David confessed, "I'm spending 80% of my revenue on software to run my business." I hear stories like this all the time. We start our business and believe we need all the software to run it from day one. Talking to your peers, they tell you they are using this cool CRM that emails or texts a lead within minutes. Believing it's the standard, you add it to your tools.
Before you know it, you are paying hundreds of dollars per month for software, and then you're losing money. Your revenues are growing, but every month you are losing money paying for the tools.
This reminds me of the 1849 Gold Rush. Do you know who made the most money during the California Gold Rush? The people selling picks, shovels, pans, and supplies to the miners. In contrast, about half the gold-seekers made a modest profit.
Force your revenues to justify the software and automation expense. I operated my business for over a year with no CRM. I kept track of my leads on index cards. When I hired my first sales rep, she begged me for a CRM. We went basic. I started with the lowest level plan, which was $25 per month. Then, I added more automation and tools as the sales grew.
Many times, we end up building systems for a business that doesn’t even exist yet. But when we wait, we allow the revenue to justify the software expense. I know it's easy to justify adding software and automation, but it's expensive. Software costs should not eat up your revenue. If your SAAS charges are more than five to ten percent of revenue, you have tool bloat.
Comfort Work
Why do so many startups get this backwards?
Because building systems feels safe. It's easier to stay in your comfort zone than to do work that actually moves you toward your goal. Let's be honest, it's more fun to build systems than call sellers or write another ad. I get it,
I can always tell when someone is playing it safe because they spend their time and energy on low-risk tasks. They start writing SOPs, adding fancy automations from the start, or worse, focus on their logo. Do customers even care about your logo? Honest question.
Billy is a perfect example. He spent months creating scripts and processes for calls that never came. He was busy, but his business had zero sales. He was building systems and processes before he was doing the actual work. That was a waste of time. He was solving problems that didn't exist yet. Designing for hypotheticals instead of building around the reality of the business.
What Comes First
In the book "Fix This Next for Real Estate Investors," I teach that order matters. Deal Flow. Then Profit. Then Order. Automation and systems sit in the Order level of the Investor Priority Pyramid. They are not the starting point. They come only after you have consistent deals and cash flow.
I learned this lesson the hard way with a subscription I thought would help me scale faster. It cost me fifty dollars a month, and I paid for almost four years. But I wasn't using it. Cutting our expenses should reduce our need to use debt. That is the margin health principle. Profit comes from two places: raising prices or cutting costs. Systems and automation are costs.
Ask yourself: Can I afford the automation today, or am I hoping it will generate additional income? If it is the latter, you are gambling with your margins.
The Right Time to Automate
Automation makes sense when repetitive work creates real bottlenecks. When your manual processes are slowing down revenue growth. When you have positive cash flow to fund the automation. When the system pays for itself in time and profit.
One investor I know implemented a self-guided touring system for rentals. But they did not do it until they had enough revenue to cover longer vacancy periods if it backfired. That is the right way to think about it. Automate only after the work and revenue prove it is necessary.
Here is my challenge: look at your expenses. What are you paying for that you hope will make money, versus what is actually making money? Cut the dead weight and put that cash back into deal flow. That is where growth starts. Remember, you can always add services back when your revenues justify them. Your priority today is profitability before order.