Is your real estate business making money? If you can’t answer this question immediately the answer is probably no. Why is it that so many Realtors have no idea whether or not their business is operating in the red or in the black?
As a Realtor you are your own business. You are in charge of everything. Everything from ordering supplies and services to paying the bills. It’s all on you. It’s imperative that you know all of the numbers associated with your business.
Your Fabulous Life
The first step is knowing how much your fabulous life costs you each month and each year. Once you have this information it will be easier to see where your money is going and what areas you can tighten up. You’ll need to do the same exercise with your business expenses. You can’t possibly know how much you need to earn in your real estate business if you don’t know how much you are spend on maintaining your lifestyle. Take the time to review all of your personal and professional expenses in the past year. For some of you this will be a complete shock. Sure ignorance is bliss, but you’re running a business and you can no longer operate under a “hope” strategy.
Your Business Expenses
Real estate agents are known for spending a lot money. There are more people marketing lead generation systems, direct mail pieces and client gifts than I have ever seen for any other business. Agents spend money on listings that are overpriced in hopes they will get sold and we can recoup some of the money we spend upfront. Many agents haven’t taken the time to calculate how much it costs them to take a listing. As a result, they don’t know when to turn down a listing. Of course spending money can be helpful come tax time, but you are spending it now. It’s important to know how much you are spending in your business.
Track Your Expenses
You don’t need a sophisticated system for tracking your expenses. A simple spreadsheet will work just fine. Write down everything you are spending in your business…everything. Check in with your Accountant or Financial Advisor to see what items you can deduct come tax time.
Know Your ROI
Your ROI is your Return on Investment. When you spend money on marketing activities, it’s important to know what is working and what isn’t working. Realtors often do events and activities because they’ve always done them, not giving a second thought as to whether or not they are effective. Take the time to evaluate your activities and determine if they are generating business for you. If they aren’t, either change your marketing message for that activity or get rid of it altogether. Every time you think about spending money in your business ask yourself, “Will doing this help me run and grow my business?” The answer will determine whether or not you move forward.
Are You Making a Profit?
Business people don’t start businesses to breakeven. They start businesses to turn a profit. Realtors should not be the exception. You want to earn more than you spend. But if you don’t know your numbers you have no idea whether or not you are making a profit and that’s no way to run a business. Review your costs and then determine the percentage of profit you want to earn each year.
Related: Writing Your Business Plan
The $100,000 Trap
I haven’t met a new agent yet who doesn’t want to make $100,000 a year. I have no idea where they get that number from but it’s almost universal. The troubling part is that real estate agents simply pull that number out of the clear blue sky without knowing how much they need to live on and to commit to their business. It’s difficult to set a realistic goal when you haven’t done the work to determine how much you need to live your life and run your business. You might think $100,000 is enough but after you run your numbers you may find that you need $120,000 and that’s BEFORE you factor in any profit.
Your Business Will Change
Your real estate business and business practices will change over time. Don’t be afraid to make adjustments to your business plan or marketing plan to reflect what is happening in your market or in your business. By evaluating your numbers monthly, you will be able to see what is working, what needs to be enhanced, what needs to be added or what needs to be eliminated before wasting too much time or money. It’s important to remember that being a real estate agent means running your own business and that means knowing your numbers.
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Inman News named Candy Miles-Crocker as one of the Top 25 Real Estate coaches in 2016. Candy, “The Real-Life Realtor”, coaches, mentors and trains new and experienced real estate agents to transform their business by mastering her proven systems for success. She is a firm believer in managing expectations. Her goal is to elevate the perception of real estate agents among the general public through education so every client has an amazing real estate experience. Candy’s unique training methods have shown agents what it takes to be successful!
Learn more about her training program at www.RLRETraining.com or send her an email at Candy@RLRETraining.com.
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