The Ground Game Podcast

Episode 7: How to Build Your Dream Business

• Justin Piche and Clay Hepler • Season 1 • Episode 7

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🎙️ Welcome back to The Ground Game Podcast! 🎙️

In Episode 7, hosts Justin Piche and Clay Hepler dive into some valuable topics that can help you build your dream business in land investing. They share insights on team building, quarterly goals, and the essential exercise of defining what your ideal business looks like.

In this episode, Justin and Clay cover:

  1. Quarterly Goals Update: Both hosts provide updates on their progress towards their quarterly goals, sharing successes and challenges along the way.
  2. Team Building Tactics: Clay introduces the GWC (Get it, Want it, Capacity to do it) framework from the Entrepreneurial Operating System (EOS) to help listeners evaluate their team members effectively. This framework emphasizes the importance of ensuring that employees not only understand their roles but also have the desire and capacity to excel in them.
  3. Building Your Dream Business: Justin discusses the importance of starting with a clear financial goal and working backward to determine the necessary marketing strategies, team structure, and deal flow needed to achieve that goal. He emphasizes the need for consistency and predictability in business operations.
  4. Real-World Deal Review: Clay shares a recent deal experience that highlights the importance of local knowledge and due diligence in land investing. He discusses how assumptions about property value and access can significantly impact profitability.
  5. Insights on Marketing and Lead Generation: The hosts discuss the costs associated with different marketing strategies, including cold calling and direct mail, and how to calculate return on ad spend to ensure profitability.

This episode is packed with actionable insights and real-world examples that can help you navigate the complexities of building a successful land investing business. Whether you're just starting out or looking to refine your existing processes, this conversation is a must-listen!

Hosts:

Justin Piche: A former US Navy submarine officer turned real estate entrepreneur, passionate about building high-performing teams.
 Clay Hepler: A seasoned real estate entrepreneur driven to build an eight-figure land flipping and development business.

#GroundGamePodcast #RealEstateInvesting #LandInvesting #TeamBuilding #BusinessGrowth

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Justin Piche (00:00)
Welcome to the ground game podcast. This is your host, Justin Piche

Clay Hepler (00:05)
This is Clay Hepler and we are here to talk about how to win the ground game.

Justin Piche (00:23)
All right. So today we've got a lot of good topics to discuss, I think really valuable topics to discuss. So we are going to give a quick update on some quarterly goals. Clay's got a great team building tactics portion here where he's going to share some gold. And then our main topic here is how to build your dream business. And this is an exercise that I like to go through when I'm talking to a new coaching client or just really any land investor who's like, hey, I want to scale. Well, how do you do that? How do you?

How do you figure out how you're going to build that dream business? And then Clay's got a sweet deal to review at the end that we can talk through. So why don't you kick it off, Clay? Give us a quick update on some pipeline revenue goals.

Clay Hepler (01:04)
for sure and also making sure that I'm six inches away from the mic today. For those people, I apologize. I've been told.

Justin Piche (01:07)
haha

We are working out our video and audio issues and challenges. We're land investors. We're not podcast producers. So I guess we are now.

Clay Hepler (01:14)
Hahaha

Right. was like my wife was telling me like I was eating the mic in my in my first couple episodes She's like just don't eat the mic. Okay, okay. All right yeah, so update on quarterly goals, so We ended up locking up about What I thought was and we're gonna go over this in a deal review what I thought was 175 K last week ended up only being a hundred like 10 K because

Justin Piche (01:23)
You

Clay Hepler (01:50)
of a deal that I'm not going to spoil. You got to listen to the end, we quickly realized that it was not a deal that can be a profitable deal. We thought we were going to wholesale it and I'll go through the whole story of how we got on our contract, how we negotiated it and why we're no longer pursuing it. So good, solid week last week. Definitely on track to hit our goals. I think we're at, for the month,

I mean I can look here, I think we're in the mid to high twos right now for the month of deals locked up in terms of profit. you know, definitely solid start to the quarter.

Justin Piche (02:33)
Yeah, Any update on your TC and the appendicitis?

Clay Hepler (02:39)
Good memory man. Yeah, so all is good. She's back at it and just And, you know, in addition to that, I know I've been trying to find a lead manager and upscale my SCR and my operations guy and found another lead manager just away. And it's funny, we were talking about this before. She you know,

you know, Justin Bichet in our interview and she's like, my husband actually works with Justin. She said, I'm glad it's you and not Justin. I'm just kidding. Just kidding. Okay. No, no. So, so the lead manager found a really good one. And one thing that I, that's important to note is that we have gone through so many applications for this position.

You know, just we filled out two lead managers and I have a really high standard, right, for our lead managers. They are our setters and they have to be really good, ambitious, coachable, and aggressive, right, and someone that wants to learn and grow. And we went through about 200 application, Justin, for two people. And of course, we could have had out of 10.

Justin Piche (03:49)
Man, yeah.

Clay Hepler (03:56)
of the 200 we could have extended the job offer and we actually did with one of them and the guy came in and within two days he said hey I can't you know this is just not the place and I think I talked about that last week but we found another one and we're training and really bringing them into our business and I'm super excited for that so everything is looking good there and then the upscaling of the operations manager he's killing it already taking ownership of guiding and training the new

lead managers because getting out of that position. a little bit slower, you know, because she is a STR right now and doing a lot of outbound prospecting for us, which requires, as you know, a lot of a lot of their time. So we're going to be easing into that slowly last month and a half, but everything's good.

Justin Piche (04:43)
Amazing. I'm glad to hear about the improvement in health. It's always it's always tough. Let's see for me a couple of updates. Yeah we we sold a property on Monday from one of the big subdivides and it was just great. I realized about eighty two K gross profit on Monday that brings us up to somewhere around three hundred and gross profit realized so far this quarter

We have another 160 in gross profit closing this week. So two more from a different subdivide and then a third owner finance deal. So I mean, I get maybe it may be inaccurate to say we're going to realize all that gross profit this week. We'll get a good down payment and we'll sell the mortgage here in the next maybe month or so and actually close that one out. But yeah, so those are all good. I also just hired a US based sales agent commission only. She just accepted the offer this morning, so I'm super

Clay Hepler (05:19)
Thanks

Justin Piche (05:34)
pumped about that. You know, I had some really, really good candidates. So you're talking about 200 candidates for your TC or for your lead manager. I had I posted a job on LinkedIn and I've had a paid job running now for maybe like two and a half months. And we have I don't even know how many total applicants. The last time I looked about a month ago was like one hundred and eighty and more have come in. And so it took a lot. I had my assistant really help kind of pare it down. I was really looking for maybe younger folks, people who weren't maybe as experienced.

but were much hungrier and had a sales drive. really wanted somebody who wanted to grow with the company and maybe wasn't nearly as established as somebody who has just a really long history working for certain types of companies doing certain types of sales. And so I had some really good interviews. Man, was like, I tell you what, choosing was so hard. And I think those are always the best. Those are always the best, right?

When it's really easy, you're like, there's one person that stands out. Those are great. You feel good because you're like, OK, I have a really clear choice. But I actually prefer when I have a really hard choice because multiple candidates are so good. And that's how this one was. There was really three candidates that I had a really hard time choosing between. But I think what it really boiled down to is one of the candidates was maybe just more aligned with growing with the company.

as like a primary focus than the other ones. And that's really what I want. Cause I want somebody who's like, who takes a, like takes ownership. You know, you're talking about your upscaling, your, your team, your, your, your team member there. And one of the biggest things is this person is taking ownership over the business. That's what I want. Right. I want somebody who's going to come in and recognize the impact they can have and see the benefits for them for putting the effort into scale my business and maybe not necessarily a different one or some other.

you know, some other business. So I'm really excited about that. And maybe just another, yeah, go ahead.

Clay Hepler (07:32)
Yeah, quick thing, man. So interesting. think I want to just focus on this, Justin, because we all hear, hey, global talent is the way, right? You can get there to global talent. And you were, even you and I six months ago, talking back and forth about my US-based people and your global talent. And you had brought someone on. What caused that change?

in you? What made you want to do that? And also, what's the structure of, you said they're commission only, which is, that's a hard sale, right? A lot of people want draws. And so how are you structuring that?

Justin Piche (08:00)
Yeah.

Yeah, no, it is a hard sale. Yeah, I'll dive into that. That's a great question. You my sales team, my acquisition team, they're really good. And like this isn't by any stretch a knock on their capability. It's just that there's something about being born here where you've raised here and you're just in this economic climate. You're in this. You just understand everything that's happening. There's an edge, right? It's just impossible for somebody who isn't living here and dealing with

everything that we see on a daily basis to understand exactly how people all the extra stresses that people have on their lives. can you know, some great salespeople from from overseas great talented salespeople can engage sellers. They can understand the motivation they can they can empathize with the problems that they're having but all of like the shared kind of national identity domestic issues that still play on people's minds.

Those are not well understood and it's really hard to get people to understand those. So there's always an advantage. That's one thing. The second is I really wanted somebody exceptionally skilled in sales to help up level the rest of my team. I recognize that not everybody on the team is an exceptional salesperson that needs to be and I am not either. You might be like the outstanding salesperson.

My background is in sales. Okay. My background is engineering. You know, that was a submarine officer as a nuclear engineer. I work for an Exxon Exxon mobile and oil company. Like that was my background. I'm like a tech minded. I'm business minded. I'm a personable person, but I'm not a killer sales closer. Right. Like that's not my skill set. So I want somebody on the team that can help train the rest of the team because they will recognize that by having the cold outreach team be better at handing off warmer leads to closers.

that will help us close more deals like it's in their best interest to up level the rest of the team. And so that was another kind of another reason for it. But let me talk real quick about compensation. Why I chose commission only the number the other the thing that I wanted maybe characteristic that I wanted the most from somebody was somebody who was willing to bet on themselves. I wanted somebody who was so confident in their ability to get deals done.

that they were happy and willing to work commission only. That's the type of salesperson I wanted. That was actually kind of a disqualifier for me. was somebody who was like, hey, I want a base and then I want some commission on top of it. I didn't say that was a disqualifier, but that was in my mind is like, I want somebody betting on themselves. The way I'm structuring it is a percentage of gross profits from the deal, but those can take a really long time to pay out. so,

You know, somebody may have to work for six months before they get a penny, which is tough, right? That's a tough sell. So what I'm doing is I'm going to pay 25 % of the projected gross profits upon acquisition. So let's say, Clay, you're my killer sales guy. You get a contract today. We close it in 60 days. The projected profit is 100K. Let's say your gross profit percentage is, let's just say it's 10%.

you're going to get $2,500 upon close. And then you're going to have $7,500. You know, we'll, calculate the real number when it actually sells and we realize the real gross profit at the end, but you're going to have this carrot that's out there. That's your money. Cause you negotiated that deal when we sell it, but you'll still get some of it upfront. The other thing I'm going to do is do a share of total gross profits for the company, kind of like a profit share. do this with most of my team.

So there'll be a percentage on a month to month basis that's based on the total sales of the company. And then the commission that they earn will be directly tied to the deals that they negotiate. But they'll get a piece of everything that the company does with that. And that that incentivizes them to level up the rest of the team because that directly impacts their ability to earn that percentage of commission. And then they'll get another percentage commission on all the deals that they close. So there'll be a monthly recurring. Well, there'll be some of it brought forward and then there'll be a payout at the end.

Clay Hepler (12:09)
Okay.

Right, right, right. I actually do that with my guys. have a bass though. So one other thing for that, think that listeners would want to know is do you have a graduated, you get this amount under contract per quarter, or close per quarter, do you have a commission rate or do you have a flat commission rate?

Justin Piche (12:32)
Right now it's flat. know, that's a good, that would be an interesting thing though to incentivize even harder work is to, to be, yeah, I haven't, I haven't done that yet. I think that the, commission structure itself, it escalates linearly with the number of, you know, the amount of gross profit that this person's able to get under contract and then us close and then sell. so that's interesting. Do you, do do you do graduated?

Clay Hepler (12:57)
I do graduate based on a quarterly, like we do the base and then, know, 0 to 2, 2.50, 6%, 2.50 to 3.50, it's 8, 3.50 to 5, it's, no, 3.50 to 5, it's 10, something like that. I forget what it is. But definitely if you make over half a million dollars a quarter for the company, you're getting 10%.

Of all those profits, you know, they have a base too. You know, this is I like the idea of the Commission only and the way you do it kind of pulling those profits forward a lot of times how people do that is actually just finance the property a little bit more so don't even have to come out of their own pocket they just get financing from the financing company or whomever they're working with of hey, this is an additional $2,000

Justin Piche (13:29)
Yeah.

Yeah.

Yeah, I have seen that. I have seen that people who fund deals providing additional capital for the property at the at the acquisition. I've seen a couple of arrangements like that.

Clay Hepler (14:05)
Yep, so that's a good way to do it if you don't have a lot of money bringing those types of quality salespeople into your organization. they're gonna want to, anyone that's in this arrangement, by the way guys, they're gonna want to have at least 200K on the table, right? So you're not gonna bring someone in and it's gonna be hard to find someone where you don't have it, you don't have it what?

Justin Piche (14:24)
yeah, man.

No, no, no. just said, yeah, man. We have like a pipeline of more than a thousand leads that all want to sell, that we want to buy, and we just couldn't quite get their own price for this person to literally go after day one, day one. In terms of how much profit potential there is, like it's really not limited at this point.

Clay Hepler (14:32)
Right.

anything else? Any update on your other quarterly goals?

Justin Piche (14:52)
You know, that's all kind of update now. We're still, we're obviously working towards all of them. I have a weekly meeting leadership team meeting and so we haven't had it this week. We had it last last Thursday and that was a lot of it was, Hey, let's go over these quarterly goals and like, let's talk through what, what steps have you taken? And if you haven't taken any, let's talk through what are those steps you should start taking and what my expectations are. So I expect a good update this Thursday on that.

Clay Hepler (15:18)
Awesome, awesome. Well, I want to go into our next section here, the team building tactics, right? This is something we introduced first time last week. And I think that a lot of people are going to benefit from it because the team building tactics is actually how you build a business, right? You just have a high paying job. It's cool. Some people like to do it. You have a high paying job though, if you are not learning how to scale and manage your people. And so this thing is ripped right out of traction.

is EOS entrepreneur operating system. Those people that don't know, read the book. It is incredible, right? And highly recommend learning how to implement EOS in your business. It is an operating system for small and mid-sized businesses. And it really just teaches you how to run your business, your, meetings better and how to cast a vision, a mission, to, build a company that's worth hiring. That's worth joining, right? For your

for your future hires. So the team building tactic this week is GWC, okay? And so when we are hiring an employee, when we are putting an employee in a position, or if you go out and read Traction and you say, wow, there are some people that I hired, that I hired because I was in a different mindset, a different leadership level, and really they're not the right people, but you just have that emotional feeling. You know, lot of entrepreneurs early on,

They're just sort of making decisions out of emotion and not data. And so the way that we make decisions based on data, when it comes to an emotional decision like people is we use GWC. Get it, want it, capacity to do it. Get it is simple. Does this person understand the position? Do they understand exactly what the outputs of the position are? Right, so if I'm a salesperson, do I understand that the outputs of the salesperson in this company,

Right? The salesperson in at Scout Lane Group might be very different than the salesperson at HEPOI Land Holdings. The objective is still the same. The output is still the same, but how we reach that is gonna be different. And so in our context, do they understand the outputs that they need? $150 a day or an hour of talk time or two hours of talk time or X amount of qualifications per week or whatever, X amount of offers per week, whatever the outputs in, do they really understand that?

That's the core level. That's how we qualify people. Number two, want it. So my operations, soon to be operations guy, salesperson, I wanna clone this guy. Five, six, I wanna have five or six of them in my company. He's just incredible. I told him that. said, John, you're amazing. I love you. Just a top performer. embody our core values. He's just an amazing contributor to our company. But he wants to move into

the operations role. Now he's a salesperson, Justin. He's been in sales for 10 years, but he no longer wants it. So if he's gonna perform at his peak level, if he doesn't wanna do it,

Justin Piche (18:27)
Yeah, no.

Clay Hepler (18:29)
Right, right, exactly. So you you were talking about, hey, I'm hiring the salesperson because I'm not a, I'm not at my core level, a sales guy, right? Now you might be able to do sales, but it's probably not natural to you. Or you know, you're probably just not, that's not your vent. And so you don't really want to do this. You want to hire someone else and have them come in and manage that, right? That's the one of the GWC. And so you can look at your team members and say, does this person actually want to be in this position? Whether it's a cold collar,

whether it's a data scrubber, whether it's a operations manager, whether it's an acquisitions person. And we sometimes say, hey, I'm just gonna give this person this position. I'm just gonna promote them to this position or I'm gonna change them laterally and put them in this position. And in reality, we're not really asking them if they want it. And what happens is two, three, four months down the road, when they're not performing to the level of the position, you say, you blame it on them.

when in the reality it was on you for not understanding what they actually want as a professional. So that's number two, want it. Get it, want it. Last one is capacity to do it. I've made this mistake so many times. I'll give you perfect example. A couple of months ago, earlier this year, I had an executive assistant who was very, very talented.

I was super impressed with her and I said, hey, I want you to be my personal executive assistant. I want you to also sort of blend, kind of be on the chief of staff role, doing some tech operation stuff. An executive assistant can do that depending on their capacity, right? You can have an administrative executive assistant that manages your calendar, your travel, your emails, but then you have a more high level.

like a chief of staff operations person, they can kind of live in that world. I know you have one, Justin. But I said, I want you to, because you're so talented, I want you to be my executive assistant who manages my emails, my calendar, admin stuff, personal financial, stuff like that. I want you to also be a basically chief of staff role with operations, learning about Notion, building out Notion.

those types of tasks like more project-based tasks more how do we consolidate and Concentrate our resources in the right ways in our business How do we build out infrastructures and systems so that we can position ourselves to scale? Those types of things that are those are not five dollar an hour tasks like you know your emails those are those are 15 25 even hundred dollar an hour tasks depending on who you want to bring in

And I also wanted her to be a transaction coordinator, right? And so, did she have the capacity to do all this stuff? Yeah, of course, right? She could do all this stuff, but not at the same time. And so, a lot of times we find entrepreneurs, me in general, we're like, I can do that, right? Because we get a high or we get validation internally, Justin, from doing all the stuff.

Justin Piche (21:28)
you

Yeah.

Clay Hepler (21:55)
Okay, I'm calling a broker and then I'm closing a deal and then I'm sending an email and then I'm calling a title company and then I'm raising my capital and then I'm ordering drones, right? And we're able to do all that stuff because we want to work 12 hours a day. And we can do it because we can sort of push ourselves through it, right? But at the end of the day, our team members, it's not fair to them, right? And they're gonna become disgruntled and they're gonna wanna leave.

And so capacity is not only in terms of the capacity of volume of tasks, right? In terms of the outputs of the position. Capacity is also, I can't expect a operations manager to make director or executive COO level decision making. And sometimes we put pressure on our employees, particularly if they're global talent, to make a decision that's not under like,

under the umbrella of their their position, right? So we want someone to just make a decision on something that is should be only made by the CEO, right? Should we only have the capacity to do that? And so that's another thing, Justin, I see, you know, that when we say capacity, we're talking about volume of tasks, we're talking about outputs of tasks, but we're also talking about the level of intellect and understanding and context

Justin Piche (23:21)
Hey guys, this is Justin, co-host of the Ground Game Podcast. I'm interrupting your podcast here to remind you to subscribe, like, share with your friends.

And especially if you're getting value here, please give us some comments and feedback. We really appreciate the comments where people are asking for us to discuss specific things. We want to dive into every topic that's valuable to you. Now back to your regularly scheduled programming.

Clay Hepler (23:45)
required to make some types of decisions.

So that was our team building tactic practice week.

Justin Piche (23:48)
Man, gold. already said it. This is part of Gino Wickman, Traction, EOS. This is part of the system that you're supposed to do every single, every single year is evaluate your employees. And this is honestly one of the hardest things I think for an entrepreneur to do, especially when you have good loyalty members, but things change. And so maybe just a quick.

Anecdote, you know, as I was scaling my business, I hired a few folks for the business that I had at the time back in early 2022. And as things scaled as transaction volume scaled, this kind of a tale of two of two employees, right? As transaction volume scaled, I had a sales assistant who was a really, really nice guy, like someone who I really like, like personally really like. And I also have.

had a transaction coordinator who is still with me and is my longest serving employee. And as sales volume started to go up and we had to do make a whole lot more listings, we had to do a lot more Facebook marketing, we had to have a lot more buyers list leads coming in, a lot more directed targeting buyers list ads and things that we were marketing campaigns that we were setting out to sell properties. The sales assistant just could not keep up.

They could not keep up with the number of transactions. They couldn't keep up with the level of detail that was required. And so what ended up happening is my sales manager was just reworking all of these lower dollar tasks that were supposed to being, they were supposed to be completed, you know, very efficiently, very just set it done type of listings, like very just, there's a process, there's a procedure, but we just, things were missed day in and day out. And we ended up obviously having to let this person go because they had to get it, like they got it.

They had the want it. They just didn't have the capacity to handle that number of things and still pay attention to the details that mattered. And on the other hand, my transaction coordinator has scaled from like two transactions a month to in some months, 30 transactions or more on this. If you combine acquisitions and sales and has just crushed it has just is continuing to crush it.

She has to get it. has the wanted. She absolutely has the capacity to do it. And I think what, what people can fall into is, Hey, you know, maybe, maybe this person can't handle the role anymore, but I really like them and I'm just going to keep them in the role. And honestly, that's just not fair to you. It's not fair to them. And the biggest thing is it's not fair to the rest of your employees. If somebody is not able to execute on their job and it ends up

hurting your other employees and you as the leader don't do something about it, that is an absolute failure on your part. You're gonna hurt the morale of your team. And that's one of the reasons why you have to do this exercise. think every year you have to have some way of evaluating your employees, especially on these three criteria and having a way to either scale back their role, move them into something else or let them go if it's not the right fit.

Clay Hepler (26:58)
Yeah, and if you're doing this simply, Justin, before you even start this, the key here is to make sure that there is clarity in all of the outputs of the position, right? Because what you also find or see people do is they get frustrated for the outputs of one of their team members. And in reality, it was their fault because they did not

Justin Piche (27:25)
Yeah, they didn't set the expectations.

Clay Hepler (27:28)
clearly set expectations, outputs, responsibilities for the position and that's so common. And it's very easy to blame global talent for, this is a low dollar an hour team member and it's just their intellect. It's like, no man, it's actually your fault because you did not clearly define the outputs of the position. And that's one thing, always look first at yourself if there's a get it.

problem or a capacity problem. The one it, it's pretty simple, right? That's in the hands of the employee. But before over indexing on this person doesn't get it or they don't have the capacity, look at yourself first in the context that you give them to achieve the task that you're giving them underneath the responsibilities of their position before you start to pull plugs.

Justin Piche (28:19)
Man, this is man. We could talk on this for another like 20 minutes. Maybe just let me say one more thing about it then we can move on to the meat of the podcast, which is building your dream business. But I literally was having a conversation today with one of my coaching clients who has a cold collar who's not performing particularly well. And I think like he was saying, hey, like, what do I do? And my instinct is always to go with, did you set

incredibly clear expectations for what this person was supposed to do. And if there's if you can look introspectively at yourself and say, you know, there may be some muddiness about what exactly I was expecting, then go back to that employee, set those expectations unbelievably clearly, like no question what the expectations are. Give them one more chance. And then if it's still not working, it's obviously time to let that person go. But I think, you know,

I just, man, you've some great, I love this, I love this team building tactics section. This is great.

right. So now we are going to get into a topic that I really, I think is a super important for every person who's building any kind of business. But obviously, you know, we're talking about land investment businesses, to figure out, is where do you want to go? Like what, like, how do you even know what type of a team you should have? How do you know how much marketing to send out? Who to hire? Like, those are really good questions. And I think it all starts, at least when I'm thinking about it, it starts with a number.

Okay. And that number, if for a lot is can be different for everybody, but usually it's a, this is my net take home number. This is how much money I want to take home in my business. And I think when you're building a business and you're, you know, obviously there's a whole lot of other purposes to do it. A lot of people start businesses for a variety of reasons. Your reason could be time. could be whatever, but for the purposes of actually designing a business that produces a financial result, that's kind of what we're talking about here. So it starts with a number. What is your net?

profit that you want to take home at the end of the day. And so this is an exercise I go through with a lot of different coaching clients. And I think everybody should go home and take out a piece of paper if you haven't done this already and figure this out for yourself. But let's just use an example of I want to take home five hundred thousand dollars from my business over the course of the next year. Maybe that's a good a good starting point. I want to take home a half a million dollars out of my business over the next year.

So how do you back into that number? Well, there's a couple of assumptions that you have to make, right? The first is what's your margin on the gross profit that you have to make? So like, what's your revenue margin? What number would you use, Clay, on that? I like to be conservative on this one just because, you know, especially when you're scaling, your OPEX tends to exceed what it would at steady state.

Clay Hepler (31:06)
Yeah, I-

I'm trying to think this through. So I mean, my gross profit margins are like 45 to 50.

Justin Piche (31:20)
Okay, good. Okay. Let's start. I like to use 40 as a conservative number for people who are like planning this out. You know, obviously, obviously like how there's so many factors that go into this, right? How effective is your team and negotiating? How good are you at lead management? How cheap do you do your marketing? Right? Are you all mailers? Are you all cold calling? There's so many different factors that go into that. But if you use 40%, I think that's a good kind of rough number. So

Clay Hepler (31:28)
Okay.

Justin Piche (31:46)
40 % margin on revenue brings you to $1,250,000 in gross profit. So if you're taking on $500K, that's what you're going to pay taxes on. You need to make gross profit wise $1.25 million in a year to realistically expect to take that home. All right, so the next question is, what is your average deal profit? Because you need to know, how many deals do you need to do in order to achieve that number?

And so this is a really hard question, right? Because there's so many different types of deals that you can do in my business. I like to target 25 to $30,000 average profit on a flip. and when I say it, maybe a better way of saying that is I try to only target properties that have a minimum of $25,000. And it just so happens that we often get properties that are worth less than we thought, or we make lower margins than we thought on them. And in the end, it averages out to somewhere around 30 K for us.

But if you're gonna target 25K profit deals, let's just use that as a number. So that means you need to do 50 deals per year in order to hit 1.25 million in gross profit. That's the next question, right, is how many contracts do you need? Because you're not gonna close all those contracts, right? I mean, you're gonna get contracts, you're gonna have title issues, you're gonna...

Buy or get a property under contract with a wrong assumption about what it's worth I mean clay is going to talk in the deal review About an issue on a deal and I imagine it's going to fall into that category of hey We just made a wrong assumption or there's something wrong with the property That's gonna we're gonna realize less profit than we thought and we're not gonna do that deal. We're gonna cancel it So, know, I think a really good operator closes somewhere between 75 and 80 percent of contracts The more the less conservative you are. You probably may be closed two out of every three

contracts. If you're wholesaling it's probably something a little bit even lower than that.

Clay Hepler (33:44)
I would say because of how many quick clean deeds, how many muddy titles, it's best to be 65%. OK. OK.

Justin Piche (33:57)
Yeah, and that's the number I have here, which is two thirds. So out of every three contracts you get, you're going to end up canceling one of them. That's a decent rule of thumb. It could be a little more, it could be a little less. None of this is exact. It's really, really dependent on many, factors, but this is a good rule of thumb. So that means if you're going to do 50 deals a year, you need to get 75 contracts a year for properties that average about $25,000 gross profit at the end of the day. All right.

That's 1.5 contracts per week. So now the question comes, how much marketing do you have to send to reasonably expect to close that many contracts or like to get that many properties under contract in a week? And I have some numbers that are true for my business. I'm gonna use cold calling and I'm gonna use mail as the two numbers that are true for my business and how much it costs for me to get a contract. This is incredibly varied. So like,

Anybody who's listening who's thinking, man, Justin's numbers are terrible or Justin's numbers are amazing. Just keep in mind, there's a lot of factors that go into this. And here's some just general rules that I'm sure, and maybe Clay you can, go ahead.

Clay Hepler (35:07)
Yeah, this is actually important. just to expand upon that, It's like, know, just to say, hey, there's so much variability in these numbers. Here's why. A cost to acquire a contract on a house flip or wholesale in San Diego County is going to be much higher than Little Rock, Arkansas, right? The profit's gonna be there. It's gonna be much higher.

But I'm sure Justin's going to talk about this in a second. What actually matters in order to scale here, in order to get profitability, is your return on ad spend, which we'll talk about probably in this conversation. least I'll make sure to add this at the end if Justin doesn't. But the type of properties that you're targeting dictates a lot of this, but we can kind of focus on middle market for these types of flips and then we'll expand upon like...

Justin Piche (35:46)
Yeah.

Clay Hepler (36:01)
lead to contract rate, contract to close, all that stuff.

Justin Piche (36:04)
Yeah, these are so the numbers I'm going to share are are all in cost inclusive of data inclusive of skip tracing inclusive of team labor. So the cost of my employees to actually pay them to work and get these contracts under under contracts. This is not from with the numbers. I'm going to give her not just initially return on ad spend but return on total spent op-ed spend per contract. And just to kind of expand obviously some rules with them the cheaper the property.

the more likely you are to get a contract with a given amount of marketing. We said again, the cheaper the property, the lower dollar the property, the easier it is to get a contract for that property. The main reason is because the seller has less options. A seller who has a property that's worth a quarter of a million dollars can go to any realtor and that realtor would be happy to take that listing because there's enough commission for that realtor to properly market, actually put some effort into it to find a buyer and make good money.

The same seller who has a $20,000 property does not necessarily have that option. Most realtors would not give that person a time a day because the commission they're going to earn on it is very low. It's very, very low. And so those people are much more motivated to sell to somebody who's coming in without realtors and is willing to pay cash or close relatively quickly than somebody who has a quarter million dollar property. And so as you target larger and larger tracks, for me, it's basically five acres and up is the only things that I'm marketing to. And most of the markets that I'm in,

That bottom level five acres is probably around a 40 to $50,000 market value property. And then obviously on the high end, we are targeting properties that are worth millions of dollars. And those ones are really hard to get under contract with mail or cold calling, frankly, because those sellers are much more sophisticated. They have way more options for what they do with their land. And generally they don't need to sell or even desire to sell in a lot of cases. So for mail, let me start with cold calling because I always cold call before I mail for cold calling. It cost me one contract.

cost me about $2,400 to $2,500 in spent. So that's the systems, the phone numbers, skip tracing data, and the team who's actually doing the calling, their rate, their labor rate, $2,500 per contract. And then for mail, for me, it's up around $8,000 per contract is how much it costs for me to get a mail contract right now.

And my main hypothesis for that is because I am only mailing to at this point to developable properties. I'm only mailing to potential subdivides and higher value tracks. I'm not mailing to like, I mean, it'd be hard. don't think I'm mailing to anything that's worth less than maybe 150 to $200,000 at this point. And so those are much more sophisticated investors. They're not as likely to reach out to you if you send a mailer, you know, they're much more likely to list with a broker. And then we also work the lists over obviously first with

cold calling, we're trying to get, I'm trying to get the cheapest, the cheapest way to get a lead before I go into a more expensive way to get a lead. And so a lot of the, what you might consider lower hanging fruit or folks that are more motivated to sell that are that answer the phone. We're already getting those, having those conversations before we even send a mailer to those people. Both of are contributing factors to the mail cost being quite high relative to what a lot of people are doing. So what does that mean? Okay. You want one and a half contracts per week?

you're gonna have to spend some money on ads or like on marketing spend and team spend to actually do that. Another little quick rule of thumb that I use is one cold collar, a good cold collar can get one property under contract every six weeks. And that assumes a ton of things, okay? It assumes that you have good lead flow processes, you have good follow-up, you have a good negotiator. Like the other part of the team that's actually taking like your lead manager and your acquisitions manager.

team are working and they're able to get those leads turned over into contracts. But that's kind of that's the rule of thumb that I'm using when I'm targeting a certain number of contracts I want to get in a week. I have to scale my team to a certain size to get that. So six cool colors would result on average in one contract per week from that marketing channel.

And maybe we'll just take a quick pause, Clay, for you to give some input. I can kind of round it up with, hey, what does your team have to look like to actually do that number of deals? But maybe just a quick talk on return on ad spend or other things that you thought of.

Clay Hepler (40:09)
Okay.

Yeah, yeah. You know, yeah, yeah. What I do here is if we're talking about, you know, actual numbers, right? If we're talking industry average, okay, for coal calling, you're going to close in the first 30 days of deals coming into your system, about one out of every 50 to 60 leads, okay?

So this kind of aligns with what Justin's saying. Depending on how many leads you're submitting a day, let's just say you submit two leads per day for Cold Caller. So that means two leads times five, that's 10. I'm trying, hold on.

Justin Piche (41:06)
Times six is 60.

Clay Hepler (41:10)
Right. yeah, so math right now going on afternoon recording session here. Yeah. we're, we're, we're about 10 leads a day, right? In that respect, if you're, let's say six, if you have six cold callers, and you're going to do 12 leads per day, 12 leads per day times five days in a week. If you're cold callers, you're calling five days. Sometimes some people do six days, right?

Justin Piche (41:10)
sorry. Yeah. 10, yeah, that'd be 60 leads in six weeks.

Clay Hepler (41:39)
But if your cold call is accounting for five days, this is Justin's number. I arrived at it differently. This is how land investors get to numbers differently, right? So that's 60 leads in a week, right? And so if I'm really good, I might be able to do one out of every 50 leads, right? And so that kind of gets closer to Justin's number of every six weeks, but

If we're just talking one out of every 60, which is this is exactly what Justin said, it's one lead per week per cold collar.

Right? And so if we just use that, if we're just doing cold calling, we're like, okay, so I can expect basically I have six cold callers. I can express basically four to five deals per month. Right? Essentially from, from.

Justin Piche (42:25)
Yeah, that's about right. Yep. And again, those, we talk about numbers, right? So Clay is saying, you know, you can expect one out of every 60 leads when you're first starting maybe to result in a contract for us. It's more like one in 25 to 30. We just push less leads per code caller because we do a lot of the qualification on that front end in that first call, which we kind of talked about in a different podcast. Whereas Clay's got lead managers and they're doing a lot more of the maybe deeper qualification before it gets to acquisitions manager.

I mean, there's a million ways to do this business.

Clay Hepler (43:00)
Right, and the reason why we do that, me just kind of heads up is we have people in our system now that have opted into communication. And so we can continue to market to them in a compliant way. they're in our system for like Justin might have 25 people that are more qualified. It's less strain on his system today. But I'm building up over a longer period of time, I might have more people. Now these are philosophical differences. They could be right, they could be wrong, right? But I like to have more people in my system because I trust my sales team.

And so, and that's why we push more people through for retail leads, kind of retail leads, people that are motivated in selling. And then as it pertains to mail, right, if we're just talking about Justin's mail cost, right, you know, he says $8,000. You know, that's pretty expensive for mail, right? You know, they're, in the old days, right?

Justin Piche (43:53)
To be clear, that's inclusive of my acquisitions manager, lead manager, all of their time relative. That's like a proportional amount of time they spend on mail leads versus spending on cold calling other lead sources. So that's not, I'm not sending, cause that would be an equivalent of sending what, like 13,000 letters to one contract. That's not true. It's more like 8,000 to 9,000 is what I'm seeing right now. Letters per contract.

Clay Hepler (44:14)
Yeah.

Justin Piche (44:20)
It's just the cost inclusive of labor and everything is about $8,000. My marketing cost is probably more like $4,500 or like $4,700. So I know a lot of people look at those numbers differently. Just a little clarification there.

Clay Hepler (44:31)
Right.

That's super important, right? So when you hear us talk about cost per lead, cost per deal, cost per contract, average profit, all these things, always ask yourself, like we just look at this one way, guys. You should run your business in a way that really, and this is what we're talking about, building your dream business, but running your business in a way that is conducive to your goals, your life. And this is just what we do. We're not saying this is the right way. We're just saying this is how we roll.

And so for mail, you can say, if I sent out like 4,500 pieces of mail using kind of what Justin's doing, which is higher dollar properties, that's what I can expect. I find that people can really visualize that a little bit better, Justin, kind of those nitty gritty numbers. And Justin is a sophisticated sales team. There's a lot of stuff to go into this, right? But that's kind of high level. So you can expect that if you have six coal collars, I'd deal the week.

And if you send out 20,000 letters per month, let's just say, you can do three to four deals a month, right? So that'll get you to where you need to be.

Justin Piche (45:43)
Yeah. And you know, it's kind of hard to show it. We're talking on this podcast. I've got a, for those who are looking at the YouTube, I've got a remarkable tablet and I draw, I write this stuff out and I'm showing a client or coaching client or talking to another land investor on a consulting call and I'm talking through this type of stuff. It's a lot easier to visualize. And I totally recognize some of this may be lost on folks. I think the most important thing that anyone should take away from this is

to start with the end in mind, figure out what that number is that you want to take home and then work into what your operating budget should be. Your marketing OPEX budget should be and that will help inform what your team structure should look like. And this business is so customizable. You may say, you know what, I don't want to cold call at all. All I want to do is mail. Okay, great. use a, you probably don't need to use the number I use, which is, you know.

eight to nine thousand mailers. may have better performance five, six thousand somewhere in that range, depending on the types of property and the area that you're targeting. But figure out what that number is and scale that marketing budget. Spend the money that you need to spend. Get those mailers out. Make sure they're good. Make sure you're improving constantly to generate the number of contracts you need to do the number of deals you need at the right price to hit your number. You've got to actually like execute on the plan and figure out what that plan is.

Otherwise you're just throwing money in the dark. You don't know what the results of your business are going to be. And you're to be frustrated because you're not going to have consistency. You're not going to have something you can hang your hat on. You know, one of the things that like my wife and I talk about all the time is like, Hey, she, she, she wants to, okay, we're to cut that out. I don't want to talk about that. Okay. We'll still go to go back a step. One of the things, yeah. One of the things my wife and I talk about all the time is like, how do we know this business?

is going to consistently produce income, right? Because every time she talks to me, I'm like, I got these deals going and I got these deals selling. And then like I'll go into a month of like very high stress, you know, sales maybe slows down and then a month of Jubilee when we get a bunch of and it's very, it's very, it can be very up and down. But what I'm trying to do is design a business that is very consistent. And yet there's no way around the cyclical nature of this business. It's just no matter what, even at scale. Okay guys, even, even doing a hundred and

50 deals or whatever in a year, it's still feels cyclical. Okay. But I want to have at least consistent enough deal flow through the months that I can predict a good deal flow to have to be able to pull out a regular income from this business so that I'm not stressed every month of like, you know, am I going to be able to pull out the money I need to pay my mortgage and pay and feed my kids and do that and go on vacation or whatever other things I want to do. without planning, without proper planning and actually understanding what the results are supposed to be.

for the input that you're putting in, you're never gonna feel that way. And I think that's a really challenging way to operate a business is just feeling like you're constantly in the dark about what the results of it are going to be.

Clay Hepler (48:35)
Right, and let's just set the right expectations here. Justin and were talking about this before and this is just so timely. Justin and I, we came into this business in very different perspectives. Justin came with a lot of cash, I came with $30,000, if that, right? And I can tell you one thing, the way that Justin did it is better than the way that I did it, right? So,

Justin Piche (48:59)
You

Clay Hepler (49:02)
This business, like Justin said, is a cyclical business and we need to take the time frame of a quarter versus a month. Right? Everyone says, I had this Twitter post that like got a lot of impressions and people liking it because I'm like, first month, negative 60K, second month, 30, second month, 30, second month, or fourth month, 60, 323K, 500K, what like, so all these cyclical

Justin Piche (49:20)
I know, I love that one.

Clay Hepler (49:32)
Natures of the business and people want to say hey, you're gonna get a hundred K months but the but what matters is the year and So, you know being able to pull out that money in a way that's really or building a business that's consistent But consistent on a quarterly basis versus a monthly basis is what matters So I just want to touch on two more things Justin as we're wrapping up here at the end of it at the end of this section number one return on ad spend, okay, so

Justin and talking about, okay, it cost me $2,400 to get a cold call lead. So if you call me up, right, Justin does consulting, people call me all the time about it or the Landman Accelerator and they're asking me, my, actually my cost to acquire a contract is actually $1,500. I said, wow, that's good. What's your normal gross profit? Well, it's usually about $3,000.

This is a hypothetical example. That's bad. That's actually very, very bad because you can't run a business like that. You can't pay your employees, your commissions, you can't scale out of that. Where we need to be in any channel that we're doing, whether you're doing cold calling or texting or RVMing or whatever you want to do in your business, that's your business. But you want to be between 3 5X return on ad spend.

Right? So that means you put a dollar in, you put a dollar in, three dollars come out. Or you put a dollar in, five dollars come out. That is the recipe to scale. If you're going after one marketing channel, okay, and you're investing in this marketing channel and you're like a 2.9 follower, 2.95x, and you're wondering why your business isn't scaling, you gotta fix the problem of that marketing channel first to get it to three, over three, or to four.

And that's either getting better on your front end with the actual leads. It's getting better in your lead intake process, but you can start to analyze, but know, analyze your process and know that the three to five X return on ad spend is where you need to be, or you're not scaling your business, right? You are not scaling your business. You're not scaling yourself out of your business. It doesn't matter. Justin could say $8,000, but he says every contract I get in direct mail is I'm making $50,000.

Justin Piche (51:56)
Yeah.

Exactly. I mean, our male contracts are higher profit on average by a good margin than our cold call contracts just because we're targeting a different type of property. But that's what a good what a good point. What a good point. Man, you want to go run into the deal review. Kind of been teasing from the beginning. I'd love to hear about it.

Clay Hepler (52:19)
my acquisition guy was trying to close the guy on the phone. And he, don't normally come into close, but I do love, I love to do it. He couldn't close this guy. And this guy threw up all these objections, hey, I'm not interested, whatever. I needed to have my attorney look at it. I get on the call with this guy.

Walk them through the contract. I'm not going to into details because we are running out of time here, but We go through the whole contract. I close them on the phone. Okay? And I thought that this property was a great property. It was going to be a wholesale deal, right? This was in a proper estate that's pretty northerly though So it was a little bit of a risk because it's it had a three season road that actually went to the property and so We get this thing under contract. I eventually call a broker

right after the fact. And we're thinking that we're buying it for like...

1700 an acre, something like that, it 80 acres. And we were like, we were gonna sell this thing for 4,000 acre. And we were super pumped, man. I was like, wow, this is gonna be a killer deal. And it's gonna be a really good contract for us in this quarter. So we called a broker and a couple things happened. So the broker said, hey, number one, this is a three season road. So your speed to sale is gonna decrease dramatically.

because it is an ATV road. So access is a classic land investing, right? Access is so critical, right? So just because it has an easement, it looks like there's a dirt road, it's a big road, until you get the local knowledge to know the accessibility of your parcels, you don't really know where it's gonna end up, right? Because that could swing a price dramatically. Justin, he also said there is no electricity to this lot, even though the seller told us there was electricity to the lot.

And he said, in this county, for some reason, 80 acres individually will sell for 2000 to 2500 an acre. A 40 acre that will sell for 5000 an acre. And so that's bizarre. Again, local knowledge, this stuff happens all the time, especially if you're jumping into different markets, as most land investors do, right? And so...

Justin Piche (54:28)
Yeah.

It means they're priced the same. mean, like an 80 acre and a 40 acre are exactly the same price.

Clay Hepler (54:43)
Exactly. Exactly. And so what, or even more, right? Like, it's like even more, even more expensive. So we talked about the electricity. So basically this, this parcel term from what we believe to be recreational hunting property to a pasture and forest, right? Unless you get a generator out there, which is expensive. We got another thing that went against us, which is the road that was

Justin Piche (54:48)
Yeah, that's bizarre.

Clay Hepler (55:12)
a three season road. And so now we're going into wintertime. This is October, November, December, January, February, March, not gonna have access to it. So five months of cost of capital eroding profit. The you know, the like I said, the electricity which is going to dramatically impact our our value. And so those two things because of a local knowledge, killed our deal like instantaneously, okay.

Justin Piche (55:18)
Nothing.

Clay Hepler (55:40)
And so the question always is for land investors is do I get this information before I close or after? Does it help me before or after? And I know Justin, you're kind of an after guy and I've become more of an after guy, right? Because these are, after contract is closed, we talk to a broker. Basically what we do is we now have learned from this, right? That these things are important and we kind of screwed up that underwriting. We're gonna go back to the seller, try to negotiate it, probably not gonna work, right?

Justin Piche (55:54)
You mean after a contract is signed? Yep.

Clay Hepler (56:10)
You always got to give it try. But then what we'll do is I'll go in there, I'll take a loom video, explain these are all the reasons why this specific property we had to drop out of this property. And then we upload it into our own database internally. And so when we train new acquisition people, we have that information so that they can refer back to it as they continue to learn and develop and learn how to underwrite. Right? So I learned something there. I shouldn't have approved it. But this is all these failures.

that we just take them and we learn from them.

Justin Piche (56:41)
I love that. I mean, I actually had maybe not quite as similar, but something kind of similar happened. And I know we can't just sit around a sign, but we don't want to make this podcast so long that people don't listen to the whole thing. But I had a kind of similar deal happen where I had a property in Alabama, subdivide opportunity that I offered one hundred and fifty thousand for sixty eight acres. It was a good deal at one fifty. I think it just worked and the seller wouldn't go for it.

And so they wanted 225 minimum. I kind of cut it up a different way and made a judgment call that I could get that many lots out of it. It was kind of sloped. I had questions about the buildability of some of the lots. I had questions about the access off of the dirt road or the county kind of gravel road that was fronting the property. But I'd sold some property in that region before, similar style. I thought I could kind of

get close with some leverage on the numbers to get a 100 % return on cash on this property. And so we got under contract. I was very concerned from the beginning. And so I immediately got a broker one that we've worked with on a couple deals out there. I got my drone pilot out there. We got videos, photos of the road frontage. And then I had the realtor go and take a photo in front of like the center point of every proposed lot and try to tell me how big the berms were and how big everything. Cause I w that was my big concern is how much money do I have to put into.

each of these access points to actually create a place where somebody can drive onto. And turns out there's only about, I had about nine lots. There's only about six spots where it really makes sense to do that. And the price, basically my 150K underwriting was correct. 225 was nowhere even close to what we could pay for the property. And we were basically one day before due diligence expired. So we canceled the contract. The sellers came back to us.

encounter after we canceled the contract and said hey would we come back at 170k and I told my position manager no like I literally cannot pay a penny over 150 and that is it and like I'm okay to walk away from this deal 150 is the most but I guess they are motivated to sell so they came back and they they accepted the 150 offer which doesn't I know it usually doesn't happen it like it usually doesn't happen and this won't be like a slam dunk okay this is not a slam dunk deal this is a

Clay Hepler (58:57)
I've never heard of that. I've never heard of that.

Justin Piche (59:04)
You know, we'll use bank leverage. It'll be about a 90k total investment with about 100k return. 90k investment, 100k return. But I'm going to create six lots, right? I'm going to have to sell this inventory. We're going to hold this deal for probably eight months. A lot of them are going to be owner finance sales. So like, it sounds great, but it is its work. I mean, that's why this is like a business. is not, it's not always just a quick flip type thing. Sometimes, you know, we're going to generate some notes. We're going to sell those notes.

And we'll probably end up netting out probably somewhere just south of 90 % return on cash, which is okay That's a that's a that's a solid what I would call a double, you know, maybe a single to double

Clay Hepler (59:42)
Yeah, yeah, yeah. If you need me to take any of those doubles off your hand, I'm happy to.

Justin Piche (59:46)
man. But it's going to take a lot of work. It's going take a lot of work for the sales team, a lot of coordination for clearing work. And there's still a lot of unknowns. That's kind of the big thing is I can underwrite six ways a Tuesday, and I'm going to miss something. I'm going to miss something. I try to be really conservative. I try to get hard quotes. So we're still in the hard quote phase right now of getting actual quotes for people to go out and improve to make sure I'm not wildly off with my.

Estimates on clearing work. I'm usually not really really off I've done enough of these now to have a good idea of what it's gonna cost but you never know you never know

Clay Hepler (1:00:22)
That's right. Dude, thanks for that little ad there. I appreciate it. Guys, if you've gotten any benefit to the podcast, of listening to the podcast, please, the gentleman's agreement is this, we're not adding any ads here, but we really appreciate when people give us feedback. Someone actually, I saw, gave us feedback on KPI. So we're actually gonna be going into KPIs here in a couple of weeks, and we take those reviews seriously. And the ones that we really wanted to...

talk about and discuss are the ones when people give us five star reviews and specifically they mentioned the reason why they gave the five star reviews because my section was incredible. Justin's pointing to himself. He's pointing to himself. You're watching YouTube. But those are the ones that I'll make sure that they get to the top of the pile. They'll get to the top of the pile. But yeah, gentlemen's agreement here is...

Justin Piche (1:01:02)
You

Clay Hepler (1:01:18)
Like, rate, review, subscribe, share with your friends for the other land investors. If you're looking to take your business that is maybe puttering along, right? You took a guru course and you're looking to take your business to the next level and have consistent, predictable profits. That's what we're doing this for. So again, rate, review, subscribe, share with your friends. And until next week, Justin, you got anything to add?

Justin Piche (1:01:39)
I don't. don't. This was a great episode. Thanks, Clay.