00;00;06;14 - 00;00;30;24

Unknown

Welcome to the Profit First for Real Estate Investing podcast. Every week we bring you top investors and experts sharing how they create clarity, cash flow and consistent profit. This episode is brought to you by simple CFO. Profit first. Profit always. Let's go. Right behind sales is profit. Because if you're going to create sales, to me it's almost like sales and profit.

00;00;30;27 - 00;00;52;17

Unknown

It's like one is sales and one A is profit. Because if you're going to build a successful business, a successful business doesn't just create a ton of revenue. Then the profit step is the next step to build. Hey everyone, it's Cristina Gutierrez and David Richter, simple CFO. We are back with another episode for you guys to enjoy. Hi, David.

00;00;52;19 - 00;01;15;13

Unknown

It's nice meeting with you today. It's nice being here. And nice to see you on this. We're recording this on a Monday, so I bright Sunday Monday afternoon. Thanks for being. Yeah. And we're live. So we get to see each other. So we do. If you if you ever tune in and you see it live and you actually watch it when we share screens and when we talk through a lot of things, it makes a lot of sense when you see what's going on.

00;01;15;13 - 00;01;32;22

Unknown

And today we are going to share a screen, but we're going to talk through it enough. And it's pretty basic that we really want to get into what businesses really need and what you what you get out of your business, how you give out of your business, why you start it. Like there's so many different things that we talk about with the business owner.

00;01;32;22 - 00;01;51;14

Unknown

And sometimes it's like, I'm really good at buying houses and selling them. I'm really good at fixing houses. I think I'll start a business, you know? So it becomes a it becomes a business. If you see me, I'm quote on becoming a business because you can run yourself crazy doing it. So sometimes there's, there's things that you need.

00;01;51;16 - 00;02;16;16

Unknown

There's and what we're going to talk about today is the business hierarchy of needs. And I think it was Mike that yes, that wrote the book Fix this next. That's a part of this system. So there you go. That's so David is great at explaining it and talking through it, because being an entrepreneur himself and knowing that he had to take some of the hard ways to probably fix a lot of things that didn't realize that it might have been broken.

00;02;16;16 - 00;02;38;13

Unknown

So he's going to give you a little bit of insight and talk through some of the things that he went through, and why it's so important for you to look at it in your business as well. So, David, take it away. So a lot of business owners, they either hyper focus on the bottom level or they don't focus on it at all, depending on the stage of their business.

00;02;38;13 - 00;02;59;19

Unknown

And you'll see, once I actually share the screen, I'll share my screen and show you the business hierarchy of needs. But if before I go into the actual business one in Maslow's Hierarchy of needs, which is on, you know, the personal side, like what do you need? What are your base needs as a human being? And you go up and you know you're going to take care of these things.

00;02;59;19 - 00;03;12;27

Unknown

You got to have food, you got to have shelter. You know, you got to make sure that you're being taken care of. And then it goes up from there. It's the same in a business like you need air, like you need blood. You need, you know, like you need the life of the business. And that's what we're going to talk about.

00;03;12;27 - 00;03;46;04

Unknown

Because sometimes people take these things out of order and it really kills their business. If you love the word scale, that's great, but it's only great if you do it in this order, you know? So there's like some things that I really like about this pyramid that really shows that this is the proper steps in order to get you the business that you really want to have lots of calls with lots of owners that have either skipped a step or they reach out to us and they're like, I haven't done a deal yet, but I love this stuff that you're talking about, like profit first and all this financial stuff.

00;03;46;04 - 00;04;02;09

Unknown

I'm like, that's great, but you don't have any deals. Like, we got to talk about this once you actually create some cash in your business. So needless to say, once I share my screen, think you'll know what the number one thing is going to be that I'm going to tell you. There it is. Let's see. So here it is.

00;04;02;13 - 00;04;23;27

Unknown

If you can see it, it's a picture of a pyramid. The business hierarchy of needs. The very bottom rung of that pyramid is sales. This is the base. This is the foundation. You have to create cash. I really like this image that I found because it gives like what is the purpose of each phase as well? Well the first thing you have to have is sales.

00;04;24;03 - 00;04;45;19

Unknown

You have to have money to manage in order to manage it, which is it sounds funny, but there's a double in there, even like, because even if you have money, you might not be managing it from there. So that's why when I say if you need to have money in order to manage number one, you have to create sales.

00;04;45;19 - 00;05;09;26

Unknown

That's if you're a business owner. If you've been in the business world a long time, you know that that is the number one rule. Like we have to be generating revenue. We have to be creating whatever it might be, a going out, meeting sellers, if it's taking phone calls from buyers, if it's signing a contract, if it's getting the agreement sold, like whatever it might be that you're doing, if it's rentals, it's putting someone in that property and it's getting those deposits.

00;05;09;26 - 00;05;32;06

Unknown

It's getting someone in the place, it's getting it rented. Your website doesn't matter. You know, like up front. It's like all these things your your Ein and all that. Yes, it is very important. But what you need first. Exactly. But what you need first is to create an actual business. And a business is not just your LLC or your incorporation documents.

00;05;32;06 - 00;05;55;26

Unknown

It's not all those things, even though they're very important. What a business is, is you are bringing value to someone and they are paying you for that value. That is what a real business is. A business is something that solves a problem and you're getting paid to solve that problem. And that's why you have to create cash, because for you, the business hierarchy of needs, needs cash.

00;05;56;03 - 00;06;17;12

Unknown

You also need cash. As a business owner, you need to be able to see it coming in. You also need to be able to manage that. That's why in this pyramid, if you're just listening to my voice, the second run on this pyramid or the second step up, you can I pause you on the sales one? I was going to say yes before I give it away for the people that can't see it.

00;06;17;14 - 00;06;34;05

Unknown

All right. So I just want to add something because a lot of people say I have a small business loan, I don't need some or someone I inherited money, someone gave me money, or I was born with the silver spoon in my mouth. And I have everything I need to start a business because I know what to do and that's great.

00;06;34;05 - 00;06;50;23

Unknown

Don't get me wrong, that is great. And the reason I say that is because I have worked with clients that come in and they have a small business loan and they're ready to start their business, but this is why they come to a CFO or financial partner, because you need a pro forma. You need a plan. You need back to what David was saying.

00;06;50;23 - 00;07;07;28

Unknown

You need a plan to generate cash and generate revenue from that business. You don't just take a loan and say, okay, I got a loan. Now I can go do whatever I want with it and spend. It's been it's been it because you will quickly find yourself spending into a dark hole or maybe creating some type of financial fraud.

00;07;07;29 - 00;07;26;16

Unknown

But there's, there's you can get cash and you can have cash in your hand as much as you want. Someone can give you $1 million, but you've got to have a plan with what to do with that million dollars and how to generate and create cash in revenue in your business before you can even start to build your business.

00;07;26;16 - 00;07;46;22

Unknown

So I will say that. Yeah. Some people come to us because they had a W-2 job, and then they've had a lot of savings, but they poured a lot into their own business. And then it's like, okay, great, but this has to stop. At some point. We have to create a business that can stand on its own, and we can't just keep covering the sins of, okay, okay, well, let me just throw some more money at this problem.

00;07;46;27 - 00;08;05;20

Unknown

So I know that was a great point. Just because you have cash does not mean that it was generated from sales. So we want you to create sales first. That's why it's the bottom of this pyramid. It's the foundation. But from there, if your business is creating sales and you actually have revenue, we need a bottom line. We need profit.

00;08;05;20 - 00;08;38;19

Unknown

That is the next step. Here's where most people break this system. This is why most businesses break once they actually start creating revenue. Once you get off the ground, usually they go down pretty quickly. If they skip the profits step, there's a third step. The third, you know, step in this pyramid, the third one up, the one that's right in the middle is called order, which is the creation of efficiency, which is usually people, processes, systems, all the stuff like that where you're making the business more efficient.

00;08;38;21 - 00;09;03;20

Unknown

But efficiency has a cost, okay. There's overhead, there's software subscriptions. There's all these things that go into it. Marketing costs keep going up and up and up, because we have to do more deals in order to sustain this business. That's why the second level is profit right behind sales is profit, because if you're going to create sales, to me it's almost like sales and profit.

00;09;03;22 - 00;09;31;23

Unknown

It's like one is sales and one A is profit. Because if you're going to build a successful business, a successful business doesn't just create a ton of revenue, especially when we're talking about the business that you, as a listener of this podcast are going to create. Unless you are one of the unicorns that are going to create $1 billion business, like within a year or whatnot, and you get all this money from outside and you don't need revenue like that or whatever, which doesn't describe anyone listening to this podcast.

00;09;31;23 - 00;09;54;17

Unknown

I or most people, I should say like 99.99%, including myself. Then the profit step is the next step to build. What does that mean? That means that if you create cash, you need a system for your cash. When a dollar hit your bank account, where does it go? That's why I'm such a profit first fan. Even if you don't have great books, I want you to manage your cash.

00;09;54;19 - 00;10;18;12

Unknown

I believe if there was like a financial hierarchy of needs. The first level is clarity. Like clarity in your cash and clarity in your books. But to me, cash clarity is even more important just because you as an entrepreneur, because of systems like Profit First that have made it super simple. You can even do this without a financial background, without knowing QuickBooks, without knowing anything, you need bank accounts and you need the profit first book.

00;10;18;13 - 00;10;38;11

Unknown

Like if you do that, you can at least give yourself a chance at actually having cash profit in your bank account. So you make a sale. Oh, yeah. Wow. Excuse me. Almost sneezed, coughed all at the same time and they got nothing out. So here we go. First you make the sale. Then the next step is you are implementing profit first.

00;10;38;11 - 00;11;09;16

Unknown

So when that sale comes through, you know where every dollar is going. So that's why the next level is profit. Because another great person that I know at a mastermind said one time, do not grow from your revenue, grow from your reserves. And I love that so many people go and make a sale and they invest their revenue into order instead of they make a sale, they manage their money efficiently, have a profit, set aside, and now we can grow from the reserve that we've set aside the cash profit.

00;11;09;20 - 00;11;25;15

Unknown

That's what I want for you. So that second level is profit if you need help. That's why you can reach out to us at simple com. I'm just going to throw that out there. This is our podcast. So I'm going to throw it out there. If you need help with the profit step. This is where we come into play.

00;11;25;18 - 00;11;43;16

Unknown

Because sometimes people will reach out and like, oh, can you help me get more leads or more deals? I'm like, well, yes and no. Like I'm not the one that's going to teach you marketing, but I can teach you to keep more cash in order to put more to the fuel of the fire for marketing. So that's why if you need someone that's going to help you with the cash side, that's what we do.

00;11;43;16 - 00;12;02;26

Unknown

So I'm just going to throw that in there. On this hierarchy of needs. We help cover the profit step because the next step is order. It's creating the efficiency in the business. You have enough revenue now that you have enough profit to set aside. But now what do I do with that profit. Well, there's there's a couple of great books that I'm going to recommend right here.

00;12;03;03 - 00;12;22;29

Unknown

One of them we incorporate inside of our business, which is the book traction from Gino Wickman, which follows the EOS system. There's other ones out there to, like rise from Gary Harper and the Sharper Business Solutions. There's other ones that are built for the the smaller entrepreneur under $10 million like and EOS is one of those and that's what we use.

00;12;22;29 - 00;12;51;12

Unknown

So that's creating order. What is EOS and all that system basically how do you run meetings? How do you hire people? What are your core values. So you find the right people that have this, the shared vision and the same shared values. That's what order is and that's how it's created. There is another great book out there as well as an entrepreneur, you might have heard of it, Dan Martel buy back your time because if you have the profit and it's set aside, that's one of the things you'll want to reinvest your money into is buying back your time.

00;12;51;15 - 00;13;12;10

Unknown

That's where order comes into play. So that's where we probably won't talk much on this podcast today. But there's two other levels in this hierarchy of needs. If you can't see it, there's this. The second to top is impact. Basically now we have the money, we have the funds. Maybe you set aside a giving account and you're starting to regularly give to things and you're actually transforming people's lives.

00;13;12;10 - 00;13;33;19

Unknown

Or maybe you have a bonus account for your employees and you're in your changing the people on your staff and your team that's working with you, and you're helping change their lives as well. Go to Ward. We have a Wednesday meeting from the order. From the order process here or the order step in this business hierarchy of needs, where we have all of our company meet and our bookkeeping team is on that call.

00;13;33;19 - 00;13;49;12

Unknown

And how many people, Christina have said, like, you know, like what simple CFO has been able to help them with and transform their life in some way because they either helped them with a doctor's appointment or it helped them get the treatment that they needed, or a car or something that they never thought they'd be able to have.

00;13;49;16 - 00;14;07;15

Unknown

And that's why we do our business, and that's why a lot of the business owners, if you're listening to this, if you're wanting to keep profit, you're probably wanting to take care of someone, whether it's yourself, your family, if it's those employees, those people that work with you, if it's the contractors, if it's your partner, if it's whoever it is, that's where the impact comes after order.

00;14;07;16 - 00;14;23;24

Unknown

Like if we can create order, we can really create an impact, because now we can give efficiently to the things that we really care about as well. It's not just about keeping the lights on anymore. It's now saying, how can I help and bless other people as well too. Then from there is legacy is how do I make this permanent?

00;14;23;25 - 00;14;48;16

Unknown

How do I make sure that what I actually have created is is still here long after I'm gone and we won't talk about the top two, but that's really what we're trying to get to. But I will say, if you're a small business owner, you will have a repeating cycle of the bottom three sales profit order. If you want to scale, that means that the profit percentage you have in your business might shrink a little.

00;14;48;19 - 00;15;15;16

Unknown

I don't want it to go away, but if you're going to reinvest in the business, we're taking from profit now and reinvesting it in order. But when we do that, Christina, what do we need then? We need to go and get more sales. It's like it's that repeating cycle. So that's why I love showing people this, because it's a very clear picture of if you want to scale, you're going to be in this cycle, this bottom three cycle until you decide, hey, we're done scaling.

00;15;15;16 - 00;15;37;07

Unknown

And I want to now either have a lifestyle business, maybe sell your business and exit, which Christina, I heard that you did or podcast recently with someone on that on exit planning. So if if people want to listen to that as well too. But I know this was a lot of me talking, but I want you if you're listening to this, to know wherever you are now, what's broken?

00;15;37;10 - 00;15;58;03

Unknown

Is it the sales? You don't have enough revenue coming in? First of all, is it really that issue or do you have revenue coming in? But number two is really broken profit. Like you don't have a system to really catch that money because sometimes people think sales problem. Right. Exactly. Some people think it's a sales problem, but it's really a profit problem.

00;15;58;05 - 00;16;17;04

Unknown

Or do you have sales and profit but you're just not sure where to put the money now to be most efficient in the business? That's where we can help you as well to to know like okay. Who do you need to talk to? Who can you reach out to on the order step. But that's next is making sure you as an entrepreneur know what's the problem that I'm trying to fix?

00;16;17;10 - 00;16;35;28

Unknown

Where am I at this and what are the resources that we have available here? Christine, do you have anything? I know I went through a lot there, but I want to make sure if you have any other comments on the business hierarchy of needs. Yeah. I mean, I would just say as a, as a CFO, you know, we see people come in and it's not a bad thing to go sales, profit order, sales profit order.

00;16;35;28 - 00;16;56;01

Unknown

Because as you go, as you grow, you go back to sales and you profit order and then you grow some more. The problem is, is most owners get stuck between profit and order because nobody's translating their numbers. So nobody's translating the numbers to actually get decisions. So you're stuck in this and it becomes a cycle, as you mentioned.

00;16;56;02 - 00;17;25;28

Unknown

But it's not a good cycle. You're just how now what do I do? Oh wait, I made an extra dollar. Now what do I do? Okay, now I made profit. Wait, I didn't make profit this time. So nobody's actually translating those numbers for you and turning it into decisions. Which is why you need someone on your team that actually takes the sales profit order and actually truly grows and gives you that financial visibility to know your numbers well enough to make decisions instead of just throwing things out, making guesses, throwing it against the wall, figuring out what's fixed.

00;17;26;02 - 00;17;46;12

Unknown

It's it can be a very tough road if someone's not there walking next to you. So that's the whole reason that we exist. And I'm I get fired up because I did do the podcast earlier, and I get excited at how intelligent, the CFOs that we work with are, like how much they understand someone and dig into a business and how much it means to them.

00;17;46;12 - 00;18;03;24

Unknown

And just getting in your getting in your mind, what's your goal? What are you trying to do? Trying to turn their business and grow it smartly. And that's giving you that impact. I know impact as part of here, but giving you that impact in your business and the rest of the world. So it's just really cool to have someone that can help you walk through that.

00;18;03;24 - 00;18;25;19

Unknown

And you're not you're not alone. If business ownership can be very lonely. Yeah. It's why that's why a lot of the billionaires in this world end up, I hate to say it, but end up single or by themselves because they put so much into their business and drive themselves crazy with the hustle that they can't really get away from it and get to that give instead of just getting.

00;18;25;24 - 00;18;47;06

Unknown

Right. Yeah, exactly. And that's where we want to help you if we can. We'd love to, because especially if you don't have that profit step already built into your business, that's like a foundational piece of your business. But then if you want to grow and grow profitably, that's really where having a game plan and having someone hold you accountable, but also be there alongside you to walk through that journey with you as well.

00;18;47;06 - 00;19;06;29

Unknown

So love that, Christina. And that's where if you want to reach out to simple cfo.com, or if you want to, I've got my little widget here, the little QR code if you're on YouTube, if you want to see the actual thing that we shared today and you're only listening to the podcast, you can go to our YouTube channel, which is the profit first for Real Estate Investing YouTube channel as well.

00;19;07;03 - 00;19;23;28

Unknown

So you can see the little QR code, you can see the business hierarchy of needs, all that stuff that we're sharing here today. We'd love to have you go over there. If you are just listening on the podcast, if you are. Thank you so much for listening. But as well, don't get stuck. Don't get stuck going from sales to order and saying, why can't I grow this thing?

00;19;23;28 - 00;19;47;03

Unknown

Or why can't I keep any of the cash? Or where did all my cash go? That's where you need someone to help you on that journey. If we can help you, we'd love to. Simple.com. Christina, thank you for being here and for helping us and helping a lot of the people in our hemisphere as well too. And with the CFO and everyone helping them really understand the profit, the order, and really helping them get to where they need to be as well.

00;19;47;05 - 00;19;58;28

Unknown

That's it for today's show. Be sure to subscribe, review and share this episode. If you're serious about financial systems and keeping more of your profit. Visit simplecfo.com to take your free discovery call today.