How To Be More Honest: Accounting For Morons.

by Chris Johnson

Instigator, anthill kicker.

Author website

The worst thing that ever  happened to me was November of 2003.  I made, as a Realtor $57,000 in closings (without a team) in one month.  In early December, I added another $19,000 to that pile of money.  Because of my phone banging good times, I didn’t have expenses or marketing that created it, my willingness to endure rejection, and a booming economy created that opportunity.

I remember that number, those numbers because I added them and re added them.  It made me a big dude.  I was happy and proud about a $76,000 run in about 20 days.  Proved that banging the phones works, validated me as a person.   I was king of the world, at 27.  Hot wife, money in the bank, Acura RL in the driveway.  What’s not to dig?  (Heh).

Yesterday’s Awards Don’t Pay Tomorrow’s Bills

Well, the fact that you read your own press.  See, I took most of December off.  “I earned this break.”  I said as we went to Oregon.   Bought a new house on a stated deal, pissing $40k on a down payment (Because you know, I now make $60,000 a month, you know?).   Didn’t work in January because I had myself convinced that I was earning $60,000 a month.  I was that good, I could turn it on.  Get it?  I rounded up to a number I only did once, and didn’t worry because that’s who I was. (In my head).

Payments came due, and my money was gone, mostly on BS and needless luxuries, and maintenance for the rentals we’d bought.   But I didn’t worry, because … wait for it… I made $60,000 a month.

It was true.  I made nearly $60,000 a month…ONCE.  The rest of the year was just over 5 figures per month, with two months that were less than $3,000.  But my ego declared that I was a heavy hitter, banging the phones and making $60,000 a month.  It wasn’t till late February, only 1 closing on the year that I began to worry.   I had 3 crap listings, no buyers, and my customer service had become rake like.

But, a little success made me entitled.  I could, any day I wanted to, find a listing by banging the DNC scrubbed list I had.  I could find a buyer in similar fashion.

My mind still considered me a $60,000 a month dude, even though that was a lie.

And I refused to live in Reality, and so my love for the real estate business splintered mostly because I didn’t have any kind of honest accounting.

Meaning this: I had no clue what my expenses were.  I had no clue what my pipeline was.  I had no clue how many calls it took to make the phone ring.  I had no clue about anything else.  I was still money drunk on the  money I made MONTHS ago.  My skills were good but my work ethic atrophied.

And then when you’re broke–not poor–you have to dance a highwire act and surf the payables.  The energy it takes to surf the payables..isn’t to be triffled with, it saps strength and creativity.  So here’s the way to not do that:

1. Know–cold–what your monthly and daily business and personal expenses are.  With or without debt service is fine.  Mine?  $118.06 based on a 30 day month, and $177.09 based on a 20 day month (god bless the Midwest)  (Workdays, though that doesn’t have a ton of meaning)
2. Know what you need to earn that.  For me, now, it’s about 145% of that number: 5135.00.  This pays current state & local taxes & hits my IRS account for the minimum that they require.  This may be surfed a little, but not a lot.
3. Know what your 30/60/90 day pipeline is.    Written down each morning.
4. Know fast you get paid on your sales.  Pity the poor mortgage lenders that have to wait on W2s.    Keep track of how much and wen.
5. Always have your 60 day intake > 60 day receivables.  Then work on getting it to 30%.
6. Freak out when #5 isn’t met, and sell stuff. Look, I went bust resting on pseudo-achievements.  Resting on my past.  If I’d have paid attention to every 60 day period as if it was separate, Id have been fine.
7. Lower in any way you can your expenses, without being cheap. My leak was gadgets.  I spent too much.  Now I don’t.
8. Write down every debt you have.  All of it, excluding mortgage.  Know that number, cold.   Mine?  $61,000.   $10k to a business loan, $30k IRS, $2k remains on my car…20k student loans for GenuineWife.
9. Stop hiding if you’re broke. Phil Hodgen has been something of a priest to me in this area.  I gotta know how much, how many, how soon…every damn week.  You have to have someone or someone’s to talk about the money stuff.  Offense & defense is important.
10. Sales before service. Sounds cold, sounds harsh.  Necessary.  You need excellence in both areas.  My customer service currently is terrible, but will be dramatically better in days.   I’m fixing it right now with my friend Johnny B Truant, and the help of Digital Access Pass.
11. LIFO for debts.  Lifo changed my life. Really, if you pay the last stuff first, you get out of the habit of catching up slowly.  You separate the old from the new, and you run a profitable business.   If something gets out of hand, throw it in a separate column, but pay the new costs of running a life/business currently.

My results?

I left the mortgage business in May of 2008.  I left owing $79k to the IRS and being another $65k in debt.  I’m down to $60k total, throwing nearly $5k a month at it.    I’ll have the IRS retired sometime in the next 100 days.   I know this, because of where I’ve come from.

It mostly sucked.  Just like, most of the time, banging the phones mostly sucks.  But, what doesn’t suck is getting free of this mess.  What doesn’t suck is having options again, and not being financially fragile any more.

Next post is about making customer service and retention good, automatic, and customer-honoring.  Going from a rake to an unbelievable practitioner, using DAP.

Following the cut is some diggable music: Rhett Miller of the old 97’s explodes words.