How to Choose the Right Partner for Your Real Estate Business

Mike DeHaan: [0:00] Really quick before the show starts, in case you haven't heard, we have a growing community of investors called the scale community, which is full of people learning to make massive income with their real estate businesses so they can reach financial freedom a little bit faster than building a rental portfolio solely over time, because, honestly, that takes decades. And who has time for that? So if you're an investor who is serious about growing and creating a scalable business without needing to be a slave to it twenty four seven, then go to collectingkeys.com/scale and apply. And if you're a good fit, we would love to have you join the community. So, again, collectingkeys.com/scale. Go ahead and apply, and we'll see if you're a good fit. If you can get those two parts of the business filled by a good person from day one, you're gonna make a lot of money very, very quickly versus if you're one person trying to do it yourself. What is going on, guys? Welcome to today's episode of the collecting keys real estate investing podcast. Today is Wednesday. It's the off market operator show. And if this is your first time here, this is the show where teach you to make massive income, not just passive income with your real estate investing business. I am Mike DeHaan here with my cohost, Dan Austin and Dylan Cook. And on these Wednesday shows, we talk about the real estate world in general, kind of like more macroeconomic stuff. And then today, specifically, we are actually gonna be doing a little more focused conversation and talking specifically around partnerships and business partnerships and sort of, like, when you should have them, when do they make sense, the pros and cons, primarily because we work with a lot of newer people.

Mike DeHaan: [1:35] I would say, like, growing investors through our scale community or talking on social media or different things. And partnership seems to be one of the most recurring questions and themes that comes up in what people ask us about or, you know, some of the areas people get caught up seems to be around partnerships. So we wanna do an episode just to go over kind of our thoughts when they make sense, when they don't. And that way you can maybe make a little more of an informed decision before you go and sign the dotted line with somebody that might not be a good fit. So would you guys wanna start with this? I know, Dylan, you've brought this one up for a little bit, something that you wanted to explore. I guess, what's your rationale outside of what I just said around you wanting specifically to dive into this one?

Dylan Koch: [2:13] Most newer people that they get started, they view partnerships, I think, as like a safety blanket. And even when I first started, you know, you didn't have a lot of assets and a lot of net worth. So I did have a partnership at the beginning of my investing career. And we scaled kind of quickly, relatively, we had 13 units after like six months. And it was all the like the buy and hold method. It wasn't really like wholesaling or flipping at that point in time. But as things kind of went on, you know, we kind of drifted in separate ways, and we had different goals and aspirations. And so that partnership ended up splitting. And the lessons that I took from that is one, always have, in the beginning, get your operating agreement signed up to how things are going to be split if things do go sideways for one, because you don't have to try to negotiate that on bad terms when it's ending. And then two, have complimentary skill sets, which I know is like cliche, but we were so much alike that we were just doing the same shit. We dislike doing the same stuff too. So like, there was nothing that was complimentary other than like, you do it this day, and I'll do it a different day. So I don't know. That's my like my take. I feel like I could have done things a lot better at the beginning.

Dylan Koch: [3:15] Now that I've built something to this point now, like kind of by myself, I would be a lot less hesitant to bring on a fifty fifty partner in today's like in my business today, because I built this from the ground up. So someone have to bring a lot of value just to for me to do something like that.

Mike DeHaan: [3:31] Yeah. And so you you have some good wisdom there for, like, how things ended. Let's start with this. So Dan and I, we partnered up originally because we had slightly different skill sets.

Dan Austin: [3:41] Probably had a mutual need. We probably had a mutually a need that was probably we both had gaps that would have been filled easily right then and there.

Mike DeHaan: [3:49] Correct. Right. And, like, I had already been pretty involved in, like, the flipping world at, like, a larger level. I'd really been diving into systems and figuring that out. Dan had a lot of experience around the renovation and the property stabilization side, everything else. And then when we partnered up, we decided to do that because we also had similar goals at that point. So when you started up, Dylan, why did you choose to have that partnership? Was it because of a similar circumstance?

Dylan Koch: [4:12] It was one of my closest closest friends at the time. We are both kinda starting on this journey together, so, like, the synergies were there. And, it just felt safer. It felt easier.

Mike DeHaan: [4:22] Yeah. Yeah. See, and I think that's the trap that a lot of people fall into, which I would always say is the worst reason to have a partnership is because it's your friend, and you feel like it's going to be safer, more secure for some reason, which is funny because, like, as a more experienced person, you realize that that's kinda silly. Right? When no one has a track record, it's like, I don't know, the blind leading the blinds. Like, two virgins having sex. Right? Because you have experience, you don't really know where things are going to lead next, but you can still take each other's half of each other's net worth. Yeah. Exactly. Well,

Dylan Koch: [4:54] that too. And the other caveat is, like, we were at this time, at this point in our careers, we were both, like, graduating pharmacy school. And we had no intentions at this time to leave our w two. So we were gonna make 250 k combined. So it was like, okay, we're gonna have all this money that we can deploy into real estate It was kinda like Yeah.

Dan Austin: [5:11] And so you were buy and hold strictly, like you mentioned. You weren't trying to start our

Dylan Koch: [5:15] At the very beginning, yes.

Dan Austin: [5:16] Yeah.

Dylan Koch: [5:16] Yeah.

Dan Austin: [5:17] That to me doesn't make any sense to partner up if your intention is to build a single family or small multifamily portfolio because you're basically taking on the exact same amount of risk. It's not like the debt is half the risk yet. Technically, you guys can split the debt up, but like technically you're both liable for all of the debt, and you're splitting up all the cash flow, and you're not splitting up the risk in my opinion. And so then when you break up, you have this like weird, like, how do we split these assets up?

Dylan Koch: [5:44] Dan, it's funny that you said, you just made me remember something. You remember how so the government will let you have what, 10 in your own personal name, 10 loans in your own personal name? So we would do like the we'd each buy one. We'd each buy 10 and then quick claim those into the LLCs that we own together so that we could get the 5% down or whatever it was financing at the time. But that was our beginning strategy.

Dan Austin: [6:04] And I mean, it's not a terrible idea. It's just like a lot of people you can't trust that well. It sounds like this person was at least trustworthy, your original partner. It's not like you guys, like, broke up because I'm assuming that's why we haven't gotten to that part of your story, but it wasn't like you're ripping each other off.

Dylan Koch: [6:16] No. A 100%. Like, he still is. And when it ended, he was still groomsmen in my wedding. But I would be lying if I said our, you know, our overall friendship wasn't affected by that ending.

Dan Austin: [6:27] Really? What was the cause of that?

Dylan Koch: [6:29] More he wanted to do more commercial side assets. I still wanted to do the single family, small multifamily. And not to get like too dive into it, but his like living dynamics are so much more different than mine. So that I was starting to grow a family, like we're getting married. And there's this we're going in separate ways pretty quickly unlike the personal side, which then affected the business side.

Dan Austin: [6:50] Yeah. Goal misalignment, is natural, like for things to grow, even like relationships with anybody you have, like your lives grow differently. And sometimes they still grow parallel, and like you can like have friendly relationships and you stay, but it's like when do you have a friend throughout your life that you've really stuck with and have the exact same hobbies your entire career? Like that's just less likely to happen.

Dylan Koch: [7:09] Yeah. I think one of the hot takes is I think partnerships are more likely to fail the younger you are when you get into them. I think if you're older and you're kind of set with what your business looks like, what your life looks like, they're less likely to fail at that point

Mike DeHaan: [7:21] in time.

Dan Austin: [7:22] That's fair.

Mike DeHaan: [7:22] Yes and no. I mean, I I would say age is one piece of it. I would say that your life experience is really what it comes down to. Because I think if you're I have older people that are very immature in business, but their lives are very secure, they're probably still going to fail just because they're going to have different reactions to the challenges that you face in business ownership, which are inevitable. And a lot of those things you don't necessarily learn until you face them. And so I guess just to to bring this around sort of to keep it actionable too is starting at the very very beginning piece. Like, when you're starting out and you're trying to decide if you should have a partner that's going to be with you from day one, the main thing you should look at are, do you guys have mutual middle and long term goals? Not short term goals. Everyone has the same short term goals, just to make money. That's why, like, three guys can go out for drinks at a bar and come up with the best business idea that they're never actually gonna do. Right? Because that sounds awesome right now. But looking at, the three, five, ten year goals, which realistically a business relationship, if it goes well, will last that long, those should be aligned. Also, making sure that you guys have different skill sets, but also making sure that you guys have the similar expectations around, like, how much time you're gonna be willing to put in, how much money you're gonna be willing to risk. Right?

Mike DeHaan: [8:36] What exactly you want your day to day to look like. Because Dan and I I mean, we recently did a little business acquisition, and we fired the partners that we were the previous owners. We bought into that because our expectations around what the day to day was meant to look like were very, very different. These guys wanted to work from, you know, nine to four and then go to the gym and then hang out. And then Dan and I are running another business, and we're also now manning this this business they were supposed to be in charge of. And so that didn't work out. And those little things are what caused most of the tension. Because when you're starting out and everything's going well, it can feel easy. The problem is with partnerships is as soon as there's a little bit of friction it's just like a marriage. Right? As soon as a little bit of friction, it'll start to fester, and it'll start to really get out of control very quickly. And like you said before, Dan, the problem is is now it's like a financial burden essentially on both sides. If a partnership breaks up and one person's more well-to-do than the other, you have assets that are gonna need to be split. That can cause problems if you've made even, like, a most, you know, mediocre amount of money. And so it's like starting out, that's a that's a thing to me to realize.

Mike DeHaan: [9:43] But I would say if you can find somebody, the power of a partnership is incredibly massive. You know, like most companies that private equity looks to invest in, they typically look for companies that are owned by partnerships, ideally three people, because that has been shown to, I would say, most equally align people's, like, energy and skill sets into the pillars they normally look for, which are usually what are they? It's like it's like sales and marketing, product development, and Like HR admin? Yeah. Like HR, thank you, and, hiring. And so when private equity is looking for these large companies, they typically want founders or leaders in the company that are established in those roles. Because if you can get people in those silos and they're good at it, that's the recipe for companies to really, really do well. And I would say the same thing exists in a real estate business. When it's small, it's a little bit different, but you need someone that's good at, like, acquisition portion. And you need someone that's actually good at, like, the project management or the disposition portion of it. And if you can get those two parts of the business filled by a good person from day one, you're gonna make a lot of money very, very quickly versus if you're one person trying

Dan Austin: [10:46] to do it yourself. I mean, it's hard to know, especially if you're new into an industry, it's like hard to know who's gonna necessarily be a good partner. And I will say we get a lot of folks through the scale community or just, you know, through social media, like talking about or asking questions about partnerships. Like one of the things I always tell people, and it's like 99% true all the time, do not partner with your contractor because they have the skill of swinging the hammer. There's a difference in being able to run projects and understand how to stabilize properties and being passionate and good at that then swinging a hammer. You can hire that. In my opinion, if you can hire it out right away super easy and it's a commodity like being a contractor, you probably shouldn't partner with a contractor. Now if you're partnering with a contractor to do something like starting a contracting business and part of that will be renovating your assets and your flips, that's a little bit different. But when when you're like, well, I'll just split it fifty fifty. Well, guess what? Almost a 100% of the time when people tell me they did that, the contractor charged them an hourly wage or a general contracting fee and then still wanted half the money at the end of it. And by the way, there usually isn't very much money because the contractor's milked you dry by that time and slow rolled your project. Even if they're a great guy and you're going into it, it just happens almost all the time. So when you're choosing the skill set, just because you don't know how to swing a hammer, you never need to know how to swing a hammer in this industry. Just don't use that reasoning to partner with a contractor.

Dan Austin: [12:10] Now if you have complementary skill sets or there's something like another thing I see is people that don't have money want to bring a money partner in, which is great, but not usually in like a fifty fifty true business entrepreneur standpoint because the person with the money in a lot of these cases would be a better fit as a private lender and not necessarily somebody to fund the day to day operations of your business. Because let's be honest, I don't know about you guys. I don't know too many people that are willing to just give me money to burn on marketing and sales and staff and and salaries and all that sort of stuff. Right? When we're talking like a wholesale and online real estate, that just doesn't happen. And then they're gonna be looking over your shoulder. They're not gonna bring any of the skill sets. They're just bringing money, and then they're gonna demand more from you.

Mike DeHaan: [12:49] Yeah. And that those are the two most common, I would say, air partnerships I see for new people. And that contractor one, I think that that's mostly fueled by people's, I would say, like, desire to avoid conflict because they're afraid to, like, have to deal with the contract with slightly different personalities. What happens if things don't go wrong? They don't have hard conversations. That's easy to get around. When it comes to the money partnership like you mentioned, where this is something that I I regularly think about when I see the situation come up. We've seen it come up with scale members and a lot of other people, but it always seems to be this weird power dynamic when it happens where it's like a younger investor trying to build up their business, and they meet with, like, a older seasoned, you know, veteran guy that's been in the industry for thirty years. And the guy goes, yeah. Well, I go and partner up on this. And every single time I've heard this situation, I'm always like, bro, you realize that this old dude's fucking taking advantage of you. Right? He's positioning it from a thing of, like, mentorship, and I understand that you probably want to bring him value because he's provided knowledge for you. But for him to just, like, write you a $100,000 check to flip this house and want 50% of the profits is an obscenely expensive way to start getting into doing deals where you're better off just getting a hard money loan, paying a fixed rate, and you're gonna keep a lot more of the profits. And the old guy knows that.

Mike DeHaan: [14:06] Like, he's not stupid.

Dan Austin: [14:07] Yeah. He's trying to get good margin.

Mike DeHaan: [14:09] He's smart. Totally. And it's just like such a a weird, I would say, a abuse of power almost, abuse of positioning by somebody that knows that they have leverage over this person. And so it's something to be really cautious of. Or even if it's not like necessarily like an older mentor, if you just have like a buddy who's like, hey. I'm rich. You know? I own whatever company. Make x amount of money, and I wanna, like, partner up with you on your business and get, like, 50% of the profits. If they're not gonna bring any other skills besides money, do not work with them. You're gonna be indebted to somebody that is going to have a lot more financial leverage if things go sideways and shit needs to hit the fan. Totally. Yeah.

Dylan Koch: [14:46] Don't most GCs isn't a typical GC, like, 25, 30% of the job. So just by the sheer math portion, you're losing out 15% of your overall profits just from partnering up instead of just hiring a GC.

Dan Austin: [14:59] Yep. Totally. Yeah. Exactly. Yeah. It never works out. And I I would look at the money person as the same thing as a contractor, and you can typically hire, you know, and I'm saying that in quotations, the money, because hard money is actually not that hard to get in this business, and you can find private money. And I've had a lot of people like come up to me like, hey, I'd love to get involved. I'd love to, you know, invest with you. I'm like, cool. It's you know, we're gonna pay you a 9% flat rate on this, blah blah blah blah blah, or whatever it is. And they're like, well, I always thought we'd like partner in 5050. I'm like, you bring nothing to me. Like, I can get money. And I'm at a point now, obviously, I have money to do the deals, and that's how we operate our business, but I can get the money. And and it's a self limiting belief that you can't get the money when you first start out. And I get it. It is It's a good belief because, like, you haven't done shit, so why should people give you money? But hard money lenders exist for this reason. They're gonna charge you more. It's gonna cost you a little bit more, but it's not gonna cost you 50% of your deal.

Mike DeHaan: [15:52] Yeah. I think there's this thing too where people are like, oh, I'm I'm gonna be willing to partner with this person for 50% of the deal. In case the deal, like, goes bad, like, they're, like, worried about, like, losing on it, but, like, that's a problematic way to view it. And if you realistically have concerns you're gonna lose on the deal, you probably shouldn't be buying it in general. Totally. A 100%. It's a weird dynamic we'll get into. So I'll ask this question

Dan Austin: [16:19] to both you guys. You're an operator. You're kinda starting out. You're like, I'm scared to spend money on marketing, but you're doing it, and you're just not seeing the the growth you want. Maybe you're hitting a deal a month or a deal every couple months, and so you're like, you're covering your costs, and maybe you suck at sales, or it's just something that you're you're bad at. Do you hire, or do you look for that partner?

Mike DeHaan: [16:40] Yeah. That's always the key question is a lot of people go and try to find a partner to do that because they don't wanna have to pay somebody. When realistically, you can hire people for probably a lot cheaper than you think. Right? Even like like solid players, and that's realistically the route most people could go. Because if you're bringing in a partner to say, like, do the acquisitions now, that's gonna be probably one of the most expensive hires you can make, especially if you're giving them 50% of your company when you could be paying them, you know, if your business does well, like, a $100,000 a year.

Dylan Koch: [17:07] And you keep all of the ownership.

Mike DeHaan: [17:09] Exactly. Yeah. If you're gonna be bringing in a partner, like, into something established like that, they need to be, like, multiplying your business at, like, kind of an exponential level. Otherwise, it's not worth it.

Dan Austin: [17:20] Yeah. One plus one is equal three kinda thing.

Mike DeHaan: [17:23] Exactly. Totally. Yeah. You know, it's funny. I've had this conversation at GoBundance events a couple times now. I talked about this at KeyesCon too. But I remember getting into kind of a debate with somebody about this. And they said, well, how come you partnered up with Dan then? Right? And I said, well, honestly, because I was the one that was kind of in need in that situation because Dan had more financial leverage.

Dan Austin: [17:46] I got taken advantage of.

Mike DeHaan: [17:47] Yeah. Dan got taken advantage of for sure. Because, realistically, if Dan had decided that he had these goals, he'd said, like, hey. I'm gonna pay you a $100,000 a year to basically do this for my business. At that point in my life, I would have done it for sure. Like, I can guarantee it.

Dan Austin: [18:01] Yeah. And I guess the argument on my behalf of why a partnership would have made sense at that time, I had some financial stability compared to Mike, but I wasn't by far the rich guy or anything like that. And I had experience in real estate in my niche, and I knew exactly what I was. I was laser focused on it. However, my growth goals did not align with what the market niche I was I was looking at would allow. Right? There there's a misalignment. I couldn't get to where I wanted to go faster. So Mike came in and we when we partnered, I was able to go a lot faster. I had to broaden and move outside of a niche, and now I don't I don't even think I have what I would consider a niche other than residential real estate. Right? We flip, we wholesale, we do all sorts of things. And so that for me was the one plus one equals three. Right? Because I could financially invest and then invest my time in our business, and I would get a lot further, a lot faster, which is exactly what happened.

Mike DeHaan: [18:49] Exactly. And I came in with less financial power, but significantly more time, which I was more than happy to bring, and so that balanced it out. But, you know, and the funny thing is too is we didn't necessarily realize that at the time. Honestly, we just kinda got lucky that it worked out that way.

Dan Austin: [19:03] For sure. Yeah. But a

Mike DeHaan: [19:04] lot of people, they don't even I don't know. They just don't get that fortunate, and it sort of cuts friction early.

Dylan Koch: [19:09] Yeah. And I think from, like, the people who are listening to this, it might be like the outside perspective. A lot of the big social media people that I follow in this business who seem to have killer businesses are partnerships. You know, you and Dan, you know, I I won't name drop a lot of people, but there's a lot of people. Billy and Tara, even Josh and Tiffany, like, you know, we hate on them. Like, there's a lot of people who have these 7, quote, 7 figure business.

Mike DeHaan: [19:31] Pace and Jamil.

Dylan Koch: [19:32] Yeah. There's all these people, man. Like so I think that's it's kinda like the shiny object syndrome almost.

Mike DeHaan: [19:39] Yeah. Exactly. I mean, totally. It's because when it works well, it like we said before, it causes exponential returns. But the problem is it also has a lot of downside risk. Yo. If you don't follow me on Instagram, which is that Mike underscore invests, by the way, then you might not know that we officially have a new mission as a brand, and that is to help 2,000 real estate investors build million dollar businesses. Obviously, to do that, we need to get in front of as many people as possible. So quick little ask to help us reach that goal. First, shoot me a follow on Instagram at Mike underscore invests. Second, follow collecting keys podcast on Instagram. That's at collecting keys podcast all written out. And third, every time the algorithm is kind enough to show you a post from either of us, share it on your story or in your post and tag us. If you do that, I'll DM you, and we can have a little DM conversation about what is preventing you from having that million dollar business that everyone is seeking. And we can see if we can come up with a plan to help you make that massive income, not just passive income. So again, if you see any of our posts, just go ahead, reshare them, tag us, and let everyone know that you enjoy the content we produce. It will help us a ton, and then we'll be happy to help you as well.

Dylan Koch: [20:55] On that, Mike, I just wanted to share this story. There's a guy who's a local wholesaler in my market, and he actually did pretty well for himself. And we can sidetrack into what we talked about yesterday about how many deals you can do a month as a solo person. But anyway, he was doing a couple deals a month, making probably like $25,300 k a year, and then he got approached by somebody who owns like 300 something apartments. He's like, hey, why don't you work for me? And then they hired another guy who does construction. They have a team of three. Right? And now they're the one of the biggest wholesaling operations in Cincinnati. They'd probably do 20 deals a month. But he told me personally, he's like, he he makes less now than he do what he does then. And so you just have to be okay with like, this goes back to what the goals that you want and where you wanna go. If he's more happy now and he has less time, that's great. But the financial is what you're mostly after, then that scale might not be the answer.

Dan Austin: [21:43] That's so powerful, Dylan. Alex said this, one of his partnerships failed is when experience meets money, experience gets money or gets the money.

Dylan Koch: [21:51] Yeah. I think it's a Warren Buffett quote originally. But

Dan Austin: [21:53] Is it? Yeah. Okay. So Alex from Mosey said it in my book. So if it is, it's true. It's so true because we've seen that. Mike and I personally have seen that. And it happens. We were approached, I remember this, we were approached when we were just starting out the backyard home buyers like model by a pretty experienced person that was investing in apartments as well and wanted to bring us on. And it was kind of exciting. It's like, oh man, this dude's a big baller. Like he's he's written a book, you know, like guy knows some stuff. He's a very big name.

Mike DeHaan: [22:21] Yeah.

Dan Austin: [22:22] He's a very big name. And what it turned out to be as we kept having the conversations, because Mike and I were a little bit slow on it, like, and what we found out was like this dude just wanted to basically ring us out and take us, and we would have made less money, and it was the best decision we could have ever made is walk away from that.

Mike DeHaan: [22:38] At the

Dan Austin: [22:38] time, we also had another partner that we were working with, which we walked away from as well and voted off the ship, and that completely changed. But that wasn't the experience meets money situation. But we also have personal relationships with people that ran into the same situation. A very experienced people person or team comes in and says, I wanna work with you, new person. And you usually go and get your money taken.

Dylan Koch: [23:00] You have to ask yourself why are they approaching you? Like, what is in it for them?

Dan Austin: [23:04] Who's getting more leverage?

Mike DeHaan: [23:05] Yeah. On that note too of that third partner that we fired, that was a a funny situation as well because for basically, where where I think people really get in trouble in partnerships is during, like, the honeymoon phase. We'll keep it on the relationship sort of connections. Everything was going super well, and he's super into it. And we started making, like, actually pretty freaking good money. And this is also an another thing that I've I've heard. Think I think it's also her thing since we just fucking jerk off on his podcast all the time. But so as he's saying, one of the issues that people have when they start with partnerships is this is a common thing where people say, well, we're gonna be making so much money that doesn't really matter. And he goes, I'll tell you what. From personal experience, it really does fucking matter when someone's not doing shit and you're writing them a million dollar check every single month. Yes. Right? And we were not that big by any means, but we did have a partner who, by all intents and purposes, started off awesome. And then for some reason, just like fell off the ship, but we were still paying him every single month. And the big sort of, like, event I say with the showed the big problem, I went on a trip.

Mike DeHaan: [24:13] I went to Africa. It was this this trip my wife and I've been planning for several years. Went on this. I got back, and Dan was like, bro, I don't think I've heard from him the entire time you've been gone.

Dan Austin: [24:23] It's like a month. Yeah.

Mike DeHaan: [24:24] He had been like MIA for, like, thirty days pretty much. And so we're like, well, I guess we gotta fire him today. And literally, it was like first day back at work. We get on a call. He actually shows up for this one, and Dan's fucking late to the meeting that we're gonna be voting him off the island. So I'm sitting there for ten minutes making awkward small talk with the guy who's head I'm about to chop off. And then he he hops on, and we're like, okay. So we've decided that we are going to be removing you from the company. We're gonna do a vote as per our operating agreement. And here's the thing is we were versed enough that we knew what we needed to do in order to, like, deal with this bad situation. And then Dan and I did a really cheesy little, like, two to one vote. Okay. Cool. You're out. And because we had established what that looked like already through our operating agreement, that was the one thing that we did well. We were basically able to just give him a third of the cash that we had in the account, and we said, cool. See you later. And it was that simple.

Dan Austin: [25:16] And it was super amicable. Like, I think looking back handled it just fine. Right? Like, it was just like, that's what happened. It's the operating agreement. Yeah. It was all lined out. We did that recently and did a vote with the partners Mike talked about earlier. It's just like, hey, well, we have, you know, the majority share of the company and the majority votes to shut down the entity. And and that's we've done that a couple times. And then just we typically will restart the entity if we wanna keep the business going and just keep operating in a new direction without that person.

Dylan Koch: [25:42] Something that kinda ties into this too is Mike and I had a conversation offline the other day that and I guess Cody agreed to this too. The max that I think a single operator can do is what? Three to four deals a month?

Mike DeHaan: [25:52] To do them well. You can probably do like a little bit more, I'd say, if you were like very organized. Did that seems to be about like You

Dan Austin: [25:59] had no employees at all?

Mike DeHaan: [26:00] Yeah. If you have zero employees, you're doing just to give a little bit more context, you're doing full pipeline management. You're doing all your administrative stuff, your marketing, your bookkeeping, your data, you're doing everything else. You're doing all your acquisitions. You're walking all your appointments. You're doing all your TC. You're doing all your disposition. You're basically a one man show across the entire thing. As you carry those deals through that pipeline, three to four seems to be about the ceiling for most people. I bet there's a couple that can get to five to six if they were, like, on it, but it's gonna be a stretch.

Dylan Koch: [26:29] Well, if you're one of those people and you're listening, you can come on the operator show.

Mike DeHaan: [26:32] Right. Exactly. Seriously. Yeah. Yeah.

Dylan Koch: [26:35] Let's say you're making 15,000 a deal, you can almost reverse engineer what your max could be as a single person with either a, not bringing on a partner or b, bringing on other team members.

Dan Austin: [26:45] Yeah. That's a great point.

Mike DeHaan: [26:46] It is. I mean, and funny thing is too is if you think about the people that we've interviewed on past Monday shows or, like, people that we know that are are good operators, they seem to peak out at about that $405,100,000 dollar a year number as a single person operator.

Dan Austin: [26:59] Which is great.

Mike DeHaan: [27:01] Yeah. Totally. But then, you know, when you bring in the partnership, now say you can double that number. Or I would say, like, realistically, if you bring in an additional person, bring in a team, you can probably increase that number more than two x. It'll be two to three x. Now you're making more revenue. You're gonna make more money if you can keep your profitability up, your margins the same. You know? And, like, the funny thing is too is on the piece of of partnerships versus staff. The most money that Dan and I ever made was back when it was literally just us and an acquisition manager and a lead manager slash TC. Because, like, our margins were super high, our overhead was very low, but we learned that going from that, we went from being able to just kinda be us to doing five or six deals a month. All of a sudden, we're doing ten, twelve. Right? And we're carving off bigger deals too because we had people whose dedicated job was to get larger margins, and we weren't basically just settling like it wasn't. It was just us because we needed to be more efficient. And then as we have grown over the past couple of years, our top line has increased a lot, but our EBITDA, our profit is lower just because you brought on more overhead, but it gives us more flexibility. Right? We've been able to start collecting keys. We've been able to get involved with scale, which scale now produces its own income, which has has added to, you know, our our top line even more just like as a partnership. And that's where the opportunity comes in is, like, it gives you that trade off.

Mike DeHaan: [28:24] And one of the I don't remember why I heard this, but this concept that, like, when you are bringing in staff, you can't expect them to be perfect. But what you can do is you can expect to trade 80% efficiency for 80% of your time back.

Dan Austin: [28:39] Yeah. That's an interesting comment because, I have, like I believe that, but then you hear these other people, and this is a good conversation of how you do this. Other people are like, well, you should be hiring people that are better than you. Are they gonna do better than you at that role? And so, like, for example, like, if you're you could hire a CFO, there's a good chance they'll do it better than you if you're not a finance or accountant person.

Mike DeHaan: [28:59] Well, you're talking c suite level, though. Right?

Dylan Koch: [29:00] I do

Mike DeHaan: [29:00] think you should be hiring people that are better than you. So for example, when we brought on our first AM, she was definitely better than us at closing. Right? And she brought immediate value to the company. Like, you can find people that are better than you at those specific skills. I think that the challenge entrepreneurs have is they try to look at that from, a holistic perspective. They're like, I wanna hire, you know, like, I'm in the worst team in the league, and I wanna hire fucking Tom Brady. It's like, that's not how it works. You what you need is you need that one guy that's faster than everyone else that you currently have. Right? Or, like, way faster than you.

Dan Austin: [29:29] Yeah. I and I think I think to add to that is like you have to respect the boundaries. If they're an employee, they're not an owner of your business, so they're going to do employee things and work like employees. Now does that mean there's not employees out there that are willing to go the extra mile? Totally not. Like, we have employees like that. Like, there are employees out there that kick ass. But when you talk about the 80% efficiency thing, they may not be as perfect as you in all aspects, and they're probably you shouldn't expect them to be working all twenty four seven like you normally would. So that's where you're gonna get 80% of the efficiency out of

Mike DeHaan: [29:57] them as if you were

Dan Austin: [29:57] doing it, because, I mean, you'll just figure out because it's your business.

Mike DeHaan: [30:00] Correct. And then also too, the people that you are going to hire are different when you're a small business than when you're established. 100%. Even if you your business doesn't necessarily grow exponentially over, say, four years. When you have four years of operating experience, you're going to be able to attract better people because you're gonna have a track record. Right? And people that are, I would say, more serious employees, they are going to care about that a lot more. I mean, we we recently hired a couple sales reps for the, like, the scale and and SimplyLead side. And one of the most common questions that I got during interviews was how long we've been around.

Dan Austin: [30:34] Yeah.

Mike DeHaan: [30:35] Right? Which I thought was very interesting. And, you know, I've reflected on that. And I'm pretty sure it's because what happens, you get a lot of people that go into interviews for a company that's been around for, like, six months. Yeah. They might not be around in six months, but the fact that we've been around since, you know, early two thousand twenty, you know, late twenty nineteen, that means a lot of people. They're they're a lot more likely to wanna invest their time in your business.

Dylan Koch: [30:55] I just hired the EA, and when I was going through the interview process, was the same thing. Like, how long have you been doing this?

Dan Austin: [31:00] It's long Yeah. Yeah.

Dylan Koch: [31:03] Just wanna make sure it's stable. You know? That's all the that they're they don't wanna be looking for another job six months from now.

Dan Austin: [31:08] Yeah. That's super fair.

Mike DeHaan: [31:09] See, and and that's a thing to keep in mind. Right? It's when you're when you're hiring people, you know, where we talk start with partnerships. Now we're on on hiring, which I think they're they're very related. When you're hiring people, recognize that the vast majority of humans, what they value more than anything is stability. Right? And those of us that are entrepreneurial, we don't always understand that because we we desire growth. We desire challenge. We desire opportunity. Most people don't want that. Most people are perfectly happy if they have their bills paid, and they can go home and they can watch Netflix. They can go on their one vacation a year. They can go to their kid's soccer game. Right? And they don't have to worry about, you know, paying for food or or paying their rent or whatever. And it's important to to keep that in mind. And that's why I think there's this I'm just kinda, like, outdated, but that old notion that, like, when you once you reach, like, $85,000 a year or whatever, like, your happiness doesn't improve anymore after that. Now I don't know what the modern number would be because I feel like that was years ago they said that.

Dylan Koch: [32:04] It's, 400,000 for inflation? Probably.

Dan Austin: [32:07] 2,000,000,000.

Mike DeHaan: [32:08] But the funny thing is is, like, depending on who reads that, right, if you're a driven person, you're like, what the fuck? $85? Like, what would I do if that was all that I made? But there's also a shit ton of people that are like, man, that was what I made. I would be freaking stoked. Like, if me and my spouse made $85,000 a year, we would be set. We could just do our thing. And that is how 99% of the world thinks. It's important to recognize that.

Dan Austin: [32:31] Well, yeah. And there's some security in, like, knowing what's gonna happen next and where you're gonna go and all that sort of stuff, and that's what people are looking for in a company. Right? They want that comfort, and part of that is them interviewing you while you're interviewing them. Right? So if you can't bring that to the table or you can't at least sell yourself, you're going to get less quality employees. And that's where we always talk about like you need to practice interviewing. Like if you're thinking you need somebody because you're struggling in a part of your company, you're not keeping up with the work, like start posting the job now, start interviewing. Even if you don't have a company, I don't know, just go interview. Figure out what it feels like to be a business owner and start doing that stuff. Like, there's real value in it, then you'll figure out that you might suck at interviewing. Yeah. And you need to get better so you can attract top talent.

Mike DeHaan: [33:10] Yeah. And one thing too, just to bring that back to the partnership discussion that we started with, it's a very important thing to recognize when you have a potential partner to make sure that they are not one of those people whose happiness is going to peak at $85,000 a year. Because they will never be with you during the grind and the hard parts that are necessary to grow a business. And the funny thing is too is there are a hell of a lot of people who think that they're entrepreneurial. They just don't realize they're not yet because they haven't been put into a situation where they either need to figure it out and thrive or they need to take a huge step backwards. And until that happens, a lot of people don't really know if they have what it takes.

Dan Austin: [33:47] And it's okay if your goals change too. Right? Like, as partners, like, your goals might change.

Dylan Koch: [33:51] Well, I just I'm glad you said that, Dan, because I want you to I wanna ask you guys about this question. We said at the beginning of this that you should have same long term goals. Right? But you also have to have the willingness to change what that looks like. Reflect on your two businesses. And your day one, how much different does it look like now than than then? Like, Like, I'm it's probably almost a one eighty.

Mike DeHaan: [34:11] Oh, it's not it's not even remotely similar.

Dylan Koch: [34:14] It's not even remotely similar to what you first set out with. But if someone has this vision of I'm only doing this thing for the long time, then it's just destined to fail. You have to be dynamic.

Dan Austin: [34:23] If you're inflexible or have, you know, low flexibility, then you're you're probably never gonna be a good partner. And there is no people out there that they're like, this is what we're doing. This is how I'm doing it. And that's great. You're probably gonna have a struggle to have a long term partnership with anybody because you're too rigid. For us, like our goal what was our initial goal, Mike? Was it to buy like 40 properties? Like 40 doors?

Mike DeHaan: [34:42] Yeah. I think I think it was it was like 50 properties in ten years.

Dan Austin: [34:45] That's what our Yeah. Goal So then we did that in like a year. And so we were like, okay. And our we were only a 100% mindset of passive income. Like, that's where I was at. That's where Mike was at. Like, what if we had this what if we had 10 k a month coming in each? Like, that would be so sick. Now, I would say we don't really pay attention to passive income as much as we do like income and then building a business. And now our goals are more around building a a broader business and what that looks like from from an income standpoint. And we've just evolved too. And I think as a business in general, you need to evolve with what the market's giving you. And that we've kinda done that, and we've kind of changed our goals together.

Dylan Koch: [35:21] Well, and you learn new things along the way. Like, and you just stack those skill sets on top of each other as it goes.

Mike DeHaan: [35:27] Exactly. And you say like evolve with the market too. How miserable are the people that are purely focused on passive income right now with interest rates and everything else? It's a terrible place to be. But those people that were purely focused on that and never learned how to make money, how to produce revenue, they didn't adopt their skill set, they're a less skilled person. Right? They are going to be less successful over the next, you know, who knows how long while the interest rates stay against their favor.

Dylan Koch: [35:51] I wanted to ask you guys one other question. It kinda relates to hiring, but also partnerships. I've seen in the GoBundance forums, people talk about how they compensate their a players, and there's always the discussion of, you know, a low equity position, so they're owner and they have that, you know, ownership feeling, or they do like a revenue or profit splitting, like, with their employees. Have you guys ever done anything like that, or do you have opinions around either of those models?

Mike DeHaan: [36:13] It's challenging because so we have several people on staff right now that, you know, have, I would say, like, unofficial ownership in the business mostly because we haven't figured out how to actually structure it in a way that makes sense. Like, legally, they're are people that have a lot of trust in us, and we're not gonna, like, screw them over. But, like, we do need to figure out the appropriate legal way to do that. I think a big thing that most people need to realize, and this scale again goes back to people's desires and expectations, is you can have, like, true a players that will have different desired outcomes of their time with you. And a lot of it's based on their personalities, you know, like their own personal goals. And so, like, if someone's a very driven, like, a high d on the disc assessment, they're gonna be heavily driven by money. Right? That is just sort of who they are. If you have someone's on the other end, they're more of like a c type. They're gonna probably be more into, like, the game, right, on, like, building something that they find value in. Right? And we have two people right now that are very key players in their business that fall on those each end of the spectrum very, very specifically. Right? And you and you'll know exactly who those people are doing.

Dan Austin: [37:17] I would say the the argument with it is is a lot of people think they want equity, and they really don't want equity. And Mike and I have gone we've talked to people about this and tried to figure this out, like, outside of our business. And what equity what true equity means is ownership, and so that means you give me money when we need money. So if you have 10% equity in my business, when we do a capital call, you need to come up with 10%. And this is where a lot of partnerships fail too. It's like fifty fifty, thirty seventy, whatever it is. It's like, hey, by the way, like we're doing a capital call. When you're a small business, you might do a capital call. I mean, Mike and I were doing capital calls every single month until we cut our first deal, and then we were still doing capital calls. Right? Like, technically, right, we're just like, we need another $5 each, another $5 each. And that gets much more complicated, especially if you're trying to build a business with an exit. When you have like a complicated cap table where you're like, oh, this person has 1%, this person has 10, this person has 15. Really what they want is profit sharing and maybe some phantom equity, is essentially when you do make an exit, they'll get a piece of that. But it's not going to complicate your cap table.

Dan Austin: [38:16] It's not gonna dilute any potential buyers shares in the business. They can still buy it, and these people will get then a piece of that. And then you, as the owners or the founders, still maintains all decision making authority, all of that sort of stuff. It's just that they're working towards a bigger exit or a bigger profit share.

Dylan Koch: [38:33] That makes sense.

Mike DeHaan: [38:34] Yeah. And also too, you can probably pay people less than you think you need to. Right? And that's an important thing for people to realize. And not that not saying you should underpay people, but the thing is is once you start paying someone a certain amount of money, you can't go down from that. And so it's an important thing to realize you're looking at business growth or what a gut kill is gonna look like. And, you know, I think that that a lot of people, they think that in order to get an a player, need to be maxing out their salary. You're doing all these different things when realistically, there's probably like a middle ground that would be better.

Dan Austin: [39:07] Absolutely. Yeah. You're better off, like, providing a long term vision for them when you bring them on and saying, hey. This is where I'm starting you at. Here's kind of the tiers of what I think your bandwidth should be for this this role, and here's my plan to get you there, but you're gonna have some milestones you have to meet to get those those increases in pay or profit share or whatever it is.

Mike DeHaan: [39:25] Yep. Exactly. And also too, if you're like, well, I don't think I can get them to work for me without paying them x amount of money, that's a leadership problem, and you probably need to learn how to incite excitement through your vision, what you're trying to build. Because if you can get someone to believe in it or, like, what you're trying to do, they are gonna be more likely to work for, like, less than, a top top dollar. And if not, then fuck that person. Go find somebody else. Like, honestly. Like, they're not a good fit for you and your business at this time. Cool. Right on. So I guess just to wrap it up, bring it full circle with some actual stuff. When it comes to partnerships, do not partner out of fear. Do not partner out of, like, it'll be fun. They're your friend, whatever. When you are going into these partnerships, make sure that you guys have complementary skill sets, that you have the same vision, that you guys are willing to go through the same stuff both in, like, workload as well as, like, how much time you're willing to commit to everything. Set up the exit strategy for if things go bad, which they will ultimately happen for the vast majority of partnerships, unfortunately. So it's very important to make sure that that's all teed up appropriately. And then realistically, most people should not be looking at partnerships. They should be looking to hire out for the skill sets they don't have, and that will make it a much more clear way to grow your business. You'll be able to bring in more specialty people while also being able to keep more of your profits.

Mike DeHaan: [40:44] Did I miss anything on all that? Nailed it.

Dylan Koch: [40:46] I think that yeah. Good. Great summary.

Mike DeHaan: [40:48] Cool. Right on, guys. Alright. Well, thanks for listening to today's show. Please share this with anyone who is about to get themselves into a partnership that they are going to majorly regret. If you also have a friend that has, like, a shitty girlfriend and you're afraid they're gonna get married, share this episode. It'll probably helpful to him too. Because

Dan Austin: [41:03] do it.

Mike DeHaan: [41:04] Let's be honest. It's all the kind of the same thing when when you get into the the details of it. So, anyways, guys, appreciate y'all listening, and we'll talk to you guys next week.

Dylan Koch: [41:11] See you. See you.