Sisters Maeda Palius and Amy Chorew offer guidance on developing a comprehensive business plan, so you can better understand your business as you plan for your financial future.

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As a real estate professional, you are not just an agent; you are the CEO of your own business, and you are an entrepreneur. Embracing this mindset is crucial to creating a real estate business that will financially support you. 

Is it too late for a business plan? Heck, no. As we are all finalizing our taxes for 2023, we are hearing that many sales associates still do not use a business plan. Here’s our case for one.

A business plan provides a comprehensive roadmap that aligns with your vision, goals and the ever-evolving real estate landscape. This plan is more than a strategy; it’s a commitment to your growth, empowering you to work with confidence, make informed decisions, and build a sustainable, successful real estate business.

The best part is that a detailed business plan can be used by a financial planner to plot out your financial plan for saving and building a financial portfolio.

Think eventually cutting back to retire or simply taking time to smell the roses.

Remember, your journey in real estate is not just about transactions; it’s about leading a business that reflects your ambition, expertise and the value you bring to every client.  

Establishing your business plan and budget

A business plan is not just a document; it’s a roadmap for your business’s future. It’s essential to revisit and revise this plan annually or even more frequently to stay aligned with your evolving business goals and market conditions.

Key components of a business plan

Cost analysis: Your business plan should comprehensively detail both your business and personal expenses. Understanding these costs is vital for effective financial planning.

Financial goals: The plan should outline your financial objectives and the necessary revenue to achieve these goals. The financial planner advises you on the necessary assets to generate the necessary revenues.

Operational metrics: It should specify the number of calls, appointments and transactions required to meet your financial targets.

Cost analysis

Business expenses breakdown: Detail the various types of expenses your business will incur. This can include:

  • Fixed costs: Rent, salaries, insurance, etc.
  • Variable costs: Printed materials, Farming and online Marketing, shipping, etc.
  • One-time costs: Equipment purchases, staging inventory
  • Operational costs: Day-to-day running expenses, etc.

Personal expenses: 

  • Living expenses: Rent/mortgage, food, utilities, etc.
  • Taxes
  • Personal insurance: Health, life, disability, etc.
  • Savings and investments: Retirement plans, emergency funds, etc.

Financial goals 

Revenue projections: Estimate your expected income. This helps in understanding how your revenue will cover your expenses. Include:

  • Sales forecasts: Based on market research and business model
  • Pricing strategy: How you plan to price your products/services
  • Revenue streams: Multiple sources of income, if applicable

Operational metrics

Based on national and local data, this should include:

  • Average sales price
  • Commissions
  • Costs per property
  • Number of calls to appointments
  • Number of appointments to listings or sales

Bridging your business plan and financial reality

A financial planner can use your business plan to create a bridge to your financial reality. This involves understanding your financial statements, including the balance sheet, profit and loss (P&L) and, sometimes, a cash flow statement. The financial planner can run this data through their financial modeling software and with your input develop your financial life plan.

Whenever there are changes, new child, new house, college, vacations or whatever, you can re-visit the financial plan to see how those changes will impact the plan and some adjustments you may have to take. 

Understanding financial statements

  • Balance sheet: This shows your company’s assets, liabilities and equity.
  • Profit and loss statement: This reflects the company’s financial results over a specific period, like a month, quarter or year.

Setting financial goals in your budget

Your budget should define the gross sales needed to generate your net commissions. An accountant can help you determine the number of homes you need to sell and at what price to achieve your financial goals.

Advanced financial planning

After a year of following this plan, consider diving deeper into your financial reporting by categorizing your business expenses into direct and indirect expenses. This advanced step can provide more clarity and control over your financial health.

Collaborating with your accountant

Investment strategies

Using your budget figures, determine how much you can invest in your 401k, rainy day fund, and alternative investments.

Enhancing your budget

Improve your Profit and Loss statement by:

  • Tracking sales by revenue streams aligned with your marketing plan (e.g., Sales, Rentals, Referrals).
  • Monitoring the income generated by specific initiatives like targeting demographics or neighborhoods.
  • Calculating the gross profit from each sales category to understand their effectiveness.

Developing a comprehensive business plan and budget is a critical step for real estate professionals. By understanding and implementing these strategies, you can create a solid foundation for your business, ensuring financial stability and growth in the competitive real estate market.

Amy Chorew is an active Realtor involved in investment properties and listing well-staged homes in Connecticut. Since 2008, Amy has been on the national speaking circuit teaching industry professionals about technology and sales strategies to help improve their business. Connect with her on LinkedIn and Instagram.

Maeda Palius has been a practicing CPA for 40 years. Her CPA firm focused on helping small and medium enterprises become more profitable and help the owners grow personal wealth. Connect with her on LinkedIn.

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