Aliso Viejo, CA November 17, 2008 As I sit here waiting for the snow to start rolling-in my mind is already beginning to wander to the upcoming holidays in a weak attempt at avoiding planning for next year – especially after this last one.  Unfortunately no matter how hard I try, nothing will make business planning as appealing as the Holiday season, especially since this has been an especially hard year for all of us.  Nevertheless it’s without a doubt one of the most vital parts of any successful business.  Even with all the other things going on at this time of year it’s critical that we make time to think and plan ahead or we will find ourselves on the “holiday downside” with no “upside.” 

 

A critical part of this process is to make sure we spend an adequate amount of our planning time reflecting on our mistakes and developing a strategy to avoid repeating them in the future.  The key question to ask yourself is - What do I need to do to succeed next year?

 

It’s always easy to look at what worked last year to see if it will work again.  On the other hand, rubbing salt into wound isn’t a very pleasant exercise and neither is taking a detailed look at the aspects of your business that didn’t work.  Moving forward, like the healing process, has to start somewhere, and for the successful agent that begins by creating a business plan.  One simple way to view the process is to commit to improving your business through better management of those items that you can control directly - activities and expenses.

 

In terms of your business planning process, start at the beginning - create a personal budget. Included in this budget should be all your household and personal expenses; mortgage, insurance, food, utilities, vacations etc.  Make sure to include savings and taxes.  A good way to view this figure is the Salary that you want to pay yourself.  This Salary is your focus - the top of the pyramid that will be become your total business plan. 

The second step is a close and thorough examination of your business expenses.  In business there are two basic expenses and real estate is no different; Overhead (fixed) and Transaction (variable).  Overhead is the silent killer in this industry because it consumes a large portion of each commission check.  Because you pay overhead items randomly throughout the month it’s hard to relate these expenses on a per transaction basis.  Overhead includes items such as licenses, MLS access, desk fees, automobile expenses, education and computer and software expenses as well as those things that you do to personally promote yourself.  If you aren’t able to define your overhead cost per transaction you will never be able to accurately respond to a client’s request for a concession.  This is the very reason that many agents find themselves losing money every time they close a transaction.  The result is a dash between transactions to make and close more deals – not an easy task in today’s market.  If you are losing money on each one it just becomes a viscous circle.  Getting a handle on fixed overhead is a must at anytime but in this market it’s “critical.”

 

The other element contained in business expenses deals with transaction expenses.  These are your variable expenses, the ones that you incur each time you take and close a listing and/or a buyer.  Want a bit of enlightenment?  Stop and take a few minutes to write out where you spend money on a typical listing or buyer.  You will be surprised where all your money has been going.  Surprised?

 

Don’t worry, you’re in good company as many very successful agents have gone through that exercise and learned that the secret to profitability lies in the knowing the details of their expenditures. 

 

As you begin to evaluate your expenses begin to ask yourself, “What do I really get out of the money I spend?”  This will help you to clarify where you need to be at the end of the process.  Then during the course of designing your business plan you will be able to take a critical look at each expense item and determine if it’s a benefit to your business as opposed to just something you do because all the other agents do it.  The extra items that you do may actually have little or no impact on adding new clients or improving the relationship you had with existing ones.  This makes the process of trimming and eliminating much clearer and easier to carry out.

 

Remember, the top of your business plan pyramid is the focal point - your Salary.   The supporting level below that contains the number of transactions you must close to pay all your business expenses “and” pay your Salary.  This is one of the items your business plan should automatically calculate for you - how many transactions you must close to meet your Salary goal?  As important as this element in the planning process is, don’t be tempted to stop here; move on to your activities.

 

Activities are the crucial steps in your business plan that form the foundation of your pyramid.  Without them you will never get to the top.  Failure to recognize, understand and implement these activities is what has caused many agents to fail during this most recent market shift.  For your plan to be effective you must not only list all the activities that you need to do each and every day, week and/or month but make the personal commitment to carry them out.  This is your Marketing-Checklist – the scorecard to track your progress.

 

Your Marketing-Checklist should include; sphere, referrals, past clients, open houses, floor duty, Internet, personal notes, calls etc.  Ultimately what you want to create is a realistic list of the activities that you need to do week-in and month-out to make sure your Salary is sitting on top of the pyramid when you get there.

 

The last part of your business plan is probably the most critical … when it’s ready don’t let it sit in a drawer and never to see the light of day.  Take it out, review it, study it and use it to measure your progress and make adjustments.  If you find yourself off course along the way start examining the items that make up your business planning pyramid.  Start at the bottom with your activities – the ones that you are both doing and not doing.  There may need to be corrections in both areas.  Your business plan is just like a house - most problems can be found at the foundation, which in your case are your activities.  If things are going well you can trace it to accomplishing your activities.  If things are not going well … you get the idea. 

 

To help you with your business planning NRN has arranged a special offer with CreateAPlan; a fully automated, online business planning program for real estate agents.  To get the details just visit www.CreateAPlan.com.