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

David Richter

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;48;09

David Richter

The goal is simple to help you run your business with more confidence and less financial stress. Enjoy the episode. If you can't see your numbers instantly, you're not running a business. You're rolling the dice. Let's be honest, lots of business owners. The financial side usually is not the sexiest topic. Like, okay, that's great, but I'm just going to go make more money and then all the stuff will take care of itself.

00;00;48;12 - 00;01;04;00

David Richter

Do you know how many times I hear that? But then people come back to me later on and like, oh, shoot, I don't feel like I'm really out of my rat race or I'm making money, but I feel broke. So I hear that type of statement all the time, and it's usually because of one big word. They don't have clarity.

00;01;04;02 - 00;01;26;05

David Richter

What does clarity really mean? It means you wake up and you know where every dollar is going in your business. It means that you can make a difference by either tweaking the number or knowing exactly what the cause of a number is. To be able to make a change in your business where the numbers are literally alerting you to those pressures, or to where ever the pain points are and the bottlenecks in the business.

00;01;26;07 - 00;01;48;14

David Richter

Usually, the first bottleneck we see when we come in and work with someone is that they don't have any numbers in place, or they're they're not tracking anything. You do also have the other extreme where they're tracking everything, and it's not pinpointed enough to really give them something that's workable. When I look at numbers, I want to be able to have numbers that can help us make a decision.

00;01;48;16 - 00;02;05;06

David Richter

So that's where this whole video is going to be around. It's what numbers do you need to track in order to make a decision from those numbers? And why would you even need to do this? Because you're like, well, I've done business up to this point and I haven't tracked anything, and we have money in the bank account and it doesn't really matter.

00;02;05;06 - 00;02;26;24

David Richter

Right? This is where you also might have felt cash crunches along your journey. And if you haven't, they will come because the market does not always play fair or nice or care about your business. That's where we have to have certain systems in place to know and to understand when to make those moves, when to adjust, when to make pivots.

00;02;26;25 - 00;02;49;05

David Richter

When do we need to go a different direction? And you know how you get that. By numbers. By data. Like by knowing what to track. That is literally a $10,000 per hour task. It's not necessarily the bookkeeping and the actual data entry, but it's being able to interpret those numbers and have them in front of you. So that way you can make those big pivots.

00;02;49;07 - 00;03;05;21

David Richter

For a lot of people. A good place to start if you haven't started anywhere. And this is for any type of business, whether you're in real estate and you're fixing, flipping, wholesaling, I don't care if you have a brick and mortar business and you're out there running a restaurant. One of the first things to know which it's the most obvious, especially in the financial space.

00;03;05;21 - 00;03;30;06

David Richter

But how much are you're spending out the door? Do you know exactly where every dollar is going? Do you know what you're spending on? And if you are marketing and you're using marketing dollars, do you know what the returns are for those marketing dollars? Where just as a general blanket statement for any type of business that you're watching should be getting at least a 3 to 5 x return on your marketing, spend three on the low end, five on like a good average.

00;03;30;12 - 00;03;45;04

David Richter

Now some people can get eight, nine, ten. But you need to know am I getting at least a 3 to 5 x return? Maybe you're doing a lot of organic content and you're like, you know what? I do a lot of organic content and I don't spend a lot. Well, how about the return on time? How much are you posting out there?

00;03;45;06 - 00;04;06;11

David Richter

Are you getting a return on that? Like I want you to be able to track. Okay. How much time or money did I spend versus how much deal flow did we have or how much sales did we have this month? Now, if you can tie them together, that's the best of both worlds. Like if you have a CRM, tracking every single lead in the follow ups and like when a deal closes, maybe you have QuickBooks for the financial end.

00;04;06;11 - 00;04;21;20

David Richter

When a deal closes and you can see the money and you can tie those two together of like, here's where the lead came from, here's how many I actually closed from those leads to be able to say, how much money did I make. You can actually put it against. How much did I spend versus how much I made for a single channel?

00;04;21;24 - 00;04;45;06

David Richter

So that would be one thing that if you're not tracking that, that's the best place to start, because financial management and money management and a CFO and a dashboard, all of that is useless if you're not putting the money where it really matters to be able to make more money. I need you to be able to put money into marketing and know, hey, are we getting a return?

00;04;45;07 - 00;05;01;09

David Richter

Are we getting leads? Are we getting deals? Are we getting sales? Are we getting closings? Are we actually getting dollars in the door? That would be one of the biggest first steps. And if you have a dashboard that's worth its weight in gold, that's going to be one of the big things on there is what am I spending versus what I'm making?

00;05;01;11 - 00;05;31;01

David Richter

Another thing, if you are in the real estate world, here's another big one to track because a lot of people, they are in real estate and they know that, hey, especially if you're flipping or if you're buying and holding, there's that wonderful time that's called work in progress of like, I am in the middle of a fix and flip, and I am spending a lot of that money out the door, and it feels like if I keep doing this, I'm going to go out of business just because all this cash is going out.

00;05;31;04 - 00;05;51;02

David Richter

I would have you track knowing your cash positions, meaning how much cash do you have? How much do I have to finish the projects that I have in my pipeline? Versus how much cash do I have to run the business and the operations? If you've got anyone on payroll. Do we have enough for payroll? Do we have enough to maintain the marketing spend?

00;05;51;04 - 00;06;09;29

David Richter

But then, do I have enough to be able to finish the projects? Now, if you are in real estate, there is a profit first hack that I can throw out at you. The working knowledge is profit. First is a system that helps you know where every dollar is going and we help you set up bank accounts which are like envelopes from the envelope method, making sure you're naming every dollar.

00;06;10;01 - 00;06;29;07

David Richter

But if you want a great number to track in your business, it would be how much cash do I have versus how much do I still have left of projects to complete? So we help set up an extra account specifically for real estate investors or any type of industry where you might get money sent to you or wired to you for a specific project.

00;06;29;09 - 00;06;59;24

David Richter

So a lot of people in real estate, they get private lenders, or they might get where they get wired directly the funds for purchase plus repairs. Plus, you know, the holding costs. So that way I would have you set up a specific bank account called, we call it, whether it's the Investor Vault or OPM. And those could be interchangeable, but basically a bank account dedicated to anyone that send you money to be able to fix and flip or to be able to complete a project in your business where that money is tied to that project.

00;06;59;26 - 00;07;17;16

David Richter

This will help you sleep at night. I'm telling you, if you're a fixin flipper and you're wondering where's all my money going? I don't know if I have enough to finish the projects. I don't know if I have enough to keep running the business. If you could understand. How much money do I have? That's dedicated to finishing the projects that I have on the board?

00;07;17;20 - 00;07;36;02

David Richter

Versus how much projects do I have on the board? And, like, how much do I really need to finish this? Because everyone that's a IT flipper or everyone that out there that has they usually have some project management tool to know how many flips or how many products do I have in progress and how much do I really need to spend in order to finish everything?

00;07;36;04 - 00;07;55;14

David Richter

That way you can see very clearly how much money do I have? How much projects do I have? Do I have enough to finish that? That's another big one. So number one, I would make sure you're tracking your returns on marketing. And I kind of gave you some really good aspects of how to track that. Like if you have a CRM and you know how many leads are coming in and you're tracking the lead sources.

00;07;55;16 - 00;08;11;09

David Richter

I would also track on the QuickBooks side, what were those lead sources, where they came from, and then when they closed, how much did you make from that lead source? So that way you could actually compare apples to apples of here's how much we spent, here's how many leads came in, here's how much we actually made. So I'd be number one.

00;08;11;09 - 00;08;31;01

David Richter

Number two would be your cash. Knowing where every dollar is going. That's where you set a profit first and know what's coming in, know what's going out. But specifically, if you are in a really industry heavy where you're going to be spending cash on projects like fixing and flipping or like buy and holding, or could be inventory management at a restaurant, like whatever it might be.

00;08;31;01 - 00;08;52;04

David Richter

But specifically, if you're in the real estate industry, knowing how much do I have in that OPM or how much do I have inside of that account, like to be able to know how much do I have to finish the products that I have on the board? I would also say to in that realm is those other accounts in profit first, knowing how much and if you don't know, profit first, you know from a twig.

00;08;52;05 - 00;09;09;20

David Richter

It's like, here's the five bank accounts. Owner's comp to pay yourself profit to make sure you have profit in the business owners taxes. Making sure you could pay yourself a tax time income in apex. So knowing what's coming and knowing what's going out of the business. So if you have those five fundamental accounts, you'll know how much am I able to keep?

00;09;09;25 - 00;09;28;02

David Richter

Because those first three help you keep more the owner's comp, the profit and the owner's tax. They help you keep the money. I would also know the income account, how much is coming in or how much you're making. And then the apex, how are operational expenses, how much you're spending out the door to run the business? Apex is different than OPM.

00;09;28;05 - 00;09;48;26

David Richter

Apex would be all the outflow of money to be able to spend, the money to keep your business operational, and scaling and growing, where OPM would just be able to get the projects off your plate, and to be able to spend the money in order to get those projects done. So those are the difference between those two, but that's another number you could track as an owner, even if you don't have fancy system software.

00;09;48;26 - 00;10;06;20

David Richter

All that, but a dashboard, this is what a business owner who wants to be a true business owner needs that will give them, at the drop of a hat, all those numbers, some of those you can implement yourself, some of those that I've talked about now you're like, yeah, right. That sounds like a nightmare for me to be even be able to track that.

00;10;06;20 - 00;10;22;26

David Richter

How would I even go about that? This is where I'm going to tell you someone that not just a bookkeeper, because a lot of owners will go to their bookkeeper and try to get those types of numbers, like a higher level number out of the bookkeeper, and the bookkeeper just hands them a profit and loss, or hands you a balance sheet and says, good luck.

00;10;22;28 - 00;10;41;09

David Richter

Or an accountant, like a tax person says, well, I can help you potentially save money on taxes, but I'm not your CFO. I'm not going to go over your business. Money management. That's where a CFO comes into play, to build a dashboard, to say, here's what these numbers are. Here's all those things that we talked about are built on a dashboard like that.

00;10;41;09 - 00;11;01;05

David Richter

We create to make sure you know where all those dollars are going and what's the return on marketing and really, where are you spending every dollar in what's going out for your projects? And do we need to go and find some more money so you don't run out of money, even though you might be scaling up and you have great profit, but you the flips are eating you alive because it's eating all of your cash.

00;11;01;07 - 00;11;22;25

David Richter

This is where I want you to have a very clear picture. Now we've implemented a dashboard with every client that we work with, and a lot of times what we hear back from people is that they feel like it's a crystal ball, because it also helps them know what's coming down the road, because some of the things I didn't even touch on, like forecasting of, okay, how much are we going to do over the next three months and what do we need to plan for if this does not go right?

00;11;23;01 - 00;11;37;00

David Richter

And if it does go right, how much money can we put in these different accounts to reinvest back in the business or to pay ourselves as the owner? So then you get to do more of that fun stuff. Or if you need to hire someone, what if you need to hire someone? Do you know how much you have to hire them?

00;11;37;05 - 00;11;56;17

David Richter

Do you know how long you'll be able to keep them on until you know, like if they are a good hire or not, and how much you're willing and able to spend on a new hire before you cut your losses. Those types of things are manage on a dashboard. And specifically if you have someone like a CFO, what's the CFO, the chief financial officer, or someone more like a financial leader or a financial coach?

00;11;56;23 - 00;12;18;27

David Richter

That's helping you through these big business decisions. But then with a very easy to understand, built for entrepreneur dashboard to say, what are those numbers? What do they mean? And how do I make a decision from these? That's the power of a true dashboard. So maybe right now you're tracking numbers. The number one question I would ask is from every number that you're tracking are you able to make a decision from that number.

00;12;19;04 - 00;12;45;05

David Richter

Number two is it easy. Is it easy to track and easy to know how to pivot or how to make a better decision from that number? And are you looking at it consistently. Because that's the other thing a dashboard. And if it's updated consistently and if you have the handholding or accountability of a person, like a financial leader, like a CFO, then you're able to look at it on a regular basis, and then it becomes part of your business and a part of the system and the structure that you have.

00;12;45;08 - 00;13;02;02

David Richter

That's why I would want you to have a dashboard in place, because then it's holding you accountable to look at those numbers on a regular basis. Then if you have a person there, that's literally another person holding you accountable to those numbers. Because ultimately, why do we want you to be held accountable to the numbers? Because those numbers should point towards what you want from the business.

00;13;02;02 - 00;13;22;10

David Richter

Do you want financial freedom? Do you want to get out of your rat race? Do you want to quit your W-2? Do you have you already quit? And you're like, I want to just pay myself more, or I want to sell the business in five years, whatever it might be, the dashboard is going to help you get closer to that, but help you build good money and wealth habits that way you can see what the money is telling you to do, and you can make those pivots.

00;13;22;10 - 00;13;42;05

David Richter

Because the number one thing that keeps people up at night is not knowing their finances. Even the people that sometimes lose money can sleep better at night because they know the decisions to make to get out of that hole. But if you're losing money but you don't know it, that's when you wake up in cold sweats where you're like, I don't even know how much I'm losing or how much is coming in.

00;13;42;08 - 00;13;57;08

David Richter

That's why if you can see it right in front of you with pretty colors and knowing and big numbers here of like, here's where you are, here's where you want to go and here's the gap between here's the decisions we need to make together. That's what's going to give you that clarity to take your business to the next step.

00;13;57;15 - 00;14;14;01

David Richter

This is why you need a financial dashboard. But also the dashboard should help you achieve what you want from that business and what we've seen time and time again with people in their crystal ball be able to say what's coming down the pipeline. How do I get there? And how do I pivot if something doesn't work out like we wanted to?

00;14;14;03 - 00;14;32;16

David Richter

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.