot of, personal stuff through there, and whatever business that you're doing and then wondering why you have no cash at the end of the day, actually, you're you might be more healthy than you think.

00;20;33;18 - 00;20;53;13

Unknown

You just don't realize that you're funding your entire lifestyle through your business and you know the least. Providing some of that clarity to them really helps them realize, oh, I guess my business is better than I thought. I'm just funding everything from my car to my dining to my, you know, paying my wife or whatever it might be through my business.

00;20;53;15 - 00;21;13;06

Unknown

You can continue to do that if you want, but just understand, let's set that up so that you understand the visibility behind that you actually are doing that. And you can set up a a personal bucket or whatever it might be. So I would say, to answer your question, it's, it's understanding their numbers, that sort of visibility into their numbers.

00;21;13;08 - 00;21;34;12

Unknown

And then the other thing that is, yeah, I know you know this better than most, the last thing on any, simple CFO, client's mind is taxes, right? They never think about taxes until they're due. That is that is just always something. That's I. Yeah, yeah, I don't need to pay him. Or if I do need to pay him, I don't have any money to pay him.

00;21;34;12 - 00;21;47;16

Unknown

Okay, well, that works on the short term, but it doesn't last one long term because the IRS may be slow, but they're good. They'll eventually catch up with you. So. And it's going to hurt when they do.

00;21;47;18 - 00;22;06;19

Unknown

That and you know, some people come in to like what's so important about a CFO because some are like, I have a CPA, my CPA should do that. Or how come I CPA never told me this or I have a bookkeeper, but they don't tell me any of this or what makes us different. What do you think makes us different than like a bookkeeper?

00;22;06;25 - 00;22;36;09

Unknown

Really good. And the the people that you've accumulated as part of this whole business. A really good CFO. May understand the bookkeeping, but if you're at ten feet when I call it the sort of ten foot level the entire time, you're never able to step up to the 1000 or 5000ft level. Right? Taking a step back from an all of it and understanding, okay, well, the debits and credits are done correctly or not done correctly or whatever it might be.

00;22;36;11 - 00;22;57;05

Unknown

You might need journal entries to make adjustments here or there. Well, what does that even mean? What what does it look like from a health of your business and understanding where you are, where you've been, and where you want to go. And if you're not, if you're just operating at sort of a very sort of micro level, you're never going to be able to step back from your business to understand, where do I want to go?

00;22;57;05 - 00;23;18;10

Unknown

What are my goals out of this business now? How do I get there? And really, a CFO provides that financial visibility and sets a plan for you, whatever your plan might be. So, yeah, definitely said, well, I like that. Okay. I made that up. We're going to call it.

00;23;18;12 - 00;23;35;24

Unknown

All right. So then when all the clients come in, you know, obviously explain to them what they need, what type of bookkeeper, what type of an accountant like you have, what you need in place. Now, let's talk about what the first 60 days look like. So we always lay that, you know, foundation for that and that financial foundation for them.

00;23;35;24 - 00;24;05;05

Unknown

So what does that walk me through, what the first 60 days with the client looks like for you? Usually, my first 60 days, we want to set 1 or 2 goals. We want to, make them sort of achievable. But really, it's about them understanding, what I'm trying to accomplish and me understanding their business and what they want to accomplish.

00;24;05;08 - 00;24;35;05

Unknown

And so my first 60 days is always, I want to dive into your business and understand exactly what it is that you're doing, what you're doing on a day to day basis, what you're doing from a business standpoint, and specifically what your goals are, whatever those goals might be. And then using, the financial information that we have or sometimes lack of financial information, we have to set some real goals within that first 60 days that we can accomplish that might be in one particular business.

00;24;35;08 - 00;25;03;00

Unknown

All right. Let's make sure that we're all caught up on end of year transaction so we can set a budget. And if we can't do that, let's just go through and set a budget anyway and figure out if this kind of, you know, forward looking statement is, is doable for you, right. And I always try and at least set up one KPI so that they have something that they're sort of in the back of their mind, you know, sort of monitoring.

00;25;03;02 - 00;25;22;10

Unknown

And that might be, you know, for my, Utah client, it might just be a look, when I get out jobs, I want to make sure that, as I do that job, at the end of the day, I'm making sure that I'm at least exceeding that 25% gross profit margin on an estimated basis for this job, right?

00;25;22;10 - 00;26;02;20

Unknown

Whatever that might be. Do the numbers and understand that. Don't just run through your, you know, your your deal sheet as you've sort of bid this project out, but do the numbers and make sure that it's profitable from your standpoint. And if it's not, why isn't it. And you know, I you know, there's a great example of I've got a client in North Carolina who came to us, he has, he has a small business where he owns a, eyelash, you know, retails, you know, center or whatever it is.

00;26;02;20 - 00;26;24;07

Unknown

Right? Like, it's women's eyelashes. You go in there, it's. I think it's a chain or a, a franchise that he bought. Right. And then he had a real estate portfolio as well. And so when they came to me as a client, I think he just said, look, I'm looking for some financial visibility. I'm buying out my real estate client, and I've got this lashes business that never really makes any money.

00;26;24;09 - 00;26;52;11

Unknown

Okay, great. Let's on our first 60 days, let's understand whatever that business is. Why does it make money? And let's understand what you're doing on your real estate portfolio. And in this particular case, I love this client because, he's very unassuming. He's very low key. And what no one realized about his business was that this eyelash business was a one off thing that he bought for pennies on the dollar.

00;26;52;11 - 00;27;11;21

Unknown

It doesn't make any money. It doesn't lose a whole lot of money. And he's not very interested in it. What he does have is a portfolio of single family home rentals. He has built this portfolio over 20 years with a partner. His partner died a couple years ago. He's buying out his partner's share of this in the estate.

00;27;11;23 - 00;27;44;28

Unknown

Very quickly as we dove into all of his numbers and I sort of got a real sort of picture of everything that he's that he's put together. He doesn't need my help, from the standpoint of, budgeting or sort of understanding his numbers. He understands all of that very much at a micro level. What he didn't understand, from a step back standpoint, was that he owns probably 18 to $20 million worth of real estate assets.

00;27;45;00 - 00;28;24;03

Unknown

He has about $2 million worth of debt, and he's buying out his partner, for about $5.5 million. And they have a partnership agreement with a predetermined, price for whatever it is that they're going to be buying it out. But he had so much untapped equity into his entire portfolio. And because all he does is focus on the day to day operations, I think his pay rate on all of this debt, including the the piece that he was buying out from his, from his partner was something like 18 to 20% right on the debt.

00;28;24;06 - 00;28;45;20

Unknown

Which means he's, you know, probably paying, especially after this buyout, somewhere, somewhere in the neighborhood of 60 or 70 grand a month in debt service payments. But he didn't understand that that was crazy like that, that sort of like debt load that he had, that he was paying for, was excessive and he'd never gone to a bank.

00;28;45;20 - 00;29;07;13

Unknown

He uses a local credit union bank. Who does some you know, small mortgages for him on, you know, pulling up 3 or 4 of these different assets. And he didn't realize that you've really grown to an institutional level. You could put this entire portfolio together, go out and finance it at 50%, walk away with a couple million dollars and refinance proceeds.

00;29;07;13 - 00;29;30;05

Unknown

Right. And save what I what I showed him as you can say, probably 30 grand a month in debt service payments. Just by by stepping up instead of going to Bob's Credit Union, we've been working with going to Wells Fargo or to Chase or somebody like that. He's going to have people lined up once he's able to put together a nice lender package that will want to be his new business partner.

00;29;30;05 - 00;29;50;09

Unknown

Right? Just not something he's ever been experience with. He started out buying single family homes, and over the course of 25 or 30 years, he now has over 200 of them with significant positive cash flow on his entire business. The largest business. It's just a one off thing. Like he doesn't, you know, care about it, doesn't manage it.

00;29;50;12 - 00;30;22;01

Unknown

And so our plan in the first 60 days was we need to focus on really putting together a professional looking lender package so that you can go out and shop this thing. And I'm going to help him do it. And then let's put your lashes business up for sale. You don't care about it at all. Anyway. Let's figure out, you know, as we dive into the numbers, how we can make some minor improvements to it and, and sell the thing off because it's such a minor part of his overall portfolio and he doesn't even care about it.

00;30;22;03 - 00;30;36;25

Unknown

But when he came to simple CFO, that was the that was the premier thing. Hey, I own this lashes business. It doesn't make any money. And I'm looking to get, you know, how do I make some improvements? And and then, by the way, I'm buying out a partner in my other real estate. This. Right. So,

00;30;36;27 - 00;30;59;15

Unknown

He's great. I love working with him. And I think, what I've been able to provide in that first 60 days with him is let's refocus your plan, like from a step back standpoint, like let's refocus your priorities in your plan. Because if you know, 90% of your net worth is tied up in a huge real estate portfolio, why don't we really focus on that?

00;30;59;18 - 00;31;16;28

Unknown

We will put some focus on your lashes business, but since you don't really care about it and it's not a priority, let's also look to just unload that thing as part of your, you know, overall plan this year. So, his plan when he came in is simple CFO completely different from the plan that we put together for him.

00;31;16;29 - 00;31;33;10

Unknown

And so that's usually the case. I always say that when you get a different story in the sales call, then you during the onboarding call and then the CFO, because it just depends on what questions you ask, what you bring out of them. And like we have a foundation, right? So when they come in 60 days, we get to know you.

00;31;33;10 - 00;31;51;21

Unknown

We figure out what's important to you. We implement profit. First, we give you a financial assessment, we roll it out and we tell you what that looks like. But in your case, I think it's a little different because, you know, as we say, we meet you where you are. So every client comes in with something different. And we've had clients that are like, I like the idea of profit.

00;31;51;21 - 00;32;13;29

Unknown

First I read the book. I'm just not ready for it right now. And there's other things that are more pressing. So you can't convince somebody to do something if something else comes first on their mind, especially in a different year, because their brains are my business, my business. And that's why we come in to assist them with financials, where so they can do the one thing they do best, which is what focus on their business.

00;32;13;29 - 00;32;32;01

Unknown

So like and and as part of that profit first plan on that 60 day plan. One of the things that that always sticks out, that is that is I think the most key. And there is the financial assessment. The onboarding call is a is a sales call and a get to know. You call the financial assessment, whether it's through the battle plan call or your first couple meetings.

00;32;32;04 - 00;32;54;27

Unknown

That dictates everything else then, right? How quickly can I put profit first? Well, if you're running a really, you know, you know, buttoned up and tight business, let's put profit first together immediately. If you're six months behind on on understanding where your numbers are and six months behind on doing account reconciliation, it doesn't make sense for me to set up a profit first until I at least understand where your cash flow is, right?

00;32;54;27 - 00;33;18;18

Unknown

Like I don't have a good sense of that. So, what start there from that financial assessment? Because we can do the profit first plan, but if you don't have the cash to support it, then it's just going to seem like we're running through, you know, random numbers and you're going to end up borrowing from this bucket or that bucket because you're trying to understand where stuff is so unless the last thing you want to do right is implement something and then you're like, oh no, it's short.

00;33;18;18 - 00;33;38;29

Unknown

Oh no. And that is a perfect example to of like, you know, I read the book and you can DIY, right? You can download spreadsheet, you can listen to David speak, you can do a lot of DIY. But you know, what would you say there is the most important thing, like why that's different of DIY than actually coming to us and getting that guidance.

00;33;39;02 - 00;34;00;10

Unknown

You know, my my, Virginia client, the guy that owns the, all the, single tenant retail. So what he owns is, is probably like 20 or 30, Walgreens and CVS that he's built and that owned for 20 years. He's the guy that tried with his bookkeeper, who's third party bookkeeper to implement the profit first plan.

00;34;00;10 - 00;34;18;25

Unknown

And they even sent that over to me when they onboarded. Right. Like, oh, we started this process. We've got a great profit. First plan. But what they lacked and because, you know, she was not familiar, they all they both read the book and they understood the diet. You know, they could do it themselves, but they didn't go through any financial assessment on the whole thing.

00;34;18;25 - 00;34;39;18

Unknown

Right. Like there was no sort of analysis of his business as a whole or where money was going. So it became a profit first plan that was just funding these sort of, repeatable bad behaviors. Okay. Great. Well, then that's it. It is a profit first plan. And sure, you've got the various buckets set up, but it is a good one, right.

00;34;39;18 - 00;35;08;05

Unknown

Like, you know, my assessment was, yes, this will work, but it's not necessarily a good plan. We need to go through an entire assessment of everything that's going on in your business and then reset this plan. And then, by the way, you know, their profit first plan is they sort of built it out. And people that are unfamiliar with it was a very complicated line by line plan of, of, you know, we need to allocate, you know, X dollars for this particular expense category and X dollars for this category.

00;35;08;05 - 00;35;29;01

Unknown

And, you know, I would say from a bucket standpoint that there were three different buckets. It's not a plan like that's that's barely even a budget at that point. Right. Like make it simple right. So that you can view it and see it. It's got to be simple in some respects. So it's taking the complicated nature of business and simplifying it so that you can understand it.

00;35;29;04 - 00;35;49;07

Unknown

And I always call it the elevator pitch. You should know what your elevator pitch is either from a simple CFO, from a, from a profit first allocation plan, or even a business plan. My, my, you know, this particular case, my my, my elevator pitch is I'm doing $10 million this year. That's my goal, okay? And I want to be on a net profit margin.

00;35;49;10 - 00;36;06;28

Unknown

Somewhere between 9 and 10%. Great. That's awesome. You know your numbers that that comes from iOS, though, right? And then you guys I know do iOS, but that's that was one of the things that always was was driven from us. Know your numbers. What numbers. Well know your numbers. Whatever those numbers are just know your numbers. So yeah.

00;36;06;29 - 00;36;29;28

Unknown

Because numbers don't lie. Yep. But we always say I don't. It's, when you come to us, it's it's it takes the theory out of it. Right? Like, it's not just theory. It's built into our tools. It's built into our process. Like, you can't not do it right when you come and have someone, you know, standing with you and financial advising you and helping you make those decisions.

00;36;30;01 - 00;36;50;27

Unknown

But in the book, you're like, I got this, so. Or someone else says they can implement it and it doesn't go as expected. So yeah, I mean, those are great, great, great examples. One last question for you. So the dashboard, we all know that we use the dashboard as it can be complex, right. Because it's made up for every different type of client at this point.

00;36;50;27 - 00;37;06;12

Unknown

So it's our job as a CFO to walk them through what's important to them. What sheets do they need, what's important. So tell me a couple of the sheets that you use that you love, that your clients love, that are most useful for you. The one that resonates most with clients is one of our newer sheets. It's the dashboard sheet.

00;37;06;12 - 00;37;34;19

Unknown

It's the one that shows all the, financial snapshot pictures, of their business. It's a real time update. I think I've been if I understand it correctly, it updates like three times a day with real numbers that are being driven from QuickBooks or whatever their accounting system is. Right. And it shows, really just those sort of visual pictures, that are great for founders and owners and businesses.

00;37;34;19 - 00;37;59;08

Unknown

Right? Like you can pull a QuickBooks PNL for people and run through the, you know, 90 line items. And most of the time it goes right over people's heads. And unless you're knee deep in the business and want to dive into those details, pulling a PNL or even a cash flow statement doesn't matter. Those sort of dashboards, which then take those numbers and put them into a picture to show you like, hey, by the way, this is what my overall revenue looks like.

00;37;59;08 - 00;38;23;04

Unknown

Here's what my cash position looks like. Those are great, right? And then immediately going to that over to the budget to actual I love using budget actual setting that up. What we normally do is set up a budget for somebody based on the historicals and it changes, you know, a variety of that stuff that happens as we sort of set up a monthly, budget for the year.

00;38;23;06 - 00;38;44;14

Unknown

When you put that into the budget to actuals, then it'll immediately show you like how far and what percentage are off in any given category that you've set up within your budget. Okay, guys, like payroll was right on line, but you spent, you know, 50% more on your licenses and dues. Let's dive into that. Why is that one higher this month and why did we miss that on the budget?

00;38;44;16 - 00;39;08;02

Unknown

Do we need to adjust the budget? My personal opinion is no, you never want to adjust the budget. You can do once in a mid-year adjustment. My personal opinion. But if you're changing your budget constantly, then it ceases to be a sort of measuring stick, if you will. And so when showing them those sort of, I would call the major categories that we've identified in the budget and then those sort of changes are great.

00;39;08;04 - 00;39;34;22

Unknown

And then the other sheet I always start with as part of our 60 day plan, as we go through, there's a stoplight page and then a goals page. Right. Like just setting up the goals. We talk about goals and KPIs. I usually start with the, some of those KPIs in the goals, and then there's a separate KPI worksheet in which you can then sort of, identify some of those KPIs in there that, that are important, that gets a bit more granular.

00;39;34;24 - 00;40;01;27

Unknown

But the, the, the goal worksheet and that sort of stoplight worksheet are the stuff that we identify, along the way that are, either risks, for achieving whatever it is that we want to achieve that year. You know, in the case of, my, let's say my contractor out in Utah, one of the things that we identified was his, you know, his workload, if you will.

00;40;01;27 - 00;40;20;24

Unknown

He was trying to dive into many different aspects of his business. And for them to be successful, his entire focus, or 80% of his focus, needs to be on driving revenue into his business, because he's the sales guy. He's the one getting the deals and bidding out these projects. That should be your focus. So let's make sure we revisit that at least once a month.

00;40;20;24 - 00;40;46;09

Unknown

Like, are you doing that? Are you taking a step back and and getting more involved in some of the accounting or employee management or whatever it might be? Okay. Is there somebody else there that can help do this? Or you can assign some of these tasks to you so that you can focus on what's important. And if you have those written down in some of those tabs, they help you, understand, you know, two months ago, we identified this.

00;40;46;09 - 00;41;08;08

Unknown

Are we still keeping, you know, on track with some of this stuff? Anyway, you know, those are some of my favorite tabs within those worksheets. Yeah, I love that, too, because it's. What's that book? It's not, it's not what you. Not about who? Not about what? It's about who. So it's not always like the entrepreneur. Business owner doesn't have to take it on every time.

00;41;08;08 - 00;41;24;22

Unknown

Like you don't have to do every task. You can find the person that's best to do it. So then you can focus on what you do best and we can help you get that done. And I think that's it. That's a great point because that is that is the entrepreneur mindset that every entrepreneur starts with. When they start their business.

00;41;24;22 - 00;41;48;03

Unknown

They are doing every task all the time and they're always involved with it. And eventually, if you're even moderately successful and you're growing your business, you can't do that. And so sometimes it's solving the problem with people, right? But then you get into the sort of trap that entrepreneurs get into, where they consistently throw people at problems to solve them for them.

00;41;48;06 - 00;42;14;27

Unknown

And then you run into or, you know, outside services and then you run into, I have no cash because I'm spending X, Y, and Z on this service or that service or these guys or that guy or whatever. It might be. Okay, great. Let's reevaluate that. Let's reevaluate what's important so that you can stay on track, but also understand that you don't need to spend this much money on all those outside services, whether they're educational, whether they're using subscriptions, whether they're people, third parties, whatever it is.

00;42;14;27 - 00;42;32;17

Unknown

So yeah, and everything new, I mean, everything's a price. Like we don't want to dwindle down the owners pay because what's the one? I think there's a book too, and I can't think of the name, but, David talks about it a lot to that. When you're, when you're an owner, what are the tasks you should be spending money on?

00;42;32;17 - 00;42;58;07

Unknown

Are you are you spending your time on 15 to $20 an hour task, you know, 50 to 150? You shouldn't be doing anything that's within that range. As an owner, you should be doing anything that's like $300 an hour trust task. You shouldn't be doing all the admin. Someone else can do that. And also like you don't just hire someone different for every problem because maybe there's the same person, or the same subscription or the same whatever.

00;42;58;07 - 00;43;16;20

Unknown

That can actually do these multiple things. And they're sitting around twiddling their thumbs waiting for something else. You build throughout time all these different services and not realize that you have five of them. And one of us, one of those people could do all of them, and it would be 10% more to that one person. And you can eliminate all the other ones, and that happens all the time.

00;43;16;20 - 00;43;34;12

Unknown

So yeah. And then and it's and it's those details. Right. As part of the, you know, financial assessment part in that first 60 days that I think are eye opening for people. So because they just don't do that, you know, get to the end of the year and it's time to plan for the next year. And you know, I don't really want to dive into all the details.

00;43;34;12 - 00;43;56;19

Unknown

It's, you know, mundane. Right. So that's why we're there. Yeah. That's why we're there. All right. Well, we got a lot of cool. I'm glad I, you know. Yeah, I'm glad we got to do this. So. Me too. Thank you for being here. I mean, the the examples, the way people come into us, the tools that we have, I mean, I think we've dug into everything that we can possibly do.

00;43;56;19 - 00;44;21;15

Unknown

And we know from your clients like how different they are and how they come in and how you been able to change their lives and transform their business, which is amazing. Thank you for those stories. Thank you for being here. It's been amazing. This is exactly what we do every single day, every single client. So if you're listening now, thinking like, oh my gosh, that sounds like me, or that's how I feel, or, you know, I'm not passionate about another business that I purchase too.

00;44;21;15 - 00;44;38;13

Unknown

Or we do get this a lot too. I have a partner and I'm buying my partner out or something's happening with the partnership. It seems to have major changes, right? The life, lifestyle, life changes for that. So yeah, so if that's the way that, you know, if you're listening and you feel that way too, like give us a call.

00;44;38;13 - 00;44;57;23

Unknown

Head over to sample cfo.com book or discovery call. Get the clarity that you deserve. Get someone like Erin on your side that can give you that financial guidance and really help you through that. Because yeah, that's what we're here for. That's why we're here to do so. Thank you. Erin, you have anything to talk to? See you all in the next episode.

00;44;57;26 - 00;45;15;09

Unknown

Thank you. Thanks for listening to the simple CFO case Files on the Profit First for Real Estate Investors podcast. If you found this helpful, make sure you're subscribed so you don't miss our guest interviews featuring other real estate investors and our profit first chats with David Richter. If you're ready to bring clarity and structure to the finances in your business, visit profitrei.com/ to apply for a free financial discovery, call with our team.