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BUSINESS PLAN

6 November 2007 by Dirk Zeller 343 views 19 Comments

The business plan is a foreign tool to most REALTORS^®. After studying, observing, interviewing, and coaching hundreds of Agents, I have concluded that very few have taken the time to create a quality business plan. Fewer still review their business plan on a regular basis. The few who have good business plans often make them so complicated that they possess little value. Those Agents create such a complex business plan that they will never carry it out. What kind of value does this complex business plan have to them? . . . Zero!

A well-written, concise business plan can provide an exceptional road map to guide your quarter, year, or next five years. Most well-run companies have well-developed business plans. You, as an Agent, are the President of your own real estate sales company. You have to view yourself as the head of a corporation that needs direction, vision, and a well-conceived road map to follow. The business plan can provide all these tools that lead to success.

To create a quality business plan, you have to know where you are today – right now – in your business. You have to ask some basic questions about your business. 1. How much do I want to earn in gross commission?2. Where does my business come from?3. What is my average commission check?4. What is my average cost per transaction?5. How many days am I going to work this year?6. How many hours per day am I going to work?7. What things do I need to implement to take my business to the next level? The best place to start is at the top. Ask yourself, “How much do I want to earn?” You can have total control of your income. You can make as much or as little as you desire. The only person or thing that determines your income is you. The market, other Agents, and other outside factors have very little control over your income. You alone have absolute and complete control. Once you determine the amount you want to earn, break it down to quarterly, monthly, and weekly amounts. For example, if you decide to earn $500,000 next year, you need to earn $125,000 per quarter, $41,666 per month, or $9,615 per week. Secondly, you need to determine where your business comes from. Figure out the percentage of transactions that are done in every category. Let’s say you closed seventy-five deals last year. The break down was thirty from referrals, fifteen from open houses, eighteen from sign calls, and twelve from expireds. Here is the breakdown in percentages: · 40% Referrals· 24% Sign calls· 20% Open houses· 16% Expireds You should also know the ratio or percentage of listings sold versus buyer controlled sales. The next exercise is to determine your average commission check. Take your gross commission and divide by the number of transactions. For the purpose of our example, we will use $5,500 as the average commission check. You want to earn $500,000 next year. In order to do that, you divide $500,000 by $5,500 which equals 91 transactions. You will need to close an additional 16 transactions next year to reach your goal. Then figure out the number of transactions you need in each category. · 40% of 91 = 37 transactions from referrals· 24% of 91 = 22 transactions from sign calls· 20% of 91 = 18 transactions from open houses· 15% of 91 = 14 transactions from expireds You can break these numbers down to a quarterly, monthly, and weekly number of transactions from each category. This break down will give you a clear path to achieve your income goal. If you do the number of transactions you need weekly, by year’s end, you will achieve your goal. Then you need to break down each category of business: referrals, sign calls, open houses, and expireds. You need to figure out exactly what you need to do to create the results you desire. The further you can break your business down, the easier the overall goal is to achieve. It is easier to achieve your goals if you can break them down to daily activities. All you have to do is the daily activities to achieve the desired results. Another important factor is profitability. You determine your profitability by subtracting your gross expenses from your gross commission dollar. The critical point is to not forget any of your expenses. Organize all of your expenses into categories such as automobile, staff, mailings, marketing, office supplies, etc. You are only fooling yourself if you are not accurate. Take your gross expenses and divide them by the number of transactions. For example, gross expenses of $95,000 / 75 = $1,267, which is what it costs you to close one transaction in our example. You can see how profitable you really are in your business if you follow this example. To answer questions five and six, you need to address your work days and hours. You need to factor them in against the work that needs to be done. Then allocate the work that needs to be completed to the number of days worked. This process will give you a schedule of what needs to be accomplished daily. The last section of a well-planned business plan is implementing new ideas or systems. Determine the weaknesses in your business and devise a plan to overcome them. Do not overdo in this area because, often, when Agents over implement, they slow their business down to a crawl. Since everyone is different and all staffs are different, a good rule of thumb is: Do not implement more than two major changes in a month. Determine what needs to be completed. Prioritize your list, and then devise a plan to implement changes at specific times. A business plan can be the backbone of your successful business. The backbone will weaken if not checked on a regular basis. You must review your business plan daily for the first few months; then you will need to review it regularly after that. Do not make the mistake of writing a fantastic business plan and then never look at it again. That mistake would be almost as bad as if you had never written it in the first place.

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19 Comments »

Kim said:

Thanks for this great information and tips! You can also look up business plan workshops in your area. When you all are done with those plans, There

# 6 November 2007 at 9:45 pm

Matsonian said:

For those agents who are intimated by a business plan, they are not alone. Most entrepreneurs and independant contractor types are DOers not PLANners. I recommend that they forego the business plan in favor of a simple strategic plan which is a much more flexible and living document. Business plans, really, are designed to be seen by financiers, strategic plans are meant to be followed to achieve a successful outcome. Programs like QuickPlanner Plus < http://www.quickplannerplus.com > guide the user in creating an plan for any subject or any need. Perfect for the real estate industry.

# 8 November 2007 at 10:40 am

Robyn Hardy said:

Thank you for breaking that down for us. It’s extremely hard for agents to know where to begin and most experienced agents have never put a business plan in place. It is up to their leaders to guide them. I used to start my agents with a Vision Statement and a Mission Statement then produced the business plan. The vision statement is imperative to keep the focused on why they are doing those open houses etc. The mission keeps them on task and the plan is road map. The Cyber Recruiter has an awesome real estate business planner built into their broker recruiting websites. You can see a sample on their demo site http://www.choosetherightcompany.com and go to the training button on the bottom left. Read the intro page and take a look at the activity planner, then click on the business planner banner in the middle of the screen. I wish I had this tool when I owned my brokerage!!!
The last piece of a business plan is accountability. If you don’t hold yourself accountable then you may as well not waste your time writing one. However, for those resistant agents I created a very quick plan…one listing and one sale a month and I would hold them accountable. It’s a start. By consistently doing that some of my agents built amazing businesses.

# 21 November 2007 at 3:18 pm

Dallas Homes For Sale said:

Thanks for the great post, just in time for the new year. I’ll be applying one this year for sure!

# 18 December 2007 at 9:03 pm

Keith Dobbs said:

Thank you so much for this insight. I’m telling all my agents to get these strategies underway immediately to pony up for the new year!

# 13 January 2008 at 12:18 am

Dallas Condos said:

I agree agents need a business plan, I think more agents would fair better if they had some sort of plan to follow. So many times we see & hear about agents that are not focused and have no plan. I think it’s great that you have provided this information for all agents to benefit from!

# 7 March 2008 at 4:24 pm

Philadelphia Employment Attorney said:

When running any business its important to create a business plan. It gives yourself a guide to follow so that you can keep track of your long and short term goals. Great post this was very helpful.

JB

# 31 March 2008 at 10:03 am

Dallas Real Estate said:

Great post, this is especially true with today’s market conditions. It’s very hard for newly licensed agents to get started in a down market. A good business plan with a solid strategy is essential.

# 22 April 2008 at 11:56 pm

Homes For Sale Dallas Texas said:

This is a major reason most business fail. It’s the reason successful franchises continue to succeed. A good sound business plan.

But even better than a business plan that revolves around process and systems.

Thanks for the post. It’s sweet and needed.

Kenney

# 13 May 2008 at 5:36 pm

Fort Myers Real Estate Lawyer said:

Most new Businesses fail because they have no business plan or structure. If you don’t have a plan you got no road map for success. Thats like getting dropped in the middle of no where with no compass or certain people driving around without their navigation system. Great Post!!

# 16 May 2008 at 4:00 pm

Dallas Real Estate Omni said:

Great post. We all have to have a business plan in place and review it constantly. Otherwise we will be in the red even before we realise it. One of our realtors guides us very much and keeps up the pace regarding our business objectives that we keep our focus intact.

# 26 May 2008 at 2:10 pm

San Antonio real estate said:

Well the year is about halfway done and I’m completely off track!! I need to regroup and view my goals again. Its so easy to get off the road.

# 26 May 2008 at 8:53 pm

Richardson Real Estate said:

I have a business plan that I think will prove effective in the coming years for the growth of my real estate practice. Thank you Dirk for your wonderful advice. You are truly an asset to this industry.

# 24 June 2008 at 4:15 pm