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Starting to Build the Machine

Starting building the Machine-
Collecting my thoughts this morning, and a lot has been changing in the past two weeks or so.

In business, I have formed a new team for a big 300 unit deal coming soon.  We are currently in the negotiating phase and in set and final on our offer. We are working at solidifying our relationship with the seller’s broker.  It has been fun to tell the team how to negotiate. A lot of the times, in the past, I’ve learned that the broker really just wants to make money there and their interest is not in line with the quality of the transaction most of the time. So, in order for me to get some of the due diligence items that I needed, to be able to get Intel or insight as to what the seller really cares about, I have to sometimes circumvent the broker. Sometimes money is not all the seller cares about. If it were me as a seller, I would just want to know that I have a reasonable buyer and someone that can perform. The relationship is really worth everything.

For example, in this process of submitting an LOI or letter of intent, the broker told my team not to contact the seller. I’m sorry, but we do not have a legal agreement signed and I’m unaware of any damages that would be caused to any of the parties involved.  If it’s a good deal, no makes no sense letting it go to waste. What I mean by a good deal is something that cash flows close enough to pay our investors out and be able to increase the value of the complex by close to double what we bought it for.

We have collectively underwritten about 100 deals, some off market, to finally find one that works.  Here is where I get feisty. And I’m willing to fight for a good deal because obviously that brings our business success. Those that won’t fight are the ones that will not succeed. I have a passion for what I do and this is actually the fun part, where they try to tell you to stay in your lane, and I am motivated as to buy as the seller is motivated to sell … so obviously my goal is to make this transaction happen.

Another thing that is changed in this process is hiring people for certain support roles. I’m reading a book right now called scaling up, and it goes over all the different support positions we need in our business model plus the key performance indicators that are necessary to meet on a weekly basis in order to meet our goals.

Alongside this, I’ve also been busy building the purpose behind the company as well as ethics and standards that the company stands for. It is important for me to define the company culture and only hire those who have a passion for the same. My goal is to keep employees for 15 to 20 years and a great starting point is having a staff filled with people who truly are passionate about the same cause or purpose. Defining the big hairy scary 10-25 year goals has also been a focus. Knowing valuation, profitability, budget, and % adherence to KPI’s (key performance indicators) are all necessary gears that run the wheel.

I’ll give you an example of the key support positions that we need in a real estate investing company-First we need a CFO chief  financial officer and Sales/Investor relations.

These roles KPIs look like-

CFO-

Measuring and understanding your financial performance

Cashflow Revenue growth rate – The rate at which you are increasing your company’s income.

Bookkeeping
Net profit – Income minus expenses – the bottom line, but certainly not the only metric you need to worry about!

Quarterly review with all state of financials

Net profit margin – The percentage of your revenue which is net profit.

#suggestions to lower tax burden

Gross profit margin – The percentage of your revenue which is gross profit.

Tax Benefits
Operating profit margin – Operating income divided by revenue – another measure of a company’s profitability

Paying bills
Return on investment (ROI) – The revenue generated by investing money into an aspect of a company’s operations, in relation the cost of that investment.

Opening new accounts at frost
Cash conversion cycle (CCC) – How long does it take for money invested in the business (for stock etc) to come back to the company in the form of increased revenue.

credit cards-mgmt

members draws

k1-generation

income versus expenses of business

insurance expense

Actual versus budgeted cost of hire

Average interviewing costs

Average sourcing cost per hire

Cost per hire

Internal, external, and total headcount recruiting costs and ratios

Percentage of HR budget spent on training

Compensation cost as a percentage of revenue

Average training costs per employee

Internal, external, and total headcount recruiting costs and ratios

Return on investment (ROI) of training

Marketing budget ratio (MER)

Staying in budget

finding deals

#investor suitability forms filled

$$ raised

Return on investment (ROI) of our brand

Return on marketing investment (ROMI)

Revenue generation capabilities of brand

Staying within marketing budget

treasurer

INVESTOR RELATIONS-
ipad for leads-each event registration

Monthly Sales Growth

Average Profit Margin

Monthly Sales Bookings-calls need calendar link

Sales Opportunities

Sales Target

LOI To Close Ratio

Average Purchase Value

Monthly Calls (or emails) Per Sales Rep

# of new investor registered Per Rep

Product Performance-keeping deal flow-constant?

Sales by Contact Method-what are top 2?  stop the rest

Average New Deal Size/Length

Lead-to-Sale %
# event planning for marketing -with assistant

# video or marketing ideas per month

Customer Lifetime Value-ranking current investors by contributions-remind assistant to send gifts

Average Conversion Time
#of leads from events active for money or deals

#meetings with interested sellers face to face

#calls to interested owners

Actual sales value versus initial bid
#off market deals that fit our criteria

Average administrative time per sales person

If you are excited to watch us grow, your support means everything! If you have any questions how you can help us build this machine, please don’t hesitate to reach out to us at admin@theapartmentqueen.com

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