2020: the year of clarity
As folks were doing their planning for the beginning of this year, a common theme was that 2020 was going to be “the year of clear vision.” I even have a really cool t-shirt printed with the saying that I got from a business mastermind meeting. Now that we are almost to the end of the year, things look a little different than expected.
Somewhere between February and April is when it began to get blurry. Strategies we had used for acquisitions changed dramatically. One of our main focuses for finding properties has always been door knocking the pre-foreclosures. And since there was a stay on foreclosures during COVID-19, that strategy went out the window. The shelter in place and social distancing put a damper on regular door knocking, as well.
That situation caused us to take a long look at what we needed to do to keep buying houses. After evaluating our marketing techniques, it became very clear that referrals from interpersonal relationships with friends, clients and other real estate professionals was what was producing a bulk of our house leads. So, we cut out our other costly marketing methods and focused on those.
Having a personal touch is something that we are known for with both our flipping and property management. But since we couldn’t get face-to-face with people, we had to figure out a different way to maintain our personal service. For us, that meant using technologies like Zoom and Bombomb to record videos and interact with our tenants, buyers and sellers on a personal level. Not only have we been able to provide great service using these, but it has also been very efficient.
But one of the biggest changes that we have had this year didn’t come from a new property management system or new lead generation technology. It came from a money management system that has been around for generations. You’re probably familiar with it if you have ever listened to Dave Ramsey. He calls it “the envelope system” and says your grandmother probably used it. But a guy named Mike Michalowicz took that same methodology and applied it to the way businesses should run their finances. He calls this system “Profit First.” And it has been game changing for our company this year.
We were blessed. We got introduced to a guy named David Richter who is co-writing a book with Mike called “Profit First for Real Estate Investors.” David has a company called Simple CFO, and they came in and helped us implement the profit first system.
Basically, instead of envelopes like granny would’ve used, you set up five accounts called the foundational accounts. They are Profit, Income, Expense, Tax and Owner’s Compensation. Then when money comes in from a sale or after rents, you allocate a percentage of that money to each account — just like granny did on payday.
This allows you to intentionally tell your dollars where to go before they are spent rather than trying to figure out where they went from looking at the profit and loss and balance sheet reports that quicks books pumps out.
For the first time ever, we have accounts where we intentionally allocate money to pay us for both the work we do in the business (Owners Compensations) and paying us for owning the business (Profit.) This is huge because most entrepreneurs pay themselves after all expenses are paid… assuming there is money left over.
That was huge. But the biggest thing came from when David and his team did what they call “the instant assessment.” It looks at the past numbers in your business and reveals how you’ve been doing.
As it turns out, we have spent a lot of time and effort flipping. But we are not very profitable at it. On a house by house basis our deals make money. But as an overall means of generating income for the business, the instant assessment revealed our property management side was the money maker.
Armed with that knowledge we started focusing more of our efforts on that side. The result is we have devised a debt snowball plan and have already paid off two mortgages this year.
This is huge because Ashley and I have aspirations of starting a religious camp called Camp Yahweh. And I thought our flipping company would be what funded it. But because of David and guys like Tim on the Simple CFO Team, it looks like the property management side is where we start getting our funding.
2020 was not the year of clear vision. But because of the things it revealed, it became the year of clarity for us.
Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.