Difference Between Scaling and Repeating Business Model (LA 864)
Difference Between Scaling and Repeating Business Model (LA 864)
Transcript:
Steven Butala: Steve and Jill here.
Jill DeWit: Hello.
Steven Butala: Welcome to the Land Academy Show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit: And I am Jill DeWit, broadcasting from sunny Southern California.
Steven Butala: Today, Jill and I talk about the difference between scaling and repeating a business model. You know, like McDonald’s is repeating.
Jill DeWit: Right.
Steven Butala: You open one, it’s successful, you open another, and another one, and another one.
Jill DeWit: I think of Starbucks, now. I used to think of McDonald’s. Now, I think of Starbucks all the time.
Steven Butala: Scaling is like writing a book or writing software. You sell 100 copies, 1000, then 10 million. It all becomes marketing, which is a beautiful thing. Publishing, I love the publishing business.
Jill DeWit: Cool. More importantly, how’s your day going?
Steven Butala: It’s going okay.
Jill DeWit: Really?
Steven Butala: It’s okay. Why do you ask?
Jill DeWit: Because you’re cheery and you feel like you’re in … I feel like something’s going on today that makes you feel really good. So what’d you do this morning?
Steven Butala: I ran two miles. Jill and I, for our last, we’ve had that for a year now. We put a machine in our garage.
Jill DeWit: Yeah. The elliptical machine. I love that thing.
Steven Butala: Yeah. The brand is NordicTrack. We spent some money on it. Sears had a fantastic … Who goes to Sears anymore? I do.
Jill DeWit: I know. That was hilarious.
Steven Butala: Sears had an 80% off deal for, it was like February. They brought in a bunch of inventory for these workout machines.
Jill DeWit: That’s not why we went there. We were looking for the machine.
Steven Butala: We bought it because it was a fantastic deal.
Jill DeWit: It’s great.
Steven Butala: So, anyway. We’ve had that thing for almost a year. We put a bunch of miles on it between the two of us.
Jill DeWit: I know.
Steven Butala: I feel great.
Jill DeWit: Well, here’s what I did today.
Steven Butala: Probably to the point where it’s annoying.
Jill DeWit: You’re annoying? It’s annoying?
Steven Butala: Like, man, you’re too happy. You can get hit in the head in Detroit for that stuff.
Jill DeWit: No. I’m proud of you. I woke up today, got on the scale, and I was not displeased with the numbers, so I used that as an excuse to not get on the machine. So I’m proud of you.
Steven Butala: You want to know a secret?
Jill DeWit: Yes.
Steven Butala: I know exactly what the results are from your morning scale session just by your attitude, like, around 10:30.
Jill DeWit: That’s hilarious. And how often I hang out in the office kitchen?
Steven Butala: No. If you’re in a good mood, then you had a good scale event.
Jill DeWit: Thank you.
Steven Butala: So did you have a good one?
Jill DeWit: Everything’s great.
Steven Butala: You want to give us the numbers?
Jill DeWit: No. I don’t. Are you kidding? What the heck? Wow.
Steven Butala: And then you can tell us your age right after that.
Jill DeWit: Yeah, that’s a great idea. Thank you. Moving on.
Steven Butala: What’s this show about?
Jill DeWit: Let’s go on.
Steven Butala: The difference between scaling and repeating a business model.
Jill DeWit: Right.
Steven Butala: Before we get into it though, let’s take a question posted by one of our members on the Landinvestors.com online community.
Jill DeWit: Steven K. asks, “I’m looking at a parcel needing both physical and legal access. This is a personal interest, not for resale, and the neighboring lot has a road ending on that lot that I would need to extend the access road to a short distance the subject lot.” All right. “The road ending on that lot travels right on the property lines of three other lots before ending. Would I need to get access agreements from all the lot owners or just the lot where it ends? To visualize, think of two sets of boxes stacked two high.” Oh my good. “And you want to travel up to the top.”
Steven Butala: We have such intelligent people in this group.
Jill DeWit: “And you want to travel up the line to where the boxes meet, to the top box on the right, and veering onto that box, near the top, to access right above it, which would be a third box on the right.” I was better, Steven, before we brought in that one.
Steven Butala: So, barring the box example, let’s forget about that for a second. In this case, the neighboring parcel that has a road to it, you just need to contact that person and say, “Hey, can I stretch that road out to my parcel?” 90% of the time … This happens all the time.
Jill DeWit: Yeah.
Steven Butala: Access is a massive issue with rural vacant land. You find fantastic pieces of property in God’s country, and you can’t get to them, or there’s some few little things that you need to solve, and it’s all paper-driven and legal stuff. It has nothing to do with the actual property itself.
Steven Butala: There’s two types of access, by the way: legal and physical. There’s a good chance this property already has platted legal-
Jill DeWit: It could.
Steven Butala: … access to it. If you call the county planning and zoning, they’ll tell you immediately. They may give you the runaround and say get a survey and stuff. If that’s the case, ask them for their top two favorite surveyors in the area because, chances are, you can have a conversation with a surveyor and he can look at it with the way the internet is now, and he can say, “Oh, yeah, yeah. There’s legal access.” Then you’re home free.
Steven Butala: The person who owns that property with the road to it may not know that there is an easement going right through his property to yours. That’s usually what happens. It’s very easy.
Steven Butala: You know if you go onto Google Earth and you slip between satellite and the other one-
Jill DeWit: Oh, yeah. You can see the roads.
Steven Butala: … you can see if there’s legal access most of the time.
Jill DeWit: That’s a good plan. That’s an easy way to check. That’s great.
Steven Butala: You know it’s funny because we were posting a property in Florida that’s got this exact situation. Exactly. We found out that it’s got total full-blown access, physical and legal, you just can’t see it from the satellite pictures, so make sure you do that before you spend a dollar. I think that kind of covers it.
Jill DeWit: I think so.
Steven Butala: Access is a … I’ve become an unwilling access expert over the years because it makes or breaks the value of a property.
Jill DeWit: That’s true. That’s very true.
Steven Butala: Today’s topic, the difference between scaling and repeating a business model. This is the meat of the show.
Jill DeWit: Which one’s better?
Steven Butala: Scaling. If you watch Shark Tank, that’s all they talk about. “Oh, this business model’s not scalable.”
Jill DeWit: It’s true because it’s only you. They talk about that like, “Oh, if you’re making all the pies, as great as the pies are, you’re never going to get anywhere because you have to give up making all the pies.”
Steven Butala: That’s exactly the business model I was just going to say, [inaudible 00:06:04].
Jill DeWit: Really? That’s hilarious.
Steven Butala: [inaudible 00:06:07] Jill.com.
Jill DeWit: Thank you. Thank you.
Steven Butala: There’s only so many pies you can make, and then you can hire another baker-
Jill DeWit: You have to give up the recipe.
Steven Butala: …and make more pies, and then you can hire another baker, and so pretty soon you got 22 bakers baking pies.
Jill DeWit: Can you imagine if Kentucky Fried Chicken-
Steven Butala: That is exactly what you don’t want.
Jill DeWit: … if he never gave up the secret recipe? Seriously. Where would we be? There would be one and only secret recipe somewhere in Kentucky, and maybe we’d know about it, maybe we wouldn’t.
Steven Butala: Here’s another big problem that happens that no one thinks about. I don’t care how intelligent you are. A plumber and a medical doctor are exactly the same when it comes to how many service calls they can make.
Jill DeWit: That’s true.
Steven Butala: A plumber makes x amount of service calls in an eight-hour day, and a surgeon can only do x amount of surgeries in and eight-hour day. Granted at way different pay scales, but there’s still a cap. Restaurants, there’s only so many seats or a drive-through and you will hit a top, a glass ceiling, so to speak, on that business model. I, personally, have avoided those businesses my whole life. I actually learned something valuable in business school, believe it or not.
Jill DeWit: Great. You know what? That’s two things. I’m going to write that down. Just kidding.
Steven Butala: What was the other thing? Buy low, sell high?
Jill DeWit: Excel PhD. I got a PhD in sell somewhere along the way.
Steven Butala: Excel is all self-taught. When I went to school, there was no Excel.
Jill DeWit: That’s true. You just love it.
Steven Butala: There was just Lotus 1-2-3. It doesn’t matter.
Steven Butala: But think about that. So it’s not scalable, albeit it’s profitable. It’s not scalable. Scalability is the business that we’re in. You send a bunch of letters out. You don’t do the deal yourself, ever. And that’s a vast majority, if not every member that we have, I teach this over and over again, and everybody falls back into it, and does it wrong. You want to send out a bunch of letters, and then you’re going to receive a bunch of phone calls, and you’re going to decide very, very quickly whether or not you want to do the deal, and how much you’re going to purchase it for, and what you think you can sell it for, and that’s when you’re done. That’s it. The whole thing takes, maybe, five minutes.
Steven Butala: On the front end, to send a mailer out, it might take you 90 minutes a week, and then as the deals come in, you review which ones you want to do. Someone else answers the phones. Someone else does all the work.
Jill DeWit: And don’t worry. This is not the beginner level. This is what you’re striving for. This is where you should get your business too.
Steven Butala: That’s the whole point of this episode, why our business model is scalable.
Jill DeWit: That’s good.
Steven Butala: It’s all on software. You decide, I decide really, which deals I want to do, and it takes literally five seconds to answer, maybe five minutes that I go on the internet and I can see it, how much we’re going to sell it for is glaringly obvious, if the deal is profitable or not, and almost all of them are if they get to that point. The transaction coordinator kicks in and does the deal.
Jill DeWit: That’s it.
Steven Butala: And some of the transaction coordinators are local, based on the asset, and some of them are, which we call boots on the ground, and some of them are here with us, depending on the asset and where it is in the country. That’s scalability. There’s virtually no limit to the number of transactions that we can do because of how we set this up.
Steven Butala: To do a mail merge, if that’s not boring enough-
Jill DeWit: Right.
Steven Butala: To do a-
Jill DeWit: Sorry.
Steven Butala: She was just fixing her hair in the monitor. I totally just- Did you see that? You were looking at your hair like this, like you would in a rear-view mirror.
Jill DeWit: I did. Because I tuned out two minutes ago. I’m sorry. I’m so sorry. I’m following along. I’m doing my best.
Steven Butala: Let’s leave it at this.
Jill DeWit: Okay.
Steven Butala: Let’s leave it at this.
Steven Butala: Buying and selling real estate the way that we do it with mail merge blind-offer campaigns is totally scalable. It’s limitless. You can do it with any product type in any market. I avoid saying these sales-y type things because people don’t believe me.
Jill DeWit: Now, I’m afraid to comment because I heard you. Well, I agree.
Steven Butala: All right, we have several minutes left, let’s talk about whatever you’d like to talk about. Let’s talk about that.
Jill DeWit: I’d like to know, okay, I would like to shout out some professions, and you tell me if they’re scalable or not.
Steven Butala: All right.
Jill DeWit: If they are scalable, how they do it. Ready?
Steven Butala: Perfect.
Jill DeWit: Okay. Real estate agent.
Steven Butala: That’s horrifically non-scalable and not repeatable. That’s a joke.
Jill DeWit: Thank you.
Steven Butala: That’s awful.
Jill DeWit: What about broker?
Steven Butala: Here. Hold on. Here. My sister is one of the most successful real estate agents I’ve ever met, and she really only can do about 100 deals a year.
Jill DeWit: Okay.
Steven Butala: She makes probably $150- to $200,000 a year.
Jill DeWit: Now as a broker, though.
Steven Butala: Brokerage is not bad because you can get 5,000 people under you. It’s still not as scalable as it should be, but you can actually, if you believe in how this whole thing is structured, a broker having a bunch of good agents below them is okay. I don’t think it’s technically scalable.
Steven Butala: You know what’s even better is owning Century 21 itself, or owning, like, Warren Buffett owns Berkshire Hathaway. They take 2% of every single transaction. Can you imagine?
Jill DeWit: Right. All the subcompanies and the Geicos.
Steven Butala: Billions of dollars.
Jill DeWit: Whatever he has.
Steven Butala: No, not that. He specifically owns Berkshire Hathaway, so if you see a Berkshire Hathaway real estate office-
Jill DeWit: Oh, you mean that.
Steven Butala: … he makes, like, 2% on every deal.
Jill DeWit: I thought, I meant the whole big entity. So, okay.
Steven Butala: Just the real estate part.
Jill DeWit: Oh, okay. Got it. All right.
Steven Butala: Give me another one.
Jill DeWit: Insurance agent.
Steven Butala: That’s probably scalable. You get a lot of payments coming in.
Jill DeWit: Yeah, like our particular insurance agent does no work.
Steven Butala: Yeah. They just get the clients.
Jill DeWit: I never talk to him.
Steven Butala: Right. They get paid every month.
Jill DeWit: Exactly.
Steven Butala: Yeah, that’s scalable.
Jill DeWit: All right. Day trader.
Steven Butala: That’s scalable completely because you could buy a piece of stock for a thousand shares or 10 million shares, and then it goes up .001% and you get out.
Jill DeWit: Cool.
Steven Butala: Day trading is very scalable, now that I’m thinking about it.
Jill DeWit: Thank you.
Steven Butala: Want to hear a secret?
Jill DeWit: Tell me, yeah.
Steven Butala: On Sunday, when I’m watching a movie or something-
Jill DeWit: Yeah.
Steven Butala: … I fake day trade all the time-
Jill DeWit: Really?
Steven Butala: … just to see what would have happened. I never pull the trigger and I never buy, I don’t own a share of stock, but I just want to see if I put $100,000 on Ford-
Jill DeWit: I did not know this.
Steven Butala: … and it goes up 1/10 of 1%, that’s all stock moves. Well, 100th of 1% every day.
Jill DeWit: Yeah? Are you fake trading on the US market or an international market?
Steven Butala: It’s almost always indexes because they’re more of a [inaudible 00:12:57] as a percentage. It’s never like an actual piece of stock, and it’s always US, and sometimes currency.
Jill DeWit: All right.
Steven Butala: That’s the last thing I need in my life is a day trading operation.
Jill DeWit: Yeah. I almost started to say, hey, baby, if you really want to do that. Bite my tongue.
Steven Butala: No. That’s because you’re the greatest girl in the world because if I did say that to you, you would say, “Okay. Let’s get another office.”
Jill DeWit: All right. Throw some money over here.
Steven Butala: “Get some guys in here.” I know you would say that.
Jill DeWit: You know what? And Steven?
Steven Butala: You’re the greatest girl ever.
Jill DeWit: Thank you. All right. How about gambling?
Steven Butala: That’s just, don’t even.
Jill DeWit: Don’t even go there?
Steven Butala: No.
Jill DeWit: All right.
Steven Butala: That’s what I just described. Gambling.
Jill DeWit: All right. Never mind. That’s true. Let’s see. I’m trying to think of another good profession that I want to ask you about. We all know all the service industry, anything in a service industry where you have a time clock, literally, don’t bother. What about-
Steven Butala: How about rolling up an industry?
Jill DeWit: What about psychologist?
Steven Butala: No. You’ve got eight hours in a day, or 10 hours in a day at $100 to $200 an hour, that’s a great living, but there’s a huge ceiling on it.
Jill DeWit: Okay. I have a question.
Steven Butala: I don’t think people go into that for the money. I think they go into it to really try to help people, or at least they say that to themselves.
Jill DeWit: Lawyer. This is another community, they really just want to help people. How about lawyers?
Steven Butala: Yeah. Lawyers really want to help. Every lawyer I ever met wants to help. No, I think it’s, a one man shop is probably your eight to 10 hour day billable hours. You get a bunch of people below you, I don’t know. It’s debatable. Is it technically scalable? No.
Jill DeWit: Okay.
Steven Butala: Best scalable example is software and publishing.
Jill DeWit: Oh.
Steven Butala: I said this already, but I think you were looking at your hair.
Jill DeWit: I might have been.
Steven Butala: If you think about Windows, Windows in the perfect example. Windows is written and it’d edited and improved all the time, now. It used to be just buy it and that was it.
Jill DeWit: What about-
Steven Butala: Software and publishing specifically, now, because you don’t have to distribute a physical book. Any type of publishing or membership. Remember when we were kids you had that for a penny you could get all these records from Columbia Records?
Jill DeWit: Oh, yes.
Steven Butala: But you have to continue to buy records and stuff? That’s very scalable.
Jill DeWit: I can’t believe you remember that.
Steven Butala: Yeah.
Jill DeWit: I remember when it went up from a penny to 19 cents. It was something odd that they upped it. It was really weird.
Steven Butala: I was out by then.
Jill DeWit: That’s funny.
Steven Butala: That’s when cassettes came and you could just record your buddies record.
Jill DeWit: We should probably cut this now. It’s going weird. That’s hilarious.
Steven Butala: Well, you’ve done it again. You’ve spent another 15 minutes or so listening to the Land Academy show. Join us next time where we discuss why Shark Tank and the business panel on Shark Tank, why that model works.
Jill DeWit: And we answer your questions posted on our online community Landinvestors.com. It’s free.
Steven Butala: You are not alone in your real estate ambition.
Jill DeWit: I like it when we get to play would you do this deal or what do you think of this occupation or what do you think of my hair. Just kidding.
Steven Butala: It’s fun for me too. I like any time we don’t talk about real estate. That’s what I like.
Jill DeWit: That’s nice. Oh, boy.
Steven Butala: We are Steve and Jill.
Jill DeWit: Steve and Jill.
Steven Butala: Information-
Jill DeWit: … and inspiration-
Steven Butala: … to buy undervalued property.
Jill DeWit: We gotta get tighter on that.
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