Our business of buying houses has never been easier and more automated than it is today. The bank REOs are delivered to us daily in our in-boxes with all the info needed to make an offer, including photos.
The FSBOs are also sent to our in-box to Gold Club Members and our VAs find and call the ones advertising only. Add a couple other things to the mix like yellow letters or our FSBO field agent program taught at Quick Start School and one can be quickly flooded with more leads than can be followed up properly. Getting leads is no longer the problem. Actually it never was but it surely used to cost a lot more. The real issue is…
The entrepreneur’s ignorance of,
and never ending quest to,
ignore the math.
Because of this ignorance some quit too soon and blame their failures on whatever gossip or misguided assumption is readily available.
Here’s a list I hear the most…
- There aren’t any bank owned deals left. The competition is paying too much.
- There aren’t any pretty houses deals because the market is hot and sellers don’t need terms.
- All the sellers I called said no to terms.
Before I get into these, let me explain what I mean by “math ignorance.” I’m always annoyed when talking to entrepreneurs of all kinds, just how little they know about how important simple math is to business and why all businesses are nothing more than simple math. The income must be larger than the outgo. That’s it. Doesn’t matter much what the product of source is as long as the math works.
That macro math must then be broken down into micro math.
- How much does it cost to get a new customer?
- What is that customer worth in the just 30 days, one year and life.
- How do I get the new customer to spend more per transaction and buy more after?
My friend, I’ve just described the only way to grow a business internally.
Get More. More per transaction. More after.
If the owner of a business doesn’t focus on the math and understand its importance, there’s a fool running the business. Watch the Shark Tank and the Profit and you’ll see the first questions are always the math. If we can’t get past the math, the rest doesn’t matter. When my PPG (Prosperity Partners Group) send me projects they don’t send more than one before quickly realizing I’ll respond by saying…
“Send me the math first.”
In my new restaurant, Iggy’s Seafood Shack, I’ve made it real clear to my manager my focus is on the math. Those numbers I watch closely are the revenue, labor cost and food cost.
For 4 months they were too high and still are but in the fifth month we finally turned a profit and the reason is 100% by controlling these three numbers.
Now every day I can go on our app and in real time see what the numbers are and instantly recognize anomalies. The math is always available. I know how well every coupon works and if it produces more than it costs. I know how much the average ticket is and can instantly see if anything we do like offering a desert platter will raise that average.
At Global Publishing the heartbeat of the entire operation is constant reports (math) of every portion of our business. We can use our past math to predict future results. Without this knowledge, millions would be wasted on stupid mistakes and we’d likely go out of business, as most of our competitors have over the years and many of our current competitors will in the coming years.
It’s true, REOs cost more than a couple years ago. It’s also true we have to work more offers and work harder as times get better.
Two years ago I was getting about 1 out of 12 REO offers accepted. Today it’s about 1 out of 20. Before I was spending about 1 ½ hours a week on Listingbook.com to get one. Today it’s about 2 ½ hours. If I buy one in the recent past or today, it must net $35-$50K if I renovate it or I won’t buy it.
So back then I was making about $23,000 for each hour spent on my Ipad making offers. Today its only $14,000 an hour. Life really sucks man!
A year or so ago we were getting about 35% of FSBOs to say yes to terms and about 1 deal from every batch of 10 yeses. Each deal was worth $15-$25K in front end money. Money only from deposits or down payments and collected within 30 days. Today it takes about 15 yes leads to get one deal I’m willing to take and we still get about 35% of the total leads to say yes. So, that means we need about 50% more yes leads to get a deal, or 15 yes leads.
But here’s the simple math…
Then I needed 10 per deal,
Now I need 15 per deal.
Who gives a rat’s ass?
Pay a few more VA dollars and you have 5 more leads…
But that’s not how most people think. Those who’ve never run a business think like employees, who’ve never been responsible for the important math… like staying in business.
This mindset breeds impatience and causes some to quit before they give the business a fair chance. It takes time and patience to learn your math and fix what’s broken.
It took me 4 months in my new restaurant. I closed the last two which is why I could fix this one so fast. I know now, didn’t then. That was a seven figure seminar.
If you’re getting real estate deals done you have a math problem. If your buying junkers there can only be a few reasons…
- Not making enough offers
- Making offers too low
- Doing something wrong in the offer process
- Targeting the wrong prospects
I had to almost double my offers but changed nothing else. If I were willing to pay more I could get twice as many accepted. I’m not, I’d rather make more offers.
In this pretty house business, we just call more sellers. Some quit often getting a few nos. They lose and will continue to lose at every business endeavor they do unless they develop this grit to stick to the plan. There is no business without road blocks. Plowing them down is what makes successful people successful. It’s the fun of the game. It creates grit and alligator skin which quitters will never get.
You will never run out of FSBOs
who will say yes to terms
or all cash deals
you can buy at deeply discounted prices…
regardless of where you live.
You may have to work harder, call more sellers, make more offers, get better at communicating and do a few things you’ve never done before… but you can always make money in real estate… until you decide to quit.
If you do, you’ll have the same or similar challenges in your next business until you learn to fix what’s broken. You’ll always be slaving for others on their terms helping fix the same problems you choose not to face… and getting paid poorly for your efforts.
If you wanna quit, you’ll have plenty of company. If you wanna stay you’ll have less company but more money and confidence. Seems like an easy choice to me.