When you look at this year?s business plan, how confident are you that it?s the best you can do? Is it detailed enough? Did you dive deep enough? How accurate is it?
The best business plan is one that eliminates your debt and achieves financial security. If yours doesn?t, we think you can do better.
Of course, we don?t know your personal financial situation, and sometimes accomplishing those things just doesn?t seem feasible inside one year. If your current plan cannot achieve those things, you either need to change the plan, or extend the time-table to see them through.
It turns out, there are 7 questions you need to answer to get you on the path to being debt-free and financially secure.
Question #1: What are Your Business Costs?
Look at the amount you spent on running your business last year. Was it enough? Was it too much? Do you need to spend more on it this year, or less?
Add up everything that is essential to your success, including your website, insurance, minimal marketing costs, business cards, board dues, cell phone, car expenses, gas, etc. This is your baseline number.
Then, figure out which additional expenses will best help you achieve your financial goals. These might include an assistant salary, beefing up your marketing budget, investing in lead-capturing, or a miscellaneous fund for those all-important business and networking lunches and coffee. What will you spend on each?
Being honest and thorough is crucial to coming up with a plan you will actually stick to.
Question #2: How Much Will Your Household Spend?
Do you know what your household expenses are each month? Surprisingly, many families are completely in the dark about how much money they go through on a daily, weekly, and monthly basis.
Most of us don?t like to think about this, but It is important to sit down with your family and go over your bank statements. What have been spending and what you plan to spend going forward each month? If you have children, this is an especially good exercise to teach them about budgeting and financial responsibility.
We?re not suggesting you force your household to make sacrifices or deep cut-backs in their lives, unless you should deem it necessary. Knowing the amount of money exiting your bank account each month will help you to understand how much you need to bring in to reach your financial goals.
Question #4: How Much Debt Do You Need to Eliminate?
When we say to focus on becoming ?debt-free,? things like your mortgage are a necessary debt for most families, and can generally be excluded. Debt that needs to be taken care of sooner rather than later includes credit cards, outstanding medical bills, reverse mortgages, or lines of credit.
Eliminating your debt is a huge part of creating wealth. The more you set aside to pay those bills in this plan, the more motivation you?ll have to get out there, make those calls, and convert those leads each day.
Question #5: How Much Do You Need to Save?
Let?s face it. These days, there is so much to save for. At the bare minimum, you?ll need a retirement fund (we recommend an SEP or IRA to lessen your tax burden as an agent) and an emergency fund. In a variable-income career like real estate, the importance of building up at least 6 months worth of expenses in savings cannot be underestimated..
Depending on your circumstances, you may want to contribute to a college fund, a vacation fund, or an investment fund. Putting money toward these things will not only allow you begin to accumulate wealth, but help you sleep easier at night.
Question #6: What is Your Outside Income?
Since the amount of money you?ll earn as a real estate agent this year is uncertain, other ways your household brings money in need to be accounted for.
What methods of generating household income do you have at your disposal, aside from real estate? Maybe you have a side gig, an online money-making hobby, or your spouse brings home a salary. Do you coach a sport or teach a class? Is there a pension or trust fund? Do you own a lease or vacation rental property?
Make a list of any outside earnings your family will generate.
Question # 6: How Much Money Do You Need to Make this Year?
This is the painful part. Pull up your calculator app and add up up your expenses, which are the answers to question numbers 1 through 5. The total is the minimum recommended income goal amount.
We know what you?re thinking: What about subtracting outside income from the total?
We didn?t forget. Though it seems counterintuitive, subtracting this income from your expenses is actually a major rookie mistake.
As an agent, there?s no way to predict how much you will owe in income taxes, but the more you make, the higher that number will be. We highly recommend reserving your outside income to pay your income taxes, and the rest can be extra savings to tuck away or put back into your business.
Question # 7: How Will You Make that Happen?
It is likely that the number staring you in the face makes you feel slightly uncomfortable, if not downright shook.
That is precisely the point. Seeing exactly what it will take to get you where you want to be can give you the motivation to become the hustler we know is in there somewhere.
Figure out how many houses you need to sell this year, based on that nauseatingly alarming number.
Multiply your commission rate by the median home sale price in your focus area. That is how much you?re likely to make on one sale. Then divide the big scary number by your commission. This is your goal.
Break it On Down
Let?s say your calculations determine you need to sell 18 houses this year. The general rule of thumb is that you have to talk to 40-60 people for every house you sell. Therefore, you?ll need to talk to an average of 900 people in the first nine months of this year, or 100 each month. Break that down, and you need to reach 22 people every week.
If you?ve spent any time at all in real estate, you likely understand how many calls it can take to actually reach one person, so the goal of calling at least 10 people every day to reach 22 per week starts to seem pretty reasonable, if not optimistic.
Need Help Reaching More People?
If you find that you?re not reaching your target number of people each week, you either need to call more people, or capture more leads. Book your free discovery call to learn more. We?re always here when you?re ready to chat.