You already read my four different ways to crunch numbers and evaluate profitability. Here are working examples of how you can beef-up your bottom line.
Eliminate FreeAs Dr. Phil McGraw, the psychologist says, “The most you’ll ever get is what you ask for”.
Rethinking expenses/getting serious about your hourly value
Until you perform your own triage on the amount and type of expenses you typically incur in a real estate transaction, you won’t make much of a dent in improving your bottom line. For two or three sales try evaluating every dollar you spend before you spend it.
For example, is it really necessary (and/or wise) for you to hold an open house on a property that’s not likely to sell in this decade? Just how much does an open house cost? At an hourly gross fee of $150, you’ll be spending a minimum of four hours doing low-level tasks like schlepping signs and printing flyers. That’s at least $600 in expenses that make absolutely no financial sense (not to mention generating no viable leads). Unless the seller is willing to either a) hold the open house himself and harvest the leads for you; or b) pay to reimburse your costs, you’re racking up expenses that will do nothing but detract from a positive bottom line.
While it’s enlightening to uncover how valuable one hour of your time is worth, it’s a whole other level of guts and gumption to be empowered by it!
Here’s an approach to help you get comfortable with not only realizing your own value but with asking consistently for its compensation:
- For one week, write down every major activity you do and the time and resources it takes to perform. For example, let’s say you spend thirty minutes online accessing county records, followed by another thirty minutes putting the information into a subdivision analysis for a potential seller. That’s not only time spent, it’s one hour of your time at your gross hourly rate of $150. At the end of the week, determine not only how many hours you spent on major activities, apply your gross hourly fee to each hour. If you work like most agents, this could total several thousand dollars.
- Next analyze the tasks you performed to determine: a) how many of the activities could have/should have been performed by a lower-compensated assistant, plus b) what those services would have cost. This would include any photocopying, color copies, or other charges involved.
The end result of your findings may startle you. Not only are you “majoring in minors”, you’re wasting hundreds/thousands of dollars per week by not having someone perform mundane tasks that could free you up to generate far more hours at your gross hourly rate. Most of us sacrifice “doing it all” at the altar of lost profit year after year after year.
Even though the changing landscape of the real estate market proves challenging, the greatest challenge lies within us---in evaluating what we spend and why, in tandem with how to best embrace innovative, profitable business approaches for the future.
Published: December 27, 2002
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