I’ve been asking some of you for feedback on this newsletter, and that’s what I’ve been hearing: make it shorter and more focused. I agree!
In that spirit, my team and I have narrowed this month’s edition into three sections: Current Business Data Insights, Entrepreneurs Making It Happen, and Playing the Long Game—a segment for me to talk directly to you about what I’m seeing, feeling, and hearing.
I hope you enjoy this shorter version. Please keep us posted on what you like and what still needs improvement!
The 2021 coronavirus relief plan is huge.
Here’s my take: This package absolutely floods the market with capital that, along with keeping interest rates low, will give the economy, already in recovery, an enormous boost. I also like the fact this package is more targeted to people who really need the help, which should drive overall growth. At least, that’s the hope.
If you’re lucky enough to get access to some of this capital, from this stimulus and/or the last, how are you going to invest it? Personally, I’m investing in hiring—always the best investment, in my opinion. Across our companies, we will have made 6 full-time hires—all new positions, except one—by the end of March.
Here are some additional things stemming from the stimulus to note for this year’s taxes:
Meals, which are normally 50% deductible, are 100% deductible for 2021 and 2022. To get the 100% deductibility, though, meals need to be provided by a “restaurant” (loosely defined). “Entertainment” is treated differently, which means if you have a combined category of “Meals and Entertainment”—the default for many—you now need to separate those expenses into two categories. Check with your CPA for specifics.
The second round of PPP loans is now available, but you need to demonstrate a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. If you haven’t yet, don’t forget to apply for forgiveness for Round 1. And for those who got the Economic Injury Disaster Assistance Loans (EIDL) last spring, payments start up soon. You should have received a statement from the SBA at this point. Be sure to follow up on it if you haven’t.
If you’re a restaurant or concert venue owner, you’re in luck: This package includes a $28.6 billion revitalization fund to help pandemic-related revenue losses. It’s unclear how to get access to those funds just yet, but expect more information soon.
In real estate news, there are some signs interest rates are pushing up. I don’t think it’s enough to take any noticeable steam out of the unprecedentedly strong seller’s market just yet, but it’s something to watch.
If you like to follow these trends and listen to some great banter between two different people, I recommend Pivot with Kara Swisher and Scott Galloway. They have a really good handle on where things are headed and provide excellent, actionable insights.
Please join me in welcoming my new Chief of Staff, Shane Feldman!
It’s been a number of years since I made a hire that would work so closely with me, so I’m both excited and nervous. We are at an important inflection point in several initiatives, and I very much want to impart on Shane the wisdom and learning others have helped me with over the years.
Among other things, Shane will be responsible for the Brandon Green Chapter 2 Ventures Brand IP. He will be a key contributor to our community, and I wanted you to get to know him through more than just a bio paragraph.
Please enjoy my interview with him. I know you’ll agree: He is going places!
How much wealth is your business actually creating for you?
By and large, real estate sales entrepreneurs aren’t investing correctly. And they are not alone—most service business entrepreneurs face this issue too.
Why? They tend to reinvest almost all of their profits and extra time back into their business.
Initially, doing this makes sense. For most entrepreneurs, their business is the biggest driver of their wealth and is probably where most of their family’s cash comes from. And in large part, they’re not wrong: Hiring people, for example, is a tremendous investment for the future.
The problem is, when you spend 10 years investing your profits back into your service business, most often you’ll only be able to increase your profits incrementally, at best. Then you go to sell, and you realize the business isn’t worth much more than 1-3x one year’s profits—if it’s sellable at all.
Here’s the dirty little secret: For most of you, your business isn’t worth much to anyone other than you. It’s a cash machine, not a wealth driver. That means you have to take a healthy percentage of the profits (50%) and invest elsewhere.
Your best bet is to run the hell out of a great service business by providing an extraordinary service to a loyal customer base. Maximize your profits, and reinvest no more than half of those profits back into the business to feed it and help it grow. Take the rest off the table.
Hear a few more actionable tips for how real estate agents can get their finances in order from me on a recent episode of the Agent Advice Podcast: Agents Helping Agents, hosted by my friend and acclaimed industry leader Chris Heller.