Look closely at the numbers to maximize net profit and efficiency
As the leader of your real estate team, you wear a lot of hats. You are the Sales Director. You are head of marketing. You are Chief Operating Officer and you are the Director of Human Resources. Basically, you are responsible for everything that you and your team do.
One role that often gets overlooked is that of Business Analyst. Agents and team leaders must periodically review their business to make sure that it is operating successfully and so that they can recognize areas that need adjustments. Here are a few places to start:
Profit and Loss
Is your real estate business earning the net income that it should? Most agents have a good general idea of where their business stands year-to-date, but it is important to look at the hard numbers to make sure that they are actually what you think they are. Hopefully you are using an accountant or financial software program (e.g., QuickBooks) to track your revenue and expenses, in which case producing a profit and loss statement will be simple. If not, set aside the time to go through your bank statements yourself to add up your gross income and business expenses. Break down your expenses into major categories (marketing, admin, etc.), and determine both your periodic (monthly or quarterly) net profit as well as your year-to-date total.
This does not have to be overly cumbersome; the big numbers will jump out quickly, and you can put everything else into the “Miscellaneous” category for simplification’s sake. Once complete, people often find that revenue is not quite what they thought it was, or that one or more expenses are running higher than they thought. This is important to know so that you can make adjustments as necessary. And doing this exercise and reviewing actual profit and loss statements will allow that to happen based on real numbers.
Besides simply looking a raw dollar figures, it is also important to see how revenue and expenses numbers look as compared to previous time periods. Is your second quarter gross revenue up versus 2019 (which would be fantastic given this year’s events!)? Whether it is up or down, are your expenses trending up or down similarly? Analyzing trends, especially with major expenses categories that you don’t necessarily keep top-of-mind, will help you ensure that your business is operating profitably and that you aren’t suffering any “leaks” against your net income.
One helpful way to analyze your business is to convert revenue sources (e.g. individual team members) and expense categories into percentages of total income or expenses, then compare them to past periods. This will allow you recognize when imbalances are present and address them before they go on too long.
Actual Results vs. Projections
Most agents and teams have sales goals for volume, units, gross commissions, etc., but you also should have projections for net income and a budget for your expenses. If you do have financial goals and a formal budget, take the time to compare them to your periodic and year-to-date results, and then make any adjustments in your business as necessary. If your projections and budgeting is less formal, do this exercise: quickly jot down what you think your revenue and main expense categories are for the month/quarter/year, then actually look at your results and see if they match. If they do, then great! If something is off, however, you can then take a closer look and see how an adjustment might improve your bottom line.
Analysis of these figures should be done on a regular basis—preferably monthly but no less than quarterly. If possible, do this with your accountant or business manager, or choose a “buddy” agent and do it together, comparing results and making mutual suggestions. However you do it, reviewing these figures will reveal your true financial performance, highlight revenue and expense trends both annually and during comparative periods in previous years, and will keep you on track based upon the plan that you set forth upon to start the year.
In short, gross sales and volume do not fund the rest of your life and that of your team. Net profit does. Put on your Business Analyst hat to make sure that your business is operating as profitably as it should, and your success will be greater than ever!
For a free copy of my exclusive “Weekly & Monthly Action Plan Worksheet” to keep new and existing team members productive and accountable, click here.
Sherri Johnson is CEO and founder of Sherri Johnson Coaching & Consulting. With 20 years of experience in real estate, Johnson offers coaching, consulting and keynotes, and is a national speaker for the Homes.com Secrets of Top Selling Agents tour and the Official Real Estate Coach for McKissock Learning and Real Estate Express. She is also an RISMedia 2020 Real Estate Newsmaker as an industry Influencer. Sign up for a free 30-minute coaching strategy session or visit www.sherrijohnson.com for more information.