November 11, 2023Reside Founder Nick McLean interviews Andy Mulholland, founder of Simple Numbers, a specialized bookkeeping service for real estate teams. Andy shares his journey, emphasizing freedom, delegation, and key numerical principles that drove his success. Explore the “Five Simple Numbers” crucial for substantial business growth and increased financial and physical freedom.
Video Contents:
00:00 – Introduction
01:45 – Andy’s Background
09:08 – Andy’s Top Values for Real Estate Success
14:14 – The Pain Point & The Profits
21:38 – The 5 Simple Numbers
Episode breakdown: the five numbers that let a team leader step back
In this episode, Reside Platform co-founder Nick McLean talks with Andy Mulholland, who co-founded Simple Numbers with his wife, Ellen. Andy started as a solo agent, built a team, stepped out of production and then walked away from the business entirely. His argument is that the move out of production is a financial problem before it is a staffing problem, and he walks through the five numbers he wants every team leader to read.
Leverage yourself one layer at a time
Andy sold 28 units in his first year, working from a desk phone, open houses and a paper notebook of contacts. He knew that couldn’t last, so in 2009 he bought a CRM and hired an assistant. Each year after that he added another layer of people and systems, a habit he and Nick call “delegate and elevate.”
The next layer was taking buyers off his plate, because the listing side gave him more leverage. His first buyer’s agent didn’t work out. The next two or three stuck. It took about a year to fully exit buyer production and focus on listings. From there he built a listing system tight enough that another agent could run it. An ISA set seller appointments at times Andy chose, in his own office, and the listing coordinator handled everything until an offer came in. Eventually a sales manager and an operations director ran the day to day, and Andy’s job shrank to leading the Tuesday L10 meeting.
Build around the system, not the star
Andy’s view is that systems come first and people run them. Businesses built around a few highly skilled A players are fragile, he said, because when those players leave the business falls apart. He would rather hire for culture fit and let the system carry the consistency, so a client gets the same service no matter which agent or admin they deal with. He still had A players, but he wasn’t dependent on them.
I never wanted a giant team. I wanted a small tight-knit team that was leveraged through systems and marketing.
Andy Mulholland
Treat profit as future time and options
Andy said almost everyone he meets who is stuck in production is there because of a financial dependency. Their model doesn’t work, and often they don’t know what their numbers are saying. He pushes back on the idea that profit means greed or frugality. An owner running on thin margins is one market shift away from letting staff go, so profit protects the people inside the business as much as the owner.
We are rewarded not by profitability but by production, and that is a very easy trap to get sucked into.
Andy Mulholland
Nick framed profit as stored time. The more a company keeps, the more choices the owner has later, whether that is time with family or reinvesting in the team. Andy agreed and called it options and opportunity.
Read the books as a CEO, not just for taxes
Andy separates two ways of reading the books. One is the CPA and IRS lens, which is about lowering tax liability. The other is what the numbers say about the business, which he calls the CFO or CEO interpretation. For years he didn’t look at his financials until the end of the year, and then they confused him. His five numbers are built for the second lens.
- Total revenue: the true top line, not just what lands in the bank after the brokerage takes its share.
- Cost of goods sold, which he prefers to call cost of services provided: what it costs to deliver each deal, tracked separately for the listing and buy sides.
- Gross profit: revenue minus cost of goods sold. It has only two jobs, paying the bills and paying the owner.
- Operating expenses, in three buckets: lead gen and marketing, people (salaried and hourly staff) and overhead for everything else.
- Net profit, or loss.
Nick said hiring a bookkeeper with a chart of accounts was one of the most critical hires he made when he opened his company in 2012. He uses gross profit to see how much the company keeps on each listing and each buyer sale, which tells him how many homes it takes to cover fixed costs, payroll and new marketing.
Work the budget backward from net profit
Andy’s warning is that many teams start with their current expenses and work out how many homes they need to sell. If sales fall short, the margins disappear. He starts from the owner’s income goal instead. In his example, Nick wants to make $1 million out of production at a 10% net margin. That means a $10 million top line. Take out cost of goods sold, split what’s left across the three expense categories, and divide by 12. That sets the monthly budget. Then the owner decides whether that business can be built.
Financials and the right economic model are the key to driving freedom in your life when it comes to running a business.
Andy Mulholland
If the target margin isn’t realistic in a given market, Andy adjusts the profit goal rather than pretending. He describes the model as a pie with three pieces: profit, expenses and cost of goods sold. The only question is how big each piece is.
Key takeaways for team leaders
- Add one layer of leverage at a time, a person paired with a system, and expect some early hires to miss.
- Build the system first, then hire people who fit the culture and will follow it.
- Read your books monthly as an owner, not once a year for taxes.
- Track total revenue, cost of goods sold, gross profit, operating expenses and net profit, with expenses split into marketing, people and overhead.
- Set your income goal and margin first, then work backward to the top line and monthly budget you need.
