Posted on: July 27, 2022
WI 1003 | Financial Mistakes To Avoid

 

Imagine making over $600k monthly with wholesaling and still losing money? Unfortunately, this is a trap many real estate investors fall into. We tell ourselves the more deals and the more employees we have the better. And without an accounting system and accounting philosophy to keep us in check, we end up living paycheck to paycheck instead of achieving the true financial freedom we got into real estate for. Today’s guest, David Richter, is the Founder of SimpleCFO and author of Profit First for Real Estate Investing. He joins Lauren Hardy to discuss the biggest financial mistakes real estate investors make and how to avoid them.

 

If you liked this episode and are ready to level-up your game and achieve true financial freedom, apply to Lauren’s Virtual Investing Mastery program.

 

Show notes:

  • (0:48) – Beginning of today’s episode.
  • (1:52) – Many investors are living paycheck to paycheck – here’s how to avoid it.
  • (5:30) – The company you DON’T want to be.
  • (11:28) – The biggest financial mistake to avoid.
  • (19:38) – Why drinking the “social media Kool-Aid” is hurting you.
  • (24:35) – Save this much before hiring.
  • (28:35) – Lauren’s Quickbooks hack.
  • (33:15) – The importance of a CFO and what to avoid.

 

Resources:

These Mistakes Are Costing You With David Richter

Episode Transcription

Are you a brand new real estate investor? You’re not sure how to get started or where to get started or a platform that you can go and ask questions. I’m here to tell you that over at Wholesaling Inc, we’ve started something called the Rhino Roundtable where on the last Saturday of each month, me, Lauren Hardy, Brent Daniels, Chris Craddock, David Dodge, and Grace are there to answer your questions over at Wholesaling Inc on our Rhino Roundtable. This is live. We can come in and put your questions ahead of time or you can ask them live on the show. Also, as a land coach, I will answer your questions.

Lauren Hardy, as a virtual investing mastery, we answer your question. David Dodge is in charge of the BRRRR program and Lauren and David have rolled out the Rhino Roadmap. This is Wholesaling 101. Join us on the last Saturday of each month at 1:00 PM Eastern Standard Time. For one hour on a Saturday, we’ll be there to answer your calls and your questions about starting a wholesaling company, real estate, investing, buying and selling land, and creating a business around it. Come on and join us. We’ll see you soon.

In this episode, I’ve got David Richter on the show with me. He owns a company called Simple CFO. He is the man to go to talk about finances. We’re going to have an uncomfortable conversation. I’m sure as you guys are reading, you might be squirming in your seats. I feel like that’s what everyone does when we start talking about your personal finances or your business finances, but we have to get real with ourselves, especially with the times right now.

We are going into uncertain times, potentially a recession, a real estate market turn. Now, more than ever, it’s important to own your finances, know where you’re at, start cutting down on some expenses, and keep a closer eye on things. I thought having David on the show is perfect timing. David, thank you so much for joining us.

Thank you for having me. I have to throw it in there too. I’m the author of Profit First for Real Estate Investing because I want to make sure people know that that book is out there. That’s probably where we might go with the conversation, but I took eighteen months of my life too so I was like, “I got to mention it.” It’s awesome to be back. I’m excited about this. If you’re thinking that this is going to be a painful episode, I promise to not make it as painful as you think it will be. I’ll speak plain English. None of that financial mumbo-jumbo. Let’s keep it on the bottom shelf here for everyone because I’m a simple person too. Lauren, I’m here to help however I can.

I’m glad you brought up the book. The reason I called up David was like, “I got to get him on the show.” It’s because I bought his book and I was expecting a dry accounting book. I was expecting to be bored. No offense to the Profit First author, the original, but it’s dry. Your book, however, is not dry. You story-tell throughout the whole thing and I was so shocked that there are so many real estate investors out there that have little financial literacy, don’t know how much money they’re making, and are losing money in their businesses. Why don’t you share with me what influenced you to write this book?

A lot of people came to me while we were starting to implement Profit First with them and it was very evident. They’re amazing. They get the deals done. They get the deal in the door. They’re awesome at it. Real estate was their path to financial freedom so they wanted to do this real estate adventure. In a few months or a few years, they’re like, “I feel like I’m making a ton of money, but where is it all going?” My CPA tells me, we made $100,000 in profit and my bank account has $10 in it. I’m like, “What in the world is going on here?” That’s where I saw that over and over again with a lot of real estate investors.

My background is in real estate investing, too. I saw that firsthand in some of the companies I worked with and for during my early years, my early twenties. Now, it was like, “There’s a better way for you to manage the money and to gain the real freedom that everyone wants in real estate investing.” That’s why I wrote the book. It’s to say, “Get out of your own way.” You don’t need to feel like you’re always living in your rat race. In the book, I call it the real estate rat race. You jumped from a W-2 job into real estate and now you’re living deal to deal instead of paycheck to paycheck.

It’s like, “That’s where I wanted to get that knowledge to people because real estate is the vehicle that you’re trying to get to the financial freedom road. You’re trying to get to that destination but what you’re doing is playing the game of money because you could have picked anything. If you’re that type of person or an entrepreneur, you probably could have gone into different fields to make money in some form or fashion.

You chose real estate as the vehicle, but you’re playing the game of money and a lot of people know how to do a deal, but they don’t know what to do with the money once it comes into their account and be like, “How do I make sure that we’re profitable, and that I, my family, and the employees are taken care of and we’re still marketing in the same way?”

It was all of that and then all the hurt I saw when I first started of people opening up and saying, “This is how much money I’ve lost,” or, “I don’t know how much money I’ve lost, but my bank account keeps getting smaller and smaller.” It’s those types of things. When it first happened, I was like, “I got to help here because I’ve got a real estate background, but I also can be dangerous with the numbers, too. I help people and know where that’s going.” That’s why I started it at the beginning.

Can you share with the audience the story of you working for a company? They had a smaller team and it was seven people. They were closing seven deals a month. It grew to 30 people and they are closing this. A lot of people are going to relate to this because I go to these masterminds, and Meetups, and I hear it all over social media. These big kahunas are talking these big numbers. You worked for a big kahuna but the reality was not what you think. Give us a little rundown.

I worked at a company when I first started investing. I hooked up with a real estate investor there in the local area where I lived outside of Chicago and we did about 5, 6 deals a month when I first started. That grew to about 30 deals a month, which sounds amazing and awesome but as Lauren said, we went from 5 employees to 25 to 30 employees so our overhead went bonkers. Also, we didn’t know what we were making some of the time, too. We were clueless.

WI 1003 | Financial Mistakes To AvoidI sat in a lot of seats there, too. Over those five years that I worked there, from acquisitions to selling the properties to marketing to finance and to transaction coordination. It’s anything you can think of in a typical real estate, wholesaling company, or any type of that real estate on the investing side. When I sat in the finance seat, I saw it in black and white. It wasn’t like, “I feel like we’re not doing so well.” It was like, “Here are the numbers. The numbers told the story.”

That’s why I like the numbers too because it tells the real facts of the business. Even though we were doing 30 deals a month, it was like we were spending 31 deals a month. It was ridiculous. We go to these masterminds and you’d hear the other people doing that as well, too, or they would be doing a bunch of deals, but no one ever talked about their bottom line. No one ever talked about what they were making. They only say, “We’re a seven-figure company,” or whatever it might be, but how is their bottom line doing?

That was one of the huge reasons. The other reason is after I worked there, I worked with another smaller investor who was doing a few flips a year. He had probably 40 rental portfolios. One of his big problems was he didn’t know the numbers. He didn’t know what he was making or keeping. The books were a mess. It was like, “Let’s at least get that in place.” We laid the foundation from there and then he saw that on his rental portfolio. He was at 30% loan-to-value. He had 70% equity in his properties so he was able to refinance and cash out a lot of that equity and still only be at 50% or 60%. He said, “This has been life-changing for me and my children.”

I know where I stand, what I’m making, what I’m spending, and what I’m keeping. I was able to refinance because of the powers that the books and the story that his numbers told him. That’s where it was like, “I got to help more people like this.” I bet you, there are a lot of people like that. One of the first clients we helped came to me and lost $70,000 in real estate.

This was why I wanted to do it because there were so many people that on the outside looked like they were okay but then we were having the real conversations behind the scenes of like, “I’m losing money left and right. What do I do? I can do a deal. I don’t have trouble going out there and doing a deal. I can market. I could go door knocking if I had to,” or whatever they had to do to get the deal in but they didn’t know what to do with the money once it came in.

It’s because then they go to these masterminds and you hear, “If they’re doing this much, I can do that much.” That’s what got him in trouble. He was trying to do way more than he thought he could. There were so many other stories like that. After we implemented the Profit First cashflow system with several of those people, I went to Mike Michalowicz, the original author, and said, “I want to write the one for real estate investing because number 1) there are so many people out there that are hurting, and number 2) I can speak the real estate language.”

As Warren said, if you read the book, it’s not a bunch of financial mumbo-jumbos in there. It’s regular real estate investing talk because that’s my background. Full confession here, I don’t have an Accounting Degree. I don’t have an accounting background other than what I worked in the real estate world. Now, I have 25 CFOs on the team that has their MBAs, their degrees, and all that good stuff. For me, I saw that need of like, “I can interpret the numbers and I know that there are people out there that need this because they want financial freedom. That’s why they got into it.”

That’s the long story of my background, the different companies that we worked with, and then going to Mike and him saying, yes, the stamp of approval, “Let’s get this out the door.” Now, the book’s out there, hopefully, to help more people from this show or wherever know that if you’re going through something like this, you’re not alone.

If you’re starting real estate investing, set this up. This system is for anyone at any stage. This system is more about creating a good habit as a person versus an accounting hack that sounds cool on how to manage your money or attain financial freedom. It’s a habit that creates financial freedom in you and as a person. There’s my little backstory for why I wrote the book.

A lot of your stories in your book had a lot of impact on me because I know those companies. “We used to do 5 deals, but I scaled and now we do 30 deals.” What does that company per month on a revenue basis look like? What does that mean? Is that $100,000 a month? Is that $200,000 a month?

Our average profit on a deal was $15,000 to $20,000. It could be $500,000 to $600,000 in a month.

Many people know how to do a deal but don’t know what to do with the money once it comes into their account.

However, they were still negative.

We were spending $500,000, $600,000 or $700,000 sometimes.

Let’s put that out there, guys. I get compared to influencers and stuff, “So-and-so does 30 virtual deals a month and you don’t do that number. They must be better than you.” My answer to that always is, “The number of deals doesn’t mean anything.” First of all, they could be lying. Second of all, it doesn’t mean anything because it could possibly mean they’re losing more money. Bringing in $600,000 a month and you’re still negative, that’s crazy to me. With every episode I do, I love giving tactical advice to help people make better strategic decisions in their business. That was my goal with this episode with you. Can you think of one mistake that you see most in a newbie to the business?

The biggest mistake I see is having one big bank account where all your money goes in, all your money goes out, and you’re tossing a cash salad. You’re like, “There’s $5,000 out the door because I had $5,000 in my bank account. Shoot, I can’t pay myself now. I can’t pay this person.” You then get the “Shoots.” That’s where I see. If you have that one big bank account and it’s all going in and out, it gives you zero control, clarity, and confidence to make decisions. You’re making decisions like a typical entrepreneur who’s in debt and losing money. They make it by the seat of their pants.

The Profit First Methodology is all about making sure you take your profit first off the table. How you do that practically is by setting up bank accounts specifically for different areas of your business. The first three are the golden trio of accounts. I’m a big Harry Potter fan. I like Star Wars and all that. I love that. It’s like Luke, Han, and Leia. You’ve got the three heroes. You need three heroes in your business because that’s your epic saga.

You need the three main heroes. You’ve got the profit account, the owner’s compensation or owner’s pay account, and then the owner’s tax. Set up those three accounts first. Transfer any deal money that you get there. If you close a deal and you bring rental income in, the first three accounts to fund would be those three by percentages. Read the book for more practical tips on the percentages and all that, of what you should put to those accounts.

Another account I would set up is an income account, too, because income is where all the money comes in. It sits there until you move it to the other accounts. You have control of moving the money versus it going in and out crazily. You’ve already got the OpEx, the villain, the Lord Voldemort to the business. You’ve already got the operational expense account. You’ve already got that in place. Those are the five fundamental accounts for you. You could set up those accounts, start transferring and make profit a habit in your business by doing that.

If you’re like, “That was a lot to take in a short amount of time.” At least, set up one account. Call it to profit and transfer 1%. That’s what I tell most people on these podcasts that are looking for like, “Give me some practical advice.” As I said, it’s more about the habit. If you’re like, “I can’t set up all those accounts,” or whatever roadblock you’re having mentally, at least set up one account, other than all your other accounts. Name it Profit. Transfer 1%. Start building the profit muscle and the profit habit in your business.

You said the cashflow salad.

You are tossing the cash salad. Money goes and out. It’s all done.

I’m going to explain this in a way that my little pea brain understands. Essentially, when you first get started, you open one business account. You get profit from deals there but you have expenses. You pay your expenses out of the same account. You start losing track of how much you have to pay for the next month’s expenses and the months after that. You start losing track of how much money you made. I would argue, wouldn’t a lot of that be solved if you had a bookkeeper and you paid attention to your P&L every month?

WI 1003 | Financial Mistakes To Avoid

Financial Mistakes To Avoid: There are so many real estate investors who have very little financial literacy and really don’t know how much money they’re making and are losing money in their businesses.

 

I’m going to argue back because number 1) how many people especially one year or less have a bookkeeper? Number 2) if they do, they send them the receipts and say, “I don’t want to hear from you another year. It’s tax time. I got to get you this stuff at this point,” or they don’t do anything with that side. They don’t want to look at it. They’re scared. That’s not a side that they’ve ever been taught.

I tell people that Profit First is about managing the cash. If you don’t have a bookkeeper, no matter what, you have to manage the dollars that come in. You have to give them a name. If you have the one big account and it’s going in and out, you’re usually the one not giving it a name. It’s like whatever expenses come up and you’re not directing every dollar at that point. Get this in place because you, as an entrepreneur, will look at your bank account way more. Even if you have the best bookkeeper in the world, you’ll look at your bank accounts more than you will your QuickBooks or anything like that. I guarantee it if you’re a typical entrepreneur. That’s where I would rebuttal down.

I’m not a typical entrepreneur. My dad was a CPA. He had a Ph.D. in Accounting and was an Accounting professor for 25 years. I am a little advanced on the accounting side of it only because I was born into it. I always had a bookkeeper. I always keep track of my P&L. When I was flipping properties, I kept track of each property’s P&L. I do believe in having separate accounts. I don’t do the Profit First method yet. I just bought the book but I do have different accounts. I do have an account for saving for taxes. That’s important because I remember being like, “What if the end of the year comes and I forgot to save for my taxes?”

With all the money you make or if you close the deal, make sure that you put some aside in that account. I have a fund account. If I borrow money for deals, there is a fund with a vault that we can never accidentally or on purpose pay expenses out of. That is something that people do if they only have one bank account and they’re borrowing money for flips, I bet they accidentally pay their operating expenses.

In the book, I call that the OPM account, Other People’s Money. Put it somewhere else other than your operational money where it’s going in and out.

Do not touch that fund. I have that account and then I have different bank accounts for each business I have, but I don’t have it broken out as detailed as the Profit First method, but I keep a close eye on my P&L every month to see where I’m at, too. That’s a newbie mistake. What is a mistake that you see experienced investors make? Let’s give an experience an amount of time. Let’s call it someone who’s been doing it. There’s this difference between your first two years. In your first two years, you’re a freshman and then there’s this JV stage. The JV stage is 3 to 5 to even 7-ish years. What is at least one mistake that you see that a JV-level person makes?

Besides the same one, having one bank account which transcends every single level, it’s thinking about leveling up the financial side as well, too. If you’re scaling and growing, a lot of people wait on their financial side because that’s the last thing that they’ve learned about or they don’t want to invest in that side. That would be one thing. It’s making sure as you scale and grow that you have a good financial team so you know you’re still making money. The more money that’s coming in the top, you should have more money at the bottom, too.

It’s keeping track of that, making sure that you have a good team and that you’re scaling and growing it. The other big thing that I see, too, is as people start to scale, they do lose sight of, “Are they keeping money now? Do they have a bottom-line profit?” It’s easy to start pumping money into people, systems, processes, and software and then lose track of why you started the business. It’s not to only become a cash-eating monster, but to have money left over at the end of the day. It’s easy to go down the expense slope way too fast and then slide into it and be like, “We were doing so well. Now, we’re scaling up and we’ve got a lot of hurt and heartache on that side.”

I went through and I could relate to a lot of what you mentioned. I would say a mistake that I see experienced people make does have to do with scaling, but where it starts is drinking the social media Kool-Aid. I can relate because I’m in that position. You go on social media and you learn that so-and-so puts a big picture of his board like, “Fifteen deals this month.” He even has the total net profit of what he’s supposed to make. He posts it on social media and immediately you go, “Maybe I’m supposed to be doing that. Why am I not closing that? Something must be wrong with me. I need to be at that level. Clearly, I’m not doing well and I need to go there. What is he doing?”

You give them a follow and the next thing you do is you’re following him or her. You’re hearing all this stuff they’re posting. You get influenced to start as you see, “They started doing this marketing method. I’m going to do that. They have an office. I can see in that photo they have seven employees. I’m going to do that.”

It’s a slippery slope.

The golden trio of accounts you should have in your business: the profit account, the owner’s pay account, and the owner’s tax set up.

The next thing you know, you’ve tripled your business expenses and you’re going, “How did that happen?” The mistake that I see other than drinking the social media Kool-Aid is that typically, it’s not the newbies that do this. It is that moderate JV who has been in it for a couple of years. They go, “If I start this $10,000 a month PPC campaign, it’s an investment and I am going to 4X my return.”

They signed up for expenses based on anticipated revenue projections. The next month goes by and they spent $10,000 on whatever, a new acquisition manager, and a PPC campaign. The next month goes by and another $10,000 and they’re like, “We put one deal on the board from PPC. Sweet. Awesome. Let’s double down. Let’s put more into PPC.” Another month goes by and they’re now $30,000 on the whole.

Month four goes by and they are $40,000 in the whole because I deal fell out of escrow and they’re going, “I lost $40,000. I can’t fire Jessica. I just hired her. No way. I’m going to call up the Google PPC guy and see what’s going on.” He’s going to tell you, “You got to give Google PPC six months because of this and that.” They’re going to tell you that because they’re getting money from you every month. They don’t want you to quit. You are not alone. If you have fallen into that trap, I have been there.

What someone told me that now has flipped my perspective is he said, “Lead with revenue.” Don’t ever lead thinking, “If I do this.” Don’t lead with anticipated profit projection. Lead with revenue. If you have an X amount of business expenses saved up and an extra month because you got a good month, that’s the revenue that you can now go, “I can either invest in a new coaching program or I can try PPC for a month and see if it works.” Do not lead with the projected profit that you think you’re going to make. Do you agree with me?

Yes, 100%. A lot of people go down that road. They call it reinvesting back in their business and it’s a wing and a prayer. “Hopefully, we make money.” That’s what I teach with the Profit First and that whole mindset. It’s that formula, Sales minus Expenses equals Profit. It means profit is the last thing you think about. There is no planning. This sounds good. I think it will work, but there’s not like, “We’ll do this for three months. I need to see a return at the end of that three months or at least four deals in the pipeline from this or I’m cutting it off.” We have to give it time, but we also have to have a plan around it.

I’m much more open to that. If you say, “This is what I’m going to spend, this is how much I’m going to spend, this is where I’m going to spend, and this is the expected return I want as well, too.” I also like leading with revenue. If you do have an increase in revenue, the first thing I say, “Can you pay yourself more?” The second thing I would say is, “Is there somewhere where we should be spending this money that will help us return this to our people, a system, or a new marketing channel?” Is it pouring more into a marketing channel that’s already working that hasn’t been fully tapped into yet? It’s looking at your options and planning versus, “Hopefully, we make money here.” That’s never going to work out.

What is your opinion on the number of business expenses someone should have saved up before they add to their expenses? Let me give you an example. If somebody wants to scale their business and hire an acquisition manager. How much should they have saved up before they’re allowed to hire that acquisition manager?

I would say that the business overall needs at least three months’ expenses. That’s the bare minimum. In recession times, I would be a lot more comfortable with 6 to 12. If you’re looking to hire someone, I would also say, too, “Can you save up three months of their salary as fast as possible?” That way you could say, “I’m going to give them a quarter. Have they become profitable?” “Yes.”

They’re probably paying way more back to you than the salary that you saved up to be able to pay them. It gives you a good measuring stick of, “I saved this up for them. We have enough in there to be able to pay them. We did pay them. They brought in ten deals over the last three months. That’s a good start. It’s paid way more than what we’ve paid out.

I remember when I was newer, I used to be careful about hiring people. I can admittedly say, I drank the Kool-Aid and would hire people a lot that’s loose, not paying attention to like, “What is their salary going to cost? Do you have three months of that in the bank account plus your other business expenses?” If you look at it like that, you would be careful about who you hire because you’re like, “I don’t want to waste that $15,000 on a dud.”

Slow to hire and quick to fire. If you’re putting guards in place, it’s almost like you’re putting it in places where I have to go with a plan, make sure they’re the right person and the business is going to be okay, too.

WI 1003 | Financial Mistakes To Avoid

Financial Mistakes To Avoid: The biggest mistake you can make is having one big bank account where all your money goes in, and all your money goes out.

 

Another fire-round question. What would you advise if you have someone who is at a loss? Let’s say they’ve lost money. They’re halfway through the year. They had maybe a couple of bad deals or they had deals fall through. They overspent on marketing. What would you advise that person to do?

Set up Profit First. Get that in place. It’s there to make sure that we’re making good money decisions on the cash that comes into the business. That would be step one.

It’s visibility. That’s what Profit First is. It’s seeing what you’re losing every month.

It’s clarity. You control the red flags a lot sooner. That’s one number one. Number two, I would say, “What is there that we can cut? What can we add to it? Do we need to double down on something?” If we’re doing wholesaling and flipping, do we need to focus on one right now to make sure that we can get one side pumping out a consistent number of revenues?”

That’s something that we can do consistently. That would be another thing to look at and ask the owner, “If this doesn’t turn around, what is the plan there? What do you want to do if we’re not able to turn us around in a quarter? Do you have a plan for that? Is there lending or are we shutting it down? What are some of those options as well, too?” That’s never fun to think about, but we have to have a plan in place for that.

If it goes that direction, do we let everyone go and it’s only you? You’re back in the business and we have to start back here. We don’t want to go that route that’s why those first two points are all about putting everything in place that we can in order to save us from that but then we have to be real. What does this thing do?

If they have rentals, I would be like, “Do you have any ones that are underperforming or they are performing, you have equity, and that would help you dig out of a hole cash-wise and you can refinance even at a higher interest rate? Do we need to sell them off and you need to get yourself back in the black? There would be a couple of things that we would be looking at depending on who it is, their business, and what they already have going on.

As far as the topic of cutting expenses, everybody should audit. I call it an expense audit. You should audit your expenses as frequently as you can. I try to do it every week because I feel like we are going into a market. The market is shifting and we have to be more careful. I’ve audited my expenses and scaled down my business a lot. I’ve scaled down my team because I want to run lean. We’re in a recession.

One thing that’s very helpful if you are using QuickBooks is to download your expenses instead of doing it and looking at them through QuickBooks. Download the report and copy-paste it into a Google Sheet, Excel, or whatever’s easier for your eyes. There’s something about making the expenses easy to see. Going through each one, highlight them. Red means, “Do you need it?”

Ask yourself about every line item in that month. Is it a need? Is it directly contributing to revenue or is it revenue-killing? You have to have it. It doesn’t necessarily contribute to revenue, but it kills revenue. I’ll highlight in red anything that I can cancel and you would be so shocked how many software that you have 5 users when you have 1.

It’s silly expenses that you’re like, “Why do I have this pro-level plan when I’m only using the basics features that are free?” I did that and I was like, “It’s crazy how much I had to get rid of.” I was like, “I’m not using this. I’m not pulling lists for the rest of the year. I don’t need to have this subscription for lists. I’ll fire it back up in January. That saves me $300.” Highlight those in red.

Look at your options and plan versus just hoping you make money. That’s never going to work out.

Yellow is like, “Do you need this?” You dig in a little bit more, “Can you make it better? Is there any way to get this cheaper somehow?” Doing that regularly has helped me. There is this thing about it being easy to see on it. Take it outside of QuickBooks because QuickBooks can look messy for someone who doesn’t have an accounting background. Taking it out of QuickBooks and putting it in a simple sheet where you can see it easily helps manage expenses or at least, it did for me.

I love all your tactical advice. I want to leave with one more question and I don’t even know if you’re going to answer this, but I’m going to give it a shot. Of your clients that you have, what is the biggest waste of money? Anything that you can think of where you’re like, “They are wasting so much money on this.” You might not have an answer.

I’ve built a good business with good people. I don’t work with a lot of the clients anymore, myself. We’ve got over 80 clients we’re working with and 25 CFOs on the team. A lot of the people that came to me, even when I was doing it upfront the first few years, weren’t even spending it on crazy stuff. That’s what sucks. They’re spending it on marketing. It’s not like they were blowing up.

Some people buy fancy cars and have had to give them back, but at the end of the day, they’re not blowing it on crazy random crap that they’re going out there and buying. I’m trying to think of a specific word. That’s a great question but not in my mind. If I slacked my team, what’s the craziest expense you’ve seen now that’s come through someone’s thing? Why are they spending money on this?

Why are they doing that?

I don’t have a good answer for that.

That’s fair. I thought that would be a fun question.

That is a fun question and I need to be prepared for the future.

David, thank you so much for taking your time to talk about some of these things that everybody needs to be aware of and thinking about, especially where we are in this market. There is going to be so much money to be made in the next cycle. I’ve been personally waiting for the next cycle for a long time. I am so excited about where the real estate market is heading.

As real estate investors, we make our money in the down markets when we can buy low and cheap and ride that wave right back up. I am so excited, but I’m still doing the things that are necessary like tightening up a little bit because it could be a bumpy year next year as we adjust. I’m super stoked that you do offer a cool service. Why don’t you explain fractionalized CFO services?

It’s a part-time CFO at a fraction of the cost of what you choose if you pay a full-time Chief Financial Officer. We help people with a financial leader on a team. A lot of people don’t know what to do with their bookkeepers or CPAs or how to get the most out of them. We bring that financial leader in to direct that team. They also help implement Profit First, hold accountable, and build a CFO dashboard to make sure that all your finances are on track. You’re measuring your cashflow. You’re getting the returns on marketing in what you are spending versus what you arere getting.

WI 1003 | Financial Mistakes To Avoid

Financial Mistakes To Avoid: Make sure you have a good financial team as you scale and grow to know you’re still making money. The more money that’s coming in the top, the more money you should have at the bottom, too.

 

That’s what we do and you can find us at SimpleCFO.com/LaurenHardy. You can go there and you’ll get some awesome gifts, too. We’ll give you a copy of my first book, Less Stress, More Profit which has a lot of the concepts that I talk about in Profit First and some other ones as well, too. You want to get that book and if you want to get a couple of other things as well, too. We’ve got an awesome calculator for the Profit First side. If you’re wondering, where should I put all my money, it helps you get it there. If you go to SimpleCFO.com/LaurenHardy, you can get some of those tools to implement it right away and get more profit in your pocket.

I can’t let you leave without sharing another huge mistake I made with my money and it has to do with the CFO. David offers CFO service, but part-time. Explain what a CFO is.

In a big white-collar company that is making $250,000 to $$300,000 a year, they’re on that team making sure that the company knows how much they’re making, spending, and forecasting. They are making sure cashflow is in order, being an integral part of the leadership team of a company to make sure the financial department is in line, and helping you grow the business and put more money in your pocket.

I like to think of a CFO as the marrying between your business activities and your bank account or books like your accounting.

In simple terms, the bookkeeper and the CPA are the rearview mirrors. CFOs are the GPS, where we’re going and seeing exactly what you’re saying, the business activity, and the bank accounts. It’s how we see how your business activity is affecting the dollars that are in over here in your bank.

If you go out and try to hire a part-time CFO, which I did in 2021, do you want to talk about throwing money away? It wasn’t with you guys. This is before we met and I didn’t know. I swear I made this mistake and then we met the next month and I was like, “Are you kidding me?” I went on job boards. I posted an ad for a part-time CFO and I got this woman who didn’t know her business at all. I hired her anyway because she had this impressive resume and she was a good salesperson.

In total, I worked with her for six weeks. She charged me $25,000 in six weeks. Her weekly invoices were thousands and thousands of dollars. I’m not good at firing people so it’s this hard thing where I’m just throwing more good money bad going, “This wasn’t what I was expecting.” She kept promising, “In the next meeting, I have more for you, but you’re not ready for that yet.”

She would keep stringing me along to keep her and finally, I was like, “This is crazy. I can’t afford this. She’s going to be making more money than anyone in my company and she doesn’t even work.” She works for three hours probably. What you have created is pretty amazing because it is a need, but it’s at a price that people can afford.

David, thank you so much for your time. I appreciate it. If you guys are interested in joining my coaching program with all the best virtual investors in the country, make sure you go to www.VirtualInvestingMastery.com. We are coming out with some new changes to the program. I am so excited to officially announce it. With my program, you get six months of coaching. You get a complete and comprehensive course on all virtual investing.

You get access to a form where I’m answering questions every single day. We’ve got some awesome coaching calls that happen every single week with me where we can go back and forth. I answer all the questions you have. On a monthly basis, we do in-person meetups at my office where you’re more than welcome to come. I hope to see you. I would love to have you be a part of my group. Thank you so much for tuning into this episode. We will see you next time.

 

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About Lauren Hardy

Lauren Hardy is Virtual Investing expert and Real Estate influencer who owns multiple companies in the real estate industry including real estate investment, coaching, and software companies. She is also a Wholesaling Inc coach and co-host of the Wholesaling Inc Podcast.

Her experience in the last decade has been focused on real estate investing and creating products and services to serve the real estate investing community. If you are interested in investing in real estate virtually, house flipping, or virtual landlording, Lauren’s your girl.

 

 

 

 

 

 

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