"Hello and welcome back to another episode of the Collective Clicks podcast. This is your host, Brandon Bateman, and today I'm going to be joined by David Richter. David owns Simple CFO, a company that works with over 160 real estate investors with fractional CFO services. David has seen all the finances; he's seen the pros, he's seen the cons. He's even run an investment company doing 25 deals a month and not making any money. He talks about all the lessons he's learned through all of this, eventually writing the book 'Profit First for Real Estate Investors.' I asked David a ton of cool questions like, 'What is Profit First? How can you incorporate it in your company? What is a normal net margin or normal percentage marketing expense for a wholesale company versus a fix-and-flip company?' So, we could talk about all those different things to help you know if your company's healthy or not and get some actionable first steps to become more healthy from a financial perspective."

"How are you doing today, David?"

"I'm doing great, Brandon. It's great to be here."

"Yes, I am honored to be here as well. Feels like we've been spending more than a little time together recently. Just hanging out in Tampa for three days at Family Mastermind, so that's always a good time."

"Yes, it is, and it's been awesome. Just had you on our podcast too, so I like that I'm getting to see you more and more. Just got to keep the masterminds flowing and go into them."

"Yes. Out of curiosity, how much do you end up traveling to different masterminds and stuff like that?"

"Last year was crazy. Last year I just launched my book and so I got asked to speak at a lot of different things. So last year I was traveling at least once or twice a week almost. Wow, I think I did over 40 in-person events last year. So maybe a little less than a week, but some weeks I remember one week last year I went to four different places in five days, like in planes, and I never want to do that again. This year has been a lot better. Last year was about getting the word out. This year has been more like, 'Okay, these are the things I really want to go to.' So, I at least go to three masterminds a quarter, so that's still traveling, you know, three times every single quarter. Then I usually do some speaking engagements, things like that. So, it ends up being maybe every other week this year. Maybe it'll be 20 things this year versus 40 last year, which honestly felt better to me. This last weekend was nuts. I was in three different places, literally from Florida to Washington State, Columbus, Ohio, then back to Tampa. So, three different places in the matter of five days. But besides that, travel this year hasn't been as bad."

"Well, that all sounds pretty bad to me. I'm more of like a once-a-month travel kind of guy. A lot of people think that's a lot, but that's insane."

"Yeah, and I'm not a—I do not love travel either. I don't love being up in the airplane. That's why what I'm doing I really do view as the mission. Like, this is the mission that God has put me on this Earth for, and I need to get this message out. I've had frank talks with my wife and my daughter and getting them involved, which makes it so I at least don't feel the burden of really letting them down or not spending time with them. Because I've also had them say, 'When you're here, you're here at home,' so I at least have that going for me. I've had good people pour into me, like no matter what you're doing, make sure that tomorrow I'm taking all day off. Tomorrow I'm going to Mickey's Not So Scary Halloween Party, dressing up like Prince Charming. My daughter's going to be Cinderella, and my wife's going to be the Fairy Godmother. So, as long as you're doing those types of things and making sure that your home life and that you've also got the other stuff built in, it's like, 'Okay, then what do I really need to do in order to get this message out?' So, yes, it's been chaotic for me personally these last two years, traveling that much."

"Yeah, I believe it, man. That sounds like a lot. Well, let's talk about that message. Hopefully, I'm giving you a platform here to share this message without having to fly somewhere."

"Yes, that's why I'm very grateful. You see this? Whenever you see this background behind me, like if you're watching this on YouTube or if you're listening to this, like I'm sitting in front of my desk, I've got the bookshelf behind me. If you ever see me like this, I usually have more energy because I'm pumped that I'm home and I get to spread this message. So, the message that you're referring to is, man, this is the message in a nutshell: So many people make money but feel broke. They're out there hustling, the entrepreneur, they're out there doing the deals, getting everything done, but at the end of the day they're like, 'This isn't worth it because there's no money,' or their CPA might tell them, 'Oh, you made this much or you lost this much,' and they're like, 'Where did all the money go?' What I try to bring out to them is the message of hope. You don't have to stay there. You don't have to stay making money and feeling broke. There's a system to get out of that, and that's where I go and speak about the system, and it's all around the book 'Profit First.' I try to get that message out as much as possible because it's not just about the speaking and the traveling. It's about what I've been able to view over the last few years of having this business and people actually not feeling broke anymore or not going through the same financial struggles that they have their entire business career. Because the number one thing after I speak, the number one question I get is, 'Where were you 10 years ago?' or 'Where were you when I first started this?' Because they've never heard anything like this before when it comes to their money."

"Yeah, I totally understand. And I have to say, I've heard more than a few things like that from the clients that you've worked with and all the impact that you've had. So, let's talk about—so for anybody who has—I mean, honestly, I'd be a little surprised if somebody hasn't heard of 'Profit First' yet, but maybe you know better than I. Maybe there are—"

"I was in a room two days ago, two days ago, where there were 200 people, and probably 90% of them had never read the book. So that's why it's like, 'Oh man, you haven't heard of this book? Got to get this message out.' So I'll dive into it. If you're listening to this podcast, you've probably read 'Rich Dad, Poor Dad.'"

"David explains the 'Profit First' concept—taking profit off the top before paying expenses."

"Poor Dad, you've probably at some point read some of the other entrepreneurial books too, like 'The Seven Habits of Highly Effective People,' maybe 'The Richest Man in Babylon.' Well, all those books say some version of 'pay yourself first,' or 'a portion of all you have is yours to keep,' or 'put first things first.' So, I will just tell you that 'Profit First' is really built around those statements and that guiding theme of profit first. In a for-profit business, we need to put profit first. Where a lot of people out there have the formula backwards, they say it's sales minus expenses equals profit, meaning, 'I make a sale, pay everyone else and their mother, and hopefully, at the end of the day, I make some profit.' They build their business on the hope and pray plan. Well, that's where the 'Profit First' formula says, 'No, it's sales minus profit equals expenses,' meaning, 'I make a sale, I take my profit first off the table and build the business that I want to and the lifestyle that I want to, and then I work the expenses in after that to make sure I still have the business there to support the profit.' So, that's where a lot of people have heard some version of that, like I said, from those other books because all those other books are basically that formula—sales minus profit equals expenses or 'pay yourself first' or 'a portion of all you have is yours to keep.' That's where 'Profit First' takes it one step further and why it resonated with me a lot more than just those statements that I'd heard before. It says, 'Here's an actual system for your finances to make sure you're keeping more of the money that you're making, that you actually can be able to put that formula into your business and make it a reality.' It's not just words on a page or something you heard on a podcast."

"If you look at me, I look like the nerdy numbers guy, so I get it. You feel like, 'Okay, this works for you because you're a nerd. You like the numbers, you like the back end, all that stuff.' But my background is real estate investing. I've been a part of over 800 deals in the real estate world. I've done a lot on the single-family side. I mean, I've been in it to where we were doing 25 deals a month at our highest point but spending 206% worth, and it's like, 'This sucks. It doesn't matter.' So, I've lived through it, and that's where 'Profit First' showed me the light of where I'd read all those books before. Then I read 'Profit First,' and then I was like, 'It's not only the mindset that I've heard growing up and from all these other books, but then in my entrepreneurial journey, it's also this system as well.' We could dive into that, but that's the overview of 'Profit First.' It's really the 'pay yourself first' formula coming into a system that you can actually put into your business."

"Yeah, that's super, super well explained, David. All right, let's talk about tactically how this works, right? Because I know some people—I—let me tell you my experience the first time I heard about 'Profit First.' Maybe I'm a unique person, maybe I'm not. I was like, 'Huh, let's see. I'll let you know. Let's see. Sales minus expenses equals profit. No, sales minus profit equals expenses. It's the same equation if you know anybody who's done basic math, right?'"

"Yeah, right."

"So, I think it's like—it's not the math that makes the difference, right?"

"Exactly. It's the mindset."

"It's the mindset that makes the difference, but I just—to me, it didn't—it seemed obvious, right? It seemed like this is like the basic path. Yet, I think so often we get caught in these traps where you kind of know that—what's the best way to say this? So many of the things that you learn that have the biggest impact on your life are things where you look back and you're like, 'I kind of knew that,' but you weren't really fully acting in accordance with it. So, let's talk about some of the things that—when people truly understand this and they truly absorb this mindset, or maybe some tactical things that make sure this happens. What do you actually do tangibly different?"

"Yeah, I'll tell you about the tangible. I want to hit on what you just said, though. That's the other thing. When people actually—when we go through the tactical part, they're like, 'I've known about this before. I've heard this from somewhere else,' or 'I feel like I have,' just like what you said. And I love how you said that. Most of the things that make an impact on our life, we feel like we've already known, and it's just being exposed to us or getting us to pay attention to it, usually at a time when we need it. Like, I needed 'Profit First' in that real estate business where we were just spinning our wheels doing a bunch of deals but not making any money at the end of the day. That's where, with this, the tactical side is—it's real simple. It is very simple. If you've ever heard of the envelope method, like in your personal finances, where you literally grab envelopes, name them different things like groceries or spending money or restaurants and food or whatever, and you put different envelopes, and then you spread your personal finances out to where you have them in the different envelopes."

"The 'Profit First' tactical side, the system behind the finances, is very similar. Like, Dave Ramsey's made that popular. Whether you love him or hate him, you've also got a lot of that where we've learned that just from different people or maybe grandparents or parents taught it to you. But that's where in the business, why I like this system is it's the same core concept of we need to be intentional with every dollar and give every dollar a name. It's naming the dollars. Because one of the biggest mistakes most entrepreneurs make is having one big bank account where all the money goes in, all the money goes out, and they have no clarity. That is how they're running their business. 'Do we have money? We can spend it. We don't have money? We can't spend it.' And the core problem is we think that income or the next deal will solve all of our problems. Yet, we get to the point where we scale and grow and scale and grow, but we still have the same bad habits around the money and don't know, and you never get out of that rat race. You have literally built yourself into a rat race."

"That's why it's very important not to have the black hole account and just have one big account where it all gets sucked in and out again. That's where I want you to set up specific bank accounts that are for the profitability and for you, the benefit of the owner—the owner's benefit accounts. The first three, and I'll give you them here on this podcast because this is something that—even if you just did this from this podcast—like, here's why I'm excited to be doing this podcast now, because I've been doing this so long that I've been to other events or other podcasts, and people have just taken this one step and told me it's brought them more financial peace in their business and in their life. So, if you could just do this, set up at least one of these three accounts that will make the most impact on you. I call them the golden trio of accounts just because I'm a big movie nerd. I mean, if you're looking at me, I've got the glasses and stuff. Like I said, I lean into that hard. So, I love 'Harry Potter,' 'Star Wars,' all that stuff. They've got the three main heroes, right? Luke, Han, Leia, always making sure the story moves forward and the good guys win in the end. These golden trio accounts are to help you because you, as the business owner, are the hero of your journey. It is your 'Star Wars' story, your real estate company or your entrepreneurial journey, is what is going on there. I want three heroes to make sure that you're winning in the end."

"So, those three to set up are the profit account—an actual physical bank account that's a checking business bank account called 'profit'—another one called 'owner's comp' for owner's compensation or owner's pay, then there's the 'owner's tax' account. So, those three accounts—the golden trio—all for the benefit of the owner help you keep more of the money you're making and be intentional with your dollars. So, those are the three to set up. I always get asked, 'What's the difference between them?' We can dive into that if you want to, Brandon, but the tactical part is—now here's where it becomes the habit. From every deal that closes or every time you get income, you put a little bit of that money towards those three accounts first, and now you've made profit a reality in your business. It is now physical money in a bank account that you can look at on your phone versus some spreadsheet or some profit and loss statement that some CPA gives you at the end of the year that tells you you made or lost money. Then you're like, 'Where is that money at the end of the year?' That's the big difference in how you can make that a system as an entrepreneur on the back end. But those are the first three accounts I would set up without going into more detail."

"Yeah, that's awesome, David. In the spirit of talking about how so many of these things that make a big difference are just things we always knew about that we start to pay attention to."

"It got me thinking that a way that businesses pay attention to things is not necessarily the owner paying attention to it, but that's why roles exist in a business, right? Like, why do businesses have CFOs?"

"Well, because if you don't, then you run into all these problems, right? I can almost guarantee you that like 95% of these entrepreneurs or more that you're talking about that feel that way, it's because they don't have a CFO. And what they're feeling like, that feeling, is the feeling of not having Financial Clarity."

"Yeah, so let's talk about, um, let's talk about like when to consider getting a part-time CFO for your business. At what point should you have a CFO in your company? Um, at what point should you be doing it yourself? At what point should you work with some sort of outsourced option?"

"Yeah, so, and CFO, if you're listening to this, Chief Financial Officer. Most people think white collar, big business, like, 'I'll never need a CFO. I'm just a startup,' or 'I never want to get to 10, 20, 100 million dollars and have a full-time CFO.' That's where I created a part-time CFO company about four years ago because that need, there, there's a need in the marketplace of people that are too big not to have financial leadership but too small to need a full-time CFO."

"So it's like, I want you to have that help. So I would say if you're just getting started out, you do not need a CFO. Like, even a fractional part-time. Fractional just means part-time. You do not need a part-time CFO on your team. You need someone there that might be a good bookkeeper or you do it for the first, you know, maybe up to $200,000 in revenue."

"Maybe you go to $200,000 and then you start thinking, 'Maybe I need a leader or someone here telling me what's going on.' But then whenever you start scaling or growing, excuse me, whenever you start scaling and growing the business, that's when you're like, 'Okay, do I want to scale profitably? Then I probably want a financial leader on the team. I probably want someone that is there and knowing where is my money going and giving me Clarity, helping to implement Profit First.'"

"But if you're a new business owner, you can start setting this up if you are making any type of money starting 200, 300, 400, 500. If you're at seven figures, definitely that's when to start looking at it because I view the three financial roles, which one person could take all three of these or it could be three different people. That's a different, you know, different question for a different time. But that's where you've got the bookkeeper, CPA, and CFO."

"And usually, I'll equate it to a hospital. You've got this bookkeeper like the nurse coming in every day just checking on you, making sure everything's okay, getting your charts in order. You know, they're doing the day-to-day, doing the entries. Then you've got the CPA who's kind of like in his own wing in the hospital and like just like, 'Okay, come see me when you need the leg to be sawed off,' or whatever. You know, it's like the CPA does the specialist job of, 'Okay, I just do the taxes and I'm really here for tax strategy or tax planning or just preparation and filing.'"

"Then you've got the CFO who doesn't work for the hospital. At the hospital, in this case, is the IRS. You've got the bookkeeper and CPA who work for them, and then the CFO's like the private doctor who comes to your house and says, 'Are you healthy or not? We might need to get you on the treadmill, you know, like maybe this is not just some pills you need to pop, but maybe this is something else that needs to happen,' and really helping you get healthy overall so that way you don't have to take the trips, you know, to the hospital. It's like, how do we do this and guide you? So that's where a CFO comes in as a financial leader."

"This is honestly what changed my life back in the day of actually having Financial Clarity. It was reading Profit First and then having someone on the team that acted like a CFO that was like, 'Here, this is where the numbers mean. This is the clarity. This is the projections. Like if we keep going this route, it's not going to be pretty.' You know, it's like helping us get back on the right track financially."

"Because even back then, I did not, as a business owner, which is hilarious, I own a CFO company, but I do not have the accounting background. Like, I have a company now full of people that have those backgrounds and credentials, but back then especially, I was just like every other entrepreneur out there, 'What the heck is going on?' So it was having that person on the team who knew what the heck was going on. And I became smarter as a business owner too and more savvy of how to read the profit and loss, how to read the balance sheet, and how important that is. Especially in a real estate investing business, it was like just learning those simple things plus then implementing a system like Profit First."

"So I would say if you're in that first stage, you know, of business where you're just getting up and running, Profit First is a great first step that you can start to implement yourself. But then if you need that hand-holding while you get bigger, that's where a CFO comes into play to really hold you accountable to that system. A lot of people who start don't continue the system. I hear that a lot while I'm out and about as well, like, 'Oh, I started Profit First but then I didn't stay on board with it.' So it's like that accountability and help there as well too. So those are just some of the things from observing this over the years and just observing the people that need that type of help too."

"Yeah, I've, uh, something I realize at every stage of my business as it grows is that all these big companies that have all these roles, you still need all those roles. Somebody has to wear each one of those hats. Just, you're used to kind of it being you and like the 20 minutes that you had at the end of the day checking your bank account and making sure you have money, right? That was like the earliest version of the CFO in your company."

"And then as you grow, these roles take more life, right? And it gets a lot more complicated, it gets a lot harder. Um, but we forget to look at those things."

"Yeah, um, I want to ask you a question, and probably a different, uh, a different path than a lot of your interviews go, but we love marketing here, right? That's what we talk about. A lot of people come to this podcast wanting to learn about marketing. I'm sure you love it too. Um, so, and I think you'll have a different perspective on this, right? Yeah. So people might ask us all the time, 'What budget should I have for these new digital marketing campaigns that I'm going to launch?' Right? And then our answers are going to be something along the lines of, 'Well, depending on your market and depending on these factors and how many channels you want to do and, you know, all these different things. What kind of revenue you're looking to generate from the campaigns based on XYZ? Maybe you want to be somewhere in this range. That's going to be what can accomplish your goals. But really important is to make sure it's sustainable. Whatever you have putting towards marketing, you want to make sure you've got six months of runway there, right?' So that's like, that's our standard advice, right? Take into account all those factors."

"So let's just say I'm an investor, and I'm, and you're my CFO, and now I'm asking you, 'I want to start these new digital marketing campaigns. How much budget should I put into them?' What is the path that you would go down to answer that question?"

"Typically, if we don't already know their numbers and they're facing already a financial mess, we're just going to say 25% off the, you know, like right from your real revenue in the Profit First terminology. So I'll even give you like a hard answer like that, not the 'depends on this and that.' It's like, 'Let's at least do 25%. Can you get at least a 4X return on your marketing?' You know, like that's where we start."

"Total marketing budget, right?"

"Total marketing budget. So it's like this, so I'm doing a million a year and I'm already spending grand, then now I want to spend another 150 here to get to 25% of the top line."

"Exactly, if you want to go down that road. And if this is where you can start. But a lot of people, we have to walk through first and just see the clarity. Do you have that money to be able to spend on that channel at this point? Because, and what are the returns on your other marketing? Like, 'Cause I see this PPC and like the act that is the best type of lead because they're reaching out to you. So it's like, can we go, how fast can we get to that type of thing? Because then you have a more sustainable business."

"So it's like, how can we build that into the budget? Sometimes we'll even set up a different bank account that's a sub-account of like some of the Profit First accounts and make it just for marketing. So that way we know this is how much we're able to spend every month

. And we have to keep that constraint. So I would say at least if you can do that, but then also if you're getting the 4X or more return on your marketing, then it can scale up to as big as you want, you know? So it's like if you can keep those targets, and we have that system in place, we have a sub-account for the marketing. That's where we keep them accountable to that."

"And if you have a hard time getting there, that's where you might need to say, 'Maybe I don't need a fractional CFO at this point, but maybe I need a fractional CMO.' You know, like, 'How do I get a fractional Chief Marketing Officer at this point?' But it all has to have a leader in each one of those roles. But that's typically how we do it. It would say, 'At least 25% off the top line.' If we can make the business sustainable with a 4X return, then we're ready to go down that road."

"That's awesome. And just like thinking about what you said, it's like the 4X return is key, but then also how you're funding it. And thinking about, like, to me, I'm like, okay, we can tell people, 'Here's how to fund it.' What you said was super key, and this is, I think, super important to hear from people because people hear the 4X return and they think, 'I need to know what channel will get me a 4X return.' But a lot of that is up to the business. A lot of that is up to the person's funnel, their follow-up, their marketing system, their copy, their follow-up, their team, their culture, all of those things."

"Yes, I had a guy who was crushing it with Facebook ads, came to us because he was worried his ad costs were going up. And he's like, 'How can we pivot? What can we do?' And it's like, it wasn't a channel problem. It was the sales conversion process after they got the leads because he was used to them being much lower cost. So it was like, we had to analyze that part of it, too. So it's, like you said, there's different factors that come into it, but if you're running it from a CFO standpoint, it's like, 'Okay, here's the clarity. Here's the 25%. We're going to get that. We know if we're getting this return, then we're good. If not, how do we switch to get there?' So that's where we start."

"I literally had a call last week with a partnership where they were like, 'This last year we had some great months upfront, but then we just kept spending like it was the great months, and then it started slowing down. We had no idea what we were doing, got into a lot of debt, and this year is even better than last year, but we're paying off all the debt we got ourselves into, so we can't even enjoy the fruits of the labor of this year being a better business and doing more deals.' And I'm like, 'Like knife to the heart, I've been there. I feel that. That's why I try to get this out there because the systems help you create where in the good times you're storing up the nuts, but then when it's the bad times, you're taking some of those nuts out and saying okay, we still need to market, we still need to pay our people, I still need to pay myself as an owner because if I don't, the whole thing goes down if I'm just running around like a chicken with my head cut off.' So, yes, I 100% agree with that, and it's like I just see this all the time, and that's why I'm so passionate about getting this out and why I go and travel and speak and do all that because there's so many people that talk about marketing and sales a lot, you know, like as, 'Okay, I'm having an issue, I either need to cut marketing off or need to ramp it up,' but a lot of the reason they hit their head on their pillow and they're not able to sleep is because there's no money in the account and they're wondering, 'How do I even pay for marketing, or how do I pay this person, or how do I hire the person I really need to?' That's why I'm like profit first and like the financial side is so crucial. If you're going to work hard to get the deals coming in, you need to work just as hard to have a system to catch the money on the back end so you can keep growing the business and have the business you want and why you started it."

"Yeah, totally understood. Alright, I'm going to take you through a scenario if that's okay with you, and it might be one that you're kind of familiar with because you've been there. But, you know, just diving deeper and understanding this on a deeper level, right? Let's just take, say, the very basics, right? I'm doing 20 deals a month, and I'm finding a way to spend 20 deals a month worth of expenses, right? Opex equals 100% of revenue, which equals naturally 0% profit. Cool. So I follow your advice earlier in this and I say, 'Okay, I need these accounts, I'm going to start setting aside money for tax, I'm going to start setting aside money for owner income, and then for profit.' Right, I do that. Okay, now I have even less money theoretically for operations of business because it's not working right, like the business isn't capable of producing that. So how do you tackle this from that standpoint? Obviously, operational expenses need to go down, but how do you know in what areas they can be decreased and what the best way to do that is without killing the business in the process?"

"There are two things whenever we run into that situation that I always give guidance on that help right away and immediately. Number one is if you set up this system, try to do 1% to those accounts, the golden trio of accounts, and say, 'Okay, if you were living at 100% before, can you live off of 97% and just cut 3%?' Usually, most people, when we go down this road with them, can cut 5 to 10% easily, on average. Some people are even more, 15 to 20% of just bloat that's inside of their business. So it's like, number one, you've got a good margin. Exactly, now you've got a good margin, but that's where number one is can I do at least 1% of these accounts, can I get a little bit of breathing room. This would be like you're drowning and then only your mouth is sticking out of the water. Like now you can at least breathe a little bit, so that's where we're trying to get to."

"The second thing is we give them a system, and we walk through with a way to cut expenses right away because a lot of times if you're doing that amount of deals, it doesn't sound like more deals are going to solve the problem because you're spending just as much as you're making. If you were doing 20 deals a month, you were probably at one time doing one deal a month, then maybe five, then six, then seven, then 10, so you're in some bad habits. So the first thing I want to do is give you the system of profit first so we can start putting away some money, but then also give you a system to cut expenses, and it's a really simple one which has been hilarious, some of the stories I've heard from this. But it is where you take out either one quarter or your past two quarters of your bank statements for your business. As the owner, this is going to sound like nails on a chalkboard, but I promise you this is more than a $1,000 per hour task for you to do. You print those out, and then for every expense in your business for the last three to six months, you mark them P, R, or U. Is it profitable, replaceable, or unnecessary? So is this something that's bringing me P, which would be profitable, making me money or saving me a ton of time or headache? That would be your admin people, your finance people, like they're helping me make sure that I'm making enough or keeping enough, or they're taking things off my plate. Salespeople would be like they're making me money, type thing, or the marketing channels, like I have to spend the money on marketing because it's profitable. I'm getting 4X return or 10X return on this marketing channel. Those are the profitable things to look for. Replaceable would be like, 'Okay, is there a faster, better, cheaper system, or is there a better person that if I put more into this, I'm going to get more out?' Like I go from direct mail to PPC. Like I could spend maybe the same amount of dollars but get a better return for my money. Is that a replaceable expense where you're doing one thing that's not working so well, and then you put it with something that could turbocharge it?"

"U is very easy, unnecessary. Usually, it's the things that you're just like, 'How did I keep paying for this thing? What the heck's going on?' Whether it's a subscription, a service, sometimes it's hard because it's a person. You're like, 'They're a great team member, they're a great culture fit, but they don't do anything. They don't push the business forward.' That's when it gets tough is when you have to look at your individuals on the team and do the same exact exercise by yourself in your office or at home. Don't do this in front of everyone. But then from here, if you have the expenses that people are in control of, you just tell them, 'Hey, these are unnecessary, we need to cut these off, cancel all these.' And then the replaceable and the profitable ones you usually talk about if you have a leadership type meeting, whether it's you've got a small leadership team and it's you and someone else, or it's just you sitting down and saying, 'Okay, what am I going to do about these expenses?' But that's a framework that I also give in the book too. Like this is something that I have literally had people save from anywhere, the average is $1 to $2,000 a month, which is $12,000 to $24,000 in your pocket at the end of the year. I had our highest ones, two clients that we worked with, where both of them were able to cut $50,000 within the first quarter. $50,000 a month, like they were over $100,000 in expenses, and they looked at their team, they looked at all their processes, they looked at all their systems and CRM and all this stuff, and they cut $50,000 a month. So those are the craziest stories on both extremes. Like I've got people as small as $1,000 a month when they just listen to this and they do that, but it's still $12,000 in your pocket or $600,000 a year, you know, like with the $50,000 a month. But that's a framework where if you're like, 'I am literally spending as much as I'm making or I'm bigger than this,' this will literally save you thousands of dollars every month just by sitting down and having a framework to go through that."

"Yeah, that's so interesting. Something that someone told me once that I wish I could even remember who it was, but it impacted me. They said, 'In your personal life, a penny saved is a penny earned. In business, a penny saved is four to five pennies earned.'"

"That's really good. I like that."

"Yes, that is so good because, yeah, I love it because I think so many investors view it as like, 'Oh, I could save this $10,000, or I could just find that other deal where I'm going to make $10,000.' Right, but those are not the same thing at all."

"No, no. Okay, I have one last question for you. Something I'm really curious about is net margins. There's a lot of talk about this in the real estate investment industry. Why, and you know what? I don't believe most of it because I don't believe that most people actually know their finances."

"Right, yes."

"I believe it just as

much as I believe all the other metrics that are thrown out there. But why does a net margin matter, and should it matter? When do you decide that it's a metric you need to really be paying attention to?"

"Yeah, we've got quite a large sample size."

"Yeah, well, that's super cool. Thank you, David. I don't want to take too much of your time with all my weird questions. If somebody listens to this and feels like they finally heard the gospel of David Ror that's going to change their life, please tell me what are the next steps?"

"Yeah, so I want to make sure that you have two things from this: get my book, *Profit First for Real Estate Investing*, which I'm giving to you for free at this link, and also the *Profit First* cheat sheet. The *Profit First for Real Estate Investing* cheat sheet literally tells you the first steps of getting this started and has links to different resources that I give out. I want you to have no excuse not to start keeping more money right away. I want you to start keeping a whole lot more. If you go to simplecfo.com/baatman, just like Baitman Collective here, and Brandon Baitman, you know his last name here, it's simple CFO, like Chief Financial Officer, dot com slash baatman. You can get my book for free and I’ll give you the download. I think we also give the audio version too, and then we also provide the step-by-step and a visual overview of *Profit First*. So if you're like, 'I love that podcast, but I'd like to see a picture of what's going on with the accounts,' I also give you that overview. It’s very much like, 'Okay, I put it in this account, and it goes from here to these other ones.' That'll give you a better deep dive into the actual details of the book, like the setting up of the system and any questions you might have, and the first steps if you're like, 'The book sounds great, but I just want to know how to implement this.' You get that as well at simplecfo.com/baatman."

"Love it. Thank you, David. You've been so generous with your time today. And for everybody else listening, I will see you next week."

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