Episode 24: How to Survive and Thrive When Deals Slow Down

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

Clayton Hepler (00:05)
This is your co-host, Clay Hepler, and we're here to teach you how to win the ground

Dude, I look forward to these every single week. Like, this is something on my calendar that I move everything else, but this is one thing that I keep on my calendar. I always look forward to jamming with you, just talking shop. You know, it's like one of the real benefits of finding someone in the space or in a space, it's like where you are.

close to where you are and just hearing perspectives and thoughts. I always learn something from just chatting and kind of learning things and processing things out loud. And I hope most importantly our listeners are learning something too. What do you have going on this upcoming weekend? Anything special?

Justin Piche (00:55)
Yeah, I do too.

Yeah,

well, I'm actually going skiing for the first time in three years. My wife and I have I grew up snowboarding. And then when we were dating, we went skiing together or we went we went skiing. She would choose a skier, a really, really good skier. And I could and I was a good snowboarder, but I could never keep up with her ever. Like going through the trees, like doing a moguls, like things like that. I just was not as good.

And so I switched to skiing maybe like 16, 17, 15 years ago, 15 years ago now, and quickly became a very good skier. And we used to go all the time when I was stationed up in Washington, we'd go six, seven times a season to the local mountains there and the Cascades or we go up to Whistler or go to Colorado or whatever. And then we had kids and

Clayton Hepler (01:58)
Wow.

Justin Piche (02:06)
We went a couple times when after we had my daughter, but ever since my son was born, we haven't we haven't been because it's just a lot to manage. But now my oldest is five. My middle is three. And so we're meeting some friends up in Oregon this weekend. My friend Adam has and Nicole, they have a house up there in Sun River. And so we're to fly up there, go to Sun River and ski at Mount Bachelor. And it'll be my kids first time skiing. So we've like I went and broke out the ski gear, you know, because we had everything. And my skis were like rusted.

from like crap like from sitting in my garage in Houston for years. My goggles, which are like $200 Smith goggles. All the foam is completely deteriorated. So super frustrating because I haven't really pulled that stuff out in a couple of years and it's all damaged. I had to buy new goggles, like new helmet. I went and got some new skis and it's just frustrating to buy all that stuff. But, you know, when you go as infrequently as we do, you want to make sure you got good equipment. But interestingly,

Houston is not a good place to buy skis, just so you know, obviously, it's not very many people ski down here, but I found it an incredible deal and some really good skis that were a couple of years used. And I drove up a couple of days ago to go get them from this lady Facebook marketplace all the way. They're like six, seven hundred dollars new skis and they were selling for 200 bucks and they'd been used for like a season or two, a really good shape. And anyway, I went up there and I was talking to this lady.

Clayton Hepler (03:20)
Facebook Marketplace.

Justin Piche (03:35)
And we had so much in common. was crazy. Like just talking to her. So her husband had passed back in October and that's why she was selling the skis because her husband had passed away. So it's really sad. She got really emotional, but she's from New England, grew up skiing. was born in Massachusetts. I told her the first mountain I skied on was what she's there. Snowboarded on was what she said mountain, which she said she grew up right next to. That was where she went growing up as well.

Clayton Hepler (04:00)
my gosh.

Justin Piche (04:02)
Her and her husband are big sailors. They sail all around. I was like, I used to own a sailboat. She's like, what kind? Like she knew the it was a Pearson Ariel. She's like, I know that boat and like all these things in common. You know, she it was just a really good conversation. And, you know, she got kind of emotional, obviously, like selling her husband's skis. It was something she they love to do together. But it just was nice because I was like, hey, you know, I'm going to really appreciate these skis. I'm taking my kids for the first time. Like they're going to be.

I'm going have a lot of fun. They're going to get great use. it was just great. It was sad, but like maybe feel happy that she knew they were going to a good place. it seems so trivial, just skis like, you know, whatever buying for 200 on Facebook marketplace. But it was really like it stuck with me. She even gave me she gave me this this little bookmark that was made after her husband passed away. Like at his wake and

It's talking about like the reasons for skiing, something they love, and then sailing. It's like a poem about sailing and then her husband here. Anyway, it was intense and it was a cool interaction. I don't think I'll forget it, honestly.

Clayton Hepler (05:08)
man.

Justin Piche (05:19)
By you, what's going on for you this next week?

Clayton Hepler (05:22)
Dude, my wife is also going to another bridal shower. So it's daddy and the little man again. I'm super pumped.

Justin Piche (05:35)
You get some grandma grandpa time. Go hang down there.

Clayton Hepler (05:39)
Yeah, we'll probably hang down there but like I'm not entirely sure like I, you know, he still takes two naps and so it's like two hours on or three hours on and so I can just hang with him for that time. And my wife's only gonna be gone half the day so it's really not that big of a deal.

Justin Piche (05:55)
Yeah.

Okay, sweet. Well, we talked about it last time on last episode. In this episode, we are going to talk about managing through the lulls in the sales and acquisitions process. many of you know, of course, I know, of course, Clay's knows that this can be a really cyclical business. Traditionally, what I've experienced is that winter time is generally a slow period.

for various reasons. Obviously the weather gets bad in a lot of places. So on the sales and Dispo side, if people can't get out to see property, then they're probably not going to be putting offers out on property. And so you get a little bit less sales contracts during that period of time. And then things generally start to pick up late spring. So like right now they're starting to pick up at least for us. And then in the summer during summer vacations, things slow down again and they pick up again after kind of school starts in the fall. And then they slow down again in the winter, so on and so forth.

That can be really challenging if you're not managing aspects of your business to anticipate those lulls. And so the kind of question is, what do you do when the sales pipeline runs dry? And we've talked about good deals that we've done and big wins. But today we're going to talk about how you keep that momentum when the deals slow down. And we're going to share some strategies that we both use to manage through the lulls so that you don't run out of money when you're in the middle of a lull.

Clayton Hepler (07:25)
Yeah, I think the Guru's didn't teach us this at the beginning, right? And it was interesting, I was talking to my bookkeeper the other day, and he was talking about the lumpiness of this business. You some months you're like, dude, I am on top of the world, other months you're negative. It's crazy. And depending on how you're investing in your marketing, your sales, if you're bringing on new people, if you're hiring, scaling, whatever, man, it's like...

It is a serious part of this business and I think this is an important, important topic to really talk about, be transparent about it, specifically when you're starting out. This happens a lot, your first year, your second year. And knowing how to get through it is the difference between surviving and putting into town and stopping this business. So we're really gonna go into

Justin Piche (08:12)
you

Clayton Hepler (08:24)
how we can do this, but I wanna start off by asking the question to you. What is a good amount of money to have in your bank as a ratio of your monthly burn rate?

Justin Piche (08:27)
Mm.

my god, so there's a difference between there's a difference between good amount of money and how much I actually operate with. So I'm just gonna caveat that for me to like really sleep really well at night and I might take one step back. For me, it's not necessarily I need to maintain a minimum balance of some amount in my account.

Clayton Hepler (08:48)
25 days.

Justin Piche (09:12)
It's that I need to have access to certain amounts of liquidity in certain amounts of time that isn't wholly dependent on finding a buyer that hasn't materialized yet. So at the beginning when I started my business, I was like, okay, well, obviously I don't have a ton. I'm deploying my cash into deals. I'm not going to keep like this huge operations budget cushion until I have gotten to like a consistent deal flow. That's kind of how I like entered the business in and then after about the first year.

I was like, okay, well, I'm going to keep like a six month minimum OpEx budget, like always there in the account. And that very quickly disappeared. I was like, well, that's not that's that was way too much unproductive cash for me to be operating with. It was too conservative. At least that's I still feel like that's a little bit too conservative in this business personally. And now I kind of hover around about a two month, two month burn kind of like cash cushion at this point.

And that's just pure cash. So the other piece that we're to get into later in this episode is levers. So that doesn't mean that I don't have a bunch of levers ready to pull that can generate liquidity within a 30 day or 60 day window as I see kind of crunch points coming. But two months. What about you? What do you like to hold?

Clayton Hepler (10:33)
I'm a little more conservative than you. I'm like five to six.

I don't have as many owners financing levers to pull. And so that's why I'm a little bit more conservative. And so I usually have anywhere between five to six, probably have like six or seven right now in the bank.

Justin Piche (10:58)
Yeah.

You probably sleep better at night than I do.

I have to, sometimes I, you know, we have some like crazy kind of deal flow. I'm like, here's a perfect example. A lot of my deals now are funded by the fund that I set up. Most of them, but not all because I'm doing more deals and the fun can handle at this point for the amount of capital that's invested in it. And when I have a really good deal come across my desk, just if the fund can't fund it, it doesn't mean I'm not going to buy it. Right? If I've got 200 K sitting in the account,

Clayton Hepler (11:10)
Yeah.

Justin Piche (11:36)
above my like kind of two month minimum threshold and there's a $200,000 deal that comes up. I'm not going to hold that cash reserve for the end and kind of bring on some other partner in the deal or anything like that. I'm just going to spend the money and buy it by that deal. But I know that I have, have the ability to raise some money in the fund, which is, is not a for sure thing. It's not like I can pull a trigger and say, somebody's going to invest in it. I know it's work. It's happening. Money is kind of coming in every couple of weeks into that fund that is then buying.

that essentially buying the interest in that property or some of the interest in that property from my company. But again, levers levers are the reason why that makes me comfortable, you So this episode, you know, we're going to talk about a few things. I want to talk about how to keep your team motivated during the rules because psychologically, especially for like people who are.

Clayton Hepler (12:15)
Yeah

Justin Piche (12:28)
really like killer salespeople when they have dry spells, it can be really demotivating for them. They can start to question their ability. I mean, you can start to question your ability or their ability. And you know, the truth is it happens and you got to give them and yourself some grace. Obviously, if they're not performing, that's a different story. But in lull periods when you can go speak to another land investor and say, hey, what are you seeing? And another one says the same thing. You know you're in a lull when multiple people are talking about slow sales across the whole industry.

It may not be your performance. It just may be a seasonal issue. We want to talk about how to manage cashflow and then kind of things that you can do to make your business more robust and how to upscale yourself to handle more complex and different types of deals to keep things moving in lulls or maybe just creative ways to structure deals when you can't get things done the traditional and normal way. And I think that's kind of

what's happened in my business multiple times through lulls. We've been forced into adopting different strategies for acquisitions or dispositions that have now stuck and now make us more flexible right now than we were maybe a couple of years ago.

Clayton Hepler (13:36)
I think that's a great overview. Let's, let's jump into it, dude.

Justin Piche (13:41)
So the first thing is we're going to talk about understanding the lulls in sales and acquisitions. And we kind of alluded to this. I think the biggest one is just where people are and like the like, what are they doing at that moment? The ideal situation for any buyer or seller is they don't have a lot of other things going on in their lives. If somebody has a ton of things going on in their lives, trips that are coming up or summer vacations with their family.

or big changes in work or whatever, like they're not gonna have the bandwidth to think about and negotiate on their properties. And most of those things happen during the summer and in the winter. And so that's why those seem to be consistent lulls. What do you see as some lulls?

Clayton Hepler (14:26)
I think real estate is more local and I don't...

I don't look at like a blanket season as this season is going to be slow versus not. I know in upper peninsula, Michigan, like good luck getting a deal done between, you know, the fall and spring and longer periods of time. But that doesn't mean that a deal can't be done in, South Carolina, Georgia, Florida during that time period. I think locally in terms of like,

where the property's located. And then depending on that, that's the seasonality. I just apply logic to it. It's like not a science. I wish it was, but I would agree with you. There were certain times that deals sell slower, but a good deal will sell no matter the time. But of course I agree with you, know, November, December, January, February, like

Justin Piche (15:11)
Yeah. Now.

Yeah.

Clayton Hepler (15:31)
land to sell slower than what it does in April, May, June, July, and then in the fall after people go back to school.

Justin Piche (15:45)
Yeah. know, one thing I found really interesting about this year specifically is traditionally January has been my slowest month on both the acquisitions and sales side. If I go back every year, the business, you know, relative to the surrounding months, you know, obviously each January is better than the last one, but relative to the surrounding months, it's always been kind of a dip on how many contracts we get, how much profit we get, how many sales offers we get, et cetera.

And this year was a little different. January is actually a pretty decent month. And then February was really bad for us in terms of transaction volume. Just everything kind of slowed down. The acquisitions kind of were still trickling in like we were buying things that we had previously gotten under contract, but new properties on our contract was down and then offers on the sales side was down for us in January.

You know, I'm not an economist and I don't know exactly, you know, what are the triggers in the economy that might compel people to buy or sell or whatever. I think there was some elation, at least in the markets that I'm in, which are primarily conservative markets where people were waiting on the sidelines, waiting for some positive change or putting the country in a direction that they thought was more positive to pull the trigger. And I think a lot of that was happening after the inauguration and

kind of leading up to the inauguration when people felt that confidence. And then the traditional winter slump just came a little bit later. That's kind of what my thoughts on it now. What do you think?

Clayton Hepler (17:15)
In the Twitter sphere, which is a very insulated sphere, people are signaling recession, a recession coming up. Is that real? Is that not real? Who knows? How does land fair in that period of time? Who knows? It's everything is different. I would say that we sold a lot of deals in January as well. It was a hot month. February was not like it was not great either for us, even on the buy side.

To be fair, had a, kind of completely upended our process, our front end, uh, outreach process, data process during that month. But it, what it certainly was a low month. I think it was one of our lowest months over the past five months. So maybe the lowest. So I, I, I agree with you and you know, there's so many factors that contribute to, um, a lull that I don't really spend that much time thinking about them. I just spend time thinking about like, what can we do?

Justin Piche (17:44)
you

you

Clayton Hepler (18:13)
Internally on our team to sell more deals and to buy better quality deals to sell during this time period So I don't really spend that much time on thinking that through So yeah, that would be my answer to the question

Justin Piche (18:27)
Yeah.

I think when you get to a scale where you have over a quarter, let's call it consistent deal flow, then some of these monthly or seasonal or economic lulls don't really impact you as much. They really impact you when you only have a small number of deals in inventory and your OPEX relative to your revenue is high and inconsistent. That's when it really kind of hurts you.

And so just maybe as a word of encouragement to anybody who is in that situation where they've maybe recently started their business or they're just not doing high transaction volume. Yeah, it's, might, you might have a couple hard months, you know, in a row and then, and then, but you need to maintain, you need to find a way to be consistent. think that's kind of, that's what we're to get into later in terms of managing cashflow and how to, how to maintain your operations through, through the law, which honestly is you maintain them. You keep executing on, on, on your prerogative, which is acquire quality deals.

a little impact things like revenue and morale and OPEX for you and your business?

Clayton Hepler (19:34)
I think that, well, we do the same things, right? We just keep doing the same things. But I will say the people that are expected the most are the salespeople.

And there's something about the dopamine hits of getting a deal and a contract, right? And so for a lot of, if I were to tell a salesperson, hey, you do one deal this year, you make the business, five million bucks, you get 500K.

but you're not gonna get that deal until month 12. I don't think any sales people would make it, right? Because they're really, they require that constant maintenance of, you're a good guy, you're a good girl, go, go, you're a star, that I think a lot of other people don't really need. And so the morale,

for me and I'm closest to the sales department and I still love to take sales calls. I just love it. Like I would do it all day.

Justin Piche (20:38)
you

Clayton Hepler (20:43)
That is the people that I believe you really need to be grooming and supporting and saying, it's totally okay. The big thing that I found to help salespeople, whether you're onboarding new ones or you are saying, hey, we're hitting a lull here, is focusing on metrics that they can say, okay, if I make X amount of calls, for example, I'm gonna get an outcome.

Justin Piche (20:56)
you

Clayton Hepler (21:11)
What that means is on average our company has closed one out of every seven offers, let's just say. Or one out of every eight, one out of every 10. It doesn't really matter what it is. So this week you may have offered on 15 people and not gotten a single contract. But that doesn't mean over a period of a month you're not gonna get one out of every 10. Or maybe one out of every eight. Maybe this week was different.

Justin Piche (21:26)
you

Clayton Hepler (21:36)
And salespeople have a really hard time doing that, but allowing them to visualize, if you make this amount of calls, this amount of offers, this amount of conversations, this amount of talk time, that connects them to the end result. And so if you want to do that same thing, you can do that same thing with your team, morale-wise. There can be the rah-rah, hey, we're fine. But showing people metrics is more important, in my opinion. The data, the logic is more important.

Justin Piche (21:46)
Thank

Clayton Hepler (22:04)
is something that will supersede the emotion in this case. I found that to be very effective in my organization. Always saying, this is where we're going, these are the metrics and these are the numbers that we can expect to get there has been the way that I've managed the morale.

Justin Piche (22:23)
Hey guys, this is Justin Piche, just interrupting your podcast to say thank you for listening. We're talking a lot of details about how to manage through LULs, cash positions, et cetera. If this is valuable to you, please leave a comment down below. Let us know what you've used to manage your cash position through a LUL. And we'd love to expand on this topic if you have any other questions. So leave us a review, leave us a comment, and now back to your regularly scheduled programming.

That's great. Yeah, I do something kind of really similar, which is kind of focus on the fundamentals. Like, what are our target? are the KPI? Or another way of saying that is control the controllables, right? You're in control of how many follow up calls you make and how many cold call outreach and how many whatever you're in control of all these outbound metrics.

And those are the things that during roles that you need to double down on focusing and making sure your team achieves to produce that end result. And yeah, I think your point is super valid, but this week, this month may have been bad, but did we hit the targets we were trying to hit? And like if nothing has fundamentally changed about the process, it's just some outside factor is influencing people's willingness to get on the phone and sell property to you. Then you go out over enough time and your numbers are still going to look good.

Now there are times when something fundamentally changes and that obviously is your job as a CEO to understand and identify what those are and then change things to make sure you can account for that and still get the deals done. that isn't it's not common for something to suddenly fundamental change fundamentally change usually is a slower process that you'll see over time. I think that's great advice. So I had a conversation this week literally today with my sales office manager and she's obviously she's feeling a little frustrated.

because of this last kind of month of not getting a ton of deals on our contract. She she was engaged in like a really good negotiation with this attorney to buy this piece of property. That would have been a killer deal for us. Very high six, high six figures, you know, not quite seven figure, but, up there kind of potential gross profit. So she would have made a ton of money on it. And it's been like 20 calls and hours of negotiation and back and forth and contract.

all kinds of stuff and it just did not happen. You know, just kind of fell out after all that work and that's super demotivating for a salesperson, especially when they don't have other quick wins that can help boost their confidence. That was kind of a, you know, and also coming from other industries, you know, if you're not hiring, if you're hiring salespeople, really good salespeople that come from other sales industries where maybe sales are more regular or there's more consistent sales process or I guess closing rate.

Clayton Hepler (24:48)
Yes.

Yes.

Justin Piche (25:11)
Right? Maybe that's better way of saying it than coming to this industry where I mean, we're, closing a fraction of a percent of the amount of people that we reach out to some fraction, small fraction of a percent. sent out a ton of outbound marketing just to do one deal because the potential on that one deal is really high. You're going to make 30, 50, 200, a million dollars on one good deal. That's a hard mentality to shift to. You know, if you're used to closing consistently.

Clayton Hepler (25:41)
My question, Justin, I'm gonna go back and how did that conversation go? Walk me through that conversation.

Justin Piche (25:50)
All right. I'm literally going to pull it up. I'm not going to say exactly, but we, let's see. So I started off. Yeah. I'm to just kind of run you through generally the conversation. So I started off and I just said, Hey, how's it going? Any negotiations that you're engaged in that look promising? And then the kind of conversation she, she texts me quite a bit of things or message me rather, but it's kind of like, Hey, we're talking about a deal that basically fell apart. That was frustrating.

Clayton Hepler (25:57)
Use some chat.

Justin Piche (26:18)
And then kind of some suggestions that she wanted to do. So I have her focusing on both sales and operations, like improvement, she sales ops manager, right? She's the ultimate closer. She's definitely the best closer on our team, but she's also the other half of her job is improving the rest of the team to tee up leads better for her and the other closers. And so she's been spending a lot of time on that. And her request was,

Clayton Hepler (26:38)
Well, being it won't be

an exact could you give her listeners an example of like what that what she's doing right now in your business?

Justin Piche (26:45)
Yeah, yeah. So she she's she's training all of the cold callers cold outreach team. She's doing specific revising scripts and doing call reviews and basically upskilling all of our cold outreach team. So that's a big piece of what she's doing. She's building out and improving our follow up process for every lead that comes in like.

implementing texting Betty follow-up boss, like those type of things. And so she blocks her calendar. There's a piece of part of the day where she works on that or maybe one day she works on that. And then the next day is going to be sales and sales calls and following up on high quality leads, et cetera. And I think sometimes you can get, when you, when you have two big responsibilities for your job that are different and you're not having success in one, the, the temptation is to focus on the one that you have more control over that you can actually see material progress on.

And I think that's kind of where what's happened a little bit is that she's focused a lot of on us because of the lack of success in the last month on the sales side. And so, you know, she's like, I need to I think I think we need to agree. And we also have pretty aggressive targets on completing some of these operations tasks that I've set. And so the specific ask was maybe we can relax or push out some of these operations deadlines that I've put on her so that she can spend more time focusing on sales. And that was the solution. So.

She gave me kind of this, the things that were going on, which, you know, I really appreciate it. thanks for sharing. And I go, this could be a discouraging process for sure. And then I kind of encouraged her and I said, we only need one good deal a month to keep things rolling. So give yourself some grace. And I talked about what our company burn is and how like one good deal, one single good deal in a month gets, keeps everyone paid, keeps the lights on. That's it.

We're targeting 10 deals a month, but we just need to get one good deal a month. And I think that little bit of perspective obviously helped her, you know, just thinking, okay, I'm putting a lot of pressure myself to close a bunch of deals, which I want her to put that pressure on her. She's a winner, right? She's like, I want her to feel this way. I don't want her to be like happy with not closing a bunch of deals. If your person, if your salesperson is happy, not closing a bunch of deals, you don't have the right person as your sales person. So this is good.

Clayton Hepler (28:52)
Right.

Ha ha ha!

Justin Piche (29:07)
But you also have to kind of talk those high performers who are used to a lot of success off a ledge when they don't experience success because you will not there's periods of time where you will not experience success despite doing everything right.

Clayton Hepler (29:18)
Yes, yeah, that's the big point. That's the big point. So the mind game here, man, is everything, which is why like sitting down when someone gets in that emotional state and salespeople do like, they wanna see the numbers. And so if you sit down and say, this is what you can expect if you call this many people and you offer them this many people over a period of a quarter.

And that is the controllable that we can control. so when motivation lacks the metrics matter and bringing up those KPIs and saying, you know, this is what we really need to adhere to and focusing on as a previous acquisition manager that I really, really, really care about. So Chalkboard Carry Water.

I'm gonna chop wood, carry water today, Clay. And I said, damn right, baby. So, besides the motivation, which is great, there is a cash crunch, right? And this business is lumpy, we've talked about it a million times. Even if you're a super high operation business, like things happen, right? We talked about the savings rate.

Justin Piche (30:25)
you

Clayton Hepler (30:47)
I'm always looking on a weekly basis of Okay What is our projected? deals profit deals to sell in the next 60 days Okay, so we got deals under contract to sell what's that look like over the next 60 days I don't really go out longer than 60 days is because most of the time it's 60 days Right usually you're closing a deal in 60 days

I like to look at our cash conversion cycle. I look at it on a monthly basis. The sell time, which we update every month. So for example, imagine you have a deal that's been in your pipeline for a year. That stays in the cash conversion cycle calculation.

Justin Piche (31:25)
you

So it's basically an updated days of inventory of what's existing in inventory each month.

Clayton Hepler (31:39)
Exactly.

Exactly, so that allows us to think through and say make three strategic decisions. What's coming in in the next 60 days? What's the cash coming in next these days and How are we going to bridge this gap? now this is a huge pain point and I'm gonna go I'm gonna kind of go off topic real quick, and I think it's gonna be super relevant I Saw this pain point in my business

And so I, as you know, I fund people's deals. You fund people's deals. We fund people's deals and created this concept of smooth cashflow. And so sometimes people bring me opportunities and they can take cash away at closing. Maybe 5,000, 3,000, whatever it is on top of the principal. it adjusts the split a little bit.

but it smooths out their cash flow. They can get that cash ahead of time, so it allows them to smooth out their cash flow. So that was one thing that, it's not a direct pitch, but for people that are interested in that sort of thing, no other lender's doing it. It's like when I was in the house flipping world, you get that rehab estimate, right, and you put a little bit of,

Justin Piche (32:53)
Okay.

Thank

Clayton Hepler (33:09)
to get that rehab to help you continue to pay for your bills. And it's not

huge, like it's not, know.

Justin Piche (33:16)
Yeah, you're not paying you're not over levering you're not paying a ton of yeah, but a little bit.

Clayton Hepler (33:18)
$50,000, but

that's something that we've implemented and we've given other investors the opportunity to do that to smooth out their cash flow a little bit, provided there's good LTV. There's a lot of different stuff there, but those are two things that I've done actually tactically because I see that there's that need in the market.

Justin Piche (33:37)
Yeah, no, I like that. You know, one of my friends met Walt. He was a land investor for a while, still doing deals and larger deals on the side. We met up in Cancun actually a few weeks ago at the Casual Fridays REI event that Justin Sleeve and Adam Southey put on. But when he was starting his business, he had kind of capital partners and that's basically exactly what they did. Like the capital partners would fund the deals plus some

amount based on whatever the expected sales price and gross profit and all that was going to be of the deal. So that gave him operational cash to keep running his business while that property was selling. I mean, it's not. Yeah, it's certainly a can help from an operations standpoint. And a lot of cases, if you have if you have a fund and you're the operator of the fund and your operating costs of the company are going into through that fund, you'll also do that. Your operating company will essentially bill the fund for those operating expenses.

and the fund will also purchase and participate in the deals. And it's a really kind of similar model. That's pretty cool that you're doing that.

Clayton Hepler (34:45)
It's a true need in the marketplace, mean, like, for a lot of people, they're starting out, they need a couple of deals, they need that help. That little bit of help, it might not be a long-term solution, but it can get them over the finish line. And I remember, you know, starting out, and dude, for me, you know, it was brutal. Like, I was counting every dollar, you know, to get this business off the ground so I could pay for my wedding and everything, and that would have been super helpful. I mean, I definitely would have had a bigger honeymoon.

Just kidding. So how do we bring, yeah go ahead, go, go, go, go.

Justin Piche (35:18)
Maybe let me, yeah, let me maybe let me talk a little bit about kind

of the cash flows. I've talked about this before and it's something that has taken a backseat in the last like quarter because I've been so freaking busy, but it's super, super valuable. And that's the 13 week cash flow analysis. And Clay was talking about that with two months out, outlook of what's coming in, what are the going outs? What's your current cast position? If you're, I think it's super valuable for anybody who

is in a little or expecting a little and frankly you should be expecting a little at some point during the year because it happens just part of this business. Having a 13 week cash flow built out allows you to evaluate where you currently are how much cash is sitting in your accounts. What are your what's the OPEX that you are responsible for funding over that course of the next quarter. You can throw your deals in there. So if you're self funding deals that's a cash out if you're getting a bank loan that's a cash

Clayton Hepler (35:53)
Mm-hmm.

Justin Piche (36:17)
in with the deal as a cash out and like you can look at all these different cash flows and know and see what is your expected cash position going to be in each of the next 13 weeks. And so when you get that cat when you you put all that stuff out on a spreadsheet and you see where your cash position drops below your minimum threshold, whatever it is, you know, I need to do something about that. Like there's something that I need to do to mitigate that. And that's where you come in.

and you start looking at what are the levers you have in your business to adjust that. And we'll get into levers here in a bit. But some strategies that you can use for bridging the gap through lulls. Obviously, I think it's valuable for every single person to go in and cut non-essential expenses at one point. This is something I'm personally really bad at. We get all these different software products, we use them, and then something new comes along that we like better, that we use and we replace. And oftentimes,

I'm not going back and canceling X software and Y software. Have you ever seen those ads for maybe it's true bill or something? You know, I'm talking about where where they ask somebody they're like, how many subscriptions do you think you have? And they go in there like, I think I have two. You have 17 costing you $490. Like your business is like that, too. I mean, we use a ton of different software products in this business. So when things to proceed something else, you're not under utilizing something or you can do without it.

Clayton Hepler (37:20)
Yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah,

Yeah, right, right, right, right, right, right.

Justin Piche (37:42)
It is certainly worth going through and giving a purge. And I'm actually going to take my own advice. So next week I'm going to go through and I'm going to throw up my QuickBooks download of all my transactions into AI and be like, hey, identify all of the recurring expenses, monthly, quarterly, annually, whatever, of a certain amount or less,

so if you're if you're able to look at your Expenses and your ins and outs over a period of time you can anticipate those cash shortfalls, right? But now what do you do? About those cash shortfalls when they hunt come and that is where those levers come in. So maybe I'll ask you

We talked a little bit about them. What are the main levers that you're considering when you get below your minimum reserve? First step is setting some reserve. You don't want to get below. Second is making sure you notice your ins and outs. And now you are getting to a point where you're going below your reserve. What are the levers that you think about in your business to keep your cash position high enough to manage through a slow period?

Clayton Hepler (38:42)
I don't really have many, I have a line of credit, that's about it. And I don't have a lot of levers to be honest with you that I pull. But I mean, there's a lot that you can get. You can get a line of credit on, just in general on your house, HELOC, something like that, right? But I have a couple of notes, not enough. That's kind of it with my levers, dude.

Justin Piche (39:13)
Yeah.

Clayton Hepler (39:13)
I don't

really have, to be fair, don't really have that many.

Justin Piche (39:16)
That's that's mean, that's a good reason to keep a larger cash cushion for sure. And I think part of knowing doing that is just knowing what your business needs and what your options are and like that that should inform the amount of risk you take with your cash position for sure. So maybe I'll just go through some of the ones that I've either discovered or used over the years to manage some pretty small cash positions at one point or another due to maybe overzealous purchases of land without partnering on them. So the first one is

Clayton Hepler (39:19)
Great.

Justin Piche (39:46)
a line of credit like Clay said. If you have a line of credit against another asset, that can be super useful to maintaining yourself through a lull period.

Those are a great lever, right? Because they're long-term cashflow. A lot of people enter into this business and they say, I want to build up this huge portfolio of notes so that it's paying me passively over time. And I think that's incredibly smart and a good thing to do. But if you come to a cash crunch or you have other opportunities that can produce higher returns, you may be in a position where you want to either sell your notes, which you can do on a marketplace like Paper Stack. There's a bunch of different note buyers out there.

I work with several of them that repeatedly and consistently buy mortgages from me. And then another option is getting a line of credit or a loan against your mortgages, which is harder to do. You have to find a bank that's willing to do that. But if you call enough banks and explain the situation, there are local banks and there are business friendly banks that do lend against mortgage portfolios. And actually, I think I talked about it maybe two podcasts episodes ago, but me and some partners found a bank in Texas that's willing to loan up to 80 percent of the principal value.

of a loan and they're willing to match the loan terms, obviously with a lower interest rate. So if I originate a mortgage for a hundred thousand dollars at 12 % over 10 years, let's just say that's the loan that I originate. Normally I would sell that to somebody at a 15, 16, 17, 18, 19, 20 % yield somewhere in there. And when I sell that, I'm going to get some cash discount to the principal. So if it's a hundred thousand dollar principal, maybe I'm 80, 82.

83, 85, 79, whatever, whatever it works out to be to be the yield that we negotiate. And that's great. I get that cash. I sell the mortgage. I'm done with that property. I have the cash boom. But if I am able to get a loan against that at 80 % or 70 % or some high percentage of the principal value, I get the same benefits of getting that cash upfront. But I also have all the additional benefits of the interest margin or arbitrage for all of those payments that I'm charging.

the additional 20 % of principal and interest that comes with that percentage or that portion that's owed to me from the borrower any early payoffs. get the benefit of all of the principal coming to me instead of having to sell it at the discount and that benefit obviously transfers to whoever buys the note. And then if there's a default and I still have a great loan to value, then I could foreclose on that property. You know, obviously foreclosing that property.

and then resell it as this property I've already sold that I've had experience selling. And that's a huge benefit for your business. But notes can be a really strong lever to get through the lulls. It's also a strong, in my opinion, eliminate a lull. If you're not offering owner financing in your business for sales, why? Like owner financing is a way to find a whole new pool of buyers who may not be able to afford the full price of the property.

And then you can turn this kind of piece of land that is only marketable to a certain number of people into a financial instrument that is then marketable to a whole bunch of people, funds, individual investors, people who want to buy them in their IRA, people who are just looking to buy cashflow cashflow that's backed up by a real asset that has more value than the price they're paying for it. So that's another really, really good way. One other way that I think is often not thought about is worth discussing.

is if you have equity positions in deals, if you own percentages of like larger scale deals like subdivides or you buy properties in cash, you can sell your equity for some amount of estimated return for somebody else. Like maybe like the normal way is if you don't have the cash to buy a deal, whatever you're to bring on a deal funder and you're going to partner on that deal and they're going to bring the cash and you're going to pay them some percentage of profits. But

If you've bought it yourself, you can still get a deal funder. You can still have somebody come in and pay you some percentage of that money you have tied up for some percentage of the profits. a lot of people don't think about that as a lever, but that's absolutely a lever that you can pull. Those are kind of the big ones that pop into my head immediately.

Clayton Hepler (43:59)
Yeah, there's a really interesting relationship between converting deals, getting that cash through the door and notes. If you were very, very, very cash heavy, notes obviously is a more tax efficient way to sell your land. so, ideally, the best way to do it would be just building a portfolio of notes over a period of time. That would be the ultimate way of

of building this business. The problem is you do need the cash. if, for example, if you have 100 notes that are really big notes, with great interest rates, like you're going to pay fewer taxes and make more money that way. But of course, like not everyone can do that because you need the cash coming in.

Justin Piche (44:50)
Yeah, I'm pretty excited about the finding identifying a bank that's willing to lend a pretty high loan on the principal value. That's going to be a game changer. Absolutely game changer for us as we figure it out. So we've got the first one first note that I've originated with some partners in Texas that we're bringing to them to get a loan against. So I will have an update probably in a later episode of how that went and what we ended up with.

Clayton Hepler (45:17)
So two things, big things, right? We talked about team motivation, keeping the motivation high through using metrics that matter to keep the motivation high, alliteration, gotta do it. Cash management, whether you have a portfolio of notes, line of credit, the ability to leverage your notes, other, a portion of your equity to another investor.

There are ways to get liquidity in your business or having expansive amounts of or excessive amounts of cash. When I say excessive, I mean a lot like five, six months of cash reserves. Those are the ways that we really discussed how to get through the laws in your business. And it's a mental game. It's more a mental game than anything, Justin. mean, you know, being able to get through that, those stresses, the stresses of entrepreneurship, they're big.

Here's one other thing I'm gonna throw. If you have a deal that is a larger opportunity.

There are people like Justin or myself that will take these deals, and not just Justin or myself, plenty of other people, that will give you an assignment fee if you have a large deal. And you get a portion of profits like an acquisition fee, and you sell the deal to another person. You got it for good price, you make a margin, and you sell it to another person that could take the deal to the finish line. I'm thinking about other deals, man, that like,

Justin Piche (46:31)
.

Clayton Hepler (46:51)
I need the quick cash like today, I can't wait six months, I can't wait 12 months, I can't wait 18, 24 months. I've done that in the past in my business. I've assigned a deal to someone, get that quick cash. I mean, Justin and I, look at deals every day that people bring us that are in those buy boxes. Hey, I need some cash quickly and I'm willing to give up some of the upside for the time it takes to continue to have that business coming. Every business owner does that at some point in their business.

And that's just one other way. The assignment thing to another land investor could be a really good way to get really quick cash. And it could be as simple as not even a title work. It's just you setting an addendum, you getting a consulting fee. I've done it many times. You don't even have to do it the title company. Depending on the type of deal, you can just get that cash like same day if it's a really good deal and assign it. So happy to look at those deals and that can help you get that liquidity quickly.

Last part of this podcast, man, as you know, it's time to put C-L-A-Y-T-O-N in the review. And subscribe, review, share the episode with people that maybe one of your friends is experiencing a lot in your business and there's some ideas that they could take and really implement. Of course, that.

helps us get this podcast out there and Justin and I both appreciate it. So Justin, anything else before we end the call and the podcast today?

Justin Piche (48:26)
Yeah, this is not an exhaustive list by any stretch of the imagination There's other strategies. We didn't really talk about bank financing private lending or all kinds of other ways You can use to get leverage So this was helpful to you guys Let us know in the comments and we can do a follow-up episode because I think this is a pretty valuable Topic to maybe spend a little bit more time on in a future episode But other than that, no, it's been great conversation as always. I'll be skiing

This time next week. So pretty pumped about that. I will miss our weekly meeting, but you know, we'll connect the next, the following week.

Clayton Hepler (49:04)
Oh dude, we're totally having it when you're skiing. What are you talking about? We're gonna do it, you're gonna be in the, on the slopes? On the slopes? Yeah.

Justin Piche (49:07)
I'll bring my little portable mic. I'll film on

my iPhone and it'll be good.

Clayton Hepler (49:15)
Yeah dude, yeah, yeah, yeah. Awesome. Until next time.

Justin Piche (49:20)
Later,