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"Get Profitable Now!"

by Bernice Ross, Ph.D., MCC and Byron Van Arsdale, MCC

Most real estate professionals are focused on "revenues" or "gross commissions." One way to keep more of what you make is to shift from focusing on revenue to focusing on profitability (i.e. how much you keep AFTER expenses). If you would like to increase your profitability now, here are ten great strategies. If you need additional help, consider hiring a coach!

1. Begin by looking at your Schedule C on IRS Form 1040. Take the net income you report to the IRS and divide it by 2000 (i.e. 40 hours per week for 50 weeks) to determine your actual earnings per hour. (This is your after tax, hourly rate of profit per hour.) If it's greater than the minimum wage, seriously consider delegating part of your business to a minimum wage person. When you spend time doing minimum wage tasks such as going to the post office, dropping off dry cleaning, addressing brochures, etc. you are working for minimum wage. This reduces your profit because you could be engaged in prospecting, presenting offers, or doing other activities that produce more income.

2. Eliminate "non-productive opportunity costs" (i.e., time spent doing business development without compensation). For example, if you earned $40,000 last year, your hourly rate is approximately $20.00 per hour. Spending 4 hours on an open house that produces no leads has an "opportunity cost" of $80.00 plus the cost of operating your vehicle to get there, refreshments, and any prospecting pieces you may have used. To reduce these costs, take a hard look at which activities consistently generate leads and which activities generate little if any income. Be ruthless about eliminating activities with no return, no matter how much you think you "should" do them. Remember, the less time you spend on "non-productive opportunity costs," the greater your profits.

3. Top producers consistently report that the bulk of their business comes from referrals, past clients, and other people in the sphere of influence. Yet, when it comes to how we spend our "business dollars," we often spend a large portion of our time and money developing new sources of business rather than strengthening our referral base. To be more profitable, focus on building referrals from your existing sphere of influence. It takes less time and as a rule, usually yields higher results.

4. Each quarter, challenge your assumptions about how you conduct your business by experimenting with new ideas, new niches, and new processes. Profit is ALWAYS temporary. What keeps profits increasing long term is staying in touch with an always-changing marketplace and a willingness to try what is new. Be willing to invest at least 1-5% of your gross revenues in making mistakes, taking time away from the business to do strategic planning, and learning new ideas.

5. Limit marketing and promotion to 10% of your gross revenues. Instead, use your telephone and email to keep in touch with your client base rather than expensive mailings and other forms of print advertising.

6. Buy whatever you can in bulk. This includes computer supplies, paper products, and open house supplies as well as personal items you use at home. For example, if you routinely send out postcards to your sphere of influence, consider printing up at least 10,000 with your core information and then customizing them as you list or sell properties you want to publicize. If you serve coffee or mineral water at your open houses, stock up at your local membership department store or order on-line to save sales tax. Watch for sales on products you use and buy a 6-12 month supply. This not only saves you money, it also saves you time because you didn't have to make several trips to purchase the same products.

7. Telecommute. When you drive, you spend money, time, and energy. How much would you save if you worked at home one day a week? Two days a week? Most cars cost a minimum of 40 cents per mile to operate. Cutting mileage by 50 miles per week can save you over $1000 per year, not to mention the reduction in time and stress.

8. Cut "market time" by pricing your listings correctly. The shorter the time your listings are on the market, the fewer hours you spend earning your commission, and the greater your profit will be.

9. Decrease time spent showing buyers property by conducting a thorough "Buyer's interview" to determine their critical needs as opposed to their "wants." (A "need" is something the buyer must have if they are to purchase. A "want" is something the buyer would like to have but is not an absolute necessity.) Having clarity about what your buyers are really looking for saves you both time and money.

10. Ask for your client's input during the transaction and after it has closed. Be proactive in finding out what your clients really are feeling and experiencing. By identifying troublesome areas, you can take steps to correct problems before they occur. This eliminates wasting time, energy, and money to clean up the problem after the fact. Also be sure to survey each of your clients for their feedback on how you can provide better service. Conducting your own on-going research in how to improve your customer service, will help you maintain long term profitability in terms of client referrals and client loyalty.