Strength in Numbers with Marcus Crigler

Episode 51: Expansion Phase - Why You’re Not at $100K Per Month (And How to Fix That) - Part 3

• Marcus Crigler • Episode 51

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In Part 3 of this series, Marcus Crigler and Kaden Hackney break down what it really takes to achieve consistent $ 100,000 months and why most business owners get stuck before they ever reach that goal.

For today's episode, they focus on the expansion phase, where growth becomes intentional, not just with more deals, but with smarter decisions, better systems, and the right people in place.

They also call out one of the biggest mistakes entrepreneurs make and the misconceptions about expansion.

Listen and enjoy the show!


You’ll Learn How To:

  • Scale your business toward consistent $100K months
  • Use reserves the right way when hiring and investing
  • Stay focused on what’s already working
  • Build the right team to support your growth


What You’ll Learn in This Episode:

(01:26) Expansion phase explained

(02:36) Growing business through wise investment

(03:21) The difference between revenue and actual cash flow

(04:37) You should only grow expenses when you have reserves

(08:13) The “right move at the wrong time” problem in business

(10:57) Stay in your lane: expand what already works

(12:34) The three-legged stool in marketing

(15:08) How taxes change when you hit higher income levels

(16:54) Why expansion is the time to bring in experts

(20:23) Managing profits and moving from monthly to quarterly decisions

(22:28) Your goal should be 6 months of reserves or $1M in the bank

(24:00) Thinking beyond the deal in front of you

(26:00) Growth is uncomfortable


Who This Episode is For:

  • Business owners who are making money but not building real wealth
  • Anyone trying to scale without burning cash
  • Operators who are ready to grow smarter


Why You Should Listen:

This episode shows you how to expand the right way by protecting your cash, doubling down on what works, and building a business that supports your life.


Connect with Marcus Crigler:

SPEAKER_02

If there's ever a time in your business to get the people behind you to help you get to that expansion that you want to get to, this is the time. This is the time to invest in those things. If you've been needing to join a mastermind, go join the mastermind. If you've been needing to, you know, invest into a CFO, go invest into that CFO. If you need to go invest into a CMO, go invest in that CMO.

SPEAKER_00

Welcome to Strength in Numbers, the podcast for real estate entrepreneurs who are tired of being broke and not having control of their finances. If you're ready to finally take control of your money, slash your taxes, and start building real wealth, you're in the right place. And now here's your host, Marcus Krickler.

SPEAKER_02

Welcome everybody to another wonderful Wednesday. Marcus Krickler here. Caden Hackney alongside me. What is going on, Caden?

SPEAKER_01

And we've got another busy week. So today we're we're in episode three, if we're calling them episodes, of how to scale to a hundred thousand dollars a month net profit business. Two weeks ago, we talked about the hustle phase. Last week we talked secure. This week is expand. What's the heart of expand?

SPEAKER_02

Expansion is where most of us really are trying to get to, right? We're trying to get to a spot where we can expand our business to a place where we are very, very comfortable. And our business is not only producing us the income that we want to live off of personally, but it's also producing additional income that we can utilize to invest, grow the business, pay employees, those kind of things. And so it's important that we look at expansion as a necessary part of any organization. And so expansion doesn't mean you're you're trying to double your business. And so when you get through the hustle and secure phase of your business, like we've talked about over the last couple of weeks, expansion is how you get to that 100K a month. Like this is the area where it's either the make or break. In the hustle and secure phase, you might have touched a hundred K month. You might have had one, you might have had a hundred K month in there because you had a really good deal or whatever, or maybe a couple of them. But we're talking about consistency, right? Consistency in those hundred K deals. So expansion is all about growing your business through wise investment. And so one of the things that I talk about all the time, and I will tell you, I feel like this is the secret to success of growing a business. And uh we can talk about a couple of examples of why this is the case, but most business owners that don't quite get it, they increase their expenses with revenue. Okay, which means as revenue is increasing, so are their expenses. Well, the problem with that is that you're missing a very big component of revenue, which is cash flow. Revenue is what you bring in the top, but cash is what's produced out the bottom. And so what happens is when you're increasing expenses with revenue, you increase expenses disproportionally with how cash is flowing out of the business. And so you could increase your expenses too fast. And what used to be a business that was making $50,000 a month that you're wanting to turn into $100,000 a month is now making $30,000. And we've seen that happen before. And for a lot of business owners, they tell themselves this lie of, well, I've got to invest money to make money. I'll reduce my profits today to then make more later. And part of that is true, but the issue is most of the time they're not actually paying attention to why their profits are reducing, right? Because they're expanding, they're taking their eye off the ball, and their expenses are growing disproportionate to what the returns they're getting with those expenses. And so if they wait too long and those returns don't ever happen, then they end up having an issue. And so what we recommend you do is that you increase expenses with reserves. That brings in the cash component to the cycle. If your business is not currently able to build reserves consistently, then you're not ready to increase your expenses. It is a self-fulfilling prophecy that way. If you want to hire that, let's say $120,000 employee, that's called $10,000 a month, right? Well, if you remember in the secure phase, we said you need three times business expenses in order to run the business effectively and at a minimum. Well, so in the expansion phase, we need to say, all right, that's a $120,000 employee. That's three months of their salary, is thirty thousand dollars. Let's just assume that's includes payroll taxes and benefits and everything, right? I need to get thirty thousand dollars in addition in reserves before I hire that person. And if I can't do that, I'm not ready to hire the person. My business isn't ready to hire the person. It needs to go back and it needs to generate the cash flow to be able to hire that person. And see, a lot of people do it the other way. They just spin, spin, spin, and they never find the money coming out the bottom. And they go 18, 24, 36 months without ever cash flowing and telling themselves this story of well, I'm investing in my business. But here's the thing about real estate businesses one in 20 of them, two maybe now that's a conservative number, or that's a pretty aggressive number. Probably more likely one in 50 of them is actually a sellable business. So if you're spending 36, you know, 24, 12, 18 months investing in a business that's not cash flowing, so you can grow it, but it's not worth anything at the end. Well, I don't understand that. That doesn't make a lot of sense. You got to cash flow it now. You got to make the money. That doesn't mean don't grow it, but you've got to allow it to, you've got to have the cash come from that business. It's a necessary part of this game. And I want to talk to you about like, here's the proof and the pudding.

SPEAKER_01

Okay. Before we go into the proof and the pudding, let me unpack a couple of things. So when you started kind of laying this out, there was like this chord that struck in my mind that I've heard in another world, right? Where people, the rat race, the rat race is you make more, you spend more, and you spend more than you make. And it's almost like the same thing. And it's it's almost dystopian in a way that if you're a business owner and you're doing what you're doing, like you're already in a different race than somebody who's, you know, just working in a job and everything. But you can kind of take some of those tendencies and bring them over. And even in your business, you're applying those tendencies in your business. And that is what's holding you back, just like it's holding back others in what they're doing with their life. They don't have a business that they're trying to improve, but they are trying to go and save and and uh they want to buy a house, they want to have nice things, they want to have that, and you want that too. And in your business, it's kind of funny. Like, you know, I'm not I'm not gonna go and tell anyone, oh, that's that's a terrible idea. Don't hire some guy that you, you know, you need or some some lady that you need in your business. But you know, it is an investment. You feel like you're making an investment. But you know, Marcus was just saying, we trick ourselves because we're doing a good thing at the wrong time. Yeah, it's kind of interesting. That that was just a little chord that that struck for me.

SPEAKER_02

Well, you hit the nail on the head. This whole process is about trying to do the right thing at the right time. That's why we're trying to lay this out for everybody. Because if you do this, I'm telling you, I'm telling you, if you do this in the right order, in the right sequence, in the right time period, it doesn't take more than a decade. It doesn't, I'm telling you, it doesn't. It's that simple. But if you do it the wrong way, if you go from hustle to expand, and then you try to secure and you won't secure very well because you didn't get yourself in a good position, so you end up back in hustle, and then you try to invest a little bit along the way, and now you're all over the place. No, hustle, secure, expand, invest. That's what we do. We do it in order. We have a sequence of how we get to things and we want to get through it as fast as possible. We want to get to the investment stage as fast as possible, and so we need to get our business expanded to a spot where it's making that hundred grand a month because a one million dollar net profit business is what we're striving for. This is what we need to be getting to, right? If you're going to take this effort, you're gonna take this risk, if you're gonna go after these goals, then you need to get to a one million dollar business, and that's a hundred thousand dollars a month. Again, it's 1.2. We're doing a little bit of a rounding here, but you get my point. You're creating a seven-figure business, and that's what we want to do. And this stage is all about it. So we talked about building this thing with reserves, but what do you actually build? Like, here's where people get screwed up in this whole thing. They go into the expansion phase and they think, okay, I was good at this over here, I'm gonna go do this thing over here that's kind of similar, but they're not the exact same. That's how I'm gonna expand. So, like, let me give you an example of of how that works and how I've seen that really hurt a business owner so or a real estate investor. So, real estate investor that does a really good job flipping houses, makes a lot of money flipping houses, and then they decide they want to go into multifamily. They're still flipping houses because that's where the bread is butters, but they're also doing multifamily right now. They're both real estate, but man, that's a very different set of real estate. It's a very different flip, it's a very different rehab, it's a very different management, very different.

SPEAKER_01

Yeah, your end buyer is completely different too.

SPEAKER_02

Nobody's buying everything's different about that that multi-family, right? And so while it's real estate, you know, we want to get into bigger real estate instead of getting focused, getting better at what we're already doing, we get bigger and focus on something else. Well, guess what? What you've just done by putting your focus on something else is you've put that into hustle phase, like that little section has got to go through the hustle phase and the secure phase to get to the expansion phase. And so you don't just get to start, most places don't just get to start an expansion, right? And so you've got to build that whole thing out now, and that distracts from the thing that was actually making money, which was like flipping properties. And I'm not saying you can't do that, but what I am saying is if you really want to solidify things, you've got to expand in what your best ROI is first. That's where you start the expansion, right? I'm not saying you don't pick off some properties and own them. I'm not saying you maybe don't go buy a self-storage unit or a multifamily, whatever. That's all wealth building stuff. But you understand that's a one level up. We're investing at that point in time. And so what we want to do is we want to make sure we don't get distracted by investments at the expansion phase. We want to get focused on profit, consistent profitability to 100 grand a month. That means you got the right marketing in play that's consistent and diversified. If you've gotten to this point and you've only got one marketing channel, you got risk. We've got to diversify it. We got to find another marketing channel, three marketing channels. Most people will call it a three-legged stool when it comes to marketing. At least three channels helping support the stool.

SPEAKER_00

Yeah.

SPEAKER_02

And so that you know, we see that all the time. A four-legged stool would even be better, but most people talk about a three-legged stool. People, at this point in time, you might have been able to get away with like some BAs, right? Maybe uh some low-cost talent, right? And people that are were great to get you here, but aren't going to get you there, right? So, this is where a lot of people struggle with changing up or upgrading their talent. Part of that phase where, yeah, it's not a lot of fun, but they either need to upgrade with your business or they're gonna drag your business behind and they're gonna keep you at a level that you don't want to be at. And so now you've got to kind of start top grading, but you got to focus on your biggest ROI so you know what to top grade. Yeah, and so you don't want to go and just say, Okay, well, now I'm gonna get into multifamily, I'm gonna go hire a acquisition specialist for multifamily. You just created a whole nother business, my friend. That's not expanding, that's a business model.

SPEAKER_01

Yeah, that'd be like, I know this is this is a joke, but this is always something I've always been like, man, should I go to law school? It's the same, like I see it, it's right there, it's right in front of me. I know I could go and kick ass if I got a law degree and I could do extra, but then I've appreciated you've written me back in, like, well, we could do that, but why don't we just get better at what we're doing instead? And then I'm like, ah, you know, we should just do that. That makes way more sense.

SPEAKER_02

If you can get better at just doing what you're already doing and not take your eye off the ball, I will tell you this expansion phase, and we're gonna talk about this a lot more in the investment phase because what happens is when you get in the expansion phase and then you go into the investment phase, you start taking your eye off the ball of the business you expanded. When that becomes a problem, we're not gonna get into that today, but we will definitely talk about that next week when we get into the expansion phase.

SPEAKER_01

Yeah, it almost feels like the expansion phase is like bulking, you know, like in uh bodybuilding, or they're yeah, yeah. You're putting on weight, you know, you're building up, you're getting really beefy, and uh, you know, it's intentional. You want to do that, you're trying to build out the muscles, get stuff going. You're exactly right. I think the expansion phase is kind of unique because one thing that I'll say on the tax guy, right? If you're doing the expansion phase, inevitably you're gonna find yourself in the highest tax brackets. And we're gonna tell you to invest in tax strategies that will keep more money in your hands to allow your business to continue to grow. So you're gonna think, oh, I'm in an I'm in the investment phase. I want to, you know, go and buy assets. You only need to buy what you need and nothing more while you're doing this.

SPEAKER_02

Yeah, you're exactly right. And gosh, it's so our job is so fun, man, honestly. Because like when you get into this expansion phase, so we're gonna switch, let's talk tax for a second. In taxes, in the hustle and secure phase, you're probably paying like between the 10 and 22 percent tax bracket. That's like where you're gonna be at. So probably like 15 taxes in the teens overall, not terrible, like not a terrible tax bracket as you're growing, right? So that allows you to grow a little bit quicker, and still there's strategies that you should be implementing there. But when you get to 37 tax bracket, and you are at that 100 grand a month, which puts you at that 37 tax bracket. Now it is imperative, right? That we do look at some investments and we do look at ways of reducing that tax strategy and or tax liability because that 1.2 could turn into 650 really quickly, and it's imperative you don't let allow that to happen.

SPEAKER_01

Um what I just heard is you got $350,000 that you could either give to the government or do something else with it. That's right.

SPEAKER_02

And so it's just important that you guys, especially in this expansion stage, this is where you got to bring all your army together. This is building, like, think about it. I mean, if you were going to combat, and maybe this isn't the best time to be talking about this, but if you're going to combat, you want to go with your full arsenal, like everything. If you're gonna expand, we want to go with everything. We don't want to go with some bad dead here, we don't want to go with bad reserves, we don't want to go with not having this stuff dialed in. So it's just important to kind of keep that in mind. And one thing I was going to mention earlier, a lot of people are like, Well, Marcus, if you have to have reserves to grow your business, what about all these other companies that don't seem to have to be profitable? And I'm like, Well, what are you talking about? They're like, Well, private equity and these other companies, you know, these other big companies that grew these huge mega corporations. I'm like, all right, here's how they did it they raise a ton of capital, right? They are the epitome of increasing expenses with reserves. That's all they did, but they didn't do it through creating the reserves. Like, you know, small business owners, we got to create our own reserves. They did it through raising it, capital, right? They went and raised capital to the tens of millions and hundreds of millions of dollars, billions of dollars in cases, right? And then that billions of dollars went into supporting all of the expenses for the company until it did become profitable. And so it's funny if you look at the biggest companies in the world, they have demonstrated to you that you don't increase your expenses with profits or revenue, you increase your expenses with reserves, with capital, well, how much money you have in the bank. And if you do that, you do it right, you have a the chance of growing a really nice business. You really do.

SPEAKER_01

Yeah. And another key point there. So that's honestly perfect, what you just said. That is, you know, I didn't even think about that that way. So you just enlighten me a little bit there. Another key piece of that, though, is these guys are also going and growing businesses that are going to be worth something to sell. Yeah, that's that's a big thing. And the only reason they're worth something to sell is the idea is eventually going to stabilize and become a product that's gonna be very profitable and lucrative, but it is an investment where these guys are trying to go and swing big and get you know a thousand percent return on their money or 500% return on their money in a short amount of time. So, with what we're dealing with, real estate business, like you just said, one in 50 maybe is gonna be able to actually sell. So we have a different story because we're building a process to yield an output, not a business to sell later.

SPEAKER_02

Yep. And guess what? If you do it right and you do it really, really well, like if you're one of the top five percent, maybe top two percent, you might be able to exit this business. You might be able to exit this business. Let's not assume you will. And if you do, guess what? That's icing on the cake. We've already built our cake through all of the rest of our processes. So the other thing I like to talk about in the expansion phase is how do you manage cash? And so if you remember back to the secure phase, I talked about you want to get yourself to a spot where you're paying yourself every single month the same amount of money. And when you start the expansion phase, you're gonna have excess profits, right? And when you start the expansion phase, you're probably going to take some of those excess profits and you're going to put those right back into your pocket and and help, you know, you probably starved for a little while. And so when at the start of the expansion phase, it's pretty common that you see like profit distributions paid out every month, right? But once you get more secure in your business and your personally financially, am I saying that right? You guys get my point. Then it really makes sense to turn into a quarterly profit distribution. And the reason why you go to quarterly profit distributions from a money management standpoint, let's say you're paying yourself the twenty thousand dollars a month, and we've now got your business up to a hundred grand a month in profits, cash flow and good, and for three months you've saved up 300 additional thousand dollars after your spend. Well, now you've got opportunity, you've got ability to make a decision on what you need to do with that money. You can become a lender for yourself, fund your own deals, reduce your own capital cost with that 300k. You could put 100k in your pocket and go on an amazing vacation, you could go buy a couple properties, you could go invest into a software, you could go invest into a leasing operation to save you a bunch of money in taxes, you can go do a bunch of things, you can go buy a Ferrari. I don't Care, but what I want you to do with that money is I want you to be proactive with it. I want you to tell that money where it's going to go, not take it out as you earn it. Right. Because in real estate, what we know is there's going to be ups and downs. And when there's ups, we don't need to get too high because we know there's going to be downs. And I don't want you to get too low when there's downs. That's why we prepare for that. And so the last part of this whole thing is part of the reasons why we're paying these excess profits quarterly and we're making decisions proactively, is that I want you to get to where you've got a minimum of six times expenses in reserves. So we started in the secure phase at three. Now we want to get to six andor the greater of those two, a million dollars. So if you're running a real estate business today that's making a hundred thousand dollars a month, you should probably have a million dollars in the bank or be headed towards it. That's going to give you ultimate security to making sure that you can continue to run your business long-term success. I was on the call today with literally somebody. It was on the land call that I did. Guy said, you know what? In 2022, I had all this, all these deals out on the street. I had a million dollars in the bank, and that saved my bacon. That was the only thing that saved me was that I had a million bucks saved and I didn't have to go into foreclosure and bankruptcy and restart everything. I was able to wait it out, and that's what I'm talking about. Because now, guess what? He's on offense right now. He's out there doing other deals that he wasn't doing in 2022 because he was able to shift his business because he didn't have to go start over at zero, right? He's a decade ahead because he was able to do that.

SPEAKER_01

Yeah, I was actually just talking to a client earlier today, and we were talking about this concept. And I told him, I said, I think what people start to see is they see the deal in front of them and they see what it could be, and they get excited about what it could be, and they don't see that, oh, I actually just went and got, you know, five or 10 more things that I was excited about in my shopping cart, and I'm gonna have to swipe my credit card and then I'm gonna carry a balance and pay interest on that because I'm not gonna be able to pay it off immediately. It's almost like just seeing that thing in front of them. They don't think about the second and third degree consequence of their choice because they're just looking at that and not seeing the entire battlefield. Yeah.

SPEAKER_02

No, I I think you're I think you're exactly right.

SPEAKER_01

So don't don't go in on Normandy if you're not sure that Normandy's gonna win the war. That's for sure.

SPEAKER_02

One last point on expansion, and I think I I hit on this a little bit earlier, but I want to I want to emphasize it. Guys, I will tell you this if there's ever a time in your business to get the people behind you to help you get to that expansion that you want to get to, this is the time. This is the time to invest in those things. If you've been uh needing to join a mastermind, go join the mastermind. If you've been needing to uh you know invest into a CFO, go invest into that CFO. If you need to go invest into a CMO, go invest in that CMO, go invest into that system so that you can build this on top of smart people in their lanes. That's what this opportunity gives you. That's what expansion is all about. That doesn't mean expansion is not about growing a company to a hundred people. That might not be what you want to do, might be what you want to do, right? That's cool, but it might not be what you want to do. So get the people behind you that you really want in your corner to help you get where you want to go and also understand that you need to always be expanding, right? You need to always have a goal to grow a little bit every year because the reality is when you stop growing, you will stop dying and somebody will take your spot. And there's nothing you can do about it. While you're in business, if you're in the game, you need to be planning on growing, and that's just part of it. That doesn't mean you got to grow by 100% every year, but you do have to grow, and that's what the expansion phase is all about. Last thing I'm gonna hit on here, you're gonna be uncomfortable. You know, there's nothing about expanding anything in life that's comfortable. Caden talked about, you know, bulking phase. You think that's comfortable? You know, when bodybuilders eating 10,000 calories, I'm eating 2,400 calories and I feel like I'm stuffing my face right now, and that's like supposed to be low. And these guys are eating 10,000 calories. You think that's comfortable? That's not comfortable, but they do it because they want to expand. And if you're gonna expand even a little bit, you got to understand there's there's gonna be some uncomfortability there. So the expansion phase is about getting yourself into a spot where you're as comfortable as possible with the things you can control, and the things you can't control, you just gotta tackle. It's a problem, you address it, you move on, and you tackle it on to the next thing.

SPEAKER_01

That's exactly right. Well, bam, I think this is a really solid discussion about expansion. I think we did hit on a uh quite a few good nuggets here, so that's a solid one.

SPEAKER_02

Hopefully, uh, you know, we've been getting a couple hundred viewers on these every week. So hopefully, you guys enjoyed that one. I think that there was a lot of golden nuggets there. I agree with you. Are we tooting our own horn a little bit here?

SPEAKER_01

Maybe, but but we gotta do that once in a while. Otherwise, how are people gonna know that we're the best at what we do? That's right. That's what I'm saying. That's right.

SPEAKER_02

Speaking of that, before we log off here, if you are interested in being a client of Beck CFO and CPA, we are an accounting firm that's helping real estate entrepreneurs across the country save money, make money, and build real wealth in real estate. We do it through this philosophy, right? The philosophy we're talking about on these calls, uh hustle, secure, expand, invest, understanding where you're at in that line of thinking, and then ultimately get yourself into the spot where you're doing the right things at the right time, right? And we make sure that your books are in the right order, you're understanding where they're at, your dashboards, your financial KPIs, getting your tax strategy squared away along your growth cycle. What works for you at $600,000 a year in income doesn't work at $200,000 a year in income. It's very different. And so we help you along that path and get you to a spot where you're growing intelligently and keeping the most amount of money you possibly can because that's what really matters, right? That's what drives wealth. So visit usbeckCFO.com. Top right hand corner, there is a free consultation button. You'll get on the line with Tony. Tony's the man, he will walk you through how the process looks and diagnose if we could be a good fit for you.

SPEAKER_00

See you guys. Thanks for listening to Strength in Numbers. If you're ready to take control of your finances and start building real wealth in your business, be sure to schedule your free discovery call with markets at BECCFO.com to get started. Thanks for listening, and we'll see you on the next episode.