The PFREI Instant Assessment
Know where you stand financially in under 30 minutes
The PFREI Instant Assessment is a rapid diagnostic tool that reveals your business's true financial health using just two numbers: your total income and what you paid yourself over the last twelve months. From these two data points, you can derive your Current Allocation Percentages (CAPs) for every category in the PFREI system.
The assessment works by calculating your Real Revenue (total income minus pass-through revenue like cost of goods sold for selling businesses, or PITI for rental businesses), then showing what percentage of that Real Revenue went to profit, owner's comp, taxes, and operating expenses. The gap between your CAPs and healthy Target Allocation Percentages (TAPs) reveals exactly where your business is bleeding money.
This is deliberately designed to be quick and rough rather than precise. The point is not accounting-level accuracy but directional clarity. Many investors avoid looking at their numbers because they think they need perfect books first. The Instant Assessment eliminates that excuse by requiring minimal data to produce actionable insights.
- You only need two numbers to start: total income and what you paid yourself
- Real Revenue equals Top Line Revenue minus Pass-Through Revenue
- Current Allocation Percentages reveal where your money actually goes
- The gap between CAPs and TAPs shows exactly where to improve
- Rough directional data now beats perfect data never
- Find Your Top Line RevenueDetermine total income for the last 12 months. For selling businesses, this is total sales. For rental businesses, this is total rental income. Use bank statements if you do not have financial software.
- Calculate Pass-Through RevenueFor selling businesses, subtract Cost of Goods Sold (purchase price, rehab costs, closing costs, holding costs). For rental businesses, subtract PITI (Principal, Interest, Taxes, Insurance on rental properties). This gives you Real Revenue.Pro tipIf you are unsure of exact PITI, use your monthly mortgage payment amounts multiplied by 12 as a reasonable approximation.
- Determine Current Allocation PercentagesDivide each category (Profit, Owner's Comp, Owner's Tax, Operating Expenses) by Real Revenue to get your CAPs. These percentages show where your money actually went over the past year.Pro tipIf your Profit CAP is 0% and your Owner's Comp CAP is very low, you have identified the core problem: your business serves everyone except you.
- Compare CAPs to TAPsLook up the Target Allocation Percentages for your Real Revenue bracket. Compare each CAP to its corresponding TAP. The gaps tell you where your money is going wrong and what needs to change.Pro tipFocus on the biggest gap first. If your Operating Expense CAP is 85% but the TAP is 60%, that 25% gap is your primary area for improvement.WarningDo not try to close all gaps at once. Move each percentage by a few points per quarter to avoid shocking the business.
When David ran the Instant Assessment on Joey's two businesses, the numbers revealed that his fix-and-flip company was losing money and funneling cash away from his rental portfolio. Joey had been working harder and harder in the flipping business without realizing it was actively destroying value.
David Richter created the Instant Assessment after repeatedly encountering real estate investors who avoided financial analysis because their books were a mess. He realized that waiting for perfect financial records meant most investors would never assess their business at all. By stripping the assessment down to just two easily obtainable numbers, he removed every barrier to getting started. The very first assessment he ran was with Joey English, which immediately revealed that Joey's fix-and-flip company was funneling money away from his profitable rental business.