Dirk Zeller is a speaker, author and CEO of Real Estate Champions. His company trains more than 350,000 real estate professionals each year through live events, online training, self-study programs and newsletters. He's written several articles and books, including Your First Year in Real Estate, Success as a Real Estate Agent for Dummies and Telephone Sales for Dummies. To learn more, visit http://www.realestatechampions.com.
Evaluate Your Staff
Is your workforce soaring to new heights or running your business into the ground? Find out if you've got the right mix of associates to perform optimally.
December 1, 2009
Being a real estate broker or owner is especially challenging in today's marketplace. The competition level has increased, the units sold have dropped, and the average sales price and commission have gone down as well. All these negative factors cause an opportunity marketplace for a smart broker, manager, or owner. The new year of real estate is fast approaching, and it's a fine time to focus on increasing market share for next year.
There is a series of key numbers you must know to increase performance and market share for your company and its associates. The first is your cost per salesperson, or desk costs. I know this seems pretty basic, but I'm always surprised by how few brokers and owners actually know this crucial figure.
To calculate your desk costs, take the total expenses for your business. The rent, phone, desks, computers, staff, benefits, and compensation — all the legitimate expenses for your office or business — and divide it by the number of associates in your office. This is the contribution each person must make in company dollars for you to break even. In most real estate offices, generally speaking, there are too few who bring in the required company dollar on a per-person basis.
Another important financial metric is your net profit goal per person. To figure this out, just consider the net profit you desire annually from the business or office you run. Then take that number and divide by the number of associates in your office or company. What is the net profit goal per person?
With these numbers, you can start assessing the performance of your personnel. First, segment your salespeople into categories based on performance and revenue to the company. The first category would be new associates who have been in the business less than a year. How many do you have? How are they doing? Are they close to hitting company desk cost?
Then categorize the people who've been in the business more than one year who have contributed less in company dollars than your desk costs per person. How many of these did you have this year? Who has been there consistently for a few years? Why are you keeping them since they are contributing little to the bottom line? How much time do they take of yours? These are people who are endangering your business.
Then we want to group the people that fall above the desk costs but below that plus the profit goal per person. These people at least are covering their costs, but you're not making the profit you really want for your energy, effort, and the risk of business ownership.
Finally, how many people are above the profit goal? These are the ones who are really performing for you and the company. Unfortunately, too few associates in most companies occupy this territory.
Your strategy and plan for success will come out of where you currently are in your personnel mix. If you have one-third or more of your staff in the new-associate or below-desk-costs categories, it's a big danger sign for your business. If you have more than 75 percent of your salespeople in the bottom three categories you need to make some changes, but you have some time. If you have 40 percent exceeding profit expectations and another 30 percent above desk costs but below profit, then congratulations — you're on track to achieve success, profits, and market-share growth.