A Profitable Brokerage Starts with Clarity of Your Vision and Goals

Posted by Peter Mueller, CEO of The Profit Centre on 6/21/18 12:52 PM

The clarity and commitment to your vision and goals will ultimately pave a path to your destiny and your success. The problem is that typically they are not clearly defined.

Vision - goibroker.comI have discovered that the typical broker was a successful REALTOR who would never consider compromising their commissions to a potential customer. They would have a strong listing presentation that would identify their points of distinction. They take time and effort in a strategic manner in order to validate their services to command the fee they feel they are worth. One of the methods is to prove that by listing their home with them, the customer would net more money in less time than their competitors. The disturbing part is that many of them did not take that skill and apply it to their brokerage business.

When I interview brokers internationally and ask them what their goal and their vision is, I rarely get a good response. Even worse the goal seems to always be defined by how many offices and REALTORS they want to have. That is one of the worst ways to define your goals. In business and in life there is a principle that says "What you measure gets improved". If your goals are only defined by volume numbers you are setting yourself up for failure. The most important number to define is Profit.

When asked the question "What is your profit goal?", many do not have an answer. The problem is the ability to forecast the possibilities.

One of the first questions I ask a broker in a consultation is "What is the potential of the office?". Potential is defined by the size and demographic of the marketplace, how many realtors work in that demographic, the quality of the REALTORS and the expectation of how many we anticipate hiring over time. This is the first step in defining what the end or 100% potential looks like. Then, we determine a conservative answer that we can reverse engineer by looking at the end state, or in other words, by looking at the opportunity as if we are already there or at 100%.

Let's use an example.

Lets say that the conservative answer to the above question is 30 REALTORS maximum. This is the starting point. This becomes the guide in order to define how much space we want and need and to start budgeting revenues and costs accordingly.

Let me first explain the 3 factors in production. 

  • Factor 1 - Fixed expenses. Includes: rent & occupancy/ dues & subscriptions/ licenses & insurance & IT expenses.
  • Factor 2 - Variable expenses - Includes: owner-manager salary/ employee salaries, office supplies and expenses.
  • Factor 3 - Profit

Based on our extensive research and data we can offer some benchmarks in these areas.

It is important to understand what a benchmark is. It is not an average nor a best practice. A benchmark is a reasonable metric that can be used as a guide. Every area or marketplace of course, has it's differences. In lieu of knowing your regional metrics, benchmarks can be used as a base to compare to. The following is a good base.

  • Factor 1 - Fixed - $3,500 per REALTOR per year
  • Factor 2 - Variable - $5,000 per REALTOR per year
  • Factor 3 - Profit - $5,000 per REALTOR per year
  • Total - $13,500  Gross Profit per REALTOR per year Objective

Using the benchmarks mentioned, if the costs per REALTOR is $8,500 per year and you want to make $5,000 profit per REALTOR per year you would need to earn $13,500 in Gross profit per REALTOR annually on average. 

Now that we have this level of clarity it is simple to create your vision statement.

Using this example, your vision statement would be:

To build an office with 30 REALTORS averaging $13,500 in Gross Profit Per Realtor, paying myself a benchmarked management salary of $60,000 a year and having a net profit after expenses of $150,000 a year to create approximately $500,000 of equity.

Now that's clarity of vision! That's a clear goal based on volume and return on volume. 

How many did not even consider the fact that they are creating equity when building their business? Clarity gives you the inspiration in order to do the hard work. Reading your vision statement daily helps you focus on what's most important.The Profit Centre

At The Profit Centre our Mission Statement is: "Changing lives by guiding our clients to profitability". When you are profitable you have the freedom to be more generous with your time and your heart!


For more information on iBroker, visit goibroker.com/profitcentre or call 1.833.8BROKER.

 

Topics: iBroker, PeterMueller, Office Management, ProfitCentre, gross profit