Today’s Ask the Expert column features Arthur Darmanin, CEO of Sellstate Realty Systems Network, Inc.
Q: Why should I bother having a business plan?
A: It may be hard to believe, but your success or failure may depend on having a good business plan with a budget.
Whether you feel you’re doing just fine without one, you aren’t currently earning enough to make a business plan worthwhile, or you’re simply too new in the business to have one, a business plan will be the foundation of your business.
Just imagine if you were embarking on a trip without a destination, map, or clearly defined path to follow. How would you ever figure out where you’re going, or how to get there? You would likely continue to wander aimlessly until you were exhausted and frustrated before ultimately giving up. You must know where you’re going and how you’re going to get there.
There are many different ways to create a business plan and many different styles to choose from. Some are very simple, while others are extremely detailed and complex.
If you’re ready to put together your very own business plan, there are seven simple steps you must follow:
- Calculate your personal expenses. This is how much money you need every month to meet your personal obligations.
- Calculate your business expenses. Add office fees, association fees, marketing, etc., together to come up with your total monthly obligations.
- Project your income. First, calculate any income you may have from investments, spousal income, etc. Then, take the average commission per side and figure out how many closings you need to break even.
- Calculate your ROI from all previous closings and adjust accordingly. For example, if buying certain advertising produces very poor results and the ROI on the leads/closings isn’t very good, get rid of it and invest more where your ROI is best.
- Monitor and adjust your budget regularly. I cannot emphasize enough the importance of reviewing and adjusting your budget on a monthly basis.
- Avoid long-term commitments that have no termination provisions. Do not commit long-term without the option to terminate. Even in cases where you’re comfortable with the ROI, an escape clause is wise. For example, if you sign a one-year contract on what appears to be a great lead generation tool that a friend is using with great success only to find out it’s not working in your area, you’re stuck.
- Do a quick and simple calculation on where your business is coming from and how you can increase it. If you’re a lister and you have success with FSBOs, calculate how many calls/appointments it takes to get a listing and how many will sell. For example, if it takes 20 calls to book five appointments to get two listings and one sale, you will need X more calls to get XY appointments. The same goes with open houses, etc.
No matter how your business is doing, or how long you’ve been doing it, a business plan is an absolute must.
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