An Eye For Profit
From a Sonia Lee song
Many real estate business owners struggle to make a profit from their sales departments.
Although the market is often blamed, my experience is that a leader who does not make profit in a ‘tough’ market fails to make a profit when the market improves. I believe that such leaders do not have an ‘eye’ for profit.
The real estate industry is notorious for focusing on turnover.Franchises charge 8 percent of turnover, salespeople are paid anywhere between 40 percent and 95 percent of turnover, depending on the system used. Whatever is left remains with the office, which still must cover all of the expenses before the leader can earn any profit.
Traditional real estate training focuses on ways to bring more money into the office, to increase turnover. But turnover is not profit. It’s not how much you bring in that should be your focus: it’s how much you KEEP of the money you bring in that’s important.
An eye for turnover must be replaced with an eye for profit.
Why are you in business? It should be to make a profit, not to generate a large turnover.
If you are not happy with your office’s profit, I urge you to develop your eye for profit and do things differently – to quote Sonia Lee again, “If you keep on doin’ what you’re doing, you’ll keep on getting what ya got“.
Cut expenses. Begin with non-performing salespeople. This is the biggest expense your agency incurs, but it’s often a hidden expense. Even commission-only salespeople who are not performing cost the agency hugely. Think about the listings they lose through their incompetence. You may not be paying them a salary, but if they lose one listing a week, at today’s selling fees such salespeople could be costing the agency at least $300,000 a year each.
There are two types of expenses in a real estate agency – fat and muscle. Muscle expenses help you win business – marketing for example. Cut a muscle expense and you will cause the agency to lose more in selling fees than the expense you cut.
Fat expenses are different – cut them and you won’t cause the agency to lose business. Little expenses add up, too. That water cooler might be costing only $10 a week, but that’s $600 a year, or $6,000 over ten years. Chill some tap water and keep the 6 grand!
You don’t save money by keeping your team small. You will cost yourself profit by doing this.
Look upon good salespeople as an investment and not an expense.
But you need good salespeople. If you say you cannot find good people, this thinking is the problem. You can find good people if you have an effective hiring system. There are many people out there who would love a career in real estate. If you want a winning team, you have to go looking for them.
Pittard can help you with this, but whether or not you take me up on this offer, make building a team of WINNING salespeople your top priority.
It amazes me that leaders try to save money by not training their people. I love the saying, “If you think education is expensive, try ignorance”. How true!
But don’t just train your people, TRAIN YOURSELF TOO.
Salespeople attend sales training. But if you are a business owner, you need business training and leadership training. Most business owners don’t feel they need this type of education, but when you consider that 90 percent of businesses go broke in the first five years, you can see how short sighted this thinking really is.
If the team trains in their discipline – sales – and you don’t train in your discipline – leadership – you will lose your best team members. Regularly. The ones who train, grow apart from those who do not train. Fact.
Think profit. Develop an eye for it. Constantly seek ways to make more profit. This is why you are in business.