For more than two decades, Tim and Julie Harris have been leaders in the real estate industry, first as top producing agents, and now as sought-after business coaches. Their latest book, Harris Rules: Your No-BS Practical Step By Step Guide to Finally Become Rich and Free, is an international best seller. Learn more at timandjulieharris.com.
Working Backwards to Reach Goals
This formula for achieving income goals will help define exactly what you and your agents need to do to succeed.
January 24, 2018
The new year is underway, you’ve created your goals for your real estate firm, and now you’re ready to begin achieving those goals.
Let’s say you want to net $10 million in profit after business expenses this year. Great! How exactly is your company going to achieve that goal? The answer is by working backwards.
When working backwards, you’ll need to outline your company’s expenses and projected income and define what every agent, staff person, and leader at your firm needs to do in order to achieve this numerical goal.
Start by breaking it down by month. Write down all of your brokerage’s monthly expenses (and we do mean all of them), such as rent or mortgage, utilities, internet and communications, salaries and commissions, taxes, marketing costs (such as content writing, postcards, brochures, ads, newsletters, and photography) car and travel expenses, memberships and MLS fees, training costs, food, and entertainment. Do not deceive yourself and skimp on any of these costs. Be completely honest about how much you’re spending, then add up all those expenses and keep that total in front of your eyes.
On another separate piece of paper, write down all the sources of your firm’s monthly income, such as net commissions, rental income, and investment income. Again, be totally honest about how much income your brokerage generates. Don’t use the number you wish you were generating.
Now, on a third piece of paper, write down a realistic income figure you believe the firm would need in order to keep the lights on if and when your housing market hits a slump. Multiply that number by six (assuming a business slowdown lasts for six months), and set up a separate savings account—say, 5 percent of the firm’s monthly income for six months—so you can keep the lights on.
Next, subtract your firm’s total monthly expenses and the monthly percentage you’ll need to keep the lights on (which you’ll put into that separate account) from the firm’s monthly income. The resulting figure is the exact amount your firm will need to generate every month in order to earn $10 million in 2018.
Working backwards has given you the “what” your firm needs to do in order to achieve your goal. Now, get to the “how,” which is what your agents must do to reach that goal.
Let’s suppose your brokerage has 10 agents. Depending on your market, the “how” might mean a minimum of 10 listings at all times; a minimum of five new contacts per month through networking, lunches, appointments, and phone calls; or a minimum of 10 consistent marketing initiatives through various channels. In other words, it is up to you as the broker to help your agents deliver the “how.” It’s also up to you to hold your agents accountable. Sure, some agents are more productive than others, so help each agent come up with their individual “how” in order for your company to achieve its “what.”
Just as it is your job as the broker to work backwards to define the numerical goal for the firm, it is also your job to train and assist your agents and make technology and services available to them to help them work backwards to define and implement their own goals. Put the “what” and the “how” together and you and your team will collaboratively achieve your goals in 2018.