By MIKE FERRY
If you look at all the “Buzz” words in and around the Real Estate Industry, “profit” is definitely not the one you hear being used in most offices. You’ll hear all about how this person made this, and that person made that, but rarely, if ever, will you hear about how much an agent profited.
So what is “Profitability?” To define the word profit, we simply take the gross revenue of the business … or the total amount of commissions the agent receives after the house split, then total all the applicable business expenses (remember, the IRS is watching) and you subtract your total expenses from your income, and what’s left is your pre-tax income or profit. As you can see, it’s really not that complicated.
PROFIT … IT’S AN ISSUE
In all businesses, one of the ways they measure success is to look at their profits. In most cases, whether it is an individual or a company, “the higher the profit, the better.” The Real Estate Industry has numerous ways of measuring an individual’s success. Some of the most common are gross sales volume, gross income … and if you believe what we teach, we measure by the “number of deals you close annually.” You’ll notice the word “profit” is not mentioned in any of these definitions or descriptions of success in Real Estate.
During most of the 1980’s and early 1990’s, I was banned from speaking to a majority of all Real Estate organizations because I put a lot of focus on the words, “business,” and “profits.” In observing the industry daily, I realized that most agents did not understand these words, and I left them feeling more confused than enlightened by saying things like, “We must run our business like any other business,” or, “It really doesn’t matter how much you earn, it’s only what you keep!”
These statements left many agents totally perplexed because they had not been taught what business or profits were. The question I asked, of course, was “Why is this so difficult to understand? Where do these agents come from?” The same situation occurring back then is still the same today, and that is a majority of the people entering Real Estate sales have little to no background in business, running a business, or in the field of sales! Real Estate agents come into the business from everywhere, and everyone is a “former something,” but we know that since a majority have no business background, the words “business” and “profits” don’t mean a lot to them, yet Real Estate sales is a business just like any other business and must be run in exactly the same fashion.
In a normal business, any and all of the following are prescribed to, or followed I detail, depending on the leadership of the organization. As a Real Estate agent, you are the Chairman of the Board, the CEO, President, CFO, Administrator, Marketing Director, Sales Manager, and last, if not least, the salesperson whose job it is to create income and profits. Therefore, you must consider these 5 business principles and incorporate them into your business:
Implement a sound business strategy or Business Plan. This is the guide that we use to measure our progress towards the goals we’ve set.
Make good, sound business decisions daily. Reality based thinking is a critical factor in making good decisions. Learn to deal with the reality of where you business is versus where you want it to be.
Learning and applying the methods required to build a business. Non-business Real Estate agents hate to hear the word “prospecting,” but the bottom-line (profitability) is that without a plan on how you are going to go out and find new business, you’ll have to wait for it to find you, or buy it, which is extremely unprofitable.
Handling the administrative side of the business. If you do not have a staff member dedicated to this function, you must become an expert at delegation and scheduling so you have the time to maintain and build your business. If you have staff, you need to develop your leadership skills so you don’t get in the staff’s way.
Generating substantial profit that you can either reinvest in your business, or take for your personal use. Profits allow the agent to reinvest in themselves and their business, whereas a lack of profits keeps growth at a minimum.
YOUR EGO IS NOT YOUR AMIGO …
Without question, one of the biggest problems agents face in building their business and maximizing their profits is an uncontrolled ego. Why? Because an uncontrolled ego is not only expensive to maintain, it also kills your business from the inside out. It is the most destructive and unprofitable trait that you can have. It will stop you from learning and growing, in-turn eliminating new information from moving into your business and sales process.
An uncontrolled ego will stop good communication between yourself, your staff, your prospects, and customers. Why? Because the focus is on you and your problems rather than the people you are associating with. The uninhibited ego will dramatically reduce your referral and repeat business, create staff turnover, which is time consuming and expensive, and will get in the way of quantum leaps in production because if you already know everything and refuse to learn new skills and techniques, your business becomes complacent, and therefore is not as profitable as it could be.
The dictionary defines ego as “an exaggerated sense of self-importance, behaving in a manner that evolves only around oneself.” Just reading the definition should be enough for anyone who suffers from it to look at it carefully and set-up a plan to change their behavior and increase their profits.
CHANGE IS NECESSARY …
Change can be very difficult for most people, whether it be changing our business practices, changing our skills, our expenses, or our behaviors, change is necessary. There are only three ways to increase profits … increase gross revenue, control and cut expenses, or do both at the same time, which will build a stronger and more profitable business.
If your goal is to move away from being a traditional Real Estate agent and move toward being a service-oriented, highly-productive and profitable business person whose job it is to list and sell Real Estate, the tips in this article can move you in the right direction quickly. Start studying the business of selling, hire and surround yourself with quality people, and demand more of yourself and the business you’re involved in. These thoughts and actions will ring you the profits you deserve!