Predicting Your Revenue Outcome & Profitability

The number one issue facing brokers on an ongoing basis is quite simply profitability.

Profitability By Design

There is a constant focus, maneuvering, and many times, manipulations by business operators to squeeze out a profit in the ever so tight margin world of running a real estate brokerage firm. I find in my experience, most of it is reactionary instead of a more responsible “by design” approach. So how do you predict and design the outcomes of your profit and loss statement on an annual basis? There has always been and will always be one solution to profitability, it’s human resource and recruiting.

Think about this for a moment, you are not in the real estate business; you are in the human resource, human attraction, and human development business. Real estate happens to be their vocation. No people = no revenues. More people = more revenues. (I know that point can be argued by many, but most of the time those equations stand true). So let’s take a look at how you can predict your revenue outcome & profitability by design through reflection, establishing assumptions, projecting, and recruiting.

1. Reflection

Look back at the last year of recruits that joined your organization and calculate the retained company dollar or fees you realized from that group.

Example: 30 recruits joined your office in the last 12 months and you realized a total of $300,000 in retained company dollar from those recruits in that same period. You have established a go-forward assumption that each recruit has a value of $10,000 in retained company dollar to your office.

2. Establishing Assumptions

Your go forward assumption is that you will realize $10,000 in company dollar for each agent you hire in a 12 month time frame. Now you can start the projection process. (Same correlation if you are a fee based company or a company that “caps out” revenues from agents on an annual basis).

3. Projections

Want to add $300,000 in retained company dollar to your company? Now you know what you need to do. Simply hire 30 agents over the next 12 months based on realizing $10,000 in retained company dollar from your hires.

4. Recruiting

This is always where the rubber meets the pavement, but now with a “why” and “what” along with a specific, measurable, and actionable profitability target. You now have purpose.

Summary:  The above is an illustration of a very simple exercise that will create a result “by design” and create the ability to predict your revenue outcome. There are more considerations to take into account such as your normal annual attrition and agent revenue losses that take place when they leave, and managing expenses. This is normal and expected responsibilities of today’s leadership.

Need More Help Predicting Your Revenue Outcome & Profitability? Start Here!

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  1. maria martins
    5 years ago

    Thank you for the info. How do I get in on the recruiting calls you do with Century 21???
    I am a Century 21 Manager with Prevete on Long Island. Let me know. Thanks

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