The gifts are unwrapped, the tree is dead. Your extended family have gone home, and you’ve cleaned most of the mess. As we approach the 1st day of the new year, we invariably lead ourselves down the path of “busness planning” for the new year.
Creating a business plan does 3 wonderful things. First, it motivates you to restart in real estate after 5 pounds of Turkey and 3 gallons of wine have settled into your gut from the holidays. Second, it allows you to review your budget and plans for the new year. And finally, third, it gets you out of the remaining house cleaning and post-christmas chores that you’re most certainly avoiding.
I’m not kidding. For may Realtors, the most effective thing that their business plan does is point #3. We spend hours and hours creating pretty documents with full color charts and graphs, detialing how we’re going to run our real estate practice differently this year. We show it off to our spouse, our broker, and maybe a few close friends.
Then we put it into the desk drawer, promising to review it regularly, and never see it again… until we open that drawer next christmas to write our new business plan. It’s a useless document.
Sound familiar? I thought it would.
So instead of a big formal business plan that won’t do anything for you anyways, here’s how to create a business plan that actually WORKS for Realtors. I’m also going to share some thoughts, ideas, and best practices that should help you to make your business plan a useful tool in the coming year, rather than collecting dust.
BUSINESS PLANNING A.D.D.
The first thing you need to do is drop the document. Stop typing a novel and use as few words as possible. We’re Realtors, we have A.D.D. by nature, and we won’t read a long winded document. The extent of our reading is 1-2 paragraph MLS ads. So don’t be long winded!
Your business plan should be no more than 2 pages. 1 page is preferred and realistic. If you can’t describe something in 1 sentence point form, then you aren’t going to use it effectively. You certinly can’t glance at a 20 page document in the 30 seconds that you’re on hold waiting for the MLS department to answer your call. Because that’s how long this document should be… 30 seconds or reading.
So here it is, in a nutshell. Oh… and NO TYPING. Write it down “old school” so that you take it more seriously.
Part 1 – Goals
Really simply, figure out how many homes you want to sell this year and divide it by 10 months. Make it a resonable goal; if you’re a solid 15 transactions per year agent, don’t write down 100. You won’t get there. Ideally, you should be 10-15% higher each year if you want to grow your business. If you sold 50 homes last year, 55-60 sales is reasonable.
(It’s OK to blow your goals out of the water with actual production, it’s when you budget too high that problems occur.)
Write the number on the top of the page as “Monthly Sales Goal”. Write it in big bold letters; it’s rather important. Use a felt marker if you’re gutsy. This should extend from the left side of the page to the middle. Or there abouts.
Next to this, write the initial of the months of the year. J F M A M J J A S O N D
It will look like this:
MONTHLY SALES GOAL: 4 Sales J F M A M J J A S O N D
At the beginning of each month, you’ll tally the previous months results and mark up this page. WRITING ON THE PAGE IS VERY IMPORTANT. It ties you to the document and the plan; it keeps you accountable. If you sell MORE homes than your target, you write the number as +1 (or +2 +3 etc) ABOVE the letter of that month. If you sell fewer homes, you write it UNDER the month as a -1, -2, -3. If you hit exactly your target you circle the letter of the month. By the end of the year, the top of the page will be a heck of a mess. Which is good!
Why 10 months and not 12? Because most of us don’t do a lot of business in December, so that leaves 11 months. We should also take 2 weeks of holidays, that’s what the rest of the world gets as a minimum. Why not us as well? So that leaves us with 10.5 months. And we’re also likely going to screw up a week or 2, get sick, have sick kids, or some other sort of an emergency will take us away from work for some time. If nothing else, it gives you a bit of a buffer. So divide by 10.
Calculate your average commission by taking the past 2 year’s total combined incomes and dividing it by the number of “ends” that you completed in those 2 years. It will give you a reasonable idea of your per-transaction income. Then simply multiply that per-transaction income by the number of transactions that you plan to complete.
Write that in the middle of the page, under the previous writing as “goal income: $xxx,xxx”.
Part 2 – Prospecting
So now you know how many homes your’e going to sell each month. GREAT! Good for you. Do you have any idea HOW you’re going to do it? Now would be the time to write that down. Underneath “Monthly Sales Goals” write a section called “prospecting” and detail, IN POINT FORM, how you’re going to generate the business. It should look something like this…
- Google AdWords – $500/month – assistant
- Local Real Estate Paper – $500/month – assistant
- Mailing and calling Expireds – 90 Expireds – $100/month – me
- Neighbourhood Farm / Bulk Mail – 1,000 pieces – $500/month – assistant
Write the prospecting as a column down the page. It should describe WHAT you’re doing, how often, how much it will cost you, and who’s responsible for making it happen every month. The significance of this is that it will give you reasonable permission to actually SPEND the money on the prospecting, and ensure that it gets done. That’s important; you have to be allowed to do this stuff first, and actually DO IT as well. Be liberal with your spending; this is the column of expenses that actually makes you money.
Part 3 – Support Expenses
These are all of the non-lead generating expenses that you face. Your car, cell phone, fuel, office bill, etc. etc. etc. all goes in here.
I usually suggest you put this on the back of the page, or on the 2nd page. There’s an unusually high number of these expenses. Writing them down will help you to keep them under control. It will also show you just how much money you’re wasting on stupid little things. $25 here, $40 there… it adds up to hundreds, even thousands of dollars every month.
Again, just like the prospecting expenses, write it down in point form. Don’t get too detailed, we’re aiming for quick reference here not detailed reporting.
Part 4 – Rewards
Detail 2 rewards and 1 penalty on this final part of the page.
The first reward is a biggie; something that you get or get to do if you hit your goal for the year. Last year for me it was a new home theatre in my basement. The year before, it was a brand new performance car instead of my boring mundane sedan. (Today I drive a hot Infiniti G37, and I don’t have a home theatre… guess how my last 2 years went?) Dream big, but make it something you’re actually going to follow through on. If you can get a picture of “it” and tape it to the page… all the better.
The second reward is your monthly reward. This should be smaller, like a nice dinner out to a favorite restaurant, and should be affordable. Make sure your spouse or significant other knows about this reward. She/he will be partaking of this reward with you; or should be at least!
And finally the punishment. That’s right, you’re in trouble if you don’t hit your target. What will you do if you don’t make the targets for the month?
Again, make sure that you share this information with your spouse. He/She will need to help you enforce it.
Don’t make the punishment “more prospecting”; I don’t want you associating prospecting with punishment. We have a hard enough time prospecting as it is, making it a punishment will make it impossible to do! (My punishment last year was to spend a day working on the brick walkway beside my house, while the reward was hiring someone else to do it for a day. By the end of the year I have a gorgeous brick walkway… and did a fair chunk of it myself.)
Does It All Add Up?
This is the first step of closing off your business plan. You have a goal, you’ve broken it down monthly, and you have a plan for achieving that goal. Add up your two columns of expenses to get a final total. Add to this the amount of taxes you expect to pay (be honest!), and ensure that the final total is no more than 66% of the total income you plan to earn. The remaining 34% of the money is your after-tax living expenses. Make sure that figure is high enough as well.
If you’re short on money, start cutting the “support expenses” first. Find ways to cut these costs if you can’t eliminate them altogether. They are the “Fat” on your lean, mean, real estate machine. Cut the fat whenever you can. After that, if you still can’t make the numbers add up, look at the total sales goal. Is it high enough? If so, the next thing to do is to find a way to get your prospecting expenses down. if you have absolutely no money, calling FSBO’s and Expireds is FREE.
Make sure your figures add up. Write it on a separate piece of paper and check it twice. Have someone else add it up, and doube check it. Check it the next day. But be confident in your numbers. This is a bad place to screw up.
Working With It Every Month
You need to be reminded to look at this silly little document. It has to jump up on a regular basis and bite you in the face, or it will linger in that abandoned desk drawer and be forgotten. So there are 2 things I do to keep on top of my business plan.
You’re reading this on the internet, so you have access to a digital calendar. Sure you do. If you don’t think you do, then go to gmail.com and sign up for a free account. It’s free, so there’s no excuses. They have a fantastic built-in calendar service.
Create a separate calendar called “business plan” and schedule 30 minutes on the first Monday of every month to review this document. You can also program it to email you a reminder of the appointment. Don’t trust yourself, add your spouse and/or Broker to the appointment as well. They’ll bug you to review it, because it will email them as well.
When you review it, you should spend less than 30 minutes on it. Answer the following questions each time:
1. Did I hit my target? Why/why not? (Mark up the top of the page!!)
2. Am I inline on my prospecting budget? Why/Why Not? (I don’t recommend coming in under budget here…)
3. Am I inline on my support expenses? Why/Why not? What can I cut out of it? (Keep these annoying expense DOWN!)
4. Do I need to make any changes to my business, expenses, or plan?
Why do it on Monday? Because most offices have their office meetings on Monday so you’re in the office anyways, and it’s the day when most people are in “work mode”. Your admin staff will also be available for you to gather your monthly sales figures if you don’t know them off the top of your head.
I’m going to really get into your face now. Take the document, put it into a clear plastic sleeve, and TAPE IT TO YOUR DESK. This way you’ll see it every day, and be able to quickly remind yourself of your goals and targets on a very regular basis. it also ensures that you won’t let it slip into the desk drawer and never be seen again. Oh, and take it someplace visible on your desk. Under your Inbox or under your computer monitor is cheating.
There you have it. A thorough, detailed, and entirely useful business plan that will guide you through the year. I’d love to hear your feedback on this model, either in the comments below or by emailing me at firstname.lastname@example.org
WOW! You’re done!
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