Brett Tanner and Katelyn Mitchell walk through the numbers behind every business: net profit margin, expense ratio, cost of goods, and the flash report Brett checks every Monday. The real example: a $10,000 commission check splits into 30% profit, 30% expenses, and 40% paid to whoever closes the deal, and a bad split can mean an agent loses money on every deal no matter the volume.
Brett TannerHost, founder of Be Wealthy
Katelyn MitchellCo-host, runs operations for BrettDivide net income by total revenue. Brett targets 30% for a team with staff, 40% to 50% or higher if you're solo, and says pure referral agents can run as high as 75% because they spend almost nothing to get a customer.
Jump to 12:24Brett uses a 10 slice pizza to explain a $10,000 commission check: 30% profit, 30% operating expenses, and 40% cost of goods sold, which is what you actually pay the person or partner who closes the deal.
Jump to 24:50Pay agents 60% to 70% with a 30% expense ratio and you lose money on every deal. Brett's worst case is a 60% expense ratio plus a 50% agent split, which adds up to 11 slices of a 10 slice pizza. He says you can't make up a loss on each deal with more volume.
Jump to 27:58In Brett's investment company, the target cost to acquire a customer is about 20% of revenue, roughly $3,500 against a $17,500 average wholesale fee, and he works to push that closer to $2,800 before increasing budgets. Real estate agents run closer to 12%.
Jump to 1:08:33Brett walks through a $10,000 commission that turns into a $15,000 resale ten years later plus a referral to buy another home, landing around $40,000 in total lifetime value from one client relationship.
Jump to 1:11:41Brett's weekly flash report sticks to under 20 numbers so he can scan it in about 30 seconds and know exactly where a problem or opportunity is, even while running six or seven businesses at once.
Jump to 1:04:22Brett says he grew his business for years on pure hustle and enthusiasm with no manual and no repeatable process. The lesson that changed everything was realizing hustle doesn't scale the way a tracked, repeatable system does.
Jump to 1:01:13I believe that every single problem in life is a math problem.Brett Tanner · at 8:16
Brett's pizza-slice breakdown of a $10,000 commission check, as he walked through it on the episode.
| Category | Target share | What it covers |
|---|---|---|
| Net profit margin | 30% for a team, 40% to 50% or more solo | What's left over after everything else is paid |
| Expense ratio | 30% | Payroll, lead generation, marketing, rent and software, everything that comes out before commissions are paid |
| Cost of goods sold | 40% | What you pay the agent or referral partner who actually closes the deal |
Tap any chapter and the video starts right there.
“The secret to business is managing the expenses on the revenue you already have.”
Katelyn Mitchell at 27:58This is the same income-to-assets math behind the margin and acquisition cost numbers Brett and Katelyn walk through here.
Brett says to divide net income by total revenue. He targets 30% for a team with staff, 40% to 50% or higher if you're solo, and says a pure referral based solo agent can sometimes run as high as 75%.
Brett explains that expenses cover your operating overhead, payroll, marketing, rent and software. Cost of goods sold is the separate 40% slice that goes to whoever actually closes the deal, like a commissioned agent or referral partner, and people confuse the two constantly.
Brett targets about 20% of revenue in his investment company, roughly $3,500 against a $17,500 average wholesale fee, and works to push that number down to around $2,800 before scaling up budgets. Real estate agents typically run closer to 12%.
Brett gives an example of a $10,000 first commission that turns into a $15,000 resale ten years later plus a referral to buy another home, adding up to around $40,000 in total value from one relationship, which lowers your effective acquisition cost.
Brett and Katelyn sort leads into hot, nurture and watch buckets based on how soon they'll transact. A hot lead expected to transact within 90 days gets a phone call every week with notes logged in the CRM, while leads 6 to 12 months out get a monthly call.
0:00The goal, Katelyn, is not to just know what happened. It's actually to predict what's going to happen.
People are lazy. I have been in the past.
They don't track all of it and they don't look at all of it and they throw all the mud against the wall and say that they're following the same models of some of their CEOs out there that they might idolize.
Katelyn, I can't tell you if you want to get different results. You got to start with the math. And I believe that every single problem in life is a math problem. I want to look at the lead indicator and the lag indicator and this meeting will occur until the problem is solved. Once problem solved, we can believe the meeting because I believe that time spent on the right thing matters. Welcome back to the Be Wealthy Podcast. I'm Brett Tanner joined by Katelyn Mitchell, my co-pilot who just about to spil her drink. It was incredible. And we were just talking about really cool. If you could get a shot of this, I think it's important that I want to show the technical nature. We go on the East Coast. Is that a Chick-fil-A box or a Domino's pizza box that we use on the side of the camera? That's so light doesn't I mean
only the best here wealthy
sky's is the limit but keep it under 50.
1:02And today we're going to cover data and numbers in your business knowing that that pizza box costs 15 cents the portion that we're using. But you got to know that that's 15 cents Katelyn. So the first question I have for you Katelyn is what in the hell do you measure in your business? It sounds like there's tens of thousands of numbers in your business. And if I'm listening to this or watching it and I'm like, Katelyn, I've got a business and I have no idea what I'm doing. I've got more money in my checking account at the end of the month than I had at the start of the month. So
that's a good feeling.
Who doesn't love more money?
But actually, we could be losing money and that could still be true. Those two things could be very, very true.
That's terrifying.
And when I first started my business, I used that model. Whoa, more money at the end of the month. We're doing great. And I was my in business was based on enthusiasm. I did a lot of gut feel. I don't know if you're familiar with that, Kaline. Yes. No. I believe
No, no, no, no, no. I know that you've got math and data, but let me tell you, my I got a little tickle in my tummy that says no can do.
2:04
My business is different.
That doesn't work in my market. It in my It's really hard in my business. And so, I just had all these emotional things that I'd made up.
And I didn't have a manual. I didn't know, Katelyn, that when I did these activities to a certain degree with this conversion ratio that this result would happen and these dollars would it be in my account?
Yes.
I did not view business as a repeatable process that led to the results that I wanted that funded my dream life. Instead, to me, it was some random set of circumstance based on luck, how angry I was. A lot of the things that I had would be like it would feel like it was just happening almost by osmosis and I would get some results based on me just running and working really hard and trying to create a lot of horsepower and energy and a lot of loud noises and this was my about 20 years ago this was my business plan. I would just that would I would described all of it there. I wanted to hit all the corners like lot of enthusiasm meets you know just loud voices
and I would tell everyone how the thing
3:06I was working was going to be really great
and I think we hear that a lot and I read a book and I would say the fundamental book that changed my thought process was the four disciplines of execution by CVY
and so if you're if you're listening this a lot of what we're going to talk about is his concept in the book of lead and lag indicators
Stephen CVY right
uh I was it Steven Cvy or Cole, will you check that or is it Shawn? I want to go Shawn.
Should we?
I want to go Sean. Well, let's bet a dollar. I'm gonna go Sean. Sean CVY. Four disciplines of execution.
I think it's a Ph. Steven.
Yep.
The point was that is a dollar. Everyone, I want to tell you right now that is two Bise dollars. One American. I will choose to accept the payment in Bise. So, Katelyn, first rule of gambling. I never gamble unless I know I'm going to win. And so, just like on the golf course,
I knew I was going to win.
Just like these KPIs, I was running with enthusiasm, not fact.
You Katelyn right there was playing exactly like I used to, just wide
4:08
enthusiasm, wide sweeping, run like the Kool-Aid Man through the wall. Boom. Lost a dollar.
Steven CVY wrote entirely different set of books that had nothing to do with that subject matter, but not him. It was a maybe a distant relative, Sean. We can look that up later. But lead verse lagging indicators. And so, we all want in our business, we want closings. We want commission checks.
We want cash in the bank.
Yep.
We all want more of those things. But if you wake up and you're like, gosh, I want a closing today. And you're a real estate agent, it's not going to happen today, Katelyn, because we there's things that need to happen before it.
Correct.
And so those are lag indicators. Lag indicators are the ultimate objective we're trying to get to. Lead indicators are all the things that we've got to do before we get to the lag indicator. So leads are like can be hours that we put in the office or there could be hours at an open house. Could be calls. It could be contacts. give you these early things that show us there's some ratio between this effort from where we are and where we want to be. And so at Beealthy, we really talk about three time frames we think about numbers, right? If we're starting out, we're not measuring anything in our business, Katelyn. The easiest way to think about it, we got three different time frames we're going
5:09to look at.
Sure. Much like the Back to the Future trilogy.
Much like the Back to the Future trilogy. And so the first thing we're do is we go back to we're to black.
Yeah. We're go all the way back to the 50s, right?
We're gonna go back to the past and we can look back. And when you look at the past, these are facts. These are things that are known. We can find them. We can learn from them. And it's really valuable things that happened in our past. Think of this like your your P&L,
okay,
in your business, your balance sheet. These are snapshots in time of things that occurred in the past. We can look at the
dollars in your bank account on a specific day.
That is a, you know, that is a very real
ultimate past.
The ultimate past. Then we're going to look at things in the present, you know, so what's going on our active sales pipeline. How do we look at how many deals we have pending? You know, how many deals are in escrow? How many listings take? There's things that we look at like, hey, in the current moment, where do we think we're going, right? Are we going sideways? Is the business on a little bit of an uptick or is it kind of going down? We get a feel for that in the present moment. In the last time frame, right, Katelyn, we're trying to look into the future. So now we went
6:11and and backed. We went to the future, but now we're going to blast in the future. And we want to know like what does our business look like 90 days from now?
This would be a classic time to insert like a Biff owned the casino joke.
I mean, listen, how many g how many what is it? Gigawatts, I believe, is the unit of power measurement in the show. I don't want to get into that. I don't want to get too nerdy with you, Cole. Cole's mind.
Cole's Cole doesn't even know what we're talking about.
I say Cole's never even heard of that movie until moments ago. So, the goal, Katelyn, is not to just know what happened. It's actually to predict what's going to happen. And I'm gonna tell that through a story one of my private clients had.
Okay.
And so he gets there, he goes, "Brett, we had a terrible month last month."
And so I looked around, I said, "Hey, um, when did you realize that?" And he goes, "Well, about two hours ago when I got the P&L." Like, "So hold on. So not only recently, like 45 days ago, you had a bad month and prior to getting this document that told you that you lost money. It was you you were just having a
7:14great day and then bam, out of nowhere, I'm like, well, do you know when you could have known that? Well, number one, you absolutely know on the first of the month in the real estate business if you're going to have a good or bad month before the month starts.
Yeah, you don't need a crystal ball. You need KPIs.
You you need an Excel sheet and simple addition and subtraction and you can nail this thing. And so the idea is that we can definitely see in this business the next 30 to 60 days and know where we're going to be. And we should know if our business is beating the market, we're doing or average at the market or the market's outperforming us as a good measurement tool.
And everyone listening this, their goal should be to outperform perform whatever market that they're in.
Sure.
And so we're going to go through those three time frames and tell you what you should look at. So if you're tracking nothing, we're going to break this down and you should leave this show and you got to track this stuff. And if you do not know these numbers and you don't even know what they mean, which is where I started, by the end of the show, you're going to know what to do. And Katelyn, I can't tell you if you want to get different results, you got to start with the math. And I believe that every
8:16single problem in life is a math problem. It's the it's the fundamental language of business. And so the relationship at home with your spouse is a math problem. Cole Cole's uh got a girlfriend and which I'm sure she's going to love if she's talking on the show. and he's got a girlfriend and his relationship with her is a math problem. And it's going to be quality of time spent over week would be the would be the how we would label it. And the one-on-one time, phone down, eyeball to eyeball experiencing moments together over the week over time will determine the quality of that relationship. If you don't believe that's true, Cole, I want you to try it. Try doing 90% less of that number for a couple weeks and then trying to do 90% more of that number and you tell me if the plates spin lighter around the house in one of those two weeks. Right. So, it's all for all of us, right? Any uh Katelyn, you're in and my relationship at work
functions off the same thing.
Correct.
And it's quality time differently spent around the business initiative. Correct. Are you and I focused on the lead indicators, the lag indicators, and
9:17looking at what we're going to go through with everybody here, purposely spent on an initiative.
In our business, we have a problem.
The first thing I'm going to do is I'm going to go assign more time to it.
Yes,
Katelyn's very familiar. I want a weekly 30 minute update on this every week. I want to look at the lead indicator and the lag indicator, and this meeting will occur until the problem is solved. Once problem solved, we can delete the meeting because I believe that time spent on the right thing matters. So, let's start with the lag cable. Now, this is the past. It's what already happened. They're going to tell us the results from the lead indicators that we did, but we're looking back here.
So, I'll tell you this. A 100% of my clients, my private clients that I work with, I know yours it's going to be a similar number. A lot of them, I say 100% of them know their past indicators, their lag indicators. I think that our clients for the most part can come in and say to us, "Here's what and we're about to get into what they are. here are our lag indicators or at least they can after the first few calls with us where they sorry you were going to disagree
I would you said all of them I think
10:19that's gener uh I would say people understand this concept fundamentally their ability to take it and execute upon it and make a business decision based on it I think less than 20% of the people I start with
100% because the lag indicator so what I mean by that is
they have this information though
if you Ask any a any real estate agent, they will be able to tell you how much a commission. Most of them can go 3% of any sales price and tell you that number off the top of their head. Correct.
I would say a 100% of them know their sales volume.
Perfect. So maybe that's the lag indicator that I sub 5% of them know their profit margin.
What I was going to tie together was they aren't able to make any business decisions only knowing that number. I know. I think I know what you're saying is they're they've got past data. They're using it to file a tax return.
Correct.
They are not using the past data as a hey, this month is up 30% year-over-year. I'm outpacing the targets.
Was that because of conversions, leads,
11:21all the things we're about to get into.
It's kind of they get a they get a P&L and they go, "Okay, it's one of those, okay, I got it." And then there's numbers and things and and it's just it's something that they it's again it's more to give to somebody else to go do something with as opposed of a tool. So first thing you need to know you get your P&L. You number one you should not be doing your P&L. Even if you're an accountant and you come into this from that perspective I don't believe you should be doing your financials. I believe your time is better spent analyzing the numbers and then making decisions based on the numbers. The first number you need to know your net income. You take the number of net income divided by the total revenue and that equals your profit margin. the dollars are cool. I actually care less. It's funny when I coach someone, I'm like, I don't really care the you made 400,000 this month or you made 35,000 as a relevant.
I need to know 32% or 4%. It's
all I want to know. And so that number, if you're a real estate practitioner, the target number, if you have a team, and we'll give it solo later, that target number is 30%. 30.
Okay,
so we make $1 in our business of profit. We want 30 cents. I'm sorry, we make a
12:24dollar of revenue. We want 30 cents of profit. Okay, that's an easy number. Just divide it. I would want to know what it was last year. If it was less than this amount, we need to work on it. We'll talk about how to fix this here in a minute. If you are solo, meaning you do not have a large organization, maybe it's just you, an executive assistant, maybe a VA, I think that margin is somewhere in the 40 to 50% range or higher. That's achievable. You know, there are some folks in this business, right, Ken? They have a a referral business, a very simple model, and they're selling 15 20 homes a year, and they might have a 75% profit. totally possible, right, to to do this. As the business grows at all, that's when these margins will apply, right? Soon as you start growing it to where we're spending dollars to get a customer, that's usually the transition. If we're just if we're we've built a great I'll give you an example of someone a former teacher that becomes a realtor. You know, again, we talk across the country on this. Those folks have a really good if they are a teacher for 30 years. They've got all these relationships from the kids. So, for them to just go, "Hey, I'm I'm in real estate now. you trust me with
13:26your kids, trust me with your housing purchase, it's a logical connection. That person could have a 75% profit margin bid, but that the minute they go to acquire someone that's out of their network, all these numbers apply. So, we've got to know net margin, right?
So, and it's no longer repeat or referral.
It's no longer repeat referral. Soon as we're marketing to strangers, these numbers kick in. So, the purpose of net margin, right? It shows actual profitability. It just shows you how you're doing. For me, Katelyn is where I look to go, what does my work produce in terms of raw output, right? I mean, it's just just being honest, right? The better you are, the the better the bigger these numbers are and the better the precision, the better the percentage compared to the greater market. It tells you your operational health of your business. Right? If my margin goes down and my margin is 15%, it used to be 25, right? Operationally, I'm not I'm not doing as well as I was before off the same dollars. So, costs have gone up. Profit hasn't improved. I could be in making investing marketing dollars in the business. Katelyn,
14:28
it's not yet working. So, then I would want to go to some of these other areas we're going to talk about. I'm going to want to go to the present and the future again because this is just measuring the past. Three questions you should be asking when you look at that number. Number one, are we actually profitable? Right? Are we are we and are we on track? Number two, are margins improving? What are margins doing? Margins are just that number, right? Total income, net income divided by total income. And is growth creating real wealth, right? As we're growing the business, in some businesses, right, margin gets better. In the real estate business, it actually is pretty much the same. As you grow it, your goal is just to hang on to the margin and have it not decline. If you need help in your business right now, you've got a challenge or an opportunity that you really want to hone in and capitalize on it and make a gamechanging breakthrough in your business, come out to our one-day workshop. This is something we've never done before. We're now doing them at the resorts we've bought. So, they could be at Apple Mountain, Georgia. They could be in Northern Arizona. Um, they might even be in Bise in the future. But, you get to come to a one day where there I'm not going to present slides. It's
15:31literally you and your business and you're going to leave with an action plan you can implement in your business. Go to bewealthypodcast.com and you can click on our upcoming events and see where we'll be and book to come. We have the room is limited. We have no more than 15 people in the room. Go to bewealthypodcast.com and you can book our one-day workshop coming up. So the second number we got to know as we're looking at the past expense ratio. So now this is our total expenses divided by our total revenue.
Okay,
just what of as a percentage, right? I'm think of this as a pizza. And I always think of this business. You know, we got 10 slices of pizza.
This is how for the listeners, this is how Brett has explained it to me for the past 11 years.
And you know what? Cuz first of all, Katelyn, you show me somebody that doesn't like pizza. I'm going to show you a liar.
Can I actually tell you something?
Yes.
Side note, you said a pizza with 10 slices. And if anyone's listening to this, they say, "Cool. Very simple concept, Brett. I tried, this was about four years ago, to create you a visual. Do you know how hard it is to make 10 equal slices out of a of a pie? It
16:34actually was incredibly difficult. I can do 12. I can do eight. Any multiple of four. But the 10, it was challenging for me. Arguably more challenging than having a good profit margin.
Well, see, it's Well, it's not easy to make just 10 perfect slices of pizza.
That's what we're saying. Animated or not,
but in this in this pizza, Katelyn, your expense ratios, it should be three slices of pizza. If each slice is 10%. This is three slices of your pizza. And all it is is your operational spending, you know, divided by revenue. And so examples of things in your expenses, okay? And this is all of the things after the money's taken out before you get your check, which is the last cost of goods sold. We'll talk about that in a minute. It's all the things you spend money on.
So this is your payroll, lead generation, marketing, rent, office overhead, CRM, software, all those things are expenses. We want to look at those big categories even better as a percentage. In other words, like instead of inside of the expense ratio, we want to know what percentage of our total revenue is payroll and for my industry, what should it be? Because you kind of want to have benchmarks and trends, right? So, I want to know does the
17:36average real estate team have a 12% staff payroll ratio at 8%.
I'd want to know that, right? Based on my
in your industry, you can't just watch Shark Tank and say they make they sell ice cream scoops. a SAS business is going to be radically different than a real estate business. And then even in your industry, you've got to look at,
but what's the model? How's my model different than your model?
And I think the mistake people make when they look at this, Katelyn, is they assume, well, you're doing it this way, so I should just What are your splits? I'm going to do it that way. Whoa, you have no idea what my expenses are. What if I'm running some ludicrous business that makes no money? You adopt my splits. Well, congratulations. Now you make no money.
I was just talking to a client of mine about it. He said, you know, hey, I was working with someone. We came up with I'm going to be bringing two people into my business and here's what my slits are going to look like. And I went, whoa, whoa, whoa. We haven't even Let's get your P&L together. What are your actual expenses?
How did you know to create these with
it's just the average of what's happening in my brokerage?
So, if you're watching this or listening
18:38this and you've created splits and you do not understand your P&L, how would you have possibly known how you could compensate your people when you don't know what your ratios are? In other words, you guessed and you made it all up. How can you compensate them and still ensure the profitability of your business such that you stay in business? Because the number one reason to be in business is
to make money.
What
I know it's a bad I know it's I know it's crazy but the the purpose of business is profit.
Yeah.
So the purpose here of the expense ratios identify operational leakage,
right? Where are we inefficient?
It might be that we have all of the and in business is the hardest part. You have to do the the most revenue with the least amount of expense,
right?
It's not the most revenue with the most expense. Even though a lot of businesses try to do that, try to make no money, right? You're like, if I'm not trying to make money, it's like, man, you could really pay a lot in marketing if you don't want to make any money. But you also don't stay in business. You want to compare operational efficiency and then you want to benchmark a spending against production. So, as we go invest into certain things, are we realizing the
19:40investment? Is it come back in net margin? So questions to ask here, Katelyn.
What expenses are growing fastest? Where are we spending more? You know, in our P&Ls, in our businesses, we always want to look at where can where is marketing outperforming? If that's growing, but is it hitting the bottom line? Are we making money with it?
Bottom line is just net profit. That's the thing you're playing for. What gets to the bottom line? Is the team scaling profitably? Everyone pay attention. Queue up. Drop your if you're right do now doing squats Cole and your spotter I want you to just rack that thing pull out your phone and leave us a review because if right now this is the thing goblet squad
and I'm going to tell you I'm going to tell you right now if you want a personal best tomorrow leave us a review and watch if tomorrow if you're not shot out of a cannon just with the goodness of life and and culture and just goodwill you put that on the universe Katelyn it's going to come back
activity breeds activity Brett everybody knows knows it read a book as you say
is learn a book but leave a review and
20:43have that personal best tomorrow and so now we want to know is the team scaling profitably because Katelyn if the model is flawed the myth I hear I take on a private client they go no no I'm I'm selling 200 homes right now Brett and I'm not making any money but you don't get it and when I sell a thousand skies part clouds are clear my ship's coming in and I'm like but you have a 2% % profit margin currently. So when you grow this thing 5x, which of these expenses do not grow 5x? And they go, well, I don't think you understand my CRM. I'm like, okay, but you probably have some seats or different technique of lead genen expense, all that's there, right? Like rent. If you 5x your volume,
that becomes a variable expense.
You're probably 5xing your headcount most likely. So then we need
maybe five times the space. So almost everything in the real estate business doesn't have we don't have economies of scale and a business with economies of
21:45scale Katelyn would be like if we have a paver factory and we're running one shift a day the equipment's there
but a lot of it's equipment building it's all I mean a lot of our expenses in infrastructure
we start running a second shift
same machine same building
so we got payroll that might increase
we got payroll but we had a lot of economies of scale And if we buy more PA equipment in greater bulk, we can drive that cost down. So the more pavers we're making, we actually improve margin as it grows.
So there's different businesses where that's different.
How does it work in ours in our real estate business?
In the real estate business, the the economies of scale, you get repeat and referral can grow. So that's cool, right? Like you could get more resources you can put into them and and the bigger the book, like there's some spin-off. There's things that happen. you know, you've got your marketing, your MSAs are cool. Those those you hit it there. There are areas that it plays, but in the core business, it it's minimal, right? What you've got is what you've got. And so, we've got to make sure that
22:48if it doesn't work at 15, I will tell you this. I've never seen somebody who wasn't making a lot of money at 200 units that made money when they grew. So, if you're watching this and and the number one problem is where we're going next is going to be in your cost of goods sold. If your expenses are more than three slices of pizza, 30%, you got to fight them down. Perfect.
Okay. You're not going to see it's not going to be 20 or 25 if you're running a team. You're probably, if you've never even looked at this, you're probably 35 to 40%. And you've got to go figure out what you cut out. The challenge we have, Katelyn, is you can add a million things to your business. And you've got to figure out what do you cut and still get the same number.
You know, Gary taught it to me this way. Brett, the secret to business is managing the expenses on the revenue you already have. That's it. What does everyone want to do? They want to manage the expenses on the revenue they think they're going to make.
You know, they want to field of dream it a little. Katelyn
Cole, that's also another older movie. Kevin Cosner
Cole, it's Field of Dreams. It's really the idea that many people use in real estate where if you build it, they will come.
23:48
Baseball.
No,
Cole's a huge sports nut. He just learned a fish yesterday.
This works for you.
Let's not go too far. We just learned a fish yesterday and we're building off that. So then you want to look are your lead costs rising faster than revenue. So everything about expenses, right? How do our expenses play in our business? It's a huge and you've got to be a hawk about this. So the activity would be every month you're running through every single expense line by line. It's how we do it in our companies. Line by line looking at can I can I somehow reduce the cost? Can I get rid of it and use a less expensive tool? If I have to have it, I mean I'm keeping it, but is there can I prepay at a discount? I've got to be cutting out anything I'm not using. and it's not missionritical to grow the business.
So your first thing was let's get a P&L, right? If we don't have a P&L that we're looking at monthly, we're not even in the game. Then the first thing was guys, right there at the bottom there's net profit and we're going to go ahead and figure out our net profit margin. Then we were just going up literally one tick. It's now we're in the middle of the P&L. They're all built the same, right? The middle of the P&L is going to
24:50be our expenses. And you're saying, "What are your expense ratios?" and go ahead and do that math. Red light, green light. Am I on track or off track? If I'm off track, let's start cutting expenses, seeing what makes sense. Where do we go from here?
So, now we've got to go to cost of goods sold, Katelyn. The way I think about it, the third thing I I just think about what comes out of your check before you can start spending money on the expenses we just talked about.
So, people are super confused by this. I talk to people all the time and they're like, I they lump COGS or cost of goods sold in with their expenses and you're the best person at explaining this. How and why are they different and why should we look at them differently?
So, Katelyn, let's assume we have $10,000 that comes in as a commission.
So, most likely the most agents to hit our number, right? This number needs to equal 40%. And this is where people get super lost, but let's let's break it down. So, if we've got a if we've got a $100,000 that come into our business, we know that we want to make 30%. Three slices of pizza and that's our profit
25:53margin.
Then we know that our expenses are 30% which are also three slices of pizza. And so if you take 10 slices of pizza and you subtract three and three, you're left with four, which is COGS. So that is what you pay your people. So $10,000 comes in
what you pay commissioned people or referral splits. That's the difference I think most people miss. They hear what you pay your people and they think it's payroll and it's in their expenses and they get confused.
Great point. This is an agent on your team working on a commission basis.
Got it.
You should also though if you're solo you should run your business where you pay yourself again 40%. Which is what you would pay someone else. So, if someone else, so if you're the lead listing specialist on your team and you currently are taking in commissions and you're not paying yourself out, you're saying you need your bookkeeper and yourself to pay yourself out as cost of goods sold so that you reflect the right COGS ratio and the right net profit.
And if you do it that way, Katelyn, when
26:56you hire a agent onto your team at the same 40%, you know that your math works. Ah,
some people run a business where they put a they work for free and so they put a 100% of the money back in there. They've got an expense ratio that's 50% or 60 and they still make a little bit of money. But the minute you add you got a 60% expense ratio and you put a 50% that you pay your agent and see now you've got 11 slices of pizza. Cole,
you say this.
And here's the problem with pizza, Katelyn. You you you see when in the P&L pizza world, you can never get more than 100%. That's the pain. That's the problem. You can't. You'd love to have 20 slices of pizza.
You've only You're confined
to the tent. Yeah. You can get a personalized pizza. You can get as big a piece as Do you know what's so funny when you explain this to me? You know how like for your dad you make the nutty professor accent? Like certain people do certain things and there's something that goes through your mind. You know like Little Caesar's pizza and he goes like pizza, right? Yeah.
I literally see in my mind like a little factory in your business. So he's like pizza. Right. You make the pizza. The
27:58pizza comes in. It's 10 pieces of pizza. Then he like runs through the factory and he's like, "Oh my goodness, there's a couple of agents and they need some pizza. They're hungry. They get some work. They get some little pizza places. And then you run to the next place, right?" And you're in the you're in the business. You're running. And then it's like, "Oh my goodness, we have to pay rent. We have to pay our expenses. We have to pay our electric and utilities." And then you get to the very end and the only way you win in the pizza pizza game is if you still have three pieces at the end of the factory.
That's it.
That's literally my brain. I hear like pizza pizza every time you do it and I'm like oh he's got to run through.
And so this is all the stuff that comes out. This includes your brokerage fees too. It includes everything that comes out of there. And so we've got to think about so if you're paying your folks 60% 70%. And your expenses are 30. I I get really confused and I do this funny joke with a new client and I go, "Well, hold on. Looks like you lost 5% on every deal you're doing on your agent. I mean, is it secret that we make it up in volume? That's a hilarious finance business joke because Katelyn, if you're losing money, you don't make it up in volume.
29:00
Of course not.
And so we've got to under the purpose of this is got to understand your true profitability. We got to protect margin. It's just what we can pay our people. We've got to know. We've got to know this.
Can I ask a hot topic take?
A hot topic take.
I don't know. What do the kids call? What am I supposed to call this segment? The kids call it a hot take.
They call it a hot take when they're in a flow state.
This is a topic take.
This is going to be the first ever be wealthy hot topic take.
Hot topic take by Katelyn.
This is called an HTT.
This is our Katelyn, will you fire away with our This is our our H. We had our first spew earlier today with a joke I did
with Katelyn.
And this is our This is an HTT with Katelyn. Katelyn, give us the HTT moment.
Our brought to you by Caesar Little Caesars. by Little Caesars and our unofficial sponsor, Vori. Katelyn, today's HTT moment is
I talk to a lot of clients when we go out on the road. I'm trying to ask a very serious question who are
30:03out on the road and they have lead sources where they are paying in a way that doesn't make sense and they know they're losing money on specific lead sources.
Does this sound like Schmiller?
It sounds a lot like Schmiller. That's exactly right.
It's a lead source that does home valuations. Sounds like
they're passionate about the color blue.
Okay.
Sounds like. And so they have a a business. They have a large team. They have a business and they're producing all of these leads from
And those are coming into the business. They know they don't make money on.
Yeah.
In fact, they tell the the team they're at a lower split even on. And they're still not making money. But then on the agents so SOI, they make it all up.
Maybe. Yeah. You hope that they've structured it that way, but sometimes they they're giving them it.
Why do you when you look at something like a schmillow opportunity? When you look at that math, why does that not work for you? What makes you nervous about that?
You know, again, I'm a I'm a pizza fan and
pizza. Pizza.
31:04
I really like pizza. What I found it challenging to do is when you take your 10 slices of pizza and you rip four and a half slices or four right off the top and then I'm left with six slices of pizza and then I start my new game of pizza because now what they do in the game typically that's going to come off first. So now we have a much smaller pizza.
So before we even get to the cog section,
so before we even get there, now we have a smaller. So, we have six. We only have a total of six slices, but we're going to cut it into 10 again.
They took our 18-inch pizza, they made it a personal pan.
So, now we're going to start with the same thing where we go pay our people 40 and our expenses are 30. And so, the problem I have is number one, none of the agents actually make money.
So, the agent's on your team,
the agents on the team because it's a 40% reduction off what they would have made. And so, the reality is the volume has to increase so dramatically for them to make money. And when they see the delta between the check that they get and the actual gross commission check, the human brain cannot stand that number for that long. And so eventually the
32:07path for them will be to join your team and leave you.
And and that's what occurs. And and so the thing that they're saying is they use Zillow as a recruiting tool, but yet it's
and I mean it's
it would never be Zillow. They're used as a recruiting tool, but yet they recruit their people to a business
that isn't viable on the economic basis only to leave them to go somewhere else and take their SOI and so they're kind constantly doing that.
So when you have a huge payment that comes off the top, it just it's hard to make money. Can you do it? Is it possible? We could debate it. But again, it's just an economic it's just a math question. If that number works for you then you
which is what we're talking about
there could be markets in the country but if you don't know your math and how it's impacting it and your actual revenue transaction on profit per transaction I think it's a real problem and so there's three questions you should ask under your cogs
okay
what does it actually cost us to close a deal
what does it cost us to close a deal are acquisitions costs rising so if you've got a split that's different on their sphere of influence than on their rest
33:09of their business what if all of a sudden your lead conversions way down on the company leads but way up on the other side like and they're getting 70% on everything. You actually if the agent became exponentially more successful, could you go out of business? It's crazy to think about. You close enough nonprofitable transactions, you go you go out of business.
We've talked about that before.
I mean, you will see people that built a model where like if their agents 3x the production, the whole business would just go out. And
you said the worst thing that could possibly happen is that their business grows, they will be out of business in no I make the joke if you become successful enough, you'll actually shut yourself down
out of success.
I don't get to joke. We've seen it time and time again.
And yet, if you don't know, so then our margins shrinking. So, we've got to everyone needs to leave this episode and number one, you got to get a pen. It's got to be done by someone else. You need to spend your time analyzing those three things. Net margin, expense ratio, and if they're wrong, fix it. And there's an easy way to do that.
Those are past. Those are things that have already happened that we cannot change that have happened already, but we can change them for our future.
All we all we can do is analyze them,
34:11see if we like them, and we can make changes that would impact the future.
Perfect.
It's been said that the breakthrough in your life is going to come from a person, an idea, maybe a strategy. And I believe that every person's one breakthrough from just changing their entire life. I want you to come spend one day with me in my office with no more than 15 business owners. Bring your biggest challenge, your biggest opportunity, and let's solve that so you get what you want and you don't end up with the career that doesn't land where you want at the end. Go to bew wealthypodcast.com. Part two, we're going to go to the present. Katelyn, what's happening
right now?
Right now, you need to know all of these things in your business. So, these are KPIs, key performance indicators, numbers that we're going to look at that provide us visibility into what's happening right now. We want to look at our team's activity, our sales activity, our pipeline strength, our operational bottlenecks. We're just looking at, hey, how's the health of the business today?
This is in our businesses my favorite place to play. Yours is coming up, but this is my favorite place to play.
And so what we call this in our world, Katelyn, just act active sales pipeline
35:13management. How are we managing what we've got? How many active buyer clients do we have if we're in the real estate residential world? Sure.
How many active seller clients? You know, if you're playing both games and you're in the investment business, what about investor leads? You know, we're looking at deals under contract, pending transactions, how many buyer consults have we been on? How many listing appointments we've been on? How many follow-ups are overdue? Like how many people we said we're going to follow up in the CRM? We haven't. You want to know the total dollar value of your pipeline. We got to know those things. on our KPI reports that we look at Brett in this area the sales pipeline management there is one number in what you just looked at that you or you just said that is your hop off the page most important one for present indicators
I want to know the pending the pending commission
income come on I was going to say let's say at the same time
I want to know the pending commission income because I want to know what it was last week and the week before that and the week before and I'm looking at trend lines
correct
and all I know is if every week overw week my pending commission income if
36:16it's growing what it tells me is that my future will be better than my past.
Y
if my pending commission income is going down it tells you my future is worse than my past. If it's the same it tells me it's equal. So it really tells me I mean if I if that number's heaving because it should be hey I sell one I put a new one in. We're at the same
totally.
But if I sell two and close one I went up. And so we've got to understand that ratio for MA and every business we have. You know, I'm looking at, you know, it's more complicated than we'll get into today, but I'm looking at the cash conversion cycle. And so I want to know that pending. How quickly do we convert pendings to cash? And it tells me where I'm at in my business.
Even at our resorts, right? If we know like the resort up in Pinetop, we know what our rental income is going to be next month. Is it more or less than what it is this month, right? Are we going in the right direction or the wrong direction? It is the pivot stone, the capstone that you can take activity on today.
You've got to know ultimately where we're going. Katelyn, you led us in there perfectly, which is conversion ratios. So the present in our present
37:19world of our business and if we believe that every business decision, every business problem is a math problem. Katelyn, we all we need to know is how many leads do I need to get to get an appointment set?
So I've got leads that are going to come in. We're going to contact them. Leads go to appointment set. Certain amount of those people set an appointment. Then I'm going to have how many po people do I set an appointment with? Can I actually go on the appointment
to turn the leads into people?
We got to turn the leads into people first. That's a part of the process. We got leads to appointments set, appointments set to appointments held, appointments held to listings signed, listing signed to closings, right? Or and whatever. And it would apply in every business. And Katelyn, I've got this graph that I do. We start a new business and like lead comes in and here's all the ratios that I want to track when we lay it out. And it's just every really major milestone that marches down the world down the road to closings.
Yeah. Sure.
And so it's very very simple. If you take a real estate investment business, I've got leads again, appointments set, appointments held, offer made, contract signed, deals closed, right? But if I
38:22knew the ratio there, so let's say Katelyn, I've got all these leads coming in, and I'm not setting any appointments. I'm not setting any. I'm out there. I'm like, I've got all these leads. You know, I say the leads are weak. You say, "No, you're weak. Just kidding. That's Glen Gary Glenn Ross. So, which is soon enough if you could pick up one.
Coffee for closer.
Coffees for closer. Put the coffee down.
One more. Colt is three on movies you've never seen.
And your name is You're wanting any other watch. If you haven't watched Glen, Glen Ross, go we'll put a link in the show notes to the exact scene. And I'm doing that specifically, Cole. So, you get to watch that. But, so we've got to know like Katelyn, if our if we're talking to all these leads and no one's setting an appointment, something we are saying on the phone sucks, our script sucks.
Correct. Maybe we're just saying something random and maybe we're answering the phone just wherever we are and we're not following a sales process or or whatever's going on. That could be issue. Now, if I'm setting a lot of appointments and I'm not going on any of them, okay, am I setting them out four and a half weeks into the future and so in that time timeline someone else solved the problem already? Someone met with them or is the way that I'm setting
39:24the appointment loose? I'm not I'm not doing it right. If I'm going on lots of appointments, Katelyn, and no one's signing, my presentation sucks.
So, this is a coaching moment.
It's a like it's the ratio just tells you the right there's a right ratio you should have in all these things. Below the standard would be I need I have a skills issue on this particular problem.
Bingo. And it's either a skill that you as the business owner can coach whomever is having the conversion issue. So, now you immediately know we're not going to waste any more leads. We're going to use these as coaching moments that we can help them learn the conversion or if you're the business owner, as I like to say, if you're the man in the mirror, the person in the mirror who's having the issue, great news. You can go out and increase your skill to do so.
You've got to know, are you doing better, worse, or average than your peer, your industry, you've got to you got to have something to measure against. It can't be just I go on these appointments and I get some and I don't get some and you have no idea why because you cannot improve what you cannot measure. It's impossible. And so if you don't know these numbers, you say, "I want to do more sales." Like when we get a new
40:26coaching client, they're like, "I want to go do more." And I say, "Well, what are you tracking in your business?" And they say, "Not much." I'm like, "Well, how would you even know if you're doing more if you're not even tracking what you have? It's a div of crazy. I want to do more."
It's very challenging to go spend money on more leads if we don't know how we're going to convert them, what it's going to look like, the dollar per cost per closing, if we don't know any of those ratios. Most of my clients I think are shocked because they hire me for something else and I meet again what are you measuring and how do you determine what action do you take when the ratio's off and we really find out that they're not measuring enough and the first thing I think that really shocks them Katelyn what I do is we go in and we start cutting everything that we can't measure. So
tell me what do you mean by that cutting everything you can't measure
if we don't have the right tracking on anything like for paid marketing like well we put in our main office phone number and so I'm like well how do you know which leads come that well we ask the customer
because the customer is going to lie to you
self-reported data
self-reported data is wrong data the customer's not lying to you they just they don't have a vested interest in giving you the right answer. So, it's like, "Well, I went on a lot of websites and I kind of clicked on yours and I just went on there." They're like, "Oh, we'll call that SEO Google.
41:28
I just walked by."
Nope. It was your Facebook ad that sent them to your page. And so, you didn't know.
I don't know to triple my Facebook ad budget because I'm crushing it on that if I don't actually have tracking to that specific link.
Ideally, we add the tracking
if we can. But in the beginning, we're not tracking anything. We've got to go just let's get out of all of it
and start again
and build the systems and build a business on a great foundation so we can have a kick-ass company. And so we need to know, Katelyn, the purpose of all of this is to identify the bottlenecks.
Okay.
In every business, there's a constraint. Is it not enough leads? Is it not enough conversion? Most people blame it on leads
and it's typically always conversion.
It's always not not enough leads, Brad. I don't have enough leads. Any more? Maybe.
I just saw flash reports today come across. I need more leads. Which that person actually might need.
I literally said maybe. But I also haven't spent a lot of time working with them on their
Well, and you heard the question that I asked was, "Did you already call the lead that came in an hour and a half ago?" And the person said, "Not yet." And I said, "Well,
perfect.
I don't I don't think we have a lead shortage just yet, but we'll get there." And and that and there's no judgment in
42:30the comment, but it is a function.
We all do that. We naturally do that.
Natural behaviors. Yeah. But yeah, I didn't get that one, but if you gave me eight more, I also wouldn't get to them. But I'd all have eight more to call when I got there. And that's a whole different conversation we'll get to because one of the things we need to track is how quickly do we actually contact a lead and speed to lead is it's a ratio that we track in our businesses.
But in every business, let's be clear that we touch every one of our salespeople in every single one tells us that they want more leads.
I've never heard someone that didn't say and and that's your sales people, right? But then correct
I've never seen a salesperson come and walk with the plan to convert to increase conversion by 35%.
Here's here's what I'm getting at. So, they say they want more leads, but if you're not tracking the backend to look at their conversion, your inclination is going to be exactly what mine is, right? We got to get them more leads. We need billboards and radio and all these things that are going to cost a fortune, right? And you would say to me, great. Walk me through our current lead pipeline, how they're flowing, what's the conversion, what does that look like? Because you have the data. If you're out there without the data, your
43:34sales people are telling you, "I don't have any leads. I don't have anybody to call. None of this makes more sense. I need more leads. And you don't have any of this information. How the heck can you justify going out spending X amount of money on more leads with a hope and a prayer and a dream that it's going to convert? Wouldn't it be better if you knew the actual numbers? So you knew the ROI of the investment
100%. And so the purpose again, so we want to identify the bottlenecks. We want to improve operational efficiency. We want to forecast production. Katelyn, the reason we're running these ratios, we want to be able to really accurately forecast future revenue.
And then we want to improve our sales process effectiveness. How can we get better our sales process if we don't know any of our conversion ratios? Well, it's impossible. And so the questions you ask here, three questions. Where are deals falling apart?
Is it at the front end of the lead? Is it at the appointment? Is it at the table? Is it a presentation issue? Is the issue in your post in your closing process? Right? Where is that? which stage converts poorest.
Not all your It's not going to be like
44:3620% do this and then 20 fall off here and then 20. It's not like that, right? It's you're going to have the ratios are always crazy in business.
Sure.
And so, you know, I love to know how many leads per contract. And there's all kinds of things you can track. And then you want to know which lead source converts best. Katelyn, why would I want to know which lead source is best? If I got 10 lead sources, why do I want to know which one converts best? so that you can spend more money to get a better rate of return by investing in that one. Am I missing it? Is that it?
I have the craziest concept I want to show you, Katelyn. So, I look at a business got 10 10 different lead sources.
And I'm going to say when you lay them in a spreadsheet, is it safe to say that five of them are not producing at the same level as the other five, meaning that yes,
this one's the worst, the second worst. There's a ranking that they're not all equal.
Correct.
Every lead source is going to be different just due to the the nature of it,
just like people. So wouldn't it make sense once we've done our tests and we're going on that the goal of business would be to eliminate the bottom 50% that is not performing well and reinvest it into the top three things mostly in
45:39the top one provided scalable that is making the most money and converts the best like that would
a thousand%
and the only reason we're not doing that every quarter or on an ongoing basis in our business is because we don't have the data to know
this is your superpower it's the thing that is the most as the gal who launches a lot of businesses with you. It is I have seen you do it in everything from a title company to a cryotherapy clinic to a real estate team to an investment business to apartments to short-term to every business line you've done. We're doing it the the golf course for crying out loud. You go and want to attack every single available lead source to start.
I want to do all of it.
I want to do all of it. And then you look at me with the face you just looked at me with, which is I'm going to do all of it. There's no question. It goes crazy and it's wild and you want to track it all. So, we've got 46 call tracking numbers. It's sheer absolute chaos on the setup and how leads are being routed and channeled and you want
46:42to know updates every single day on our dashboard of what's working, what's not, what leads came in, you know, who purchased, who didn't, and you're tracking it all. Mhm.
And then aboutund I would say this 160 to 180 days in, you always look at me and say, "Cool. So these are the two that are working. You can cancel the rest and reinvest the money there and then the business is going to make a fortune." And I'm like, when we get to that day, when you clear all that out, it's fantastic. But I think people are lazy. I have been in the past and they don't track all of it and they don't look at all of it and they throw all the mud against the wall and say that they're following the same models of some of their CEOs out there that they might idolize
and they don't realize that spending that money and throwing all that against the wall may or may not work but they won't know because they're not tracking it. And you that was a very f kind compliment and I um the reality is Katelyn I I tried all the other ways and the only way I found to do it is I found that I had a lot of personal bias and I
47:44had a lot of gut feel as we covered earlier and I was out of hunches and so I would say well so and so is doing this lead source so I'm going to do it and instead like now I have no I pretend to not have any idea of what will work
correct
I have guesses and assumptions but those are all
not hypothesis
I have guesses what I think will work but I'm going to do the 10 things like we're doing here And then I start measuring the ratios on all of them. And at the end of six months, I don't have to guess anything and I don't have to do any brain work. I just have to simply sum up the totals and the cost per acquisition is the lowest on these two channels. Those two channels are scalable. Now, we look at three different things in marketing which we could cover here. Right? So there's three main pillars that I think about in marketing.
Okay. What are
number one is it's systematic.
Okay.
So whatever we're doing, can I build some sort of a system around it?
When you say some sort of a system, what is that? So let's say we are leveraging Google pay-per-click.
Okay. Can I build a system out of the way we generate ads on an ongoing basis in a golf course? Of course, right? I can write around holidays and can I build a system that would have enough
48:46calls to action that would work, right? Can I build a direct mail? You can build a system. I'm going to pull this list in this way. I'm going to hit them over six times. It's these PE. There's a system to it.
Sure.
Right. So if like a system was if your if your business is random like some days I pick up my phone and call a few people and then other days I call more people and I'd be like well what's the system?
There isn't one. It has to be a repeatable duplicatable set of things that create a consistent outcome would be a system.
The second thing is I I want it to be scalable.
So system
scalable. So is it can I scale the idea? Easiest example would be direct mail right? If I mail 10,000 pieces and I'm in Phoenix, Arizona and it works, I could take the same set of data, go to the mega zip code over and I could mail the exact same set of pieces and likely get a similar result. And then if that were now I'm mailing 20,000, I go to 30,000. So, you know, TV very scalable. Google paper click unless you're in a really smart market like in Phoenix, you sky's the limit, right, in terms of what you can
as long as it works. Yep.
And the last piece, right, of marketing
49:49is really how leveraged is the activity? How much leverage can I create in it? So things that require human capital to do them are less leverable.
Okay,
we're going to go do five open houses a weekend. Well, that's five people going to five open houses. Still leveraged. It's not as leverageable as I'm going to mail 10,000 pieces or when the mail house you hit an extra zero and it's 100,000. I mean the the requirements on that last one was one of these. It's easier, right? So just how good's the system? How scalable is it? How systematic scalable? How leverable is the idea? because that's what allows us to really grow. That's that's where I like to play is can I put gas on it?
Where can I make it go fast?
I look back at some of the marketing ideas I've brought your way and I can definitely understand why some of them were rejected. Do you remember this is this is an example of all of the things that you want. None of excuse me none of the things that you want. But we were trying to grow the cryotherapy business and you had so many I mean we were doing everything from Groupon to value pack to
50:53Google ads to affiliate relationships in the area. You had all these scalable things and I said Brad it's just so chaotic. Things are coming in a million ways. And you said classic. You said I'll tell you what. Why don't you come in with your three best ideas and let's go ahead and take a look at those. So, I came marching into your office with my marketing idea and you looked at me and said, "Kayen, how will we run the KPIs on this?" And my idea, I don't know if you remember, it was so
I think I know exactly where it's going.
It was so ridiculous. But at the time it the Phoenix Open or the Waste Management Open is held in Scottsdale and it was right next to our cryotherapy clinic and Phil Mickelson is our hometown hero. And Phil had just created a sponsorship deal due to his uh he had some arthritis in his hands and he had some kind of pharma thing that was on the on TV all the time that it was you know Phil has arthritis in his hands but the good news is he can still play golf and he was going to be playing in the Waste Management Open. And so I said to you I thought a great
51:57idea would be the following two things. Number one, I think because at the Phoenix, if the Waste Management Open, if anyone has watched it, the crowd is insane. They act completely foolish. The crazier you dress up, the more TV time you get. And TV is expensive. So, could I find a way to get some TV time for our business without paying for a TV ad, right? So, I decided we should start a campaign that was save because cryotherapy can help with inflammation, arthritis, you get it. I'm basically a doctor. So, I wanted you to allow me to take our sales team and have them wear shirts that had said hashills hands. And they were going to break off into the 18th hole and run around like crazy. They might get arrested, they might not. We can figure that out later. We were going to get a plane that was going to go over the top with a big banner kind of like Moon Valley Nurseries has. Ours was going to say Philillands. And you looked at me with the look that you're looking at me with right now. And you said, Katelyn, in no way, let me ask you a couple questions. Is that scalable?
53:00We're going to do this one day and then how are you going to create how will that person go into our business and you're going to get an ongoing customer there? How are you going to track that they came from your hashtags hands with a bunch of drunken idiots running around the golf course? And you walked me through this. And guys, this was, you know, I was being partly silly. It is, you know, I still stand by it still. I get it. But you went through this with me and said, "Katelyn, if we actually look at those KPIs and we look at how will that help our active sales pipeline, walk me through that path." And I bring that up in a laughing way because you see people a lot doing this with Facebook or doing this with some networking event that they are going to or they're spending all this time and energy on something, but how does it actually feed that present active sales pipeline in the business? And the fact of the matter is if you can't do those pieces, right? You can't make it scalable. You can't make a system. You can't make it scalable. You can't make
54:01it profitable. How will you actually incorporate it in the business? That's just a silly hobby idea. That's not building a business.
And and I think I love that. I love your story and I do remember us doing that. And it I think that so many people if they look at what they do, the way they think they generate business, it doesn't meet that criteria.
And so how would you go do a lot of it? Like how would you actually grow your business? Because unless you're making the exact amount of money you want you're making today and that's the amount you want to make. Hey, I love my income today. Well, then your goal is you just go back and you just want to try to reduce your expenses. If you don't want to grow your income, you're just trying to get greater profit, less expenses on the revenue you already have. But for most people, they're not where they want to be. They want to grow their income. If you want to grow your income, the only way you're going to do it is by doing more of the things that are working.
And if those things aren't systematic, scalable, and leverageable, Katelyn, I
you're going to run into problems. You go to grow your business. what you found is a way to create a job. And that's the difference in the real estate industry specifically as more people or and especially if it's a loan officer, it's a real estate agent, a real estate
55:03investor, you're a solo practitioner, you've got a job, right? Most folks have a highly compensated job and there's no judgment in that. That's totally cool if that's what you wanted to build.
Sure.
Like if that's what you want to build and the margin,
you make a beautiful life in that. You make the great you make an incredible there's no so the people that have the big businesses you know they're like I gota build and then they say I don't want a big business people have a small business I don't want a big business but I don't want a small one
instead just realizing like there's pros and cons to all of it the question is can the income you've created put be put into assets to get you the life that you wanted the way you do that's running numbers and by doing these things and so if if you cannot scale your current way you're doing it
you're probably never how do you get to where you want to go and I'll let the group you know self-discover that answer. Most of us make massive investments in our business and some of those investments don't pay off. So, you can come spend a day with me for $997. You come out to one of our resorts. You're going to spend a day, bring your challenge, bring your opportunities, and let's work through it in a one-on-one coaching session. You're going to be in a room of your peers. No more than 15
56:05people are going to be there, and I'm going to coach you personally to tackle your challenge and your opportunity. Go to bewealthypodcast.com to see the next dates for our event. And so, Katelyn, let's go to future. Okay,
so now we talked about we went through the past of what already happened, what's happening right now. This is what's going to happen. So this is where the extreme side of the lead indicators go. Like if we started at the lag and we're a pendulum, we covered kind of the mid lead and lag indicators, right? Because appointments held, I would argue, is more of a lag, but yet then we got into the leads, which are more of a lead indicator, right? Leads are a lead indicator. And so what's about to happen? So lead indicators predict future closings and future revenue. These are proactive activity activ these are proactive activities that create future business. So really Katelyn, how do we run our CRM in a way I always I use this example. We've got a we've got a machine, okay, and it's spinning and you want like at every time it flings like there's all these balls dropping in to this big funnel, shoots out the bottom and it shoots one out and every time it shoots one out that's a closing.
57:07Okay.
So, we've got to drop all these balls in there and there's all these things that have to happen.
Sure.
Called activities and followup and contract signed and the deal blows up and you put it back together and it poop shoots one out. I'm like, great, I got one. And there's ratios and all that, but what do we have to do to all the balls, all the leads to get them to shoot one out. And so, you think about this like, all right, number one, we got new leads generated. And so the way we teach this, you and I do in our in our coaching program is a lead comes in and immediately we get on the phone and you're trying to figure out one of a couple things. One, if they're going to do something and they're like a viable lead, like they're a customer, they're going to do some sort of transaction at some point in the future.
Okay,
I'm only looking at people doing something in the next 12 months.
Okay,
you say longer than that, what long-term follow-up? We'll figure that out later. That'd be called future follow-up. Really most people that are engaging are going to do something in the next 12 months. We break them into three buckets. People are doing something less than 90 days, 90 days to six months, 6 months to 12 months.
58:08
And in our world, we call those hot, nurture, and watch.
That's right. And so each of those time frames, hot being less than 90, has a communication requirement set with it. So if in our in our real estate sales business, any customer that is going to transact in the next 90 days, our expectation is that our salesperson contacts them one time per week on a voice-tovoice call on the phone with fully updated notes of the CRM. That is our expectation.
And a follow-up task
and well the spoiler alert, the follow-up set up for next week. Every week you must do this the entire time.
Perfect.
If we in a one-on-one when we're meeting with you, we audit all your hot leads. If we notice that's not occurring, you're definitely going to be shut out of new leads because why do we need to put new leads into a system that's not being followed up on
the way you get more converted, we got to work the leads we already have in a system harder to create the result. So if someone is out 180 to 360 days, so they're that person we're going to talk to one time per month.
So if you're 6 to 12 months out, we're going to talk to you once a month. And
59:09as soon as you cross the six-month mark, Katelyn, we're going to talk to you twice a month. So, these are our
as soon as you cross the 90-day mark, we're going to talk to you once a week. The idea being communication gets more frequent the closer the transaction gets to occurring.
As they're moving down the conveyor belt toward their
as they're in my funnel and they're getting down the thing and where the balls are about to shoot out,
we're going to communicate them more frequently because the point we're going to lose them is closer to the transaction. the old rule of thumb like if you're like in the Brian Afina area like take if they say 12 months cut it in half and then start doing stuff and you're like okay I don't I don't know I get that why don't we just talk to them every month and then if they shorten their time frame I'll know because if I'm talking to them
sure
I don't need to play some random guessing game with people's timelines
and this whole idea of that pipeline we believe that our sales people have should have no more than 100 leads. The reason is if you're really working it and you're actually following all these things we're talking about, it's going to take you three hours to follow up on your new leads, to be adding to your pipeline, to work the ones you have, and to work the old pipeline. It's just how
1:00:11long it's going to take.
But this is where now if we take all of your agents on your team, yourself included, Katelyn, I've got I can see every how many transactions we believe are in our pipeline that are going to transact in the next 90 days. I can see it by lead source. I can see it by total. I know the value, our average commission. So, I can I go, hey, this is the revenue that we could have right now. This is potential revenue. It's in our database. If we do the right things, it's going to occur. It's a really valuable thing to know. I can also go match it up in the past and I'd also have tracking to go currently of potential revenue. What portion are we capturing?
Sure.
Into real dollars. And so, it it becomes a way to run the business where the future becomes predictable. When I first got in this business, Kay, I thought it was magic. Like I was like, "Wow, what I'm going to do two months from now will be sheer, it'll shock everyone, me most." Because I just had no idea of how any of it worked. And then I'd close a month down be like, "Yes, more money
1:01:13than I thought." And it just it was so crazy as a way to run, you know, but my 25-year-old brain, that's just how it worked, right? I hadn't been through and and I tried to grow it with hustle and enthusiasm. What I found, Katelyn, is that hustle didn't scale.
That's a really important sentence. Hustle won't scale.
Hustle does not scale. So, when we talk about you've and you've been integral in writing our programs and delivering this to our customers, why do you think people get the future wrong? Why are they not spending time? I think people spend the least amount of time on this, the next least on the present, and the most time on the past. And I honestly believe it should be the inverse.
Oh, a thousand%. I think if I if I look at the conversations I've had over the past, call it 10 years with our clients in in a variety of different stages of their business. It does. It starts right here at the beginning on the lead indicators. You talked about this hot nurture and watch and what your expectations and standards are. Correct.
1:02:16I know what you're talking about is called our laws of the pipeline. We have a document. It'll be in the show notes for you. It's a very It's specifically what Brett just said and he knows it off the top of his head. When I ask our anyone we meet across the country what their their laws of the pipeline or their CRM management or what their standards are when it comes to the activities, the lead indicators inside of their business, they do not have an answer. So I think the majority of it starts right then and there. When a lead comes into the business or you have a database or a CRM, number one is all your stuff are all your humans, are they stored inside of there? If the answer is no, they're on a pipeline board or you've got a giveaway you
not these three lead sources, we don't know where they go
or my, you know, XYZ that doesn't integrate in. That's the first place to start. And I would I would venture to say that more than half of the people who are
1:03:18listening to this podcast may have a situation similar with at least one data source.
I agree.
So number one, get all of our stuff into the right place. Then develop. We'll share with you our laws of the pipeline. Just so you know, they've ran really true for 20 plus years in multiple business lines across multiple of our partners. So, we feel pretty confident in them. They're Bretts. They work. If you want to alter them for you, you absolutely can. But if you do not have a standard in your business of what lead followup looks like, you have a problem.
So, I would say those are those are the first two that before who even cares what our conversion ratio is? We can't even track it.
Do you get what I'm saying? So, if you get those two things done and then work to start tracking the rest and pick the number that's going to jump off the page to you every single week. And for Brett, we already said what it is, right? It's pending GCI. He's going to look at that cell. It's going to be 3E or 4E or whatever it might be. And his eyeballs
1:04:22are going to go right there every single Monday morning. And then he'll use that one cell to pick apart the rest of what might be going right or wrong. But he knows right where to start. But if the entire company is not speaking the same language, following up in the same way, tracking the same things just like on a personal balance sheet at the right time every single week, we aren't going to get decent data. We're just going to have a hobby, not a business.
So Katelyn, um, in our businesses, we take this data and it goes in a flash report that's done weekly.
Yes.
And a flash report is just a set of KPIs that are not the total ones we track in the business. We track everything, but they're we always say it's no more than 10 numbers, less than 20 numbers
that we're going to report in every week and track and we're going to see them week over week. So, I'll know that, hey, I got 15 leads last week and 15 leads this week and then I had 13 leads and then I had six. Well, if you were watching and you saw that, you would go, wait a minute, leads were 15 two weeks ago. Now they're six. Why is that? And
1:05:25if I knew my average was 14.7 somewhere, maybe the link broke or the site went down or I got a problem. If my ratio went off on contracts written this week, it's off by 50%. I'm going to go look into it. So the dashboard allows me to run a business without even digging in anything. I can scan my eyes across and immediately within 30 seconds know where the problem or opportunity is in my business every week. And for me as a CEO running six, seven business at the same time, I had to get a standardized way to look at the numbers. And so when I have a coaching client, the first thing I look at is what is our flash? We do all of this exercise. We start tracking things. What are we going to look at every week? And then as I as their coach, they send me their flash reports and I go, "Okay, what did you see here?" And about the fifth time we do it, they know they start and then their meetings with their direct reports become about the flash report. Spoiler alert, the direct report has their own flash report and that carries through the organization. And now we've got numbers that were tracking the drive the results. And it I had to get to the flash report model because I I thought that every business was so unique and I
1:06:28just standardized it just to my own brain to make it the same to view it. And it turns out if you're selling cryotherapy or a long-term lease or dental hygiene, it's all the same. It's business. You got a lead. You got stuff you do at the lead to get an appointment of some sorts, virtual or in person. Then you got stuff you do at that thing that leads them to some sort of contract. Then you got stuff you do to turn that contract into cash. And that's called business. And the easier we make it and there's like we can make this like some people teach business and they make it the most complicated thing on earth. They're not talking about pizza and simple addition. But Katelyn, it's that easy, right? It's really is that easy to start understanding your business and make better decisions as the owner.
And you have to have a standard around it. You literally, you messaged me. I don't know if it was last night or this morning because, you know, we've been just going and having so much fun. But it's our second operational week. We just closed out. We closed two weeks ago here. Our second operational week. And you here at Apple Mountain. We're we're at our resort. And you said, "I'm now going to have two weeks of data. When do I get my flash report?" Yeah.
1:07:30
Perfect. The team will have it for you today. It's Monday. It's our first day to do it. And you knew exactly what you wanted to go look at.
How many leads came in? What did we convert? Obviously, we had some people move in, but also how many pending leases do I have?
Oh, it's the first thing I look at. I want I want to know I want to know how much better is my future than my present. The only way I know that's by getting data and getting read into my business. So, Katelyn, I'm going to We'll do a little bonus section here on some other numbers, right? We went
We love a bonus.
We went uh this is like the gosh, what is it? Our hot topic.
What is it? Hot topic. What was the
hot topic take? Hot topic take with Katelyn Mitchell.
Hot topic take. That's a huge It's a huge scene we're going to view. rolls off the top.
So, this is a hot topic take on marketing KPI. So,
number one, you need to know what it costs you to get a customer, right? It's called a customer acquisition cost. I just what how many dollars do I have to spend? So, our investment company, your target would be around 20% of revenue. So, in our business, our average wholesale fee is around $17,500. And so, we could spend 20% of that number. So, Katelyn, if I could spend
1:08:33$3,500 and I could get an investment closing, that's a home I could wholesale. It's a home I could flip. It's one I could keep as a rental. If I could spend $3,500 or less, I'm good to go.
In your investment business,
in my investment company,
the number one thing you look at that you talk about all the time,
customer acquisition cost.
Customer acquisition cost. Because if you know your cost per closing in that specific business, you can back into your entire model.
I want to create a printing press or an ATM machine, right? I want to create something where I pay 3500 and it spits out the outcome I want. And I just then once I do that, it goes back to the market thing. How systematic, how scalable, how leverageable, but I I want to if I can get I work very hard to try to drive that number from 3500 to 2,800. And when I see that number get down there, we step on the gas. Now, we're going to double budgets.
Sure.
And see, can we hold the number?
And you can hold it for a minute. Then sometimes you double it enough and then something happens and you got to manage the machine for a little bit. But so we want to measure right what what does it cost to buy one? It tells us how
1:09:35efficient our marketing is and how efficient our sales organization is running. Customer acquisition cost
and in the investment business in particular that's the most important of all the marketing KPIs you're just about to go over because it's likely that's a one-time customer, right?
It is very likely it's one time. Um now you're going to do this by lead source, right? So we might have certain lead sources have a lower cost which
so like a direct mail might be less. direct mail versus pay-per-click versus paper leads verse TV verse radio verse whatever
and then we don't know what converts best right so just because early in my career I wanted the most leads possible if the if the customer acquisition cost was the same you know as I've got white hair and I'm older I actually would like the lowest amount of leads with the same customer acquisition cost
because I want less brain damage right like if I could get just one lead and it was 3500 and it closed 100% I would just do that because I need less systems and process and soft costs to convert.
And that's because in our invest investment business, we're talking about a human selling a property or someone selling a a property, we feel it's below
1:10:38market value, we can go in, add value to it, and sell it for more.
But every business owner, every business owner watching or listening this, if you do not know your cost to acquire the customer, again, you're not in the game.
Correct?
So, a real estate agent, right? It's around 12% cost to acquire the customer.
So,
I'm drilling this down because people get this confused with what you're about to go. So I, you know, you and I had a chance to talk about this a little bit offline. Where you're going is where people people confuse this. So that's why I keep drilling it down. One more time, Brett. So the cost of a this is the cost to bring the customer to a closed transaction inside of the business.
One closed transaction. Yep.
Perfect.
What is it cost? Spend money, one closing. The next number you'd want to track would be the lifetime value of a customer. So, in the real estate business, right, we have all these customers that close and then we're going to we're going to have referral systems or value that we're going to provide to them. Hopefully, if we sold them the home or they bought it with us, they might sell that home with us in the future, seven to 10 years down the road, whatever that cycle is.
And so, that second transaction contributes to the lifetime value. So, if it was a $10,000 commission and then
1:11:41they sold it 10 years later and it was a $15,000, there's a 25 and that person then bought another home with you. Well, now we're at a $40,000 like like that lifetime by the customer hopefully, right? Lowers our customer acquisition cost because now the first transaction we had 12% but then another commission comes in, we didn't have to spend any more money on the front end to get them. It was only the cost
to generate the referral on the back end, right? Whatever we were doing from value or we were providing electronically, physical goods, whatever your whatever your process is with your customers. And so, you know, one customer can become multiple. So depending on your business, right, do you how much is the lifetime value of a customer? If you're a dentist, right, you come in there, someone comes in there because they're like, I have tooth pain, right? Like this hurts. Well, then they go in there and they're like, well, it hurts because you had a cavity and that's because when how often do you get your teeth cleaned? Well, not that often. Well, we've got a program and if you sign up and you come in four times a year and you do this, we're going to inspect it. I'll make sure you never have that pain again and we can catch it earlier. Blah blah blah blah. But then
1:12:42they know the average customer is with us six and a half years and they're gonna spend
exactly what
$450 per year. And they literally I mean it's it's math in a spreadsheet. I will know what that customer is worth. So I know what I can pay for them, right? And then it's how quickly do I get that cash? How long
and that's the math equation.
And that's it's just math, right? It's just math
because you can pay more for a customer if they have a higher lifetime value.
So then you take these numbers, right, Ken? And different business models matter, right? So if I'm an individual, if I'm a solo agent, right, these numbers are slightly different,
right? It's going to be easier to have a higher referral ratio if you're doing all the stuff yourself
because people connect you as opposed to if one of your team members does it and ultimately they leave, right? It's going to be harder for you to get a referral from that same person.
Sure.
Right. I know I get a lot of crap for this and it's just like, well, try to get a referral from someone you've never met and it's just harder. Not saying it can't be done, but it's going to be harder than if I had the relationship. Now, the flipping business, right, our lifetime value by the customer think I mean it is it's totally different,
1:13:43right? They're going to odds are now they may refer us someone else to buy their home. It's happened, but it's pretty rare. It's it's a single transaction. So, when I look at that lifetime value, it's lower. I'm I'm tighter on that the client acquisition cost. Next thing everyone should look at, cost per lead matters. It's not an end all beall. If I could only look at one piece of data, it sure wouldn't be cost per lead.
See, that's that's what is really
my cost per lead's $4. I'm like, "Okay, well, how many leads did you need to get a deal?" 4,000. Okay. Cost per lead sucks. I hate it. My cost per lead. That's what some of this lead cost in in the investment business. It's very common where you might have a lead cost be $275 for a lead in the investment business.
In most lead sources, when you're talking to the sales guy who's trying to help you, he's almost always going to talk to you in cost per lead.
Oh my gosh. Well, or some marketing jargon that sounds like a statistic that will never be right. you know, we convert 6 and a half unless you any conversion number that anyone ever gives you, I'm going to tell you is is almost always a lie. Unless they give you a long-winded asterk behind it. So, if someone said, "Brett, what's the conversion rate in your business?" And I would have to say, "In 2025,
1:14:47our conversion rate on this lead source was 7 and a half%. I'd have to give you the date, the time frame, like I'd have to give you nine asterisks with it.
It's going to sound a lot like a pharmaceutical ad at the end.
May cause blindness. Maybe. Yes. Don't drive high equipment. Don't drive any equipment. And don't sound a lot like that. Don't make it. Does it sound like that? Because there's so many parts to it. Yet, I'll hear someone go, I converted this.
What? It's just crazy, right? Like you let me see the data you're tracking because it would just be I mean, it's just not that clear. Next thing I I look at my business. I want to know what it cost me to actually go on an appointment.
So, leads all I got to spend all this money and do all these things. And that kind of gives me two things. Salesforce and the leads, right? Right? Then you're playing, we talked about cost per closing. What about your referral rate? If you're in that game, wouldn't you want to know what is the rate of referral? Do I get 1.2 per customer, 2.3? I mean, I want to know that. A next one I think is important that a lot of people talk about speed to lead. From the time a lead comes in, how quickly are we engaging with the customer? And I know a
1:15:49lot of people want to use AI tools and AI follow-up and AI whatever as it rel relates to leads. And maybe that stuff will get there.
And no one loves AI more than you right now. I I got to tell you, I AI's changed my entire life. It's bold to say, and I'm not using the way that anyone else is doing it. Um, but I'm on the coding side. It's just I'm on a different gear because my guy Cole hooked me up and mine's name is Jarvis from Iron Man. So, that's a whole different thing. But the today as it sits, you cannot outsource success in your business using AI. You know, the joke is, hey, go build me a a real estate business and nets a million dollars. It's going to it's going to struggle with that. However, can it help you with systems? Could it help read your CRM via API? Are there really great things it could do for you? Of course. But what AI cannot do today is combine the science and the art of business. The science is so many calls I got to make. The art is wait a minute. When are you moving here? Oh wait, we've got some things going on in the market. Like you know your market and the agent, the art will always exist. The science is going to go away and we've got to get better at the art. What you do better than
1:16:51anyone else
you've got to deliver it. There is that there is so many things that involve a human and we just got to focus on those things instead of using AI to make cat memes.
That's exactly right. You say this phrase a lot. Everyone is trying to not do the thing.
There has never been a time in life that people don't want to do the thing
with speed to lead. That's us doing the thing. That's following up with that lead as quickly as possible in a systematic, scalable way. So, so Katelyn, it's business is easy. You got lead indicators. You got present operations. You got lag results. So, the past we talked about it, closings, revenue, profit, that's that stuff. Present, that's a conversations, appointments, contracts, pipeline, team operations. The future is your calls, your texts, your CRM activity, all of those things. And the most common real estate business mistakes I see uh and I I just I we got to go over these. They measure GCI only. It's my pet peeve when I ask someone what you net last year.
1:17:53
I had 1.4 million in GCI. I go
in the words of my attorney, which I love. He go, "My question's just a little bit different." Anytime you answer anything from my attorney, he says, "My question is a little different." That's a very nice way of saying,
"You didn't answer anything.
Could you give me the answer to the question I'm asking?" Is what he's really saying, right? My question is a little bit different. What did you net? They go, "No, no, no. I sold 30 million. Now we've getting two answers that I didn't need." What did you mean? Because we want to talk about all the things, right? Because we're a status business. We're an external scorecard measuring business. The next mistake they make, they ignore profitability. They have no idea. They don't look at the P&L. They give it to their account at the end of the year and they go, "How much I going to pay in taxes?" If you do not what you know what you made last month, the prior month, the prior quarter, and last year off the top of your head and margin, you're not in the game. They failed to track conversion ratios. If you have no idea what any of these ratios are and this whole thing for Katelyn and I with this was gibberish last hour, go back, watch it again, start one by one, get your P&L in order, build a flash report. You've got to know your numbers. They don't even know the lifetime value of a customer or even if they're in a business that could have a better one.
1:18:55Running the business emotionally, Katelyn, I mean, we talked about it just any and you know in our businesses my constant term if someone brings me a piece of information, where is the source of data? Where's the source of truth on that piece of information? like is that you see the CRM, you're pulling it from the state statute. I'd like to see it. I want source of truth. They run it. We run poor CRM management. I would say most people, business owners, the CEO doesn't even know the CRM.
Often you'll say, "Hey, can you just share your screen with me? Let's go take a look at it together." And if you if you're the CEO and you have trouble logging into your CRM, probably not great. you're not in the game. Weak followup, right? How are you taking that hot nurture watch and moving them down the pipeline? And lastly, there's no forecasting process. Very rarely do we have a coaching client. They're able to forecast the future. And so, Katelyn, if you understand your ratios, you understand your pipeline, you understand customer value, and you understand lead indicators, you have a predictable and
1:19:58scalable business. You can grow. It'll take you where you want to go. So, we we want to do this because this is coming up a lot with your coaching clients.
Tons. and you know you're when they start coaching it's like it's funny Cole right before this episode he's like what do you where do you start I go we start by just at the very beginning and then if they've got a P&L and they're nailing it u then I go cool what's going great how do we double down on it where are the margins where can we go create more margin here because in every business can be improved in my mind I mean ours included we're constantly every month meeting on this to go over and how do we improve the business so this isn't a oneanddone activity you build this into a cadence where this is happening again and again so all right go out get your KPIs together. We're going to drop the two sheets in the two items we referenced, which is going to be the flash report and the laws of the pipeline. We'll put those in the show notes. That's Katelyn Mitchell. I'm Brett Tanner. This is Be Wealthy, where we help you make more money and show you what to do with it. We'll see you all back here next
One day in the room with Brett on your real numbers. You leave with a 5-year plan.
