Experts agree that agents need a plan to run a successful business. Speakers and writers hound us about setting goals, meeting production quotas, and how important it is to “do the numbers.”
While there are hundreds of formats for a great business plan, no one really addresses what stops agents from creating a plan in the first place.
The dirty little secret about business planning is virtually no one has been trained on the nuts and bolts of being profitable. The primary reason we don’t have a viable business plan is very few agents have ever been shown how to create profitability. We have no idea how to evaluate our business, how to identify our strongest profit centers, or how to correctly allocate our resources based upon market trends. Instead, we’re mistakenly taught to focus on revenues and GCI rather than bottom-line profits. We’re supposed to set production goals and keep prospecting until we meet them. Complicating the issue is the fact that most agents are so busy, few find the time to step back from their business and regularly evaluate what is and is not working.
Before you write your business plan for 2004, here are five important areas to consider that will directly impact your bottom-line profitability.
1. Allocate time to “work on” your business.
In “The E-Myth Revisited,” Michael Gerber draws a distinction between “working on” your business vs. “working in” your business. “Working on” your business refers to regularly taking time to plan, analyze and modify your business as market conditions merit. “Working in” your business refers to going on appointments, attending closings, talking with clients, and doing what is necessary to deliver services to your customer base. You need to evaluate your business on a weekly basis to determine what is generating revenue, where the market is experiencing the greatest amount of activity, and how to best focus your efforts to capitalize on market conditions. Holding “working on” sessions a minimum of once per week allows you to focus your efforts where they will yield the greatest benefit.
2. Target your time and resources based upon your weekly evaluation.
The market is constantly in flux. Each week carefully evaluate what areas are producing the most sales for you personally as well as for the market in general. Target your efforts in those areas. For example, if you have received only two leads from your geographical farming efforts during the past year, change your farming materials, do more face-to-face work in the farm area, or eliminate the expense and allocate those dollars in an area that is producing results. If your weekly evaluation shows current sales activity is concentrated in the first time buyer market, allocate your resources to this niche. The key is to focus on what is producing the most income now. Success comes from building on your strengths rather wasting time trying to improve on your weaknesses.
3. Create space for new business
If your schedule is already packed, there is no room for new opportunity. Each week carefully examine what you can eliminate from your schedule. The 80-20 rule works well here. Since 80 percent of our results come from the top 20 percent of our activities, the bottom 20 percent of our activities can be eliminated since they produce less than 1 percent of our results. If you’re uncomfortable letting go of the bottom 20 percent, try it as an experiment for one week. By eliminating networking activities that don’t yield results, firing unrealistic sellers, or simply “volunteering” for less, the space you create in your schedule opens the door to new business.
4. Figure out how to keep more of what you make.
Revenues are great, but the real question is how much do you keep after expenses? To keep more of what you make, you must look at your costs. $4 per day for a latte adds up to $120 per month or $1,440 a year. Agents are easily trapped into buying services or products they don’t need because it’s only “$30 a month.” Furthermore, they often justify unnecessary major purchases by rationalizing all they have to do is “sell just one more house a month.” There are hundreds of places where you can save money by purchasing in bulk, buying products online, not eating out so much, or just being conscious of where the money goes. As part of your weekly planning process, identify at least one place where you can save money in your business and one place where you can save money personally.
5. Focus on who’s closest to the money.
Most agents respond to their clients on a “first come, first serve basis.” A better approach is to focus your efforts on those clients who are closest to writing an offer or listing their property. Each week as part of your business evaluation, determine which clients are closest to entering into a transaction and focus your efforts on them. Also, if you have unrealistic sellers or buyers who are wasting your time, decide whether allocating time to them or referring them to someone else is the best strategy.
Want to know about the “second dirty little secret” of business planning? Look for next Friday’s RealClues.
Bernice Ross is an owner of Realestatecoach.com and can be reached at bernice@realestatecoach.com.
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