I review dozens of P&Ls (and a lesser amount of balance sheets) of top agents and brokers every month. This is the time of the year when they should all be looking at their P&Ls and determining what money needs to be spent where next year – i.e. a budget. The following are the top 3 areas where I see agents and brokers could use the most focus.
- Personnel
I was just reviewing yet a P&L with an Alchemy member that showed a very handsome expenditure on personnel – not an uncommon experience. In questioning the business owner about the job responsibilities that supported the expense, I determined that in this market, other people should have been absorbing those activities. In sum, everyone needs to do more.
I get it. It’s tough to “right-size” the business on personnel since these people have been with you forever, but everyone on the team needs to step up and take on more duties in a shifting market, which ends up making some positions redundant. Be honest with yourself and ask whether you really need that person on your staff at their present comp plan, or whether you can make do with less personnel for now.
- Advertising/Marketing/Subscriptions
This is the easiest area to budget for because it’s the easiest to figure out a return on investment (ROI). Every quarter, at a minimum (or every month if your team is above $50M in annual production), you should fill in the following information and numbers to an Excel sheet.
On the left hand side, list every silo of advertising or marketing that you do and subscriptions that send you business. This includes Facebook ads, Zillow leads, buying a sign on your kid’s right field fence – everything. Across the top, you should have three columns: gross commission income (GCI) received from that source, money spent on that source (cost), and then calculate the ROI (GCI/Cost). So, for example $35,000 of Facebook ad revenue divided by $7,000 in cost equals a 5x ROI.
Over time you will see what is producing better for you, which is where you should be allocating your money. This factors into your budget going into the next year as you should know what sources of business you’ll be spending money on and how much those sources will cost. Never stop doing this analysis.
- Auto Maintenance/Repair
Finally, you should be running all of your auto expenses through your business, including monthly payment, insurance, gas/mileage and maintenance/repair. I consistently see agents and brokers underestimate the cost for repairs in budgets. A conservative year would see you adding 25,000-30,000 miles to your car unless you only service a limited area close to your house.
This much driving causes numerous repairs and maintenance that isn’t covered by any warranty (hence all the calls you get to sell you one). These can be major costs – transmission overhaul, brake jobs, differential replacement, etc. Heck, even a new set of tires can feel like a small mortgage payment. Be realistic in your budget about what your car is going to run you next year.
I know budgets can feel overwhelming, and let’s be honest – you have approximately 87 other pressing matters on your plate right now, not to mention family and friends that deserve more of your time. So if you’re looking for more of a “done-for-you” approach, I’d be more than happy to build a custom budget for you, based on your P&L, so you can stride into 2024 with clarity and confidence.
For the month of November only, we’re offering a special “Budget Bundle” that includes:
Custom budget, created for you (Value: $1200)
2 one-on-one coaching sessions (Value: $999)
Added accountability to help you stick to the budget (Value: $199)
Your one-time investment: only $1499 (was $2398)
($900 in savings!!)
If you’re interested in leveling-up your financials and getting some one-on-one coaching and advisory, click here and send us an email.
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This blog post was written by Hank Sorensen.
Hank Sorensen is a Financial Coach with Alchemy of Money. Best known as the author of “How to Buy or Sell a Real Estate Agent Business: Secrets of Valuing the Business and Transitioning Successfully”, Hank is a total wizard when it comes to agent financials.
