1 - Intro: Your Business Financial Assessment
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Get the Money Right: Episode 1 – START
[INTRO MUSIC FADES IN]
Joe Rodriguez:
Hello. My name is Joe Rodriguez and you're listening to Get the Money Right with Todd Butzer. Todd has over 20 years of experience in getting real estate agents, the training and resources they need to get their finances on track. In this episode, Todd challenges you take a comprehensive assessment of your business finances, and now here's Todd.
[INTRO MUSIC FADES OUT]
Todd Butzer:
Thank you. Hello, everyone. My name is Todd Butzer and welcome to Get The Money Right. You know, the purpose of this podcast is really in the title. Many real estate agents have proven that they can lead, generate their greatest selling homes. They take fantastic care of their clients needs and they create, in many cases, significant amounts of revenue. Yeah, many of these same agents struggle time and time again with managing the fiscal side of their business. They just don't get the money right. They get the lead gen right. They get the systems right. They get the follow up right. They get showings right and listings right and so on. They just don't get the money part right.
The good news is this can be fixed, and we can fix it fairly quickly and we could make great strides quickly towards getting better at financial management. You should note there is no judgment in this message. You're not a bad person if you've allowed your financials to get a bit messy or even a lot messy. What we will talk about are real strategies and solutions to get this part of your life on track and to remove the stress that messy financials can put on us. And believe me, they do create stress. We're going to keep the messages under 20 minutes. And if you need to look up a document or any supporting information or anything, I'll just posted on the website at GetTheMoneyRight.com. We'll also feature agents who have actually done this. We're going to have a lot of guests on the upcoming podcasts. These are agents that have gotten the money right. They'll share with us how they did it and how it's impacted them, and, you know, the steps that they had to take to do this.
Today, we're going to take a quick assessment of your business and then we'll discuss the impact on you and your company when the money is being handled properly versus haphazardly. As we get started, keep in mind that this is not a series regarding your personal finances, although they will certainly be impacted by what we're going to be talking about and we will allude to them from time to time. This is about your business's financials. All right. So let's just jump in. Wherever you're listening to this right now, no need to write anything down. Just kind of keep a mental picture and go with kind of your gut instinct or quick answer when I ask the questions.
All right. So the first question is, what is your business entity? Now you say. Todd, why would you ask that question? I mean, come on. I'm going to let you know that over the years, I've actually had a lot of agents who don't even know what their business entity is. Not judging that, I'm just letting you know, it's pretty common for people not to know. So what's your business entity? If you're one of those who really aren't sure what your business entity is, don't panic about that. We are going to talk about the different and most common business entities are at really great length coming up in future podcasts.
So next question. And again, you might say, well, duh, do you track your income and expenses through some sort of software, QuickBooks or something equivalent or a spreadsheet of some sort, or maybe even with a ledger. Could be by hand. Some people like even doing it by hand, but do you track them in some fashion? All right. Now, to help you track expenses, do you have a bookkeeper? If you don't, that's okay. We're going to get into what to look for in a bookkeeper, where to find them, how to hire them, what you might expect to pay for that, and really what duties they should be fulfilling for you. But I would really recommend, highly recommend that no matter what condition business is in or how new you are, that we step out and we get somebody who's qualified to take care of our books for us, this isn't something you want to do on your own. So, highly recommend it.
Okay, next one after that is do you maintain separate accounts for your business revenue and expenses? Again, you'll be surprised at how many people just commingle all of it. They just put it in their personal checking account.
Do you review your financials monthly? Many people will say, well, I really don't. If I have money in my checking account, I feel pretty good. Again, my belief here is that the reason people don't, number one, would be that they're not really tracking it. Number two, though, is they're not exactly sure what they should be looking for. And so because they're not really sure, they just don't do it. And so what we're going to do is we'll just take you through just a very simple, straightforward way to review how your money is doing. All right.
How would you rate the overall accuracy of your financial recordkeeping? I mean, is it really down to the, you know, pennies or is it just kind of just, again, like we said before, or is it just kind of haphazard?
Okay. Next question is, do you operate from a budget? Now, this is not a personal budget we're talking about. We're talking about a business budget. It's been my experience over the years that the overwhelming majority of real estate agents do not operate from a budget. We're going to show you how to do it. And we're also going to show you that instead of being kind of constricting, that it is actually freeing to operate within a budget. It's fantastic if you've never done it.
Next question Are you current with your taxes? This is always a little tricky. What I'm referring to is obviously, have you filed the appropriate return for your tax return and paid, you know, the appropriate tax there? And have you also filed and are current with your quarterly estimates? Those of you in the U.S., you have quarterly estimates, if you're an independent contractor that are that are due four times a year, are you current on those? And again, we'll tell you how to do that and when they're doing all of that coming up in a in a future podcast. One of the challenges here is, is agents overwhelmingly when I meet with them and talk with them and teach financial classes. Just don't pay any attention to this. They just figure they'll catch up later. And the challenge with that is or the problem with that is: Your money, your you're going to pay more to the IRS by not filing quarterly taxes appropriately. So are you current there? It's a big sign as to the soundness of your fiscal management if you're current on your taxes.
Okay. Next, are you taking advantage of every possible legal deduction that you can to help offset your tax liability? And chances are, you know, if we don't have a bookkeeper or if we're not tracking our expenses very accurately, we're missing deductions. And it's commonplace in our industry. So we're going to get into it a lot later on. But it's just a question to ask yourself is, “hey, how am I doing with tracking those and taking advantage of every single one that I can legally.”
Do you have 3 to 6 months of cash reserves? What I'm referring to, of course, is if we take the average monthly expense for your business operation, nothing to do with personal here. And let's say your business expenses each month are $5,000. Great. Do you have between $15,000 and $30,000 of cash available? Should something strange happen to the marketplace or to you, or for some reason you're taken out of production for a little while? Do you have the wherewithal to push through that that downturn? Okay.
Does your business have long-term or short-term debt, including unpaid credit cards? Now I am going to ask a personal one here. Do you also have personal debt? And the reason I'm asking that in this particular area is if you do carry personal debt, I'm not talking about investment debt like for your home mortgage, something like that, but I'm talking about consumer debt, revolving credit line, things like that. If you have debt, personal debt, really what it means is that you're out-spending what your company is earning and providing to you. That's it. You're just spending more than you than you're earning. Okay.
Do you pay yourself regularly some sort of a salary depending again, what your entity is like? Do you pay yourself some sort of a salary or some guaranteed payment? Again, depending on the entity you are and will go into this in real detail coming up in a future podcast.
Are you taking advantage of self-employment, retirement plans? And believe me, there are some terrific vehicles out there for you to build substantial wealth through retirement plans. And again, it's been my experience that most agents just look the other way or the reliant on a significant other or spouse or partner to hopefully get that part right. And folks, there are some tremendous vehicles. And again, we'll look at those coming up.
On a scale of 1 to 10, ten being excellent. How would you rate the overall condition of your business finances?
So those are our assessment questions. It's just I mean, we could have asked more, obviously, or we could have asked less. But it just gives it gives you a moment here to kind of pause and reflect on how are you doing so far? Now, by the way, many of you listening might be saying, “hey, you know what, I'm already doing most of that.” Well, that's awesome. I mean, that's fantastic. And if you are if you're really gifted at it, you can turn and help somebody else in your in your office or someone across town that you know or a colleague of yours, go out and help them do this. If you were listening to these assessment questions and you're thinking, “oh, my gosh, I'm not doing any of this. I'm just kind of, you know, haphazard.” Then it gives us an opportunity to look at where we can improve and how we can make this part of our business world so much better and so much less stressful.
[INTERMISSION]
Todd Butzer:
Let's switch gears and talk about two predictable outcomes of getting the money right versus financials that are a little messy or maybe even a lot messy. Here's my belief. I believe that when our financials are messy, it inhibits opportunity and growth.
For example, if an agent is under the stress of having poorly managed financials in their business, are they going to be as effective as possible when they go on a listing presentation this afternoon? Or maybe they have a showing tonight. Are they going to be at their very, very best? What about if they're interviewing to add a staff member or maybe they're going to add an agent to their team and they have to go into an interview this afternoon for that. And what about the vibe this agent may give off?
Here's what I mean. The agent is meeting with a client this afternoon. And the client is sound financially. Doesn't mean they're a multi-millionaire or a billionaire. They're just really, really good with their money. Now, this associate, this agent is not good with their money. They're messy financially. I believe there's a vibe that they give off. So the client gets a feeling of uncertainty. There's something not quite right there, and they can sense it.
So don't underestimate the power of that vibe. My guess is, you may have experienced this yourself on the receiving end. Meaning you're around someone who seems to have it all together financially. Yet there's something about them that leads you to believe it might be a little messier than what they let on.
So the growth part of our business can be inhibited. We're not as good at listings and showings, possibly because we're under great stress. We're not at our best in interviewing potential partners, staff members, agents and so on. We may be giving off some sort of a vibe to potential clients that can sense something is amiss with our business so we can see how it could inhibit growth.
What about opportunity? You may know people in your life, I certainly do in mine, that seem to find opportunity. They're always at the right place at the right time. From an investment standpoint, they bought that lot at exactly the right time, or they invested in that building or that business or that enterprise that the ground floor, whatever it might have been. They always seemed to be in the right spot at the right time.
Here's the secret. They were financially prepared. When that opportunity came to them. So let's say a building becomes available in your primary farm area where you like to work. It's where you do business. And you think this would be a great building for me to occupy or for me to just own? Can you take advantage of that opportunity right now? What if someone comes to you and says, “Hey, Todd, we'd like you to be involved in our title company”, or “We'd like you to be involved in our mortgage JV that we're doing.” Or you're looking to expand your own business, you're wanting to hire more associates, you're wanting to hire more staff, you're willing to invest a lot more in marketing.
Are you able to take advantage of these opportunities?
If we're messy financially, it tends to have an impact on our growth and our opportunities.
In addition to missed opportunities and growth or limited opportunities in growth, not getting the money right is also expensive. And here's what I mean. There might be a great discount available. Maybe it's a technology discount. Maybe it's an equipment discount of some sort or a massive advertising or marketing play you're trying to do. And there's a significant discount available if you can pay cash for it. And you're not able to take advantage of it because you simply don't have that kind of money set aside. Okay.
Maybe we are paying our IRS commitments late, which means we have late fees and we have penalties. Maybe we're tapping into our high cost of credit line, i.e., a credit card, and it's in the low 20s in terms of annual percentage, and it's costing us a great deal of money.
Another area where we can end up paying a lot more because of having financials that aren't quite where they should be is, we miss tax deductions. If we're not tracking our income and expense properly, we are going to miss legal deductions. And those are expenses that literally the government helps us with. And so by not taking those, we're paying far more money for that item or that expense than we would have to.
And lastly, and you've heard me say this multiple times already in this brief episode, and that is it creates stress. Messy financials are stressful. There's a lot more going on in your brain regarding those than you might think in terms of how often you think about them and things you have to do to machinate around them when they're not being handled appropriately.
Now, let's look at the fun part of it, though. What happens when we are getting the money right? Imagine how good we can be, how effective we can be in our business. If we're no longer worried about the money part of it. And trust me, the business we know the business is stressful enough. There's a lot that's going on. But if we can remove the financial stress of the business, how much more effective can we be at our lead gen, at our creative marketing, at our listing presentations, at our client follow up, at our systems development, and on and on and on. How creative can we be when we're running a team meeting for our team or we're hiring new people or we're looking at new opportunities? How much brainpower do we have for that? If the money side of the business is working beautifully. So one of the big, big benefits of getting the money right, is we get to operate at our very best in the areas that bring us the greatest returns and think of the opportunities will be able to take advantage of when we're getting the money right.
[OUTRO MUSIC FADES IN]
Joe Rodriguez:
All right. That's a wrap on our introductory episode of Get the Money Right. Join us next week as Todd takes a look at some of the most common myths surrounding business financials. Be sure to subscribe on your podcast platform of choice and leave a five-star review. If you're a real estate agent who is getting their money right and want to be a guest on the show, please submit all inquiries to getthemoneyright.podcast@gmail.com. You can find us through social media on our Instagram page or our LinkedIn group. Just search Get The Money Right and look for the show artwork. You can also find direct links to everything mentioned here in the description of this episode or on our website, GetTheMoneyRight.com. Thank you for listening, and have a great day!
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Get the Money Right: Episode 1 - END
In this introductory episode, Todd Butzer challenges you to take an assessment of your businesses financials and outlines the challenges that messy financials can bring to your business.
Business Financial Assessment Questions:
(02:52) What is your business entity?
(03:30) Do you track your income and expenses?
(3:51) Do you have a bookkeeper to help you track expenses?
(04:32) Do you maintain separate accounts for your business revenue and expenses?
(04:45) Do you review your finances monthly?
(05:16) How would you rate the overall accuracy of your financial record keeping?
(05:31) Do you operate from a budget?
(6:02) Are you current with your taxes?
(7:23) Are you taking advantage of every possible legal deduction that you can to offset your tax liability?
(7:59) Do you have 3-6 months of CASH reserves?
(8:45) Does your business have short/long term debt? Do YOU have personal debt?
(9:32) Do you pay yourself regularly?
(9:52) Are you taking advantage of self-employment retirement plans?
(10:23) On a scale from 1-10, how would you rate the overall condition of your business finances?
Next week, Todd will take a look at some of the most common myths around money financials. Subscribe to stay tuned for more real-time financial strategies that will improve your business!
If you are an agent that is getting their money right and would like to be featured on the show, please email getthemoneyright.podcast@gmail.com
Credits:
Hosted by: Todd Butzer
Produced by: Joe Rodriguez