Financial success for every business, from an agent who just got their license right up through the largest franchise, comes down to just 2 things:
- How much do you make?
- How much do you spend?
This might seem simple but it’s easy to focus on the things that make you money and rack up a huge unnecessary budget in the process. I’ve met agents paying for 10+ websites where they haven’t checked on 5 or more of them in a year. I even know agents who cancel their credit card every January to clean out their expenses.
Running a profitable business in a strong market is challenging for most real estate agents, but how can you turn a profit in any kind of market?
When the market is good and there’s business aplenty, revenue can often hide a large set of expenses. However, as times get tough unnecessary expenses can be hard to uncover, but it’s not always the best time to make a change. The time to make sure your business is running at optimal efficiency is before the market picks up or starts to shift. So, this week I wanted to give you a guide for examining your expenses and saving some money.
The expenses you have are probably things you believe you need for your business to be successful, and we’re not here to argue about that. All of the expenses we discuss have been used by agents all over the World to run their business and make money.
Our goal is to give you a way to evaluate how you are using those investments in your business so you can maximize the things that have the most value for you, and create additional income for yourself.
So let’s get to it!
STEP 1 – Outline Your Expenses
(We’ve included a worksheet below to help with the whole process. You probably want to download it before moving on.)
Start by listing all of your expenses by Title and Cost. This will give you a good overview of what you’re spending and a small glimpse into your business… but we’re not done there! Make sure you leave yourself 2 columns for “Category” and “Score” which we’ll use below to get a better understanding of your costs.
STEP 2 – Categorize Your Expenses as Fixed or Flexible
Categorize all of your expenses into either one of two groups: “Fixed” or “Flexible”.
Fixed costs are those mandatory parts of doing business where it might be tough to find unnecessary overhead. These are things like the cost for your license, C.E. courses, E&O insurance… you know, the things you can’t get out of… “death & taxes.”
Flexible costs on the other hand, tend to be a bit more ripe for saving money, which makes them worth your time to dive into a little bit further. These are things like digital marketing expenses, event costs, assistants/TC’s or anything you’re paying for that has overlapping features with other services you’re using.
STEP 3 – Score Your Flexible Expenses with Our Worksheet Questions
Sadly, you can’t do much about your fixed costs so plan for them each year and don’t spend a ton of time evaluating them outside of your annual review.
I have good news though – your Flexible expenses are completely within your control, and if you evaluate them correctly you can see where you’re not making the most of your money, and develop a plan of action from there.
Go through the Evaluator Worksheet we provided with each Flexible expense, and use the questions on Page 2 to score each one.
STEP 4 – Evaluate How Low-Scoring Expenses Fit into Your Business
Once you complete the worksheet, all of your Flexible expenses will have a score between X and 3.
Anything with an X should be considered a top priority. This means you’ve either never taken the time to set it up, or are paying for it twice.
If any of your expenses scored between 0-2, you might want to take a deeper look at what you can do to improve their performance in your business – or make a decision about how well that tool fits your model. To save yourself some time, start with the 0’s and work your way up.
Expenses that scored a “3” are likely the outputs that have the highest-value for your business. It’s important to understand just how much time and money you’re spending on these expenses, but outside of that, these items really don’t need much more validation.
Once you’ve evaluated your expenses, it’s time to decide which items deserve your attention, and where you can save money until that initiative becomes a priority.
You put these systems in place for a good reason, and most likely all of them have the opportunity to help your business. However, like most things in life, it ultimately comes down to priorities.