00;00;05;21 - 00;00;26;01

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;02 - 00;00;45;11

Unknown

The goal is simple to help you run your business with more confidence and less financial stress. Enjoy the episode. The numbers will tell you what to scale if you'll actually listen to them. Let's just be honest, most people hate tracking numbers. They hate the word numbers. They hate the finances. It's like, why are we even? Why am I on this video right now?

00;00;45;13 - 00;01;08;04

Unknown

I can guarantee it's because the finances aren't getting you what you want. Because number one, maybe you don't have clarity. Maybe you don't even have the numbers in front of you to make a decision, to be able to say, what do I need to do in order to scale to where I want to go? This is where being very, very clear of these numbers that are my business, the business numbers tell the story of your business just like a storybook.

00;01;08;04 - 00;01;25;15

Unknown

It's like, are the numbers simple? And I can have these numbers to be able to make decisions. Is this like a very complicated, like war and peace? Or is this literally a blank notebook? Because we're not even tracking anything. There's so many business owners that I've talked to where I'm like, what are you doing to track these numbers right now?

00;01;25;17 - 00;01;52;16

Unknown

Back of a napkin, you know, spreadsheet, maybe like QuickBooks, if I'm lucky. You know, this is where if you're not even tracking anything, that's the first place to start. We have to have numbers, and we have to track them in order to get the actual benefit of what the numbers can provide for us. To me. If you're going to get deal flow in and you're going to close sales, you have to have a piece of keeping the money, because keeping the money is what provides financial freedom to you.

00;01;52;16 - 00;02;07;24

Unknown

That's what you're really searching for. It's not the amount of deals or the amount of sales that you do. It's what you keep from what you get in the door. But a lot of times people are not tracking numbers or don't know where things are going. They don't know their returns on marketing or their ad spend or like all the things.

00;02;07;26 - 00;02;24;12

Unknown

This is where I want to give you some clear cut things to be able to track, to make sure you're making decisions. That catapults me to what you really want from the business. At the end of the day, you want to pay yourself. You want money in reserves. You want to be able to have that money in the account for whatever it is that you want.

00;02;24;15 - 00;02;41;21

Unknown

How do we do this? Number one, I would say if you're an entrepreneur and you have not started anywhere, you don't have books, you don't have numbers. Or maybe you do and you don't understand them. Do you understand your cash? Do you understand how cash flows in? There's three numbers that I would track. First, what you make, what you spend and what you keep.

00;02;41;23 - 00;02;58;13

Unknown

Those would be the first financial KPIs or key performance indicators. The numbers to look out for how much is really coming out, how much is going out of my business and where is it going to, what am I keeping that I get to put in my pocket? Or that our actual business reserves or tax reserves or whatever it might be?

00;02;58;17 - 00;03;17;00

Unknown

I like to use the profit first system to be able to establish those numbers. Profit first is the envelope method, but on steroids for business. So that way you're setting up business checking accounts and you're calling them different names. I call the first three the Golden Trio, because I believe that you, as a business owner, should have a golden trio of bank accounts like big epics.

00;03;17;00 - 00;03;32;29

Unknown

Movie sagas like Harry Potter and Star Wars have the three main heroes, right, making sure that good wins. Well, I want you to have three bank accounts helping you versus just one big account that's always working against you, the bad guy of your business. I want you to have those three accounts. What are they? Profit owners, cop and owners.

00;03;32;29 - 00;03;54;01

Unknown

Tax those three profit owners, cop or owners compensation and owners tax. They help you keep more. But it also gives you a very clear cut goal, a very clear cut number of how much am I keeping from every dollar that I'm making. So that way you have those accounts and they help you know what you're keeping. Then you already have OpEx or an operational expense account.

00;03;54;01 - 00;04;10;07

Unknown

That was usually the one big bank account where all money was coming in and going out before. Now it's just going to have your outflow of money so you can see how much you're spending. I would also add an income account. That way you can see how much is coming in. You would have all wires or transfers or all income coming into the income account.

00;04;10;07 - 00;04;31;01

Unknown

So you can very clearly see how much did I make, how much did I spend, how much did I keep. So the make account would be the income. OpEx is to spend the golden trio, the profit owner's compensation, and the owner's tax is what you're keeping. Those would be the first three numbers that I would track to make sure as an entrepreneur, you know what's coming in, what's going out, what do I get to keep?

00;04;31;01 - 00;04;50;14

Unknown

If you can get those numbers, you'll be savvier than like 90% of entrepreneurs out there because they're not tracking anything whatsoever when it comes to their profitability, to their finances, especially when it comes to their cash. So those are some cash KPIs. But what about what else should I be tracking in order to know how I can move or pivot, or where I should be putting the money?

00;04;50;17 - 00;05;09;22

Unknown

Number one, I would say, is your marketing returns on investment. Do you know how much you're spending versus how much you're getting a return on the marketing channels? Where a good rule of thumb is, am I getting at least a 3 to 5 x return? I'm meaning I spend a dollar. Am I getting at least 3 to $5 back from that channel or from what I'm putting in there?

00;05;09;22 - 00;05;26;03

Unknown

If you're doing organic content, that might be time. Like how much time am I spending? Versus like, am I getting a return? Is stuff coming back in? Are we getting leads in the door? Or is this content really resonating with the audience and they're actually taking calls to action? Am I putting calls to action in my content that I'm putting out there?

00;05;26;03 - 00;05;45;02

Unknown

So that's one big one is are you tracking the marketing ROI and the returns on investment? And a really simple way to do that is how many leads am I getting from that source, which is usually found in your CRM system? Like a, you know, those softwares that tell you how many leads you're getting and what's the sales like, what's the follow up and all that stuff.

00;05;45;03 - 00;06;03;13

Unknown

And it's really your management of all the weeds and the deals that you're doing. Then QuickBooks are a financial software tells you everything that you're actually making. And what are you actually netting at the end of the day? And you can set up categorization in there to reflect the deal that, you know, the channels of where you're getting your deals from in the CRM.

00;06;03;13 - 00;06;19;29

Unknown

So it's like, hey, I know one of our channels, maybe Facebook, and we're spending some money on Facebook ads, and here's how many leads we got. And then in QuickBooks, here's how many sales we got from the quick, you know, from the Facebook leads. And then we say okay what's a return? We spent, you know, $10 over here and we returned 50.

00;06;19;29 - 00;06;40;03

Unknown

So we got A5X, you know, return on investment, whatever it might be. This is where I want you to set up something really simple so you can see how are the numbers telling us if we're on the right or wrong track. Because if you're doing a marketing channel and maybe you've gotten A5X return on Facebook before, but then you reevaluate that every single quarter or every single month, whatever the frequency is.

00;06;40;03 - 00;07;02;09

Unknown

And for the last couple of months, it went from 5 to 4 to 3 to 2. You're like, hold on a second. Should I either reevaluate what happened? What changed? That way you can catch issues sooner rather than later, when you know your numbers and you're able to track like the marketing or the make, spend and keep or those type of numbers, that's where you can solve the real problems in your business.

00;07;02;10 - 00;07;22;28

Unknown

Think about it. If you're watching this video, you're probably a problem solver. If you're listening to this, you're probably a problem solver or resonate as a problem solver. But a lot of us in our own businesses are solving the wrong problems. You know why? Because we're not looking at the numbers to tell us, are we on the right or wrong track for what we really want from our business?

00;07;22;29 - 00;07;45;14

Unknown

I heard this at a mastermind that I was at once that if you're constantly fighting fires in your business, you're the arsonist. That means that you're literally whiting the fires that keep happening over and over. And you know why? Because we're not attacking the root problems, the root issues that the numbers are telling us, like, hey, if you would just look at these numbers, they tell you what the issues are or it would tell you.

00;07;45;15 - 00;08;02;05

Unknown

Hey, if we're not making enough here, is it something upstream and it helps you ask a better question of your business to really understand what is the issue here. So marketing returns on spend. So whether that's all the different channels, if you're going to match minds, if you're going to events like what's the return that you're getting from what you're spending.

00;08;02;05 - 00;08;21;10

Unknown

That's number one. Number two besides the make spending keep and besides marketing would be payroll like the payroll that you have, whether it's virtual assistants, if it's people in-house, if it's people that are virtual, like what are you spending on payroll versus what is your gross profit like, how much are you making before all the expenses and before everything in your business?

00;08;21;11 - 00;08;42;00

Unknown

What is that number versus what you're paying people? That number that you're paying people should not be greater than 25 to 35%. That's just a good rule of thumb. So if you're making 100,000 in a month, payroll shouldn't be more than 25 to $35,000 a month. That was one of the things that took us down. We built a big business doing lots of deals in the real estate world.

00;08;42;01 - 00;08;59;15

Unknown

Years ago, about ten years ago, inside of the real estate space, we were doing lots of deals, lots of deal flow, had a big team, grew it to about 25 people, and our overhead in the payroll was about 65 to 75% of the gross profit. It's like that's one of the things that took us down. So number one, know your marketing ROI.

00;08;59;16 - 00;09;18;25

Unknown

Number two, make sure your payroll is at a healthy percentage and that it doesn't creep up past that 35%, or that you're going to have some red flags pop up and say, okay, how do we we either need to make more money or we're going to have to start doing some cuts. The other thing that I would be tracking as well to is what is your overall out the door bottom line.

00;09;18;25 - 00;09;34;23

Unknown

Like what is that monthly nut. You know that you know that the expenses are for your business every single month. Because this is one of the things where if you have a system in place to be able to know what you're spending out the door and that way, are you getting, yes, the returns, are you getting it on payroll?

00;09;34;23 - 00;09;51;02

Unknown

But then for the rest of the expenses, is there anything you can cut? We've done this exercise with a lot of the clients we work with, where we have an actual system for analyzing where the money is going, and we've had people save as little as 1000 a month. We've had people save up to 50,000 a month, 50,000, but just didn't waste.

00;09;51;02 - 00;10;08;28

Unknown

Whether it was what people with processes, with systems, all of that, there's usually lots of fat that can be trimmed. So that would be another one to see. Like are the numbers telling me where I need to cut, not just be able to reinvest like the marketing Rois. So those are some of the numbers to look at to make sure that, am I getting a good return on investment?

00;10;08;29 - 00;10;22;11

Unknown

Do I know where my money's going? The make spending keep that's more about your cash and like what's coming in, what's going out, what am I able to keep? And if I just had to boil it all down, that would be the first place to start. Do you have a good system to know where your cash is going?

00;10;22;12 - 00;10;36;12

Unknown

Those are the ones you could take to someone like a fractional CFO about the marketing, the payroll, the cutting, the expenses. If you don't feel like you're equipped to do it, you might need someone to help you with that portion of it. That's where we can either help or go out there and find a fractional CFO that you want to work with.

00;10;36;12 - 00;10;52;06

Unknown

But I want you to be able to have good systems in place that are getting you what you want from your business and really understand the numbers so you can attack the right problems in the business and getting what you want at the end of the day, which is more money in your pocket and more money in those reserves and sleeping well at night.

00;10;52;08 - 00;11;11;02

Unknown

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 profitrei.com to schedule a free discovery. Call with us to create your path to financial clarity and freedom.