Budgeting for a Great 2011
“If you don’t watch your money, someone else will.” Anonymous
I wished I knew who said that quote – no doubt a smart person. And you know what one of the best ways to watch your money is? Yep, a budget.
I know there’s a good chance your eyes just glazed over at the mere mention of the word. But believe me, after nearly two decades of helping real estate agents and brokers with everything from A to Z, I have to say budgeting has produced as many smiles on my clients’ faces as anything – because let’s face it, you’re out there in the market to make money.
The blaring irony is agents spend sometimes up to 60 hours a week working at make money and yet practically no time thinking about how to make it more easily or use it more effectively.
Not only does budgeting help you keep an eye on the money you make, it can boost your chances of success because it gives a window to see future needs, profits, spending and cash flow. A good budget lets you examine potential problems before they hit and how to deal with them if they do, and how to prevent them to begin with.
Here’s one quick budgeting exercise to help you get the total number of transactions you need to complete to reach your goal: simply divide your desired gross-revenue number by your average commission per sale. So let’s say your gross-revenue goal is $174,419 and your average commission is $4,500. Total transactions equal $174,419 divided by $4,500, or roughly 39 transactions. Easy and educational.
For the coming year, (yes, 2011 is speeding at us like a runaway train) make budgeting a more important part of your real estate business. I work with my clients to have a budget on paper by November 1, so there’s no time like the present to get started.
Here are a few tips to make budgeting a part of your business.
1. Don’t forget your business plan. ‘Bob, I thought this article was about budgets and now you’re spouting off about business plans.’ True, and for good reason. A business plan tells you where you’re going (the map) and the budget helps you get there efficiently (a good engine part). So start with a business plan (and no plan is worth a dime without a budget).
2. Get a handle on where your money is coming from and where it’s going. A good tool for this is a chart of accounts (I have one I can e-mail you for free) to let you see most if not all the expenses your business incurs and the income you receive during a typical year. Use it to estimate 2011 income and expenses.
3. Decide if you can reach your profit goal. Decide your profit goal but then project your costs (fixed and variable expenses) to see if you can reach that profit. You’ll have three numbers: targeted profit, fixed expenses and variable expenses which will show how much income you will need to reach your goal.
4. Determine revenue needs. What commission will you need to charge and is it realistic? How many sales will you need? Is this achievable? If not, revisit your expenses and make adjustments.
5. Keep an eye on your budget. Remember the quote above. Stay on top of your numbers. In fact, I suggest breaking down your budget into monthly figures so you can track your progress regularly.
Let me hear from you. How is budgeting going for you? What budgeting do you use? What do you find most helpful about budgeting? Do you have any examples of how budgeting helped you be more successful? Please share any comments or questions you have about this article. In addition, send me an e-mail at Bob@CorcoranCoaching.com for a copy of the Chart of Accounts that I mentioned earlier.
Bob Corcoran is a nationally recognized speaker and author who is founder and president of Corcoran Consulting Inc. (CorcoranCoaching.com, 800-957-8353), an international consulting and coaching company that specializes in performance coaching and the implementation of sound business systems into the residential or commercial broker or agent’s existing practice.
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