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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.

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Unknown

The goal is simple to help you run your business with more confidence and less financial stress. Enjoy the episode. Did you know that it's possible to scale yourself out of business? That sounds counterintuitive. Like what are you talking about? Like, if we're scaling or growing and and maybe you've gone through this and you're like, oh, no, I definitely feel that.

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Unknown

So help me, how do I get out of this? Well, there's also a good book that I highly recommend, and this is some actual you could get right from the beginning of this video where the book The Road Less Stupid by Keith Cunningham, one of my favorite business authors. You might even know him and you don't even know that you know him.

00;01;03;09 - 00;01;27;25

Unknown

If you've read Rich dad, Poor Dad by Robert Kiyosaki. Keith Cunningham is one of the like, caricatures of Rich dad. Like he's an amalgamation of several people, but Robert Kiyosaki actually based Keith Cunningham and and his whole story of losing hundreds of millions in Hawaii and then getting hundreds of millions back. So Keith Cunningham wrote a book called The Road Less Stupid, and he says in there, if you scale cancer, the tumor grows.

00;01;27;25 - 00;01;45;28

Unknown

And at the bottom line is, if we don't have a business that we know our numbers, that is really healthy and we try to add more fuel to that fire, we're going to burn it down. It's like trying to put fuel in a plane that's going down. We're just going to go down faster. We need to know in order to scale the real numbers that takes to get there.

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Unknown

A lot of people, though, when they scale, they just dump more marketing money into, you know, the different channels and all that, or they just dump a bunch of money into marketing and say, oh God, I hope this works. And like they spray and pray. If that's you and you're wondering, why am I not getting what I really want from my business?

00;02;03;08 - 00;02;24;10

Unknown

Why am I not really paying myself? And why do we keep growing? And I feel like there's less cash the bigger that we get than there was when we were doing, you know, low six figures or whatever it might be. Our huge reason is because a lot of us do not know how to scale, but scale profitably. So I'm going to give you the secret to scaling profitably here.

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Unknown

Like, and it's not really a secret. It's really something that we just don't focus on. And business owners are not taught. Okay. A lot of us have been taught our industries game like real estate or if you're a brick and mortar business or if you're a salon, like, I don't care what kind of business you own, that's the industry that you're in.

00;02;44;08 - 00;03;07;06

Unknown

So you think you're playing that game. You think you might be playing the real estate game? What's the game? We're all playing as entrepreneurs, though, we're all playing the game of money. So if we're playing the game of money, we need to know the money game in order to win. What does winning look like? Well, for this video specifically, I'm assuming you want to scale up as a business owner, but you also don't want to go out of business as you scale and grow.

00;03;07;07 - 00;03;27;07

Unknown

You don't want to scale yourself out of business. You want a business that serves you on the way up. And then when you get to that nirvana, whatever that number is that you're trying to get to, that you also want to have a business that is actually providing a whole lot more to you as well, and that you're able to have a business that you enjoy that is not sucking you dry.

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Unknown

I want you to be able to go out there and have a business that you love. What does that mean? So how do we scale profitably? What can we do? How do we learn the game of money? Number one, I would set up a system for your cash to know where every dollar is going in your business. So to me, this is why profit first to me is a calling profit first is a cash flow system that helps you know where every dollar is going.

00;03;54;02 - 00;04;13;13

Unknown

In the practical sense. It's like the envelope method for businesses. You set up business checking accounts and you name those checking accounts. Different aspects of the business, like profit, like an owner's comp account to pay yourself a tax account, an operational expense account. I want you to be very intentional with your dollars. So let's just say you do that.

00;04;13;14 - 00;04;32;23

Unknown

Let's say you set up those accounts. Another thing from there is when a deal closes or anytime you get income, you split out that money into the different account by percentages. Meaning, okay, you just made $10,000 on a deal. That $10,000 is now not a lump sum. That just goes to one big bank account. It goes into an account.

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Unknown

Usually we call that an income account. Then you're transferring that 10,000 from the income account to those other accounts like profit owners comp owners tax, to make sure that you have the dollar spread out and you're running the business by percentages. If I just give you that, I've really unlocked how you scale profitably and you say, how did you do that?

00;04;55;24 - 00;05;20;29

Unknown

If you run the business by percentages and especially your cash by percentages, that means you can scale up. That just means that your percentages are going to change. Does this make sense if you're watching this video? If it doesn't, let me go a little bit deeper. There are what's called in the profit first vernacular or the terminology or the things that we talk about in profit first, there's something called taps.

00;05;21;06 - 00;05;41;17

Unknown

What are taps? Those are target allocation percentages. Okay. What are you just told me what taps are. And then you said a lot of words. I still don't understand target allocation percentages. Those are the goal percentages. In order to shoot for it to be a healthy business, that means let's just take your making from 0 to $250,000 in your business.

00;05;41;17 - 00;06;11;12

Unknown

Right now, let's just say you're a startup business and you're trying to get off the ground. Maybe you've made a few deals. Maybe you're on track to do $200,000 this year. Your percentages for those accounts that I was just telling you, like profit, profit would be 5%, owners pay would be 50%. So every time I do, a close of 50% goes into the owner's pay, the owner's cop account, the owner's tax would be 15, and the rest, the 30% that's left over would go to opex to make sure the business can continue functioning.

00;06;11;12 - 00;06;30;27

Unknown

And you can start to reinvest back into the business, but you're running by percentages. Now, if you're watching this, you might be like, oh my gosh, it's like 70% between owner's pay, owner's tax and the profit account. That's a lot of percentage going towards you. Well, logically right. You're just starting the business out. You don't have a lot of payroll.

00;06;30;27 - 00;06;54;24

Unknown

You don't have a lot of expenses. You don't have probably a lot of software subscriptions or a lot of things that you're needing to pay for upfront as the you want to scale and grow, though, this whole video is about you scaling without scaling yourself out of business. So how do you scale up in this whole plan? The target allocation percentages in the different stages of business from 0 to 250, those were the percentages.

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Unknown

But then from 250 to 500 the percentages change. You take some of the owner's pay and you put it towards opex, like from you go from 50% to, I believe 40% on the next here. And then you put 10% more towards opex. So now you still have profit and you still are paying yourself and you still have money for taxes, but now you've put more percentage towards opex, and now you can scale profitably because you're still protecting your profit, but you're also reinvesting more into the business.

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Unknown

This is when you can say, I'm reinvesting in the business, and I won't throw a rock at your head, because usually if you don't have a system like this in place and you say, oh, I'm reinvesting in my business, I'm just I here. Well, I'm going to scale myself out of business. That's really what I'm hearing. That's what that's code for, is I'm going to put so much into the business, and I'm going to reinvest every dollar into the business, and hopefully it scales on maybe one day I'll be successful and half profit.

00;07;51;01 - 00;08;12;28

Unknown

That is a recipe for disaster. That is how you crash and burn the plane. That is how you scale a cancerous business, is you just pour every single last dollar into it without paying yourself or without establishing a profit buffer. You know why you ran. You're running a for profit business, right? That's your business that you want to run and that you want to scale.

00;08;12;28 - 00;08;39;02

Unknown

Well, if you're running this for profit business, we have to protect that profitability or you become that accidental nonprofit that is scaling themselves out of business. You're literally scaling yourself out. So what do you do from here? Well, set up some of those accounts, be intentional with the dollars. Then from there, run your business by percentages. You can get this the percentages that I was giving you, those target allocation percentages from any profit first book if you're in real estate.

00;08;39;05 - 00;08;56;14

Unknown

Not to throw myself out there, but you're watching my video. So I wrote the book Profit First for Real Estate Investing. So I give it for the different percentages in that book, for the targets for selling a property, or if you're buying and holding because they're vastly different. So if you're looking for the percentages to run your business by, you can pick up that book.

00;08;56;15 - 00;09;17;20

Unknown

You can also look at our website too. If you want a cheat sheet from us that gives you these target percentages. No matter your business, whatever industry you're in, or whatever type of real estate, or if you're outside of real estate, you can go to simple CFO for and that will send you a copy of my book so you can get the target allocation percentages to scale profitably.

00;09;17;20 - 00;09;35;17

Unknown

Or you could get a cheat sheet from that side as well to a profit first cheat sheet. And you'll be able to actually look at that and say, okay, how much do I need to be doing? Because this is what the size of my business is right now. It is literally a plan for growing profitably. I do not want you to scale yourself out of business.

00;09;35;17 - 00;09;58;25

Unknown

I want you to have tangible ways and knowledge to be able to say, how do I actually scale up and actually keep more of the cash? That's where you can get those things. Simple CFO combat gift. You can pick up my book. You can pick up whatever profit first book that's in your industry. They'll all have the target allocation percentages there, which is literally the roadmap for scaling profitably without going out of business.

00;09;58;27 - 00;10;27;13

Unknown

Stop scaling and hurting yourself. Scale with intentionality and you will get to where you want to go. 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 to schedule a free discovery, call with us to create your path to financial clarity and freedom.