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;01;00;20

Unknown

The goal is simple to help you run your business with more confidence and less financial stress. Enjoy the episode. The fastest way to increase profit in your business is to eliminate cash leaks. So a lot of people, they think that more deals or more sales equals more bottom line profit. Like if I just do more. If I have more income, if I have more, deal flow, if I have more lead flow, if I have more sales in the door, that's going to equate to more money in my pocket, which if you've been a business owner for very long, then you probably understand that that is not always the case.

00;01;00;20 - 00;01;18;28

Unknown

Just because you make more does not mean you keep more. One of the best ways to keep the money. I'm going to give you some very practical steps to keep more of what you're making, but a lot of people just think that more and more and more is going to get them out of their rat race. And I tell people all the time, like just because you do more does not mean you keep more.

00;01;19;03 - 00;01;37;11

Unknown

How do I know this? Hey, I've got a story for you. So in my early 20s, I started with a company that we're doing a lot of real estate deals, and we scaled up. We like five x the business from like five deals a month to 25 deals a month. But we were spending once we were doing $25 a month, about 26 worth of deals out the door.

00;01;37;12 - 00;01;57;06

Unknown

So we were really good, really good at the real estate game and like getting more deals in the door. But we were not good at keeping the cash and keeping the money. And I want to give you some practical steps of how do I plug those cash leaks? Where were they coming from? Some of the ones that we dealt with are some of the most common ones that I just see out there in the marketplace.

00;01;57;06 - 00;02;15;16

Unknown

Now. I'm about ten years removed from that scenario in that situation. But now I've worked with hundreds of businesses, and a lot of them had the same exact issues that we had back then. So what are some of those cash leaks? Number one, I would always say look out for the two biggest expenses that need to have a return.

00;02;15;17 - 00;02;33;20

Unknown

Number one is marketing. Number two is payroll the marketing that you spend. I want you to spend the money on marketing, but I want you to get a return on that spend. Do you know how much you're getting at back as a return from the marketing that you're putting, and those dollars that you're putting out there to get leads and deals and sales in the door?

00;02;33;23 - 00;02;55;04

Unknown

Number two is payroll like versus how much am I making? How much am I paying people if that's above 35% of like what you're making, then it's like, hey, we got to do something different here. We either have to restructure or we have to go out and like, are we going to get deals in the door very soon to be able to push this, you know, the percentage down of what we're paying people.

00;02;55;04 - 00;03;20;28

Unknown

But I want you to understand that those are the two biggest usually that take companies down the marketing and the payroll because they get them out of control. Usually the marketing, it's not a return or they get that diminished return or it starts to lessen over time. Or number two, they're hiring people, but they're hiring too quickly, or they're over hiring when they have to build reserves, and they have to make sure that they get the money in the door first before they go out there and start hiring a bunch of people.

00;03;20;28 - 00;03;40;19

Unknown

We had like 25 people on staff on that company. We had a bunch of people. We had a bunch of different exit strategies for the deal flow that we had. At the end of the day, we really needed to be a healthy company and a healthy company. We would have had less people, so we could have kept more, and to be able to do the amount of deal flow we really needed to do that would have been healthy for us.

00;03;40;19 - 00;04;00;27

Unknown

25 deals a month was not healthy for us, even though it was one of the biggest companies that was in the masterminds and at the events and all of that, it didn't matter, because at the end of the day, we weren't keeping much. So how do you actually plug these cash leaks? How do you figure those out? How can you practically go into your business and say, is this something that I really need?

00;04;00;28 - 00;04;23;28

Unknown

Is this something that I just like? Is this something that's giving me a return on investment? Here's a quick way where if you just took an hour or two every quarter, I'm not saying every month, I'm not saying every week, an hour or two or quarter. You could literally put thousands of dollars back into your pocket, because it's that old adage of a dollar saved is a dollar earned or a penny saved is a penny earned.

00;04;23;28 - 00;04;53;06

Unknown

Its. That's really true just because. Think about it, okay? If you have a business where your net profit percentage is 10% of your income, so what does that mean? That you make $1,000 in income? 10% of that is net profit. So you make 1000. You keep 100 okay. So if you do that, that's 10%, right? 10% is the net profit off of the $1,000 that you made.

00;04;53;07 - 00;05;14;23

Unknown

Let's just say, though, that you go and find in your business like $200 a month that you can cut out of the business. Well, guess what, all $200 of that goes right into your pocket. So it's like that's where the difference is of putting more in the top line versus being able to cut the bottom. You know, the stuff that affects the bottom line.

00;05;14;23 - 00;05;40;20

Unknown

Because even if you put more in in order for you to, let's just say to have, what, 1000 a month that you're making and your profit is 10%, the net profit is 10%, you'd have to get your revenue to 10,000 a month to net a thousand a month, like if that's 10%. But if you were able to cut expenses and be able to get your net profit percentage up by cutting expenses, then you could get there that much faster.

00;05;40;22 - 00;05;55;17

Unknown

Obviously, we when we work with someone, we're trying to attack it from both angles. I want you to make more, but I want you to keep more as well to. But on this video, I want you in this recording, I want to make sure that you know and have a system to cut the fat out of the business.

00;05;55;17 - 00;06;12;10

Unknown

How do you make sure you're running as lean as possible? How do you make sure that marketing and the return on investment, how do you make sure the payroll what what can you do? Here we go. This is not sexy. This is not going to be fun. From the aspect of the actual doing the job of what I'm going to tell you.

00;06;12;10 - 00;06;31;17

Unknown

But the result is fun and the result is sexy because it will get you money in your pocket, potentially paying yourself more or building that reserve, going on the trips, the vacations, being able to go out with your spouse, like whatever it might be. I want you to have that feeling. So here's grab that feeling while I tell you this exercise.

00;06;31;17 - 00;06;53;04

Unknown

So that way you could say, this is why I'm going through this process. This is called the PR. And you exercise to get all the fat out of your business. What does that mean? I would print out your last three months of your bank statements. Okay. Three months of your business checking accounts and say, okay, let's see all the expenses that went out the door.

00;06;53;06 - 00;07;12;15

Unknown

I'm going to categorize them, and I'm going to look at each individual expense, and I'm going to say, and I'm going to market one of three letters. Was it p r or you. What does that mean. P would be profitable. This expense was profitable to me. Meaning it saved me either time or money or it made me money.

00;07;12;15 - 00;07;28;23

Unknown

So what does that what could that type of expense be? Could be a sales person. So that way maybe you're going, instead of you being on the phone and you doing the sales and you're getting contracts or whatever it is that you're doing in order to get money in the door, someone else is doing that for you, and they're doing a great job, and they have a good closing percentage.

00;07;28;23 - 00;07;47;25

Unknown

That's a good return on investment. I would put a P next to that. Maybe it also could be on the flip side, someone saving you time or money. Maybe you have a bookkeeper, maybe you have an admin on staff, an executive assistant where they're taking a lot of the 10 to $50 an hour tasks off your plate, and you can focus on that 100 to 1000 to $10,000 per hour tasks.

00;07;47;26 - 00;08;09;15

Unknown

That's where that would be a profitable investment as well. Maybe it's a software. Maybe it's a software that automates things where versus someone having to do manual work over and over again. Are you doing manual work or someone on staff? It's helping you save time and energy, and that's a profitable investment. So that would be an example of something that you might mark P next to P would be profitable.

00;08;09;20 - 00;08;32;19

Unknown

It has to be either saving you time or money or it has to be making you money. R stands for replaceable meaning I'm spending this money right now, but there's something that's replaceable that I could put in there instead. Meaning there's a faster, better version, something that could be more efficient. Maybe it's a person. Maybe you have a couple salespeople and one of them are like not cutting it.

00;08;32;19 - 00;08;48;28

Unknown

And they're like, hey, I need to be getting another salesperson in here because I need the closing percentage to be raised. Something like that, like replaceable would be I could replace it with something that would save me more time or money, or would make me more money than the U stands for. Unnecessary. Like why do I still have this?

00;08;48;28 - 00;09;10;11

Unknown

This usually comes down to, you know, every business owner has it. All those subscriptions or all those domains that you bought that you're never going to use. It's like, this is where an unnecessary expense, where you know, exactly like, why am I paying for this? Or I didn't know I still had this. This is something that we have to do on a regular basis, literally at any time we could go in there and we can say, okay, is this PR or you?

00;09;10;11 - 00;09;25;17

Unknown

But I would recommend doing this once a quarter, at least, taking at least 1 to 2 hours as the business owner going through that. That way you can see what's going out the door to maybe you catch something that you would not have caught unless you were looking over that. And you might say, that sounds a little bit overwhelming.

00;09;25;19 - 00;09;44;05

Unknown

Start with one month. Can you do last month and see what went out the door and market p r and you, you might be very surprised. You do one month and you're like, oh shoot, I just replaced or, you know, you cut some expenses and I cut a couple thousand a month. If you cut 1000 a month, that's 12,000 over the year.

00;09;44;07 - 00;10;11;14

Unknown

What does that mean? That could be 12,000 in your pocket. That could be 12,000 in a reserve account. That could be 12,000 of whatever you want to do with it if you just cut a thousand a month. This is why I'm so adamant for like, people to be able to sit down and go through their expenses at least once a quarter, because this is money that you could be putting in your pocket that you're losing out on now, but you've already made it, but now you're just literally moving that money to somewhere else that it shouldn't be going.

00;10;11;15 - 00;10;39;26

Unknown

So this is where how you can be lean and mean. Do this once a quarter PR and you. I call this the $1,000 per hour exercise because you should be saving at least $1,000 a month from that one hour of going through your expenses and seeing, is this profitable? Is it replaceable or is it unnecessary? Now, if you are going through this exercise and it's a little bit trickier with the staff and the team members because you're like, oh, shoot, I know I have some people I probably need to replace or unnecessary.

00;10;39;26 - 00;11;04;16

Unknown

That's obviously another issue we could talk about later on, but if you have anyone where you mark next to their name because maybe they're saving you a lot of time and energy, or maybe they are getting you those leads in the door, or getting you those sales in the door. Then make sure that you appreciate them, that they understand that like that you are there and that you want the best for them as well too, because they're helping you build that business, but you want to make them feel like it's worth it for them as well too.

00;11;04;18 - 00;11;22;01

Unknown

So make sure you invest in in the process, the systems, the people that are profitable, the things that are replaceable, unnecessary, get those out. So that way you're running as lean and mean as possible. We've seen people, like I said, as low as 1000 a month. I've seen people do 50,000 a month that they've cut and put in their bottom line.

00;11;22;01 - 00;11;45;09

Unknown

I'm like, I've seen some crazy things out there now in my, you know, multiple years going out and helping people. From a fractional CFO point of view, I want you to have a system that you do on a regular basis that puts more money in your pocket. This is a very simple one that you could do once a quarter, to be able to make sure that you are as lean as possible, and putting as much money in your pocket as humanly possible.

00;11;45;10 - 00;12;04;05

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.