Developing a Real Estate Business Plan
September 10, 2018
September 10, 2018
The most lucrative businesses in the world were born out of simple ideas that were successfully executed thanks to well-thought-out plans. That’s why if you want to thrive in a competitive industry like real estate, you need a business plan. It doesn’t even have to be a convoluted one either. What you need is a simple plan that gets you to the next level but also evolves as your business grows.
We have come up with a guide that might be able to help Realtors or Brokers like you to develop a real estate business plan.
Identify the purpose of your business plan.
Before you begin drafting your business plan, you must first figure out what you hope to accomplish in your business. For Brokers or Realtors, a business plan could be devised to achieve one of two main objectives:
- Ensuring the growth and development of the real estate business, or
- Maintaining your current performance.
Once you’ve established your main goal, you should start working out the details of your plan. Be specific about what you want your business to accomplish and how you’re going to achieve it.
Establish the vision and mission statements of your business.
Taking the time to think about the vision and mission statements of your business is key to your success as a realtor.
Your vision statement reveals where you want to be in the future. If you want to be a high-achieving agent, then you must know where you want your business to go five, 10, or 20 years from now. This entails mentioning not only your income goals but your sales performance targets as well, including other objectives you may have.
Your mission statement highlights the purpose of your business and sheds some light on your operations. This includes information on the services that your business offers, your primary target market, and your geographical reach.
The ideal mission statement touches upon what you will do to set you apart from your competition. It should also mention what tools and resources you will use to help make your vision for your business a reality.
Vision and mission statements don’t have to be perfect; they just need to evolve as needed. Your plan must always change if you’ve found a better way to reach your goals, or if you’re achieving your objectives faster than you’d previously anticipated.
Determine what your target sales ratios are.
Your sales ratios are important for two (2) main reasons:
- They tell you the minimum number of activities you must do daily, weekly, monthly and annually to hit your income targets.
- They will tell you where you excel in the sales process and where you need to improve.
Because sales ratios are critical to your business, you must find a way to effectively track and evaluate them. But how exactly can it be done?
We made sure that our sales ratios are fully integrated into our business plan at our brokerage using our software that we developed in house. In fact, you can determine what your target sales ratios are by following these few simple steps.
Step 1: Input how much income you want to make for a particular year.
Example: A minimum income goal of $50,000/year.
Step 2: Input your average gross commission per sale. This is the average commission that you earn before the deduction of office splits, tax and/or other fees.
Example: Average commission of $5,000 per sale.
Step 3: Think about how many clients you need to generate one sale.
Example: Four listings to make one sale.
Step 4: Let the RMS calculate your target sales ratios.
Example: If your income target was $50,000 per year, your average commission is $5,000 per sale, and you need four listings to make one sale, then you need 40 listings to close 10 sales deals to meet your goal.
Go through your sales results.
Your sales results will tell you when and where you are currently generating your sales, and provide you some perspective on where you actually want your sales to come from.
We use our software to break down our sales results into two (2) parts:
- By property value.
Why it matters: It takes the same effort to sell a property at $150,000 and $750,000, but you earn more commission with the latter. Knowing your sales results by property value empowers you to double your efforts in closing higher priced listings if it shows that you’re too focused on low-priced ones.
- By sales per month.
Why it matters: It helps you identify which months you tend to do the bulk of your sales. Hence, you’ll know when is the best time to be aggressive in your efforts to close deals and when it’s advisable to take a break. You can also try and increase your sales in your typical slow months.
Work on your marketing plan/s and list down your business expenses and budget.
Your marketing plan is a critical part of your business, and you must actively track the results it yields. Controlling your costs is also a major factor in your success, so it’s also important that you have a thorough understanding of your budget and business expenses.
With the RMS program, you can drastically reduce your overhead and improve the efficiency of your marketing activities. It provides you the information you need in every aspect of your business to help you determine what works for you and what other areas you can strive to improve. We also put together a quick survey you can complete to estimate some of the above noted ratios in the following link.
Benjamin Franklin could not have said it better: “If you fail to plan, you are planning to fail.” But once you have a business plan, you are more equipped to run the real estate business that you’ve always dreamed of. However, that is just the beginning. To fully succeed, you need the courage to execute your plan and the mindfulness to monitor your performance as well.