Over the last week I have written about the SEVEN critical errors made in business planning ... now is time for number seven #7 ... although self-serving it is important that you see the difference between a plan on paper and a computerized plan ... I will also recap the other critical errors.
•7) Paper - Many make a business plan on the back of a napkin or right one in a class because our managers asked us to. A business plan is a tool to make better business decisions and add accountability to this business of real estate sales. A properly constructed business plan should be dynamic enough to keep you informed of where you are in your business, hard to do with paper.
More importantly, a business plan should have a system to keep you focused on the activities that you need to do each and every week to stay on top of your business. Finally, part of a business plan is to help you determine which Activities create the most Appointments for you and which Activities are most profitable to your business. www.CreateAPlan.com is a Real Estate Specific Business Planning Tool with built in accountability ... give it a try ... you will be surprised at how much you learn.
•1) Confusing Goal Setting with Business Planning. Plans are calculated; goals can come from thin air. That is not to say that there are no goals in a business plan, but the premise of a business plan is your goals are calculated based on your desired income and overhead and personal marketing expenses.
•2) Excluding Transaction Costs from your Business Plan - This includes all sorts of costs from "Allowance for Terminated Transactions" to "Deal - Savers". These are the variable costs in a real estate business. The more transactions you do the more money you will spend, your plan should take that into consideration.
•3) Focusing on GCI (Gross Commission Income) - GCI is not a measure of profitability, it is a measure of gross revenue before split and franchise fees. Since most agents pay one or both the GCI numbers becomes almost worthless in planning your business. The number to focus on in business planning is Income After Expenses but Before Taxes, this is akin to your salary or the monies you can actually live on. Think about how many companies make enormous revenue (GCI) but are in or near bankruptcy; airlines, automotive etc.
•4) Omitting Activities from your Business Plan - An 8th grade with a calculator can calculate how many transactions your must close to meet your income goal, but the importance of a Business Plan is to break that income into activities that you will accomplish each and every week.
•5) Not Calculating Overhead per Transaction - A Business Plan being a calculated dissection of your business should offer some key insights into the fiscal component of your business. Overhead per transaction is the figure that summaries the total amount of overhead that comes from each commission check. Importance being, before making a decision to reduce income or purchase a "Deal-Saver" you should know all the pertinent numbers. For most agents overhead per transaction runs between $1300 and $4000 per transaction ... before making a concession, make sure you are still profitable.
•6) Having No Accountability - A Business Plan is so much more useful if accountability is added to the equation. Either through automatic reminders or an accountability partner or both, your Business Plan should allow you to hold yourself accountable for Activities, Expenses and Revenue.
Comments(4)