"I've Kind of Exhausted My Warm Network"

0:00My name is Joseph Druther. I run Druther Homes in North Carolina. We sell We basically build luxury spec homes. That's what we do. So, we're going to do not quite 30 million in revenue this year. Our goal is to be at 50 plus of healthy revenue in the next 3 years. And what's stopping me is we eat a lot of land. We need a lot of land to keep the machine running. And so, we've never We've always had like referrals. We've always kind of come across stuff on market. And

0:28>> Are you having issues finding the land or buying the land? >> Um finding the land has been I'd say finding the land and then followed 30 to 45 days, depending on what our contract says, buying the land. So, it's extremely cash intensive. So, for us to grow requires new investors, new lenders, you know, constantly bringing on lots of cash. Especially at our price point cuz we're in like the 1 to 2 million dollar price point. So, land is might be 2, 3, 400,000 dollars for a lot.

0:56>> Okay. So, what are your margins on your 30? >> Um so, we will do So, we generally shoot for about 25% gross margin gross profit and then we will end up around 15% net 12 to 15% net. So, this year we'll probably do >> 4 and 1/2? >> Like 4 and change, you know. >> Cool. So, with the four and change, how many houses So, you're So, you're basically building call it 20 houses a

1:24>> like that. >> So, we're We're projected to start about 26 this year. Yeah, we'll probably sell a little bit less than that. >> I can't imagine raising 400 grand is that hard. >> I've done it a lot. I've kind of exhausted my warm network. I'm starting, you know, >> What kind of returns are you getting the person who's investing? >> Between 9 and 15%. It depends on how much they have. >> That's not that exciting. >> Right.

1:50>> Well, I bring it up to say this, which is that it's probably right or downer, but there's never a lack of capital, only a lack of good deals. >> Right. >> Like good deals never start for capital. Right? If you said, "Hey, I've got this thing. It's asset secured and it gives 30% a year." Would anyone else here give him some money? Right. >> Yeah. >> It's a bad deal. >> Right.

2:14>> Cuz you're basically offering the same as called the market with This is me just being transparent. Single guy, you know, not single You know what I'm saying? Like small business owner uh taking risk. That's significantly riskier. Um I would say that market for something like that is probably like in the in the like it not at the nine, probably closer to like 13 to 17. You know what I mean? Maybe 13 15. Um realistically, you probably just need to find one person who can fund all of these things. Um and basically have a facility that just rolls for you.

2:48>> Right. >> Basically, all you need to do. And so it's like, "Hey, if I can just This is my model. I will buy homes. I will fill homes. You're senior secured on this so that you can't really lose money." Um that becomes more interesting. >> Yeah. >> So, let's assume that you can find that cuz I don't think that's a hard pitch to to give. Then [clears throat] we just need to go find land. Okay? >> Yeah. >> So, from the land perspective What's hard about finding the land?

3:13>> Um so, it's been inconsistent. >> What do you currently do to find land? >> Um What we just started doing was direct direct mail. So, we used to do it very long time ago. Our our pipeline got super full um from some >> So, it works? >> Well, no. Our our pipeline got really full from, you know, somebody dropped 36 lot subdivision or an 11 lot subdivision. So, all of a sudden it's like, "Hey, we don't have like stop. We don't need more deal flow right now." And then we're eating through all of that. And now we need to turn on the faucet. But that was Those were just lucky. I would say lucky. I mean, they just referrals. People wanted the listings on the back side.

3:45>> Was it from the direct mail or the referrals? >> No, that was just from referrals. >> Okay. So, when you did the direct mail piece, nothing It it >> No, we we we got we've got uh deals for sure. So, we just started that back up. >> Okay. >> So, I hired um I hired a marketing or sales guy to kind of start that back up and I told him I was like, this is this works. We got to >> any metrics on the last time you did direct mail? >> I don't remember cuz it was a few years ago, but it was pretty good. >> Okay. >> it I know it works. >> Okay. So, you have a thing that worked really well last time that you didn't do for a while that we're going to do again that will probably if you do that work again.

4:17>> Chances are. >> Okay. So, what do you want to do from here? >> [laughter] >> I mean, that would be my best bet. >> Yeah. You're like, I have this thing that worked really well. I'd be like, well, start there. >> [laughter] >> So, so it's kind of two-fold cuz we're we're trying to acquire more land, but a way for us to scale, you know, we've kind of looked at it two paths. One way for us to scale is to continue doing specs, which requires a lot of cash. >> Right. >> The other way is to go directly to buyers, you know, basically build a brand, build a luxury brand that people want to come directly to us and build essentially a custom house without any of the custom house headaches.

4:51And so, [snorts] if we can they can buy the, you know, we're using their land, their money, you know, their cash, we can build our product like for them and it doesn't require any of our cash. >> you're going to sell them on the fact that it's custom, but it's spec. >> Basically, yeah. [laughter] Yeah, cuz like, you know, exactly. It's a custom home without the headache. This one or this one? This one or this one, right? Yeah, essentially done-for-you design services like we've got in-house designers, architects, all that stuff. >> I mean, I'm all for that. So, um >> But, we don't have any of that going right now. We just started that.

5:17>> have to find someone who's sitting on land that wants to buy a house that hasn't found a builder. >> Mhm. [snorts and clears throat] >> It's probably a small subset. >> Mhm. >> I'm just saying like, you you got to find landowners who don't have a house, who want to buy a house now, who don't have a builder. I don't like that personally. >> Right. >> You might be able to find veins of that, but can I just zoom out for a ques- for a second? What do you want to have happen? >> Um like

5:43>> Well, you said 50, but like you can like we can say screw all that and just send the direct mail piece and do 50. So like what's >> When you say what do I want? Like is this like in life or >> With the business. I mean life is like >> yeah. >> [laughter] >> Yeah. I want to make an impact. It's like all right, but with the business what are we going to do? Yeah. So no, I mean we're we we consider ourselves a four purpose company like we have a goal to give a ton of money away and to change the world, right? So as long as we can grow healthy and stay really really good stewards of what we're doing I don't it's not really about a number for me. Like I I truly believe that we could become a billion dollar company whether it's when I'm 50 or 60 or 70 like it doesn't really matter to me. I just want to continue to improve and do better. Build a great culture, have an you know amazing team surrounding us and be able to kind of impact their lives and you know continue doing our all the all the nonprofit work and stuff that we do.

6:34>> Something for another time. A lot of the like I would say well-intentioned heartfelt entrepreneurs that I have met um use a lot of that kind of visionary future based language. I would just ask myself how do I know I did it? And then define that in observable terms that are probably more helpful. >> Yeah. >> For your team, too. >> Yeah. >> Cuz otherwise this is like we're just going to do this can be kind of tough cuz it's just this big globby like amorphous thing.

7:03>> Yeah. >> But beyond that um I'll ask the question that was kind of underneath of this just was like why bother changing your strategy? >> To do more. >> But we could just send more mail. >> Right. Yeah. >> So that's why I'm saying why would we change it? >> Yeah, it would just require a significant amount more capital. So >> So is the capital the constraint? If we can create a deal and deals and >> Right.

7:29>> Yeah. >> I mean how much is a how much is a couple points going to really affect the net margins of the business on the land? >> How long does it take you to build a house? >> About 6 months. >> Okay. >> So >> So $400,000 let's say for the parcel of land, 6 months, let's say you give I don't know. 12% right? So, it's a percent a month. So, it's $4,000 * 6 24,000, right?

7:55Okay. On the million dollar one and a half million dollars, is that a huge deal? >> Uh, no, it's not. It's not a massive deal. >> So, like >> Yeah. >> [laughter] >> You're you're in a classic >> situation of like you have a $30 million a year business that can very clearly get to a hundred million dollars a year. If you don't change the business cuz it got it took it was like My opinion is this. You can do whatever you want, but if you go do the other thing, again, I have nothing against it. It's just that you don't know anything about it.

8:28>> Mhm. [clears throat] >> It's like right now it's like, yeah, we're going to sell them a custom home and we're going to give them a couple options. It's like they might be like, [ __ ] that. Uh, if I wanted to spec a house, I'd buy a spec house. I wanted it to be custom. And then all of a sudden you come back here in a year and be like, dude, it is a [ __ ] nightmare. I'm talking to these customers all day. I was like, I I had it made, right? Because you haven't done 30 million in that. >> Right. And 30 million in that is hard. >> You're doing 30 million in this. There's a lot of levels of entrepreneurship.

8:53You're already here. There's a lot It's rare air. So, like once you find the the bricks of the building, like It's just we just convince ourselves that we're like cute for some reason. I mean, you know, you're also cute, but I mean, you know what I'm >> [laughter] >> But, yeah. Make a better offer for the investors. You can get one guy who probably bankroll all of this stuff. It's not that tough. These are not huge deal. You know what I mean? Like even with 26, it's what? 8 million bucks? It's not a lot.

9:20>> Yeah. >> In the in the scheme of real estate, it's not a lot of money. Um And so, yeah, make a better deal. Send the direct mail, and I would say just don't get cute. >> Cool. I appreciate it, man. Thank you. Appreciate you. If you like this video and you're a business owner who wants to break through your current revenue ceiling, I distilled every lesson from scaling 10 businesses past 10 million and three businesses past 100 million into a completely free scaling roadmap that I've used to go from zero to one, zero to 10, and zero to 100 plus. And so, you can click here and you can check it out. Again, absolutely free. And since you're a business owner, I appreciate you and enjoy.