Why Your Real Estate Business Isn't Profitable Yet

By Andy Mulholland

He has a background in leading a top real estate team for over a decade and an understanding of the critical role of clear financials, Andy, along with his wife Ellyn, a seasoned real estate CFO, co-founded Simple-Numbers.

Here’s something we see over and over again with agents and team leaders: the revenue is there, the business is busy, but when you look at the actual numbers, the profit isn’t what it should be. And the pattern is almost always the same. There’s no system for profitability. It’s not that the money isn’t coming in. It’s that there’s no plan for where it goes once it does.

The traditional way most people look at their business is revenue minus expenses equals profit. That’s how most CPAs are trained. That’s how most agents run their numbers. And it makes logical sense on paper.

The problem is that it treats profit as whatever’s left over at the end, and for most people, there’s not much left. We’re human. If the money is sitting in one account and there are expenses to pay, we pay them. We throw money at things and see what sticks. And then at the end of the year, we wonder why there’s nothing left.

The fix is flipping the equation: revenue minus profit equals what you have left to spend. You take your revenue, pull out a predetermined profit amount first, set aside money for taxes and owner pay, and whatever is left is your operating budget. That’s it.

That smaller bucket of operating expenses is what you run the business on. And somehow, you figure it out. You get more creative. You stop spending on things that aren’t moving the needle because you simply don’t have the room for it anymore.

We believe in this system so much that we send the book, Profit First, to every new client. We run it in every business we own. We run it in our personal lives. That’s how deeply we believe it works. And the reason it works has less to do with logic and more to do with human psychology.

When all of your revenue runs into one big account, you spend it. But when you separate it into smaller accounts for profit, taxes, owner pay, and operating expenses, you naturally spend less on the business because the operating bucket is smaller. It’s that simple.

And it’s not just about profit. I learned this the hard way early in my career. A couple of years into business, I had to sell a Porsche 911 out of my garage because I forgot about the tax bill. That was the moment I decided it would never happen again.

With Profit First in place, taxes are automatically accounted for. You don’t think about the tax bill because it’s already set aside. Profit is already set aside. Owner pay is already set aside. The stress of running a business drops significantly when those things aren’t surprises anymore.

Here’s the other thing we always tell agents: Bookkeeping and understanding your numbers are critical. It’s what we do for a lot of people, helping them make sure their economic model is correct and building accountability around it. But bookkeeping is reactive. It tells you what already happened. Profit First is proactive. It tells you what’s going to happen because you’ve already built the outcome into the system.

Whether you’re a solo agent or a team leader, this is where you need to start. Day one.

If you want to build a system for profitability into your business and stop treating profit as whatever is left over, we’d love to help you get started. Email us at andy@simple-numbers.com, visit simple-numbers.com, or book a discovery call to talk it through.