Business Planning
Some Agents try to run their business by the seat of their pants. They run around all year long being as busy as can be but never quite really getting to their goals…if they have set goals. Other Agents seem to coast along working full time and totally in control of their destiny. What’s the difference between these two Agents? Is it possible that Agent number 2 is just luckier than Agent number 1? Is it possible that Agent number 2 has more friends than Agent number 1? The answer is simple; Agent number 2 has built her business as a business while Agent number 1 has not taken the time to really understand business and to formally, in writing, put down her goals and plan of action for the year.
Business Plans do not have to be incredibly complex, long stories about your business. They can be of course; I have had a couple of business plans over the years that were 50+ pages long. I was also able to raise $3million in start up money with a simple Executive Summary and financial projections. Our goal here is to help you to prepare a workable paper to guide you through your year. This plan will help hold yourself accountable for your actions. The person you will have to answer to is yourself and if you are anything like me, you can be pretty tough on yourself.
So let’s get started. First we need to outline our goals. When we do this, it’s important to figure out where you want to be by the end of the year.
Question 1 – How many total homes am I going to sell this year?
Question 2 – How many homes are you going to sell this year to buyers?
Question 3 - How many listings will you take this year?
Question 4 – How many of those listings will sell?
Question 5 – How am I going to accomplish these goals?
If you answer these 5 questions, then you will be on your way from building a useable business plan. Let’s take a look at an example of how this will play out.
Question 1 – How many total homes am I going to sell this year?
Keep in mind that you should come up with realistic goals, but not goals that are easy to achieve. The only way to excel in any business is to have high standards. I have had some Agents come to me saying their goal was to sell 12 homes in a year. Not only is that an attainable goal, but it’s a goal that will leave you borderline poverty in most areas of the country. I don’t know about you, that’s not my goal! I also let them know that if they only hit 12 sales this year they most likely wouldn’t be working at our company the next year.
You can figure out how many homes you are going to sell by figuring out what is your income goal. Let’s take a look at this. If your goal is $100,000 this year, now we can figure out how many homes that equals. Simply take the average sale in your area, figure out the commission, and divide that by 100,000.
Sale Price = $200,000
Avg. Commission 3% = $6,000
50% split = $3,000
100,000/3000 = 33.3
With this example, you will need to sell 33.3 homes this year.
With this little exercise we have been able to pin down an achievable number of sales and the beginning numbers of your business plan.
Question 2 – How many homes are you going to sell this year to buyers?
Here we need to determine how many buyers we would like to help buy homes. Since most of the Agents reading this follow my lead conversion system, we are going to assume that you are receiving 1 or 2 leads per day or 50 leads per month. If you have become decent at converting Internet leads, we will assume you are all closing 1 sale in 35 leads. Therefore, you are converting about 1.5 sales per month from leads. The better you become at converting leads, the more sales you will receive from your 50 leads per month.
If all our assumptions are correct, then this will result in 18 sales from buyers and you have accomplished 54% of your goal.
Question 3 – How many listings are you going to list this year? and;
Question 4 – How many of those listings will sell? These two questions can be worked out together
The first question you need to answer is what percentage of homes are selling per month in your market. This will allow us to figure out how many listings you need to accomplish your goal of 15 sales. For this example, we will figure that 30% of your listings will sell since most of the country is currently in a buyers market. Therefore, if our goal means we need 15 sales then we will need 50 listings to accomplish our goal of 15 sales.
Question 5 – How are you going to accomplish these goals?
Let’s look at buyers first. We pretty much figured out how we are going to reach our goal with buyers but let’s take it a step further. When you are working a lead system, figuring out how to increase your sales is a matter of only two factors. One would be lead flow and the other is lead conversion. Increase just one of these areas and you will see a dramatic change in your sales. Increase both and you will be extremely happy.
Let’s look at a small example. If you can’t increase your lead flow, then you have to increase your lead conversion rate. Your goal should be 1 sale out of 20 leads. If you can get to that point, you will be at the top of your game. You will be one of the best in the country at converting Internet leads. With the same 50 leads, you are now closing 2.5 sales per month or 30 sales. So one way to accomplish your goal and to supersede it, is to improve your lead conversion. However, if you work your leads and follow a solid system (hopefully our 100MPH Marketing system), then you will have the best business to accomplish your goals.
What else can you do to increase your buyer leads? This is where you would add any other marketing efforts you might try and then associate a number of sales for that activity. For instance, if you decide to carry out First Time Home Buyer Seminars, you will be able to figure out, after a couple, how many sales you can gain per seminar. Each new buyer concept will produce results that can be duplicated.
Let’s look at listings
Listings can be obtained through many avenues such as Expired, Withdrawn, FSBO’s, Home Selling Seminars, Referrals, Buyers who need to sell a home first, Farming an area, etc. The goal of your business plan is to figure out how you are going to be able to obtain 50 listings over the year. Whichever way you plan on obtaining listings, you need to pick a project and stick with it. Let’s look at one aspect of lead generation for sellers.
I believe that farming an area is probably the most predictable means of obtaining a great listing base. So how are you going to farm an area to reach your 50 listings goal? Fifty listings is a huge goal. However, if you use a proper system, you should be able to do this with ease. The one unknown at this point is your percentage of listings per appointments. For this exercise we are going to use 50% as your number. This means that over a year you will need to go on 100 listing appointments. That sounds like a daunting number, but it really isn’t too tough. Like our buyer leads, we need to break this down into a number that doesn’t look so scary. If you need 100 appointments, you will need to go on only 2 listings appointments per week or 8 per month. At 50% you will receive your 50 or so listings.
Let’s go back to farming for a minute. When you write your marketing plan, you need to follow a workable system that makes sense to you. In farming there are 4 aspects to success. To receive 50 listings, you will need to farm an area of 1,000 homes.
Post Card Mailings – Mail all 1,000 homes a post card for 8 weeks straight. The first card introduces you. The second card is a list of sold properties in the area. The third through eighth card should have a little tidbit about real estate or an update on any sales in the neighborhood. They should also include a gift from you to them. Simply talk to local restaurants and retailers about offering a coupon to your base at no cost to them. This is a no brainer for the store and your farm area will appreciate this and keep the discounts.
Neighborhood Parties – The goal is to own the neighborhood. You can do this by hosting parties in the neighborhood. These could be cookouts, swimming parties, football parties, game nights, etc.
Neighborhood Seminars – Seminars can be about anything such as home selling tips, travel, insurance, reverse mortgages, and basically anything that you feel would be fun and well attended.
Neighborhood Beautification – Every neighborhood has the elderly lady whose husband died and the home needs gardening or painting. Or the front sign of the neighborhood needs work. Whatever you can do to help the neighborhood look great will work.
The idea behind this type of farming is to “own” the neighborhood. If you do the above, you will easily be known as the Realtor for the neighborhood. When people realize you really care about their neighborhood and the people that live there they will be more inclined to use you as their preferred Realtor.
The above is just an example of how you may reach your goal of 50 listings. This leads us to the final question we need to project your numbers.
This is about leads. Every possible customer is a lead. To project your numbers, both through listings and buyers, you are going to have to figure out how many leads you need to reach your goals. We have already done this above but let’s go through it one more time as this is the most important factor in reaching your goals.
Since we know that you must obtain 50 leads per month for buyers, you need to figure out how you are going to get there. You must have a strategy which should be specific. Let’s look at an example.
If I have an Internet program that captures 10% of my visitors to leads and I’m paying $1 per click, then how much is it going to cost me to reach my goal of 50 leads per month?
We need 500 visitors which is going to cost me $500 to capture 50 leads. Let’s say that you accomplish a 2 out of 50 close rate which means each sale is costing you $250. I’m sure in most markets you would be happy with a cost per sale of $250.
Let’s look at seller leads. Firstly these will take more effort and dollars to accomplish your goals.
1,000 postcards costs $50 per hundred or $500 per week for 8 weeks or $4,000. After that point you are looking at $1,000 per month (2 mailings per month) to keep consistent in your post card marketing campaign According to most stats, this will give you a 5% return with regard to how many listings you will receive. Therefore you should receive 50 listings over the year based on these stats. Add in your seminar programs and this number may go up.
The above examples are ways in which you will be able to accomplish your goals. From these numbers you can derive your business plan. Remember, when you build your business plan, it should have the ability to be flexible and to be changed. For instance, if you are trying a program and you have given it a good amount of effort and time and are not seeing the results, then you must adjust your business plan. Another occasion when your business plan must be adjusted is when the market changes. When I opened Tropical Realty of Suntree Inc the market was going great. I had a typical Real Estate business plan where I supplied leads for both buyers and sellers. We took and spent a lot of money on listings which did not sell. My plan had listing sales in it and our methods to obtain those listings. Our first full year in business, we had a ton of listings, but the market fell apart and our listings were not selling. I made a decision to not take listings and move strictly to buyers for the past few years. A good business plan can accept adjustments to the market as needed.
The final part of this exercise is to put all this in some sort of order. Below is the organization of your business plan.
Dollar Goal – How much money would you like to earn this year?
Transaction Goal – How many homes are you going to sell?
Buyer Transaction Goal – How many buyers do I need to work with?
Seller Transaction Goal – How many sellers do I need to work with?
Marketing Plan for Buyers
Marketing Plan for Sellers
How many Buyer Leads do I need to generate – Cost per leads and sale
How many Seller Leads do I need to generate – Cost per leads and sale
Keep in mind when you are writing your business plan for next year, you do not have to make it complicated. This can be as simple as a two page summary. The key is to have something in writing that you will follow. It doesn’t do any good to go through this exercise and not follow it. A solid business plan will guide your business to the next level!
All your goals should be broken down to the quarter, month, week and day. If you know what you must accomplish every day, then this business becomes predictable year in and year out. For instance, if you know you need to have 100 listings, you need 2 listing appointments per week. Numbers can be used to determine all aspects of your marketing plans. It’s really all about numbers. The more leads the more sales. It’s really not rocket science!
As always, if you have questions, please feel free to ask.