Stronger Financial Health Step 2: Be Smarter When You Get Paid
Quick… what’s your standard procedure when you get a check?
If you’re like the vast majority of agents out there, you’re probably saying “Standard procedure? What do you mean?” and you don’t really have a plan. It just goes in your personal bank account, you start spending it, and before you know it, it’s gone.
Sound familiar? Let’s fix that.
I’d estimate 80% of agents fall into the category I just described above. They’re not incorporated, they have no delineation between personal and business accounts, and they’re paying the price for this lack of financial structure.
Here’s how to fix it…
Get incorporated, so the check goes to your LLC or however you end up doing it.
Then create a business bank account that gets split three ways: toward your taxes so there are no surprises later, toward your business expenses, and finally, paying yourself in your home or personal account.
To go even more advanced, your “Home” account should feed automatically into various investments and sub-accounts you’ve established based on your long-term goals.
Which category are you? Which do you want to be a year from now?
Stronger Financial Health Step 3: Set a Business Budget
What percentage of your annual revenue do you spend on marketing and lead gen?
What about tech, or education, or coaching? Your staff?
You should know these figures, and ideally, all told, your operating expenses should not exceed 30 percent of your revenue. That way, you guarantee yourself a minimum of 70 percent pre-tax profits.
When planning 2021, be sure to factor all of these into your budget:
- Marketing/lead generation
If you keep all of those below 30 percent of your revenue, factor in another 33 percent for taxes, you’ll have 37 percent in profit!
Does your business have this structure? If not, make it happen!
Stronger Financial Health Step 4: Raise Your Average Sales Price
Another seemingly obvious but often overlooked way to increase your financial status is to sell higher priced houses than you are currently.
“Yeah Tom, I’d love to but…”
I’m not talking about sitting around hoping you get a high-dollar listing. I’m talking about creating a plan and making it a reality.
If you feel there’s an opportunity in your marketplace, create better, highly targeted marketing that will “move” you into that elevated price bracket. And then stick with it. (Also, don’t stop what you’re currently doing… that will keep you afloat while your new marketing takes hold.)
Marketing doesn’t work overnight, but a consistent effort can have you selling much higher priced homes a year from now compared to what you’re selling today.
Stronger Financial Health Step 5: Increase Your Percentage of Retained Commission
Have you ever caught yourself slashing your commission, and then rationalizing it because…
“Well, they’re family.”
“Well, she’s a friend of a friend.”
“Well, that guy really needed a break.”
“Well, I expected that deal to go quickly.”
The excuses go on and on…
And over time, those little percentage points add up. Big time.
In this age of commission compression, I challenge you to stop telling yourself stories of why you should reduce your commission percentage.
Show your worth. Stand your ground. Earn what you deserve.
4 Questions to Follow the 5 Steps
So now that you know the five steps, I have four questions for you:
- What are you going to do more of?
- What are you going to do less of?
- What are you going to stop doing?
- What disciplines and systems are you going to start so you can create a brighter financial future for you and your family?
Let me know your answers and any thoughts or questions you have in the comments below!