The Cost of a Cheque
When you write a cheque, you would do well to remember that money is about to leave your bank account. Before signing it, ask yourself, “What is this expense for?” If the cheque you are writing isn’t directly contributing to profit, chances are that you should seriously consider never agreeing to this type of expense ever again.
Things like rent, telephone, postage, insurance, stationery and electricity are must-have items and little scrutinisation of these costs is necessary. Other expenses such as sign erection, window cleaning, advertising, leases, entertainment, gadgets; etc, should be viewed with suspicion and traced back to see if they truly lead to income and profit.
Most agency owners would love to have that extra sale a month, one that they could ‘;squirrel away’ into a profit account, which is just for themselves. If you examine your expenses closely you might just get the equivalent income from the slashing of unnecessary expenses.
When things are going well we tend to focus on the gross dollars and relate expenses to gross commissions. “This will only cost me one extra sale a month!” can be a very expensive comparison to make: for every dollar you spend, you have to earn between $3 (for a very well-managed agency) and $6 in gross income.
So that $1,000 monthly lease payment requires you to earn roughly $3,000 gross just to cover it. And we haven’t even considered tax in this equation. Too many of these expenses will send you broke.
Try asking yourself this question before spending money: “Would I spend this money if I hadn’t made a sale this month?” And by the way, the answer, “Umm“, means “No!” Asking the question before spending the money means that you may not have to sign the cheque for this expense later.
Needless spending can be the death of a business. In our Real Estate Agency Management Program seminar, we advise managers to use the principle of Pretending to Be Poor. It’s good advice. Instead of spending money like there is no tomorrow, pretending to be poor now may mean that you never have to worry about money in your golden years, when you have the freedom to choose whether or not to work in your business on a daily basis. We call this Freedom of Choice. For some, this principle of delayed gratification isn’t fast enough and so they try and lease themselves to wealth.
There are many ways to cut costs by at least 10 percent without even feeling it. When was the last time you went through your expenses, item by item, with a view to cutting those expenses which did not link directly to profit?
If you haven’t done this exercise in the past three months try it. And with some of the money you save, come along to our next presentation of the Real Estate Agency Management Program and pick up some more great ideas on how to improve your profit so you are keeping at least $1000 per day for yourself.