Entrepreneurs love to complicate their business (even at the expense of their sanity, profits, and freedom).
Here’s a common trap entrepreneurs fall into:
They hit their peak performance month — bringing in double the amount of revenue as they normally do. So what do they do? They reinvest in their business. But this reinvestment comes at a steep cost: They make their business rely more on uncontrollable pieces.
You work harder and harder to make less and less money.
In this episode, you’ll discover the counterintuitive strategy to implement when you hit your peak performance month, so you can sustain your growth (without sacrificing your profits or freedom).
Listen now before you commit this fatal mistake!
Show highlights include:
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You're listening to the REI marketing nerds podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of AdWords nerds, a high tech digital agency focusing exclusively on helping real estate investors. Like you get more leads and deals online, outsmart your competition and live a freer more awesome life. And now your host Dan Barrett.
(00:40): All right. Hello and welcome to this week's episode of the REI marketing nerds podcast as always. This is Daniel Barrett here from AdWords nerds.com. And if you are looking to get more leads and deals online for your real estate investing business, you know where to go. It is Edwards nerds.com over a decade strong in this game. Folks over a decade seems weird to say seems like a very long time to me personally, but, uh, I am happy to be here as always this week. I don't have a guest. I wanna just talk with you and I wanna talk to you about something that's very important to me. Something I've actually talked about in a previous episode, but we're going to attack it from a different angle and that is systems reliability. Now, if you know me, if you've heard me talk for about anything for pretty much any amount of time, you have heard me talk about systems, dynamics, systems, thinking, complex systems theory, et cetera.
(01:41): This is like my bread and butter. This is largely the theoretical underpinning that makes AdWords nerds different. It's the sort of logical structure we bring to online marketing to understanding what's happening in the real estate investing industry to running our own business, honestly, to running my personal life. It's, it's really the sort of framework that's there that helps us make decisions and honestly making good enough decisions to keep us ahead of our competitors by fairly wide margin. So this is important to me, right? It's not just something I talk about on podcasts. It's something I live and breathe and think about all the time. And the reason that systems reliability is so particularly critical as a part of this kind of framework. And don't worry, we are gonna bring this right down to the ground and talk about your real estate investing business. So we're not gonna stay theoretical, but let's get theoretical for a moment.
(02:40): The reason this is so important is because so much of our lives and our success in business relies not on the level of peak performance that we can reach, but rather the reliability with which we reach that performance. Okay. So let's think about that for a second. If you are running an investing business, you're doing deals, you're flipping you're wholesaling, whole tailing, whatever, whatever you're doing, right? Buy and hold, right. There are going to be months during the year where your income is significantly greater. The revenue produced by the business is significantly greater than the other months. That's your peak performance. That's your peak performance. But if you cannot reliably hit that number, it would be foolish to run your business as if that peak number was what you hit every single month. Like let's say your business on average produces $20,000 in monthly revenue.
(03:44): All right. Let's just say that that's what's going on. Okay. You got a $20,000 month business and let's say five of that. You spend in expenses. All right. Pretty healthy business. Right? You got 75% profit margin or whatever it is. That's awesome. All right. So you're making 20 K and you are spending five. Now you are very healthy at that point, but let's say one month out of the year, for whatever reason, you hit 40 K just one month out of the year. All right. Now, if in that month you hit this 40 K you start to identify with this idea of your business being a 40 K a month business of yourself being a 40 K a month business owner, you will start to act in line with that identity that you've created for yourself. And that might mean raising your expenses, investing back into the team, investing in more marketing, investing in a nicer office, buying new clothes, a pair of fancy sunglasses, whatever it is, getting a tattoo across your stomach that says 40 K club, right?
(04:57): I'm sure that's happened before. So now you are now investing in line with this identity. You have created as a person who owns a business that makes 40 K a month. But remember what we said in the beginning, this is a one month peak. Now in the next month after this, when your revenue goes back down to 20 K, your expenses are now double. Remember you raised your expenses. You invested back into the business when you made 40 K. So before you were making 20 and spending five, you had a 75% profit margin. You hit 40 K. You raise your expenses to 10, still doing great. But then in the next month, your revenue goes back down to 20, but now your expenses are 10. You are now at a 50% profit margin. What has happened here is that you now have to work harder and spend more to stay in the same place you are making, taking home less money overall. But now you've got the extra staff to worry about. Now you've got the cognitive burden of thinking about these new marketing campaigns. Now you gotta clean the new office. Now your wife is upset. You know, about the 40 K club stomach tattoo, right? Your partner. This is what happens to us. In general, we get attached to a particular set of circumstances and start to act accordingly. And what that ends up doing is meaning that we have to run faster and faster and faster just to stay in place.
(06:51): Want to find motivated seller leads online, but don't know where to start download our free motivated seller keyword report. Today. AdWords nerds have spent over $5 million this year researching the most profitable keywords for finding motivated seller leads. And you can grab these exact keywords when you download our report at www dot AdWords, nerds.com/keywords. Now, the reason I started this whole conversation starts, uh, talking about systems reliability, is that when we are doing well, we need to think about ways we can simplify the way our businesses run. And the reason is because when we're doing well, you and I understand that, Hey, while we may be doing well, that doesn't mean we will always do exactly this well. And in fact, we may be at a peak performance period, and we may soon regress to the means. Statistically, start to average our way back towards our average performance. This is only natural. It happens to everyone in every single setting, whether it's sports or romance or business, right? It doesn't matter stock market, whatever you have an outsized good day, here're statistically fairly likely to regress to the mean and be a little bit lower. The next time you check, you have an outsized bad day, same goes, but heading back up towards the average, not quite as bad as last day was all right.
(08:23): I had a really bad week this week, just personally, I had a ton of, to a ton of trouble focusing. I just, I had a bunch of like interpersonal problems. I got angry. You know, it was like, I yelled at my kid for no reason. Like it was just kind of a bad off week, right? Maybe I ate too little or too much, or maybe I didn't sleep well or whatever it was. Wasn't a great week now because this week was abnormally bad. I can expect statistically, right. I'm probably more likely to have a more average week next week. It's just the way that it goes. All right. So the reason that when we hit these sort of peak performance months, we need to start thinking about simplifying rather than making things more complicated is because the more pieces that we add to the business, the more things need to go, right? In order for us to be successful. All right. If I'm adding the new staff and I'm adding the new office, I'm adding the new marketing campaign, what ends up happening is all those staff members need to really kick butt in order to give me a return on my investment, that marketing campaign needs to have the right ads and the right targeting and the right budget in order to kick enough butt, to give me a positive return on my investment. That office needs to make me that much more productive in order to give me a positive return on my investment. My stomach tattoo needs to attract enough cool people to make me the life of the party and give me a return on my investment. There's a lot of things that need to go right in order for me to come out on top. And this is what we all do.
(10:06): Every business owner does this in one way or another. When we have a peak month, we tend to reinvest. We tend to double down rather than taking some of that profit off the table and actually reaping the rewards of all our hard work. So again, let's return to systems reliability. How can we make the systems in our life, which is our business, right? Or our health or our personal relationships or whatever you wanna look at. Everything's a system in some way, how do we make the systems in our life, more reliable so that we lock in those peak performance months rather than squandering them. And the way that you increase the reliability of a system is actually so simple that people rarely do it. We tend to overlook it. Entrepreneurs, entrepreneurs. We love to make a problem more complicated than it needs to be. We love it.
(11:05): If it's not hard, it doesn't count, right? You gotta hustle. You gotta grind. You gotta struggle. If it's no struggle, then it doesn't feel real. So we want everything to be hard. So we overlook the simple thing. The simple way to make a system more reliable is to simply eliminate some of the things that need to go right? In order for you to be successful. If fewer things need to go your way in order for you to come out on top, you are more likely to come out on top. This is the way the world works. The more open we are to being affected by random chance by statistical fluctuation, just the less likely we are to make it the way it is. So if you are doing well, if you are profiting, if you're like, Hey, I wanna lock in peak performance. The way you do that is by elimination. Not by addition, but by subtraction, how do I make my business simpler? How do I make it? So I'm not as reliant on a single person. So how can I build in some redundancy? How can I make it so that I'm spending less so that even if my income goes down, my profit margin is still substantial. How can I make it so that fewer things need to go, right? In order for me to win, that's the secret. And I'll tell you, it's a secret that I personally struggle to implement. Sometimes I've created a system for doing this, but it's a struggle for me to implement it because all entrepreneurs love to build. We love to add, we love to make beautiful things, complex things. We have new ideas going back to the same old, the tried and true, and just boiling it down and boiling it down.
(12:59): It doesn't feel as romantic. It doesn't feel as exciting to us, but in the end, if you're constantly building and constantly reinvesting and constantly making things more complicated, you're gonna find yourself working harder and harder and being more and more stressed while getting further away from what you care about or getting further away from your goals. And I don't know about you. That's probably not why you started your business. It, isn't why I started mine. So think about this folks systems reliability. When you have a peak performance month, when you're doing really well, when times are good, those are the times to make things simpler. Those are the times to make things more reliable. And those are the times to lock in your wins. I hope this was useful. I hope you like this episode as always, you can find all our past episodes and tons of free content email@example.com. Once again, that's AdWords nerds.com and Hey, I also have a YouTube channel. You can Google AdWord's nerds there. Uh, and please do leave us a like, or a subscription or a review. Any of that is so helpful. I read every single one and it helps other people find the podcast as always. This is Daniel Barrett from AdWords nerds.com signing off. I hope you have an awesome week and I'll talk to you. Cheers.
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