When it comes to aspiring wholesalers, it seems that the common “benchmark” of success is being able to buy and sell 10 properties a month. At 120 properties a year, averaging a profit of $4,000 per house (which is being conservative), that would mean your business gross revenue would be around $480,000 per year.
Out of that, you have to count your overhead costs, which for me includes payroll for my team, our office lease, utility bills like website management fees, internet, software subscriptions, marketing cost (namely direct mail), real estate agent fees and so on.
There are also random expenses that spring up, like trainings for your team, podcast gear (ours is coming soon) ordering signs, going on company retreats, adding to our working capital to purchase inventory, etc. But if I would give an average for the sake of our example, I’d say it’s around $20,000 per month (and again, this is extremely conservative).
Now, these numbers are not the exact numbers of my business, as I like to keep my finances private (it really turns me off when people boast about how much money they make — that’s totally not my heart at all in this post), but I want to give you an example so you can catch the principle I’m trying to get across.
If we have $480,000 per year in gross revenue and our annual overhead is $240,000 ($20,000 annualized), that means your personal take home would be $240,000 a year, which is great!
Now, I want to point out the obvious and say that $20,000 is a lot, and you could easily make that $240,000 sooner by having less overhead and taking on more responsibility yourself.
However, if in order to make $240,000 a year, you have to work 80 hours a week, have a terrible social life and genuinely be a slave to your business, is it worth it?
I’d say no.
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Big Money — At a Cost
You know, the greatest year my business has ever had financially was back in 2008. Though my dad at the time was a financial partner, when it came the execution of the business, I was pretty much a one-man show.
I worked like an animal! I had money, but boy, did it come at a cost! To make a long story short, I sacrificed all in the name of making money, and it took a huge toll on the course of my life. I ended up losing everything except the money, and if you do what I did, you’ll find out pretty quickly that that’s a really empty existence.
If your life is full of stress, your relationships with the people you most care about are suffering, and you’re just straight up not happy, for me that isn’t success; it’s slavery! The amount of money you have doesn’t define how successful you have become. It’s about having the resources to do and to be everything you most care about. Success is living a life where you are most fulfilled.
This brings me to the focal point of my post today:
If you want to do 120 properties a year, the only way to do that without driving yourself crazy is to scale your business and work on it instead of in it.
I’m sure by now you’ve heard this concept a lot, especially in the context of real estate investing, but it’s something that needs to be repeated over and over again.
If you’re anything like me, you will probably find working on instead of in your business is a whole lot harder to do than to talk about!
It’s so easy for me to get caught up in doing tasks like answering emails between us and the title company or getting in the middle of things like making flyers or random non-essentials that I have a team to do. But if I want my business to grow, I have to be the captain of this ship and direct my crew to handle the day-to-day tasks.
Otherwise, no one will be driving, and we’ll end up crashing or in some other direction where we don’t want to be.
In my business right now, we’re in a hyper growth phase, and I have to be honest — it’s been a really scary thing.
Hiring Someone is Like Analyzing a Deal
When you hire someone, it’s very similar to analyzing a deal.
You have to estimate what kind of return on investment this person will be able to bring to your company, both in terms of your personal time and freedom, as well as in actual revenue.
Though you do the best in your estimation, there is still the risk that you’ll waste your time and lose money on the deal.
Business is a risk, but it’s one worth taking!
Right now, our focus is on developing our systems and process to the point that they run as smoothly as possible. This ultimately frees me up and generates more business, but the growing pains to get where we want to be are pretty tough!
If you’re anything like me, you like to fly by the seat of your pants.
I naturally don’t like rules or scheduled, mundane things but again, if I want my business to be the best it can be for the context of my lifestyle, I need to have a machine in place that operates all on its own.
So, now that I’ve hopefully convinced you to focus on scaling your business in order to reach 120+ properties a year, how do you actually do it?
In answering that question, there are two things I need to break down. Let’s begin with the first:
There are four different areas of your business you need to focus on in order to scale successfully.
4 Vital Tips to Successfully Scale Your Business
1. Have the right people in the right roles.
When you are considering hiring a person, you need to take a number of different factors into account. You need to look at their skills, their personality type, their aspirations in life, and their values. One of the best things to do is to have everyone on your team and anyone you hire moving forward take a personality test. This gives you quantifiable data to determine if they are the right type of person for the given role.
For a while, I had people on my team wearing a number of different hats, and productivity was suffering pretty badly. I’d say if 100 was perfect work capacity, we were operating at around 30 percent.
I have a guy on my team who is great at creating systems, developing vision, and working with me on the “big-picture” stuff. But do you know what? He is absolutely terrible at handyman work. The other day, I had him assemble a new desk, and he said he was at the office working on it until 1:00 a.m., and it still took him another day to finish it!
From a business standpoint, having him put that desk together was a huge waste of company money and company time. I should have either hired it out or had someone else on my team do it who could have knocked it out faster.
Does that mean this person isn’t valuable on my team? No way! I asked the same guy to put together the breakdown on how I want my business run, and he came up with an eight-page breakdown of our business and process, as well as an extremely detailed mind map, and he did all that in no time at all.
In guiding the ship of my business, I need to place him in the role of helping me develop internal systems and not in assembling desks!
I have another guy on my team who was in a sales role, helping us build our buyer’s list and unload our inventory, but it turns out his personality is extremely docile and detail-oriented, and he thrives more in helping us handle contracts, accounting, and communication with the title company.
So, I’ve recently hired someone who is incredibly competitive and great at sales to fill the role of marketing and sales and placed my detail guy in the transaction coordination role.
This way, we can optimize on people’s strengths and complement each other’s weaknesses.
2. Have a great long-term strategy.
Where do you want your life and company to be in 10 years?
If you cannot answer that question right away, then you need go back to the drawing board until you can.
If you’re driving your business — again, if you’re the captain of this ship — and you have no destination in mind, you’re kind of wasting everyone’s time.
Why would we go out to sea if we had no place to sail? You need to know where you’re going so that you can get everyone in your company there.
It’s crucial to work with the end in mind. My business coach right now is having me work out my big, hairy, audacious 10-year goal. This is essentially the answer to the question I mentioned above, but it’s supposed to incorporate all the things that I care about for my company, as well as the massive, almost scary results.
This also helps break down the purpose of your business, and once you’ve clearly defined your BHAG goal, you can then break it down into benchmarks and achievable steps.
For us, we want to use our business as a ministry that transforms the lives of the investors who buy from us.
So we have certain metric benchmarks toward where we want to be in 10 years, of lives that we’ve helped transform, people who we’ve helped reach a certain amount of income, and jobs we’ve provided for those who are in need.
I think it’s best to break down your big 10-year goal into metrics of a 5-year goal, a 3-year goal, a 1-year goal, and then 90-day increments.
3. Have great systems and execution.
This area is where you create the machine and then actually have the machine working.
Now that we have a very clear description of what everyone on our team does and how the work flows from lead to profit, we also are doing things to help make that work flow actually happen.
For example, we’ve started doing daily huddles and weekly vision meetings. In our daily huddles, we take 15-30 minutes where the entire team calls in and we distribute tasks, ask questions, and make it so that everyone knows exactly what is expected of them for that day. In our weekly vision meetings, we discuss the future of the company and our personal dreams and aspirations, and we brainstorm on how to get to our destination as a company.
One of the things I’m really trying to do as a CEO is learn what the personal aspirations are for my employees and then use my business as a way to help them reach their goals. That way, they can see how Simple Wholesaling can be their long-term strategy to where they want to be in life.
I use this as a way to genuinely care for my team, as well as guide a passionate team.
When people are just as passionate about your company as you are, you don’t have to worry about turnover, trust, or micro-managing. Those things pretty much take care of themselves, but the key is you as the business owner have to facilitate that passion in your people.
4. Have a lot of working capital.
I know I’ve mentioned it a lot lately, but when it comes to scaling your business, it’s super expensive!
Not only do I need to have more working capital to handle more deals, but I also have to pay for hiccups, more payroll and all the random stuff that hits as we grow.
A lot of people these days do all they can to cut corners on this step, and the fact is if you want a solid business, it simply costs money. You can’t think small or short-term. If something costs you $10,000 but it can generate you $20,000 a month, it’s worth spending the $10,000.
On this step for us, our marketing and sales person is also now responsible for finding private money partners so that we can have more working capital. We’re already doing 120+ a year, but we want to do that much more, and it’s just not possible to grow at scale without it.
When you grow, you have to have working capital to work with.
My Business Structure Broken Down Into 7 Elements
Now, for the second part of the answer to the above question:
Our business structure can be broken down in the following steps.
- We send out direct mail and conduct our other lead generation strategies.
- Our acquisitions manager vets all the calls and negotiates the price with the truly motivated sellers.
- Once a motivated seller agrees to sell, our acquisitions manager informs our transaction coordinator and our marketing and sales manager. The transaction coordinator then handles communication with the title company, and our marketing and sales manager begins the first phase of marketing, letting our buyers list and website know we have a new property available.
- Then once we officially close on the property, our sales and marketing manager posts the property on Craigslist, Zillow, and other online platforms and actively reaches out to investor-buyers in hopes of selling the property.
- Once we have an investor-buyer interested, we show them the property, negotiate the price, and if all goes well, generate a purchase agreement.
- Once signed by both parties, our transaction coordinator sends it to the title company and communicates with them until closing.
- Once the property closes, we make money!
This is literally our process in 7 simple steps. Obviously, on paper this looks a lot easier than the actual execution of it, but if you have people to fill these roles, things run a whole lot smoother than if you’re the one doing everything. Did you notice I’m not mentioned at all in the 7 steps? I simply oversee everything and make sure things are getting done.
This really frees up my time to focus on steering the ship and having my company be exactly what I want it to be.
So to wrap up everything this week, if you’re looking to do 10 deals a month as a real estate wholesaler, the best way to do it is to scale your business and get the right people in the right roles. You have to know where your business is headed, and you have to be free enough to be the captain of your ship.
You also need to have a lot of working capital, and this may look like taking out a business loan or having private money investors who you partner with on deals. If you do this, if you do what it takes to think long-term and make your business a well oiled machine, then you’ll truly find yourself successful.
If you’re working on scaling your business, what issues have you run into? What advice would you add to this article?
Leave your comments below!