One of things I hear weekly from real estate brokers is the question:
“How can I can increase my production?” Whether you are a beginning broker or a seasoned producer, most agents are equally interested in maximizing their earning potential. The key ingredient that is most often overlooked is a written business plan. Let’s take a look at the components of a standard business plan:
Elements of a Traditional Business Plan:
- Executive Summary
- Company Description
- Products and Services,
- SWOT Analysis of Industry
- Marketing Plan
- Operational Plan
- Management & Organization
- Startup Expenses & Capitalization
- Financial Plan
Why Do I Need a Business Plan?
As a real estate broker, you are running your own small business. This means you are wearing all the hats of a small business owner which can be challenging. Most brokers have not had any formal business training and have little idea of what they are getting into when they launch their careers in real estate. As with any business, a solid foundation is needed to succeed and without one the business is doomed from the start. A business plan is your working roadmap to follow as you strive toward success. Having this laid out from day one can save countless wasted hours and thousands of dollars spent on ineffective marketing. Your real estate business plan is the blueprint for your entire business and the day to day roadmap for operations.
As a real estate broker the key ingredients of a real estate business plan include:
- Income and Expense Projections
- Market Analysis
- Source of Business
- Action Plan
- Marketing Strategy.
Let’s dive deeper into these components:
Income and Expense Projections
Determine your current production using:
- The most recent trailing 12 months closed transactions to calculate your gross commissions earned.
- Use your current production along with your desired income goals to project a realistic income goal for the next 12 months. Determine the required gross commission income (GCI) to reach your income goals. Use the following formula:
- Formula is GCI minus office brokerage fee (commission split, transaction fees, monthly fees, desk fees, e&o, etc.) also include local, state, national associations dues, MLS dues, licensing fees, continuing education fees, Marketing expenses, federal self-employment tax, health insurance etc.
With real estate being seasonal and cyclical it is critical to know your cash-burn rate. You should always strive to keep 6 months of reserves to run your business, this includes your required personal income.
A thorough market analysis includes:
- Analyzing your market to determine the average dollar sale, commission, and number of transactions needed to hit your gross income goal.
- Determine the percentage of your market you will have to own to achieve your income goal.
- Calculate how many deals you need to close per month to meet your financial goals.
- Calculate the average market time for your listings to ensure you carry enough inventory.
Ask yourself, is it realistic or should you be looking at other markets to achieve your goal? Remember not all deals will close, so also figure about 10% of your deals may fall out.
Source of Business
Now that you have your financial goal calculated, it’s time to write out where your previous years business came from:
- Include the source of each transaction side so you can see what lead generation sources are providing you business. This will show your customer acquisition cost for each one of your marketing channels. This can be a real eye opener as often people’s best sources are getting little attention and ones that are consuming a great deal of time and money are returning the worst results.
- Next take your list and project what each source category is going to produce for the next 12 months, this allows you to readjust your marketing efforts for maximum efficiency and revenue generation.
Now build a detailed action plan for implementing your marketing and maintaining your sources of business:
- List each source of business and next to it write out what needs to be done to implement and maintain it. Include a milestone chart with estimated time to complete each task along with a start and finish date.
Finally, write an outline for your marketing and prospecting efforts. This will include frontend marketing to acquire listings, buyers, and renters to give you a competitive advantage.
Be sure to outline a plan for Marketing:
- Your listings to the general population, your active buyers and your sphere of influence.
- With referral partners.
- At the backend to your closed clients and your “A” list of people that send you referrals.
Your outline will be unique to you and your business and will change throughout your career. The following are some examples of what may be included:
Front-end Marketing “Prospecting”
- Listing ideas
- Calling FSBOS, Expireds, around listings and closed sales, or cold calling.
- Buying leads such as Zillow and Realtor.com or other reputable sources.
- Advertising on Facebook and other social media platforms.
- Buyer ideas
- Advertising properties for sale on social media, cold calling, buying leads Zillow, Realtor.com etc.
- Advertising properties for rent on social media, along with rent to own ads.
- General Population
- Wear a name tag everywhere you go as this starts conversations, you would be surprised how often this works for agents.
- Attend as many social events as you can as this is also a great way to pick up clients. People love to do business with someone they know and there is no better way to get comfortable with someone as in a social setting.
- Meeting people in your daily activities such as running errands, shopping, and dining out.
- You can also join clubs and attend events for anything where there will be people such as, community events, religious organizations, charities, school events, sporting events, so on and so forth.
- Marketing your Listings
- You should have written step-by-step plan of everything you do to market each listing that you also give to each one of your clients. Every client should get the same level of service each time and your marketing plan helps ensure this.
- Mail just listed and just sold postcards, open houses, social media marketing, knock doors etc. Always ask for referrals at the point of signing a listing agreement and again at closing. Ask for testimonials at closing, video and written. Put the client into the backend marketing system.
Marketing your active buyers
- Ask for referrals at signing of a buyer’s agreement, throughout the process, and at closing. Put client into the backend marketing system
- Marketing to your Sphere
- Set a schedule to routinely call your sphere such as monthly or quarterly. Have special events such as a party you host for them. Put them on email drip campaigns, newsletters, holiday cards etc.
- Marketing with Referral Partners
- Any small business might be a good candidate for this such as insurance agents, lenders, dentists, chiropractors, pizza shops, etc. Offer to market them to your database with a trusted referral and maybe include a special offer if they want and have them do the same for you.
- Backend Marketing System
- In any business it is critical to know the cost of acquisition of a new customer and the lifetime value of that customer. This is why you see so many rewards programs, bounce back coupons, mailers, emails, etc. from any business you interact with. A good response rate for marketing to the masses is 2% where is can be as high as 10% or more for previous customers. So, your backend marketing system can be your most efficient and cost-effective part of your marketing plan. This is where all your closed clients go and sphere that has sent you referrals.
- Include mailings for holidays, anniversaries, birthdays, phone calls after close, monthly, quarterly etc.
- Newsletters that give a shout out thanking others for referrals.
- Drip email campaigns, special events, and parties throughout the year for client appreciation. Be creative here and do things you and your clients will enjoy. This will be sure to keep you at the top of their mind when they hear of someone thinking of buying or selling real estate, and they will gladly refer you.
- Remember always ask for referrals and tell them how much you appreciate the referral. Referrals are your key to a sustainable career in real estate.
Now that you have your plan written, it is critical to review your plan weekly, monthly, quarterly and annually. Adjust your plan as needed to stay on track of financial goals and to implement new marketing tactics as needed to achieve your goals. Remember to have your plan updated by November of each year for the following years goals so you roll right into the New Year without missing a beat. No business can be successful without planning and accountability:
Your business plan is your road map to success.