Use This Real Estate Professional Profit and Loss Guide to Help You Gain Clarity and Grow Your Business
Being a real estate agent can be a lucrative business, but it can also be stressful, time consuming and unpredictable. I probably don’t need to tell you that!
You may have 10-20 active clients at any given time. Some might be overly picky. Some might get cold feet. Some may have want to buy a condo, farm, beach property or bunker…and they want to see them all…at a moment’s notice.
The point is, what seems like some good income months ahead, may drag on for an unforeseeable future. So, how can you financially plan to grow your business if you don’t know when the next commission check is coming in?
At the very least, you create your income goals and then track your time and efforts towards those goals. Yes, you could call it a profit and loss statement.
But, my free profit and loss spreadsheet for real estate professionals adds some important metrics.
If you want to see where you could increase efforts to help you increase income, reduce expenses and free up more time to focus on whats’ most valuable, read on!
First, why is it that real estate agents only track commissions as one line item?! I mean, there are multiple ways to earn commissions as a real estate agent, right?? So, let’s list those out and track them.
Listing Commissions – In this hot housing market, everyone wants to get more listings.
Buyers Commissions- Still nothing to bock at, this is clearly the most common commission type for agents.
Referral Commissions– You very likely know plenty of people who are or have planned to move to different states or counties. So why not offer the help of vetting agents in that area and receive a referral fee for it?
Consulting Fees– Real estate agents give away too much good advice for free. There are plenty of opportunities to earn consulting fees, including helping out people selling their house “For Sale By Owner”. They may not want to give up money to commissions, but they certainly are worried about royally messing it up. They’re very likely willing to trade a little money for some solid advice.
The same financial advice can be offered for expenses. I still have not come across an agent who knows exactly what they spent on their business.
But they are also fully aware that they should know what they spend annually to make the income they did.
Here are some quick categories to think about:
· Broker’s fees
· Salaries and splits
· Referral Fees
· Closing Gifts
Another important category that should be tracked on a real estate agents’ profit and loss is number of active clients through the year.
I would categorize this as anyone that you have or are spending a significant amount of time with. If someone has just been kicking the tires and all you have done is add them to a portal, then don’t worry about that.
However, if it is someone that you are actively discussing your real estate services to, meeting with them, or showing them property, then you should be tracking those people.
So, if you were actively working with 50 people between buyers, sellers, referrals, and consulting clients….write that number down.
The last extremely important number to track for real estate agents is how many days you took off during the year.
“What?! Did you really just ask me how many days I took off? Buddy, I’m a real estate agent!”
Yes, I am aware. And you are also a human! Just like the rest of us, you need time off to reenergize and spend time doing what truly matters most to you in life. Whether that is friends, family, etc., you deserve some time to enjoy your life!
BUT! There is also another really important reason to track your days off (meaning no phone calls, emails, or any bit of work).
Once we know your revenue, expenses, active clients and number of days working versus not working, we can arrive at a critical financial number.
How much you actually make an hour!! Yep, this ought to make you nervous!
You pride yourself on being a successful real estate agent, but you definitely don’t want to find out you are only making the same as your kid working at the local coffee shop.
However, numbers don’t lie.
So, as you are financially preparing for your next year in real estate and beginning to assess your goals, download my free profit and loss spreadsheet for real estate agents. I promise that once you get a true assessment of where you are, you will be at a place where you can start growing!
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.