How Brenton Hayden of Renters Warehouse Created a Franchise Business Professional Landlord

Hi everyone, welcome to this week's edition of Growth Everywhere where we interview entrepreneurs and bring you business and personal growth tips. I'm your host Eric Siu and today we have Brenton Hayden, founder and CEO of Renters Warehouse. Brenton, how are you doing today?

I'm doing good, Eric. Thanks for having me on your podcast, I really appreciate it.

Yeah, thanks for being on the show. So Brenton, why don't you start off by giving us a little information on your background?

Sure, you mentioned I'm the founder of a company called Renters Warehouse. Now, I have several other businesses, but this is the main one for me. It's a professional landlord service. We help everyday homeowners and real estate investors to rent and manage their residential real estate. It's really that simple. However, we flipped property management on its head. It's always been a mom-and-pop style business. It's been a spreadsheet and kind of an accountant's line of work. And we brought in technology. We brought in marketing know-how and we brought in Proven processes to really make it more efficient so that we could manage more properties for less money, which helps everyone. And so we've grown into quite a large professional landlord in the country. In fact, we're the 2nd largest professional landlord for another, for a fee, in the country. And we have about $2.5 billion worth of residential rental real estate under our management.

Wow.

Just in Minnesota alone. So, and that's where our headquarters is. That's where we started. We started out as a property manager there, and now we've begun franchising. We've made some acquisitions in the software space. We've opened up real estate brokerages. I'm also an angel investor in 3 software companies myself. So, while much is related to real estate, not all of it is. But we've been doing this now since 2007. Along the way, I picked up a partner and a best friend. His name is Ryan Marvin, who is kind of— he's a minority shareholder but my right-hand man, and we've been doing most of this together.

Cool. So walk me through Renters Warehouse. Let's say I'm trying to rent out a place. I mean, how does that work for me?

Well, typically our clients are property owners, not a property renter. However, we work with the renters quite a bit, and I'll talk to that in a second. You have a house you want to rent, or maybe a house you can't sell, or you'd lose too much if you did. Maybe you inherited a house from mom or dad or grandma or grandpa.

Mm-hmm.

Maybe you've been relocated to take that dream job at Google or something. Point is, is you have a house to rent and you call a guy like me. My job is to tell you how much it should rent for, how long we think it'll take, answer any questions you might have, talk about your risks, overcome any objections you have, and talk to you about how easy and worry-free we can make Renting your property out and how profitable that can be. And then you just basically sign an agreement that says, Brenton, you're my landlord, and we take it from there. We'll market that property on 230 websites. Our average market time is about 14 days. We do all the showings. We do all the background checks. We prepare the leases. We don't approve tenants. The client approves tenants, so you have accountability in the sense that you only get to approve the tenant. And then we warranty that tenant for 9 full months. So any tenant we place in a property, it's like we warranty people. That homeowner knows that we placed a good tenant, and if it goes bad or goes south, we'll get them a new one. They can hire us just to find a tenant and then take over themselves, or they can hire us to be the landlord as well, where we'll manage the property, we'll collect the rent, we coordinate the maintenance, we enforce the lease provisions, we'll handle evictions as well. So we're a landlord for hire, whether you have a tiny condo or you're a big real estate investor like, say, Invitation Homes, who has 48,000 homes. We can help any type of real estate investor. However, we focus mainly on the everyday Joe. 90% of our business has 5 or less properties in ownership. In fact, most are 2 or less. And so we're catering to blue-collar working stiffs, entrepreneurs, people just like you and I that have 1 or 2 pieces of real estate. And frankly, here's an interesting fact. If you own 5 or more properties, you're in the top 1% of all real estate investors in America. A lot of people don't realize that, that to acquire that many properties is very hard to do. In fact, there are federal limits that limit you to only allow to have 4 loans on investment properties if they're federally insured.

I didn't know that.

So there's a big— it's very challenging to get a lot of properties. So we come in and we help people outsource being a landlord.

Got it. Okay, that's cool. So are you able to talk about, you know, number of revenues or number of customers today?

Yeah, absolutely. I'll try and be as open as I can.

Cool.

What do you think? We want to talk revenue? So this year we'll do $15.5 million out of our Minneapolis office. We've been profitable every year we've been in business. In fact, I'm a retired 29-year-old now. I work but one day a week and I'm kind of the brand spokesperson. I get to talk with guys like you and promote and pump the tires of this great company we've built. To me, that's not a job anymore. So that's a lot of fun. The other companies, the franchise company, we have 11 franchises. We hope to have 25 by the end of the year. My software company, it's a small company and frankly it's got 3 employees that just cater to my franchisees because we're trying to make the software proprietary and not let the public have it. And we're trying to monetize it through our franchise network and other streams like affiliate marketing. I have a traditional real estate brokerage, got about 6 employees. They'll do $1 million this year. And then I have a couple angel investment opportunities that I've invested in, a software company in San Francisco called 15Five.

Ah, they're on the show.

Yeah, they've been on the show. David Hasselhoff?

Yes.

Wonderful. Obviously you can understand why I invested with him. He's a wonderful entrepreneur and I had the opportunity. I didn't even really— I spent about 15 minutes with him on the phone. I saw his deck and I said, How much do you need? I'm ready to invest in you. You've got a great idea and you're a great business owner. I invested in another one called Onside Sports. If you haven't talked to them yet, we should connect you. They're a fantasy sports betting application.

Okay.

In the Android and iPhone market. So they're poised to legalize— when sports betting is legalized across the nation, they're poised to be the first app to do it. However, right now it's fantasy betting. You bet with stars and coins instead of real money. But you got live games, live Vegas odds. You can bet on a number of things, mostly sports. But that's called Onside Sports. And then my software company RentFeeder I shared with you. Those are my businesses. Now collectively, we're about a $20 million business or the Brent and Hayden business is about $20 million.

Okay. Got it. Cool. And how long— I mean, refresh my memory. When did Renters Warehouse start again?

September of 2007.

Got it. Okay, cool. So very small amount of time to get to where you're at right now.

So very impressive. Yeah, not been long. 6 and a half, 7 years.

Cool. So I saw an article on Entrepreneur where it said you wrote something about retiring at 27. Can you tell us about that article?

Yeah. From the time I started in business, I'd always told people that I was going to retire very early, age 27. And people laughed. They said, no way, how are you going to do that? You can never retire. I got that. You work too hard. You're going to want to work. And over the years, I heard all that and I really didn't know what to say. But that was my goal and I was hell-bent on it. Now, I was about 7 months past my 27th birthday when I retired in October of last year. It was— I was sitting down in St. John's, Virgin Islands, or United States Virgin Islands down there. And I was on a 2-week vacation with my wife and I was sneaking away to work at the patio on emails and she came out and busted me and said, what are you doing on here? We're supposed to be on vacation. I said, I got work to do. She's like, what do you got work to do? What work do you have to do that has to be done today? And I really didn't answer too well. I just— I was very attached to my business and then she gave me the grill. You've been telling people you're going to retire when you're 27, you're 28. Why aren't you retiring? And I couldn't answer that either. And I got to thinking, I have all the right people in place. I don't need to be there anymore. I'm not passionate about this line of work or staying the CEO anymore. And I found out I was just scared. And then I also started to think, well, what if people are right? What if I can't retire? What if I'll just find something else to do? Or what does retirement mean to me? If I just don't go into work today, what will I do? And I thought about it and I wanted to redefine retirement. To me, retirement is having the privilege to design each day as I see fit. So my biggest problem every day, other than Tuesdays, is to wake up each day and say, what am I going to do today? And I love that. That's retirement for me. I don't go out and play golf. Sometimes I go to work. Sometimes I'm out there investing in real estate or buying a restaurant franchise or working with an angel investor. But at least that's what I wanted to do that day, and nothing made me or required me to do that day. If I want to go on a month-long vacation, I can do that. It also stems from the fact that I'm an atheist. I believe when you die, you're dead. You turn to dirt, and you've got one life to live. And I want to go out, you know, going in broadside, banged up and used up, and the last dollar spent, and looking back and say, man, that was great. That was a hell of a ride, and I spent every last penny I had, and it was great. I did everything I wanted to do. No regrets. And the last thing I wanted to do was be in that position when I'm 50 or 60 or 70. And so now I'm 28, I get to sit back and decide each day. And to me, that was what I wrote for Entrepreneur. And I don't know if you know this, Yahoo.com picked it up the next day and we had 1.5 million views. They put it on their homepage. And the support and the outcry and the people that wanted to do exactly what I did Uh, was awesome. People really resonated with what I was trying to accomplish and I felt finally for once that I wasn't alone in that dream of retiring very, very early and that there are a lot of people who are trying or want to do that or have done that. So the point there is there are many people who have done what I've done and I thought I was alone. I thought I was crazy. I thought I was an outside thinker but there are plenty of people who have done what I've done and you don't need $100 million. In fact, I thought I needed $7 million to retire. Now, I was able and fortunate enough to create more than that for myself, but frankly, you can live a great lifestyle off several hundred thousand dollars a year and do about anything you've ever wanted to do off that. You don't need that 100-foot yacht and the helicopter and the $10 million penthouse. You just don't. You can have a beautiful life with several million dollars for the rest of your life. I'm banking on that while I'm putting in some investments out there too to perpetuate those investments and make better. That's what that article was about and I later wrote another one, round 2, how I got that far and how quickly it can happen for you, how it happened for me and how it happened for others. I think it's still up on entrepreneur.com. I encourage people to go check it out. Cool.

We'll have to find that and put it in the resources for sure. Cool. So yeah, I really like that definition. I never really thought of it that way but I think that's exactly what most people are trying to do. So thanks for that. Thanks for clarifying it for people. So let's talk about, you know, let's step back and talk about franchising for Renters Warehouse. So, you know, why franchising?

Well, as a younger business, it's capital efficient. It allows other people to tap into most of the potential. You know, for example, I get a 4.5% royalty and I get $35,000 upfront, and then I basically give my business plan, my trademarks, my proven processes, my technology, my customer acquisition strategy, A business in a box. Everything you can imagine if you want to start your own property management company, I put in this fictitious box and here you go, it's $35,000. And then I'll forever be with you as a partner in your business through royalties, 4.5% revenue share. And then my job is to make sure you grow and that you're healthy and that you just go to work and do what you do best. I'll innovate, I'll come up with the new ideas, I'll work on a national branding platform, I'll keep us relevant, and then they get to just go to work and focus on what they do best, which is being a great landlord. So we've been doing franchising now for 3 years. We'll have 25 offices by the end of the year. We hope to have 175 in the next 5 years. So we've just taken the gloves off and we've invested a quarter of a million dollars into advertising this month alone.

Wow.

And taking our franchise model to the next level. You'll find us on The Blaze with Glenn Beck's TV program. He's been a longtime proponent and spokesperson for our business. We're hitting CNN and Fox Business News. We're hitting the real estate conventions. We're letting people know that we're open for business and we need real estate passionate entrepreneurs to help us expand nationwide. I just sold an office in Des Moines, Iowa, Milwaukee, Wisconsin, Tampa Bay, Florida, and Las Vegas, Nevada. The fact that Tampa Bay, Florida and Las Vegas, Nevada were still available is amazing. I mean, think about if you could have got in at Dunkin' Donuts and bought the Las Vegas rights. or our Starbucks in Los Angeles, right? These things are opportunities. We still have markets like all of New York, all of Louisiana, all of California is available. We still have top prime markets for our franchising opportunity where somebody could come out and start a professional landlord business. We'll teach them all about it. So that's what we're doing now. We just doubled down on our staff. We just recruited a guy from Coca-Cola who was one of the franchise managers there, and he's now our president. We've aligned with some celebrity spokespeople, Mike Golick from the Mike and Mike Show on ESPN, Glenn Beck who's got his own television network, to local celebrities, athletes. We've really gotten a lot of clients that are really getting behind our brand, buying into our brand. We have people from X Magazine import/exporters to Chinese novelty items to real estate attorneys to real estate brokers that have bought a franchise and now are very successful all across the nation under our brand, and we're trying to get further along in that way. Why buy a franchise in my opinion? As an entrepreneur, I start businesses, but I also buy franchises. I'm trying to bring a restaurant chain to Minnesota, my hometown, because they have it all worked out. They have a proven process, a proven concept. You have support from the founder. You have a collective hive all working together to make a bigger brand. I really believe in franchising, and for what? To give them a tiny royalty? I'd do that all day to shape my learning curve down 5 years or to not go through the trials and tribulations of figuring everything out on my own. So I'm a big believer in franchising. We're opening corporate offices as well, but we're investing more in our franchise side than anything. If I could leave you with one thing, Eric, I really need more passionate entrepreneurs that like real estate so we can get it going. It's hard work, but it requires some prerequisites in our line of work. You got to be licensed in 38 states. The other 12 states you don't need licensing in. So a lot of times we have to run into somebody who's got a real estate license. And then you need to have $50,000 to $100,000 in available capital to get a business like this going. And if you have that and you're passionate about it, you're willing to be a hands-on business owner, That's the ideal candidate for us and that's who we're seeking out with that advertising I'm talking about.

Wow, okay, cool. So you have my interest because my mom's a real estate agent. Okay.

Where is she located?

She's in LA. And the thing is, here's the thing, the area we grew up in, it's like all Asian people and that's where all the Asian people just flow in.

Sounds like it'd be a great fit. It's a great community.

We can talk about it after the show.

There we go.

Yeah, but so my understanding is, $50K to $100K all in, that's what it takes to start something like this, right?

And that includes the $35K to me. So frankly, depending on if you are an LA franchisee, I'd want to see you have about $75K to $100K because that's a big market and it's going to be more expensive to do business. Now for Des Moines, Iowa, now this candidate was very well qualified, but I would require less money to be qualified there because things are cheaper, cost of doing business will be cheaper, your market is smaller. So about $50,000 for smaller markets, $100,000 for larger markets. When I say $100,000, it's more like $85,000.

Uh-huh.

And that includes the $35,000 you're going to pay to me. The rest is like business startup capital, rent, security deposits, your prepaid— you know, some advertising, some salary money. And you can start this with 1 to 2 people. That's what I did. We're going to show you how to do it from bootstrap capacity, or if you're a millionaire and you want to start with 10 employees before you even got a client, we can show you how to do that as well. And that's what's great about being with a franchise. We show you how to scale it. And when you have questions, you say, now what do I do here? Instead of having to be on your own or go and find a networking group that can try and give you perspective. Instead, you got a member of the family invested in your business who's going to give you the proper advice.

Got it. Okay, cool. And how much does the biggest franchise today make?

Right now I have a franchise that's 3 years old in Phoenix, Arizona. They'll do $2.5 million in revenue this year. They started like me with $3,000, and he was an absentee pilot. He's now the owner of 4 franchises. He owns Denver, he owns Rochester, and he owns Tucson, Arizona, and Phoenix, Arizona. So he bought one and he loved it so much and it's growing so well for him that he's bought 3 more since then and has diversified himself into major markets.

Wow, okay. Cool. It sounds like this is a golden opportunity that people need to be getting in on.

Frankly, it's timing. I think property management is a great time to be in it right now. Huge institutions are getting into the business. For example, Blackstone Capital, a Chicago hedge fund, invested in Invitation Homes, gave them $8 billion to buy properties in 2 years. They bought 48,000 homes. And those, guess who they're using? They're using property management companies. Colony, American Homes 4 Now, all these multi-billion-dollar organizations have organized and bought several hundred thousand homes. Banks, investment banks, big-time high-net-worth families are getting into significant real estate holdings because of the recession. As Warren Buffett says, the money is made in the doldrums. It's when you buy when nobody wants it. That's when you can make the real money. If you look at Warren Buffett's purchases of the railroad companies when they're least valued, he buys them up at the bottom of the— their market value and takes them up again. Now, this is a great time to be a property manager because there's so much demand for us at the moment. There's not a lot of competitors. And 2, it's a great time with my company because I have all these top markets available, and we're the fastest-growing property management company in the United States of America for 4 consecutive years.

Wow.

So you not only get to team up with the rapid growth player, we also still have really prime territories available where you can get established in top markets that otherwise would not be available.

Got it. So once someone claims like LA, for example, is that just gone?

Yeah, we'll give you a million population actually. So there might be a couple franchisees potentially in LA, but that's kind of anti the way we want to do business. My competitors will sell you a 1-mile radius and say that's your territory. That's nothing. We give you a 1 million population. We have a software that shows you how far that goes out from your location. Now, LA is highly dense. But we can shape a territory. You can buy additional territory. But I work, for example, in 7 counties of Minneapolis-St. Paul, and that's only a 1.4 million population. And out of that small market, in a market like Minnesota that's not exactly known for real estate investing, I'm one of the biggest property managers in the country in 6 and a half years' time. So if I can do it in Minnesota, imagine what somebody could do in a prime market like LA, Las Vegas, Miami. High density, lots of rental property. In fact, the rental saturation rate in Minnesota is 28%. That means 28% of homes are rental properties. LA, 44%. Miami, 48%. That means almost 1 in 2 people rent in Miami or California. As a result, property managers are in significant demand and your only competition are real estate agents that are moonlight doing it, frankly.

Wow. Okay, so let's— starting this whole franchising thing, I mean, it's a whole set of new struggles versus starting a new business, right? So what's like one big struggle you had to face with starting this franchise thing?

There's a reason why franchising is not done by every business. It's cost prohibitive. It cost me $350,000 to become a franchisable business. It also is highly scrutinized and governed by the Securities Exchange Commission. In fact, you have to register in about 40 states in the United States to even be able to sell franchises there. There are things like franchise taxes in California that I have to pay tax on my royalties just because that come from California. So it's very expensive initially to become a franchisor, and then it takes a long time to recoup the money through $30,000 investments and things like that. So it's cost prohibitive. I had to create a 166-page franchise agreement that covered— you know, I had to think about what all could go wrong and what all am I going to do and what do I expect everybody to do for me and put it all in a contract. Because when somebody goes into business and gives me $35,000, we need to have everything worked out on paper. So there's a very lengthy contract between us all. You know exactly where you stand, where I stand, what we owe each other, and what the rules are because we got to protect the brand as well, make sure we don't have a rogue operator ruining it for everybody. So it's cost prohibitive and then every year you have to register in the states and that's $15,000 to $20,000 a year to continue registering in states and sometimes each state wants you to vary Modify your agreements to match their laws. That's a ton of legal fees every year. And then the marketing of franchising. Right now, to be a great salesperson as a franchisor, you'll sell 1% of the leads you get. 1%. So for every 100 phone calls you make, 1 guy is going to buy a franchise. And these are people who call you or email you and say, you know, if you had 100 people off your podcast tomorrow email me about a franchise opportunity, very likely only one will buy one.

Uh-huh.

So it's a very— a lot of work to get a deal, but it's a long-term play. And if it was easy, everybody would be doing it. That's why it's not easy. It's hard to do. It takes money. But now that we're here, we're really— we're 3 years into it now. We're getting established as a franchisor. And frankly, I wouldn't have been so excited about people investing in us year one, but now that we have 3 years of practice and we've really mastered it before we went to market in an aggressive way like we are now, We're really ready. This is the right time. We're taking the gloves off. So backing it up, franchising is very costly upfront and ongoing. That's been very prohibitive. And then now you have to support your offices, so you need to have support specialists. You need to have training people that show you how to train you in on how to become a property manager. And we have to train you in about 2 weeks. So we have to tell you everything you need to know in a business in about 2 weeks. So we have to have a robust training program. And then you're gonna have questions for a long time after that. We're gonna support you. So you have staff and stuff that are gonna help you support those franchisees, including myself. So it's a lot of money to get into that space. However, it's a lot more to expand, you know, opening a corporate office each time. That's gonna cost you significantly more than, say, setting up a franchise model and then selling franchises out as a business owner. Furthermore, I really like the idea of I'm an angel investor. I want to have people invest in things. Well, I want them to invest in my business. I know it to be a good investment, and so I kind of get to do best of both worlds. Oftentimes, a franchisee will come to me and say, I'm ready to do this, but I only have $50,000. I'd like to be able to have more money in the coffers. Well, as an angel investor, I'll finance them. I'll say, why don't you— I'll waive half the franchise fee and you can pay me back later, or I'll finance some of their operation costs. So I'm investing in my own businesses as well. You need to be prepared as a franchisor to be financially viable because if you don't have enough money going into franchising, you're not going to make it because it's a long-term play.

Got it, cool. So would it be fair to say, you know, out of that $100K, you know, if you wanted to be perfectly safe, would you move that up a little? And if you were to move that number up a little, what would it be?

I think you can get started as low as $38,000 with me, and I think at the most, I really— you need is about $85,000. So frankly, if you came to me and said, I got $10 million to put in this thing, I'd say, well, all that's going to do is you're going to have a bigger marketing budget, you're going to have a little more employees, and you're going to have a little more cushion. But every one of my franchisees, and I can say this because it's a fact, has been profitable inside the first year, meaning net positive.

Wow.

And every one of my franchisees in my network is willing to talk to prospective franchisees about how great it's going for them. As a franchisor, I can't give you projections. Because that would induce you into buying a franchise. So I'm not allowed to, you know, and that's another thing. When you sell a franchise, you really can't sell. They take selling out of it. You can only talk strictly factual because the government says it's too easy to say, Eric, I'm a millionaire in 7 years. I did it. You can do it too. Buy a franchise right now and you'll become a millionaire. And you might get, well, that's great. I'm ready. Well, they want to prevent that from happening. People being persuaded and making an impulse buy. Or being told things that aren't necessarily factually realistic. So they really take away the ability to sell, and so the best thing I have as my sales approach is having really happy franchisees. And so when they say, well, how are people doing? When can I make my money back? I can't answer that, but I'd encourage you to call every one of my franchisees and ask them that question. They can answer that. And they'll tell you from real-life experience. Some of these people have been in business a year, some of them have been in business 3 years, they'll tell you a different Got it.

All right, cool. So very impressive. Let's talk a little bit about customer acquisition. So what's working for you guys today?

Radio. Radio is an old medium a lot of people forget about, but it's really affordable. I'm getting great results from a cost per lead and a cost per sale standpoint. It's— what I didn't realize at first is the amount of branding radio does for you as well. I separate things, advertising and branding. Advertising, lead generation, direct response, you know, people are coming to your— they're responding to an ad. Branding is like what big companies do when they just put their logo up on a billboard and it says nothing. You know, Target, McDonald's, they do a lot of branding just trying to keep you thinking about them. You already know they exist. Well, people don't know I exist necessarily. At least in Minnesota they do, but not all across the nation. So Radio helps you educate the audience in 60 seconds or 30 seconds. You can hit them 15 times a day. You can do that for as low as $25 to $100 a spot. Frankly, it's been really great for my business and we're going to continue using that. The quicker you can get to TV as well and afford that, I think that is working very well for us as well.

Uh-huh.

Then you definitely got to be astute With respect to pay-per-click and search engine optimization. You got to have a great website, you got to have great SEO, and you got to have a great pay-per-click campaign because people nowadays, they— when they'll be thinking about something, you know, I want to rent my house, they go to Google, rent my house California, and they're going to look for a property management company or somebody that caters to them there. You need to be popping up there, and if you're not, you're losing out on a significant amount of business. Those 3 things, digital media, radio, and television are working for me. And I would put them in this order: radio number 1, digital number 2, and TV number 3.

Yup. And I think the key takeaway here is a lot of people— and, you know, there's a lot of tech people that watch this. People are saying, you know, this medium is dead, this medium is dead. I think the key thing is you gotta be willing to— you gotta have an open mind and be willing to test these other old mediums.

Yup.

'Cause you never know what's gonna happen.

It takes money to make money too, Eric. If the ad's expensive, there's probably a reason why it's expensive. It works. There's a huge audience. In advertising, they charge per impression. If a magazine has 100,000 subscribers, they're charging you that ad of when you flip the page, 100,000 people are going to look at that ad. That's what you're being charged for. So when the ad is very high, assuming— you can safely assume that that's probably a pretty successful ad, at least for most people.

Yeah.

Now, it may not be for your business depending Depending on the line of work. But, so you got to spend a little money, but if you spend it and you know how to track it, you know what you're getting as a return. And so I'd like to take a minute to talk about tracking advertising if I could.

Sure.

So you have the cost of advertising. Let's talk about a radio ad for example. My number one source is a sports talk radio station in Minneapolis. It's called KFAN. All the guys and the blockheads go there to talk about sports. It's great. It's one of my favorite stations. We got great local hosts. We get 175 new clients a month from this radio station. I spend $18,000 a month to take over that station. I have the studio naming rights. I have at least 2 60-second spots per hour. I really got a great campaign because it's a great source for us. So I have the cost of the ad, $18,000, and I have the number of leads.

Mm-hmm.

I'm going to divide those 2, $18,000 divided by 175. I know that my cost per lead is $102.08. What does that mean to me? Well, now I know how much I'm paying for a phone call. Now some people would say that's a lot. Now if you're selling dog food on pets.com and you're only getting a $28 sale, you can't pay that. We just learned there, right? Right there. That's not a good advertisement for Pets.com. It's too expensive.

Uh-huh.

However, I'm in the real estate game and the lifetime value of my client, meaning the commissions I'll earn over the time spent with me, is $18,204. So I'll pay $102 all day. In fact, I'll pay quadruple that all day to get a new client because my lifetime value is worth $18,204. Now that's just the napkin test. Now let's take it down a notch. Now you need to factor in your closing ratio, cost per sale. The first thing was cost per lead, CPL I call that.

Yup.

Then there's cost per sale, CPS. What is your closing ratio? So I paid $102.85 a lead but I closed at 85%. So now I got to go back out and say $175 times 80%, that means I got 140 clients actually. Now I know I take $18,000 and I divide that by 140. Now I know my cost per sale is $129. Okay, that still works. Now the last thing you want to do is figure out your cost of customer acquisition overall. What did the ad cost? What did your salesperson cost you? Factor in the cost per sale and now you know exactly what each lead out the door as a client on the books costs you. Now you know your lifetime value of a client. Now you know your net margins, okay? Now you know if that advertising is working for you or not. I didn't learn this on my own. I read about this online site called— it was a pet store company that went out of business. They were backed by like $100 million in VC money. They spent on average $42 for a cost per lead, but their average sale was $28 a year. And they went out of business. They couldn't acquire a customer cheap enough and get them to buy enough. You have to know these metrics on every source, on every advertisement you do to determine if it's working well or not. Otherwise, you're just blind money. And so, not only does it take money to make money, you have to strategically analyze it through analytics. I do that through tracking phone numbers, landing pages for domains, Asking people, where did you hear about us? Asking them to choose a self-selected source. I won't let them get off the phone until you tell me, where did you hear about it? How did you call me? What prompted you to give me a call? And they may say, I heard you on 3 radio stations, but what prompted me to call? I forgot about all those radio spots. I went online and typed in, you know, rent my house Minnesota, and you popped up. And I'm like, oh yeah, I heard them on the radio. So now that's kind of convoluted, but I look at what prompted the action. Online did. Now, to put this in perspective, my cost per lead for TV is about $400. Radio, it's about $200. And on the internet, pay-per-click, $60. So as you can imagine, I'm trying to maximize and throw as much money as I can at the internet, and I'm maxing out all my clicks and opportunities there. Then I'm maxing it out on radio, and I'm maxing it out on TV. And now that I know they all work, I'll find my next medium. Guess what that is? Digital radio. I'm going to Pandora and iHeartRadio and Spotify and buying ads now because people want radio on demand. You can buy advertisements in those. I'll find out soon enough. I just started this month on what that metrics look like. It's very important that you analyze your advertising so you know at a granular level how well it's performing or not performing.

Jesus, you're printing money with those numbers.

Yeah, it's not bad, right? You can see why I retired. It's got good margins and why I could You pay a lot for a customer. Now at first, there was a source and I'll tell you how I paid a price for this at one point not knowing the data. There was this talk, there was a woman's radio station in Minnesota, it was a gossip station, kind of like a TMZ of the radio and it produced a lot of leads. I get 100 clients, 100 leads a month and by all perspective, that was a good source. But what I didn't have on any of my metrics was the cost per sale. What was the closing ratio? What I found is it had low quality leads. While I was getting lots of leads, only 18% were converting while everybody else was at 80%, 75%. I didn't know that, so I kept putting more money. Oh, look at all these leads I'm getting. Keep going. None of them were converting, so I was throwing a lot of bad money after it. If you don't know your numbers, you might be fooled to think it's working when it's not.

It's really, really strong. I mean, you know, a lot of people talk about cost per lead, cost per acquisition, all these numbers, but no one really talked about it on the show and how to calculate it. Really definitely appreciate that. That's something that's a make or break for a business.

No problem.

Cool. So starting out, going back to Renters Warehouse before you had the franchise, the franchises. So what's one big struggle you faced while growing the business?

Capital. When I started it, capital wasn't so easy to come by as I think it is now because a lot of people have taken attention to investing in businesses is a great investment and I believe it to be true. But when you're 21 and you got no experience and you're going around trying to get bank debt or a loan or a private equity guy to invest in you, good luck with that. It's tough. Unless you're in the software game and you got a very specific skill set like you're a programmer, it's very tough out there. So that's why I started angel investing, right? I want to invest in those kids that are in similar positions as me. But give them their first $100,000 or something to get them going. But capital was tough for me and so I lived off very little for a long time and I took— I could have made more but I retained those profits and put them back into marketing and advertising because I was getting a great return. Because I knew that because of my metrics now. I could pay myself $100 grand a year or I could pay myself $30 grand a year and take $70 grand and put it into advertising and turn it back into $210 grand.

Uh-huh.

Okay. I'm going to take $70 grand and put it in To advertising and get $210K back. I'm going to do that instead. And that's what I did. So stay small, stay agile, be smart. Those are some of the things that I did well looking back on, but I had to learn that the hard way. So those are some of the struggles I learned. I found out that I'm not much of a book reader, but I found there was— And I'm now a book reader because I read a book not long ago called Rework by Jason Fried and David Hanson. They own Basecamp and Highrise. Those guys are awesome. But I read their book and it's an amazing book. It gave me a modern-day rework mentality of what it's like to be a business owner. They have chapters in there like pick a fight with your biggest competitor, planning is guessing, inspiration is perishable, underdo the competition, ASAP is poison. And my favorite one, be more like a drug dealer. Okay, what the hell does that mean? But they break it down and that's— it's now my business mantra. In fact, you saw me keep looking up. I have a poster on my wall that has all these phrases on it.

Let's see it.

It's my mantra now. So read books. Don't take on investors if you don't have to. And bootstrap as long as you can because that's the best thing that happened to me was the hard work up front. Turned out to be the best thing ever because now I don't have debt and I don't have investors in my business and there's a lot more for me left over at the end. And all I had to do was work a little harder upfront. Well, you're going to work your ass off upfront anyway. Might as well work your ass off and keep all of your business so long as you can do that. So while money was my biggest problem, it was also the best thing that ever happened to me to not take it. That's where I was going with that. Other than that— The life of an entrepreneur, man, you're going to work day and night. If you really are passionate about this business and you want it to go places really fast, you got to be dedicated to it. You absolutely have to be passionate and dedicated and you will find there are a lot of people with good ideas and then you ask them, why don't you start it? They will give you some excuse. Well, the excuse is they are not passionate or dedicated to it. If you believe it's that great, you will do it and if you are that dedicated to the good idea, you will do it. But if you won't, there is something there in the back of your head telling you it's not that great yet or you are not capable of taking it to the next level. While you don't have to have everything figured out, you just have to be dedicated and passionate to figure it out and you will. I didn't face a lot of struggles other than just hard work and lack of money. But I think that's every entrepreneur and you should expect that.

Got it. Couldn't agree more. So was there any point in time where the company was on the brink of failure or—

Yeah, yeah. Actually, it wasn't Renters Warehouse. It was before Renters Warehouse.

Okay.

In 2005, remember I started Renters Warehouse in 2007. In 2005, I started a real estate company and it was prime market, right? 2005 was awesome for real estate. 2006, even half of 2006 was awesome. Some of the best we'll ever see. I got into real estate. A lot of people were— properties were appreciating at 10%, 15% a year. So even novice investors were buying properties, getting straw buyers and anybody they can to buy properties. At the time, you could do a no-doc loan. You could lie about your income and not prove anything and get a million-dollar loan. That's what lending was like at the time. So everybody was doing that. Well, I found myself with a bunch of bad guys on my books, people who had manipulated mortgages, who had bought properties that shouldn't own properties, that aren't qualified to own properties. And so I found myself with property owners who couldn't afford to maintain the property. I had property owners who had violated law and committed mortgage fraud. I had all kinds of wrong clients on my books. And in my hunt to find and grow as fast as I can, I didn't really take too close of a look at that stuff. Well, when the market came crashing down, people had to be held accountable for what happened. And some of these investors and some of these people who were bought properties and then couldn't afford to maintain them, put my company in a bad way. At one point, I was indicted because I had all these people on my books and they said, how can you be the manager but not have nothing to do with it?

Hmm.

We later sorted that out. We had nothing to do with it, but it was embarrassing. It was hard on the business losing clients. It was hard on the business because we had bad clients who weren't taking care of properties. At the time, that was not what I set out to do. And I was thoroughly embarrassed. I was a young business owner. The market was collapsing. I was mainly doing real estate sales, not property management. And I thought about moving. I thought about— I didn't want to show my face in town anymore. I was embarrassed by my failure. I was embarrassed that the market was changing and I didn't know what to do next. And then it hit me. Every one of these people that are affected and hurting my business today are going to need help. They have— they're distressed. They can't sell. They lose too much if they did. They're going to need an alternative to selling in a down market. Otherwise, they're going to go into foreclosure. There's the aha moment. Why don't I just do strictly property management? I've been talking about it. Nobody does it. I can bring a value proposition to it. Nobody's going to think I failed because the market collapsed. I had these bad clients and I'm emerging to help them out now. And so there was a time when I was so embarrassed I wanted to even leave the country. I just was— I failed my first go at it. I was going to go get a job. I even thought about joining the Army. I was just— I didn't know what to do. I failed. But then I tried again and it was my best hit yet. So that was my story. I remember having at the time, 2005, 2006, the company had— we had 6 Mercedes company cars for some of our top performers, big SUVs at $80,000 apiece. We were rolling in it. We were giving out great perks at the company. Crash. All ends. And I got all these things I personally guaranteed. I was not about to ruin my credit. So for the next couple years starting a business, I was carrying all these company vehicles, all this massive overhead from another former business, and burying myself in debt. And, uh, well, not necessarily burying myself in debt. I had no income left over. I'd make $30 grand a year, but I was making $250, but I had $30K to spend. Everything else was in expenses. So I fought through it. I maintained my credit. I kept my vendor relationships and I formed a new company through the trials and tribulations and it was my best hit yet. So when faced with adversity, I think I responded pretty good but I definitely almost went another direction, that's for sure. Wow.

Okay. Persistence is key, huh?

Indeed. No question about it.

Cool. So last few questions from my end. So what's one piece of advice you'd give to your not-so-far-away 25-year-old self?

I get annoyed by all the people who have great ideas. Great ideas are worthless. They have no value until you can execute on them. And so as an angel investor, I get a lot of people come to me with ideas but no real plan to execute. It's not even worth the paper you wrote it on. Everybody's got 100 of those good ideas, but the ability to execute and take it to the next level is another thing. But here's the thing. If you do have a good idea and you really do think it's worthy, worthy of your own money, even if it's only $1,000 you got, go to market. Give it a shot. If you're dedicated, passionate about it and you really believe in it, you got to go. Too many people wait until they have it all worked out. They have everything, you know, the website's done, I have the right amount of money, the timing in my life is appropriate. Everything has to be in perfect order. Well, that's never going to happen. It's not. You're never going to find the right time to start a business. It's a risk. You're risking everything to start a business. You're quitting your job, you're putting your family at risk, you're putting your money at risk, you're putting all your time into this. It's a risk and you have to take it. And so if you believe in it, take the risk. If you don't and you're not capable of taking the risk, then throw that idea away or put it in a folder later and come back to it when you think it's appropriate. But get up and do. Go. Get started. And the way I start that with is— Start small. Imagine if you had a hot dog stand. You don't need to have the condiments and the freshest cart. You don't have to have fresh hot dogs flown in from wherever. Just start with a great hot dog. That's all you need, a hot dog and bun, some ketchup and mustard, and go to market. If you believe you have the best hot dog, just go out there and start with that. Sell more of your best seller before you get out and diversify and have condiments and sell a pretzel and some soda with it too. Forget all that. Go out and sell the shit out of some hot dogs and prove your concept, make some money, be sure you are passionate about it and then come back and say, alright, now can I sell pretzels and maybe some soda too? That's an analogy from the Rework book and it really gave me some perspective that I didn't need to go out and create all these new programs. I did invent some programs last year but 6 years into the business before I created my secondary programs. I've been selling more of my best seller, Tenant Placement and Property Man, before I came up with these other products. So don't be too quick to diversify. Go to market and just do. Just start and you don't have to have it all figured out. But what you do have to have, dedication and passion.

Got it. OK. And what's one productivity hack you can share with the audience?

Productivity hack that goes with the audience. I got to pick up my iPhone. I got too many. I have to narrow it down to one here. Let me see which one I love the most.

Huh.

Easy, Dropbox. As an absentee business owner, the owner of multiple businesses, a guy who works from kind of anywhere, every file I have for every business is stored in the cloud and accessible on my iPhone, my iPad, my laptop, my desktop. People can interact with it, I can share things from it, I can share large files from it. I don't need paper. I love it. I absolutely love it. It's so affordable. You can link it into your desktop. I'm at home and I'm trying to log into something last night, a password to one of our banks. I don't know it. I didn't have it. I just went on my Dropbox on my iPhone, looked up this little password spreadsheet we have there. There it is. Bam! Got in in 2 seconds. That would have made me required to go to the office the next day, ask my CFO what's the password. He's got to look. No, I can help myself. I love cloud-based storage. I think it's just revolutionized my business. In another facet, we do inspections, move-in and move-out.

Uh-huh.

We have an app that actually takes video. So if, you know, there's a common dispute in rental housing of who damaged what and who's responsible for the damage. So when we move a tenant in, we say, hey, I'm with Eric and there's a stain on the carpet. And there's Eric and there's a stain. Now we know that you— we identified there was a stain when you moved in and you were there and that's not your stain. Otherwise, we can show a video where, hey, previously there was a stain, now there's not.

Hmm.

And now there is, there's a video proof. And what's neat about that is we can store all that in the cloud. My agents can go— a different agent can go to the move-out inspection, grab it from the cloud, look at it and compare it and create a new one at the same time. Cloud storage is revolutionizing my business.

Wow, okay, cool. What's that app called?

That's called SnapInspect.

SnapInspect, got it.

It's not mine, but we have a private license that we've customized. I think the company is out of— I think they're local. Bunch of young entrepreneurs started a great app for the property management space, and we loved it so much we asked them to license a variation of it.

Got it. All right, cool. I'll have to show my mom that one. Alright, so final question. I know you just started reading again and you recommended Rework, but what's another must-read book you'd recommend to the audience?

I got a few. Remote by Jason Fried and David Hanson. They show you how to become a great remote worker and how to be a remote property owner or a remote business owner, how you can have remote employees. It's great about this new age of people working from home or working from anywhere. I think it's a great book. Both Rework and Remote will take you less than 2 hours to read. There's not a chapter in there over 2 or 3 pages. It's an awesome way to write a book. The book that taught me how to organize my business from a small business to running it like a high— like a Fortune 500 business is a book called Traction by Gino Wickman. Traction helps you create things like this. As you can see, this is called my scorecard. All the things here are all the key metrics I need to know in my business and these are all the metrics that go along with it. So as an absentee business owner, I can say I need to know if my business is going well or bad and I need to know— there are 68 different metrics here that I need to know on a weekly basis to determine if my business is going well or not. This was taught to me by Traction. So one of the things is there is a— how many evictions do we have at Renters Warehouse? How many deals, how many listings do we have? What's our average market time? What's our closing ratio? These are numbers I have to have and I can tell if my business is going good or bad. Traction shows you how to organize your business from how to conduct good meetings, how to have goals, how to hold people accountable, how to have all these key metrics plucked out of your business so key players know if the business is going good or bad. So you got to read Traction. Now that's more of a textbook kind of read but nonetheless a great book. And then there's 3 books I want to recommend after that, all by the same author, Robert Greene. G-R-E-E-N-E. The 48 Laws of Power, The Art of Seduction, and The 33 Laws of War. You got to know these books and it's all kind of business focused. How do you gain power in business? There's the 48 Laws to Live By. How do you seduce everyone you meet and make them become fans and advocates of you, your business, and friends of you forever? Art of Seduction. And then The Art of War. You're going to create enemies. You're going to have people attack you. You're going to have people who take you head on in your business and you need to know how to, you know, have a business war against them. And The Art of War is understanding principles of war. It's good for business. For example, I practice something that is kind of aggressive. Management stop. When somebody wages war against me or tries to attack me or my business, you're attacking my business, my livelihood, 133 employees and their livelihood, and everything I've ever built. So you waged war on me when— there's a guy waging war on me in Minnesota and he's not going to come out well after the end of this. Because when you wage war with me, I'm going to end the war and I'm going to end it in a way that you never want to wage war with me again. Um, and so, um, there's a, there's a A law in the 33 Laws of War that says, if you must go to war, never go to war again. Meaning, if you are induced into war, make sure that when you end the war that you've ended it so strongly that there's no chance that they'll ever come back from it. Look at World War I. Germany lost to the United Nations. And the Treaty of Versailles and how that treaty was so one-sided and basically just spanked Germany of all their rights. You can't build a military. You owe us $80 billion, this, that, and another thing. And to hell with you. And your country is going to go into turmoil because you waged war against the world. That's a practice of saying, hey, you waged war, you started this war, and you're never going to go to war again. In fact, that treaty was so powerful that Adolf Hitler, when he came to power, he was— the only reason he was so upset with the world is because of the Treaty of Versailles, because it impoverished his company, his country, and made Germany weak, and he couldn't stand that. So I believe in this principle: when you start a war with me, I'm going to end it, and I'm going to end it in a way that you never want to wage war with me again. So, you know, win the battle and win it big. So if somebody goes against you like this company is doing against me, I'm doubling down, I'm tripling down, I'm throwing out the propaganda, I'm taking them head on. Like Rework says, pick a fight with your biggest player. They're saying wage a war. If you have a player in your space, go out and pick a fight with him and get it going. If you're better than him, get going and prove it to the marketplace. Those books are just— they're good life principles, they're good business principles in general. There's about 10 books I've read and I just highly recommend 5 of them.

Got it. All right, Brenton. Super inspirational stuff. I think this is one of the best interviews we've had on the show.

Oh, good, man.

Definitely want to have you again on the show sometime soon. But again, Brenton Hayden from Renters Warehouse. And if you're an entrepreneur watching this, freaking go check out one of his— buy one of his franchises.

Look, can I give a couple shameless plugs?

Absolutely.

If you're interested in our franchise model, check out professionallandlords.com. That's where we talk about all of our opportunities and the markets that are available. If you're interested in my property management services, I do got a number of offices across the nation. You can go to renterswarehouse.com and just click on the markets we're in. And I'd love for everybody to follow me on Twitter. My handle is Brenton Hayden, just B-R-E-N-T-O-N H-A-Y-D-E-N. And I'm most social on my LinkedIn page, so seek me out if you got questions, you got an investment you want me to look at. I don't respond to everybody, but I do read everything. So if you got something, send me a message. Let's connect on LinkedIn or Twitter and we can stay in touch with everybody.

There you have it. Brenton, thanks so much for being on the show.

Real pleasure, Eric. I'd love to come back again.