If someone took away all the administrative tasks from your day, what would you do with your time?

If you have studied business or worked in the corporate world, you probably know the difference between cost centers and profit centers.  If not, it may sound like a bunch of accounting mumbo-jumbo that has nothing to do with you.  You couldn't be more wrong.  Everyone who has a business, whether it is just you as an individual Realtor or an entire brokerage, should know the difference between cost centers and profit centers and how they interact with each other.

A profit center is intended to do just that: generate a profit.  In terms of a large business, a profit center may be a product or a service, and typically there are several.  A cost center, on the other hand, is an area of the business used to support the profit centers in reaching their goals.  An example of a cost center is an advertising department or an IT department.

You probably spend a lot of time thinking about profit and how to make more of it.  We all do.  But do you think about how cost centers can be used to drive up your profits?  Many of us run our businesses on a tight budget because we have been taught that is the wise thing to do.  I agree with this completely, but my definition of a shoestring budget may be different than yours. 

Let me paint a picture:  John has been a real estate agent for a few years and is doing pretty well.  He has a few listings each month and his referral business is growing.  John mails out a newsletter each month to his sphere of 200 people, and he prides himself on extraordinary customer service with each transaction.  John is doing well, but he is completely wiped out at the end of each day and cannot imagine how he will keep up if his business continues to grow.  Nice problem to have, huh?

John's profit center is doing well.  He is selling houses, but he is limited in the number he can sell because of the expense of his cost centers.  When John prints his newsletters on his personal color printer, it takes him several hours.  He then has to fold, address, and mail them.  This activity is now taking about a day and a half to complete, not to mention the cost of the printer cartridge and heavier stock paper.  In addition, he spends quite a bit of time each week calling or emailing his clients regarding their ongoing transactions after he has checked in with the buyer's agent, the lender, the inspector, the appraiser, the handyman, etc.  John can't work on growing his profit center because he can't get away from his cost centers.

John doesn't want to sacrifice customer service, and he shouldn't.  What he should do is make a list of his activities each and every day for at least a week.  Then divide those activities into cost centers and profit centers.  This is a great exercise in determining where all the time goes. 

For example:  John spent 12 hours last week putting together his newsletter.  Sure, he could do other things while the newsletter was printing, but because he was using a personal printer and not a heavy-duty one, he had to stick around his office to make sure the printer didn't jam with the heavier paper and to make sure the color cartridge didn't start drying up before the printing was done.  John also spent quite a bit of time on the phone for two of his transactions, and because he was in his car during some of these calls his notes were scattered and he had to follow up on them via email when he got back to his office.  It didn't help that a couple of these critical calls came in while he was showing a home and interrupted his time with a buyer.

If John outsourced his newsletter to a service like The Agent Guide he would gain back 12 hours of time per month.  The price of the newsletter is $42 per month for 200 subscribers.  That price is about what John's hourly rate figures to be, so by outsourcing this task he just decreased his cost from $484 (plus $82 in postage and a few dollars in paper and printing cartridges) to $42.  Even if he still wants to write his own newsletter, by outsourcing the design and printing to a virtual assistant or moving from paper to email, he will save considerable time and money.  Either way, John just gained hours of valuable selling time. 

By using a virtual assistant to coordinate his transaction, John is free from the hassle of scheduling appointments and monitoring deadlines and can concentrate on selling to new clients.  This doesn't mean that John is not involved with his current clients; on the contrary, what this does is make sure that the time he spends updating his clients is productive because he has all the information he needs from his virtual assistant and can work on the finer points of client service, like building a long-term relationship.  He spends his time working only on issues that his virtual assistant alerts him to, not the basic administrative functions that keep him from valuable selling and customer service time.

There are many more examples of using your cost centers effectively, such as partnering with a home stager or adding a buyer's agent to your team.  The thing to ask yourself is not how to save dollars, but how to make dollars.  Strategically managing your cost centers by thinking in terms of growing your profits instead of keeping costs low will transform your business and your life.

Doubtful?  Try listing your activities every day for a week and categorizing them as cost or profit activities.  Then think about what you could do with your time and energy if you delegated some of your cost centers to another person or service. 

*Thanks to David Podgursky, who inspired this post with a call out of the blue Wednesday.  Nice chatting business with you, David.