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By Allen Wright

RISMEDIA, Nov. 3, 2007-Unfortunately, no matter how hard we try, nothing will make business planning as appealing as the holiday season; except for the fact this has been an especially hard year for many agents. Nevertheless, it is 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 wounds is not a pleasant exercise and neither is taking a detailed look at the aspects of your business that didn’t work last year. 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 you can control directly-activities and expenses.

In terms of your business planning-process, you should first start by creating 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 will be your focus-the top of the pyramid that will become your total business plan.

The second step in designing your business plan 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, computer and software expenses, as well as those things that you do to personally promote yourself. If you are not 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. If you are losing money on each one, it just becomes a viscous circle. Getting a handle on fixed overhead is a must.

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.

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

As you begin to evaluate your expenses, 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 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.

For more information on creating your own business plan for 2008, visit