The Science of Flipping - This Is When To Scale Your Business

Starting point is 00:00:00 You need to understand the business that you're trying to build. But the moment that helped me pour gas on it was the moment I realized it's just a matter of doing more marketing, turning my business into a marketing business and not so much into a rehab business. What is up, everybody? What is up? Welcome back to the Science Flipping Podcast. I'm your host, Justin Colby. If you haven't yet, do me a favor, go over to YouTube, subscribe to my channel. Look me up, Justin Colby, because these podcast episodes, as well as other organic videos that I produce for entrepreneurs is right there on my YouTube channel. Look me up, youtube.com forward slash Justin Colby and subscribe. Now, this episode

Starting point is 00:00:57 is for the person who's trying to figure out how to grow their business. I was asked several times over the last, I don't know, a couple months, when was that moment that I decided to pour gas on my business? And I'll tell you, we were going around doing several deals a month and it was good. We were making good money. But then came the moment of realization that we really knew our numbers. We really understood if we got this amount of deals or leads, we'd be able to convert this amount of deals. Now, at the time, I was heavily invested in a lot of remodels, right? So what that really means is I didn't have to do a volume of deals

Starting point is 00:01:38 to make good money, but we would wholesale from time to time. Well, I didn't want the hurdle and the challenge of these contractors anymore and the challenge of what these remodels bring to our world. So I decided to say, okay, I want to really get going with this wholesale model. Well, how did I do that? The best thing I did was trusted my numbers. I took a look at our KPIs. I saw what we were doing with marketing. I saw the returns we were getting, how many leads we were getting, and I went all in. I took faith. I took belief. And I charged $40,000 of direct mail onto my credit card. I didn't do it blindly. I knew the numbers going into it. I knew if we sent out a certain amount of direct mail pieces, we were going to get a certain amount of callbacks. And I knew based around a

Starting point is 00:02:29 certain amount of callbacks, how many were going to be leads. Out of the leads, I projected how many we would be able to close and wholesale decision. Sorry there. And that was the reason why I made it. Now, does it take a lot of gumption? Does it take a lot of balls to be able to throw down 40 grand in one month on direct mail? Absolutely. But that was the pivotal point that changed my business model forever. I was doing pretty good, right? I was doing several deals a month, if not more, making good money. But I wanted more. And I knew something had to change because you can go along this real estate investing

Starting point is 00:03:17 business and kind of limp along and make some money and everything's good. But then you have these peaks and valleys. So how do you even that out? And that's what really, I guess, pushed me to make this decision was I was tired of the big swings of cash, right? You flip three or four homes in a given month and you have hundreds of thousands of dollars that come in. And then it takes another three or four months to flip another couple, right? And I liked the idea of wholesaling as a model to kind of bridge that gap. So what I found was by putting faith in the model, by understanding your KPIs, I was actually able to securely, as competently as I could, really push play, pour gas on the fire when it comes to marketing.

Starting point is 00:04:05 And that was the moment is I took a deep breath and had faith we were going to do it. And here we are roughly, I guess that was back in 2012 or 13, I guess. So here we are eight years later, you know, basically spending the same amount of money, uh, every single month since then, and just having the same type of returns. Now the model, what you're shooting for, for those that are trying to scale is a three X return on your marketing. If you spend a dollar, you want three X. If you do more awesome high five, I love it, but that's the model you're shooting for. So that's why, you's why you look at 40 grand a month. Well, if you can 3X that, so you're looking at $120,000 every month, 12 months a year.

Starting point is 00:04:54 Now you know how to do the math. Now I would encourage people not to just go out and spend $40,000 a month on a credit card right now. Understand your numbers first. Understand the team you have. Understand who's going to be bringing the leads in. Who's going to be converting those leads? Are you going to be rehabbing some? Are you going to be wholesaling most of them? Are you going to buy any as a rental? You need to understand the business that you're trying to build. But the moment that helped me pour gas on it was the moment I realized it's just a matter of doing more marketing, turning my business into a marketing business and not so much into a rehab business.

Starting point is 00:05:37 And so that was the point. And I would encourage you to take a look at your business right now, figure out where you're at. What are the missing links? Is it personnel? Is it marketing? Is it leads? Is it conversion? Most people that I talk to, actually, they don't have a lead problem. They have a conversion problem. They're not very good at converting deals. And I would tell you, that's the biggest problem that people aren't really aware of. They just don't realize that that's their actual major problem. Most people walk around saying, oh, it's because sellers want too much money. I'm not saying that that's not a challenge for us too. I'm just saying we know how to convert more deals and we are better at sales than most. So harnessing that and getting good at sales is going to really be paramount to this ability to pour on the marketing dollars, create more leads,

Starting point is 00:06:21 contract more deals, and then have your exit strategy, whether it's wholesale, wholetail, rehab, buy and hold, or otherwise. That's going to be the big moment that you need to be watching out for. So hopefully that gives you some perspective on when I made the decision, and hopefully it can give you some guidance on if you should be making that decision, because it is a lead game. If you are great at the exit strategy, meaning you can flip, you can wholesale, you can wholetail, you can novation, you can remodel, you can short-term rental, long-term rental. If you have that in line, then it's just a matter of bringing as many leads as possible and going from there. Now, the last part I'll say

Starting point is 00:07:01 for you guys is you need to make sure you're making offers. I see too many people, again, blaming not enough leads. And I ask a quick question of how many offers are you making during the given week, right? So every single acquisition person on my team has a quota to hit, which is basically two contracts a week, which means they need to be making roughly 10 to 20 offers a week any given week. Now, when your pipeline builds, you're able to rely on some of this pipeline that you built up in the nurture campaigns to be able to bring in contracts. This doesn't always mean contracts from newly generated leads. That's a misconception I think most people think of is

Starting point is 00:07:46 they're contracting the new leads that come in. When you have an experienced salesperson and you have a pipeline of leads, that's what helps your conversion ratio, right? And so that is also something to take a look at. What does your database look like? Do you have confidence that if you pour more onto that database that your salespeople or yourself are even going to be able to convert at the level that they need to convert? So there are different levers that you need to really watch when you make this decision. But I will tell you this, if you want to get more deals done, you need to bring in the leads. And two, you need to make sure you have the proper exit strategy. I can tell you, we have a deal right now in Georgia. It will not fit a fix and flipper, but it will fit a hedge

Starting point is 00:08:31 fund. And so our first call was to a hedge fund to make sure that we would be in the right price point. And we're going to go lock it up. Now that exit strategy is based around the most important pillar of our business, which is our network. We have that connection where we're able to get a deal done where most others don't because they don't have that connection. So there's a lot to this, guys. I'm excited. I will be down in San Diego talking to the Scale and Skip event, which is why I'm talking about that moment where I decided to scale my business and grow. And listen, scaling your business comes with its own hurdles, leadership, management, personnel, hiring, training, recruiting, retaining those people. But I'll tell you what's the most important thing overall is your bottom line. Make sure you remain incredibly profitable. Your goal

Starting point is 00:09:17 is to maintain 30% of every dollar you make goes in your pocket. That's your goal. And so anyways, this is a pretty big subject. Hopefully that gave you some clarity and some color on how I made the decision. And hopefully that can help you guys make your decision. I'll talk to you guys on the next episode. Peace.

The Science of Flipping - This Is When To Scale Your Business

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