00;00;00;00 - 00;00;26;19
Unknown
This week. I've had five calls myself personally. Every one of them said I've never had this happen like this, but all five in a row said that they were not sleeping at night, and all five of them was not because they were losing money, but because they didn't know. They didn't have the clarity, they didn't know how much they were losing, or they didn't know if they were going to run out of money, or they didn't know where the money was ending up.
00;00;26;21 - 00;00;49;18
Unknown
Welcome back to the Seven Figure Flipping Podcast. I'm your host, Adam Whitney. Why do I got a massively impactful guest, somebody that I have been personally a fan of for a very long time. This guy is, he's a brilliant mind. And he wrote a book called prophet first. His name is David Richter. David, welcome to the show, Adam.
00;00;49;18 - 00;01;11;13
Unknown
Thanks for having me. I'm super excited to be here today. Cool. Hey, here's the thing, guys. David is known for writing a book called prophet. First. It is a, he's going to explain it in detail, but it's a method to bucket and manage your cash in a way that's going to make sure you are profitable and paying yourself, which is the number one problem that we in seventh year flipping see and have to solve all the time.
00;01;11;13 - 00;01;39;13
Unknown
It drives us absolutely crazy because you got in this business for a reason. And it was not just, work for free. So, what what people may not know about David that I think is a secret weapon in the industry today is that he runs a company called simple CFO. Okay. And what they do is like, look, some of your businesses aren't ready to bring on a full time, you know, six or multiple six figure CFO.
00;01;39;19 - 00;02;06;10
Unknown
You. But you need somebody. You pay so much attention to marketing, to sales, to project management. And then you forget about the finance and admin component, the paying yourself, the building wealth, the building freedom component of your business, even though it should be what you lead with. So today we're going to dive in deep on what profit First is and what simple CFO can do to help your business.
00;02;06;10 - 00;02;22;29
Unknown
Like they have so many of the best investors in the country. David, how about you give us a quick update on how you got here into the real estate industry, and how was all this stuff even born? Yeah, so I got started young. I got rich dad, poor dad given to me in college and that was game over.
00;02;22;29 - 00;02;42;28
Unknown
I wasn't going to do the same, you know, work for 40 years and just retire anymore. And then I linked up with a real estate company right out of college that was in my local market, and they were doing about five wholesale deals a month when I first started with them. And over five years we grew to about 25 deals a month, between wholesale fix and flip, lots of fix and flip.
00;02;43;04 - 00;03;05;17
Unknown
We did turn keys. We had about 120 unit portfolio and a lot where lease options and the rest were straight rentals. And so I got to cut my teeth in that company, which was amazing because while I was there, I was part of 800 deals that were done because like we were doing 300 year at our highest point, which is great, but we were spending about 26, you know, a month worth of deals out the door.
00;03;05;17 - 00;03;20;06
Unknown
So it's like we do 25, but we spend more than we're making. And I was like, what are we doing? You know? So that's where I quickly realized that it doesn't matter how many deals we were doing, it just matters if we're keeping the money or not. And I was also in masterminds at that time, back then.
00;03;20;06 - 00;03;35;02
Unknown
This is about ten years ago, and a lot's of people were in the same boat. They were making money, but feeling broke. We weren't the only ones. So that's really what kicked me off down this road. I wish I had a better ending to that story, Adam. Like, I, I went in there, I read profit first, and boom, I fixed everything.
00;03;35;09 - 00;03;54;07
Unknown
The book wasn't even out then. I don't think that way back then. But I went and started working with another investor because needless to say, that company did not stick together. We had to go separate ways. There was lots of people on that team and it was very amicable split, but we couldn't keep doing $25 a month and spending 26 worth.
00;03;54;07 - 00;04;11;22
Unknown
So I worked with a guy in Richmond, Virginia. He was doing one flip, a month and he was in the same boat. And I'm like, oh my gosh, okay, this doesn't matter how many deals you're doing. It's like, this is everywhere. So that really opened my eyes like I thought it was us because of the high volume. Then I saw someone doing a lower volume like, okay, here we go.
00;04;11;22 - 00;04;29;15
Unknown
Like, what's going on here? So I helped him get his numbers straight. He didn't have good numbers or anything. He wasn't paying himself, just a lot of the stuff that you were saying at the beginning there, Adam. And that's where I helped him get that clarity. Just on three numbers. What he made, spent and kept, like just what came in, what went out, what did he get to put in his pocket?
00;04;29;18 - 00;04;44;20
Unknown
He came back to me about a day later. Once we got it all done, he was like, this has been life changing. Like I looked at the numbers. I looked at this stuff like I can actually make decisions from the numbers now and I feel more in control. I was like, oh, okay. Like I want to give other people this feeling.
00;04;44;20 - 00;05;09;27
Unknown
That's where simple CFO was born about six and a half years ago now. And I also had a good mentor at that time and still a good friend. Gary Harper called me up, said, I heard your, starting simple CFO. I think you should read the book Profit First by Mike McCall. And so I read that book and one night took ten pages of notes and said, every single client we work with is going to get profit first implemented, because, of course, of what we're going to talk about here on the podcast.
00;05;09;29 - 00;05;30;07
Unknown
But about ten months into working with people, that's when I reached out to Mike Markowitz to write the book Profit First for Real Estate Investing. So there you go. There's like a four minute overview of how I got into real estate and then how I got into simple CFO and writing the book. Oh, good. So good. Okay, let me I oh, there's so much to go through here real quick.
00;05;30;10 - 00;05;48;22
Unknown
What what is your what's your like, educational background? Like, where did you come from? This is my favorite thing about that I love this. You know why? Because I tell everyone I totally look like I should have gone to college for accounting. Like, I look like a bookkeeper accountant person. Like I'd be filing your taxes, you know?
00;05;48;29 - 00;06;06;01
Unknown
But no, I honestly, I have an entrepreneur blood in me. My. I went to school for teaching secondary education. I thought I was going to be a teacher at a school. Only now it's a little different. I teach, but I teach people how to make sure that they're financially free and know where their money's going. But that was my background.
00;06;06;01 - 00;06;32;19
Unknown
And then honestly, from there, a lot of the other stuff was every entrepreneur's journey, right? It's personal development, like I had to I read a ton. That experience in my early 20s was way better than my college education. Five years in that real estate company, going from, you know, it's still a good volume to then like a massive volume and seeing that scale and like what worked, what didn't work was a way bigger investment in my education than even the college that I got.
00;06;32;19 - 00;06;49;28
Unknown
So, yeah, that's my background in the education field. And no, definitely not in the finance space. And people say, well, you own simple see if I'm like, yeah, like everyone on the team is way smarter than me. Like, they have their MBAs, their degrees, their finance degrees, like they're this high level financial person. I am a better CEO than I am a CFO.
00;06;49;28 - 00;07;10;16
Unknown
Personally, I have my own CFO. Like to make sure that I'm on the right track as a CEO. So that's my background and I just I love making sure that people have that, you know, teammate on their team. Yeah, I love this. By the way, Gary Harper is an esteemed alumni of seven figure flipping. Was a, awesome high volume flipper.
00;07;10;16 - 00;07;34;11
Unknown
Does a lot of, help. He helps a lot of businesses now on the kind of infrastructure space. So, cool, cool to hear that connection. Hey, the other thing that you said that is, like, really, really a big deal is you reached out to this, like this renowned author who, when he released Profit first became he was on the podcast cycle.
00;07;34;11 - 00;07;53;07
Unknown
He was this big guy, a name for a bunch of nobodies. But you had the the goals to go and like, hey, man, I've been doing this and I want to write this book. Tell me about that part of the yeah. So that was strategic to because I, I just spoke to Mike last month and he said that Profit First is now surpassed a million copies.
00;07;53;09 - 00;08;15;07
Unknown
And like, there's only a new book like the. Yeah, it's in the business space that have done that, which is incredible. But I reached out to him because when I first started simple CFO and Gary told me I should read his original book, then I actually became a profit first professional, which is like his service in order to sell profit for his services and implement with people, you have to be a profit first professional.
00;08;15;07 - 00;08;32;06
Unknown
So that was my first. And to make sure I was a part of at least the circle. But that doesn't get you direct access. So that gets you like a coach, like to help you to know that what you're doing and make sure you're doing it right and everything. Well, I asked my coach about ten months into it because my the guy that was helping us on the marketing side, he's like, you should write a book.
00;08;32;07 - 00;08;48;28
Unknown
You should write profit first. And the real estate, because of your real estate background and because of profit first. So I reached out to my coach and I said, can I have his email? She's like, sure, you can shoot your shot. And so I she gave me his email. I emailed him out of the blue, just said, I'd like to set up a meeting if you're willing to, and then I'll never forget.
00;08;48;28 - 00;09;05;07
Unknown
He set up a meeting on my birthday, July 2nd. And then I was like, he said, yes, let's do this. And I'm like, this is the best birthday present ever. So that was where I got the okay to write profit first for real estate investing from Mike Markowitz. 18 months later, it was out and had the physical book.
00;09;05;14 - 00;09;26;13
Unknown
That was a process. I could go into that as well too. But the book world is so different than real estate or anything else that I've done. But that's how I got in with Mike McGough. It's and then able to write the book. I there's, there's so many good just like General entrepreneur lessons. First off you you you paid to be in that world, which a lot of us do, me included.
00;09;26;13 - 00;09;48;00
Unknown
Like I'm in like, embarrassing, maybe like five masterminds. So yeah, I, I did. I have a fitness coach. I paid him and it wasn't cheap. I have a social media coach shout out to Sam Primm. I wasn't cheap. Paid him. I have, real estate coaches. I have, like I have I pay all these coaches. I pay to play.
00;09;48;00 - 00;10;07;05
Unknown
Why? Because you're like, I need this thing and I need to happen fast. I'm going to go pay for the access and the information and the implementation. So I think that's really, really powerful. So many people have such a hard time getting over that hurdle of parting ways with a little bit of money, because they see it as an expense instead of an investment.
00;10;07;05 - 00;10;29;17
Unknown
And I think that, it's it doesn't it feels interesting for a lot of people. It's like once once they get into that world and they see all the opportunity that opens up, they get it. But to get into the world is such a hard thing. And then you just took it a step further and said, like, I got to get this coach to get me on with this guy so that I like just a perseverance.
00;10;29;17 - 00;10;57;07
Unknown
The relentless pursuit of something you're passionate about is like it is a lesson in and of itself, man, congrats on doing that. I was a dog with a bone there, honestly, because I think I had a very emotional connection to to this whole process. I had seen the 25 deals a month and how like the leadership I was part of that leadership team and I knew the owner like he was one of my best friends and just how it was hurting him every day of like, we're not making real money here.
00;10;57;07 - 00;11;12;06
Unknown
And then the guy that I worked with in Richmond, Virginia, and I've seen his business turn around. I'm like, I have to like, if I can't work with everyone, I at least want this space to have a book or something in their hands that can at least give them a fighting chance, like everyone can spend 20 bucks on a book.
00;11;12;06 - 00;11;30;19
Unknown
Like if they want to get better at, they really want to do it. So I was like, we got to make this happen. Like, I know I can't do this without his blessing and it's a license and everything. So I got to get through there. And thankfully he was super. Mike mechanics is a super down to earth guy, was super open to talking about it and just he just had to make sure I actually had the background and knew what I was doing.
00;11;30;19 - 00;11;54;10
Unknown
And that I had implemented it successfully up to that point. Yeah. Wonderful. And, what's your relationship with them today? Oh, I imagine, yeah. Very good. Because during that 18 month process here, here's, here's what went into the writing of the book. He's part of a group that meets at 6 a.m. every weekday to write for an hour in the morning from 6 to 7 a.m. eastern time.
00;11;54;12 - 00;12;10;19
Unknown
So for three months, I was part of that group because I said, I'm going to write an hour in the morning, an hour in the evening. So I got to know him really well because he was there every day. He's one of those people that are annoying in the morning because he's like talking and like, actually seems like he's had his coffee already by 6 a.m..
00;12;10;21 - 00;12;27;15
Unknown
So I'm like, Mike, Mike, you got it. You got to tone it down. But but besides that, he's amazing human being. And like, I just he texted me out of the blue the other day because he saw my book inside of an airport. He's like, did you pay to get it? And he's like, I said, no, I'm not paying for it to be in it, you know, distributed in airports.
00;12;27;15 - 00;12;41;20
Unknown
He's like, then someone must have seen it or bought it. Read it. And someone in the bookshop, you know, was actually ordering books for that. And he's like, so we text like that the other day I asked him, like, have you passed a million? Yeah. And he texted me back, so it's that type of relationship. But you get that cool.
00;12;41;22 - 00;12;56;10
Unknown
It is because it's like these people are just human beings. But like you said, Adam, they were a dog with a bone at one time. Like he was a dog with a bone going down the profit first road. He was a no name. And then honestly, because of the grit, perseverance and stuff like that, he still does that to this day.
00;12;56;10 - 00;13;17;25
Unknown
Wakes up at six, but he's still pumping out books. He just came out with Profit First for personal The Money Habit book. So it's like he's still pumping it out there. So it's like, Adam, this is why we're friends, because like, we and the entrepreneurs that really get this, it's like when you get that, when you know that the thing that you're doing is not just a passion, but at your purpose, you have a different drive than if it's just a passion.
00;13;17;25 - 00;13;45;26
Unknown
Passion is great, but passion can flame out. If it's your purpose, it's going to be there for a long time, and you're going to do whatever it takes to get it done. Yeah, for sure. And you know, it's like if somebody came to you today as a business leader, the business leader that you are, and they're like, hey, I'm going to start a business, even if it's like a CFO business or something you're familiar with, like you probably would help anybody if they were hungry doing the work, not if they're coming and saying, tell me, hold my hand right.
00;13;45;26 - 00;14;08;22
Unknown
And harvest, obviously, that's like you didn't. You showed up every day at 6:00 in the morning. You paid to get in that first room and then you just were relentless. And I think that's the piece that people miss. And we, we you hear on the podcast, if you go on the podcast circuit, when you get into the kind of podcast world, you start listening and so can everything in and you hear people say, oh yeah, if you want to be mentored by me, just lead with value.
00;14;08;25 - 00;14;34;13
Unknown
Well, people don't know what that means. And they're like, how do I lead with value? I don't know anything. Well, what do you have? You have you have time. You have hustle. You have grit. Like just be relentless. That alone will get you on people's radar and then crap, who knows what opportunities come out of that. I can tell you, you know, similar ten, 5 or 10 stories about how my life has changed, just doing the same thing, expecting nothing in return.
00;14;34;13 - 00;15;01;18
Unknown
Okay. Exactly. Yeah. It's good. So, okay, cool. I this is, I'm so excited to talk to you today because this is something where, like, I was telling you before the show, like, especially house flippers, man, they have slower cash conversion cycles. They're the poorest rich people in the world. And, you know, like, you said, you're in this business, these guys doing 25 deals a year, but his profit margins like going down.
00;15;01;18 - 00;15;20;19
Unknown
And then, you know, when you're flipping all those houses, you have these cash conversion cycles. So what what is it that simple CFO does and who do they serve and how do they help them? Yeah. So, because of my real estate background and because I wrote the book profit for for real estate investing, I show up in a lot of real estate investing rooms.
00;15;20;19 - 00;15;41;15
Unknown
So we work with lots of people fix and flippers, wholesalers if you buy and hold. So that's a, you know, the core group. But I would also say it's a lot of people that do struggle with cash. Like if you make money but and feel broke, that's really who I like to help a lot. Like if you need that next level of I am so sick of doing all these deals, but not getting paid or not knowing what to do.
00;15;41;22 - 00;15;56;07
Unknown
That's at the core of what we do. And if you're going to go out there, make, spend and keep money, I want to make sure you know how to make it. You spend it in the right places, and then you end up keeping what you want to from the business. And then honestly, even with what you are asking for, fix and flippers in the buy and hold.
00;15;56;07 - 00;16;19;21
Unknown
Like that's where I believe profit first is a cash management system. So knowing where every dollar is going, knowing what dollars you have to spend on the flips, knowing where you were able to get the money for the flips, or if you got other people's money or investor funds, you know, it's like tracking these things to make sure, you know, okay, how much money do I have in order if some of these got delayed, if some of these got pushed back, and do I have 30 days, do I have 60 days?
00;16;19;21 - 00;16;45;24
Unknown
Do I have ten days? Like, what do I have in order to be able to finish these fix and flip projects? So we build dashboards to make sure people have a very clear picture of what their numbers are, and making sure they know exactly where every dollar is going. The number one thing I think that, I not that I think I know that keeps people up at night because I literally okay, this week I've had five calls myself personally because I'm back on the phone this week because I just all have been on the phone sometimes with just people like, where are you?
00;16;45;24 - 00;17;06;16
Unknown
What's happening? I just want to hear the marketplace. And so every one of them said, I've never had this happen like this. But all five in a row said that they were not sleeping at night, and all five of them was not because they were losing money, but because they didn't know they didn't have the clarity, they didn't know how much they were losing, or they didn't know if they were going to run out of money, or they didn't know where the money was ending up.
00;17;06;19 - 00;17;21;18
Unknown
That's where I tell people, if you just don't, if you have that lack of clarity, it creates a lot of anxiety. And so we helped come in to give that clarity and make sure you know exactly where this money's going. So that's just a very high level overview. We could get nitty gritty, but that's where we fit in in the marketplace.
00;17;21;18 - 00;17;46;23
Unknown
As a financial leader, we're a fractional CFO. If you've never heard of that before, it's a part time chief financial officer where like Adam, you had mentioned at the beginning, you're probably too small to have a full time CFO because that costs like 100,000 plus a year, you know, or to have 100,000 a year plus. But a fractional CFO, you're probably too large not to be looking at the numbers and using them to make sure that you're on the right track for your financial freedom.
00;17;46;25 - 00;18;01;04
Unknown
So it's like that's where a fractional CFO, because then as a leader, you've got the bookkeeper for the day to day stuff, the CPA to make sure you've got the tax planning and strategy. The CFO is more like, I need to make sure that you're healthy as a business owner and like, well, how are we going to plan these stuff out?
00;18;01;04 - 00;18;20;26
Unknown
And forecast and budget and all this stuff that owners don't want to do, but will ultimately give them the financial freedom that they want? So that's where we cover the space in this, in the real estate investing world. I love it and I love that you guys have you guys are planted at layers. If you're just starting, you have an opportunity to start on the right foot.
00;18;21;00 - 00;18;42;28
Unknown
Yeah, you can do it the right way and you don't have to figure it out on your own. You literally just go buy a $20 book called Profit First Year Real Estate Investors and get set up like you can self implement until you start making money. Then what I love is, you know, we've got these the tweeters we call them the younger the, the, the, the maturing businesses that have started to do deals.
00;18;42;28 - 00;19;04;07
Unknown
They're bringing in 100 K to 500 K and you can come in and help them get it set up. You've got like a 90 day program where you come and you optimize everything for them, and you get them all set up and running. And then for those folks who are up and running plus 500 K, you come in as a fractional CFO and and I think this is what is really cool.
00;19;04;07 - 00;19;24;06
Unknown
And I just know this to be true is it costs money. But the problem is, is you're losing more money by not having it, by not knowing your numbers, by not knowing where your money's at, by not putting money from your business to your bank account. I, I talk about two things, David, and I want to hear your perspective on this.
00;19;24;06 - 00;19;43;02
Unknown
Yeah. You know, there's you get into this business for freedom. And we were talking before the show about how freedom, the freedom we have the Freedom Award in seven, nine, five. And, everybody's freedom looks a little bit different. It would be foolish of me for you to come into something bigger and say, build my business. Don't build my business.
00;19;43;02 - 00;20;11;14
Unknown
It's built for my freedom. Right? Build your business. Right. So we look at, these businesses and these people, they they they think that this expense is like a problem. They can't afford that. They can't afford not to do it because, of two things. Number one, we tell people to measure their net worth. Okay. Like, you join this, you join this world so that you could grow your wealth, and your wealth could buy your freedom.
00;20;11;17 - 00;20;37;08
Unknown
So you must measure your net worth every month. Number two is something I personally call NSO c or no owner's compensation. Okay. And what NSO C is is simple. It's money leaves your business bank account and it comes to your personal bank account. Okay. And here's why that is so important. And I learned this from my mentors is not original to me as if I am.
00;20;37;08 - 00;20;55;05
Unknown
Oh, this is what you guys will tell yourselves. I'm reinvesting into my business. And then I'll ask you the following question, which is what's your return on capital? And you will have no clue what I'm talking about. You have there's no there's no relationship in that money other than you're just not taking money out of your business. So it's nothing.
00;20;55;05 - 00;21;11;11
Unknown
So there is no return on capital, which means you're actually not investing in your business. You're just leaving your money in there. So then I will say, so it's like this, right? The money comes out no matter what, even if you're even if you're going to reinvest back in your business, money comes out, comes in your personal bank account.
00;21;11;13 - 00;21;37;29
Unknown
Now, that's my money. It's a lot harder for me to give my money back, right? Yeah. To that. And I might have to I might have to put it back in the business. But it's got to come to me first. It's got to become my money. Once it becomes my money, then it goes in. And we know this, David and I, I'm sure you guys see this a lot of business owners live out of their lives, out of their business, which there's some tax advantaged type stuff to some of that done the right way.
00;21;37;29 - 00;21;59;02
Unknown
Legally, of course. But there's a disadvantage in the fact that it doesn't feel like your money, it doesn't like this is why Dave Ramsey blessed that man. He helped. He helps all the broke people get not broke, but have no money. It's the craziest thing in the world. And he's made hundreds of millions of dollars doing this.
00;21;59;02 - 00;22;27;00
Unknown
He teaches you how to have good financial habits, but he sucks at investing, right? Like we can all kind of agree with that. Like what? At least his advice. And, he talks about this, envelope method. I don't know if you know this. Right. He's got this envelope method. So you put your cash in envelopes and they're allocated towards expenses, and you're giving the money to the expense, the physical money, which is different than using a card because it just you can't do that.
00;22;27;03 - 00;22;42;11
Unknown
But when I got to take cash out and I look in that envelope and it's lighter and I hand that money over to something, I go, you know what? I actually don't need that. Let me put that back in here, because I want it to go over to the saving or investing bucket. And this concept of sock is like so critical.
00;22;42;11 - 00;23;00;21
Unknown
Not just because you need to make money and pay yourself and get freedom, but because it creates a different habit. And I think that's what you guys are doing and profit first for people. Yeah, exactly. And that's exactly what profit first is. But for business profit first is the envelope method for business owners because they lack two things inside of their business.
00;23;00;21 - 00;23;18;14
Unknown
Usually it's control and clarity. Like I need to make sure that I control my money and it doesn't control me. And I know where every dollar is going and I tell where to go. Because if you spread out your money into different bank accounts, because that's what profit first on the system side is because the mentality is exactly what you were talking about.
00;23;18;14 - 00;23;34;17
Unknown
And I'm like, I have to pay myself first. Like like Robert Kiyosaki says in like all of his books, like a thousand times over again, like, and this is the system profit first is the system to make sure you can pay yourself that you can't have that nice Aussie account. Like, I love that because we have an account in profit.
00;23;34;17 - 00;23;50;21
Unknown
First, we call it the owner's comp account to make sure you actually have a physical owner to comp checking, business checking account where money goes in, and then you take from that account into your personal finances. So that way, you know, this is how much I have to pay myself from the business. But then there's other accounts too.
00;23;50;21 - 00;24;07;23
Unknown
But that's exactly so. Yes, I'm 100% on board with everything you're saying, because that is the system of profit. First, it's just broken down for the business owner and certain things that to make sure that they're keeping the money and making sure that they know where the money is being spent as well, too. Okay, give give us all an overview of this system.
00;24;07;23 - 00;24;30;03
Unknown
Yeah. Like just, you know, give us the give us the overview of the system and, and why it's so beneficial for businesses and why they should be doing it today. So the mindset let's let's dive super quick. I think the root problem why most people make money but feel broke, especially in the fix and flip world of the real estate investing world, is that we think that we're playing the real estate game when we're not really real estate is our widget.
00;24;30;10 - 00;24;44;26
Unknown
It's just the thing that we acquire money with. And that's where a lot of people just have to make sure that they've been taught how to play the real game we're playing, and that's the money game, right? It's like, that's why we do these deals. And what does the money buy? Our financial freedom, whatever that means to you.
00;24;44;28 - 00;25;02;08
Unknown
And that's why I love Profit First, because I felt like I don't know, Adam, if you ever read those books like The Richest Man in Babylon or. Oh yeah, Rich dad, Poor Dad, or like the Seven Habits. They all say the same profit first mentality and like the mindset of pay yourself first or like, profit first as sales minus profit equals expenses.
00;25;02;08 - 00;25;19;15
Unknown
I make a sale, take my profit first, and then pay everything that's left over. But everyone had said that. Or like I read those books, I'm like, that's great, how do I do this stuff? Like, how do I pay my like, that sounds good. That's where profit first came in and said, okay, there's a system behind it. It's not just I'm going to tell you, you should pay yourself first.
00;25;19;15 - 00;25;36;25
Unknown
Like, okay, that's good. It's now we have this system, which is the envelope method, where you set up physical business checking accounts that are named specifically for your business. And there's the fundamental accounts that could apply to any business. And then in my book, I go a little bit deeper in the real estate side. I'll give you some of the core accounts.
00;25;36;25 - 00;25;49;22
Unknown
The first three are the golden trio of accounts, because these are the ones that help you keep more. I call them Golden Trio because if you saw me, yes, I look like I should have gone to a college or a county. But I also look like I love Harry Potter and Star Wars, which I do. You know, all those big epic movies, right?
00;25;49;25 - 00;26;05;04
Unknown
They have the three main heroes, which is like the golden trio of those stories. Well, in your business, you need your own golden trio, like they need to be fighting for you versus the one bank account that's usually fighting against you. Right? That operational expense account. I just I'm paying these bills every month. I never feel like I'm getting ahead.
00;26;05;04 - 00;26;20;17
Unknown
Well, I want you to have some accounts that help you feel like you're getting ahead. I think that's what you you also touch on this, Adam. It's that feeling of you transfer from business to personal, and it feels different than if you're just swiping the business card like it's now your money and you tell your money what to do.
00;26;20;19 - 00;26;37;08
Unknown
So here's the first three accounts the Golden Trio, profit owner's comp, and owner's tax. Making sure you have a profit account which fuels your financial freedom. And you take that out quarterly to do whatever the heck you want with my favorite account is the owner's cop account, because even Adam said, it's like you got to be paying yourself.
00;26;37;15 - 00;27;04;26
Unknown
That's the first step. To know if you even have a real business is can you pay yourself consistently. So having an account dedicated to paying yourself from your business and call it the owner's comp account for owner's compensation, then the owner's tax? Not a super fun account, but it's a financial peace of mind account where if you're going to pay taxes as a flipper, especially in a wholesaler, then at the end of the year, if you don't have a bunch of write offs or things that you can't put towards your taxes, you're going to pay, you're going to pay taxes.
00;27;04;26 - 00;27;23;21
Unknown
So having a tax account there. So that way you can pay the taxes from the business versus trying to take it from your personal or wherever or having to do for deals. So that's the first three accounts. The other two accounts that are foundational are functional accounts, income and expenses, knowing what's coming in versus what's going out. So I would just have that for clarity and control, knowing what's coming in.
00;27;23;21 - 00;27;45;16
Unknown
So that's why I would go to the like the income account deposits would go in there. And then the opex account operational expenses would be everything that outflows I do. Adam, I need to say that one other account for the real estate world specifically, and that's especially if you're a fiction flipper, the OPM account, other people's money, if you're going to get private money or hard money ever wired to you directly, it's not held in escrow.
00;27;45;21 - 00;28;01;17
Unknown
It's not held just in. You're not just taking draws from them, but they send you the full thing because some hard money and some private money will send you, like, purchase price plus repairs and everything. I would have an OPM account so it doesn't co-mingle with the first five accounts. The first five accounts are to run the business.
00;28;01;22 - 00;28;17;02
Unknown
The OPM account would be to run the projects. So it's like you want to make sure that you have the accounts to make sure the business is healthy. And then the OPM account is to make sure, do I have enough money to make sure that even if they got delayed or whatever, I have enough runway here to finish the projects out.
00;28;17;02 - 00;28;35;26
Unknown
So that's another one to Adam that makes it unique with what we do, because a lot of people just take it into one big account and it's like, okay, as it goes out, like, oh shoot, they wake up on one day and like, where's all that money? So if you have that OPM account, it helps, you know, okay, do I at least have enough to finish all the rehabs projects that I have on deck?
00;28;35;28 - 00;28;51;24
Unknown
If not, let's take a deeper look of like, okay, is it one project that's eating this up or whatever it might be? And that's where you go a little bit deeper with, you know, the books, the PNL, the balance sheet or a, you know, a dashboard or something, but at least a bank account will let you know, do I have enough to finish these projects?
00;28;51;27 - 00;29;15;07
Unknown
Yeah. This is this is like it's so powerful and it's way more than just putting profitability into your business and into your pocket. Right? It is creating new habits. And if you think about it and it is and habits are the hardest thing to do, we could all have a six pack and be multi, multi millionaires if we had good habits.
00;29;15;08 - 00;29;32;15
Unknown
Yeah, just the habits that you have. It's just the habits that you have. It's the standard you're willing to accept for yourself. There's a problem. Are you saying sorry. Are you. Yes. Yeah I'm dude I'm with you man I could have wrote a for them. Right. Exactly I need to I'm going to revamp it. I'll have you write the forward because it's like one of the sayings of profit.
00;29;32;15 - 00;29;51;17
Unknown
First is profit is a habit, not an event. So many of us treat it like, oh, that'll happen someday, or when I sell these properties or that big deal. Just have to close and then I'll be rolling in it. Or like maybe ten years in the future when I sell everything or I pass it on or whatever, we're looking for that someday event when we could be more profitable from the very next deal that we do.
00;29;51;21 - 00;30;11;06
Unknown
If we build the habits from the very next deal that make us wealthy. So that's why this system is so powerful. It can make you better as an investor from that very next deal. If you just start these habits right away. And this is beautiful, I want to, let's take it to personal for one second or so.
00;30;11;09 - 00;30;33;21
Unknown
We're all in this to to build some kind of freedom for ourselves. Freedom of decision, financial freedom, family freedom, vacation, freedom, you name it. Right. And when we let, let's use, we'll use a fitness example. Okay. And then we'll go to our money example. So the fitness example is this. Hey, I want to get in shape, I want to I want six pack abs.
00;30;33;24 - 00;30;55;06
Unknown
Cool. The formula has never changed. I don't care what's being sold on the internet. You have to take in less calories then you expend. The bigger the deficit you create, the more fat you get. It's a wild thing, right? Right. Okay. And here's the other component. How long can you do that for consistently? I'm not saying be perfect.
00;30;55;07 - 00;31;13;09
Unknown
You can fall off and get back on the wagon, but, the person who gets falls off and gets back on the wagon the fastest because we'll all fall off, is the one who ends up staying the most consistent and builds that deficit of calories, becomes fit, gets a six pack abs, personal finances. I was just talking to somebody this morning.
00;31;13;12 - 00;31;37;25
Unknown
The formula super simple. Reduce expenses, increase income. Take the middle. And that's the middle. Like there's no there's nothing else to it. It is it. It's fundamentally it. But we try to like we see all these different widgets and ways and strategies. And we were chasing stuff and we're looking for the easy button. And it's just doing the boring thing consistently over time that is proven to work.
00;31;37;25 - 00;32;00;03
Unknown
And that's why Profit First is such a like flip it on its head thing. It's not it's not new. What it is is it's a way that's designed to defeat your internal desire to sabotage yourself. Right? And create a new habit, to create a new way of thinking about it so that your mind doesn't keep sabotaging yourself in your business.
00;32;00;10 - 00;32;23;15
Unknown
And that's like the beauty of the whole thing. And it just baffles me when I watch, I'll tell you, I'll be honest. I talked to, a house flipper recently that got nine projects going on, and they've got like $800,000 out there that's coming back to them. That is going to be in the profit bucket. But today they have no cash.
00;32;23;18 - 00;32;44;09
Unknown
They're broke. They're struggling to pay these interest payments. But there's they're like I'm broke. This isn't working. I'm like, you're not broke. You have 800 grand. It's just in this bucket over here. And you don't know how to manage your cash. Which is why if you're not an expert at this, if you don't have a finance background now, you don't need to be brilliant at it.
00;32;44;09 - 00;33;03;06
Unknown
You can. I'm a I got a history degree from a directional school and I figured it out and but I have financial people in my corner that are keeping my dashboard up to date, that know how to run the numbers and understand the cash flow that tell your business where it's at, where it's healthy, where you need to focus your energy on.
00;33;03;08 - 00;33;24;12
Unknown
And and we're getting to the core of what's most important in a business is profitability. And it's a thing that we talk about, at least on the internet. It's the least thing talked about. And it drives me insane, man. Which is crazy because like financial freedom is talked about like ad nauseum. But it then we don't talk about like what it what it really takes to get there because it's not the sexy part.
00;33;24;12 - 00;33;39;26
Unknown
Right. Like going to the gym and like getting up early and not eating, you know, and like doing those things is not the sexy part, but you end up with something super sexy, right? I did that for the first time last year because I had like a personal trainer and I was like, okay, I want a six pack to show me.
00;33;39;26 - 00;33;54;01
Unknown
And I was like, here, load this up into, you know, like the the, my fitness Pal and all that. I'm like, okay, yeah, this does suck. But I like the end result. I'm like, I think I'll go back to what I can do consistently and just like, keep this up. And it's the same thing with our money. It's like it.
00;33;54;01 - 00;34;10;23
Unknown
And I've heard that story, Adam, time and time again, being in the seat that I sit in, I've heard so many people like, I've got all this money out there, I've got I'm in the middle of all these flips, and I've got literally multiple six figures, even seven figures coming back. But I'm sucking for air. And now, like, what do I do right now?
00;34;10;26 - 00;34;32;25
Unknown
And it's like, that's where we have to build those good habits into every single deal. So we have the profitability and we have the reserves when we need them. And a lot of people grow from revenue and we're not from their reserves. They just do more and spend more when they make more, not necessarily when they've built a good reserve base and when they've built something that will help them get to that financial freedom.
00;34;32;28 - 00;34;52;07
Unknown
There's one other thing you said that was so good. You said good business is boring. And I'm like, oh man, that is really if you're going from solopreneur to then hiring people, then you have like a team where now you're leading leaders are you have leaders on the team. One of the things you're going to have to become okay with is that there will be some boring parts.
00;34;52;15 - 00;35;09;01
Unknown
And what got you from 0 to 1, which is super sexy because everything's new, exciting, you're breaking things. It's utter chaos, but you're like just powering through it. But when you go like from 0 to 1 and you make like your first million, but you try to go from 1 to 10 or 1 to 5 or even 1 to 3.
00;35;09;04 - 00;35;27;21
Unknown
There are some times there where you have to slow down and you cannot create the same chaos. And especially when it comes to your cash, if you have bad habits going from 0 to 1 million, and then you go from 1 million to 5 million, it doesn't magically get better. Your problems get bigger. And it's like if you don't have the good habits in place.
00;35;27;21 - 00;35;45;22
Unknown
So, man, there's so many ways we could take this, but I 100% agree with you. Adam. Yeah, dude, I love it, man. Okay, cool. So like that, that's a lot of the, we've kind of talked about the problem. We talked about the, the concepts in the infrastructure. So right now somebody is listening to this and they're going, cool.
00;35;45;22 - 00;36;01;23
Unknown
What do I do next, David? Yeah. Well, I would say exactly what you said. If you are not doing any deals right now, get the book on Amazon, like go to Amazon, get profit first real estate investing. If you are out there. I actually do have a link that you can book a call with us if that's okay.
00;36;01;23 - 00;36;26;05
Unknown
Adam. If I give that out there with us, said simple cfo.com/7 five. If you go there, you can get you can book a call, but you can also get my book and a profit first cheat sheet. Like even if you just need that stuff to get you started. Because honestly, I wouldn't wait to get started. I would say from this podcast, one thing you could do without going and buying my book, and without even going and booking a call like what you could do right now, like pausing this podcast.
00;36;26;10 - 00;36;44;04
Unknown
Go set up one bank account, call it owner's comp, and transfer 1% of everything you're making like, can you just start somewhere? What you said as well? Adam, the consistency is key because some people listen to this and they're like, 5 or 6 bank accounts and I it's going to be a nightmare. And I'm going to have all these two animals like, okay, whatever.
00;36;44;04 - 00;37;02;28
Unknown
Like, that's another time for a different story. But like, do you like where you are? Right now? If you don't like, you're not on your way to financial freedom with one bank account. But if you open just one more and change your habits, I'm more interested in you changing your habits from this podcast than I am you signing up with us or buying my book.
00;37;02;28 - 00;37;19;12
Unknown
Like go out there, open one bank account and just start to put a little bit away and pay yourself something. Even if you have a W-2 and you're like, I don't have to pay myself from yeah, but what do you think? One day you're going to wake up and not want to be full time in real estate? Or maybe you want to hire people and like you haven't paid yourself.
00;37;19;12 - 00;37;41;10
Unknown
So are you in good habits for paying others as well, too? It's like, make sure you start somewhere. So set up one bank account, transfer 1%. If you want my book and stuff, that's simple. Cfo.com/7 five. Yeah, it's so good. And the like I'm just going to hit this again because there are people listening who like dude, I like I'm not there yet.
00;37;41;10 - 00;38;00;20
Unknown
The truth is you are there because step one is like literally just getting a book. How many books have you write? Like, I bought 13 books in the past week because I wanted a master very specific skill. And and reading books still is a is a great tool for education. So just go buy one book 20 bucks. Like literally you can implement.
00;38;00;20 - 00;38;25;17
Unknown
The book is written so well and so specific that it gives you everything you need. It's not some like garbage lead magnet book that doesn't tell you anything. It actually is super educational. It gives you the the playbook to it. So like if you're if you're new, you can go do that. If you're if you're like doing deals and you're feeling some of those things David talked about where it's like, where's my cash at?
00;38;25;19 - 00;38;46;01
Unknown
Okay. Do it. Do a strategy call with their team and let them just show you what it could look like. And it's like, not expensive for, you know, that 100 K to 500 K business like his team can help you get set up if you think that's the right path. And then if you're doing 500 K or more, you have to have a financial component of your business.
00;38;46;01 - 00;39;08;27
Unknown
It's a non-negotiable. Whether it's David's team or a good bookkeeper or a good CPA. Like, I don't really I'm like, do what you're going to do. But at the end of the day, you must have something. And for me, this is how I always think about it. Like I when I bring on people to work with our team, whether they're fractional or in-house, I do have, do they have proven results?
00;39;09;04 - 00;39;27;18
Unknown
Are they working with other clients that are ahead of me or like me? And if the answer is yes to those things, that means that that company has the skill sets that I need in my business. Like they are doing it across dozens of businesses. They have seen it all more than you have, more than I have on the finance side.
00;39;27;20 - 00;39;55;14
Unknown
So don't you think it would be worth having a conversation with that somebody who has that kind of expertise that could help you actually make more money? My opinion is, yes, I am, I am not afraid to pay somebody to to shortcut something or help me, fix something that I'm not good at. So I would encourage everybody, to, to go hit that book if that's where you're at, or at least talk to their team to see how you can get this help, get help implementing this strategy, if you like.
00;39;55;14 - 00;40;15;18
Unknown
And you if you are living under a rock like profit first has been a game changer for business. And when David came in and wrote, I remember this, I didn't know you at the time. David, you came in. I read, Mike's book and I was like, oh, this is a cool concept. I kind of got it at the time, but I wasn't really ready for it.
00;40;15;21 - 00;40;32;04
Unknown
And then you wrote Profit First for Real Estate investors, and it just, like, clicked. I was like, oh my gosh, I get it now. I see what I need to do to make sure the money goes out of my business and into my into my pocket. And I don't want to do this business for free because, you know, it's not that easy to do.
00;40;32;04 - 00;41;03;17
Unknown
It's simple. It's just not easy. So, I'm grateful, man, that you wrote the book. I'm grateful that our paths have cost, crossed your your, your values match for our people in our community. And you're a great human. And, I'm thankful for that, man, I appreciate that. And that means a lot. I mean, just the fact that so much hours and months and, like, over a year to get that book out and spending quite a bit to get that book out as well, too, it really was a labor of love, because honestly, a lot of people poured into me like Gary wasn't just the one that called me about that.
00;41;03;17 - 00;41;17;19
Unknown
Like he was one of the people on that team for five years. So it's like I had people like him, other mentors throughout my life, like pouring into me. And this is just like, please, for the love of God, if you are going to go out there, bust your butt to get a deal in the door, please protect your profit.
00;41;17;22 - 00;41;41;24
Unknown
I please go out there and put money in your pocket. And that's really what this is about. So I really appreciate that, Adam. And honestly, I do. I love that community. I was very privileged to go there last year and see. And, you know, it's just that you do things differently and you really do there. And you have certain awards like that Freedom Award, where it's like you are focused on the people that are actually getting to their freedom, whatever that means for them.
00;41;41;24 - 00;41;58;18
Unknown
And I love that. So it's like, yes, we are very much in alignment because that's what we're teaching all the time. So I appreciate you having me on. Cool, man. Thanks so much for spending time with us today. And guys, if you're listening to this podcast, simple cfo.com backslash seven five. Did I get that right, David?
00;41;58;18 - 00;42;21;15
Unknown
That's it. Go go check it out. Certainly will be in the description of this podcast. And, if you got something out of this podcast, if you want to talk to David, if you thought this was good and you wanted me to maybe do a training with David for everybody, send us an email at info at some bigger flipping.com and just tell me like, hey, let's do a free training with David and I want to get more of this.
00;42;21;17 - 00;42;35;06
Unknown
We'll set something up if we get a good response and it will be super, super valuable because David's never done anything with me. Where it's not like I've learned something or it's massively impactful for our people. So I appreciate you, man. Thanks for listening to the show and I'll see you guys on the next one.
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