Utilizing Simple CFO Solutions for Your REI Group
On this episode of Next Level American Dream, Sean is joined by David Richter. David is a real estate investor who has closed more than 850 deals and founded Simple CFO Solutions, LLC to help other investors secure financial freedom. During the interview, David walks the listeners through his approach with CFO Solutions and how their services can maximize profits.
Key Topics
Tell us about your background
What prepared you most for what you are doing today?
"Profit First for Real Estate Investing" is coming out in December. Can you give us some highlights?
What are some of the top tips you can give someone starting out?
Connect with David Richter:
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Abigail: [00:00:00] Welcome to the next level. American dream podcast brought to you by Thomson multifamily group. Your hosts, Abigail, and Sean will discuss how you can take your American dream to the next. The real estate investing business practices and personal development. Join us. As we share our experiences as a father, daughter, duo, who are trying to accomplish their goal of financial freedom, we hope you learn more about how to define and achieve your American dream.
Here's another episode of next level, American dream. Welcome to the next level of American dream podcast. We have a wonderful guest for you today, but first, please make sure you have subscribed. If you have not already, we also love getting your feedback through likes comments, ratings, and reviews. Today on the show,
sean welcomes David Richter. David is a real estate investor. Who's closed more than 850 deals and founded simple CFO solutions, LLC. To help other investors secure financial freedom. During the interview, [00:01:00] David walks the listeners through his approach with CFO solutions and how their services can maximize profits.
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Sean: Hi, David. Welcome to the show? Thanks for being on. How are you doing?
David Richter: Yeah. Good. Thanks for having me.
Sean: Good. Good. Well, let's start off by telling everybody a little bit about your background, where you come from and then maybe what you have going on today.
David Richter: Sure. So I got into real estate about 10 years ago. I read rich dad, poor dad in college. One of my friends, I gave that to me and I read it, consumed it, then went out and bought a deal and was really excited about it.
It was a foreclosure, it was a good deal. I fixed. Actually rented it for a little while, then lived in it for a couple of years, because then after two years I [00:02:00] lease optioned it. Move to another house. And then the tenant in there was super tenant paid early and then cash me out six months later, later with his option agreement.
So I got that money tax-free and I was like, oh wow, this is awesome because I lived in it two out of the last five years. So no capital gains tax. So that was really cool. So I started working with a real estate investing company up there. Where we were doing about five, seven deals a month. When I first started and by year five, we were doing about 25 to 30 deals a month.
So between wholesale, wholetale, rentals, lease options, like any type of deal, you, an exit strategy you can think of in the real estate game we were doing. And you know, that provided a lot of insight because I got to sit in every seat too. I got to sit in the marketing acquisitions is finance. You know, anything you could think of there and.
One of the seats, like I said, was finance. And I like sitting in that seat and I got to see, that was near the end of when I was working [00:03:00] there. And I got to see basically from the deal, starting to the deal ending, how the money flowed, you know, like how it all interacted and overhead and everything. So it gave me a big, eye-opener like, oh my gosh, like we're doing 25 to 30 deals, but we have like 25 employees and got a lot of overhead here.
We've got a lot of things going. So that was like a big eye-opener to me. It was like, you could be making a ton of money, but it can all be going out the door if you're not carefully guarding that and watching it. And so during that time too, it's it was pretty abrupt, but we went to, we moved across country to be closer to family.
And we, I moved to Virginia area. I started working with an investor there and. Basically helped him. One of the first things was like, I want to look at your finances. Like, I need to know that this is working and I, you know, uncovered some things where things weren't being entered, right. Or didn't have the right people in place.
So in a span of about three months, we [00:04:00] got everything rocking and rolling from the financial side. And that's where we were able to dive into his books and see like he needed, he had a lot of equity on his properties, but he was like under leveraged. We went out and got a new loan for him. And he was able to then get, you know, several hundred thousand dollars out and go and use that money for whatever he wanted.
And he looked at me and said like, Hey, this has changed my life. And so that got me thinking like, oh wow, I could really be helping other people with this. And, you know, it's just knowing your numbers and having someone that can talk to you, you know, like from the real estate perspective or from an owner's perspective.
So that's why I started Simple CFO. Was that, and that's where I am today. We have our fractional CFO company that helps real estate investors and business owners, entrepreneurs understand their finances so they can have those life-changing moments of actually using the finances as a benefit, instead of just always as like a, a place where they're, you know, losing sleep over.
So that's [00:05:00] what that's what I'm doing today versus what got me into real estate.
Sean: Yeah, that's a huge part of entrepreneur's life is the money, right? Counting the money, where's it going? What are you doing with it? And how can you maximize everything and then taxes, all those other things and being an expert in that and doing your entrepreneurs stuff is really tough.
And so I, that's a huge, I think it's a huge benefit to people that are, that are especially solopreneurs that are just doing their own thing. Having someone that can kind of watch over that for them and help them get through it much more efficiently as it is, is critical. Talk about let's talk about how that kind of works.
I let's say I'm an, I'm a solopreneur. And you know, I'm just struggling to keep up with my money and how things are going. And like you said, refinancing my portfolios or whatever. So how would someone work with you to kind of optimize that stuff? How does that work?
David Richter: So we're fractional CFOs.
So we go in and we help them implement a cashflow system because that's usually the [00:06:00] first thing they're struggling with. is just knowing where to move the money. Cause you, you made a great point. An entrepreneur thinks like, oh, I have to be an expert at making the money and keeping the money. But those are two completely different skillsets.
Like you have to invest the time. You probably, as an entrepreneur have invested a lot of time, either learning, marketing, or learning, how to get a deal, how to find, you know, like how to get the money in the door. But then equally as important is keeping that money too. And that's also a skill you have to learn, but it's like, People don't know where to start, what to do.
And that's what our company really does. It helps them from that perspective of knowing how to keep the money and putting tangible systems in place in order to keep more money in their accounts, or be able to actually pay themselves and be a healthy business owner. Instead of, like I said, losing sleep every night or getting stuck in the real estate rat race and just going in circles over and over again, deal to deal, you know, project to project.
Sean: Yeah. So it's so what [00:07:00] are some of the details of how that would work? So do you guys, and you guys do, is it the bookkeeping? Is it the accounting? Is it the taxing? What, what, what sort of things...
David Richter: What does that? I said, none of that, that's really not our specialty. We have those services like bookkeeping as an auxiliary service, you know, taxes as an auxiliary service.
But our main focus is to be a CFO. So what is a CFO? A CFO is like a financial business strategist on the team saying, here's your numbers. Where you've been. Here's where you are now, here's where you're going, you know? And like, let's make sure that that lines up with your values aligns up with your end goal where you really want it to be.
And like, let's put some actual systems in place like profit first, which is an like a cashflow management system that we implement in real estate investing companies and, you know, implementing like some CFO dashboards, things that are tangible. So that way they can actually. Their finances and have a handle and make better decisions for about their money.
If I had to [00:08:00] equate it to like a hospital. The there's a bookkeeper. Who's like the nurse comes in and checks on you every day. Make sure, you know, all this stuff is taken care of, you know? And that's your chart is okay. Then you've got the specialist who I would think is like the CPA they come in and they do one section.
They do the taxes, make sure you're good. Gonna stay out of the orange jumpsuit and make sure that you've got, you know, the tax savings at the maximum tax savings. Then you've got a CFO who is like the doctor who comes in and is like, okay, is your overall health good? Do you need to see a specialist? Do I need to recommend a specialist to you?
Do you have the right nurse, you know, checking up on you? Do you have the right things there? And like, how is the overall health and are we working towards an end health goal for you? So it's more if I had to give that's where we fall in as like that piece. A lot of people look for, I think that they think when they get a bookkeeper or they get an accountant, that's what they're getting.
But honestly, a bookkeeper's job is just to do data entry, most [00:09:00] bookkeepers, and then most people, most accountants really work for the IRS. They're just making sure that you pay the right amount to the IRS and, you know, get the tax breaks and help you. But I mean, they're there to make sure you're getting compliance that the CFO's role is to be like that, that business strategy.
That helps you from that financial vertical, because you've got the CEO, who's the owner, usually on the vision, the culture, the people, the numbers, but then you've got the COO who's all about the day to day managing the people, managing the operations, managing the systems. Then you've got a CFO. Who's there to make sure that the financial systems processes and the department are working in, in tandem.
And that's what we do as fractional CFO.
Sean: Yeah. So that's, I, I still, yeah, I, I understand what you're talking about. So you w you would monitor just kind of the flow of the finances and then, and then. Helped me say, okay, Sean, you're doing really well in this [00:10:00] area. You need to apply more energy there.
Or if you're trying to go this direction with your business, you're going to have to do X, Y, and Z with your finances to make that happen. So it's, it's it's strategy more than it is. Like you said data entry.
David Richter: Exactly. It is more because, like we said, so many people. Have the skill of creating the wealth that our entrepreneurs, they just don't have the other side of it, of the keeping, the wealth.
And that's what we're there for is like, exactly. Like, let's look at the numbers, but it's a work where you've been let's project out where you want to be too. And like, are we setting objective? Or goals or rocks or whatever terminology you use of, are we getting closer to where we want to be financially?
Like, are we taking enough home? Am I paying myself as a business owner? You know, that's one of the first things we do is how are you paying yourself enough as a business owner? Do you feel like either you're paying yourself what you need or what you want somewhere in between, you know, like making sure that you are the owner feel healthy.
And that the business is healthy [00:11:00] too. So like that's one of the big things we do is helping the entrepreneur know that, that, that the bunny questions to be asking themselves in their business and then someone to guide them. That's been down this road too, of like, okay, here's what we should be thinking about.
Here's what we should be asking ourselves. And here's the answers, you know, like that we can be working on together.
Sean: And as a fractional CFO, what is the time like? Is it a, so if I wanted to have someone work with me, is it a weekly thing? Is it a monthly thing or is it, how does it work? Exactly. In terms of interaction with my business
David Richter: at the beginning, it is weekly.
We want to make sure, like the first 90 days is more intense. We are learning your business. We want to be. The right consulting arm, that CFO arm to use. So it's usually weekly at the beginning. And then as it tailors on, it could be a once, maybe a once a week meeting or once every other week, a lot of the people we do at least twice a week, twice a month meetings, you know, even the people that are on like a [00:12:00] regular.
like, flow that we're with, that we've been working with for awhile. So that really depends on where the business is, how much the help they need, because I just, you know, today had a person that I had a call with and they. You know, we're doing about $3 million this year, but we have no books and we have no setup.
So like, it's going to be a little bit more intense with them upfront to put the right key people in place, the right systems processes, then it would be if you came to me and said, no, I've got, I've got a great bookkeeper. I've got a great CPA. I've got all, everything. I just need strategy here. I need to know like that.
I'm looking at everything correctly that I'm looking at, you know, maximizing what I'm doing and running it by someone from the finance. You know, that has for that financial experience. So that's really, it depends on where you are in your business too.
Sean: Let's talk about that as well. So, Where do you find the most success integrating with businesses?
At what level do you find that they, that the businesses need your services the most and it kind of fits it fits the best for that [00:13:00] business? Or are they at a certain financial level or kind of what's the metric there that you did that helps you determine how you guys need our help? And this is going to be a fit.
David Richter: Our sweet spot is anyone $500,000 - 10,000,000. That's like we're at the small to medium size, you know, smaller and of the business spectrum of being able to help people as a fractional CFO, because they're usually making not enough for a full-time CFO on their staff, which can cost 150, 200 grand, but they're also making.
You know, they're not making enough for a full-time, but making too much not to have someone focused on that side of the business and keeping them out of hot water and keeping them profitable, you know, as they scale and grow. So that's kind of the sweet spot. 500,000 to 10 million is really where we're working with a lot of our clients right now.
So it's
Sean: more of a revenue it's more of a revenue metric than, than a timing metric or seasonal metric for the business itself.
David Richter: Correct? For us. Yeah, because it has to make sense for them to work [00:14:00] with us. And it has to make sense like that it's the right timing for them too. At the beginning. A lot of people, if they just set up profit first, if they're a solopreneur, if they're just someone that's starting out with out.
Read the book profit first, get that cashflow system implemented and you'll be well on your way to being a lot healthier than even most business owners, you know, that are doing. Like I said, the guy that today that was doing, you know, $3 million, but has no idea what is going on.
Sean: Yeah. And so that's kind of the methodology that you guys use is from the profit first book.
And that's what you helped deploy in people's businesses, right?
David Richter: It is one aspect of it yep. That is one aspect that we employ and implement inside of the businesses that we work with.
Sean: And just other general fundamental CFO. Functions, I guess as well. So let's talk about your you just so profit first was was a book that came out sometime ago and you specifically took it and sort of created the profit first for real estate investing, right?
David Richter: Correct. So I went to Mike [00:15:00] last year after working with real estate investors in saying like, Hey, this is really helping their business. You know, as an addition to our fractional CFO service, you know, like implementing this cashflow system, I think there needs to be a specific book though for the real estate investing industry, because that book was the original book was written for
general business and it wasn't written tailored to any industry. And, you know, a lot of people were asking us questions about, you know, which bank accounts should we set up? What should be our percentages? You know, like what's different and here's how we've adapted. So yeah, I talked with Mike Michalowicz the last year.
And I was like, yeah, I think there needs to be for real estate investors. He was like, yeah, I think so, too. So that book is coming out later this year of profit first for real estate investing, in December.
Sean: And so you took, you sort of took the philosophies of profit first and what you've learned with dealing with investors over the years and just put that into the book.
So it's more specific to real estate because real estate is, it has some unique components to it that you don't [00:16:00] really see in a lot of businesses. So I guess it's important to have that specific niche covered as well. Right?
David Richter: Exactly. We wanted to make sure that they could get the actual information they need and have their quest, you know, their questions answered.
Sean: Right. Exactly. So Let's talk about what would you suggest? So someone that's kind of not maybe, maybe they're they're under that 500,000 or level. What can someone do? That's in the real estate game, I guess, get the book and, and what are some of the things that they would, that you would suggest they focus on implementing or looking into in their business first, maybe one or two tips that you would give them
David Richter: from the financial aspect?
Definitely read that book and implement it. Cause it's, it's... the book is written to entrepreneurs it's not written to bookkeepers or accountants. It's like very, the language is very much and the, the steps are very much tailored to entrepreneurs. So I would say. Implement that system, maybe even hire a bookkeeper.
I, you need a book, especially if you're [00:17:00] making a hundred thousand 200, 300,000, you know, if you're at that level, then you need someone in, you know, entering transactions for you. So you can focus on growing and scaling that business. So getting actually someone in there to enter the data and then using the profit first system to manage the cash as it comes in.
So that way you've got, you've got a handle on it and you'll sleep better at night knowing where the money's gone.
Sean: Yeah. So profit first it gives you that framework for sort of structuring your financial systems initially. And then, like you said, you have someone that, that is can come in and help you with the books and maybe you get an accountant for your taxes and you can kind of fill that void with that stuff.
Are there one or two things that you see that are kind of widespread across businesses that, that are neglected or that people can, can focus on and help their business? Or is it, or is it just everything?
David Richter: No, I would say that one of the biggest neglection, it's just the finances of general. Like not wanting to look at that side.
Not hiring someone to manage the finances, you know, and I'm not, you know, not having any set of books, he [00:18:00] can't know your, your business, your business numbers. Tell your story about your business. You know, like that's how, you know, if your business is healthy, if it's a horror story or if it's a love story, you know, like if it's a good adventure novel or not, that's why you need to know your numbers.
And so a lot of people just neglect that side. The second biggest thing. What most entrepreneurs, when they first go into business is commingling business and personal expenses like using the business account for personal things and personal cap for business. You know, it's like, let's try and separate that out.
Otherwise, if someone comes after your business, they're basically going to be able to come after you too. So that's a lot of things that people neglect, setting up correctly at the very beginning and using that too much. And you know, that can get them into a lot of hot water down the road. If they're not careful and don't take steps.
You know, separate themselves as much as they can from their business.
Sean: So the, the biggest problem is the people just avoid dealing with this issue altogether. And so [00:19:00] if, if someone were in a position where they're, they're an entrepreneur and they're starting to make some money putting, just getting any systems in place and focusing a little bit of energy on their finances and using the guidelines, maybe in the profit first books would give them probably a big jump in their business already just by doing that.
David Richter: Yes, I think that would give them a headstart. You know, just from, like I said, from even investors that are doing multiple deals are way down the line.
Sean: Yeah. If you're not looking at it at all, there's no, there's no way to improve it. So just, just getting something, going, paying attention to it, starting to just starting on that, that aspect of your business.
I'm sure at this point you probably have had some success in making money and doing all those things, but focusing on this a little bit would be a good idea. And then the second thing is making sure that. The two personal side and the business side, keeping those two as separate as possible.
Just to, just to sort of prevent any sort of issues later down the road, if there is a litigation or something that comes up. Right. Right.
David Richter: Exactly.
Sean: So, what are [00:20:00] the tips? Might you give someone that are that are just trying to get, get this stuff under control? So what, what would they, what would you say would be to do first to just get, get the book and start to deploy that?
Or is there something else.
David Richter: Depends on what level they're at, you know, and why, what type of help they need, if they're, if they're a smaller sole runner, you know, just starting out, I would say, yeah, read the book, that'll give you a good framework and you can start wherever you are, you know, so make sure you know where you are to, I would wherever size business you are.
I would look at what did I make within the last 12 months?. What did I keep for myself within the last 12 months? And then what did I spend in the last 12 months? Get those basic numbers on paper and then see out of what I made. What percentage did I keep? And what percentage did I spend? And that's kinda like where I am right now in my business.
And can I improve on that? Can I lower the expenses somehow? And can I raise what I'm actually paying myself? So it's like, get those basic numbers, you know, just to see where you are currently. And then from there started implementing [00:21:00] the profit first system. If you're a larger company, it might be better to bring someone on board that knows this and can actually meet with your team or meet with you because then if you're at a higher level, you're probably running
a big team already, or you have team members. So it's like, okay, who all needs to be involved in the conversation? So probably the CEO and the COO visionary integrator, you know, at that level. And then do they need someone to guide them? So it depends on where you are in your business, but if you're starting out, I'd say, get the book, start implementing the framework.
If you're a larger, you could still get the book, start implementing the framework, but you might need some guidance and help because you're already doing a massive amount of deals or, you know, a massive amount of volume already.
Sean: Yeah. So if you haven't implemented, if you're, if you have a larger business and you haven't implemented something already, you may need some help because of the complexity of your, what your business is doing, right?
Yes. You need to bring someone in that's good. Well, so the name of the podcast obviously is the Next Level American Dream. So I ask every guest kind of what their American dream is. So, so tell [00:22:00] us what your, your, so you, you are achieving your American dream through running your own business, and you're also helping other people with their businesses as well.
So you may have a different perspective, but what is the American dream mean to you?
David Richter: American dream to me is exactly this, like running the business, helping people actually transforming lives. So that way they can achieve their American dream. You know, like we've had a lot of people now set up the system and they're like, Hey, I just took a vacation from my profit account.
Like to me, that's like awesome that they actually get, do they see these benefits? And one guy just said, Hey, I have reserves. Now. I used to be like paying off credit cards all the time. I don't have any credit card debt and we've got reserves in the account. I'm like, he doesn't know what to do with himself.
He's like this. So it's things like that. But then also I've got a four-year-old daughter. I've got a wife, like I want to be able to be there for them in the morning. Like what's the American dream to me is I get to wake up in the morning and every morning from like 7 to 8:30, I play with my daughter.
If she wakes up that early. And for most of the mornings, I [00:23:00] get to play with her. And then in the like tonight, we're going to have a good dinner. I've got to get to play with her tonight. We get to live where we want, we get to travel where we want do those types of things together. So that's also to me, a very big part of it.
And that's why I love owning a business and helping others achieve that because so many people think that the top line solves everything. And while it solves 99%, you got to have the bottom line to actually pack it up. That's why I want to help people get that bottom line and get that type of American dream for themselves too.
And then also we say, I'm, I've got a. Very good upbringing from the culture, my parents, my, you know, the influences like a Gary Harper. And so I love to give as well too. So we support some missions, some missionaries, and some people like that through our company. So I'm like, that's amazing American dream too.
Like I started this business because I wanted to give more to, so I want to be able to give back, especially to the people who've invested in me and like those to me, it's doing my why? Like what D what is that important? Using [00:24:00] the business to achieve that and really help people. So that's my American Dream.
Sean: yeah. That's awesome.
Well, I always love talking to someone like you because you're, you're achieving your dream with your business, but you're helping other people do the same thing. And it's, it's kinda, I think it's it's it has to be tremendously gratifying and fulfilling to do that. So it's great. Yeah. Well, David, so how can people reach out and get in touch with you if they do, if someone says, Hey, this is exactly what I need.
I've got to get this going right away. How would they, how would they do that?
David Richter: Go to simpleCFOsolutions.com and you can apply right there on our page and make sure we're a good fit for each other. That's how you would reach out if you are an entrepreneur just starting. Now we have a Facebook group profit first for real estate investors, and we've got a podcast.
Profit First for REI as well, too, that just gave some basic info. It's people. It's a lot of investors, honestly, on there that have implemented profit first and seen the life-changing benefits of it. And you know, like just the basic system of it too. So no matter where you are, we've got something to help you get started.
But [00:25:00] if you want to work with us, it's simpleCFOsolutions.com.
Sean: Okay. Awesome. Yeah, that's good. And the podcast and that sort of stuff is a great resource too, just to kind of get some preliminary information as well. So if you're not sure maybe you can start there and then graduate to, to contacting you, but that's really good.
Well, thanks for coming on the show. I really appreciate it sharing this with us and maybe, hopefully someone would get something out of it. And then maybe this is something that people really can use and to help their business and help their lives and stuff. So thanks for coming on and sharing that.
David Richter: Awesome. Thanks for having me, Sean.
Sean: We'll talk to you soon.
Abigail: Thanks for joining us for another episode of Next Level American Dream. If you would like to learn more about what we talked about today, want to contact the team directly or interested in passively investing and being a part of our deal room. Head over to our website at www.thomsonmultifamilygroup.com.
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