Biggest Money Mistakes Investors Make and Do THIS to Avoid Them

David Richter: So many people lose sleep at night, not because they lose money, it's because they don't know how much they're losing. A lot of the entrepreneurs that we encounter that look successful on the outside literally have 7 figure businesses are not taking home what they even need. They are constantly stressed making bad decisions in their business because they're constantly stressed about what they're bringing home or not bringing home.

Steve Trang: Hey, everybody. Thank you for joining us for today's episode of real estate disruptors. Today, we have David Richter with Simple CFO Solutions, and David flew in from Orlando, Florida talk about the biggest money mistakes investors make and do this to avoid them. Now I'm gonna mission create a 100 millionaires. The information on the show alone is enough to help you become a millionaire in the next five to seven years.

If you take consistent action, you'll become one. And the show is brought to you by our sister company, Investor Lift. Get access to millions of cash buyers across the country. Go to investorlift.com, put in disruptors to get 10% off. And, guys, if you get value out of today's show, please hit that subscribe button that way we can all grow together.

You ready?

David: I'm ready.

Steve: Alright. So, in talking to you before the show, you indicated that you are part of a company that did 850 deals Yeah. Approximately Mhmm. Doing 25 deals a month Yeah. But spending 26 deals a month worth Yeah.

In marketing or expenses.

David: Yes.

Steve: So that that's an interesting math. Interesting model.

David: Yeah. It was. Yeah. But especially well, back then, it was nuts. Like, this was 02/1516.

You know, we were buying HUD homes, you know, just it was wherever the properties were, we could go and get them. You know, just pick them off the shelves. But we were doing 25 deals a month. We scaled up to that. When I first started, it was about five deals a month and scaled into 25, but that's where I got to sit in a lot seats there too.

Mhmm. Acquisitions, dispositions, you know, marketing and, like, transaction coordination and then finance. I totally look like the finance nerd, but, like, I have no finance background. Mhmm. Not no QuickBooks, none of that, you know, CPA license.

But I did. I learned in a year's time, like, how to read the profit and loss, the balance sheet, all the different statements in that. Mhmm. And I did. I saw the story.

The story the numbers were telling, and it was like, oh my gosh. What the heck are we doing?

Steve: Right.

David: Now it's like we're making a million, but it's been a 1.1 to get there. Mhmm. And it's like, this is just not working.

Steve: So there's this term that's popularly, on, in social media. Not a fan of it, especially being a girl dad. Right? The girl math. Oh, yeah.

You're familiar with that?

David: Yes. Also being a girl dad.

Steve: Yeah. So I guess in some ways, it's kinda like entrepreneur math. Yes. Exactly. So walk me through entrepreneur math.

David: Well, the root cause of entrepreneur math Mhmm. The root cause of entrepreneur math would be that most entrepreneurs get fed the line that sales solves all problems. It does, but you have to have a system to catch the money.

Steve: Yeah.

David: And it's like, we think the next deal is going to solve all our problems or just more income, and that's where we get stuck in our own rat race because we never get out of that. That's where we were with that company where we just thought more and more and more. Entrepreneur math is just scale. It's scale at all cost. Grow, grow, grow.

Let's do 25 deals a month, but who cares if we have to have 25, 30 people to do it and we have so much overhead Mhmm. That now I can't actually function and have profitability as a company.

Steve: So Yeah. It's kinda like we read Rich Dad Poor Dad. Right?

David: Yeah.

Steve: And we learned about the concept of the rat race. Yes. I was like, oh, this rat race sucks. Right? Like, knowing that there is a rat race and I'm trapped in it, this sucks.

Yeah. So I wanna go out and buy real estate. And in the process of buying real estate, instead of being a real estate investor, we become real estate business owners that get real estate.

David: Right.

Steve: Right? And then we get in just a faster rat race, but no one tells us it's a faster rat race. Like, this is a rat race where you drive Lamborghinis now versus an Accord to work.

David: Right.

Steve: Right? And we're just doing the same thing, and we're spending a lot of money to make, in your case, less than what we were bringing in.

David: Right.

Steve: Yep. I'm hoping it wasn't that way the whole time.

David: Oh, I could tell you the whole story. Yeah. Alright. One of the reasons that was near the end of my time there. I was there for five years.

That was one of the reasons where that company kinda blew apart internally. It was because of some of the finances. There was a lot of a players there. There's, you know, others, people in the real estate space that have their own companies now, and we're all amicable with each other, but it just didn't work. And a part of that was, you know, we're not making any money.

You know, the owner's not happy. So but another thing too was I was going to masterminds at that point. This was my early twenties. I never been exposed to masterminds. This was eye opening to me.

Going to a place that actually thought, like me, that had read Rich Dad Poor Dad. You know, I knew about these concepts. But at that place too, it was like, yeah. We're doing 2,000,000 top line, then they're crying at the bar later. Like, where's all my cash?

You know, that's what I kept hearing.

Steve: What was your exposure to entrepreneurship before getting the real estate?

David: Nothing really. Just reading. I read Rich Dad Poor Dad, just like you said.

Steve: So you got a degree in college?

David: Yeah. I got a secondary education.

Steve: So you're supposed to, like, work your nine to five. Yep. And then you instead, you work at this company.

David: Yep.

Steve: And then you go and you hear on the front, here's how much money we're making. Right. And then you hear later on, here's how much little we're keeping.

David: Exactly.

Steve: And, you know, it it really hits me hard because I thought that I I I started off in the realtor side. Right? Yeah. Not the best thing in the world. Gave me some value.

It was nine years experience building because it was not about making wealth. So I would be in so many masterminds and conversations. And, you know, people that ask me about, like, the mastermind I kicked off, it was a realtor. It was a realtor mastermind. It was not a recent mastermind.

So I would see these people talk about how many deals they sell or transactions they do per year. And they were impressive numbers, and they looked the part. They dressed nice. Right? They got the nice cars.

They've got the fancy ads, whether on the park bench or whatever. And then I would hear later on. I was like, yeah. I'm making all this money, but, like, not keeping anything. Yeah.

And I was and I would look at this, like, why the hell is this happening? Why am I doing this? And my answer to this, which turned out to be wrong, was, oh, in wholesaling, the margins are higher. Because the margins are higher in wholesaling, I make more per transaction. I don't have to do as many transactions, and they're easier, and the cash conversion cycle is shorter.

For sure for sure now, I'm not gonna have this problem because I'm making more money per deal. Turns out that's not how it works. Right. No. Not at all.

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David: It doesn't work because people need to understand as business owners just the bare minimum of finance of, like, there's two different skill sets. I have a good friend. You know, he runs one of the masterminds we're a part of. He says, making money is a skill set, keeping it as a discipline. Mhmm.

And it's like, they're two step separate skill sets that you need, making it and keeping it. And most entrepreneurs don't get to keep skill set because it's boring. It's the the we talk about finances. Like, why did we not name the show, like, financial management with David Rich? Because no one would listen to that freaking episode with that title.

Yeah. But it's that's the key. Because so many people lose sleep at night, not because they lose money. It's because they don't know how much they're losing. Mhmm.

They don't have that skill set to know, like, here, how much are we even in debt, or how much are we going in the hole? Like, that company I was with, it was like, no one was focused on that number until I was, what the heck are we doing? Mhmm. You know? And it's like, that's what most people, they're just running and gunning it, never taking time to slow down to say, is this worth it?

Are we really making what we want to, but then are we keeping it on the back end? Mhmm. That's where a lot of and and for whole it doesn't matter what the business is. Right. You could be a restaurant.

You could be real estate. You could be realtor or real estate investor, you know, both sides of that fence. If you don't have some of those basic skills, then you're gonna end up in the same place. You're gonna end up where everyone does. But it's funny because most people, excuse me, most people think they're alone.

Mhmm. Most people think they're the only one that goes through those issues. And it's like that silent I heard a great statement this weekend. He said someone said, the silent pain you go through is usually, like, public pain. Like, that everyone's going through, they just don't talk about it.

And it's like, that was really eye opening because it definitely is that for the finances because I'll have lots of conversations behind the scenes, people hurting, but it's like they're they think they're alone. They're on this island, and no one else is having these issues.

Steve: Well, the great thing not so great thing, but a thing Yeah. Is that they eventually come to you.

David: Eventually.

Steve: They eventually come to you. Right. So prior coming to you, they kinda suffer in silence for quite some time. Yeah. Right?

So my thing where I was saying, why doesn't this work? I was bringing in more revenue.

David: Right.

Steve: I was making more sales.

David: Covering it up.

Steve: But I still wasn't doing the necessary things to keep it.

David: Exactly.

Steve: So and and even talking about it, knowing what you need to know about keeping the money, it even goes a step earlier than that in that, you know, we were on a coaching call the other day, and one of the coaches in our organization was saying, these people don't monitor their KPIs. And I was like, yeah. He's like, why not? I was like, look. There was a phase in my career, in my journey where I did not wanna look at the KPIs.

Yeah. I was embarrassed to look at the KPIs. Right? I didn't I was aware. I had a rough feel, but I didn't want to know the KPIs.

David: Yeah.

Steve: Because if I know the KPIs, now I gotta hold David accountable. David. Right. You know, you said you wanted to do this. Here's how many dials you know you needed to make.

Here's how many conversations you know you needed to have. I'm looking here, and here's the amount of dials and conversations you committed to. And here's how many conversations you've had in the last seven days. Yeah. Walk me through this.

I didn't wanna have that conversation. Yeah. Right. We have those conversations now, but there was a phase in my career where I didn't wanna have that conversation either. Yeah.

And I think it's it's kind of a if you could look at it potentially, like, a backwards, situation where first, we make a lot of money, then eventually figure out how much activity we need to do to make that money. And then we have to figure out, are we monitor are we doing those things? And once we develop that discipline, then I think at that point, now we have a little bit more to work with where we're willing to look at the finances. Right. But I don't think you can look at the finances until you get to the KPI phase.

David: And I think they're one in the same because the KPIs lead into the money that you're making. So It will.

Steve: But you have to actually log in to QuickBooks or someone has to log in to QuickBooks.

David: Right. That's where the the wheels fall off the track real quick. If someone has to log in there and you're the only one there as the entrepreneur. So, yes, until you have someone that's willing to do that, KPIs are probably gonna come first. Yeah.

Steve: So KPIs first. Because KPIs is in Salesforce, it's in Podio, it's in Rx. Whatever CRM you

David: see,

Steve: it's in there. Right? To some degree. Yeah. But, man, like, I could tell you, just about myself, I would say, alright.

This weekend, I'm gonna log in QuickBooks. Whatever. Alright. I'll do it next weekend. Right?

It's like the same effort, like, you know, making follow-up calls. I'll do it this weekend. Except you have to make follow-up calls because you need money. Right? Right.

But the QuickBooks thing I remember, like,

David: there's one You even did it right there. You equated follow-up calls to money, and it's like QuickBooks doesn't equate that to you. It does not.

Steve: It does

David: not. Even though it would. It would. It would. But that's where most people don't make that emotional connection of if I log in and really see what's happening, I could keep more of it.

I could focus on it.

Steve: I get to keep it. This one is the is the making it. Yeah. Making is exciting. Right?

Keeping it is important, but it doesn't get the blood flowing quite the same. Right? Not at least not initially. So I remember one time, I was like, I put off I'll do it this weekend for nine months. Right?

And it was at that point, I was like, I need a bookkeeper. Yeah. Right. Nine months. This is outrageous as a business owner.

So I've it was at that point, I was like, I need a bookkeeper. So is there a psychological thing? Is there something that you, a tactic, a conversation where you have found for those that are listening to get them to see to put to to to connect the dots between wealth and looking at your finances?

David: That's where with a lot of people, I say, you know, we titled this the biggest mistakes. The biggest mistake people make is they build their business on the hope and pray plan. Mhmm. They build their business on, like, I hope I make enough, and I pray there's some left over. But I'm just gonna go out there and hustle and grind, now look at my stuff for nine months and hope I'm okay.

Steve: Yeah.

David: Versus if I know what's going on and I know what I need, like, I call I call it finding your keep number. Like, what do you need and want? Need is like, I gotta get out of this w two job. I gotta get out of my rat race. You know, I this is what I need.

Then want is like, why did I start this business? You know, think about why did you really start it? Where are you right now? And equating that, that's where if I could have gotten to you then nine months earlier Mhmm. It would have been like, here, Steve, what does money keeping it really mean to you?

Mhmm. Okay. You say financial freedom like you're doing it for this, but if you wake up nine months from now not having the money that you really want, will you have will it matter that you did all those deals and you just went out there and did all the follow-up calls, but you didn't have money to show for it? Yeah. Like, will you feel how will you feel?

It's like those types of things where we have to equate it to their long term vision Mhmm. And, like, how today affects that. So can we put some of these key pieces in place? That's what drove me to profit first too in that book and that concept was it was really easy for the entrepreneur to grasp. I can keep more, and it's exciting today.

I can make you just as excited about keeping it as you are about making it. Yeah. Because then you can equate it to both. The more I make, the more I actually keep now too. Where before you're just spending your

Steve: money fascinating is that you actually could keep more without making more.

David: Exactly. That's the crazy thing.

Steve: If you actually understand your numbers.

David: Yeah. I've got story after story of that. The my the guy that I tell his story all the time, his name's Joey English, and he came to me in 2019, like and told me at the end of that year, I did more deals than I've ever done but lost more money than I've ever lost. The next year, he did a third, a third of the deals, but kept more Mhmm. Like, to the tune of several $100 more, like, net profit.

Just because he was focused on the profitability, focused on the less deals, more actual profit, and making the business effective, making it run smoothly and efficiently. And that's where, like you said, you don't have to necessarily even do more. Mhmm. That's where if you hear that cliched statement, slow down to speed up. Mhmm.

A lot of people like that statement, but they never do it. They never slow down and just to be like, where am I right now? It's what you were talking about, the nine months. I'm just gonna put it off for nine months. It's ostrich syndrome.

Mhmm. I'd rather stick my head in the sand Mhmm. And not look at it than focus on it because I think that focusing on it's gonna be boring. It's not really gonna bring me any money in and all that.

Steve: It's not revenue driving.

David: It's not revenue driving. So it's like I can't do it. It's like, well, no. Do you want to stay stuck where you are? Like, you said the rat race.

Robert Kiyosaki is saying, like, do you just wanna go on a bigger hamster wheel here? You know, and that's where a lot of people think I'm just gonna, you know, balls to the wall, get all the deals that I can, go to this hamster wheel, and it's like, that's not what you're really after. You're really after the freedom to spend time with your family Right. Or to give to charity or to do what you want to do. And you can't do that if you're just making all the money, but it's all going out the back door.

And it's like you've got this big bucket. You create this big engine Like, we did, we create that big engine where all these houses are coming in, and they're literally all falling out the bottom. But then in real estate, it's even more dangerous because you can get loans. You can get loans, so it covers those sins plus you could spend more than you make.

Steve: Right.

David: So it's like, oh, man. You could get yourself into pretty, nasty situation.

Steve: Yeah. Yeah. I think we've heard some of those recently. Yes. Okay.

So the biggest mistake is the unwillingness.

David: I would say the hope and pray plan.

Steve: Hope and pray plan.

David: Yeah. Like, you build it on the you build your whole business around, I hope I make enough. I'll just stick my hand in the sand and just keep grinding it out.

Steve: Yeah. What are some other big mistakes?

David: Another big one is one big bank account. That's how you manage all your finances for your entire company. That's another big financial mistake I see people make because a lot of people have one big account, and I love what one person said on our podcast. He called it the black hole account, where it's literally, like, money gets sucked in and sucked right back out, and you never see it. And it's just you don't know what it's for.

Steve: I'm just thinking about a a vacuum sound.

David: Yes. Exactly. It would just go. It it that's a perfect situation there, perfect sound. But that's where a lot of people have the one, and that's how they manage everything.

Do I have money today? Good. I don't have money, or I don't think I have money. I'm not even gonna log in to my account. You know, like, they're scared to look at it.

Mhmm. So it's like a lot of people have that one big account where they're just putting all their money into. Doesn't give them any clarity. Doesn't give them any foresight. This is where too you had talked about, well, you need QuickBooks and all that.

That's another reason why I like Profit First because, like, you don't even have to. To manage the cash, you don't have to know anything about QuickBooks. You don't even have to log in to QuickBooks. You could just have a bank account. Mhmm.

And, like, can you manage it from there? Because the second one is that one big bank account because most people manage it through that. And, of course, I could tell you, you know, like, how you can overcome that, but that's something that a lot of people do. Or they mix personal and business. Oh, it's okay.

You know, like, I'm just gonna put on the business card and then just pay it off, or I'm gonna put on my personal card and then have the business pay it off. Mhmm. So they're just playing the money shuffle game back and forth. It's like you just have that one account. Not even sure if you could take money out to pay yourself.

Steve: So what's the solution then to the one big bank account?

David: Well, that's where I went down that profit versus rabbit hole. Good mentor of mine said, hey. You're starting this business, Simple CFO. You should, you know, read the book Profit First. That's where I read that book.

And then to me, that was just so eye opening because it didn't talk one time in there about QuickBooks. No. It didn't talk about, you know, P and L's balance sheets. It talked about the cash.

Steve: Money management.

David: Money management because everyone manages their money, whether it's sucky because if they've got one account and they don't look at it ever and they just all the money goes out of it, or do they have a system for it? Mhmm. And to me, that's what Profit First was. It was a system to help people, especially the entrepreneurs because it's very low key, very much bank oriented, very much like you're just setting up bank accounts. Like, the solution there is you're intentional with every dollar.

It's the Dave Ramsey principle. You give every dollar a name, like the envelope system or whatever you've heard about in the personal finance world. It's that same concept, but you're just applying it to business, setting up business bank accounts, but naming them specific things, like, to keep more money. Like, I call the first three accounts that everyone should open. If you're listening to this one or if you've listened to my other episode way back when, I told you there's three main accounts, the golden trio, profit, owner's comp, and owner's tax.

All three of those help you keep more. They have different, you know, different functions, but they're all there for the owner's benefit, and most people just never focus. We were talking about this before the show started. Focus. Like, how what you focus on expands.

And so many people have one big bank account, and they call it operating expenses or their operating account. Mhmm. So they're just always focused on the expenses. And guess what grows? The expenses.

So it's like, now we gotta focus on other things beside that, making sure we have a healthy margin, a healthy profitability, healthy cash Mhmm. Position in the company. So that's how you can start.

Steve: Yeah. And we talk about, you know, park in your book, you talk about Parkinson's Law. Yeah. So how does Parkinson's Law work?

David: Like work. Right? If you give someone if you you're a business owner or a leader. If you give someone a project and you say you have three months to do it, how long are they gonna take to do it?

Steve: They're gonna take probably three and a half months.

David: Three and a half months, even better. Love that.

Steve: Right. They'll start about two, three weeks before it's due. Right. And then about a week after, we realize, crap. I understand.

This this project's bigger than I thought it was gonna be. Yep. Turns into three and a half months.

David: So if you give someone a project similar in nature, but you give them three days to do it, are they gonna try and fit it within those three days if you think it's reasonable for them? Yeah. Exactly. So that's Park It's a lot. It's that work expands to the time that you give it.

It's the same thing with money. Mhmm. If you have one account, all the money's going in there, you're very much inclined to either spend that money or just use the money that's in there. But if you separate it out into different buckets, you're placing yourself in a position of, I know my money's in different accounts, and it's earmarked for these different things like profit or the operational expenses of the business or to pay myself out of the owner's comp account. So that Parkinson's law, it's like, I'm making sure that my money is separated out so I don't just spend all of it because I'm giving myself smaller increments and making sure that OPEX is really just to pay the operational expenses of the business.

So it's that, you know, type of concept.

Steve: Gotcha. So, I'm thinking the Brent Daniels had a conversation about when's the right time financially Yeah. To bring someone on. So how are you determining profit requirements before making any major decisions? Like, what where is profit and then additional expenses?

Like, how does it all play together?

David: So are you talking about just your first hire ever? Like, that you bring into a company? Because if you're doing it like that, like, in the book, we give models of these are the different percentages you should have based on the size of your business. Mhmm. Because if you're small, you're not gonna have many people on, so it's weighed heavier to pain yourself.

It's like, hey. It's the pay yourself first in Robert Kiyosaki's book actually coming to life so you can get out of your rat race and you could start full time in the job, you know, the business that you've built. Mhmm. So you can escape your w two. But then from there, it pairs down to, okay, less towards paying yourself, but more towards operational expenses and paying other people.

Mhmm. So I would say at least at the $2.50 mark I mean, if you're making 200, 250,000, you're probably gonna get your first person full I would say first full time person around that. You might have a virtual assistant before that. When I started Simple CFO on the very first day, I had a virtual assistant. I had someone there that I trusted.

He was from the other he was from the real estate job that I had before. He was someone I had bonded with. But from day one, I even had that because I wanted someone to help me with I'm the entrepreneur, so I need someone to handle some of the admin stuff. Mhmm. So it's like you can start there with, you know, a fractional or an admin type person, a part time person to help you with some of that.

But then I'd be thinking 02:50, you know, that's when you're starting to get into, okay, can I get a full time person? Can I get a full time admin in the office where they can start handling maybe the bookkeeping, my stuff, paperwork, transaction coordination, some of the stuff that's not revenue driving Right? For you, the business owner. That's when I would first start. But then as you're growing, it's just gonna be based on percentage.

You want your payroll to be anywhere between 25 to 30% of the business. So if you can keep it there, that's great. That's a healthy, you know, percentage for the business. If it gets much more than that, then you know, like, I'm probably not bringing in enough or I'm a little bit top heavy. Do I need to pair back?

If you're smaller than that, then you can say, okay. We need to allocate some of those funds towards getting another person if you're not bringing in what you want to and you're wanting to expand. So that's where a good rule of thumb

Steve: You don't have a prescribed, like, dollar amount. It's you have a more of a percentage amount.

David: More per I I love percentages. Mhmm. So it's more percentage based because then from every dollar that comes in, you know what a portion of it's gonna go to. Mhmm. So even if you say I'm small, I'm in my first $100,000 a year, and you say, well, maybe I do want a part time assistant or something.

Well, don't make them more than 25%. So can someone do it part time for 25 k a year? Maybe. It depends on what you're having them do it and how long they're doing it. So I would much rather based on percentages rather than dollar amounts.

Especially, we're talking here. We're in Arizona. I live in Florida. You know, we were talking about the Midwest before the show too. It's like, it really depends where you live too.

So dollar amount isn't really relevant. It's more I like percentage because the percentages are pretty much across the board in any business. I

Steve: was talking to a recruiter a week and a half ago. I was like, yeah. We're looking for a sales manager, and here's a budget. And she's like, did that have to be in Phoenix? Like, yeah.

She said, well, we're not we're not hiring anybody.

David: Is that bad,

Steve: Yeah. It's just like, for that budget, you're not you're not hiring a person. It's like, if we're gonna hire in Phoenix, you're gonna have to have the budget or or be open Yeah. To this person not being in Phoenix. Fair.

David: Yeah.

Steve: Right? Because you forget, you know, cost of living is quite a bit higher here.

David: Right.

Steve: You know, I'm I've lived in Phoenix, Phoenix Metro. I've lived in San Diego, and I moved back here. Everything is reasonable here from my perspective. Yep. But from the Midwest Oh, yeah.

David: I moved from the Midwest to Florida. I was like, that was a wake up call. But moving from the Midwest to anywhere, substantially nicer is a wake up call. You know?

Steve: So What was a wake up call? Yeah. What what was it? What was your experience?

David: Well, for me, rent. Like, because I I own my own houses in the Midwest, all that stuff, and then rent it out to other people. It was, like, 1,000, 1,100, 1,500, you know, or whatever. I moved to Florida, and then we started renting because I've got my whole thing on that too. Like, I like renting where I live for now just because when I move to a new place, I'm not sure if I'm gonna stay there.

It's flexibility. It's freedom. To me, I'm focused on the company. I don't need a lot of things going wrong with my house, and so I take time away from my business, that type of thing. But rent was, you know, double you know, two and a half times what it was in the Midwest.

I'm like, well, that's interesting. You know, now now I'm on the renting side versus owning. Mhmm. I'm like, oh, okay. But then the houses are a lot more down, you know, in Florida even where we are near the Orlando area.

So Yeah. But winters are much nicer. So I'm like, I'll I'll take the increased rent. Like I

Steve: can imagine.

David: It's 60 degrees.

Steve: You're in Indianapolis or you're you're in India? Outside of Chicago. Outside oh.

David: So even worse. So we had the lake effect snow, could get feet of snow at a time, and then would stay there for months. So yeah. Yeah. It's definitely worth it living in a nicer area.

Steve: Alright. So, what were some of the we talked about was it Joey English? Yeah. Right? What are some of the scenarios you know, you talk about suffering.

You're not suffering alone. You're actually just public pain. Right. What are some of the scenarios you typically see from someone that, you know, you've been able to work with to have some success?

David: Yeah. So a lot of people come with that they're not paying themselves much or anything or just barely scraping by or doing the money shuffle game Mhmm. And they know it and they're embarrassed to even say it, like, on the call with us. Like, hey. I'm taking money from personal and business and that type of thing.

So that's what we see a lot. A lot of times, people come to us and they just don't know. They literally get on the call and I ask them, how much did you make last year? Just ballpark. I don't need and they are like, I don't know.

Really? I don't know how much I'm making. Do you know what you netted? Like, what was left over? I don't know.

Like, the bank account says this, but my CPA says something else. I have no idea how he or she came up with that number. So a lot of it is they don't know or they know that they're hurting, like, because, like, they're not paying themselves or they're scared to pay themselves. A lot of people come to us with, you know, like you were saying, they come to us eventually because they're eventually hurting enough. They do know there's an issue.

An issue where, like, I can't make payroll or, like, I keep having to borrow these bridge type loans because, you know, money will come in or a property will get pushed back. I need to pay payroll, but then, you know, then I need to pay that back right away, and they never feel like they're getting ahead. So that's what we see a lot as well too, with the people that walk through our door. Some people, thankfully, they've heard the message that I've been saying out there, and they're like, can I get ahead of it? Mhmm.

Because what it comes down to, the root cause, like I said, was, like, they think that income's gonna solve all problems. Another root cause is they don't have good money habits, profitability habits in their company. Mhmm. So some people are reaching out and saying, like, can we get some of those now before we scale up? Because they've heard my story or they've heard other people's story that we share of.

They come in the door and doing all these deals, but not making any money. And I'm like, I wish I could help you sooner because if I do, if I catch you in that 100 thousands, when you hit a million, you're gonna have habits. Those better habits. So that's a lot of what comes through the door. I'd say another big one, Paul Sparks, who you know Mhmm.

Very well. He's like he said one of the funniest statements, I'd rather hit my head on a nail than look at the finances. So it's like, that's where a lot of entrepreneurs are. I would rather do anything. I would rather put this off for nine months.

Steve: You

David: know, QuickBooks are looking into anything than look at this and, you know, get real with the numbers because I don't see the revenue driving or, like, I don't wanna look at it because it's scary. I'm not sure what it's going to tell me. So I would say the root cause of all of it, though, is fear. Mhmm. It's fear.

It's the fear of knowing. It's the fear of not knowing. It's the fear of looking like, all these other people on social media look real good, and they're, you know, they're doing all these deals, but then they don't really know what's going on behind the scenes too. So Yeah. I would say that's a lot of the people that walk through our door where you said, you know, that people that we see successful are the people that are willing to look at it.

Mhmm. Because I have another good friend. He runs a fractional CFO, like, training, like, four fractional CFOs, Michael Caine. He says, once you know what the issue is, you can go into sniper mode. You know, you can go into because I boiled it down to you just need to know three numbers in your business, and you'll be ahead of 90% of business owners.

What you make, spend, and keep. Mhmm. Do you can you tell me last year, 2023, what you made, what you spent Mhmm. And how much you actually kept that you put in your pocket? And if you could tell me that, you're probably ahead of most because you now have the power to change those numbers.

Yeah. If I'm not making enough, I can usually tweak it because then I can see where I need to spend it because now I have power over spend. Then if it's an internal issue, usually, the keep number and keeping it is an internal struggle. Am I not keeping enough? Do I not feel adequate?

If you're a man, do I not feel adequate as a man in the provider or whatever? Or if you're, you know, on the if you're a woman, then it's like, am I not making enough? I don't feel like I'm as successful as my partner or the other people out there or, like, the male dominated industry. You know, it's like a lot of those internal struggles that people have. So it's like, can we pinpoint what that even is?

Because a lot of people can't they don't even know those numbers. We have to dig in there first.

Steve: And that is painful because I can say for sure. I mean, until god. I don't know. Like, 18 or 19? I didn't have those numbers.

Right? Like, I and, you know, looking back, like, I had real estate back in o five. Yeah. It's over ten years. Yeah.

I did not know my finances. Right? And the ability to make decisions changed dramatically. Once I knew my numbers, the rest of when I didn't know my numbers. The nine day difference, your ability to make decisions.

Yep. Yeah. You wanna talk about that?

David: I see that all the time. Yeah. Like, even with Joey, like, I'll go back to his story. We literally just showed him what he made and spent, and then he went home and said, okay. Based on that, here's how much I want to keep next year and what that equates to deal flow.

Like, if I want to keep x amount of dollars, how many deals do I need to do? He went home and did that once he had those numbers in hand, and then he came back to me and said, guess, David. Guess how many I need to do? And I said, I don't know. Back to one to two a month.

He's like, no. I need to do five deals next year just to get me to my bare minimum number. Mhmm. And he's like, now I don't need to do $80.90, $100 weeks. Like, it's that freedom.

There's another lady we're working with. Name's Ashley, and she paid herself the bare minimum, you know, but she didn't know. She was scared to take money out. That's what we see a lot of the people that we work with, and she fit into that bucket very much so where she was just like, I'm gonna take 1,000 a month. I'm gonna take random draws when I need it out of the company, and, hopefully, the company can sustain that.

She was just scared. She didn't have the actual numbers. This last year, when she she she took it to the extreme, like, she became a KPI wizard. She's running spreadsheets around, like, with her CFO and, like, telling her the numbers. And that's where she became, like, very numbers focused of what she made, spent, kept.

In this last year, she's paying herself, like, double and a half of what she did last year on salary, so it's not random draws anymore. She, like, grew her profit line by 338%, like, just being able to focus on that. It was like a super small percentage. She was able to just blow past it this last year. But she said she attributed to knowing.

Just the power in knowing to be because the great book by Keith Cunningham, The Road Less Stupid, absolutely love that book. It's not the answers that are usually, you know, that we're going after. It's the questions. Are we asking good enough questions to get us to what the real issue is? We're all problem solvers as entrepreneurs, but we're not asking ourselves the right questions usually.

We're asking ourselves the easy question, the question that's right out there in front. It's usually several layers deep. Mhmm. Like root cause. It's the root cause.

It's getting to that root cause. And for both of them and for most people, it's that fear. The fear of the unknown, the fear of I don't know this. I will also say too, one of the things I've realized is even since we've been on the part I was on before, that the knowledge gap Entrepreneurs have this this brain block that the knowledge gap of from being an entrepreneur who doesn't know finances to knowing finances is this huge chasm. You know, like, that they have to become Superman and they need to be an accountant or CPA.

They gotta get a course in QuickBooks. They gotta be and it's not. It's like, it's really this close because all you need to know, how much do you make, spend, and keep? Mhmm.

Steve: Can you

David: get those numbers? If you can do that, you're more financially savvy than 90% of the entrepreneur space and able to affect those numbers. So those are just a couple of the people we've helped, but that's where a lot of them come through the door like that, have those issues, and just being able to know the numbers, they're able to change it. They're able to now know what to do.

Steve: You mentioned Keith Cunningham. Yes. At the end of that book, he pitches a four day event. Yeah. Have you gone to that?

David: I have not. I heard he's stopping too. Like, he's retiring. Did you hear that?

Steve: I mean, he's up there.

David: He he is up there, and he's been doing it a long time. Yeah. I've listened to all of his stuff, you know, subscribed to his emails. Like, he's one of the very few that I read his stuff. You know, like that, the emails that million emails that come through.

But

Steve: yeah, his I wanted to go to one of those, only because it's an unrelated topic. But you were saying, I can look at a balance sheet and a p and l and tell you that's a company I wanna invest in or not. Yeah. Right. Like, I can just tell you, just look at the p and l balance sheet, this is a healthy company.

David: Oh, yeah.

Steve: This is an unhealthy company. Right? And this is a company I would want to invest in now or, like, yeah, that company is a matter of time. Yeah. Yeah.

I would,

David: like, a 100% agree with that. I can look at a company at this point and do that, but Yeah. That's when we start working with people. We can tell them if they're a company worth investing in. If you're in the real estate space, man, you got me you got me revved up here because you're going after motivated sellers.

The sellers that are losing their houses because you can really help them where the real estate you know, the realtor might not be able to because it's an ugly house or they inherited it. They can't do it any other way. Mhmm. Or maybe you have a solution in your tool belt for them out of the many things you could do for them. Same thing with your business.

I don't want you to be the motivated seller. Mhmm. I want you to know what to be equipped to have because sometimes okay. Think back doing your first deal. You probably knew that much more than the seller on the other line, you know, on the other end.

It's like you knew a little bit and you were just staying ahead of them and you could get them, but they still saw you as the authority.

Steve: Right.

David: Same thing in business too. You just need to know a little bit more as as far as your business goes, especially for your own business.

Steve: Right. So that

David: way you stay ahead so you're not that motivated seller one day. Oh, shoot. I've got a fire sale. I've seen this a lot over the last year and a half that a lot of real estate investors who are buying and holding properties are starting to sell them off just because they can't sustain the cash flow anymore. I'm like, that's sad.

Mhmm. You know, that they don't have enough cash flow or they don't know their numbers or or they're so successful, they're running themselves out of business. Because they're so successful, they're going after so many deals that they're using their own money that they're having to sell, like, they're, you know, killing their golden goose. You know, the golden goose instead of just the eggs. So it's like I've seen a lot of that as well too in the marketplace.

It's like, that knowledge gap is so small. Like, let's just get you to the bare minimum so you can be a savvy business owner so you can know if you're worth investing in or not. So yeah. Keith Cunningham changed my life with several of his books.

Steve: Talk to me about, the last year and a half. We had, a lot of changes.

David: Yes. Lots of changes.

Steve: Lots of business changes.

David: That's what yeah.

Steve: That got hurt. Yes. Right? What did you see as far as the interest rate hikes and how that affected different regions in this country?

David: Oh, yeah. It definitely affected the different regions. I mean, where you saw the it's it's funny that we talked about the Midwest before we came on the show because that's usually the pretty even keel where even the interest rates, it does hurt, but it's like you're not seeing as big of an upheaval there as Phoenix or

Steve: Historically, it's even, Steven.

David: Yeah. Historically. So it's been like that over the past year and a half, and I've seen a a lot of people that came to us in a panic are usually in those bubble type markets. Like, okay, shoot. The value just dropped 30% in Phoenix, like, whenever we were talking a year ago.

And it's like, that's where I saw those major marketplaces. More people were coming to us at that point just because they were like, are we gonna make it? Mhmm. You know, look at our stuff. So to see, are we gonna be able to weather this storm or not?

Because a lot of them didn't even know. You know, like, are we gonna be able to make it if our interest rates keep dropping? Do we need to pivot our business model? You know, some people went from doing short term to long term, long term to short term depending on the market and depending on the place, like, you know, or doing the corporate rentals or they went from wholesaling to flipping, flipping to wholesaling. It really depended on where they were in the marketplace.

And then I would also say, yes, the actual region. But the ones that weren't panicking were the ones that had cash. Like, that had stack cash where it's like they could make the easy decisions, the slow decisions no matter what market because we we had those type of people on both sides in all different marketplaces. Like, we work with over a 160 investors across the nation, so we got to see it in the Midwest markets, the, you know, the crazy markets. We gotta see it all over the place.

Mhmm. And it didn't matter if it was the Midwest or if it was one of the hotter markets, those up and down cycles. If they had cash, they weren't panicking. They were able to say, do we need to focus on a different division, and here's how much cash we can put into that? And they could be intentional with it versus the panic mode of this isn't working anymore.

You know, like, I used to be able to sell my rentals for this cap rate, and, like, now that cap rate doesn't work, and, like, it's totally, you know, skewed and all over the place and they're trying to they're fumbling. You know, the ball is being fumbled. I was a lot

Steve: of, we were talking about this different conversation, Paul and I. But there are some investors that just have a lot of frenetic energy.

David: Yes.

Steve: And and in in those situations, you're probably dealing with a lot of frenetic energy.

David: A lot. A lot of it. And it's, oh, so many things we could go down that rabbit hole of a lot of entrepreneurs love the frenetic energy. Even though they don't like stress, they love being in stressful situations. Yeah.

Because being the hero and being the archetype that gets out

Steve: of that

David: problem solver. Exactly. Exactly. And that's where some of that is they don't know. They really don't know that there is a better way.

That's why I'm trying to get out here because like you said, it was 2005 when you started in it, and I've come across so many entrepreneurs across the real estate and just outside of real estate where they're like, I wish I would have heard a message like Profit First ten years ago, twenty years ago just to start stacking some cash Yeah. And, like, actually having that and building the business on a more solid foundation than now where they're decades into it. And they're like, I've never felt successful. That's some of the most depressing calls that we get on are when people say that. It's like, I've been in the business a couple decades, and I don't feel like I'm any closer.

Like, I haven't achieved financial freedom, and I don't see the end inside. I don't see a light at the end of the tunnel. That breaks my heart because it's like, there's baby steps. Like, there's just baby steps that you could do, mister or miss entrepreneur, like, that you could just take those first actions like I was talking about with the profit first or just some of those cash pieces. But just at this point, they love the frenetic energy.

Mhmm. They love that. And then they get into that situation, then they really don't love when they see, like, the writing's on the wall. I either have to sell a bunch of stuff or, like, I gotta go out of business. And it's just I wanna keep people as far away from that as possible.

Steve: How many did you see go under?

David: Go under that I personally saw?

Steve: Not that you worked with, but that you were, you know

David: Well, there were some people that we saw that they would come in the door and be like, just tell us. Like, are we going to make it? Like, it was almost like a thirty day agreement with them to just give them numbers to be like, yes. You're going to make it or no. You're not.

And almost I would say 90% of those were fine. It's like once they've found the numbers and even if they were upside down, it's like, here's the thing, the actions you could take right away Right. As an action to overcome that. Now the people that we do in work, I've seen I don't myself personally and just in my network, like, I because I don't get on Facebook a ton, but, like, maybe a half dozen. So I don't see a lot.

So the for me, it's more the once they actually take the dive into and once I get to know them more that we're working with them, like, that's usually savable. You know, it's not as bad as they thought. We had one guy come to us where he's like he had $4,000,000 worth in the pipeline to sell. So he's got, like, a huge pipeline, but he had four projects that were eating him alive, and he's like, I think I might have to declare bankruptcy. Can you help me for thirty days just to see if I need to declare bankruptcy or not?

And I'm like, oh my gosh. Like, I I felt his pain. But being there before doing all those deals, like, building himself into oblivion. You know? It's like, I don't want people to be there anymore.

Steve: Yeah. I mean, one of the things I learned from Darren Hardy is that more businesses die from indigestion and starvation. Yeah. Yeah. And they're They're over

David: over eating.

Steve: Spent their way out of business even though they're profitable. It wasn't until much later in my career my that my the importance of understanding cash positions

David: Right.

Steve: In addition to profitability.

David: Exactly. Profitability

Steve: and cash positions are not necessarily intertwined.

David: They're not. They're not the same things. Because if we're talking about profit because let's define that too. Because you hear the word profit, and that's can mean a million different things to the entrepreneur. Profit, the most typical answer is what you see on a profit and loss, like an actual statement or report that's printed out.

Like, here's what you made and spent last month, and what's the bottom line number that you actually made? That's your net profit. Mhmm. That's what most people think. And then they look at their bank account, and those numbers are way off.

Here's what I you know, here's what my statement is telling me, and here's what my bank statement's telling me. Mhmm. It's like those are way off, and people don't understand that cash is a 100% different than profit. Mhmm. And it's like you gotta be in a good cash position at all times and making sure you protect that at all cost.

Where sometimes the profit, you might show, like, close to the negative or you might be negative or sometimes that that is an indication that something needs to change, but you could still be in a good cash position.

Steve: Alright.

David: I'd rather have the cash and be in a good cash position than always just saying, okay. We've just got a great net profit. Because if you're just taking all those net profits and it's going out the door, you get into a situation like that guy Mhmm. Where literally have a great pipeline, has had a great year, but four projects are eating them in alive, and all his cash is out the door. And he's thinking about folding up shop.

Yeah. But I will say, if you take care of your cash, it's funny how magically the statements and the profit and loss and the balance sheet look a lot better too. They also So it's like, you take care of cash, which is also the easier thing to take care of as an entrepreneur. You don't have to warn the QuickBooks and all that to manage cash. You just have to know when a dollar comes in, what do I do with it?

What do I name it? That's what's different is that if you can start to do that and get a grasp on it, it makes everything else in the business run a lot smoother. But, you know, a lot of people I love what you said there. The indigestion. They die of indigestion versus starvation, and that's a 100% true.

Steve: And something that Marcus Crigley, he spoke about, I wanna say in '22 was, you know, you should set a target of having a million dollars in the bank. Mhmm. So it's I

David: remember that.

Steve: Alright. Gotta get a million dollars in the bank. Because, again, that peace of mind you talked about Yep. Your ability to make good decisions versus fast decisions. Yes.

So we got still an aspirational target. We're not there yet. Alright. We're still pretty far away from there, but that's the target. $7,000,000.

David: A great first target for a business. Like, if you could get to that target when you're first starting out, that's that's a great catalyst.

Steve: Starting out. That's miraculous.

David: That's miraculous. So I would even say in the first few years, five to ten years, depending on your business too. Mhmm. There's so many factors there. But, yeah, if you're getting in the real estate space, it's a great first target if you wanna get there, to the cash position.

Steve: Something you know, there's something that everyone struggles with. No one talks about it. Is that have we talked about it, or is there

David: Oh, yeah. That the the finances just in general, just hitting their head on the pillow and not knowing where the money is. You know, like, that's what everyone struggles with, feeling making money but feeling broke, but not wanting to talk about it because it's not as sexy.

Steve: Mhmm.

David: The same reason why you you put off nine months of, like, looking at the stuff because it's not as sexy Mhmm. As talking about all the deals we did or here's what I'm working on or all that versus I need help.

Steve: You know, part of it is I think our wiring. Right? And the thing is 100%. Being an entrepreneur is why it happens. You know, like, for myself, tried playing poker for a living, didn't work, thankfully.

Because, man, I wouldn't have these opportunities if it did work.

David: Right.

Steve: But, you know, there's been a couple of times where my wife sits next to me at the casino. Right? She's like, you know, she'll sit, you know, and just watch them do it for a little bit. For myself Yeah. At the poker table, my favorite part is putting all my chips in the middle of the table.

That's my favorite part. I know I have a better hand than you right now. Yeah. I know with a high degree of certainty. Right?

Not matter of fact, I can't see your cards. But I know with a high degree of certainty, I have a better hand than you. I can't wait to get all my chips in the middle of the table. Whether I pull the chips back into my stack, actually, it doesn't matter to me. Right?

Because mathematically, I know I made the right decision.

David: Right.

Steve: In the long run, it'll all work itself out. Yeah. So this hand doesn't matter. Right? As long as I made the right decision, I can live with the outcome.

My wife's favorite part is whenever I bring the chips back into

David: Right. Yes.

Steve: Right? So for me, it's about, like, the excitement of making money. It's excitement of driving revenue. For her, it's like being able to count the money that's right there.

David: Right. Yeah. And that's how most like you said, most entrepreneurs are wired that way, but it's also our culture in America too. It's like, that's been that culture's been driven into us since we were kids and our grandparents were kids keeping up with the Joneses. Mhmm.

You know, it's like making sure that you are living the American dream. It's like even now, the American dream might have changed, but it's now just become become an entrepreneur and make a lot of money, you know, versus, you know, like, what it might have been go to school, get a good job. Mhmm. You know, like Robert Kiyosaki, at least for the entrepreneur space, spun that on its head Mhmm. You know, and, like, getting a lot of people out there.

So that's where it's yes. A lot of that's built into us, but that's not what creates a long term

Steve: No. We got we got we got Customize it. Right. But, yeah, that's I think that's how we're wired. And, yeah, to your point, you know, for better, for worse, I think it's mostly better, but it's a little bit challenging that we're pushing entrepreneur entrepreneurship.

Right? The Gen z is more Yeah. Money motivated than Gen y. Right? Because I think Gen y is millennials.

Right?

David: Sure. I think so.

Steve: Yeah. So Yeah. I'm not I I am on that cusp, not the millennial. There's millennials, and then I think Gen z is right after the millennials. And these guys are money motivated Yes.

Because they're playing the comparison game on social media. Yep. And you got these guys with their ecom stores and the drop shipping and the and the crypto and the real estate and all those other things. But there's a lot of flashiness Yeah. Driving this.

So I think that's mostly a good thing. There's a lot of bad that can come from it, but the alternative is going to college if that's not what you want. At least they're opening your eyes to a different world.

David: Right. It is opening your eyes. On the one side, you know, like you said, it's good. But then if you keep that as your standard of, like, I'm only gonna watch this stuff, you know, for my business education, it's probably gonna go south at some point because a lot of them was that just always making it, but never talking about Mhmm. Becoming a savvy business owner.

Okay. What does this have business owner do? Well, they know sales and marketing. Mhmm. You have to have that to keep the money coming in, but they also know, okay.

How do we keep this going for a long time? Mhmm. Making sure we're not eating our shirts as well too. But that's where a lot of the the TikTok generation, you know, the Facebook, you know, just the guru land out there of, like, all the different things.

Steve: You can't sell, keep more money.

David: Right. Exactly.

Steve: Right. It's like, I don't see so much anymore, but, you know, I think pre COVID and most a lot of COVID was checks, pictures of checks

David: Right. Yeah. Instagram. You

Steve: don't see that so much anymore, but no one ever posts their rental checks.

David: Right? Yeah.

Steve: No one ever posts positive signature bucks.

David: Or their profit and loss Yeah. Or their balance sheet Yeah. Or the things that really matter in business to make sure that they're actually going to be in business for a long time.

Steve: I remember I posted my p and l. Like, here's my p and l. If you wanna figure out how I did this, right, you know Yeah. Sign up for our event. And we got people that came to our event.

And someone made a comment like, only Steve would be crazy enough Yeah. To post his P and L. But you know what I found when we when I hosted that event, we talked about the marketing. We talked about, you know, this is a couple years ago, the texting and the sales and, the the CRM and all the other stuff. We spent a lot of time breaking down how to break out your flips in QuickBooks.

Yep. We spent a lot of time there. And the the part where I was hard getting peep through people's heads

David: and

Steve: when I say this, because I was on the other side.

David: Yeah.

Steve: My accountant every year would yell at me and say you're doing this wrong. I was like, I disagree. And now I know that he was right. Was that your expenses on a property go on the balance sheet

David: Yeah. Until it closes. Until it closes.

Steve: And then it becomes an ex and we convert it from the balance sheet to an expense. Yeah. That is not a normal human concept. No. You have to rewire your brain for that.

David: Exactly. Because if you're an entrepreneur and you're like, I spent all this money I'm a real estate entrepreneur doing a fix and flip. I spent all this money on the Why don't I see it on the profit and loss? Like, where why isn't it on the expense as well? It's sitting on the balance sheet.

That's why knowing the difference between cash and the reports is so important.

Steve: Mhmm.

David: The cash and the report because it's so different. That's why I like the that methodology and why, like, I keep bringing a profit first because it's like, if you know where the cash is going and you've given it that name, then you know. Even though it doesn't make sense, like, okay. Why is it not on the profit and loss? But you're asking a better question now.

It's like, okay. Then where is it sitting rather than, oh, I thought I was gonna have all these expenses to write off and blah blah blah. It's like, well, the property hasn't closed. You had the money. You you got a loan or you used your own, and you knew it was from one of these buckets, one of these accounts, bank accounts that you had.

So just having that clarity, that comes in a lot too. Just that clarity of knowing where is the money Mhmm. Versus where does it sit over, you know, on one of those statements. It's like, okay. Yes.

You might want to learn that eventually, but first, we gotta get a grasp on where's the cash, where's the coming from. Management.

Steve: And I will share it, like, even though I've been doing this for a long time now and I still talk to my, you know, our internal CFO every single week. It's still when we look at it, it's like, gotta, like, just rewire brain for, like, half an hour Yeah. To review the finances. Yeah. Because it's just not normal.

David: Yeah.

Steve: Right? So finding your keep number. Yeah. Explain the keep number.

David: So need and want, I break the keep number into what do you need and what do you want. Because I've got even the psychology behind keep number is you get into business, not for it to become this cash eating monster. You know, you've got the one big OPEX scanning, like, all the money's going out the door just like we were doing, just like a lot of people do. Find your queue number has the effect of you don't build your business on the hope and pray plan. You build it around what do you need to bring home.

So it quiets all of the TikTok, Facebook, all the all the noise out there saying you should be doing 10 deals a month. You should be doing your 7 figures in your first year. You should be doing that. Everyone telling you what you should be doing. Mhmm.

Instead of saying, no. This is my keep number. What do I need for my family? Like, I was telling you about Joey. He thought he need to be d doing three, four, five deals a month.

It need to be five deals a year for what he needed to keep. Mhmm. So the keep number, to to break it down really simply, is your what do you need? Like, if you just print out your bank statements, your personal bank statements, something that's probably gonna kill you to do, but, you know, print out three months of bank statements and say, how much did you spend over the last three months? Can you just get that number?

Mhmm. You know, just get a general number. How much did you spend? Get that total divided by the three months. There you go.

There's your need number right now as it stands. Like, what do you just need to get by so you can keep the lifestyle that you have right now? Then the other part of the keep number is the exciting part, want. What do you want? What would get you out of bed in the morning?

What would get you excited? Why did you start your business? Mhmm. Why did you start in real estate? Was it you know, like, I I asked someone this week.

I was doing a workshop around this, and a guy said, at first, I wrote down financial freedom, then I wrote down time with kids, and then he's like, well, I got deeper into it and said, I don't want my kids to have the same experiences that I did growing up around money. Like, I don't want them to be hurting for money or thinking of it as bad or evil or wrong. And, like, I wanna give them opportunities, and I want them to see it in a positive light. Mhmm. And I wanna show them what hard work and, like, what thinking will get you.

And it's like he we really got deeper into why he was doing it. Mhmm. And that's like, okay. For the want number, okay. How does that feel that more?

How can you show your kids? Is it taking them on a trip? Do you take them to a third world country and show them how you live versus how someone else is? Like, you can get creative then

Steve: Mhmm.

David: With your want number, it's how big is that? If it's 5,000 you need to bring home, make your want number 50,000. What if you were bringing 50,000 net into your pocket, not the whole company, but just to you? What would that mean to you? Mhmm.

So it's like, how would that help you get closer to your goal? Would that help you get closer to why you started the business? Like, helping you accomplish what you started off, you know, doing the business for. So that's where we take people through that because then then when we have conversations, like you said, you had a talk with your internal CFO and we gotta rewire that and it's like it's not normal to go through that. Well, when our CFOs have conversations with our clients, I want them to connect.

Remember what you said here? You said you found your keep number and that why. Well, this is why we're going through this right now, and it's like it makes that a little easier to sit through that Mhmm. To be able to go through the numbers and say, okay. I'm working through this right now, or I need to cut this, or I need to grow this expense over here, this marketing budget, because I need more deals to get to why I said I started this business.

It's like, now it's making those connections, but it's personal to you. What is unique, you know, like, the unique selling proposition and all that type of stuff? What's unique to your business? It's you. Yeah.

It's you. It's your family. It's your situation. It's it's the kids that you have or it's the kids you don't have right now. It's like, it's what makes you different than every other company and into you.

So it's like really finding that keep number. What do I need to bring home Mhmm. To make sure that I'm okay. If you're still in your w two job, like, if you're listening to Steve's thing, he can get you out of your rat race. Like, he's had enough people on that it can help you make the money.

Now here's an episode of, like, what you do with it afterwards. It's like, first, find that keep number to get you out of your rat race, and then that's that need minimum number, and then what do you want. So that's how I break it down and what it really means behind the scenes because it keeps you going because there's gonna be hard times. Have you had hard times in business, Steve?

Steve: Couple times.

David: A couple times. Right? But it's the why that drives us. You want to create a 100 millionaires. Mhmm.

And you want to make an impact in those people's lives. And you know what it takes? Freaking money. It takes the money that you make, but then you need to keep it to be able to go out there and tell more people about it or travel or put on more podcasts or whatever it might be Mhmm. That gets you there to help them.

It's like that's where we need to create that, and it most people don't connect those dots in their brain of okay. And they'd never go through the process of sitting down and saying, what do I really want from my business? Because I even though I started it for me

Steve: Mhmm.

David: And for my family, it's not really helping me, or I'm doing it to my family.

Steve: Yeah. Doing it to your family, you're another way that I've heard people say I'm a slave to my business.

David: Yeah. Exactly.

Steve: So you're talking about a cube number. How different is that than the the freedom number?

David: When you say freedom number

Steve: From Kiyosaki.

David: From Kiyosaki?

Steve: Yeah.

David: For me, Kiyosaki, when he wrote his book, what did the same mistake as a lot of other books. I'm gonna even say mistake that

Steve: Gabe's not watching this.

David: Yeah. I hope he is watching it.

Steve: I shouldn't say I hope he is watching it because I mean, I made it.

David: Right. Exactly. But he made the same mistake of too high level of I want you to get out of the rat race, but I'm not really gonna tell you how to get out of the rat race. But he wouldn't

Steve: sell as much then.

David: Exactly. So he did a he did a great job for what he was accomplishing. Mhmm. But he it was the same mistake that a lot of other books make of saying, here, pay yourself first or get out of your rat race or the portion of all you have is yours to keep or, you know, the seven habits, you know, like, first things first. You know, that's where a lot of those books gave us that concept, but it's like the system behind it making sure we're actually keeping it.

Mhmm. You know, and that's where the freedom number to me is, like, more pie in the sky, more closer to the want number Mhmm. Than it is the need, where it's like a lot of the entrepreneurs that we encounter that look successful on the outside, literally have 7 figure businesses, are not taking home what they even need Mhmm. To survive. They're sucking air.

They are constantly stressed making bad decisions in their business because they're constantly stressed about what they're bringing home or not bringing home. Mhmm. That's where I gotta take that first step with you. This is I'm not yeah. Freedom sounds great.

But right now, you can't even think about freedom. You can't think about the next you know, tomorrow, you're thinking about how am I gonna make payroll today, or how am I gonna wake up and I gotta sell something today or we're not gonna have a business. I gotta give them over that hump. So I think it differs there where freedom number is more the big picture. That's what the want number is to me, and that's the big picture.

That's the why did I start my business, and we can focus on that, but we gotta take it in baby steps. Mhmm. We gotta get you breathing first

Steve: Yeah.

David: As an entrepreneur.

Steve: I'm I'm thinking through if I remember correctly, it's been a long time. Yeah. I probably should check out Rich Dad Poor Dad again.

David: Right. Me too.

Steve: I think Freedom Number was the number you need to make so you can quit your job. Yeah. You can replace your active income not active income, but your w two income with passive income. Right?

David: Right. And for still, a lot of people, that's the want number. Yeah. Because it's passive income, it's building it to be able to to replace it so you don't have to go to work. You know, like, his big thing is not being able to

Steve: Quit your job.

David: To quit your job and not have a real job.

Steve: And then you have the cute number, which I'm equating to kinda, like, in our in our language in a whale club, the solvable problem. Yes. Right. Here's the number that can fulfill your needed expenses as well as fund all the aspirational things you want to accomplish.

David: Right.

Steve: Yeah.

David: And it's just taking people on that journey. Mhmm. Need is, like, let's get you out of your rat race, get you off that hamster wheel, get you to stop sucking air, and then we can focus on that next step, the one number. Yes. We've talked about this at the wheel club and all.

We have very similar ideologies in that. It's just with what we do, it's putting that person on the team knowing where it's going.

Steve: I think the the the nuances here, the slight differences would be you're more tactical.

David: Yes.

Steve: Here's how you do it financially. Yes. Whereas whale club is more as, like, here are the things you need to stop doing because you're just hurting yourself.

David: Right.

Steve: Right? Like, you're making these decisions out of instinct. When reality, you're at a point you're clear now. Like, you know, what got you here won't get you there. We need to hone in some of these reactions Right.

And add some more of these other reactions. Right? Slow down and speed up like you're talking about. Like, the amount of effort, time, money, energy that we waste making up for bad decisions.

David: Right.

Steve: Right? The the road less stupid, what Keith Cunningham talks about.

David: He's he opens the book with that. If you could reverse the three worst financial mistakes you've ever made I

Steve: wouldn't be here. Right. Exactly.

David: I'd be

Steve: hanging out with Where

David: would you be?

Steve: I'd be hanging out with Tony Robbins. Yeah. Right? I'd be hanging out with Patrick Bet Dave.

David: Yeah. There you go.

Steve: Like, all these things that had I known because for me, the challenge was never how to make money. It's never been the challenge. The challenge was, keeping money, number one. But number two, going down the wrong path.

David: Yes. Yep.

Steve: Right? And then again

David: Not your path and Yeah. How that works for you.

Steve: Kiyosaki didn't say go get your real estate license. Kiyosaki said buy real estate.

David: Right.

Steve: Right? Got it. It's shiny object syndrome there. You know, you talk about the the want number and the, you know, I don't I don't want my kids to, have to have the same painful relationship with money

David: Right.

Steve: That he did. So I got three girls. One of them is a giant Swifty right now.

David: Okay.

Steve: Yeah. So she's more fascinated by Chiefs games than I thought she should be. Right? Yep. So we were watching whichever one is on, Netflix.

I don't know if it's Reputation or one of those. Right?

David: I'm not a Swifty. Yeah.

Steve: Because they were watching one of them, and I I had a conversation with them. I was like, do you guys know how Taylor Swift became Taylor Swift? Like, how she was able to get here? And they're like, yeah. You know, she's good.

She's talented. She writes her own songs. Okay. True. Not discounting that.

Did you know that she was actually not that good of a singer and not that talented, and she got rejected by every recording label. They're like, no. But dad was wealthy, and mom made a lot of money. And through their money and relationships, moved down to Nashville. Hired people to coach her up to teach her all these things.

Got their own studio. Got their own producers. Did all these things so Taylor could be who you see as her today. Right? Yep.

And that's what we want. We wanna be able to create a path so that our kids, they don't gotta be Taylor Swift. Right? Right. They don't gotta be a billionaire.

But that they don't have to accept no. Right. They don't have to accept rejection. Right? Mom and dad, like, you go out and fail and fall on your face.

And after you do, mom and dad can pick you up

David: Right.

Steve: And have you still move towards your dreams.

David: Yeah. It's really removing those mental barriers for them of go out there and fail, and we'll still be here.

Steve: Yeah.

David: And, like, you'll have a good place, you know, to call home if you need to, but I want you to go out there.

Steve: Go out there and fail first.

David: Go out there and fail first, though. Like and because that's a great story because it is. It's a lot of people just don't go out there and fail. They don't take those first steps, and a lot of people don't have good people in their life. Here we go.

So why do people make money but feel broke? Like, a lot of them never had a good example when it came to money. Yeah. They didn't have people removing those roadblocks for them. No.

So when we start working with them, it's like we gotta help. It's all about it's a lot about the psychology of money versus just the tactical part of it too. Mhmm. So that's where it's like, oh my gosh. We gotta remove these barriers because they didn't have Taylor Swift's mom and dad.

You know, like, they didn't have someone like that. They didn't have Steve train, you know, and his wife, like, helping and guiding and directing know, the thoughts around money. So it's like, that's a that's a that's a huge thing. And I love what you're doing with Whale Club because I feel like you guys really take that to that next level there because we've got a we've got several clients that are part of Simple CFO and Whale Club, and it is very true. Like, you guys help them with the the psychology of money and their relationship with it.

Mhmm. And then we help them with the tactical part. Right. Like, making sure they know what the heck is going on in their business. But, like, Jason Marks, great example.

You know, he said he just he had a CFO for a long time and just hired her again for his trucking company. But he's like, it's because WheelClub has helped me really define what I want in my real estate company Mhmm. And inside of my, you you know, trucking company and what I should be moving towards

Steve: Right.

David: And, like, removing those roadblocks for him. So that way, he could say, now I'm ready for someone to tell me tactically what it will take to get there. Right. Because otherwise, I'm pointing in the wrong direction. Yeah.

You know? So I love I love the yin and yang there, but then it's also, like you said, I've got a seven year old little girl. I want to learn as much of this and help as many people Mhmm. Or I can show her. I can show her the way, like, you don't have to take the same route that I the the roundabout route I did to get here and all those deals and, like, the hurt and heartache and all that.

Mhmm. There's a quicker, more direct path, but that's also why. It's a I'm glad you had me back on this podcast because I love sharing this message. It's really just bringing hope to people. Like, there is light at the end of the tunnel.

I've seen some I one of the worst case scenarios that came to us, he was $280,000 in the hole when he thought he was in the black. But because of real estate and loans that he got, because his cash was okay, he thought he was good on the book side, but he was too he was literally negative $2.80 net profit for, like, a fiscal year, and he turned around. He had to sell some of his rental portfolio, and it's stunned. He was crying on so this is, you know, a man you know, you think of the manly man, you know, Grizzly Adams stereotype. You know, he's, like, crying on the phone.

Like, I built these rentals. I don't wanna sell them, but he that was his only option at that point to get him out of the hole. So I we've taken people like that and gotten back to the black, and we've taken people like Joey who weren't as bad on the hole and gotten him back there. It's like, there's just very simple steps to get back there, and that starts with what you're talking about. Are you pointing in the right direction?

Mhmm. Are you getting to that breathing number? Like, can you just get out of your way, your own your own rat race, and then go from there and then implement some of these things? But it's like, oh, yeah. It's just giving people hope.

You know, it's our kids, but it's also the next generation of entrepreneurs or people out there too.

Steve: If someone has questions about, you know, all the stuff we're talking about, like, what is the resource? Where should they go?

David: Oh, I've created something specifically for here. Yeah. So they can get, number one, the book, Profit First for Real Estate Investing. I have the ebook for download and the audiobook for download, because I know. If you're listening to this, you're listening to podcast, you're probably gonna listen to a book too.

Mhmm. So there you go, because I am I am the the target audience here. But that's where I have that and also the Proffers cheat sheet. If you're like, David, you talked about it. Can you go into it more?

The book will help explain it, and then that cheat sheet will say, here's the first steps to keeping more of the money. Like, to really knowing as the entrepreneur, there's nothing in there where I tell you how to be this great account of bookkeeper q you know, QuickBooks online person. No. It's all about how to manage the cash. That's at simplecfo.com/red,red.

So simplecfo.com/red. That's where you can pick that, those resources up, and then you could schedule a call with our team if you wanna take this step further. All we do is we handhold you. Like you said, it's tactical in helping you get across that goal line.

Steve: Yeah. It's critical though. It's that you know? And and, again, I put myself in this the this, this bucket. Yeah.

Like, my hard wiring is not to slow down and look at the finances. It takes a lot of I guess if you, you know, run over, broken glass enough, you know? Right. Or if you crawl through glass enough, you're like, you know what? I should probably

David: Right. Should probably do something different.

Steve: Should probably do something about this. Right? And, again, like like you were saying earlier, we have a mutual friend, Jason Medley. Yeah. Making money is a skill.

Most entrepreneurs can figure that out. Oh, yeah. Yeah. Can figure that out. Keeping it as a discipline, and that is the unsexy part.

This is the posting rental checks

David: Right. On

Steve: Instagram. No one's doing that. Right. Like, no one's bragging. Hey.

What are you doing this weekend? Like, well, you know, I'm reviewing my p and l on my balance sheets.

David: Right.

Steve: No one's bragging about it. Yeah. But that's what the wealthy do or the people that are better off in their business do.

David: Exactly. I like how you said that wealthy. You know how they became wealthy? Habits. It's those types of habits that you do in your business.

Steve: Yeah. Is there anything we we we didn't talk about that we

David: I mean, we've covered a lot. I mean, the basics of Profit First, you know, setting up those accounts. Then the other thing that we didn't touch on, the other thing the big mistake is no wealth habit. So we even hit on that at the end right there is most people don't become wealthy because they don't have the habits. So a lot of people hear about profit first to read the book, set up some of the bank accounts, but then never do anything with it.

It's like you have to do something with it. You actually have to manage it. Mhmm. You know, it's like, okay. Comes into income.

I need to separate it out. First to those keep accounts, you know, the golden trio, and then to the OPEX operational expenses to make sure we're spending the money. So it's building wealth habits. So every week, I would move money Mhmm. Inside of your business to make sure it's in the right place.

Every month, I would review it so you don't even have to be reviewing it every day. Mhmm. Not even necessarily every week. If you just and I'm saying when I say review it, if you're on ProFirst, you could review the bank accounts. How much came into income?

How much went out of OPEX? And then how much did I sweep into the the golden tree of accounts? Yeah. Make, spend, and keep. Like, can you give yourself at least a fighting chance with that?

And then on a quarterly basis, take from profit and count and celebrate with it. So it's like building wealth habits because then once I tell people that, like, you can actually take a bonus for yourself on a on a quarterly basis from profit, that's when they can more connect the sexy part of keeping money.

Steve: That's right.

David: Because now I'm keeping it, but then I get a little reward too where how many times have I sat down with an entrepreneur and I'm not trying to be sexist. It's usually the male where they say their wife says, I thought you said this was gonna be worth it. You know, like, when are we actually gonna see something from this business or, like, you're out there all the time. What's going on? You know, that type of thing.

And I hear that a lot. And it's like that profit account helps with a lot of those marriages because it's like here, on a quarterly basis, like, let's figure out. Do we wanna do a trip? Did you want a new couch, honey? Like, what do we want to do with this money together?

So She gets to see habits. She has to see it or he has to see it.

Steve: She doesn't have to see it. She gets to see it.

David: She gets to

Steve: see it. Right. So is that whereas, generally, we're just taking distributions or buying trips and stuff like that. Right? We're going vacation, but doesn't quite hit the same as, hey.

Right. This distribution of 40,000 just shows up in our mutual bank account.

David: Yeah. Exactly.

Steve: It it lands different.

David: It's a lot different when it's like, this is because I was disciplined enough to keep it. Mhmm. And now you and I here, like, our partnership together here in the marriage, now we get to celebrate it, and we get to actually do something with it. So I would say that was the last thing that I wanna get out there is building all those wealth habits in your business.

Steve: And just to paraphrase something you said earlier, I'm not gonna I'm gonna butcher it. But

David: Please do.

Steve: We all have wealth building habits. It's either really good or it's really not. Right.

David: Yes.

Steve: And we get to decide. We get to control how good our wealth building habits are.

David: Right. Well, once you've been exposed to that knowledge because a lot of people just aren't exposed ever

Steve: to it.

David: They didn't have parents. They didn't have knowledge. Like, you've said it multiple times here. It's way sexier to talk about marketing and sales Mhmm. Than it is the finance and keeping the the money.

So it's like once you're open to it and exposed to it, there is a better way. So if you're listening to this now, your mind has now been open. So now there's not an excuse not to keep more of it. Like, grab the free resource. Do something.

Take a first step into keeping more.

Steve: Yeah. And then I'll go back to the very first time I read Profit First. Yes. Long time ago. The very first time I read it.

It was so obvious, but it wasn't in my mind. Yeah. Right? Like, I feel like an idiot now, but it was so obvious once he points it out, which is I grew up with pay yourself first. I grew up with having savings account.

Yeah. When you're four zero one k, right, we don't recommend that. But when you're four zero one k, put it and buy stocks

David: Yeah.

Steve: Whatever. Right? But save Yep. Money. And then again, the business, and again, the hustle culture.

Grind. Grind. Grind.

David: Right. Put all

Steve: back in the business. If you take money out of your business, you're starving your business. Yep. And then you repost first, like,

David: oh, wait. Wait a second.

Steve: I'm allowed to pay myself?

David: Right.

Steve: I'm allowed to take money out of the company. Yeah. And for some of you guys, you might listen to this, like, think that's a ridiculous position.

David: Oh, yeah? I hear that too.

Steve: I was in the hustle and grind, like, you know, like, grow and scale and pay yourself later. And it wasn't till I read the book that I got I gave myself or Mike Michalowicz gave me the permission Right. To pay myself first. And, again, it seems so stupid when I say it out loud now, but that was my programming as as an entrepreneur, hustle, and grind.

David: Yeah. I'm glad you said that because that's how a lot of people feel. And I'm glad you're it's like you're giving them that permission too right now because there is. There's so many people that think that way that, you know, it's always it should be. It's what they say in the book.

Sales minus expenses equals profit. Like, profit's the afterthought. It's the last in the equation versus what it should be. Sales minus profit equals expenses. Like, profit should be the first thing that we're thinking about in a for profit business.

Like, we run accidental nonprofits, you know, as business owners. But I want you to have a for profit business and thinking about, we've gotta be healthy, so the whole business is healthy. So I can go out there and pay really good money to the people or show them the way or being able to lead by example because I don't just do that with what I make. I do that with how I am as a business owner, how I'm keeping it too.

Steve: Yeah. I appreciate it very much, Scott. Again, guys, if you guys wanna get some of the resources for free, c simplecfo.com/red. If someone wants to reach out to you, is there another way to get a hold of you?

David: I mean, that's the best way because right there, it's got a link to call as well too. But if they just or if they go to simplecfo.com, that's just our main website.

Steve: Awesome. There you go. Thank you so much. This was an absolute pleasure.

David: Thanks for having me.

Steve: Yeah. You're very welcome. Thank you guys for watching. We'll see you guys next time.