00;00;05;19 - 00;00;25;29

Unknown

You're listening to the Profit First for Real Estate Investors podcast. This show is all about helping real estate investors and entrepreneurs bring clarity and structure to the financial side of their business. In these sole episodes, we focus on practical financial strategies that real estate investors and business owners can actually implement, whether it's profit, cash flow forecasting or mindset.

00;00;26;00 - 00;00;49;02

Unknown

The goal is simple to help you run your business with more confidence and less financial stress. Enjoy the episode. You can't forecast cash flow if all you're doing is guessing. So lots of people, when they think that they're forecasting is just like, oh, I think I'm going to be able to make this much, or I think the deals are going to close and this is how much revenue we're going to come in in the next few months.

00;00;49;04 - 00;01;10;18

Unknown

And honestly, some people don't even do that. And when I say some, it's probably most people where a lot of people, they go out and they're doing lots of deals and they're just keep running and going. Maybe this resonates with you where maybe you're doing a lot of deals, or maybe you're getting the deals up and running, but you don't know where the money's going and you don't know how much is coming in the door.

00;01;10;21 - 00;01;34;06

Unknown

Forecasting. Sounds like a scary word. It does. It's like, who does that? Financial people. Right? Accountants? Maybe CFOs, maybe the people out there. But for a small business, I just need to make sure I'm making more than I'm spending. Right. And that my bank account just continues to grow. I want you to have a plan. This is where so many people have built their business on the Hope and pray plan.

00;01;34;06 - 00;01;49;26

Unknown

I hope I make enough. I pray there's some left over. I don't want you to build it around that. I want you to know where the money's coming from or where it's also going. And I want you to be able to plan out not just this month and where the dollars are today, but where are your future dollars going as well, too?

00;01;49;29 - 00;02;11;23

Unknown

That way it's more predictable. One of the reasons you became an entrepreneur was for time and money freedom. And a lot of us don't have time and money freedom as entrepreneurs because we are literally grinding it out all the time. And we don't ever take a break. We don't stop, we don't slow down, we don't build profitability. We don't forecast profit into our business because we don't forecast.

00;02;12;00 - 00;02;38;10

Unknown

We don't think and it's like, and I get it, that forecast word has even a negative connotation in the fact of like, I'm a business owner. Isn't that something that just a financial person does? And I'm here to tell you that forecasting is one of those things that if you are a business owner and you're not doing it, then you're probably waking up in cold sweats saying, what the heck is happening to my business because you're just worried about today?

00;02;38;17 - 00;03;00;29

Unknown

Or maybe what just happened versus planning for the long term because sometimes forecasting doesn't just have to be this next quarter. It could be this next year. How much do we want to make? And are the quarters aligning up with the next year's goal? And like with the annual goal, this is where knowing where every dollar is going is so important.

00;03;01;02 - 00;03;21;06

Unknown

Profit first and knowing those dollars and being able to know, okay, a deal closes. How much do I put where? If you aren't familiar with profit, first you set up the core fundamental bank accounts like an envelope system to tell every dollar where to go. That way you can understand a dollar comes in and I'm going to portion out all these dollars into different bank accounts.

00;03;21;06 - 00;03;43;16

Unknown

So that way I know exactly where my dollars are sitting right now. But here's a trick that most people don't understand or don't even know. If you build a system like Profit first and you have excess cash, a more cash than what you need, you have somewhat that magic word reserves. You actually have a reserve for your business and you give yourself some breathing room.

00;03;43;16 - 00;04;09;01

Unknown

Let's just say you have the typical reserve amount that most people out there would say is a healthy reserve amount. At least three months cash on hand in your business to make sure that if something were to happen, you could at least whether one quarter. If you have that, then you can also forecast, okay, I know I have three months, and even if those deals didn't close, what could we do with the money that's in our accounts?

00;04;09;01 - 00;04;24;06

Unknown

Would we would we want to keep the money there in the account and not use it? Would we want to use money for more marketing and get more leads in the door to potentially close more deals before the end of the quarter, because maybe deals are getting pushed back. Maybe you don't know when things are going to close.

00;04;24;06 - 00;04;41;14

Unknown

Maybe you're saying, I don't really know if I'm going to get the deal for that. I want to, and maybe you want to spend more money in marketing, but really, if you have three months of reserves, you're giving yourself options to be able to forecast, to be able to say, where are we going with this? And what does it is do I need to make.

00;04;41;16 - 00;05;00;09

Unknown

Now I would also say, if you're like, well, okay, I have no reserves, what the heck do I do? And why would I even need to think about forecasting? That's where if you don't have reserves in place and you can't give yourself a buffer and a little bit of breathing room, I would then use every single dollar that's coming in.

00;05;00;09 - 00;05;33;23

Unknown

You have a system. Let's just say you set a profit first. Forecasting for you is more like how do I get as much money into reserves as possible right now? Like how do I make sure I build that buffer? Do you just see? Forecasting to me is just all about goal management. It's knowing how much am I going to be able to bring in cash, whether it's this next quarter or whether it's this next deal and being able to say, what am I going to do with that cash now, if you are a business owner and you're like, I have no reserves I'd be doing right now is forecasting this next deal that closes and

00;05;33;23 - 00;05;51;05

Unknown

saying, how much am I going to put into reserves, and how much is going to go towards the business and maybe towards taxes or paying yourself. But I want you to have a plan. Forecasting is that goal management to know maybe you don't have reserves right now. So the big goal right now is I need the priority to be reserves.

00;05;51;05 - 00;06;12;02

Unknown

So that way you have the breathing space and the head space to be able to think about other things rather than just sucking air and saying like, what's going on in my business? Like, I don't know where the money's going or where it's coming from. Forecasting also can be, if you have that buffer, it's knowing what do I want to put that buffer towards?

00;06;12;02 - 00;06;28;08

Unknown

Do I want to build a bigger buffer. And if these deals close here much here's how much I want I don't want three months I want six months. I reserves by the end of this next quarter. Or maybe your whole goal for the year is like six months of reserve. And it's like, how much do we have to put into reserves this next quarter?

00;06;28;14 - 00;07;02;06

Unknown

Or maybe it's deal four. But here's what I don't want. I don't want you to forecast and say, well, I need to hit a certain amount of deals this year because we set this goal. So I'm going to spend all my money to get the deal, fall in the door. Then you're spending money that either you don't have or for deal flow that you're now having to make deals happen, which if you ever have to do something in your business and you say, well, I have to get ten deals this month, or I have to get ten deals this next quarter to close, and you're like, that's just because the goal is set.

00;07;02;12 - 00;07;23;24

Unknown

Well, then you're going to potentially blow up your entire business by forecasting from the wrong perspective. You're forecasting now more like the startup entrepreneur who isn't thinking long term like a true business owner who's thinking not just about this next quarter, but about the next year and about maybe the next few years, because it's like, do I just need deals in the door?

00;07;24;01 - 00;07;42;09

Unknown

Or do I need the right amount of deals with the right profit? And that might mean less deals, and that might mean forecasting less people on payroll. Like maybe you're both you've ballooned payroll and it's gotten too big. And I go, okay, well we're not doing as many deal for am I going to need to make some cut somewhere?

00;07;42;11 - 00;08;01;24

Unknown

These aren't easy conversations to have. These aren't easy conversations. Maybe to listen to, but at the same time, you're not alone in this. Lots of people feel this way. They feel like maybe forecasting is too difficult, but honestly, forecasting is nothing more than goal management. Knowing what do I really want? What do I have to work with? With what I currently have?

00;08;01;24 - 00;08;21;18

Unknown

Do I have some reserves which gives me some buffer? Do I not have reserves? So that might be my first thing that I'm going to forecast as a call. And like and I'm going to work towards actively that. The next thing is if you want to get really fancy but not even fancy, but if you want to know at the drop of a hat what to do in your business and how to make a decision, that's where a dashboard would come into play.

00;08;21;20 - 00;08;39;29

Unknown

Being able to create a dashboard that tells you, here's what all my numbers are. Here's what the decisions I need to make from those numbers. Then you pair that with someone like a CFO who's more of a financial leader. Even if you're a small business owner, it might be a fractional CFO that helps you. It's like someone to help you understand what do these numbers mean?

00;08;40;03 - 00;08;59;05

Unknown

How can we really forecast and understand what pivots we need to make? Or if you want to do it, you could start with the profit first methodology. Start to implement knowing where every dollar is going, and then from there being able to say, how much do I want in reserves, and how are we going to actively forecast that to be able to say, how much do I really want this next quarter?

00;08;59;05 - 00;09;18;14

Unknown

How many deals does that mean? How many sales? How much does that mean in actual cash actually sent to our bank account? As a business? These are the types of questions to ask yourself, because I don't want to make forecasts in too complicated for you, but at the same time, you are probably not the best at the financial management.

00;09;18;14 - 00;09;38;14

Unknown

That's why you have a bookkeeper or accountant or a CFO in place, making sure that those people are feeding you the right number so you can make the decision, as the business owner, of which way to take your business or where you need to put the marketing or what person to hire next. You, as the owner, need to be fed a constant stream of the relevant data.

00;09;38;17 - 00;09;56;04

Unknown

So that way you can accurately forecast where you want to go as a business owner and the numbers are backing you up if you need that help. That's where a CFO could come into play, but then also a dashboard. And if you need to dive deeper and you need those numbers and you need to really be tracking every single dollar, where it's coming from, where it's going to.

00;09;56;09 - 00;10;12;29

Unknown

So that way you can not just accurately forecast, but then you can build a business you want to and then wake up and say, hey, I've built a business that I love, that I know that I'm waking up, I know where every dollar is going, but at the end of the day, I know also as well to where this money can take me as a business owner.

00;10;13;04 - 00;10;28;23

Unknown

And I'm paying myself consistently, and I have money for the taxes and I have money. Maybe you're forecasting the taxes a year out because you have a terrorist account set up, and, you know, like no matter what the tax bill is, I'm saving for it throughout the year, and I'll be able to pay that tax bill at the end of the year.

00;10;28;23 - 00;10;48;26

Unknown

And knowing exactly and having that confidence really forecasting the dashboard, the numbers, it all comes down to how confident are you in your numbers? Do you know where those dollars are going, and are you accurately able to predict and forecast and if you're not, start with profit first. Start with somewhere where you can implement to be able to say, where's my cash?

00;10;48;26 - 00;11;15;06

Unknown

What's coming in, what's going out, how much reserves do I want to build up right now? Do I need to get out of my own rat race, out of my own way first? Maybe that's the big thing. Stop spending more than what you're making, but making sure you have that accurate data you can forecast. You can also start at a place like the profit first methodology, but then you could take it a step further and say, what is every number that I should be tracking where you could get a dashboard, someone that actually implements that.

00;11;15;06 - 00;11;36;03

Unknown

Like us at simple CFO, we'd love to help you, but I want you to be successful and success plans out there. Success. They don't become successful by accident. If you don't have a dashboard. If you don't aren't able to forecast, you will not stumble your way into success. You need a plan. You need a system that is repeatable.

00;11;36;03 - 00;12;00;08

Unknown

So that way success is repeatable and not just something that you're constantly searching for and never finding. Thanks for spending time with me today. If this episode gave you clarity or a new perspective, be sure to like, subscribe, and comment below if you're ready to apply what we talked about today with real guidance and accountability, visit Profit Recom to schedule a free discovery, call with us to create your path to financial clarity and freedom.