With the end of 2021 rapidly approaching, planning for 2022 must begin in earnest. Truth is, your activities 90 days ago will govern what happens in the remainder of December. While many want to finish the year strong, other than getting cash transactions that can close in 20 days or less, your year is pretty much determined at this point.
With that in mind, the focus now must be on 2022 and implementing a strategic plan that will help guide you to your goals. Along with the plan, you must have a commitment to master the fundamental skills required to effectively carry out that plan.
At the core of any effective plan is a critical analysis of where you are today and where you want to be in the future. This calls for brutal honesty in evaluating your current business, as well as strategic planning for the future.
Growth-minded businesses not only plan for the coming year, but they also have long-term plans in place as well. So, with this in mind, here are my recommendations for launching a successful 2022.
1. Know your current business
You will need to take off any rosy-colored glasses and do a deep dive into your business as it is today. Any successful journey starts with an understanding and acknowledgment of where you are currently so that you can plan the route to where you wish to go.
As an example, if you are planning to fly to Italy for a vacation and you live in Dallas, you will most likely not buy plane tickets for a flight originating in Billings, Montana.
- Begin by listing the pain points that are keeping you from moving to the next level. You may come up with numerous items. Many have found that a coach or mentor can be very helpful in this evaluation process as they can provide an objective exterior view.
- Isolate the top three issues, and place them in order of priority.
- Evaluate what skills or tools you will need to master the three issues.
- Determine whether you have the skills and tools required to master your selected priorities. You might need training, coaching or, if you find that you personally lack the inherent qualities required to handle any specific component in your business, that may be the signal you need to hire competent help for that area.
2. Know your data
I’m constantly amazed at how few agents track their data. Transaction data is like the dashboard in your car; it provides critical information to keep you at the right speed, make sure you have enough fuel and more. If you do not track your data, you are literally driving blind.
You need to have a handle on the following statistics (by month, year and a running 12-month total):
- Total units sold.
- Total gross commission income.
- Total sales volume.
- Average sales price for both buyers and listings.
- Source for every transaction (referral, sphere of influence, etc.).
- Type of property sold (single family home, condo, etc.)
- Referral income.
3. Know your financials
Many agents are quick to share their total GCI (gross commission income) but have no idea how much of that income evaporates into expenses. Further, I frequently encounter agents who believe they are profitable if they have money in their bank account at any given moment.
When asked, “How much does it cost you to work with a buyer?” many agents believe it is just the cost of gas and a couple of cups of coffee. It is even worse when it comes to listings: A significant percentage of agents I know fail to track even the most basic numbers for their listings.
Admittedly, while agents are good at selling, they are usually not skilled at accounting and cost analysis. Unfortunately, like any business, if you cannot track your cost of sales (the actual amount it costs per transaction), then you will have no idea if you are profitable, will not be able to make wise financial decisions and will literally have no idea where your money went when your bank account runs dry.
The good news is that there are many accounting organizations (i.e. Streamlined Business Solutions) that can provide back-office support for real estate agents to help get the books in order.
They can track expenses and produce the requisite financial documents (balance sheet, P&L, Transaction Journals, etc.) so you can effectively track your costs. Additionally, since agents are typically self-employed, effective financials are critical when it comes time to secure financing of any kind.
4. Set realistic goals
Based on your analysis and armed with actual data, go ahead and set some realistic goals for 2022. If you are considering putting a goal in place which effectively doubles your business, then you need to be sure you understand the upfront financial investment you will need to make to get you to your goal.
Again, if you do not understand the core data in your existing business, you will have no idea how to effectively plan. Many agents throw pie-in-the-sky goals out there every year with no ability to track the metrics required to see whether or not they are meeting the benchmarks or mile markers along the way.
No serious chef sets out to plan a gourmet meal without the tools required (a kitchen up to the task), extensive knowledge and skills for preparing and serving the food, a well-planned menu, support staff and the correct ingredients.
What works in the kitchen works in real estate. If you understand the fundamentals, get the skills and training required, surround yourself with the right people, monitor your data and financials — you will set the stage for a productive year instead of spinning your wheels hoping everything works out in the end.
Carl Medford is the CEO of The Medford Team.
