What I’m thinking about: I just discovered we accidentally built a profit machine that beats most software companies.
My business partner (one of the most understated guys in finance) kept saying our current vintage has been “very good.” (A vintage is like a fund. Each vintage invests in a certain number of deals over roughly a year so that P&L can strategically be grouped for profit distro.)
I finally ran the numbers myself (and they could get even better if our Louisiana deal performs even moderately well):
Vintage 3 Performance:
- Net P&L: ~$595,000
- Overhead: ~$77,500
- Debt: $0
- Net Profit Margin: 41%
For context, RE development companies run ~7% margins. Larger brokerages hit maybe 20%. Even high-margin software businesses consider 40%+ exceptional.
(Keep in mind that our P&L excludes profit splits to land investors, so the true deal-level P&L is roughly double what’s shown.)
Honestly, I’m embarrassed. Our firm has a reputation as one of the most numbers-focused in the industry, but I had no idea what our actual vintage P&L was (even though it’s a core KPI). I had been so focused on individual deals and operations that I had a total blind spot for the overall picture.
HUGE CAVEAT: I had a daily grasp on cash in our accounts though. For any business, nothing matters more than available cash. If you’re out of cash, you’re stuck, and potentially dead. You can have an incredible P&L and low overhead, and still be out of cash if you don’t manage it properly.
The core takeaway left me reeling: We have a LOT of room to scale further with high-quality hires, something I’d been hesitant about without knowing our true capacity.
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Key Lessons To Achieve Substantial Margins:
#1. Our first question is not “How much money can we make from this deal?” but rather “How much money can we lose?“
Protecting the downside is unsexy and boring, but that’s what keeps you in business. Only once we are confident there is a near 0% chance of losing money does a deal start to become interesting.
#2. Defer payments. We try to front as few costs as possible, and instead pay on performance.
We pay land operators who bring us deals a share of profits once a deal exits. We pay realtors a commission upon an exit. We try to get buyers to pick up the cost on due diligence items (e.g. surveys, or perc tests) whenever the market allows. If we agree to cover due diligence items prior to purchasing a property, and the acquisition falls through, we will split costs with the operator who brought us the deal to ease the burn.
Even my own income as the primary operator of the business is deferred through a promote structure at the end of the vintage. If I perform well, I get paid more.
#3. Lean overhead. Many/most operators in land or real estate in general are having a more difficult year. Markets are tougher. Competition is fiercer. The macro is uncertain, at best.
I keep reminding myself and my team that if we can get through (and even thrive in?) a down cycle, then we can find success in any economic environment.
Cut any bloat. Leverage AI to its maximum potential. (FYI, if you and your team are not leveraging AI, then your talent is operating at a severely diminished capacity.) Every hire should be bringing in at least 3X what they cost.
#4. Keep. Track. Of. Capital. If we say we are going to fund a deal and due diligence checks out, we have a 100% success rate of funding.
To me, if a funder backs out because they mismanaged their capital, it’s a reputation death knell. Yet, I hear about this scenario happening routinely.
I make sure we have Plan A, Plan B, Plan C, and Plan D in place to fund a deal. We always have a fallback and don’t overcommit.
Translate this over to your own business. Where is your cash coming from and when? Where can you get more (and how risky is it)? Do you understand every angle?
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Want to work with a funder with the best eye for winners in the industry? Serious Land Capital is actively seeking larger acquisitions ($150K+ purchase price preferred, $50K minimum). You just reviewed our results. We play to win.
P.S. Check out this eye-opening list of the top 10 highest net margin industries in 2025. I promise you won’t guess #4, haha…
