Know the numbers. You have heard that before but it is still incredible how many business owners don’t bother.
Topic – Why successful ideas fail in business
Mentor – Jacob Aldridge – Co-Founder of Real REACH
- Sales is vanity, Profit is sanity, Cash is reality
- Follow the money
- Different profit centres
Kevin Turner: Good morning, and welcome to the show. I’m Kevin Turner. Today’s show produced in association with PropertyTree from Rockend, Printforce, LockedOn and View. If there’s someone you’d like us to interview, just send me a message. You can do it through the website or email me directly at Kevin@realestatetalk.com.au. Of course, your questions and comments are always welcome. As I said, we present the show each and every day with the compliments of View. You’ll get the complete view there. LockedOn, why don’t you try it? LockedOn, use the link right here at RE Uncut or Printforce for all of your marketing solutions, and also PropertyTree from Rockend. They present our show each and every day.
Pre-recoded: More thoughts now from this weeks mentor.
Kevin Turner: Why do successful ideas fail in business? That’s the series we’ve been talking this week with Jacob Aldridge about. Jacob, of course, from businessDEPOT and also co-founder of [Real Rich 00:00:57] that we’ve also been telling you about this week, and the way for you to find out about Real Reach and get more detail is by subscribing to that series, which is absolutely free. It’s a series we’ve been rolling at, well, since late last year. It’s called If I had my Time Again. We’ve spoken to some wonderful business owners about the things that they’d change if they could go back and do it all over again. As I said, Jacob Aldridge is our guest this week, and the final one in this series, Why Successful Ideas Fail in Business, you say, “It’s the bottom line.” This is all about the figures, Jacob?
Jacob Aldridge: It is. Absolutely. When we put together this programme we identified the 12 reasons why even the greatest businesses fail sometimes to implement their great ideas, and it’s been great sharing the top five of those 12 with you this week. The one that I see a lot of businesses being really scared of is exactly that, it’s knowing their numbers and understanding some of those financials. The reality is if you’re building a business sometimes it’s hard and you will need to invest, and knowing whether you’re investing out of spare cash that you’ve got available or whether you’re investing out of money that really you kind of need to pay the tax bill next month can make a world of different towards the succ of your business and your ideas.
Kevin Turner: So, is it just profit that you’re talking about?
Jacob Aldridge: Well, one of my great colleagues, John [Knight 00:02:20], has a saying that I love which is, “Sales are vanity, profit is sanity, and cash is reality.” So, when it comes to understanding the bottom line in a business, some of it is just understanding the different between those two. That just because you’ve got the sales coming in doesn’t necessarily mean you’ve got the profit to reinvest or the cash to spend, and as a business owner you’ve got to follow the money. Go through each of those. You’ve got to make sure you’re making a profit. Then you’ve got to turn that profit into cash, and once it’s cash, well, then you’ve got to work at how to spend it wisely, which can mean reinvesting some of it into your business.
Kevin Turner: Yeah, this is a business that’s very much focused on the sales, and that’s why John’s saying about, “Sales is vanity.” That’s where we brag, but it’s not so much how much you make, it’s how much you retain.
Jacob Aldridge: Well, this is it. At the end of the day, nobody builds wealth by spending every dollar that they make and then some. You make a good point about sales and potentially property-manage businesses that might have a bit more stability in their cash flow, but you still really need to understand it. It suprises me, in fact, how many real estate businesses I go into that don’t actually keep track of the difference in their numbers between their sales and property-management businesses. They kind of lump it all into one in their profit and loss in their reporting statements, which means ty could potentially be losing a lot of money in one of those departments and not even realising it because it’s been covered up by the other one.
Kevin Turner: Do you find that generally that one will prop the other up if two are together? Is that what you … or is that just only on occasion that will happen?
Jacob Aldridge: It kind of depends a little bit on the principal. Certainly, it’s possible and when you have a downturn in a market in an area it can be the case that both sales n property management drop at the same time or they both take off at the same time, but I find a lot of principals are sales background, that’s their experience, that’s their expertise, and if they’re still the selling principal then whether they know the numbers by looking at them on the paper or they’ve just got a gut feel, they realise they’ve got to go out there and do that extra sale this month out they’ve got to pick up a couple of extra listings to wait, and so they go the hard yards to do that to pay for overtime of those cracks instead of actually having the somewhat harder conversation, which is, “Well, if we go through the numbers we might be able to work out how to fix those cracks without me having to work harder.
Kevin Turner: Yeah, and that’s raises the point about if you do have separate profits and is … they got to stand on their own two feet, you get a better chance to grow a better business by identifying why it’s not going as well as it should, but if it’s lumped in with another profit centre that’s working, well, you probably wouldn’t analyse it. You’d just let it go on.
Jacob Aldridge: Yeah, and keep making the same mistakes.
Kevin Turner: Yes.
Jacob Aldridge: I think every real estate business really has an accountant, but I think you need an accountant to do more than just compliant. You really want to be sitting down with them, or if they can’t do it, find yourself a business coach or a mentor that can, and at least every three months go through the numbers and look for ways that you can improve your business by reading the story that’s in those numbers. Don’t be afraid of it. Find someone who understands it better than you, and learn from them. This is something that I think a couple of the principals in the If I Had My Time Again series have shared how if they had their time again in business they would have really engaged with their accountants sooner. They would have taken the time to understand their financial situation a lot earlier, and as a result, they would have made a lot more wealth for their family in a faster and easier manner.
Kevin Turner: Jacob, it’s been fantastic talking to you this week, and congratulations on what you’re doing with Real Rich. Jacob is one of the co-founders of Real Rich. It’s a programme that’ll be launched very, very soon, and you’ll hear about it right here, but you’ll hear about it sooner if you are a subscriber to If I Had My Time Again, an absolutely free series that we’ve developed over the last six months or so. You can get into that by using any one of the buttons on any one of the pages right here on RE Uncut. Congratulations again. Thanks for your time this week, and look forward to talking to you again soon.
Jacob Aldridge: Absolute pleasure, Kevin. Look forward to it myself.
Jet Xavier: My Angela said, “You can’t use up creativity. The more you use, the more you have. How do you need to be more creative today in your business? I’m [inaudible 00:06:41] Xavier, have a great day.
Jacob Aldridge: That’s once again, Jet. That’s it for today, and for this week. Thanks to our contributors this week. Thanks to you for your company. Have a great weekend. We’ll catch you again on Monday morning.