Are you ready to go into business for yourself? After you get your real estate license, you’ll probably be an independent contractor affiliated with an established broker. Many new agents assume getting into the real estate business is like starting any other new job. They focus on which brokerage firm they’ll join because many have never been in business for themselves. The business plan is a key ingredient of starting a business.
The business plan is your roadmap. It defines where you’re going, how to get there, and what it’s going to take to be successful. Agents who have a written business plan are more successful than those who don’t.
Business Plan Essentials
The major parts of any good business plan include:
- Goals: What do you want to achieve? Make your goals clear, concise, achievable, and measurable.
- Services: Residential or commercial, buyers/sellers/renters? In which area(s)? New agents often start with buyers/renters and then move on to listing homes after they’ve completed a few transactions.
- Target market: Who will you be serving? Who are they, what do they want, and how will you attract them?
- Budget: Current expenses like gas, groceries, and cell phone as well as the new expenses you’re taking on: association and MLS dues, increased gas, increased cell usage, and marketing.
- Funding: How will you pay your bills with no income for the first three months? When will you break even? You’ll need an income buffer to cover expenses when income is slow.
- Marketing Plan: The most effective way to market yourself is to systematically work your sphere of influence (people you know).
Now that we’ve got the basics down, let’s look at the steps to building a business plan.
Business Plan Steps
Follow the steps below to create a strong business plan:
- Draft your mission and vision: This will be in the executive summary, the first part of the plan. It’s your foundation and helps define your business.
- Market assessment: Research you “farm area,” which is the area you work. You’ll want to know the average sales, days on the market, months of supply, demographics, and competition.
- Strengths and weaknesses: List your strengths and weaknesses and brainstorm opportunities for growing your business. Your three main strengths will inform your marketing and the services you provide.
- Strategize lead generation: How will you generate and cultivate leads? This will likely involve growing and working your sphere of influence.
- Outline a marketing plan: A “marketing mix” will cover product, price, place, and promotions.
- Budget: Calculate your living and business expenses as well as how much you want to make this year. These numbers will help determine how many transactions and how much commission you need.
- Set goals: Use your mission and vision to set goals. How will you achieve your vision and mission?
- Numbers: Set goal numbers and actual numbers for leads generated, listings, contracts written, contracts closed, and money.
- Schedule and review: Draft a schedule for the implementation of the plan and reviewing progress.
A sound financial plan is the engine of your business plan; it will make everything possible. There are templates available online to get you started. You’ll need to determine and track your expenses, estimate your income, and calculate the needed number of leads and transactions.
Know Your Numbers
You need to know your key numbers at all times. You simply cannot run a business without tracking expenses and the results you net from your efforts. For leads generated, listings, contracts written, contracts closed, and money, set annual goal numbers and actual numbers, which if monitored on a weekly or monthly basis, act like a compass.
Desired Income and Transactions per Year
Let’s figure the number of transactions you need each year with an example:
Step 1: Determine Your Average Commission per Transaction
Average house price range $250,000 X 6% commission
= $15,000 total gross commission ÷ 2 (sale side or listing side) X 60% your commission split
= $4,500 commission per transaction
Step 2: Specify Desired Income, then Divide by Average Commission
$150,000 income goal ÷ by $4,500 commission per transaction
= 34 transactions needed per year to reach the goal
With your goals and numbers in place, next you’ll map out action steps to put your plan in motion. This will involve a marketing plan, specific activities like blogging and Facebook advertising, a lead nurturing strategy, and setting your business practices.
As the months progress, reevaluate and revise your plan as you track leads, transactions, and income.
Real estate is a multi-facetted, rewarding career, but it requires planning, funds, and commitment to get started. Starting out as a real estate agent, you’re a small business of one. Successful agents approach their careers like they’re managing a business, budgeting, analyzing market demographics, strategizing resource allocation, and designing marketing campaigns. Your business plan is a living, changing document guiding you through the first years of your real estate career.
There’s a lot you need to learn to be a successful real estate agent. You’ll always have a reliable partner in 360training.com, offering all the online training and education you’ll need.
360training.com’s WA Real Estate Practices M1 L1