BiggerPockets Podcast 510: Work Less and Make More by “Working the System” with Sam Carpenter & Josh Fonger

BiggerPockets Podcast 510: Work Less and Make More by “Working the System” with Sam Carpenter & Josh Fonger

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As an entrepreneur, you may be used to putting in hours of work learning new tactics, skills, and strategies. Your business rests on your shoulders, and why wouldn’t it, you’re the one who built it from the ground up. While it’s a commendable feat to build a profitable business, it can also be a prison sentence for many “hands-on” entrepreneurs. This is how Sam Carpenter, author of Work the System felt as he put in 110 hours a week just to keep his business afloat.

Sam realized why he was working so hard without seeing results: there were no systems in his business. Once he started implementing systems and processes, he went from 110+ hour weeks to 2 hour weeks. The same happened with one of his students and now partner, Josh Fonger, who runs Work the System Enterprises where he helps business owners from over 50 countries scale their businesses with far less headache.

If you’ve ever felt that your business relies on you too much to take a day off, take a vacation, or simply work less every week, these are the two guys you need to talk to. Josh and Sam were kind enough to take three live guest calls on this episode’s recording to help with their specific business problems. As all the guests are real estate investors and professionals, much of the advice may translate to your business as well!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Brandon:
This is the BiggerPockets Podcast, show 510.

Sam:
Our life is a collection of systems and processes. Everything is a system or a process, even the towel hanging after you take a shower, the towel hanging on a towel rack in the bathroom is a system because of osmosis. And over time, the towel dries.

Intro:
You’re listening to BiggerPockets Radio, simplifying real estate for investors, large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com, your home for real estate investing online.

Brandon:
What’s going on, everyone. It’s Brandon Turner, host of the BiggerPockets Podcast here, with my cohost, Mr. David Greene. I got no good nickname for today.

David:
That’s okay. We’re going to call you Brandon Throwing Bows Turner, because you just mashed your microphone with your elbow.

Brandon:
I did. Oh, that hurts. It hit the funny bone right there. Anyway, speaking of funny bone, let’s get to today’s quick tip. I have no way to pull in funny bones. It’s crazy, but I’m going to give the quick tip anyway. So, today’s quick tip is related to what we’re talking about today. So, today we’re interviewing an author of a great book called Work The System, his name is Sam Carpenter.

Brandon:
It’s kind of a different show, where the first half we interview Sam. The second half, we bring in one of Sam’s partner, his named Josh. And Josh is the implementer or integrator of Sam’s business that helps people systematize their business. So anyway, in the show, we talked a lot about systems and processes.

Brandon:
So, here’s my quick tip for everyone. This is something that my buddy, Tarrel Yarber, actually made me do recently. And I did it and it was really, really eye-opening. Go and grab a piece of paper, and for the next 10 minutes, right? Set a timer for 10 minutes and write down every single solitary thing that you do in your business, everything you do, right? In your real estate business. Let’s say, analyze a rental property, make the offer. And get specific, if you can. You should have a list of 20, 30, 50. I don’t know. It depends on how busy you are. Everything that you should do in, or basically you currently do in your business.

Brandon:
Then go ahead and put a little star next to everything that only you can ever do, that you’re the only person on this planet that could ever do that role. You shouldn’t have a lot of stars. You maybe not have any. And then, I guess, it just doing that practice, that we can go on and on, there’s more steps to this thing. But that’s basically, it’s to help realize these are the systems you need to build. The reason I suggest doing that is because everything we talk about today is going to be about systems. So, that’s today is not so quick tip.

David:
Yeah. And I’m doing this myself.

Brandon:
It’s a good practice.

David:
I’m hiring right now. I thought today’s episode was awesome for me, because I’m trying to hire loan officers. I’m hiring real estate agents. I’m hiring administrators. And a lot of what is talked about is exactly what I’m going through, being forced to systemize what you’re trying to do, being forced to give clear direction to the people you hire. And then he mentioned several times, if you have a person that can’t think for themselves, that needs you to tell them like inhale, exhale, type stuff, then you don’t have an entrepreneur. So, I thought that was a really good point too. A lot of business owners beat themselves up because they’re not good at hiring, but you can’t control everything with just hiring, right? The employees that you hire and the partners that you hire have to perform as well. So, there’s a ton of really good stuff in here for trying to build a business, run a business, or turn your real estate investing world into a business.

Brandon:
Yeah. So again, like I said, today’s guest is Sam Carpenter. So, I got recommended this book back over a decade ago. I bought it the first edition of the book. In fact, I actually got it at Goodwill. I was looking at it today. And when I moved to Hawaii, three years ago, I got rid of 90% of my books. I just kept the ones that were most important to me. And this is one of them that came with me. So, Work the System by Sam Carpenter is phenomenal, and you’re going to hear more about that today.

Brandon:
But before we bring in Sam, let’s get to today’s show sponsors. All right. With that said, I think it’s time to bring in Sam. And then again about halfway through the show, we’re going to switch and bring in Josh. So, you’ll hear from both of them today. And with that said, let’s get into it.

Brandon:
Mr. Sam Carpenter, welcome to the BiggerPockets Podcast. Man, it’s awesome to have a year.

Sam:
Hey, Brandon, David, thank you so much. Fun.

Brandon:
Yeah. Yeah, dude. I’m excited. We got to know you a little bit here in the past few minutes, just right before we hit the record button. And I was showing off my early copy of Work the System, which you told me never to show anybody ever. So, nobody ever is going to remember that.

Sam:
It’s in the fourth edition now. You have a first edition.

Brandon:
Yes.

Sam:
14 years old.

Brandon:
I’ve been a Work the System for many years now. And so, this is a huge honor to be able to get you on the show and talk about it.

Sam:
Thank you. Thank you, Brandon.

Brandon:
Yeah, man. I want to start at the very beginning though, for people who haven’t heard your story before. Who are you and what were you before the system or a systems guy?

Sam:
Well, I’ll really nutshell this for you. I’m from Upstate New York, moved to Oregon in my early twenties, did some random jobs for a service, surveying forestry kind of things. And then I worked for electric utility, and I moved to Bend, Oregon in 1978. And then I realized I couldn’t work in a corporate structure. Unlike a lot of your followers, there’s a lot of people out there who know they need to work for themselves. Right?

Sam:
And so, I was a project engineer for an electric utility for about 10 years all together. And then I realized I couldn’t do this corporate thing. And so, I bought a small business. It’s a call center, answering service. I had seven employees, $5,000 a month of gross revenue. And what happened was it turned into a nightmare. I went into a hundred hour work weeks. It’s very technical. You have all the employee problems and so forth.

Sam:
Long story short, very, very long story short. I went 15 years. That’s a decade and a half, a hundred hour work weeks, no family, went into a divorce, got custody of my kids and had health problems, and at year 15 into the business when I was 50 years old. And that was 1999. I’m old guy now.

Sam:
I stumbled across a concept that I applied to the business and everything in my life changed. And so, it had to do with the Work the System principles, which you know about Brandon. And I applied these, and essentially, what it is, our life is a collection of systems and processes. Everything is a system or a process. Even the towel hanging after you take a shower, the towel hanging on a towel rack in the bathroom is a system because of osmosis. And over time, the towel dries. Or building a car or driving a car, or running a business, or running a real estate effort.

Sam:
And so, I applied these principles. And I call it One Layer Deeper, which is my new book that’s coming out. And you go one layer deeper and you look at the mechanical principles of how life works on planet earth. And you realize everything does happen across a continuing of this thing we all share a called time. And so, you got to get the sequence right. And you got to be headed in the right direction. And so, that’s what I’ve done.

Sam:
And now, we talked briefly before, Diana and I live in a beautiful rural area of Kentucky. We sold our house in Bend, Oregon, and our commercial building there. And we live the life, I work maybe two hours a month. And my income is well into the 1%. And I work maybe a couple hours a month on it, R and D and big decisions, and so forth. We have no debt, personally or in the business. The call center, I still own now, 37 years later, but that’s a real thumbnail.

Sam:
And one thing I want to say quickly here is, I’m a climber. I like mountain climbing and I like riding bicycles. But a lot of people would take their passion and want to do that for a job. And that’s the worst thing you can do because you ruin it for yourself.

Brandon:
Yeah, I agree.

Sam:
And I talk about that in the book, if you remember, Brandon, I talk about the fishermen up in Alaska. Oh, he just loved to fish. And he got a commercial fishing boat. And that was a disaster. He learned to hate fishing. But you just need to get a boring, regular, non-flashy business and make it work where you don’t have to show up. And in my business, two things, it’s recurring revenue, and I don’t have to show up. And there’s no reason these principles can’t work in just about any business. There is short of being an artist or a musician, or a New York Yankee, you can set up a business to run itself, which is what I’ve done with my life. We have more money than we need and more time than we know what to do with. We travel a lot.

Sam:
I walk my hounds out in the woods at beautiful Kentucky woods all the time. Diane is down shopping in Knoxville today, 90 miles away. And we actually have a beautiful house. It’s not real big, because we didn’t want a real big. We have the life we want. We have more time and money than we need. And the income just keeps coming in and it keeps accelerating right through this COVID nightmare. The net income kept coming up. So, that’s the story of my life, but my life was held till I was 50. Now, at 71, I look at it mechanically, it’s everything I wanted to be and everything she wanted it to be too.

Brandon:
That’s cool, man. Yeah. All right. So, there’s a lot to unpack there, but first of all, very, very cool. I guess, our audience is going to love this because this is what the dream is for most people who get into real estate investing, right?

Sam:
Of course.

Brandon:
It’s not that they don’t want to do any work whatsoever, it’s just that they want to work on their terms. If they want to work two hours a month, great. If they want to work two hours a week, great. If they want to work two hours a day, whatever. It’s gives you that option. And I feel like the systems and the processes, and the process that you talked through in the book, that’s what can give you that flexibility and that freedom.

Brandon:
When I first read Work the System, I remember thinking, and I have recommended it a million times, and I always say, there’s this great book, right? The E-Myths, that people talk about, it’s the importance of having systems. And then there’s books like The 4-Hour Work Week. And I always thought Work the System was a more realistic than The 4-Hour Work Week, and more tangible than the E-Myth. It was this nice, middle ground between the two of like, you can work less, if you have the systems like The 4-Hour Work Week talks about. Then The E-Myth is just very hypothetical and big picture, where you get into the nuts and bolts a little bit. So, kudos to you for bringing that gap.

Sam:
That’s good. That’s a good overview. I agree with what you’re saying regarding those three books. Yeah.

Brandon:
Cool, man. Maybe we can start real quick and define, how do you define system and process? Are they the same thing? Are they different? A lot of people listen to them, it’s like, “Well, that sounds boring. I don’t want to hear a whole show about systems.” What is that? And why is that important?

Sam:
Well, this is key. This is key. Everybody wants some flashy button to push, to make their life what they want it to be. But there’s a certain amount of boring preparation that you need to go through. And in my world, a process and a system are precisely the same thing. I also call it a machine. And I define that in the beginning of the fourth edition, Brandon.

Brandon:
There you go.

Sam:
There’s not a lot of synonyms for system. But process and system, I use interchangeably. And all a system is, is a trajectory of steps along a continuum from A to B. And you need to know what B is. And if you’ve been watching the national news, there’s a real question about what was the strategic objective of happened in Afghanistan? Well, nobody seems to know, really. And that could go right down to your personal life.

Sam:
And once you see that your life is a collection of processes, and this is the first part of the book, and it encourages people to think about it and meditate a little bit about it, and look at their surroundings and come to a very metaphysical place, where you understand that everything in your life is a process or a system.

Sam:
This Mic is a process and it is a system. Our bodies are systems. The lights that are shining here to fill in the shadows, that’s a system too. And once you realize your life is a collection of systems, you start to pick out the ones that you want to work better, and you work on those, and you get rid of the ones that aren’t working, or you fix them, or you create new ones based on documentation.

Sam:
And I know there’s a lot of solopreneurs out there, but if you’re going to someday be on your own, you’re going to need to hire people. You want everybody on the same platform. And the best way to do that is a written word and processes, and documentation. And the word strategic objective is one of our first documents. And you’ve heard that word a lot on the news lately. You have to know where you’re going. It’s so simple and so stupid, obviously, if you have a target, you’d need to know where the target is, and you need to know it’s the right target.

Sam:
So anyway, that’s my rather long ramblings about a process and a system. But the key to all of this is to understand your life is a collection of systems, and you can control a lot of them. And you want to let loose the people and the systems that you can’t control, that are screwing up your life. People, especially, but also processes and things that aren’t working out, you need to drop them and go for the processes and the systems that do contribute to point B over here or over here.

David:
So Sam, one thing that I think our listeners and really everybody, because the listeners of BiggerPockets are a microcosm of the world as a whole, is they fall into two camps, either they don’t like the discipline that comes from systems, or they want every single thing spelled out perfectly before they start. And many times in life that doesn’t work out.

David:
So, you’re right about the situation in Afghanistan, it became a big mess. We did not have a plan for how to get out of there. And it obviously spiraled into chaos. At the same time, we didn’t have 50 years before we went to sit and think about how are we going to go after terrorists organizations, so to speak, whatever your goal is.

David:
So, one of the things I found with the businesses that I built, is there’s this sort of like climbing a mountain, where you take your right hand, you pull yourself up, then your left hand has to pull yourself up. And that looks like I got to go take action, get involved in business, make some revenue and realize, “Oh, there’s a bunch of problems. There’s all these things I got to do.” You organize that with the system. Then you take the next step.

David:
And so, I wanted to ask you what advice you have for the listeners. I liked your towel analogy. But I think that the practical way that this works out is you get out of the shower, you grab a towel, you dry yourself off. You have to figure out like, “Where am I going to put it?” Right? And after you do that at times, it becomes a system for how you do things. But you don’t sit down before you even get in the shower and say, “Well, what am I going to need when I get out?” Sometimes you don’t even know before you start what systems you’re going to need. Can you share any advice for what that process looks like as it organically grows?

Sam:
Oh sure. And one of the first systems we did in the business, was how are we going to answer the phone at the office? We had three or four people that answered the phones. Someone say, “Hi, this is Mary. May I help you? Centratel, where can I send your call?” Everybody had a different way of doing it.

Sam:
But for the things you need to be perfect every single time and done by a number of people, you need to have some written documentation. Obviously, you don’t need a written documentation about where to hang the towel. It’s still a system. It’s still a process, right? And so, that’s very important.

Sam:
In fact, I want to go back to your analogy, David, the thing about climbing. Remember, you’re climbing, free climbing, let’s say free solo. It doesn’t matter if you got a rope on or you’re not. You’re climbing it. You’ve always got three points in contact with the ground. You got two feet, two hands. So, you’re holding on, both your feet are planted, and then you reach, and then maybe you let this hand go, and you flex your knees up and you take a step. And the three points of contact, and I had never thought of this before, but this is really good. And you inspired me.

Sam:
The three points of contact are your documentation pieces for the people who work for you, and for yourself, you’ve got the strategic objective of the operating principles and the working procedures. But you don’t need to write a working procedure for everything to the point of being ridiculous.

Sam:
There are people who just want a free form and don’t want to structure things as you described. And then, there’s these other people that need direction for every move they make. Those are not entrepreneurs. Okay?

Sam:
The first one you described is all of us here, you guys and me. And so, we really need to have some boring structure in our effort, if we’re going to get anywhere, otherwise it’s just chaos. And you’ve got to have a straight deliberate line from A to B. And you’ve got to shed all the things that are diverting you. Maybe you have a small business, and I always use this, the brother-in-law is an idiot or lazy. Sorry, if this 20 person, property management company is going to fly, the brother-in-law has got to go. He’s got to go. And I know you don’t want a problem with your wife, but there are things in our systems and process efforts that are working against us. And so, the entrepreneur will be able to tell where you need documentation or where you don’t. The book really goes into that.

David:
Yeah. It’s true, man.

Brandon:
Now, in the book you mentioned moles. Can you expand a little bit on how that relates to what you’re teaching?

Sam:
Do we all know what Whac-A-Mole is? I think everybody knows what Whac-A-Mole is.

David:
I was so hoping this is where you take it, because I literally use that phrase in our company, Whac-A-Mole all the time.

Sam:
I had it. The games downstairs now, but I have a box, it’s written the Whac-A-Mole. Somebody gave it to me as a gift.

David:
That’s cool.

Sam:
So, the mole jumps up in a hole. You whack it with a rubber hammer. They’re at carnivals all the time. And then another one, and it goes faster and faster, and faster. And that’s the life most people live. Okay? There’s a problem, you fix it. There’s a problem, you ignore it. And pretty soon all you’re doing is killing fires. I’m jumping to another analogy now. But what you want to do with the Whac-A-Mole, is walk away from that game altogether. Don’t get really good at it. And people pride themselves on multitasking. Well, they’re really good at it. That’s really good, but it’s not getting you to point B.

Sam:
So, the boring part of this is to do a little bit of documentation. There’s not a lot, but it’s what solved my problem, because I was able to get my message of where we were headed and how am I people were to operate all the same with everybody. And so, we have 30 principals. We have our strategic objective and we have our working procedures, where if there’s something technical, or how do you answer the phone? One, you’re going to say, Centratel, name of my company. Number two, “This is Mary.” And three, “How can I help you today?” And number four might be or number one might be, put a smile on your face, so you sound happy. And then two, three, four, those little simple things are very important. You want everybody, figuratively speaking here, answering the phone in the same way. So, you do that basic documentation for your crew.

Sam:
But for a solopreneur who doesn’t have anybody, there’s very little documentation. You got to do the strategic objective of the operating principles in some working procedures. But there’s a little bit of boring in this. But if you’re not prepared, there isn’t anybody who’s listening here, who hasn’t heard that you should be prepared before you start a project. Well, this is what this is. That’s what the Work the System is, is to get ready, get what is B exactly? And how are you going to get there? And make sure the direction is right and the sequence of your steps is correct.

Brandon:
So, when I first read Work the System, it was around the time that I decided to bring in my mother-in-law to help answer phones. It was like the very first system, I guess, I’ve ever created, because I got all these tenants that I had at the time, maybe a dozen tenants. And I hate talking to tenants. I just never liked it. Right? They call me. They want their water heater fixed. I mean, come on, it’s demanding people. But I just didn’t want to deal with that. I wanted to go out and find deals.

Brandon:
And so, the very first thing I did, was I hired my mother-in-law and said, “Hey.” She was just retiring. And I said, “For $200 a month, will you just answer the phone call?” And then she’s like, “Well, then what do do?” And I’m like, “I mean, I guess, one, if they got something broken, call one of these people.” She’s like, “Okay.” And she’s like, “Well, what do I say?” “Well do this.”

Brandon:
And so, I ended up just writing. So, I read the book, and then writing down some simple systems, right? Answer the phone, this is what we say. Open Door Properties at the time. “Open Door Properties, this is Rachel.” Great. And then it was like, okay. And then if they have a problem, find out what the problem is, and then call the contractor. And you know what? Honestly, in the beginning, my system was maybe like 10 lines. It was super simple. It was just like a one piece of paper.

Sam:
Of course, one two, three, four. Yeah, sure.

Brandon:
Yes, exactly. That’s where it starts. But then, you know what happened? Is my workload dropped in half. Just from that one piece of paper, the amount of work I had to do in that business dropped in half. And then, of course, the next day or whatever, she calls me and she said, “Hey, this is a problem that just came up. I don’t know how to deal with it.” I’m like, “All right. I do know how to deal with him.” I go, “Okay, this is what you want to do. Can you write that down on that piece of paper?”

Sam:
Yes, yes.

Brandon:
And then, we did it. This is like the mole still pop up occasionally, because I can’t think ahead on every single piece of the business, like David alluded to. We can’t accurately predict everything. But then we just started writing down our systems and writing down our processes. And then pretty soon, I mean, I maybe work five minutes a month, dealing with any of that rental property stuff on that side of the business, and she’s still there. And she has all the systems. So, she’s like a good picture of property management, specifically. Dealing with rentals is like the most perfect… I mean, there’s a lot of good businesses where systems work, but it’s very systematizable.

Sam:
What’s funny is my answering service. We have about 1400 clients nationwide. We have several hundred property management companies. And everyone is different. And so, the way any one of 40 different telephone service representatives, operators can answer, whichever one they get is a one, two, three, four step or procedure. How do you handle toilet leak on a Sunday afternoon? And how do you handle this? How do you handle a lockout? And all the steps are right there. And in each account, the accounts are put together with the same information on the same page, except it’s different information for each client, but you systemize, systemize, systemize. So, we can handle over 300 property management companies with no errors.

Sam:
And every time, you know what? We call it an error, Brandon. We call it a red flag for improvement. And as you talked about, this new thing comes up, well, write it down. And pretty soon you have a procedures. And you hire a new person, you say, “I want you to study this. And I’ll come back tomorrow and see what you’ve learned. I’ll give you a little verbal quiz. Because once you learn all this, you’re ready to go.” And this learning by osmosis is such a horrible waste and so frustrating. You’ve got to be able to hand a new employee, their instruction, so they can study it. That’s why we go to school is to study.

Sam:
And so, 99% of small businesses don’t do that. And so, there lies the poor business owner. Their lies are curse. They might be making a couple of hundred thousand dollars, but they’re working 80 hours a week. They lost their family. Their life is a nightmare.

Sam:
And I like to say, and this is a joke. And Diana mentioned this this morning from her sister-in-law. She said, and we were talking about money can’t buy you happiness, but it can buy you marshmallows, which is the same thing. It was funny, but the point is money can’t buy you a life. And everybody knows that. But here’s a way, you say you work just a little bit at a time every month. And I have one to two hours only now, because of COVID and everybody is working remotely. All our TSRs are all over the United States now. But this was an extra ordinary situation.

Sam:
I’m probably working four hours a month instead of one hour a month lately. But it’s exactly right, you got to get it written down, and that’s boring. And I talk about that. I talk about that extensively, that hurdle that people have to get over. And a person that needs written direction for everything they do is not an entrepreneur. They need to work for somebody and somebody needs to give them direction.

Brandon:
Yeah, it’s so true.

David:
I think what I liked about your Whac-A-Mole description is, we all know when we’re playing Whac-A-Mole, right? This stuff sneaks up on you and you get this feeling of, “Oh my gosh, it’s just one fire after another, I can’t get out of this. I can’t get into a creative mode. I can’t get above my business and look at how to expand it.”

David:
So to me, with our team, Whac-A-Mole becomes like check engine light that you know, “All right, I need to stop. Something went wrong. I’ve fallen into Whac-A-Mole.” What happens with our real estate team is where, and a lot of the listeners probably find themselves as the moles, they start giving you objections of what they’re afraid of, and you just start answering the objection. And then there’s another one that comes up, because their fear is the mechanism underneath the stinking machine. And other questions are just the bowls.

David:
So, what happens is my agents will start saying, “Oh, well, now is a great time to buy real estate. Oh, well, yeah, there is a solution for if your tenant moves out. Oh yeah. If the toilet breaks, we can do something to fix that.” And they get sucked into this, just boom, boom, boom, boom, boom. And no one ever actually feels better. So, they never buy it. And you have to recognize these moles popping up are a symptom of a bigger problem that you’re not heading this off.

David:
So, I don’t know that it’s ever like Brandon said, a possibility that you will never have a mole. It’s more that when you find yourself with moles, you need to take a step back, like what Sam is saying and say, “How do I write down document, create a system that prevents these moles from popping up?”

David:
Now, I know Sam, you basically came up with this concept because you feel like your own life or your business was just a huge mess. I see that you were about to miss payroll. You were possibly going to lose the company. And you had a middle of the night epiphany. Can you describe what that scenario was like and how you came up with these concepts?

Sam:
Yeah. I love telling the story. So, have you ever been so tired, you have a lump in the middle of your chest as you lie down at night to go to sleep, and you’re getting three hours of sleep? Well, I was working 110 hour work weeks for a period of seven months. And I talk about the whole thing in the book.

Sam:
I went to bed one night, I was going to miss the payroll in a week. I knew I was lost. I gave up. I said, “I can’t fight this anymore. I’m not going to make this payroll. I don’t have the strength. I don’t have the energy. I just don’t want to do this anymore.” And I laid there and immediately, this was three in the morning, and it was either a dream or a vision or just a thought process. I’m not sure what it was. But I had a vision of a table with my business pieces on it. There was how we answer the phone over here. There was how we handle a complaint over here, is how we make payroll over here. It’s how we handle a customer complaint.

Sam:
And here’s the key. On the top of this table, very metaphysical kind of a thing, they were all in pieces. There were not connected. There was a piece here. There was a piece here. There was a piece here. And they were all systems and processes. And I realized in that moment, and it really was in a moment, and it was in 1999, I realized that my life was a collection of systems and I’m going to try something different. I’m going to lose my business anyway, let me try something whacked out.

Sam:
So, I went to the office the next day and I said, “Here’s how we’re going to do this.” My two managers I was talking to. I only had, I don’t know, 12 or 15 people at that time. I have about 60 now. But I said, “Here’s what we’re going to do. What is the biggest problem we have today?” “Well, what do you mean, Sam? We have lots of problems.” “No, the biggest one that’s causing the most problem.” And it was making the deposit, because we take checks in the mail, and we were having cashflow problems of making the deposit.

Sam:
Remember three weeks ago, I forget her name at this time. That was a long time ago. “You came to me and said, I lost a deposit under my car seat. I was late picking up my kid. I was supposed to drop the $3,000 deposit at the bank on my way to pick up the kid. And I forgot. And I was cleaning the car and there it was under the seat. So, you’re either going to fire me or give me a hug.” I said, “That’s an extra $3,000 we sure can use.”

Sam:
So, the biggest problem, and all three of us were putting these very complex deposits together for the bank in different ways. And we were having all kinds of problems. The veterinarian in Virginia sent a payment in, and it would cover the HVAC guy in Tennessee, and it would go to the wrong place. And now we got two problems. We’re having all kinds of problems, just putting money in the bank and reporting it carefully. So, we fixed that.

Sam:
We all sat together. It was 53 steps. We came up with a process. We all contributed to this. And we came up with 53 step, written process, and I’ve never had a problem again. The best part about it is at that time, I was one of the three people making the deposits. And I spent, maybe two hours a week doing a deposit, “This person paid. This person paid. This person paid.” And putting it in the software, and getting it to the bank. I handed that 53 step document to somebody else in the office. And I haven’t done a deposit since 1999.

David:
There you go.

Sam:
And so, you figure it out, two hours a week, probably, two to four hours a week for 20 some years. And when we did that and we saw the results, it took us about three days to put this together. And I did most of the work. I figured I used eight hours of my time. And now I’ve never done a deposit again. And that’s what we’ve done with every system in the office. And that’s how you get to delegation. And our mantra is automate, delegate, delete, automate, delegate, delete. Every time you see a new task or David, a new problem pops up, you ask those three questions.

Sam:
And as I said and as you pointed out, every time a problem comes up, you look at it and what can you do, so it doesn’t happen again? And that’s why we call problems, red flags for improvement. And in our office, we just don’t have any problems anymore. And if they do jump up, we’re all over them, we document it, we decide what we’re going to do. We just don’t have any problems. We just don’t. At first, it’s really bad, but as you go on, they decrease to zero.

Brandon:
It really does, eventually. Like you used to the point where it’s just like, things don’t come up. That’s why I’m like, I work five minutes a month, and it’s usually my wife, talking some quick question over with me over that rental portfolio in Washington State. I’m like, “Oh yeah.” For example, “Oh yeah, we should sell that property.” That’s a rather rare thing that happens once a decade. And so, I’m like, “All right, let’s have that conversation.”

Brandon:
But yeah, eventually the problems just get documented. A lot of times, I think we think that our problems are very unique, and that there’s always these things going on, but when you really boil it down, there’s just a handful of problems that has happened over and over, and over. And so, when you find ways to automate or delegate, or delete them, or systematize them, they just go away.

Brandon:
One more scenario or example of how I’ve used this in my life, I want to throw out there. And then I want to move on to the second half of the show, where we bring in Josh. That’s his name, right?

Sam:
Yeah, Josh.

Brandon:
I’ll ask you in a second, where you met Josh at. But I was going to say, so over the past couple of years, two years ago, I decided I wanted to get heavy into commercial real estate, like mobile home parks, apartment complexes and whatever. And I set this three year goal. I wanted to buy a thousand units. And we just, now we’re two and a half years into this thing, or two years into this thing. And we’re just crossing 3000 units here this month. We’ll hit over triple. I’ll end the year with over four. Right?

Brandon:
And I work maybe four hours a week in Open Door Capital, that side. And I talk a lot about this. And I brag about it. I’m like, “Look at how awesome this is going.” All I did is I built a machine that I wasn’t part of. And I will try to explain what I meant by that. It’s like, I built a machine, it’s like this piece goes to this piece, goes to this one. It’s a little engine. And then I stepped back and I’m like, “Whoa, I built an engine.” And all that means is I built a bunch of… Not even me, my team built systems that all rely on each other. And I just am the guy on top, just tinkering a little bit.

Sam:
Exactly, that’s precisely what it is. Yeah. Yeah.

Brandon:
So, on one hand, there’s businesses where people work in the business for 20 years, and then they slowly get out. And because they build a machine out of the mess that they have, of all these parts. And the other side of it, is that you could start from the beginning building the machine.

Brandon:
I was in a Safeway bathroom yesterday, Safeway Grocery store bathroom. And I was like, “This is the most disgusting looking bathroom I’ve ever been. And this is awful.” Right? Which is pretty typical for Maui. But I’m like, “This is terrible.” And I was like, “Man, if only there was a company that was called like Commercial Bathroom Re-modelers.” Right? And I’m like, “This would be a really systematizable business to run.” I’m like, I can think of a dozen employees that you have, and it’s just all they do is commercial bathroom re-model. It’s not a sexy business. It’s not exciting, but it’s so systematizable. I’m like, “You go with this tile. We go in at night, we remodel this thing.”

Brandon:
By the time I left the bathroom, I had an entire business plan worked out of how this could be a business that I don’t work in. I could build that machine. Now, I’m not going to, but I could build that machine, because it’s really a mindset thing. Right? It’s like, I’m going to approach this like a machine or like a system, or I’m just going to approach it as I can get there and do everything.

Sam:
Yeah, Whac-A-Mole.

Brandon:
Yeah, Whac-A-Mole.

Sam:
Sure. And we use that term, build a machine, all the time. Let’s build this machine. It might be a marketing effort or something. We’re going to build this machine. And then I’m going to be micromanaging the hell out of it until it’s built. And then I don’t want anything more to do with it. I’m done. And so, the owner makes sure the machine is built the way they want it and is headed in the right direction. And then everybody else does the work. Well, let me leave you with one last thing here, if we’re towards the end.

Brandon:
Yes, please.

Sam:
And what is the difference between a small struggling business and a large successful business? It’s documentation. If you think about it, every large business is documenting and working on their systems. And that’s the beautiful thing about documentation, is you have to write your one, two, three, four, five step.

Sam:
Remember things happen in sequence across a linear piece of time. And if you don’t have it down, what those steps are supposed to be, and if they’re not in the right sequence, you’re going to have a problem. And writing it down, does that for you. But this is so, so little, a percentage of the time that an entrepreneur would use, even in the short term, it doesn’t take that much time to do as you know, Brandon and David.

Brandon:
Yeah. Yeah. It’s such a good way to run your business. I mean, we run everything through a program called Asana or a lot of it through Asana, where it’s just checklists on checklists, on checklists. And so, when we get a new property under contract, that goes… And here’s the funny thing. I was telling this group of people out there, I had a masterclass out here in Maui, and I’m telling these people about how systems and processes work in our business. And then I realized I’ve never actually seen the systems that my team goes through to close on a property. And I know that they have them, and they’re Asana somewhere.

Brandon:
So, I pulled it up in front of everybody. And I’m going through these hundreds of different points and checklists that relate to each other. And I was blown away, not by the fact that they have them, but the fact that I didn’t have to build them, because kind of another point here. Yeah. When you hire the right people and you train them in the mentality of systems, they will create the systems internally. And you don’t even have to build every single one yourself. That was a game-changer.

Sam:
Yeah. So, there was a point not too far from the beginning when I didn’t write them anymore, I check them. But I don’t write them anymore. The people who work for me understand that it works. They make an awful lot of money, the people who work for me, and many of them have been with me for over 20 years, one up to 30 years. And they get the process thing. And you can pay your people a lot. You can ask a lot for what you sell, if your product is the best that’s out there. And that’s what you want.

Sam:
And we advertise Centratel, our answering service as the highest quality answering service in the United States. And actually that’s statistically true of the 800 services out there. Centratel is the very best. And I say that with full confidence. And they all know that, and they’re proud to work there. And they make double what they’d make at any other service. And so, if you’re the best, you’re in rare territory.

Brandon:
Dude, I just had this idea that just came up. You can say, basically, you can charge more. I mean, essentially, you’re saying you can charge more when your systems are good. And I started thinking, right now, I’m planning a Disney World trip. So, I’m going to Disney World after our BiggerPockets conference this year. And I just spent, I don’t know, I may spend like 20 grand at Disney World tickets. It’s ridiculous. Right? And I’m doing this insane trip. And I’m like, “Why does Disney, why are they able to charge me so much money?” It’s because Disney is one of the best systems businesses in the world. The reason they are able to charge thousands and thousands of dollars to people to come and hang out, and you go to random county fair, and you’re paying $8 to get in, it’s because of their systems.

Sam:
Exactly.

Brandon:
Yeah. That’s funny, because the better your systems are, the more smooth everything works, the more high quality everything feels and looks, and then the more money people are willing to pay. And that’s huge for anybody.

Sam:
A huge segment of any business is the top 10%, that just don’t care how much it costs as long as there’s no problems. Right?

Brandon:
Yep.

Sam:
And so, we cater to the 10% of property managers, for instance, out there that just don’t want problems. It’s still a tiny, tiny percentage of 1% what we cost. And it’s more than a lot of the other ones, but they don’t have problems. You don’t get the wrong call person called up in the middle of the night, or the wrong property on call person called up. And so, you just don’t have mistakes and your 10% will pay for it. Let the other property managers struggle over the 90% that are fighting about the cost all the time.

Brandon:
Yeah. There you go. It’s such a phenomenal point, such a good point. And it’s true for rentals too. If you’re a good rental property owner and you do a really good job, and your systems are great, you can charge higher rent because there are people who just want to rent from a great landlord. And because your systems are so good, you’re going to have an easier time attracting good people.

Brandon:
And you’ve got, from the rental side, from being a real estate agent, a good real estate like David, if there was a real estate agent that was like, “I’ll charge you 10% instead of 6%.” But they were insuring me, no problems. I’d have no problem paying it. If there was a contractor that was charging $90 an hour instead of $50, but they took care of the problems because there were systematized, I have no problem paying it.

Sam:
That’s a great deal.

Brandon:
I have no problem paying for that.

Sam:
It’s a great deal. Good ROI or whatever. Yeah.

Brandon:
Yeah. That’s it, man. That’s it. All right. So, we’re going to shift over to our second half of the show now, and we’ll wrap up later with the famous four, which is the last four questions we ask. But right now, quick question on how you found Josh, where did Josh come from into the picture before we bring him in?

Sam:
Yeah. Josh was a sales guy, who came into Bend, 10 years ago. We met actually 2011. And he found my book somewhere and he saw that I lived in Bend. So, he called me and we sat down, and he was thinking about starting a business. And he thought he’d like to talk to this author. And I think he had the copy. He had first edition, close to it.

Sam:
And so, we had Jackson’s Corner. We had a a meeting, he said, “Will you meet me for coffee?” And I did. And we got to talk and talk, and talk, and talking. And he really liked the concept. And so, he ended up working for me for a long time.

Sam:
And three years ago, I said, “Josh, why don’t you go out on your own? I’ve got this other stuff I want to do, take care of it.” And so, we still communicate all the time, of course. And he’s a good guy. And he gets it the way I get it. And that he gets it in his guts, how it works. And I think he’s had over a thousand consulting clients in his time. He’s very good at what he does.

Brandon:
That’s awesome, man. Well, we wanted to bring him in today, because we want to actually bring in a few guests or our listeners of the BiggerPockets Podcast, and have Josh and you help talk with them about how to implement this in real life. It’s one thing to talk about the theoretical of what this works. And let’s talk about how we can actually implement this. So, with that said, why don’t we bring in Josh? All right, Josh, welcome to the show. Sam says good things about you.

Josh:
Right. Well, I’m sure some of them are true.

Brandon:
Well, why don’t we get a quick background on you? I mean, we heard Sam’s how he met you. What were you doing before you got into the world of working the system?

Josh:
Yeah. Well, actually I started my career off as an architect. So, actually I was involved in real estate early on, but due to 2007, 2008, when everything crashed, I had to find a new career. And no one wanted to hire me in real estate. And so, I did what I thought I would never do, which is become a business consultant. So, I wrote my thesis paper about why you should never hire a business consultant. So, I had a very big distaste for them, but no one hired me, so I just started off and just become a business consultant.

Josh:
And at the time, I was traveling the country from location to location, to location, helping companies with their inside sales and outside sales, and their operations and helping through bankruptcy. I work with a lot of flooring stores, helping them hire, helping them fire, you name it. I was just flying on airplane from place to place, to place. And it was it was killing me.

Josh:
And I moved to Bend, Oregon. I think Sam shared part of the story. I met him for coffee or for lunch, and I had read his book and I saw this is the key to the issues I was having with my clients, which was, I would help them with their problems and then I would leave. And then six months or a year or two years later, I would realize they had all the same problems, nothing actually stuck. And so, they’d call me back in, I’d fly back into the same thing, and it would break again. It kept breaking. And I realized there’s actually a better way. And it was a different way to see business. And it was a different way to work in business, which is The Work System method.

Josh:
And once I realized that I was missing this whole documentation part, that’s what really got me bought into the fact that, instead of just investing in me as a consultant to try to wow them with some new idea, they can actually invest in a sustainable solution that could scale.

Josh:
And so, one of the biggest turning points for me was realizing that one of my first clients with this massive transformation, they were going through bankruptcy. We helped them reorganize. And it was a complicated job. And he was off to the races with huge success. And then, a few years later, I looked at his LinkedIn profile, and instead of being the CEO of a $6 million business, he’s now a salesperson doing what he used to do when he was 22, and he’s 65. And I realized like, what we did was great, but then it just didn’t stick. And that’s why this method works so well, because it actually makes sure the good ideas stick and you can build off of them.

Brandon:
Awesome, man. Well, so today, now you’re, I mean, just for clarity, when you say you work with Sam, you’re not running the telephone business, correct? It’s more of a consulting side.

Josh:
Yeah. Well, Sam is a true entrepreneur. So, he’s always started new companies, new ideas, new initiatives, software company, nonprofit, politics. And so, one of the things that we started working on together was people kept knocking on his door or calling him to get help, and they wanted help with their business. And Sam didn’t get this freedom to then start working, traveling the country.

Josh:
It was just a great timing for me to start actually working with these people who wanted help, so with their coaching, with their consulting. And so, at that point I think, I’m probably forgetting some steps along the way, but it was like a contractor to employ, to then working really closely together. And now at this point I’m actually taking this message and certifying other consultants in the same methodology. And then they’re out there around the world in different languages, with different specialties, systemizing those businesses in those industries. Because as you probably can guess, there’s a lot of companies that need help with this, and I’m just one guy. And I hit a plateau and I knew that I had to scale what I did.

Brandon:
Yeah. That makes sense, man. Well, we thought we’d take advantage of that today and have you do some consulting directly here on the podcast with a few of our listeners? So, what I want to do is I want to move this over to actually bring in three different listeners of the BiggerPockets Podcast, one at a time. And they’re going to go through their story a little bit, but more specifically, where they’re struggling with the system side of things. And we thought maybe you could do what you do best and help them. Does all that all sound good, everyone?

Josh:
That sounds great.

Brandon:
All right, man. Well, with that said, why don’t we bring in our first. Susan, welcome to the BiggerPockets Podcast.

Susan:
Thank you. Super excited to be here, what an honor. Thank you.

Brandon:
Welcome. Yeah, thank you. Well, Josh, I’ll let you and Susan take it from here, and then I’ll jump back in again in a bit.

Josh:
Sounds great. All right. Well, Susan, why don’t you tell us and the audience what the status is of your business and where you’re stuck?

Susan:
So, I’m a brand new investor in my fifties. I just started a couple of months ago listening to the BiggerPockets Podcast and the Rookie Real Estate Podcast as well. I just closed on my first investment property. And I feel like the dog that chases the car, I feel like I’ve caught the car and I don’t know what to do with it now.

Josh:
That’s really good.

Susan:
And it’s just like thinking of the process that I followed to get the home. And now I’m trying to get contractors. It’s a lot of steps and it did not naturally flow. So, I would like to apply a different approach to scale up my business. I know I need to build a team or several teams, as I’m also interested in investing out of state. And so, what are some of the steps that I can implement and the systems to make this repeatable on a larger scale?

Josh:
Yeah. Great question. I’m sure your question hits on a lot of people here listening. Are you doing this full-time or is this a part-time side gig for you?

Susan:
It was part-time up until a couple of days ago. I actually just lost my W2 job, but it’s okay. So, I will be looking for another W2 because I just have this first investment property, plus my primary home. That’s definitely not enough to live off of. And I do rely on conventional financing at this point. So yes, it will be part-time.

Josh:
Well, if you caught the first part of the episode with Sam, I think the first key thing, and it’s not like you already got it, is to see that what you’re doing in your business can be a system, right? It’s made up of separate pieces and they’re chronological. They’re through time. And that’s the first piece. A lot of people never get that. They just think their work, their business is them, and therefore they have to do it all themselves. And this kind of business I’ve worked with plenty of people doing what you do. It can be systemized, right? And you’re certainly learning from the best here at BiggerPockets.

Josh:
Now, the next key thing, once you understand the pieces, what you do is to understand where you’re trying to go, right? So, some people, they’re trying to build a real estate empire. Some people are trying to build a property management firm, others really like the remodeling aspect. So, that would be the second piece I would ask you for before we get to the tactical pieces, which would be, what do you want this to look like in 10 years? Where are you going with this business?

Susan:
So, I’m in my fifties and I’ve set a goal to do 60 doors by the time I’m 60, which is nothing to Brandon’s 3000, that he just closed on in 10 years.

Josh:
No, it’s awesome, Susan.

Susan:
Thank you. I initially just wanted to offset retirement income, or I’m sorry, have an extra stream for retirement income. Because looking at, I’ve worked all my life and my 401(k) is really small compared to what I know that I’m going to need. I enjoy travel. I enjoy good food. And I want to be able to leave a legacy.

Josh:
Okay. Well, so this next step in terms of understanding where you want to go or where you want the business to be, really what it does is helps laser focus your efforts. So, the idea of real estate investing as you know, and I’m not an investor, this is not my specialty, but I’ve worked with people who have done mobile home parks. I’ve worked with people who have done high rises. I’ve worked with people, who’ve done residential, custom, multifamily. There’s a lot of different types of real estate, and there’s a lot of different ways to make money in real estate.

Josh:
And so, I think your key thing would be to, as much as possible say, “I’m going to be searching for this type of property and this kind of location with this type of range, in terms of, is a million dollar homes or $200,000 homes?” So, the more you can really laser focus the customer, the product, the location, the more you’re simplifying your business from the get go. The more complicated and broad your perspective is and loose, the less likely you are to make it into a systematic solution. And if it’s just, “I want to be a real estate investor.” Well, then you can’t systemize that. But if it’s very specific, you’re going to be a lot better off.

Josh:
And that’s why, I mean, I wouldn’t say spend weeks or months, I would just say, spend part of a day, couple hours, and really write down that aspect, and then write down the principles for decision making. That’s the second step we go through.

Josh:
All these steps can be done day one. And once you have the clarity of where you want to go, how you want to get there, really basic stuff, then you can move on to the systems. And you mentioned that this is very complicated, and you’re right, to be a real estate investor is complicated, because there’s people who dedicate their lives only to property management or only to remodeling, or only to be in a realtor. I had one client who was a home stager, all she did is helped stage homes to get the highest value. That was her business.

Josh:
So, being an investor like what you are doing, it’s complicated, right? You’re weaving lots of different individual businesses into one business to create a lot of value. And so, you’re going to want to make sure the path you do take, and it sounds like your current path is meandering, is consistent as much as possible, right? So, don’t go buy a high-end and try to flip it in a day. And then next week go buy a low end house and try to hold it for six months. The next week, try to buy a multifamily. And then next week, try to buy like a mobile home. You have to be really consistent as much as possible. That would probably be my initial strategic advice. So, hopefully, is that making sense so far?

Susan:
It does. It does. Can I ask a clarifying question please?

Josh:
Yes.

Susan:
So, you mentioned principles of decision making. What’s a simple way to-

Josh:
Yeah. So, the methodology we use called The Work System method. You can get it, the book, for those who don’t know, haven’t heard of it or missed the first half, workthesystem.com. We do have a download of the book or you can purchase it. But the concept is first off, you have to think differently, which is the mindset.

Josh:
The second piece, you have to know where you’re going, which is the strategic objective. The third piece is the operating principles. If you and your team, and those you work with internally and externally are operating under the same principles, they’re going to make decisions the way you would. It’s hard to hand something off to someone else if they don’t have the same principles or guidelines for decision making.

Josh:
And so, with a situation like yours, you would just start off with a handful of concepts, which have to do with customer service guidelines, or what kind of technology you want to use. Or the simplest solution is invariably the correct solution, that’s usually when we write down. So, principles like that. And that’s the foundation, right? So, that’s the foundation which you’re always going to be drawing on. But again, that’s not going to make you money tomorrow or time.

Josh:
What’s going to be the practical, next piece for you is going to be when you actually look at, from start to finish what it takes or what it has taken you to do your first real estate deal and find the piece, break off the piece, that is either taking you the most time, is the most frustrating, is the most repeatable, is the most discreet. It’s the easiest for you to package up and hand off.

Josh:
Earlier in the show, Brandon was talking about all the tenant phone calls, right? Just breaking off the piece of tenant phone calls is a great piece to break off.

Josh:
And so, finding out the different pieces of your business and then identifying which one of those are going to be repeatable in your future real estate endeavors. So, and a way to think about this, which might be helpful, is that if you’re going to be doing, what do you say? 10 deals a year. Okay. Well, if you’re only going to do an activity once a month, you’re not going to get a hold of the utility out of it. But if you’re doing something 10 times a day, that would be a great example of maybe something you should isolate, document and find someone to help you with that. It could be research. It could be answering the phone. It could be listing properties. And that would be the way to think through it.

Josh:
And then the other, I guess, thing I wanted to bring it before I let you tell me where I’m wrong here, and you can push back, right? Is you mentioned out of state investing. And I just would make you think back to your, the first point, which is building a simple business.

Josh:
And I’ve had clients do this, real estate investors, where they invest in this state and they invest in that state, and they invest in this state, and their life becomes hellish. So, consider, is that really going to take you where you want to go? And maybe that’ll make you shift with regards to location as well.

Susan:
No, that’s great. Thank you. I’m in Tacoma, Washington, so not far from where Brandon started. And so, I do have some ties in the Cincinnati area, which is a really good area to invest in as well. And I’m looking from moving from single family to multifamily. This has been so helpful. Thank you so much.

Josh:
Good. Great questions. Hopefully it helped. And I know it was very broad. But take the time, write down your thoughts. And you got to start somewhere. Right? So, even if it’s just isolating a few things and you have a part-time assistant, just to get you started, every piece, and Sam could detail them, hundreds of procedures they have right now, but it starts with one. Now, it just starts with one.And then you have a little bit of time, then it goes to two, and then you just build from there.

Susan:
Awesome. Thank you.

Brandon:
Awesome. Thanks, Susan. I appreciate you.

Susan:
Yeah. Thank you, guys.

Brandon:
All right. Well, with that said, we’re going to move on to the next, I guess, guest for today’s show. Josh, that was awesome. So, thank you. So, why don’t we bring in Karina? Am I saying your name correctly, Karina?

Karina:
Yes, that’s correct.

Brandon:
And look at that, Karina. All right. Welcome to this show.

Karina:
Thank you. Hi, guys. I’m Karina. I have a few properties, but I would like to have more time to focus on the investing side of things. I’m doing pretty well in my real estate job in that is something that I want to continue to grow. But I want to ease my time commitment off of that.

Karina:
So, I want to build systems that essentially, not only increase my sales, but allow me to have the capabilities of building out a team in the future, but I’m not exactly sure what I should start with. So, I guess, the question is, how do I know what I should systemize and how do I go about actually implementing it? Which I know Sam touched on a little bit earlier, but I’d like to hear your thoughts, Josh.

Josh:
Yeah. Well, definitely. And I don’t want to regurgitate what I said with the last person for those watching the show here. But if I were you in your circumstance, and you already knew where you wanted to go, that’s you have some clarity, and you’re having some great success. You already have money coming in the door. So, you’ve done things enough time to know what works and what doesn’t work, especially as a realtor. It sounds like you’re a realtor, right?

Karina:
Correct.

Josh:
Yeah. So, what I would do is actually list out in chronological order, all the different pieces that go into being a great realtor, what you’ve done to be successful. And that might be the way you list the property, the way you price it, the way you advertise it, the way you greet people when they come in, the way you do open houses, all the different pieces. Right? And I think that those would actually be, having those pieces listed out is going to help you be strategic about making a decision. I think that’s the hardest thing is people say, “I want this systemized. It’s very overwhelming.” Right?

Josh:
I’ve actually thought about this with regards to my marriage, my wife, is like, I want to have a great marriage. Okay? Well, what are the different components? What are the different pieces? And so, let’s make sure each piece, each system is running optimally, right? And it’s going to be the same with you. And as a realtor, there’s a lot of your energy probably is spent running around doing a lot of manual things, and obviously you’re good at it. So, you could find people who are less experienced, less trained, less expensive to do a lot of those tasks for you.

Josh:
So, I would focus more on systemizing and documenting what you’re currently doing well, because the other part of your business, which is real estate investing is more experimental at this point in time. You’re still testing things out. You’re still figuring things out. You’re still not sure, “Is this going to work or is that going to work? There’s still so many unknowns, that to start to build a team in that side of the business is going to be way more risky. And you might build things that you have to trash later on. But if you already have a current revenue stream that you feel really confident in, those would be the pieces to free yourself up and give yourself that extra time and money to invest in real estate investing. Is that making sense?

Karina:
Yeah, that makes a lot of sense. I have a follow up question. And this could also go to David. I know that he has a team himself. But do you think that I need to wait until I have all of these systems in place before I hire somebody or bring somebody on to my team? Or should I wait?

Josh:
I certainly, I wouldn’t wait. Yeah. I mean, don’t think of your team as in like the annual salary, you have to pay them, let’s just say 40 or 50 grand. Think of it in terms of, “Can I get the ROI out of this person within the next 60 days? Can I hit the break even within 60 days? I bring them on. And yeah, I’ve got to train them.” And maybe your systems aren’t all proceduralized and documented yet, but you’re going to get there with them. Will they start paying for themselves within 60 days? Okay. Well, then it’s worth just bringing them on right now.

Josh:
It’s almost never happens where you’re going to bring someone on and you’re just going to hand them, “Here are the procedures on how to do your work from step one, to step a hundred.” Unless you’re an established business and you’ve had the time to build it out. Newer companies, you’re bringing them on and say, “Here’s 50 things I want you to do. We have the first two of them proceduralized. And now as you get started, we’re going to work on getting the rest of them documented.” Right? And so, as long as they buy into the strategy, they understand your principles, they understand where you’re going.

Josh:
And this is a big way to attract people to your team is, if you’re an entrepreneur that actually has a direction, you actually know where you’re going, and they can see your ambition. And they can also see that you’re organized. You’re actually going to make it happen. They’ll be excited to join their team, and they’ll understand why they’re actually building these procedures as they’re working with you. So, I would not wait to get things documented first. I would do it with them.

Josh:
And one of the easiest ways to do that is just like Brandon mentioned, which is as you’re training them, they are involved in documenting it, right? So, you’re either video recording. You’re Zoom recording. You’re audio recording. You’re doing something where your knowledge is not being told to them and they’re forgetting half of it. It’s being told to them in a way that’s recorded, and then they’re applying it, and they’re documenting it.

Josh:
And as I like to say you, people come and go, but systems stay, right? So, they might leave. They probably will leave in a year or two, but what you built with them is going to continue on, and then that’s going to give you more confidence to bring on more and more people. And I would say, especially when I work with other realtors, it’s a job where there’s a lot of activity. Right? It’s volatile. People come, they go, they do it part-time, they move. It’s harder to get somebody you can really trust to be consistent. And so, the more you can get them to write down what you do, because you’re telling them, the better off you’re going to be in terms of stability.

Karina:
Yeah. It makes a lot of sense.

David:
Also Karina, with the real estate agent business, specifically, there is a lot more flexibility in this industry than in a typical job that Josh would usually be giving people advice for. So, one of the things that we’ll do is we’ll take an agent in our office, who isn’t doing a lot of production and really wants something to do, wants to learn. And I don’t have to pay them like an administrator. I’m going to pay them through training. So, you’ll find someone you have chemistry with. You’ll find someone who has a good work ethic that represents your brand well. And you’ll take a chunk of what you do and say, “Look, I will pay you to do these things.” But you can pay them out of the commission, so that if you don’t sell houses, you’re not locked into costs that you can’t afford.

David:
And then as they get better at doing that job, you can slowly start to pay them a higher chunk. If you get enough income, that’s coming in from lots of deals that you can afford to move them to hourly, you can do that. And like Josh was saying, you’ll develop those systems at a very low risk way to yourself as far as putting out money. This is one of the industries where there’s just a ton of people who so badly want someone to teach them the way. And there isn’t anyone to do it. We need more mentorship in this space.

David:
So, I run like a webinar mastermind for real estate agents, because there’s so many people that want to learn. They all are just hungry like, “Just tell me what to do. I’ll do whatever you want. Just tell me how do I do this?” So, I think for you specifically, you’re doing some production. You have a good way that you carry yourself. There’s lots of agents that look up to you. And you could find some cheap or free labor because they just want the training. And then once they’re good and you’re like, “Okay, I want to commit to this person.” Then you can give a formal job offer.

Karina:
Yeah. No, that makes a lot of sense. I’ve actually have had people reach out to me. I guess, I have felt like I didn’t know. I wasn’t in that position yet to serve as a mentor yet. But I think that I may be wrong about that. So, it’s something I will explore. Thank you, guys.

David:
You’re totally wrong about that. Every agent thinks that they don’t know enough. You definitely, you know more than them, and that’s all that matters.

Karina:
Thank you.

Josh:
Thanks, Karina. We appreciate you coming on.

Karina:
Absolutely. Thanks, guys.

Brandon:
Yeah. Well, let’s move to the next segment, last guest, we’re going to bring in right now. All right. Matthew, welcome to the show, man. Good to have you here.

Matthew:
Awesome. Honored for the opportunity.

Brandon:
Yeah, man. Well, this is Josh. Josh, Matthew. I’ll let you guys do what you do best.

Matthew:
Sounds good. All right, Josh.

Josh:
All right, Matthew, why don’t you give me and the audience the background. What’s going on in your business?

Matthew:
Absolutely. So, I’ve grown from zero to 31 rentals in the past nine months. I first started out with a five unit, then a 10 unit, now a 16 unit. I have a highly profitable niche here in Iowa, what I like to call tweener towns. I call them that because they’re the towns between the big towns, where people live, with the ability to BRRRR and get a hundred percent of my money back within six months of seasoning, I’ve done one already, and I’m in the process of two as we speak.

Matthew:
I know I need to hire outside management to continue to grow. And I realize that I need to continue to outsource more of my life and business, more of those $10 an hour tasks in favor to free me up to do those $10,000 an hour tasks. However, I know that I’ve a tremendous work ethic and I know how to do everything because I’ve grown up in the business. So, what’s like a 12 step baby step program for me to slowly outsource things, maybe scale the outsourcing, so it feels gradual of getting benefit as opposed to losing control?

Josh:
I don’t know if you can do a slow 12 step program, if you’re moving that fast. You might want to accelerate the delegation. I think you’re about to get crushed with a lot of problems pretty soon here. So, have you ever done property management before for this many tenants?

Matthew:
No. This is my first time.

Josh:
All right. Yeah. So again, I’m not a real estate pro, but I suspect that as you reach this critical mass where you basically can’t keep up with the phone calls and the issues, you’re going to want to outsource some things. And obviously, you’re skilled at finding properties, it sounds like, and skilled at the financing and all the strategy aspects. And that’s really where you should spend your time, right?

Josh:
So, entrepreneurs need to stay in their sweet space. The stuff that it’s pretty hard to come up with a system for all of the creative problem solving that went into finding these deals and making them a success. But there are a lot of things that are super simple and boring, and repeatable such as the tenant phone call of, “My toilet is plugged.” Or, “There’s a leak in the ceiling.” All those things are going to be happening, right? The maintenance is going to happen. People are going to not pay their rent on time. All those things are going to happen.

Josh:
And I’m leading you towards a certain answer here, but I would break apart your business into the separate pieces. And it sounds like there’s an aspect of research, there’s an aspect of closing the deals, all the way to managing, all the way to selling them. But what I see is there’s just discreet businesses that already do elements of that. And one of those discrete businesses is a property management company.

Josh:
So, if you really want to scale and grow, and keep it really simple, a system you could plug in would just be having a partner property management company, do the property management for all your tenants, so you can spend your time where the big dollars are, not spend your time trying to deal with all of the little headaches. That seems like the easiest solution. So, that could be an approach.

Josh:
The other approach would be to build it all in house, which I get the sense, that’s not going to be your personality where you build every single thing in-house, but I could be wrong about that.

Matthew:
It seems like at least initially, that may not be the way to go. It seems like you may want to start outsourcing those elements. And then if it makes sense to where there are units that are clustered in certain area, potentially you could bring someone on. But I think until we hit a hundred units or so within a certain radius, it may not make financial sense for us to consider that path.

Josh:
Yeah. Well, I think that’s a great way to think about it. Right now, are all your units within the same location? Are they spread out?

Matthew:
They’re all within about a two hour driving distance, so they’re pretty spread out.

Josh:
Pretty spread out. And then, is the future, and then going back to our initial step, which is a strategic objective, is the future for you, the next 10 years is going to be hundreds and hundreds of you, these units, or are you planning on just stopping at a safe area, and then just managing it like a personal lifestyle business?

Matthew:
Yeah. Initially, my goal was to replace a hundred percent of our income with cashflow from the rentals when they were all paid off, say refinance them, put them on 10 year notes. And then when the kids go to college, we got three kids, my wife and I can do whatever we want. Well, we accomplished that 10 year goal over the first nine months of doing this.

Josh:
I love it.

Matthew:
So, I’m a high achiever. And I feel like if I don’t continue to challenge myself to grow this to be more, I’m going to have regrets, and I don’t want to have any regrets in my life. So, I feel like, I’ve got a profitable niche and I want to continue to grow. And as long as there are properties that are going to still fit the bill for what’s our sweet spot, I think we need to continue to buy. And maybe that means retiring from a W2 earlier than what I’m planning on. But yeah, I think we continue to want to grow. I mean, why not 10X where we’re at now, and get to 300? And then see where we get from there.

Josh:
Yeah. I think that’s great. I mean, congratulations. Kudos to you for doing what you’re doing. I think that the key thing, especially if you have still a W2, right now would be to make sure that all the aspects of your business that are going to absorb your time on an ongoing basis, which are not entrepreneurial, again, are taken care of, either by outsourcing externally or internally, by bringing in people to do those various things. And if you don’t have the time to train them or the skillset, or the desire to bring on all internal team members, then it’s simple to outsource to, again, property management companies, things like that. And then over time, if you have a large enough portfolio and you want to bring it in house, you can. Right? That’s pretty common for a lot of industries.

Josh:
I’m just working with a lumber yard right now that went, now they do all things. They design the buildings. They install the buildings. They deliver the material. They do everything. They manufacture the material. They used to just be a lumber yard, and now they do it all from start to finish. And I think that’s something, if you’re ambitious, then you can certainly go that way and do it all from start to finish.

Josh:
But in terms of your skillset, it sounds like your skillset is really in the overseeing everything and not so much, I don’t see you as a day to day kind of person, answering the calls. So, I would just let you know, and maybe Brandon and David could speak this more clearly, that I suspect that the future you’re going to hit critical mass, where there’s going to be so many tenant issues, that you’re going to be very frustrated pretty soon if you don’t have that outsourced.

Brandon:
I mean, you could build it in house, but yeah, if you can outsource it, way better.

Josh:
Yeah. So, early on in my career, I actually worked for some real estate developers before the 2007 crash. And there’s a lot of ways to make money in real estate, right? You all use the BRRRR method, but certainly you can make money by remodeling. You can make money by renting. You can make by refinancing. There’s all these different ways to make money. But the market does go up and down. I mean, there are things that happen.

Josh:
And the great thing about real estate is you can make money in the upmarket. You can make money in the down market. You can make money in a flat market. You can make money on all the different markets. But if you are so busy in the day to day of answering tenant phone calls or remodels, whatever, then you’re not going to be able to see those opportunities. And you’re not going to be able to really cash in when you see a great deal. And so, I’d rather see an entrepreneur’s time and free space, and energy and mind be open to that.

Josh:
And the things that are simple, like the last flipper that I worked with, he just got three partners in three cities, who were the remodeling contractors. And they did the remodeling because he wasn’t the guy doing the remodeling. And that simplified the remodels, so that he could just focus in on the deals. And then he systemized how to do the auctions. And then he had people go to the auctions for him. And so, he found the pieces that allowed him to again, have the freedom and the bandwidth to continue to look for opportunities and look for those deals because that’s a better use of your time. I think if you want to make the most money for your time, that’s where it is, not in the day to day repeatable tasks. Those things are going to be done by other people.

Josh:
And for some people, I recommend getting a virtual assistant first or somebody who is very inexpensive to manage your lifestyle, but sometimes they can slow you down. Instead, it’s easier just to take a whole mechanical piece of your business, like property management or remodeling, or maybe having a realtor, who you just always call and they’re the ones to list all your properties. That might be a better approach in terms of building the assistant for your business.

Matthew:
Thanks, Josh. I appreciate the advice.

Josh:
Yeah. Great questions.

Brandon:
All right. Well, thank you, Matthew. I appreciate it. And thank you, everyone else that joined us today. I guess, that brings us to the end of today’s show. Josh anything you want to follow up with, maybe final words of wisdom, or advice, or anything Sam, you want to jump in with at all.

Josh:
I’ll go first, and then I’ll let Sam close it all out here. But I just want to say that real estate is a great business. I just want to say that to start off. There’s a lot of companies I work with, whether they have online, offline, traditional, virtual around the world, but real estate is just a great business to be mastered, because it’s not going away. It’s not going to be outsourced. You can’t send it off to China. It’s going to be here and people need to live. And so, studying it like you all teach, I think is a really smart investment.

Josh:
And then realize that with everything there’s a system that can be done. And so, whether, again, it’s mobile home parks or it’s remodels, or it’s small or big, whatever it is, realize that there’s a system for doing it and take the time to invest in your systems instead of just freewheeling it.

Josh:
I’ve worked with a lot of real estate companies that the owner just is always by the seat of his pants. And 10 years later, they’re still in a nightmare. Right? And you just don’t want to do that. You want to be strategic about it. So, think about in terms of systems, write your strategic objective, what exactly are your goals? And think Matthew did a really good job of clarifying what his goals are. And then make sure that you stick to it, stick to it, stick to your plan and be consistent, and you’ll get there.

Brandon:
I love it, man. Okay. Just to add one more piece to that. And then I’m going to jump in with the famous four for Sam and for you, Josh. But I was going to say one thing great about real estate investing is that this is not a brand new business. It’s not unique. It’s been done by millions and millions of people, which is why, every problem we could ever have, like how to deal with this tenant issue or this land title issue, everything has been figured out by millions of people before. And so, as long as people are open to the idea of asking like, “Well, how do you deal with that? Or what’s your system look like? Do you have a book on that?”

Brandon:
Anyway, that’s one thing I love about real estate is just that it’s already been so tested and tried. This is nothing new. Yeah, it’s exciting.

Brandon:
All right, guys. Well, we got to close up shop here in just a moment. But before we get out of here, I thought we’d hit our world famous, the famous four, the part of the show, we ask the same four questions to every guest, every week. So, we’re going to throw the first one at you. Sam, I’ll start with you. And then Josh, if you have a different answer, you probably do. But is there a personal habit or trait you’re trying to work on in your life right now? Anything you’re trying to improve?

Sam:
Man, everything can be improved. I have a little routine that I do, is 30 minutes of cleanup every day. So, I wish you could see the rest of my desk within the last 24 hours. Take 30 minutes a day to just straighten something out. And it might be online. It might be like a desk. It might be something, you need to clean the car. Take 30 minutes every day to clean things up.

Brandon:
That’s 8:30.

Sam:
I need to do a better job of that right now.

Brandon:
All right. Josh, what about you? Anything you’re working on?

Josh:
Yeah, a workout routine. I just moved to Kauai a few months ago, and my wife had a baby two weeks ago.

Brandon:
Congrats.

Josh:
And so, our life is in disarray. And so, exercise has fallen down the priority scale to sleep. And so, that’s the one I want to nail again. I had it working well in Arizona, not so well in Hawaii. So, that’s the one. And the reason why, if your body and mind is not functioning properly, everything else gets off track. And so, you really got to start there.

Brandon:
So true. All right.

David:
All right. What about your favorite business books, other than your own of course?

Sam:
Well, the E-Myth, of course, is where I started. And it did give a very philosophical slant to what became Work the System. The 8-Hour Work Week by Tim Ferriss is terrific. It’s an old book now, but I think he’s revised it like a thousand times.

David:
Four hour, you doubled this time.

Sam:
Did I? Okay. It’s a 4-Hour Work Week, right? I haven’t read it in a long time. And there’s some others. And then Work the System, I recommend.

Brandon:
There you go.

Sam:
It’s a consolidation of a lot.

Brandon:
The fourth edition though, not the first edition though. That’s what you say.

Sam:
No. There you go.

Brandon:
I’m looking forward to reading the fourth edition. And your new book, you have a new one coming out, right?

Sam:
Yeah. Josh doesn’t even know this but it’s called One Layer Deeper, and I’m working on that. And that has to do with the thread that goes through Work The System, is that you need… In this book, and I recommend a hard copy book, always, although online is fine. But at the end of the preface, I list 12 very important points. And number one is reality is what it is, whether you like it or not. And then spend the majority of your work time in preparation and building, not personally executing your work, that’s number four. Create value for others all the time. And so, those are the things that I circle around all day long.

Brandon:
All right. I love it. Josh, business books.

Josh:
Yeah. I typically read books for a specific purpose in mind. Right? I’m reading a book right now about writing. And I wouldn’t recommend it because it’s not fun, but it’s exactly what I need. But obviously Work the System. When I’m thinking about advertising and marketing, I think of Influence by Cialdini.

David:
Yeah, that’s very good.

Josh:
I was just looking back, for anyone who’s a consultant or coach, this one is really good, The Business of Expertise, but probably no one in your audience is.

Brandon:
Hey, Amber.

Josh:
But with my kids, my favorite book is Pilgrim’s Progress. So, I just think it depends on the audience. And what I’m actually trying to learn and try to consume them, and then put them behind me and then reference them later. Anyways, investing in books is a really smart move.

David:
Awesome, man.

Brandon:
All right. What about some of your hobbies?

Sam:
So, I’m a climber and a cyclist, and Josh is right about the exercise thing. I’ve been an athlete all my life but I read a lot, and read a whole variety of things. I put a pile of books here, because that question always comes up. Steinbeck, Hemingway, the classics. But some of the newer ones too, Irresistible Revolution.

Sam:
One of my habits is to read every day. And if you read a book called The Shallows, and this fellow wrote another book called The Glass Cage, you find that reading is therapeutic, and it doesn’t matter what you’re reading really. You read for knowledge and everything.

Sam:
Here’s another one, English. And then this one, this Steinbeck book, Working Days is about writing. And so, if you read and you write, your mind gets more linear. And if you don’t read, and a lot of people don’t read anymore, we’re fooling with these devices all the time. But if you read a book, a hard copy book, that’s the best thing you can possibly do. That’s one of my favorite habits.

David:
Yeah. That’s cool.

Sam:
And then we like to travel. I love running my hounds with the dogs out in the woods.

David:
That’s cool. Josh, what about you? What do you do?

Josh:
Hobbies.

Brandon:
You have kids, you don’t do anything. Yeah.

Josh:
I was going to say that that’s pretty much it. No. So, since we just moved up, we’re going to the ocean every day is kind of our thing. So, boogie boarding, haven’t started surfing yet, but that’s going to be soon, swimming, going snorkeling, just trying to enjoy the time with my kids. And since I work at home and we homeschool, that’s a big part of what we do for enjoyment, try to make learning fun and try to make it a family affairs. So, in terms of other things right now, and this season of my life is not a whole lot of other things to squeak out.

Brandon:
All right. Last question for me. If you guys had to really boil it down into a one sentence, what separates successful people from those who give up, fail or just never get started?

Sam:
I love it. It’s number one in my 12 here. Reality is what it is, whether you like it or not. And if you’re not dealing with reality, you’re dealing with this wishlist over here, you’re going to fail. And the people who are successful deal with reality, whether they like it or not, and it doesn’t work the other around. That’s my one liner.

Brandon:
I love it. I love it.

Josh:
Yeah. Sam has got a lot of great… I mean, those of you who have not read the book, there’s so many great nuggets of wisdom in there. And one of the ones that I like is this idea of gun into the head enlightenment, which is, when you have to actually move, when life circumstances force you to move, then you’re go going to be successful. And most people they’re just comfortable with the reality.

Josh:
And another way to put that in the positive would be, those who are hungry, those who actually are hungry to reach a certain level are going to get there. Those who are comfortable where they are, they are going to stay where they are. And I think that’s why most entrepreneurs are entrepreneurs because they’re okay with the reality. And dreaming about the future is good enough. They don’t actually have a need. If they’re like, “I need to make, I don’t know, six figures.” They’ll figure out a way. Or, “I need to make a half million dollars a year.” They’ll figure out a way. but if they don’t need to, they’re going to just settle.

Brandon:
Yeah. That’s great, man.

David:
It’s a great point. I say all the time, never waste pain. Pain is an incredible motivator. Right? You don’t want to chase it out. You don’t want to seek out pain. I’m not a psycho, but when it comes your way, make the most out of it.

Sam:
That’s good, actually. That’s a good euphemism. Yeah, that’s good.

David:
All right. Last question of the day to each of you. Where can people find out more about you?

Sam:
Well, workthesystem.com is the place to go. And there’s a lot of really good information there. You can order the book there through Amazon. You can check out what Josh is doing. There’s some pieces about me in there. And I’m always available, [email protected] Anybody can email me if they feel like it. And I like corresponding with people. But I would start at the book, start at the website, consider getting the book and go from there. That does that cover it, Josh?

Josh:
Yeah. I mean, that’s where at workthesystem.com. I’d love to see you there. And the book is foundational. That’s where everything starts. And if you want more help, that’s what I’m involved in is trying to help you, whether that’s coaching, consulting, onsite, you name it, but I’d love to see you there, if you want help in taking your business to that next level, where it’s a self-managing business.

Brandon:
Love it, man. All right. Well, thank you, guys so much. I really appreciate both of you. This has been a phenomenal episode, and I hope everyone goes and checks out the book, and everything else you guys put out there. So, thank you.

Sam:
Thank you, David, Brandon.

Josh:
Thanks, guys.

Sam:
I appreciate it.

David:
Great to meet you too. Thanks, guys.

Brandon:
All right, David, you want to get us out of here?

David:
Yep. This is David Greene for Brandon Work that System Turner, signing off.

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